HVAC OEM allocation would be feasible.
    The commenter did not provide details for how such an allocation
category could, or should, be implemented. Additionally, the creation
of such an allocation category would require the Agency to determine
details about scope, eligibility, and implementation that EPA does not
have sufficient information at this time to develop. The commenter also
does not provide anything beyond a conclusory rationale as to why it
would be appropriate to allocate allowances to HVAC OEMs, but not other
OEMs. EPA's chosen allocation methodology that is being finalized in
this rule distributes allowances to entities that historically
conducted the same activities now prohibited absent the expenditure of
allowances. The AIM Act and implementing regulations provide that ``no
person'' shall ``produce'' or ``consume'' HFCs ``without a
corresponding quantity of production or consumption allowances'' (see
42 U.S.C 7675(e)(2); 40 CFR 84.5(a)(2) and 84.5(b)(2)). The Allocation
Framework Rule makes clear that the prohibition on ``consumption''
without corresponding allowances applies specifically to the act of
import (see 42 U.S.C. 7675(b)(6) (defining import as landing on,
bringing into, or introducing into the United States); 40 CFR 84.3
(same); 40 CFR 84.5(b)(1)(i) (requiring consumption allowances ``at the
time of the import'')). Accordingly, the regulations in 40 CFR
84.5(b)(1)(i) prohibit importing HFCs without corresponding allowances,
and state that consumption allowances must be expended ``at the time of
import.'' In short, allowances are required for the act of importing,
not subsequent use of HFCs that have already been produced in or
``imported'' into the United States. EPA notes that OEMs that have
historically directly imported will receive allowance allocations under
the methodology finalized in this rule based on historic consumption
levels. Commenters have not provided a compelling argument as to why
OEMs that did not historically import HFCs have a particularized need
to do so now, and rather EPA thinks it is most appropriate to continue
to allocate to entities that have historically imported to minimize
market disruptions. If certain OEMs that had not previously imported
HFCs had wanted to enter the HFC import business, there was an
opportunity to do so as a new market entrant to the set aside pool of
allowances in accordance with 40 CFR 84.15. The creation of an OEM
allocation category would have also required an accompanying proposal
or solicitation of comment, neither of which were included in the
proposed rulemaking, and as previously noted, the creation of such an
allocation category now would require the Agency to determine details
about scope, eligibility, and implementation that may be informed by a
range of market data and other records to which the Agency does not
currently have access. EPA also lacks information on how such an
allocation category would holistically affect the regulated industry,
including small businesses.
    One commenter asserted that if EPA intends to require allowances to
import blends containing regulated substances, allowances must be
allocated to the entities who are importing or combining HFCs to create
HFC blends, and not to the entities who are producing or importing the
individual components of the blends. Specifically, the commenter

expressed concern that under the proposed allocation methodology,
companies that blend HFCs will suffer an unfair and economically
devastating mismatch between entities that receive allowances and
entities that ultimately bear the burden of the allowance system.
    To be clear, importing a blend of chemicals that includes regulated
substances requires expending allowances to account for the regulated
substances within the blend. EPA is making alterations to the
regulations to further clarify and codify the Agency's existing
position on this issue. Those changes and the rationale behind them are
further outlined in section V.C. of this rule. As noted in the prior
comment responses, EPA's chosen allocation methodology that is being
finalized in this rule distributes allowances to entities that
historically conducted the same activities now prohibited absent the
expenditure of allowances. If an entity has historically imported a
blend and reported that import as required to GHGRP (as is the case for
this particular commenter), that entity will be eligible to receive
allowances. An entity that does not directly import blends or
individual HFC components, but combines HFCs obtained on the domestic
market to create an HFC blend, is not eligible for allowances, although
they could have applied as a new market entrant for set-aside
allowances previously in accordance with 40 CFR 84.15. An entity not
importing HFCs, but domestically creating an HFC blend, can continue to
undertake that behavior without any need for allowances. The commenter
has failed to provide reasons as to why an allowance allocation to such
an entity is needed. The commenter states that ``companies that blend
HFCs will suffer an unfair and economically devastating mismatch,'' but
does not explain why that would be the case. Without compelling
arguments or evidence to support a contrary approach, EPA is finalizing
the allocation methodology as proposed.
    As noted previously in this section, EPA did not propose to
establish, and is not finalizing, a set-aside pool of allowances beyond
what was created in the Allocation Framework Rule and was allocated
March 31, 2022. EPA recognizes that the goal of the AIM Act is to
establish a national phasedown of HFC production and consumption by 85
percent by 2036, and therefore, while the Agency did offer a one-time
opportunity of a set-aside pool of allowances for calendar year 2022
and 2023, EPA explained in the proposed rulemaking that it does not
view further allocations for a set-aside pool and/or allowances for
entities who have not previously produced and imported HFCs as
supporting the AIM Act's objectives, and accordingly is not
establishing a new set-aside pool of allowances.
    Several commenters expressed support of EPA's proposal to not
establish a set-aside pool of allowances for calendar years 2024
through 2028. However, other commenters suggested that EPA should
establish a set-aside pool during this period for entities to: develop
new, innovative, or low-GWP HFC substitutes (for additional new market
entrants as well as existing allowances holders seeking to develop
alternatives for existing equipment); incentivize environmentally
beneficial activities such as reclamation or recovery; provide a margin
of safety pool for the semiconductor industry; or, to ensure against
historical and current barriers that entities wishing to continue or
enter in the HFC market may encounter, e.g., social inequities or
disproportionate allocations to historic entities. One of these
commenters suggested establishing a set-aside pool of allowances at 7.5
MMTEVe, with unused allowances being redistributed to the general pool.
    With respect to the suggestion to establish a set-aside pool to
develop new, innovative, or low-GWP substitutes, commenters did not
provide a clear range of entities or activities that would meet the
suggested category, other than being existing or prospective suppliers
of HFCs or HFC substitutes. The Agency's views on issuing allowances to
reclaimers that are not otherwise eligible based on the final
methodology for 2024 through 2028 has been discussed elsewhere in this
rule and, for the reasons explained in those discussions, EPA is not
finalizing such a set-aside pool to incentivize reclamation. As for
creating a margin of safety pool specifically for the semiconductor
industry, the Agency reiterates that we did not propose to change the
methodology for issuing application-specific allowances, and the
existing application-specific allowance allocation methodology codified
at 40 CFR 84.13 will continue to apply as finalized in the Allocation
Framework Rule. Further, EPA has not heard concerns with sufficient
specificity to believe that there is a need for a set-aside pool
specific to the semiconductor industry in addition to the allowances
already provided under the application-specific allocation. In applying
for application-specific allowances, all eligible entities can provide
information on unique circumstances facing their businesses, which are
taken into account in the Agency's calculation of application-specific
allowance allocations.
    As part of the Allocation Framework Rule, EPA conducted a
preliminary review of entities that had previously imported HFCs and
that were HCFC allowance holders (available in the docket for the
Allocation Framework Rule) and solicited comment on whether any
individuals have experienced structural barriers inhibiting their
earlier access to the HFC import market, including if there was
difficulty entering the HFC import market based on criteria such as
business location, employment of socially or economically disadvantaged
individuals, or other criteria related to business ownership, employee
characterization, or business location. As explained in that
rulemaking, EPA was interested in collecting the information requested
to better understand whether such issues are affecting entry into this
market and to explore future opportunities to ensure a more equitable
marketplace. Commenters did not provide evidence or detailed
information that would indicate that certain businesses have
historically and could continue to experience difficulty entering the
HFC market as a result of structural barriers or social or economic
inequities. Our review of public comments received from the proposed
rulemaking associated with this rulemaking did not yield any such
records either.
    Lastly, several commenters also provided suggestions for what the
Agency might consider in the next allocation methodology, e.g.,
allowance incentives for destruction and a set-aside pool that
prioritizes the top performers with respect to providing recovered
refrigerants to reclaimers in the previous year. Comments explicitly
framed as being for consideration in future rulemakings have not been
considered for this final rule and the Agency is not responding to
those comments at this time.

C. How is EPA accounting for past production or import activity to
determine allocation eligibility?

    To be eligible to receive general pool allowances for 2024 through
2028 based on historic production and import activity (i.e., for
entities that produced and imported regulated substances in 2011
through 2019), EPA proposed that an entity must have produced (for
production and consumption allowances) or imported (for entities only
receiving consumption allowances) HFCs in 2021 or 2022. EPA had a
similar requirement in the Allocation

Framework Rule, specifically requiring production or import in
2020.\18\ As part of the proposal, EPA considered using a rolling set
of years to confirm activity, but as explained in that rulemaking,
using a rolling set of years would not provide the same stability since
allowance holders could come into and out of the allocation system,
thereby affecting everyone's relative share of available allowances and
reducing predictability. EPA also explained that it does not want to
incentivize entities in each subsequent rolling set of years' entities
to continue importing or producing small quantities that would
otherwise be outside the entity's plans in future years just to
maintain position to receive future calendar year HFC allowances. EPA
also took comment on simply basing allocations on historic reported
data between 2011 and 2019, without including an additional eligibility
requirement relating to whether the entity produced or imported HFCs in
recent years, such as 2021 or 2022. The discussion in this section of
the preamble referencing production or import activity in 2021 or 2022
is germane only to whether an entity was active in those years for the
purposes of determining whether that entity is eligible to receive
allowances. EPA is not evaluating the specific amounts that entities
may have produced or imported in these years, and the Agency's
finalized approach in confirming that entities were active in 2021 or
2022 should not be interpreted as EPA evaluating entity-specific
activity in those years to inform the number of allowances that each
eligible entity receives. The years that EPA is relying on to determine
how many allowances each eligible receives is discussed elsewhere in
the preamble. As noted in those other sections, EPA has concerns about
how representative quantities produced or imported in 2021 and 2022 may
be, but EPA has determined that some level of demonstrated activity in
those years is still a useful metric for purposes of determining
whether to allocate allowances
---------------------------------------------------------------------------

    \18\ EPA also allowed for an entity to identify individual
circumstances for not importing in that year due to the COVID-19
pandemic. EPA did not propose a mechanism to allow an entity to
request individualized consideration if they did not produce or
import in 2021 or 2022.
---------------------------------------------------------------------------

    Some commenters supported EPA's proposal of requiring activity in
either 2021 or 2022 as a prerequisite for general pool entities
receiving allowances. One commenter opposed the proposed qualification,
citing that such a requirement could penalize entities who are trying
to maximize efficiency by outsourcing production or importation but who
plan to remain in the market and service existing customers. The
commenter suggested that the more relevant consideration would be
whether an entity's allowances were expended in the affected years, and
that if the Agency were to finalize this specific provision, that there
be a way for entities to request unique consideration in the event they
did not produce or import in 2021 or 2022.
    EPA disagrees with the commenter. This additional eligibility
requirement, that an entity has demonstrated import or production
activity in 2021 or 2022, is intended to exclude entities from
receiving allocations that are no longer undertaking the activities for
which allowances are required (i.e., production and import). Under the
commenter's proposal, an entity that is transferring all of their
allowances is no longer undertaking activities for which allowances are
required. EPA understands that the commenter may be interested in
receiving an allocation such that the commenter has allowances to sell
and transfer, but the commenter failed to provide a rationale aligned
with the AIM Act and the HFC phasedown program for why it would be
appropriate in such a situation for EPA to continue to allocate to an
entity that is not itself using allowances. Entities who choose to buy
and sell HFCs within the United States, e.g., as servicing companies or
distributors, instead of directly producing or directly importing HFCs
may continue to do so without receiving allowances. EPA is interested
in avoiding allocating to entities that had historic import or
production data in the 2011-2019 timeframe, but have since ceased
operations or shifted away from HFC production or import. Allocating
allowances to entities that cannot or will not use them could be
disruptive to the market during the phasedown if allowances go
unexpended or could result in windfall profits to an entity that will
only use the allowances to transfer for a price. The practical effect
of not allocating allowances to an entity due to their inactivity would
be a pro rata increase of allocation levels to other entities receiving
allowances from the general pool allocation.
    One commenter suggested that EPA require entities to be active in
the market in 2022 to receive allowances for 2024 through 2026. This
commenter further provided a method for redistributing unused
allowances. The commenter provided a formula that would allocate more
in future years to entities that used more of their allowances. For
example, an entity that used 100 percent of its allowances in year 1
would receive more allowances in year 2 or 3 as a result of the number
of unused allowances in year 1 than an entity who only used 80 percent
of its allowances that year. The method would count transfers the same
as if an entity used its allowances to produce or import. The commenter
notes that such a model provides all the advantages that EPA is looking
to achieve, including: relying on historic data from 2011 through 2019
for allocations; transparency of available data; ensuring that entities
who are no longer active in the HFC market or active at all do not
receive allowances; and adjusting for unrepresentative activity, i.e.,
large numbers of imports in certain years prior to AD/CVD findings and
actions, that might have informed previous allocations, but not be
representative of more current real-world conditions.
    EPA is not finalizing an approach in line with the commenter's
suggestion. EPA disagrees with the commenter on the benefit of moving
allowances away from entities based on a single year of allowance
expenditure. There are many factors that could lead to an entity
expending fewer allowances in a given year beyond a permanent shift in
business model, such as a temporary change in customer demand or delays
in a foreign supplier fulfilling contracts. In such situations, EPA
does not want to establish perverse incentives to encourage an entity
to expend allowances to import more HFCs than the entity otherwise
needs or to otherwise penalize an entity that does a one-time transfer
of allowances. Further, the commenter's model would require EPA to
determine details about scope, criteria, and implementation for which
we do not have sufficient information at this time to consider
finalization of such a method. Additionally, the commenter's suggested
pre-requisite for entities to have been active in 2022 as well as the
commenter's proposed time period for when the model would apply are not
consistent with the Agency's proposals. The commenter does not provide
rationale for why evaluating only 2022 would be appropriate in lieu of
evaluating either 2021 or 2022, nor does the commenter provide a
rationale for why the Agency should issue allowances using the proposed
model for 2024 through 2026 only.
    Relying on information from 2021 or 2022 solely for the purpose of
determining eligibility for allowances will ensure companies receiving
allowances are still actively producing or importing regulated HFCs,
regardless of who received allowances in calendar

years 2022 and 2023. Allowing two years, as opposed to a single year,
provides additional time to demonstrate activity in the market, and is
intended to reduce the impacts of supply chain delays, temporary
changes in demand, or other business decisions. Some entities also
import small volumes of HFCs and may not need to import every year.
Entities who would be eligible to receive allowances based on this
criterion would not need to have produced or imported HFCs in both
years, nor would entities need to have produced or imported at any
particular level in either year.
    EPA proposed to use a fixed set of years (i.e., 2021 and 2022) to
determine eligibility for entities to be allocated allowances for
calendar years 2024 through 2028 to provide a degree of clarity and
certainty to entities during this period and to minimize disruption to
existing supply chains that have adjusted to the 2022 and 2023
allowance allocations. By finalizing this approach, all market
participants will be able to generally understand their own and other
allowance holders' market share for the 2024 through 2028 period as of
October 1, 2023, because there would not generally be shifts in how
many entities EPA is allocating allowances to and the relative share of
allowances going to those entities. Looking to behavior in 2021 or
2022, specifically to determine whether entities were actively
producing or importing HFCs, would also have administrative benefits to
EPA. For example, determining annual allocations will be more
streamlined because EPA will rely on data that has been vetted and
reviewed at a single point in time in advance of the calendar year 2024
allocation as well as all allocations through calendar year 2028. The
commenter's scenario is also one that the Agency was trying to avoid,
i.e., issuing allowances to entities that are no longer in the HFC
production or import business.
    The Agency provided one final opportunity, separate from the
proposed rulemaking, to entities to verify, and if necessary correct,
the data available to the Agency on entities' historic consumption
activities from 2011 through 2021 for the purposes of the AIM Act. The
Agency transmitted an electronic communication or letter to all
entities that were known, or likely, to have had consumption activity
of regulated substances from 2011 through 2021 that they had until
September 26, 2022, to verify, and if necessary correct, such data.
Additionally, in the proposal for this rulemaking, EPA stated that
''[i]f there is any entity that did not receive a letter or electronic
communication from EPA that had consumption activity of regulated
substances from 2011 through 2021, EPA is hereby providing notice that
for the purposes of future HFC allowance allocations under the AIM Act,
EPA will not consider any data unless submitted to EPA through the
Electronic Greenhouse Gas Reporting Tool (e-GGRT) by the close of the
comment period on December 19, 2022.'' The Agency was explicit that
after this final opportunity for entities to make corrections to
historic data, ``EPA does not intend to consider any data revisions in
allocation decisions'' where the revisions would be taken into account
when determining the annual allocation issued by October 1 of each year
for 2024 and future year allocations (87 FR 66383). After consideration
of the public comments on this issue, EPA continues to find these
considerations compelling. Accordingly, the Agency will not consider
any additional revisions to historic data for the purposes of allowance
allocations for these years.\19\
---------------------------------------------------------------------------

    \19\ Data submitted as of December 19, 2022, that has been
certified and verified will be taken into account when determining
the annual allocation issued by October 1 of each year for 2024
through 2028. EPA will not consider revisions after this date in the
2024 through 2028 and all future year allocations, where relevant.
If information reveals an entity has provided false, inaccurate, or
misleading information, EPA reserves the right to issue
administrative consequences to adjust allowances downward (in the
same year or a subsequent year). Regardless of whether or not EPA
applies an administrative consequence, EPA may also pursue any and
all appropriate enforcement action.
---------------------------------------------------------------------------

    EPA did not propose to allow companies that were inactive in 2021
and 2022 to request individualized consideration for whether they were
active in the market, and EPA disagrees with one commenter's contention
that it would be appropriate to do so. EPA allowed for individualized
consideration for failure to import in 2020 in the Allocation Framework
Rule, given 2020 was a strikingly unique year due to the COVID-19
pandemic and supply chain disruptions. Further, EPA was only looking to
one year to verify company activity, whereas under this rule EPA is
looking to see if a company was active in either 2021 or 2022. The
commenter has failed to explain why those years produced unique
challenges equivalent to the pandemic and supply chain disruptions of
2020 and also has failed to explain why looking across two years of
data, as opposed to one, would not rectify any such challenges, i.e.,
if 2021 were equally as challenging with respect to the pandemic and
supply chain disruptions of 2020, any import activity in either 2021 or
2022 regardless of quantity would meet the Agency's proposed activity
requirement. Allowing two years, as opposed to a single year, provides
additional time to demonstrate activity in the market, and is intended
to reduce the impacts of supply chain delays, temporary changes in
demand, or other business decisions.
    Accordingly, for the reasons discussed above, EPA is finalizing its
proposal that to be eligible to receive general pool allowances for
2024 through 2028 based on historic production and import activity
(i.e., for entities that produced and imported regulated substances in
2011 through 2019), an entity must have produced (for production and
consumption allowances) or imported \20\ (for entities only receiving
consumption allowances) bulk regulated substances in 2021 or 2022.
---------------------------------------------------------------------------

    \20\ EPA will look to the statutory and regulatory definition of
``import'' to determine whether an entity imported bulk regulated
substances in 2021 or 2022. An argument that an entity could fall
within the regulatory definition of ``importer'' will not be
relevant to this analysis.
---------------------------------------------------------------------------

    The Agency considered and took comment on whether new market
entrants should be required to import in 2022 to be eligible for
allocation of allowances for calendar years 2024 through 2028. Several
commenters were supportive of requiring recipients of set-aside
allowances as new market entrants to import in 2022 to be eligible for
allocation of consumption allowances for calendar years 2024 through
2028. One such commenter suggested that EPA evaluate whether new market
entrants' consumption activity in either 2022 or 2023 was consistent
with EPA's rationale for allocating those allowances in the first
place, i.e., entities that did not use their allowances, or used their
allowances in a manner that was wholly inconsistent with the new market
entrant provisions, should not be eligible to receive allowances for
calendar year 2024 through 2028. One additional commenter generally
supported an approach where new market entrants must have imported in
calendar year 2022 to receive allowances. Another commenter supported
not requiring activity in 2022 for a new market entrant to be eligible
for future general pool allowances, noting that some smaller entities
might not have been able to amass resources to fully use their
allowances in either 2022 or 2023. This commenter further cited that
new market entrants may not have been able to order products or
finalize agreements with parties such as banks and customs brokers
until after issuance of their allowances on March 31, 2022.

    EPA disagrees with commenters that took the position that new
market entrants should be required to import at some point in 2022 to
be eligible to receive general pool allowances for calendar years 2024
through 2028. Most new market entrants are, as their name suggests, new
to the HFC import market and would not reasonably be expected to have
any import activity in 2021. At the same time, data for the 2023 period
would not be available and verified in time for allocation decisions
for the allocation of calendar year 2024 allowances. Therefore, if the
Agency applied eligibility criteria to new market entrants at all, it
would need to look to 2022 for import activity. Accordingly, for these
entities, EPA would not be able to look across two years for import for
most new market entrants, unlike for general pool participants. EPA
anticipated that most new market entrants would make use of allocated
allowances and import regulated substances in 2022, but EPA previously
recognized that new market entrants might have difficulty
operationalizing their business to begin importing regulated substances
in 2022 if the entity was fully new to this aspect of the import
business. As a result, in the Allocation Framework Rule the Agency took
the position that EPA would ``not reduc[e] allowances to new market
entrants in 2023 for failing to use all the allowances issued in 2022''
(86 FR 55159). The commenters do not provide any rationale to counter
these concerns raised by EPA in the proposal. The commenters also do
not provide rationale on why it would be appropriate to look to only
one year of data for entities that were brand new to the HFC import
market, while allowing historically active companies to produce or
import at any point in any quantity over a two-year span. Such an
approach would seem to disadvantage entities that could have
significant difficulty living up to such a requirement. A commenter
suggested that EPA evaluate whether new market entrants' consumption
activity in either 2022 or 2023 was consistent with EPA's rationale for
allocating those allowances in the first place, but does not explain
what it would mean for a new market entrant to use their allowances in
a manner that was wholly inconsistent with the new market entrant
provisions or how EPA would implement such a provision. EPA recognizes
that entities who received allowances as new market entrants are in a
variety of industries, and therefore determining whether they used the
allowances in a manner consistent with the new market provisions would
require us to determine details about scope, criteria, and
implementation across each of the affected industries, i.e., one size
does not fit all. We do not have sufficient information at this time to
make such determinations. The Agency also notes that the vast majority
of these entities did import regulated substances and have had direct
contact with EPA by way of required reporting or direct emails
regarding implementation of the HFC phasedown. Accordingly, EPA is
finalizing an approach that will not require any import activity of new
market entrants for those entities to be eligible for allocation of
calendar year 2024 through 2028 allowances.
    To determine entities' eligibility for allowance allocations, EPA
will rely on data that have been reported pursuant to the 40 CFR part
84 requirements. EPA will rely on data reported no later than February
14, 2023, which aligns with the reporting deadline for fourth quarter
calendar year 2022 HFC reports under the HFC allocation requirements at
40 CFR part 84, subpart A.\21\ Further, EPA is finalizing as proposed
that in cases where allowances were not expended at the time of
production and/or import of HFCs, that production and import would not
count as activity for eligibility purposes. In other words, EPA will
only consider production and import of HFCs where allowances were
expended as required when determining whether an entity is eligible for
allowances. For example, imports where entities received non-objection
notices for transformation or destruction, and imports where entities
have notified EPA of transhipments consistent with our regulations will
not be eligible for consideration when determining whether an entity is
eligible for allowances. Additionally, entities who imported or
attempted to import regulated HFCs in 2022 (absent 2021 import
activity) without the necessary allowances will not be eligible to
receive allowances beginning in 2024, even if they had historic import
activity between 2011 and 2019. The distinction of 2022 versus 2021
import activity is integral in this particular circumstance because
there were no HFC phasedown-driven limits on import activity in 2021,
whereas the phasedown of HFCs instituted controls on import activity by
way of consumption allowances beginning in 2022. To reiterate, entities
who had production or import activity in either 2021 or 2022 would be
eligible for production and/or consumption allowances, unless an entity
only has activity in 2022 that occurred without any required allowance
expenditure.
---------------------------------------------------------------------------

    \21\ For more information, visit https://www.epa.gov/climate-hfcs-reduction/hfc-allocation-rule-reporting-and-recordkeeping.
---------------------------------------------------------------------------

    Related to the criteria for appropriate entities to receive
allowances, the Allocation Framework Rule provides an extensive
discussion of how EPA may remedy activity by entities that violate DoC
and CBP trade laws via administrative consequences. The proposed
rulemaking associated with this final rule did not explicitly speak to
these types of anticompetitive behaviors, e.g., AD/CVD findings, or any
potential remedies. However, the Agency received at least eight
comments during the public comment period for this proposed rulemaking
offering a variety of mechanisms for how EPA may address such behavior.
One set of suggestions was for the Agency to either not issue
allowances to, or revoke allowances from, entities who have
circumvented AD/CVDs because their share of the U.S. HFC market was
initially established through the sale of unfairly traded (i.e.,
dumped) imports and that share was subsequently maintained based on
circumvention of the antidumping duty orders issued by the DoC.
Commenters suggested that any otherwise unissued or revoked allowances
should be distributed to domestic producers of HFCs.
    As discussed elsewhere in the preamble, EPA has determined that it
is not appropriate to base allowance allocation calculations on any
unfair trade practices that have happened in the past, specifically in
the 2011 through 2019 timeframe before the AIM Act was enacted and
before EPA began the Congressionally-mandated phasedown of HFCs.
However, EPA emphasizes that the Agency is concerned about companies
not complying with all trade provisions applicable to the import of
HFCs, including any AD/CVDs, as violations of such provisions may
create an unequal environment. In the Allocation Framework Rule, EPA
finalized a requirement that any entity importing HFCs subject to an
AD/CVD order issued by DoC that received allowances must provide
documentation of payment of the AD/CVD duties for HFCs imported from
January 1, 2017, through May 19, 2021, the date of the proposed
rulemaking, or provide evidence that those imports were not subject to
AD/CVD for those years. Commenters also suggested applying
administrative consequences to the allowances of circumventing
importers; eliminating or reducing the ability for circumventing
importers to transfer allowances; and, reducing allowance amounts for
circumventing importers (the last of

which is discussed elsewhere in the preamble). As discussed in the
Allocation Framework Rule, there are a variety of situations or
circumstances in which EPA may exercise its authority and discretion to
levy administrative consequences. This would include a situation where
an entity has not paid a required AD/CVD within the required time
frame. However, EPA's determination to issue administrative
consequences is generally separate from this rulemaking and would be
based on the specific situation or circumstance identified. EPA will
continue to consult intergovernmental partners, e.g., CBP, as
appropriate.

D. Can allowances be transferred or conferred prior to the calendar
year?

    EPA proposed to clarify 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. In
the Allocation Framework Rule EPA established 40 CFR 84.5(d), which
provides that all production, consumption, and application-specific
allowances are valid only for the calendar year for which they are
allocated (i.e., January 1 through December 31). The intent of this
provision was to state that allowances could only be expended in the
calendar year for which they were issued. However, EPA recognized at
proposal that use of the term ``valid'' could be read as ambiguous with
regard to whether it allows for transfers and conferrals before the
calendar year. Allowances can only be expended to cover imports or
production in the calendar year for which they are allocated, but EPA
proposed to amend 40 CFR 84.5(d) to more clearly state that entities
may confer or transfer allowances before January 1 of the calendar
year.
    Commenters widely supported EPA's proposed revision to resolve
potential ambiguity. Commenters stated that this clarification will
smooth business transactions and reduce potential delays. EPA received
no adverse comment on this proposed revision. As a result, EPA is
finalizing the proposed amendment to the prohibition in 40 CFR 84.5(d)
to more clearly state that entities may transfer and confer their
allowances upon their allocation, including ahead of January 1 of the
calendar year for which the allowances were allocated. This amendment
does not permit an allowance holder to expend an allowance valid in one
calendar year in any other year, e.g., a calendar year 2024 allowance
can only be expended for a regulated substance produced or imported in
2024 even if the allowance was transferred or conferred in the last
quarter of 2023.
    The Agency hopes that this added clarity will facilitate allowance
holders' planning for that upcoming year. EPA encourages allowance
holders, including application-specific allowance holders, to undertake
transfers and conferrals early in the year and, where possible, well in
advance of when regulated substances would need to be produced or
imported. For more information on when a producer and importer must
possess and expend allowances, see 40 CFR 84.5, with the changes being
finalized in this rule discussed in section V.A of this preamble.
    EPA also received comments stating that the existing 5 percent
transfer offset was too high. Multiple commenters recommended that the
Agency reduce the offset, such as to 1 percent or 0.1 percent, to
encourage transfers and facilitate a smoothly operating transfer
market. One commenter directly asserted that EPA effectively reopened
the 5 percent offset provision because the offset is directly related
to EPA proposals to clarify the timing of allowance transfers and other
transfer-related provisions concerning the submittal of importer of
record information, requirements related to transfers, and those
required of repackagers.
    EPA responds that the Agency did not reopen the transfer offset
provisions in this rulemaking's proposal, did not solicit comments on
the matter, and did not propose revisions to the transfer offset
provisions. Comments on this issue are out of scope for this
rulemaking. Generally speaking, an agency reopens an issue when it
either explicitly or implicitly indicates it is reexamining its former
choice. National Min. Ass'n v. U.S. Dept. of Interior, 70 F.3d 1345,
1351 (D.C. Cir. 1995). A reviewing court will consider whether ``the
entire context'' of a rulemaking demonstrates that the Agency is
substantively reconsidering an existing regulation. Growth Energy v.
EPA, 5 F.4th 1, 21 (D.C. Cir. 2021). Nothing in EPA's proposal suggests
that EPA was substantively reconsidering the transfer offset amount.
The proposal to clarify the timing of allowance transfers in 40 CFR
84.5(d) in no way implies that EPA is reconsidering the transfer offset
amount codified in 40 CFR 84.19(a)(1). Neither does the invitation for
comment on the proposed new paragraph in 84.19(a)(5) clarifying that
allowances can be expended by companies with specified affiliation
without a transfer. See, e.g., National Ass'n of Reversionary Property
Owners v. Surface Transp. Bd., 158 F.3d 135, 142 (D.C. Cir. 1998)
(``When an agency invites debate on some aspects of a broad subject . .
. it does not automatically reopen all related aspects including those
already decided.'').
    Even if this issue was reopened as part of this rulemaking, which
it was not, commenters did not provide any information that would lead
EPA to change its decision as to the appropriate parameters for the
transfer offset provision. As discussed in the Allocation Framework
Rule at 86 FR 55154, the AIM Act provides significant discretion to EPA
in choosing an appropriate offset level. The Agency considered public
comments during development of the Allocation Framework Rule and
concluded that a five percent offset was the right value to balance a
net environmental benefit without creating an overly burdensome
requirement that would discourage trading necessary to meet market
demands. Allowances are issued to companies at no cost and transferors
retain 95 percent of the value of something provided for free if they
choose to transfer those allowances. Furthermore, allowances are not a
property right of the allowance holder and EPA has been directed by
Congress to require an offset if companies choose to transfer those
allowances. EPA is not taking final action with respect to the transfer
offset provisions in this rulemaking.

IV. How is EPA updating the consumption baseline?

    Subsection (e)(1) of the AIM Act directs EPA to establish a
production baseline and a consumption baseline and provides the
equations for doing so. In the Allocation Framework Rule, EPA initially
calculated and codified the production and consumption baselines
according to the formulas outlined in subsection (e)(1) of the AIM Act.
In this rulemaking, the Agency proposed to update the consumption
baseline to account for corrected data. In this action, EPA is
finalizing an updated consumption baseline, and associated phasedown
schedule, to account for these corrected data.
    The AIM Act instructs EPA to calculate the consumption baseline by,
among other things, using the average annual quantity of all regulated
substances consumed in the United States from January 1, 2011, through
December 31, 2013. In subsection (e)(2)(C) of the AIM Act, Congress
provided the HFC phasedown schedule measured as a percentage of the
baseline. In the Allocation Framework

Rule EPA codified the consumption baseline as 303,887,017 MTEVe at 40
CFR 84.7(b)(2) and the total allowance quantities that could be
allocated for each year at 40 CFR 84.7(b)(3). A complete description of
EPA's process in developing the codified baseline figure can be found
in the Allocation Framework Rule at 86 FR 55137-55142.
    After EPA finalized the Allocation Framework Rule, one company
informed EPA that the 2011 and 2012 HFC import data that it had
reported to the GHGRP and certified per 40 CFR 98.4(e)(1) as true,
accurate, and complete under penalty of law, was, in fact,
significantly more than its actual import quantities. Because EPA used
the company's 2011 and 2012 HFC import data in the calculation of the
consumption baseline, the Agency's calculated and codified consumption
baseline was high. The company then submitted and certified revised
reports. EPA verified the corrected data by reviewing the importer's
invoices and comparing the reported data to import data provided by
CBP.
    In this rulemaking, the Agency proposed to update the consumption
baseline and associated phasedown schedule based on corrected and
verified data from the one company that identified an error in its
historic reporting. Specifically, EPA proposed to revise the
consumption baseline from 303,887,017 MTEVe to 300,257,386 MTEVe, a
decrease of 3,629,631 MTEVe, to account for that error. The Agency also
stated that it would include any additional verified data revisions
from the 2011 through 2013 timeline in the revision to the consumption
baseline.
    As described in the proposal, separate from and concurrent with
this rulemaking, EPA provided an opportunity for entities to verify,
and if necessary correct, the data \22\ available to EPA on those
entities' historic consumption activities from 2011 through 2021 for
purposes of the AIM Act. EPA sent an electronic communication or letter
to all entities that were known, or likely, to have had consumption
activity of regulated substances from 2011 through 2021 that they had
until September 26, 2022, to verify, and if necessary correct, the data
available to EPA on those entities' historic consumption activities
from 2011 through 2021.\23\
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    \22\ These data were certified per 40 CFR 98.4(e)(1) by the
importer as true and accurate under penalty of the CAA at the time
of original submission.
    \23\ This request was for purposes of implementing the AIM Act.
Nothing in this letter or in the complementary process described
below relieves any entity of obligations under the GHGRP regulations
codified in 40 CFR part 98. EPA notes that failure to submit a
report or reporting a fraudulent report may be considered a
violation of the CAA subject to penalties and fines.
---------------------------------------------------------------------------

    EPA provided further notice through this rulemaking's proposal of a
final opportunity to submit corrected data to the Agency through e-GGRT
by the close of the comment period on December 19, 2022, in the case
that any entity with consumption activity of regulated substances from
2011 through 2021 did not receive a letter or electronic communication
from EPA. To allow EPA to verify the reported data in a timely manner,
anyone reporting past consumption data for the first time must have
provided transactional records (e.g., bills of lading, invoices, or CBP
entry forms). Through EPA's data review, approximately 10 additional
entities provided verifiable revised values for reporting years 2011
through 2013.
    Multiple commenters supported EPA's proposal to adjust the
consumption baseline to reflect corrected historical data. With respect
to adverse comments on the proposal, one commenter expressed concern
that the consumption baseline does not reflect the market's growth
since the baseline years of 2011 through 2013. Another commenter stated
that the Agency should account for an anticipated need of additional
HFCs for heat pumps, and underreporting due to smaller producers and
importers being under the threshold of reporting to the GHGRP, by
increasing the consumption baseline.
    EPA disagrees with comments opposed to EPA's proposal. Subsection
(e)(1) of the AIM Act provides specific formulas that describe how to
establish the baselines and specifies data that enter into these
formulas. In this rulemaking's proposal, the Agency described the data
collection and verification efforts used in the Allocation Framework
Rule to establish the consumption baseline and in this rulemaking to
revise the consumption baseline (86 FR 66382-66383). EPA does not have
discretion to increase the consumption baseline based on one
commenter's understanding of market growth after the baseline years,
which are identified in the statute, or another commenter's claims
regarding possible future demand. In response to one commenter's
suggestion that EPA needs to adjust the baseline to account for
underreporting due to smaller producers and importers being under the
threshold of reporting to the GHGRP, EPA disagrees with the commenter's
premise that there is a notable flaw in EPA's codified baseline as a
result of GHGRP reporting thresholds. As discussed in the Allocation
Framework Rule (86 FR 55140-55141), the Agency used multiple
appropriate sources of data to calculate the consumption baseline,
conducted significant outreach in its data collection efforts, and
specifically attempted to contact through letters and emails companies
that may not have been reporting to GHGRP because they were below the
GHGRP reporting threshold. EPA has also provided extensive public
notification through a variety of venues of how reported data is used
to establish the baseline. Entities have had numerous opportunities to
correct potential underreporting due to being under the threshold of
reporting to the GHGRP. The Agency used this more complete dataset,
including later opportunities to correct data as described in this
section, to establish and update the consumption baseline. The proposal
in this rulemaking to adjust the consumption baseline was narrowly
limited to correcting data that contribute to the previously
established consumption baseline and through the processes described
above, and did not implicate the general approach used to calculate the
baseline.
    One commenter stated that the baseline data should be open and
searchable so the public can review and identify errors. As noted in
the initial Notice of Data Availability (86 FR 9059, February 11, 2021)
and the Allocation Framework Rule (86 FR 55191-55195), the Agency
acknowledges the importance of data transparency and accountability.
EPA intends to release certain available data to the public while
respecting information entitled to confidential treatment. The most
recent release of data is available at https://www.epa.gov/ghgreporting/ghgrp-data-relevant-aim-act. However, the company-specific
data, including production, import, export, and destruction data, used
to establish the baselines are confidential and cannot be publicly
released. As discussed in the Allocation Framework Rule (86 FR 55192),
many of the data elements reported to 40 CFR part 98 subpart OO were
determined to be, and are treated as, confidential by EPA (see, e.g.,
76 FR 30782, May 26, 2011; 76 FR 73886, November 29, 2011; 77 FR 48072,
August 13, 2012, 78 FR 71904, November 29, 2013; and, 81 FR 89188,
December 9, 2016).\24\ Transactional records also include information
that is not publicly available. EPA has provided aggregated information
concerning baseline data as available,

such as in a memorandum titled ``HFC Production and Consumption Data--
Final Rule'', available in the docket for the Allocation Framework Rule
(Docket ID No. EPA-HQ-OAR-2021-0044). In this action the Agency is
providing additional aggregated information concerning changes to the
consumption baseline in a memorandum titled, ``Docket Memo on Revisions
to HFC Consumption Baseline'', available in the docket for this
rulemaking. However, given the confidentiality of most data involved in
the Agency's baseline calculation, it is not feasible for EPA to
release information detailed enough to meet the commenter's request for
an open and searchable dataset that allows the public to review and
identify discrepancies to the baseline data while respecting existing
confidentiality determinations and governing regulations.
---------------------------------------------------------------------------

    \24\ For a summary, see https://www.epa.gov/sites/production/files/2020-09/documents/ghgrp_cbi_tables_for_suppliers_8-28-20_clean_v3_508c.pdf.
---------------------------------------------------------------------------

    As part of EPA's review process, EPA also identified an additional
update to be made to the consumption baseline calculation to improve
accuracy. Specifically, EPA reviewed offsite transformation and
destruction totals reported by companies for the 2011-2013 period,
and--after filtering out totals already reported elsewhere as onsite
transformation and destruction--subtracted these totals from overall
consumption. Additional information on this change can be found in the
memorandum titled, ``Docket Memo on Revisions to HFC Consumption
Baseline'', available in the docket for this rulemaking. EPA changed
the production baseline in a separate action to reflect the additional
transformation and destruction identified.
    Based on the considerations discussed above, EPA is finalizing
updates to the codified consumption baseline with the corrected data.
Incorporating the corrected data from this rulemaking's proposal, and
further updates separate from this rulemaking, EPA is revising the
consumption baseline from 303,887,017 MTEVe to 302,538,316 MTEVe, which
is a decrease of 1,348,701 MTEVe. The Agency reiterates here that EPA
did not reopen the production baseline in this rulemaking.
    The revision of the consumption baseline amounts to less than a 1
percent change in the baseline. Once EPA applies the relevant phasedown
step to the baseline and then allocates the resulting allowances among
eligible recipients, the change in the consumption baseline is expected
to have a small effect on individual entities' allocations. Further,
this revised consumption baseline starts affecting allowance
allocations for calendar year 2024. Because of the prior framing of
EPA's regulations, specifically the fact that there was no prior
allocation methodology that would apply to calendar year 2024
allowances and beyond, no entities should have had a reasonable
expectation of allowance allocation levels for any individual entity.
Therefore, EPA expects that this alteration of the consumption baseline
will not affect the regulated communities' reasonable reliance
interests.
    Revising the consumption baseline changes the total consumption cap
in MTEVe for regulated substances in the United States in each year
after the revision takes effect. Therefore, EPA is revising the table
of production and consumption limits at 40 CFR 84.7(b)(3) by replacing
the current values in Table 2, column 2 of this preamble with the
values in column 3.

                             Table 2--Revised Limit of Total Consumption Allowances
----------------------------------------------------------------------------------------------------------------
                                                                  Previously codified
                             Year                                  total consumption          Revised total
                                                                        (MTEVe)            consumption (MTEVe)
----------------------------------------------------------------------------------------------------------------
2024-2028.....................................................              182,332,210              181,522,990
2029-2033.....................................................               91,166,105               90,761,495
2034-2035.....................................................               60,777,403               60,507,663
2036 and thereafter...........................................               45,583,053               45,380,747
----------------------------------------------------------------------------------------------------------------

V. How is EPA revising requirements related to allowances for import?

    EPA made several proposals based on the experience gained in
implementing the HFC phasedown program to date under the existing 40
CFR part 84 regulations. In this section, EPA discusses amendments to
codify the point in time that an allowance must be expended as well as
who can expend allowances. We also discuss a regulatory amendment to
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 substance (such as HFC-
134a) or whether the HFC is part of a multicomponent substance (such as
HFC refrigerant blend R-410A). Additionally, EPA discusses a proposed
amendment concerning importation of heels when the precise weight of a
container of regulated substances in unknown, which EPA is not
finalizing.

A. Codifying the Point in Time That an Allowance Must Be Expended To
Import Regulated Substances

    Under 40 CFR 84.5(b)(1) EPA prohibited persons from importing bulk
regulated substances except, among other conditions and with limited
exceptions, ``[b]y expending, at the time of the import, consumption or
application-specific allowances in a quantity equal to the exchange
value-weighted equivalent of the regulated substances imported.''
Through implementing the HFC allocation system, EPA has described the
exact point in time used to determine which calendar year allowance
would need to be expended for each import of a regulated substance. EPA
has spoken explicitly to this issue, including through a December 21,
2021, post on our HFC phasedown Frequently Asked Questions web
page.\25\ EPA stated that a marine vessel waiting off the coast of the
United States in December 2021, that berthed in January 2022, would be
required to expend a calendar year 2022 allowance for any HFCs that
berth at a port in the United States in 2022. EPA proposed to
incorporate this previously stated interpretation into the 40 CFR part
84 regulatory text. Specifically, EPA proposed to revise the
prohibition language in 40 CFR 84.5(b)(1)(i) to remove the point that
an allowance must be expended ``at the time of import'' and instead
require that an allowance be expended at the time of ship berthing \26\
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.
---------------------------------------------------------------------------

    \25\ EPA. Phasedown of Hydrofluorocarbons Final Rule Frequently
Asked Questions. https://www.epa.gov/climate-hfcs-reduction/phasedown-hydrofluorocarbons-final-rule-frequently-asked-questions.
    \26\ EPA has and continues to interpret berth to mean ``to moor
(a ship) in its allotted place at a wharf or dock.''
---------------------------------------------------------------------------

    A few commenters noted their support of EPA's proposal to codify
the point in time that an allowance must be expended to import bulk
regulated substances. One commenter noted that finalizing this proposal
would serve to reduce uncertainty. EPA received no adverse comments on
this proposal.
    EPA is finalizing the regulatory revisions as proposed to
incorporate the Agency's preexisting interpretation on when an
allowance must be expended to import bulk regulated substances.
Providing specificity on this point in the regulations helps ensure
consistent and accurate accounting associated with allowance use for
all importers. For context, the point in time that a vessel berths, a
truck or other vehicle crosses the border for land arrivals or the
first point of terminus in U.S. jurisdiction for planes may be
reflected as the ``Conveyance Arrival'' date for shipments, which
importers or their brokers with access to the Automated Broker
Interface (ABI) may find through an ACE Cargo Manifest/In-Bond/Entry
Status Query. However, regardless of the date identified in ABI as the
``Conveyance Arrival,'' it is the importer of record's obligation to
ensure that it has expended the appropriate calendar year allowances in
the appropriate quantity and at the appropriate time to align with
regulatory requirements.
    EPA is not amending the regulatory definition of ``import.'' The
Allocation Framework Rule at 40 CFR 84.5(b)(1)(i) prohibits the
importation of bulk regulated substances without expending the required
allowances, with limited exceptions. Since the definition of ``import''
in the AIM Act and the 40 CFR part 84 regulations finalized in the
Allocation Framework Rule includes an ``attempt to land on, bring into,
or introduce into, any place subject to the jurisdiction of the United
States,'' it is clear that the existing statutory and regulatory
framework prohibit an entity from attempting to land, bring, or
introduce regulated substances into the United States without expending
the required allowances, unless the importer meets one of the limited
exceptions in the regulations. EPA does not intend or interpret this
regulatory definition to narrow prohibited behavior as defined under
the AIM Act and the associated scope of liability with attempts to
land, bring, or introduce regulated substances into the United States
without requisite allowances.
    To codify this position clearly, EPA proposed to add language at 40
CFR 84.5(b) that states: ``No person may attempt to land bulk regulated
substances on, bring regulated substances into, or introduce regulated
substances into, any place subject to the jurisdiction of the United
States without meeting one of the categories set forth in 40 CFR
84.5(b)(1).'' EPA did not receive any adverse comments on this proposal
and is finalizing this requirement as proposed. These changes to 40 CFR
84.5(b) do not alter the existing scope of liability for attempting to
land, bring, or introduce regulated substances into the United States
without requisite allowances.
    EPA proposed an alternative to revise the text at 40 CFR
84.5(b)(1)(i) to specify that the calendar year allowances that must be
expended are based on the time a ship berths for vessel arrivals,
border crossings for land arrivals, and first point of terminus in U.S.
jurisdiction for arrivals via air. This alternative proposal focused on
defining which calendar year of allowances would be required to be
expended rather than the precise point in time an allowance needs to be
expended. EPA did not receive any comments that supported this
alternative proposal or otherwise advocated for the Agency to take this
pathway at finalization over the primary proposal. As noted earlier in
this section, EPA is finalizing the primary proposal to codify the
point in time an allowance must be expended, so the Agency is not
finalizing this alternative.
    EPA noted at the proposal stage that if the Agency were to finalize
the proposed regulatory revision to 40 CFR 84.5(b)(1)(i), EPA proposed
to also require 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 under 40 CFR 84.31(c)(7). A few commenters
were opposed to this aspect of EPA's proposal. One commenter noted that
since the purpose of the advance notification requirement is for EPA to
confirm that an importer has sufficient allowances available to import
a regulated substance, this additional requirement is unnecessary since
an entity must have allowances before being notified that they may
proceed with an import. Another commenter noted that EPA had not fully
analyzed whether this proposed requirement was necessary considering
other enforcement and compliance tools. EPA agrees to some extent with
commenter's characterization. As explained in the Allocation Framework
Rule, the advance notice reporting requirement is intended to allow
``EPA to verify if allowances are available or the HFCs have prior
approval for import in the case of HFCs imported for destruction or
transformation under 40 CFR 84.25, or imported for transhipment under
40 CFR 84.31(c)(3), and confirm whether a shipment should be allowed to
clear Customs or not'' (86 FR 55186). However, the advance notice
reporting requirement cannot function as intended without an entity
possessing allowances at the time the notification is made. For
example, if an entity received a transfer of allowances moments before
a ship berthing, that entity would have allowances at the time the
allowances must be expended, but the advance notification process would
not have been able to function as intended. If an entity does not
possess requisite allowances for the import of bulk regulated
substances at the time of the advance notice reporting, EPA will not be
able to verify if allowances are available and whether the shipment
meets EPA's HFC requirements to be released from CBP's custody. Given
that advance reporting is required near in time to when allowances must
be expended, EPA does not anticipate this requirement would be a burden
on regulated entities but does anticipate it would have significant
benefits for EPA implementation and enforcement efforts. For example,
ensuring that entities possess the requisite allowances for an import
of bulk HFCs at the time of advance notice reporting will help decrease
unnecessary EPA review of shipments, which in turn will help decrease
delay in CBP clearance. Entities will be better positioned to take
legal possession of their bulk HFC goods from both an EPA and CBP
perspective as soon as possible. Therefore, EPA is finalizing the
requirement as proposed.

B. Who must expend allowances for import?

    EPA proposed to specify that only the importer of record can expend
allowances for an import of regulated substances. One commenter agreed
that this proposed requirement ``facilitates clarity, transparency and
accountability'' and that it is consistent with customs law for the
importer of record to be the sole designated party in this regard. EPA
acknowledges the commenter's support. EPA received no adverse comment
on this proposal. For the following reasons, EPA is finalizing this
amendment as proposed. Under CBP requirements, the importer of record
is ultimately responsible for the correctness of the entry
documentation and all associated duties, taxes, and fees.\27\
Specifying that only the importer

of record can expend allowances for an import facilitates clarity,
transparency, and accountability. It can be difficult for EPA to
compare import records and other filings from CBP against advance
notification records and the balance sheet of existing allowance
holders without a clear expectation of how the entity that will expend
allowances for an import of regulated substances would be identified in
CBP filings. This can slow down EPA and CBP processing of imports at a
minimum, and in the worst-case scenarios can hamper EPA's ability to
identify shipments to be held at the border to halt potentially illegal
shipments from entering the United States. As a real-world example,
during EPA review of HFC imports, there was a single import entry with
six unique entities (referred to as parties), where at least three
parties, based on their named roles in the entry, could expend
allowances to cover the import under EPA's existing regulations. This
situation can be particularly confusing and lead to uncertainty if
multiple listed parties in an entry are allowance holders. Requiring
that only the importer of record may expend allowances for a shipment
addresses this difficulty because EPA will be able to advise CBP to
hold or deny entry of merchandise where the importer of record is not
an allowance holder or had not filed appropriate reports for the
destruction, transformation, or transhipment of imported merchandise.
---------------------------------------------------------------------------

    \27\ CBP. Tips for New Importers and Exporters. https://www.cbp.gov/trade/basic-import-export/importer-exporter-tips.
---------------------------------------------------------------------------

    Making the regulatory change will help strengthen EPA's ability to
track the importation of regulated substances and expenditure of
allowances and support compliance assurance. The Agency is also
concerned about instances where allowance holders may try to circumvent
the requirements in 40 CFR 84.19, including but not limited to the
requisite offset for inter-company transfers of allowances. EPA has
received inquiries from entities seeking to facilitate imports on an
allowance holder's behalf where the facilitating entity would be listed
on all available CBP paperwork and appear in meaningful ways to be the
``importer.'' In such instances, it would seem that the facilitating
entity is truly importing regulated substances, and using a separate
entity's allowances to do so. In such an instance, it seems more in
line with existing EPA regulations and the AIM Act that either the
allowance holder take on the role as the importer of record or for the
allowance holder to transfer allowances to the facilitating entity.
    EPA also proposed amending 40 CFR 84.5(b) to make it clear that a
person who meets the definition of an importer will be liable unless
they can demonstrate that the importer of record possessed and expended
the appropriate allowances. The Allocation Framework Rule at 40 CFR
84.3 defines ``importer'' broadly to include the importer of record and
any person who imports a regulated substance into the United States,
the person primarily liable for the payment of any duties on the
merchandise or an authorized agent acting on his or her behalf, the
consignee, the actual owner, and the transferee, if the right to draw
merchandise in a bonded warehouse has been transferred. This would
revise regulations established through the Allocation Framework Rule at
40 CFR 84.5(b)(2) that state that ``[e]ach person meeting the
definition of importer for a particular regulated substance import
transaction is jointly and severally liable for a violation of
paragraph (b)(1) of this section, unless they can demonstrate that
another party who meets the definition of an importer met one of the
exceptions set forth in paragraph (b)(1).'' EPA received one supportive
comment on this proposal noting that it would help EPA enforce the
phasedown program. EPA received one adverse comment on this proposal
from an entity that argued that entities that are not the importer of
record would not have sufficient knowledge of the import transaction to
ensure regulatory compliance and would not have the ability to force an
importer of record to comply with EPA regulations. The commenter also
argues that EPA's proposed amendment would not enhance compliance, but
rather inject confusion into the process and have a potentially harsh
result on ``parties who have not done anything wrong and do not have
the knowledge or control over the transaction to ensure compliance.''
The commenter also notes that EPA's proposal is untenable for customs
brokers.
    EPA notes at the outset that under EPA's proposed change, a customs
broker would not be liable unless they fall under the regulatory
definition of importer. If a customs broker is only acting as a broker,
EPA understands that the broker would not fall under the regulatory
definition of ``importer'' and therefore would not have any potential
liability. If, for example, a customs broker also took on the role as a
consignee, then the entity would fall under the regulatory definition
of ``importer'' and could have potential liability if bulk HFCs were
imported without expenditure of the requisite allowances. Moving beyond
the specific point on customs brokers, adding language in 40 CFR
84.5(b) tied with the regulatory definition of ``importer'' helps EPA
maintain the integrity of the HFC Allocation Program by imposing broad
liability on parties involved in importing HFCs. EPA disputes the
commenter's contention that entities falling under the definition of
``importer'' are too far removed from the transactional process to have
requisite knowledge to ensure allowances are appropriately expended.
EPA also notes that parties could contractually allocate risk through
their business relationships. While this may be an alteration of
preexisting business practices, EPA believes that this is a worthwhile
alteration because without this approach, EPA could be forced to pursue
enforcement actions for illegal imports against insolvent entities or
entities without assets in the United States. While the importer of
record must be the entity possessing and expending allowances for
imports of bulk regulated substances, making this regulatory amendment
clarifies that if this requirement is not met, EPA has discretion to
pursue enforcement action and/or administrative consequences on all
entities that meet the definition of importer for violations of those
requirements. Given these considerations, EPA is finalizing this
amendment as proposed.

C. Existing Requirement To Expend Allowances for Regulated Substance
Components of Blends

    In addition to clarifying when an allowance must be expended and
the entity permitted to expend allowances for import, EPA proposed to
revise 40 CFR part 84.5(b)(1) 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 substance, i.e., neat substance, or
whether the HFC is part of a multicomponent substance, i.e., a blend or
mixture containing one or more regulated substances. EPA is finalizing
this clarification as proposed.
    EPA stated in the Allocation Framework Rule ``allowances [are]
necessary to produce or import [a] blend, or more precisely, the
regulated HFC components contained in the blend'' (86 FR 55142). Under
the Agency's existing regulations, the requisite number of allowances
to import a multicomponent substance in bulk is determined by the
exchange values of the blend components that are regulated substances.
As EPA explained in the Allocation Framework Rule, if a blend contains
multiple regulated

substances, then the exchange values of each component are used to
determine the number of necessary allowances (86 FR 55133-55134). If a
blend contains components that are not regulated substances, then those
components are not included in determining the number of necessary
allowances. While the Allocation Framework Rule already made this
requirement clear, we proposed to revise the regulations so that they
more explicitly reflect the already existing requirement to expend
allowances for import of bulk multicomponent substances equivalent to
the EVe quantity of regulated substance components contained within the
blend. This proposed change to the regulations would therefore further
enhance clarity but would not change the scope of existing
requirements.
    One commenter asserted that EPA does not have the authority to
require allowances for HFC blends. The commenter cited section
103(c)(3)(B)(i) \28\ of the AIM Act, specifically ``for the purposes of
phasing down production or consumption of regulated substances'' as
reason for why the statute does not authorize EPA to require producers
or importers of HFC blends to acquire or hold allowances. They continue
that section 103(c)(3)(B)(ii) subsequently states that the prohibition
on designating HFC blends ``does not affect the authority of the
Administrator to regulate under this Act a regulated substance within a
blend of substances.'' The commenter argues that the language is not
itself a grant of regulatory authority, but rather clarifies that any
other authority of EPA to regulate is not diminished by subsection (i),
and that subsection (ii) does nothing more than preserve EPA's ability
to regulate HFC blends in ways that do not implicate ``phasing down
production or consumption.'' The commenter asserts that
103(c)(3)(B)(ii) cannot permissibly be interpreted as a separate grant
of authority to EPA to require allowances for HFC blends based on the
chemical feedstocks that were used to produce those HFC blends before
the products were imported into the United States, and that such a
reading would allow EPA for all practical purposes to treat HFC blends
as regulated substances, which is exactly what subsection (i)
prohibits. Instead, the commenter suggests that if Congress had
intended for EPA to require allowances for HFC blends, it could have--
and arguably would have--so stated in clear simple language. The
commenter argues that Congress chose to specifically prohibit EPA in
subsection (ii) from designating or regulating blends for phase-down
purposes, while leaving intact EPA's authority to regulate HFC
components for purposes other than the HFC phasedown.
---------------------------------------------------------------------------

    \28\ While EPA is duplicating the comment's method of citing the
AIM Act in summarizing the comment, we understand the comment to be
referencing 42 U.S.C. 7675(c)(3)(B)(i)-(ii), which we primarily
refer to as subsection (c)(3)(B)(i)-(ii) of the AIM Act.
---------------------------------------------------------------------------

    In further support of their views on this topic, the commenter
asserts that HFC blends are chemical mixtures created by physically
combining component HFCs into a new product that has unique physical
chemical properties, including being an azeotropic mixture in which the
gaseous components physically interact to create new behaviors. They
note that HFC blends cannot be easily separated back into their
component feedstocks without complex fractionation equipment, and for
all practical purposes, an HFC blend is an entirely different substance
than the chemical components from which it was manufactured, i.e., the
original HFC feedstocks that were used to manufacture the blend lose
their individual identity and become part of a new substance.
    EPA disagrees with the commenter's characterizations and
contentions. The arguments raised by this commenter were recently
raised to, and rejected by, the D.C. Circuit in a challenge to the
Allocation Framework Rule. Heating, Air Conditioning & Refrigeration
Distributors Int'l v. EPA, No. 21-1251 (D.C. Cir. June 20, 2023) (``EPA
has statutory authority to regulate HFCs within blends . . . because an
HFC within a blend remains a regulated HFC under the Act.''). Importing
a blend of chemicals that includes regulated substances requires
expending allowances to account for the regulated substances within the
blend. This requirement was first introduced in the Allocation
Framework Rule and has been an integral requirement since the beginning
of the HFC phasedown. As relevant here, the regulations finalized in
the Allocation Framework Rule provide that ``[n]o person may import
bulk regulated substances'' except by expending allowances ``in a
quantity equal to the exchange-value weighted equivalent of the
regulated substances imported'' (40 CFR 84.5(b)(1)). In the preamble to
the Allocation Framework Rule, EPA explained that ``allowances [are]
necessary to produce or import [a] blend, or more precisely, the
regulated HFC components contained in the blend'' (86 FR 55142). In
this final rule, EPA is revising 40 CFR part 84.5(b)(1) to 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 substance, i.e., neat
substance, or whether the HFC is part of a multicomponent substance,
i.e., a blend or mixture containing one or more regulated substances.
As described in the Allocation Framework Rule, the necessary number of
allowances to import a blend is determined by the exchange values of
the blend components that are regulated substances, and that existing
requirement is not changed by this rulemaking. Similarly, if a blend
contains multiple regulated substances, then the exchange values of
each component are used to determine the number of necessary
allowances. Likewise, if a blend contains components that are not
regulated substances, then those components are not included in
determining the number of necessary allowances. The statute identifies
in 42 U.S.C. 7675(c)(1) regulated substances by molecular formula, and
chemicals with that molecular formula can be present in a blend even
where there are other substances that are also part of the blend.
    This approach, requiring allowances to import bulk substances
containing regulated substances, whether the regulated substance is
contained in a blend or is a single component substance, is based on a
straightforward reading of the statute. The commenter challenges EPA's
approach based on the savings provision in 42 U.S.C. 7675(c)(3)(B)(i),
but that provision has no relevance here. Subsection (c)(3)(B)(i)
limits EPA's authority to designate additional regulated substances,
but EPA has not and is not designating any blend as a new regulated
substance. Subsection (c)(3)(B)(ii) provides that subsection
(c)(3)(B)(i) ``does not affect the authority of [EPA] to regulate under
this Act a regulated substance within a blend of substances.'' 42
U.S.C. 7675(c)(3)(B)(ii). That provision confirms the congressional
understanding that the default statutory framework allows for
regulation of a regulated substance within a blend of substances, and
EPA does not assert that (c)(3)(B)(ii) is a grant of authority. EPA's
approach here and in the Allocation Framework Rule is exactly what
subsection (c)(3)(B)(ii) states is permissible. Importing a regulated
substance requires expending allowances (see 42 U.S.C.
7675(e)(2)(A)(ii); 40 CFR 84.5(b)(1)). A person who imports a blend
that contains regulated substances is,

necessarily, also importing the regulated substances within that blend,
and, accordingly, must expend allowances for the regulated substances
so imported.
    Any contrary approach would significantly undermine the allowance
program by creating a massive loophole. Under the approach that the
commenter advocates, an importer could blend a regulated substance with
something else--even another regulated substance--and would become
exempt from the annual phasedown limits. Under the commenter's theory,
even a miniscule amount of something else mixed into a regulated
substance could immediately free the resulting mix from regulation
under the allowance program. That would allow for circumvention of the
allowance program and nullify the statutory phasedown of HFC
consumption that Congress directed in the AIM Act. See Cnty. Of Maui v.
Haw. Wildlife Fund, 140 S. Ct. 1462, 1473 (2020) (``We do not see how
Congress could have intended to create such a large and obvious
loophole in one of the key regulatory innovations of [the statute].'').
A blend released to the environment would have a climatic effect based
on its constituent substances as individual molecules, not based on the
fact that it was blended. It would also put domestic producers at a
disadvantage if foreign blends could be imported without being subject
to limits under the allowance program. Many HFCs are imported as blends
currently, and a transition to new blends with lower global warming
potentials is an expected part of the industry's response to the
phasedown of HFCs, including blends of HFCs and hydrofluoroolefins
(HFOs). Under the approach taken in this rule, importing such blends
will still require allowances for the regulated substance components,
although fewer allowances than importing an unblended regulated
substance or a blend that is entirely comprised of regulated
substances. That is important because if the importation of blends were
entirely free from the allowance program, then the allocation program
would not necessarily result in a transition from higher to lower
exchange value blends.
    The commenter's approach would also create a mismatch in the
allowance program. The statute directs EPA to establish the consumption
baseline by considering ``the average annual quantity of all regulated
substances consumed in the United States'' between 2011 and 2013 (see
42 U.S.C. 7675(e)(1)(C)(i)). Consistent with a straightforward reading
of ``all regulated substances consumed,'' EPA included in that quantity
all regulated substances contained within imports of HFC blends.
Specifically, EPA relied largely on data about historic HFC production
and consumption that had been reported to EPA through the GHGRP under
40 CFR part 98, subpart OO (see 86 FR 27164 which describes data
available through GHGRP). Imports of HFCs within blends were required
to be reported under that program (see 40 CFR 98.416(c)(1) (reporting
requirement for bulk imports of fluorinated GHGs); see also 86 FR 9059,
9063, February 11, 2021) (``Under the [GHGRP], each importer and
exporter of [HFCs] must submit an annual report that includes total
mass in metric tons of each [HFC] imported and exported, including each
[HFC] in a product that makes up more than 0.5 percent of the product
by mass.''). Also, when allocating allowances, EPA assigned consumption
allowances to companies by relying largely on historical data reported
to the GHGRP, which included historical imports of HFCs within blends.
Given that regulated substances within blends were part of the baseline
calculation and that historic imports of regulated substances within
blends are considered in the allocation of allowances, there is no
unfairness in requiring the expenditure of allowances for future
imports of regulated substances within blends. On the contrary, if
allowances are not required for the regulated substance components of a
blend, then the allowance program will not operate as intended. That
would mean that the number of available allowances is higher than
otherwise due to historical imports of regulated substances within
blends but that allowances need not be spent for future such imports.
Such a mismatch would undermine the Congress's statutory phasedown
scheme.
    EPA disagrees with the commenter's contention that an HFC blend is
an entirely different substance than if the chemical components were
still in their single substance state. The Agency notes at the outset
that the commenter's use of terms like ``feedstocks'' and
``manufacturing'' \29\ diverges from the Agency's use of those terms.
Creating a blend is a completely different process from producing HFCs
in the first instance, in which feedstock chemicals are entirely
consumed as part of a production process. As described in the materials
provided by the commenter, the blending process may create an
azeotropic mixture among the constituent single component HFCs that
functions in some ways like a single substance (e.g., the entire
mixture has the same boiling point). The Agency notes that an
azeotropic mixture exists in a vapor-liquid equilibrium based on
interactions among the constituents, but the individual components are
not transformed and no new substance is produced. Regulated substances
do not lose their identity when they become part of a blend. As
explained initially in the response to comments to the Allocation
Framework Rule, available in the docket for that action, the components
in a blend (and the amount of each component) can be identified after
blending and separated through technology such as fractionation and
distillation. (see ``Response to Comments'', pg 193, Docket ID No. EPA-
HQ-OAR-2021-0044). De-constituting a blend, while it may involve
reprocessing and upgrading recovered substances through mechanisms such
as filtering and drying, does not require individual constituents of
the blend to undergo any chemically transformational changes.\30\
Because the creation of a blend does not create a new chemical, and the
components are not chemically altered in the process, separating a
blend simply results in unpackaging the individual components. Through
blending, the components form a mixture, not a new compound, and no
chemical bonds are formed or broken in the blending. Unlike the
production of regulated substances, in which a feedstock chemical can
be entirely consumed as part of the production process, HFC components
remain in the blend and are discernable using technology such as
refrigerant analyzers or gas chromatography. Creating a blend merely
involves repackaging existing molecules of HFCs in various ratios. The
commenter has not disputed these facts on the record aside from
blanket, unsupported statements.
---------------------------------------------------------------------------

    \29\ For example, the commenter claims that ``[t]he original
HFCs feedstocks that were used to manufacture the blend lose their
individual identity and become part of a new substance'' (emphasis
added).
    \30\ See, e.g., EPA's draft October 2022 report, ``Analysis of
the U.S. Hydrofluorocarbon Reclamation Market: Stakeholders,
Drivers, and Practices,'' available at https://www.regulations.gov/document/EPA-HQ-OAR-2022-0606-0002.
---------------------------------------------------------------------------

    EPA is finalizing the proposed revision to 40 CFR part 84.5(b)(1)
to more explicitly reflect the existing requirement to expend
allowances for import of bulk multicomponent substances equivalent to
the EVe quantity of components that are regulated substances and are
contained within the blend. As an example, R-410A is a common
refrigerant in air

conditioning and heat pump applications and is composed of an equal
mixture of HFC-32 (difluoromethane) and HFC-125 (pentafluoroethane).
HFC-32 and HFC-125 are regulated substances with exchange values of 675
and 3,500, respectively. 100 kg of R-410A contains 50 kg each of HFC-32
and HFC-125. The exchange value of 100 kg of R-410A is the sum of the
exchange value of the individual components, i.e., 208,750 kg EVe (50 *
675 + 50 * 3500) or 208.75 MTEVe. An entity must expend 208.8
allowances to import 100 kg of R-410A.
    While not a blend, the Agency also wishes to provide additional
clarity on whether refrigerant that contains oil or lubricant would
qualify as a bulk regulated substance. EPA's regulatory definition of
``bulk'' is codified in 40 CFR 84.3, and reads in part, ``. . .A
regulated substance that must first be transferred from a container to
another container, vessel, or piece of equipment to realize its
intended use is a bulk substance. A regulated substance contained in a
manufactured product such as an appliance, an aerosol can, or a foam is
not a bulk substance.'' Most regulated substances sold as refrigerants
also contain a small amount of lubricant or oil. These lubricants are
necessary for the correct functioning of the refrigerant in a air-
condition, refrigeration, or heat pump system. The Agency is clarifying
that regulated HFCs containing lubricants or oil are considered bulk
regulated substances as the HFC must first be transferred a container
to a piece of equipment in order to realize its intended use as a
refrigerant. This is consistent with the preamble discussion on the
same subject in the Allocation Framework Rule (86 FR 55129). Allowances
are necessary for the production or import of these containers of
regulated substances with oil or lubricant.

D. Consideration of Presumed Amount for Heel Imports of Unknown
Quantity

    As established under 40 CFR 84.5(b)(1)(i), any import of bulk
regulated substances in any quantity, including heels, requires the
expenditure of allowances equal to the exchange-value weighted
equivalent of the regulated substances imported. EPA made clear in the
Allocation Framework Rule that the Agency was ``requiring imports of
heels to involve allowance expenditure'' because ``EPA sees no
statutory basis to exempt imports of heels from the requirement to
expend allowances.'' (86 FR 55183). A heel is ``the amount of a
regulated substance that remains in a container after the container is
discharged or offloaded (that is no more than 10 percent of the volume
of the container)'' (40 CFR 84.3).\31\ Some entities have expressed
concern that there may be situations where an entity does not know the
precise weight of the heel imported until the container arrives at the
entity's U.S. facility. Because the heel is the residual remainder left
in a container, entities should know the type of regulated substance of
which the heel is composed, so EPA understands this concern to be that
an entity may not know the precise volume or weight of regulated
substance remaining. An entity needs to know the volume or weight of
the heel to calculate the number of allowances necessary to expend for
the import of that heel.
---------------------------------------------------------------------------

    \31\ EPA views this as an amount that is no more than 10 percent
by weight of the amount of that same substance that is typically
sold in a ``full'' container of that size. For example, if a
``full'' cylinder of HFC-134a typically contains 25 pounds of HFC-
134a, then 2.5 pounds or less of HFC-134a remaining in the cylinder
would be considered a heel.
---------------------------------------------------------------------------

    To address this potential concern, EPA proposed to establish a
standard presumption of an HFC heel content of 10 percent of the total
potential volume of that container in EVe terms, if the heel weight has
not been measured or documented prior to import. Under the proposed
approach, the entity would also have utilized the 10 percent
presumption for the advance notification requirement of 40 CFR
84.31(c)(7). Given the possibility that an importer could have used
this provision to underreport how much HFC they are importing (e.g.,
claiming a heel when the container holds more HFC than 10 percent of
the volume of the container), EPA stated that it could presume the
container is full unless the importer demonstrates otherwise, such as
with records documenting the actual weight. The Agency also requested
comment on whether a provision like this was needed or if importers had
resolved the early concerns with determining the heel weight prior to
import.
    As an alternative, EPA also noted in the proposal that it was
considering an option of allowing the importer of record to submit a
provisional estimate of the quantity of heel imported, but requiring
within a two-week period that the provisional estimate be corrected to
match the exact amount of the imported HFC heel content. EPA invited
comment on how this alternative option could align with the proposal to
codify the point in time that an allowance must be expended to import
regulated substances. The Agency noted that it was unsure how and when
allowances would be expended under this provisional estimate model, and
if allowances are expended based on the provisional estimate, how
expended allowances would be reconciled with the corrected exact amount
of imported heel. EPA also stated it had concerns of what the
enforcement implications of this approach would be and sought comment
on whether such an approach would create avenues for an entity to
illegally import that are not currently present under EPA's existing
regulations.
    In response to EPA's request for comment on whether a provision
like this was needed, one commenter stated that large containers such
as isotanks, tank trailers or rail cars typically have measured weights
and that it expected smaller ton tanks and cylinders (e.g., 30 pound
cylinders typically used for servicing) would be more likely to use
such a provision. However, the commenter did not specify or document
why this would be the case. The commenter did not provide
justification, aside from unsupported assertions, of why practical
considerations of weighing heels in small tanks and cylinders would be
different from larger containers. Even if certain current business
practice does not include the routine weighing of smaller ton tanks and
cylinders prior to imports of heels to the United States, EPA is
unaware of, and the commenter did not explain, why these business
practices could not be changed to ensure that such imports are weighed.
As a result, EPA does not agree that the Agency needs to make revisions
to our existing provisions to address the issue at this time.
    Commenters did not think the proposed 10 percent standard
presumption was appropriate and recommended a lower number. They
asserted that 10 percent is higher than the typical heel content. Some
commenters supported the proposal to establish a standard presumption
under different conditions. One commenter recommended a 5 percent
presumed heel volume and other commenters suggested in a general way a
significantly lower presumption. EPA acknowledges commenters'
opposition to a 10 percent presumption and support for a standard
presumption under different conditions; however, the Agency is not
finalizing a standard presumption in any case, regardless of the
quantity being imported. EPA proposed the standard presumption at the
10 percent level as an inherently conservative estimate of what
quantity would be a heel in a container, but commenters note that this
presumption may be too high for some imports of heels. Using this
presumption could

result in importers expending more allowances than were needed for the
import if the actual heel volume was below the standard presumption.
While any presumption is open to abuse, lowering the presumption makes
it more likely that fewer allowances are expended than would normally
be required if the heel amount was actually higher. This would be
especially true if EPA does not revise the definition of heel to lower
the percentage from 10 percent. For example, if a heel can be up to 10
percent by volume, but the standard presumption for imports is five
percent, an importer could underreport by up to five percent of the
volume and not violate EPA's regulations. Such an approach would be
contrary to corresponding prohibitions in subsection (e)(2)(A)(ii) of
the AIM Act and 40 CFR 84.5(b)(1)(i). The Agency noted concern for the
potential to circumvent expending the necessary allowances if the
Agency were to adopt a lower standard presumption. Commenters did not
provide information which would alleviate EPA's expressed concerns that
importers could use this provision to underreport the amount of HFCs
they are importing and not expend the correct corresponding number of
allowances. As a result, EPA is not finalizing any changes and is not
establishing a standard presumption or a change to the definition of
``heel.''
    Several commenters supported EPA's alternative approach
contemplating consideration of allowing a provisional period to
measure, report, and expend allowances for heels that are not measured
prior to import. However, the commenters stated that a two-week
provisional period to report the measured weight was too brief due to
geographic and logistical concerns. The commenters suggested instead a
three-week provisional period. One commenter stated without supporting
information that the smaller shipments most likely to use such a
provision would need the additional time to reach their destination and
be weighed. Commenters who supported a provisional period suggested
that entities could submit corrected weight information to EPA
electronically. EPA acknowledges commenters' interest in the idea that
EPA introduced at proposal regarding a provisional period, but the
Agency remains uncertain how this proposal would align with the
requirement which we are finalizing in section V.A of this preamble
which specifies the point in time that an allowance must be expended
for an import. Even if EPA were not codifying a requirement that
allowances must be expended at a specific point in time, existing
requirements under 40 CFR 84.5(b)(1)(i) prohibit any import of bulk
regulated substances in any quantity, including heels, without
expending allowances equal to the exchange-value weighted equivalent of
the regulated substances imported. It is also unclear to the Agency how
the electronic notification and recorded transactional data would be
validated for shipments which have already been imported and received.
Commenters did not provide information that reconciled these concerns.
    Several commenters supported combining a standard presumption with
a provisional estimate. One commenter stated that a 10 percent
presumption could apply if the provisional value were not corrected and
two commenters suggested standard presumptions lower than the 10
percent level. EPA maintains the same concerns as described above in
this section regarding a lower standard presumption and provisional
estimate. As noted, there is the potential that a standard presumption
lower than 10 percent could result in insufficient expenditure of
allowances when compared to the exchange-value weighted equivalent of
the regulated substances imported. EPA also maintains concerns with the
provisional estimate regarding how and when allowances would be
expended and how expended allowances would be reconciled with the
reported amount of imported heel. This would have implementation and
enforcement challenges and is open to abuse, especially given the final
weight would be measured after the import has occurred and at a private
facility away from the port.
    As noted in the Allocation Framework Rule (86 FR 55183), imports of
heels require allowance expenditure, and heels in containers can be
weighed to determine the mass of regulated substance and the requisite
allowance expenditure. As discussed above in this section, EPA is
unaware of why existing requirements may be impracticable and
commenters did not resolve the Agency's concerns with the potential of
underreporting or abuse of the proposed and recommended revisions to
these requirements. In response to a request for comment, commenters
did not provide information supporting the need for a revision to
existing practices. As noted earlier in this section, commenters widely
opposed the primary proposal's 10 percent presumption as higher than
warranted and EPA disagrees that a lower standard presumption would be
warranted. The Agency remains uncertain of how a provisional period
would interact with allowance expenditure requirements and commenters
did not resolve EPA's expressed concerns in the Allocation Framework
Rule and this rulemaking's proposal about the potential for abuse of
associated provisions. Considering the adequacy of existing
requirements, the adverse comments received to EPA's primary and
alternative proposals, and the Agency's expressed concerns, EPA is not
finalizing either the primary or alternative proposals, nor making any
changes regarding the import of heels. In the absence of any changes,
existing requirements under 40 CFR 84.5(b)(1) to expend allowances
equal to the exchange-value weighted equivalent of the heels imported
still apply. Furthermore, the requirement under 40 CFR 84.31(c)(7) to
include the quantity (in kilograms) in the advance notification of
import requirement still applies, and section XI.A.2 of this preamble
establishes additional requirements to specify 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 pre-import notification.
    EPA reiterates that it did not propose and is not finalizing any
changes to the export requirements for heels, so exporters are required
to know the precise quantity of HFCs in a heel for an export, just as
importers are required to know the precise quantity of HFCs in a heel
that is being imported. EPA was clear in the proposed rulemaking that
its proposals on the topics of heels would only apply to imports of
HFCs and that EPA was not proposing to change the requirement to know
the quantity of HFCs in a heel for an export. Further, anyone
requesting an additional consumption allowance under 40 CFR 84.17 and
anyone exporting HFC heels must continue to report the actual weight of
a heel that is exported.

VI. How is EPA clarifying and revising recordkeeping and reporting
requirements?

    EPA established recordkeeping and reporting requirements in the
Allocation Framework Rule, in accordance with subsection (d) of the AIM
Act. These requirements can be found in 40 CFR 84.31. The Agency
proposed to make amendments to certain recordkeeping and reporting
requirements as well as proposing new recordkeeping and reporting
requirements based on experience gained in implementing the HFC
phasedown. EPA is finalizing some of these proposals.

A. How is EPA modifying the import reporting requirements?

    In the Allocation Framework Rule, EPA established reporting
requirements for importers at 40 CFR 84.31(c). In this action the
Agency is finalizing amendments which include specifying reporting
obligations that fall to the importer of record, modifying elements of
the advance notification requirement, and clarifying how to consider
import of heels. EPA is finalizing all these amendments to provide
additional detail on requirements and further promote transparency and
consistency in implementation and enforcement of the HFC Phasedown
program.
1. Specify Reporting Obligations on the Importer of Record
    To align with the proposal discussed in section V.B of this
preamble that only the importer of record may expend allowances for the
import of bulk regulated substances, EPA proposed to specify that
certain reporting obligations fall to the importer of record.
Specifically, EPA proposed that the importer of record, or their
authorized agent,\32\ would be required to file the advance
notification report pursuant to 40 CFR 84.31(c)(7), and the importer of
record will be required to make quarterly reports pursuant to 40 CFR
84.31(c)(1). EPA received no adverse comments on this proposal and is
finalizing the changes as proposed. EPA is making these amendments to
improve clarity of who must fulfill certain reporting requirements with
the Agency and also ease EPA implementation in aligning the reporting
requirement with the entity obligated to expend allowances for the
import.
---------------------------------------------------------------------------

    \32\ For purposes of providing advance notification of import
through a system such as the ABI, the vast majority (if not all)
notifications for the imports of regulated HFCs have been filed by
customs brokers who are licensed and regulated by CBP to assist
importers and exporters in meeting Federal requirements governing
imports and exports. EPA included ``authorized agents'' as
permissible reporting entities to accommodate this standard business
practice.
---------------------------------------------------------------------------

2. Modify Advance Notification of Import Requirements
    EPA's regulations contained in 40 CFR 84.31(c)(7) require ``[a]
person importing a regulated substance, or their agent,'' to report
certain information ``no later than 14 days before importation.'' The
regulation enumerates several required elements that must be included
in an advance notification of import filed through the CBP-authorized
electronic data interchange system, such as the ABI. To align with the
proposal that only the importer of record may expend allowances for the
import of bulk regulated substances, EPA proposed to specify that the
advance notification reporting obligation falls to the importer of
record, or their authorized agent.
    One commenter alleged that EPA was in effect deeming brokers as
importers of records with the associated responsibilities and
liabilities. The commenter stated that a customs broker is not an
importer of record and asked EPA to distinguish between the importer of
record and their agents, in particular making clear that the importer
of record is responsible for the accuracy of information provided.
    EPA is finalizing the regulatory change as proposed to specify that
the advance notification reporting obligation falls to the importer of
record, or their authorized agent. This change in the regulatory text
is intended to improve clarity of who must submit the advance
notification reports and also ease EPA implementation in aligning the
reporting requirement with the entity obligated to expend allowances
for the import. However, in response to the comment received, EPA is
making a minor adjustment to clarify the Agency's intent with this
change to make clear that the obligation to file the advance notice
falls to the importer of record. Due to existing business
relationships, as outlined in footnote 31, if the importer of record so
chooses, the advance notice may be filed by the importer of record's
authorized agent. However, the authorized agent is not liable if the
importer of record fails to meet this reporting requirement.
    EPA proposed to add required elements pursuant to 40 CFR
84.31(c)(7). For all modes of transport, EPA proposed to require the
container number(s) of the shipment (if applicable). EPA also proposed
that for maritime shipments, the vessel name and the International
Maritime Organization (IMO) number must be included as part of the
advance notification. Some commenters stated that they were not in
favor of EPA's proposal for reasons such as not being clear what the
additional reporting elements would bring to EPA or arguing that the
additional elements would be overly burdensome since shipment specific
information was already required to be submitted to CBP. One commenter
also noted that some information, such as the IMO number, may not be
available to the importer at the time of the advance notification.
After considering these comments, including consideration of the
existing EPA and CBP reporting requirements and associated data points,
EPA agrees with commenters that the IMO number and vessel name are data
elements that are largely duplicative of already available information.
Accordingly, EPA is not finalizing that aspect of the proposal.
However, EPA is finalizing the proposal to add the container number
associated with the shipment (as applicable) as a required element for
the advance reporting notification. Based on review of our existing
data, EPA deems this information is useful for confirming imports that
arrive in large tank containers with capacities in excess of 15,000 kg
(often referred to as ISO (International Organization for
Standardization) tanks), especially as EPA creates a future container
tracking system. Having ISO tank container numbers included in advance
reporting notifications will assist EPA in aligning the future
container tracking system numbers with the ISO tank container numbers
that are reported to CBP.
    EPA's current regulations in 40 CFR 84.31(c)(7) require provision
of the ``quantity'' (in kilograms) of each import in the advance
notification of import. To improve clarity in the Agency regulations
and provide for consistent treatment across regulated entities, EPA
proposed to specifically require the provision 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 pre-import notification. Some commenters
supported this proposal as a helpful clarification. A few commenters
did not support the requirement to provide the gross weight in the pre-
import notification; one argued the gross weight of the container does
not serve a purpose when reporting or tracking HFC consumption. Some of
these commenters were also opposed to providing the unit of mass,
arguing that providing it would be duplicative and overly burdensome
since there is shipment specific information required to be submitted
to CBP prior to importation that includes this information. EPA is
finalizing this requirement as proposed, specifically to require
entities to include reporting of net and gross weight, as well as the
unit of measure for each, in their advance notification report. EPA is
finalizing inclusion of all three of these elements to resolve
ambiguity and standardize reporting. Even if some of this information
is submitted to Customs, net weight and unit of mass are needed for the
Agency to confirm how many allowances will be required to expend for an
upcoming import. Gross weight can be, among other things, a helpful

indicator as to what type of container a bulk HFC shipment will arrive
in and this information can be used to assist EPA and partner agencies
in identifying at an earlier stage in the overall import process
potentially violative shipments of bulk HFCs. This data is especially
useful if the net and gross weights appear inconsistent for the
specific HFC or HFC blend reportedly being imported. These
disaggregated data elements can also be particularly important in
situations where it may not be apparent from shipment documentation
whether the reported weight value consisted of the net weight of the
imported HFCs or the gross weight of the container. In other words,
having both the net and gross weights also allows EPA to better confirm
the accuracy of the reported data and ensure the accurate number of
allowances is being expended.
    Currently 40 CFR 84.31(c)(7) requires the submission of advance
notification ``no later than 14 days before importation'' of any
regulated substance. EPA made clear in footnote 97 of the preamble of
the Allocation Framework Rule that ``EPA is using the term `date of
importation' consistent with CBP's definition at 19 CFR 101.1'' (86 FR
55182). To ensure consistency EPA proposed to amend 40 CFR 84.31(c)(7)
to clarify that our reference to ``before importation'' in the
Allocation Framework Rule means ``before the date of importation
(consistent with the definition at 19 CFR 101.1).'' EPA also proposed
to clarify in 40 CFR 84.25(a)(1)(v) and 40 CFR 84.31(c)(3)(i)(D) that
these references are consistent with the definition at 19 CFR 101.1.
EPA did not receive adverse comment on these clarifying edits and is
finalizing these revisions as proposed. The ``Import Date'' box on CBP
Form 7501, ``Entry Summary,'' as well as CBP Form 214 for entries where
importers are applying for foreign-trade zone admission and/or status
designation may provide information about the date of importation, but
it is the importer's obligation to ensure that it has submitted its
advance notification report in a timely manner regardless of the date
identified in the Import Date box on these forms. The Agency notes that
the requirement of advance notification prior to the date of
importation does not preclude entities from following other established
and required processes from CBP, including but not limited to the
submission of CBP Form 3461 (Entry/Immediate Delivery for ACE). EPA
also reiterates that all imports of bulk HFCs, regardless of value,
must be filed in a manner that allows for the required advance
notification.
    As noted earlier in this subsection, the regulations finalized in
the Allocation Framework Rule require prior notification no later than
14 days in advance. EPA proposed to distinguish between modes of
transport and to shorten the prior notification requirement for truck,
rail, air, and other non-sea arrivals to 5 days prior to the date of
importation. EPA also noted that the Agency was considering whether to
shorten the prior notification for arrivals by sea to 10 days. Some
commenters supported EPA's proposal to shorten the prior notification
requirement for truck, rail, air, and other non-sea arrivals to 5 days.
Some commenters also supported EPA reducing the advance notification
timeline for sea arrivals to 10 days, and one even argued for a shorter
timeframe. No commenters opposed these shortened timeframes. EPA is
finalizing both of these shortened times; advance notification reports
will be due 5 days in advance for truck, rail, air, and other non-sea
arrivals and will be due 10 days in advance for sea arrivals. Importers
bringing in goods via these transportation modes may not have the
necessary information available at least 14 days in advance under
current standard market practice. However, prior notification is
important for EPA and CBP to be able to adequately review the shipment
and relevant information. EPA based the 5-day prior notification in
part on consultation with CBP about similar notification provisions
used by other Federal government agencies and in part on information
obtained through our stakeholder meetings that included customs brokers
that have experience with importing a range of goods.
    EPA also received other comments that did not directly relate to
proposed provisions. One commenter requested that EPA explicitly allow
that an importer can clear customs as soon as they receive a ``may
proceed'' message regardless of whether the requisite timeline has
passed from the advance notification requirement. In other words, if an
importer of record files their advance notification, arrives at a land
border two days later, and receives a ``may proceed'' from CBP, EPA
understands the commenter to be requesting that bulk HFCs can be
imported at that point as long as the requisite number of allowances
are expended for the import. EPA is not making regulatory changes based
on this comment. However, for purposes of furthering the public's
understanding, EPA also notes that it views the requirements around,
and prohibitions on, the action of importing to be separate from
reporting requirements. If an entity receives a ``may proceed'' from
CBP and expends the requisite allowances for a bulk HFC shipment, that
importation action is permissible. However, if the action occurs before
the requisite time period has passed following filing of the advance
notification report, then the entity would have a reporting violation
because they did not file the advance notification report sufficiently
ahead of the importation activity.
    One commenter requested that shipper/importer names and location
``confidentiality be removed for Customs documents'' filed for
regulated substances to help industry monitor for compliance. EPA
understands the commenter to be requesting that the Agency not treat
certain elements of the advance notification report as CBI. In section
IX.C of the Allocation Framework Rule, EPA outlined that certain data
elements would not be entitled to confidential treatment (86 FR 55191-
55195). Among other things, EPA finalized a determination to not
provide confidential treatment to company-level, chemical-specific data
on individual import and export shipments, including source country,
port of entry, and the importer name and number. For further detail,
The Classification of Data Reported Under the HFC Phasedown Rule memo
in the docket for the Allocation Framework Rule documents the Agency's
determination of whether to provide or to not provide confidential
treatment for each individual reported data elements (Docket ID No.
EPA-HQ-OAR-2021-0044). EPA did not propose any changes to those
determinations, is not revisiting those determinations in this
rulemaking, and therefore is not making any alterations in this
rulemaking. To the extent that commenter was requesting EPA to alter
how CBP handles data, EPA does not have the ability to alter CBP's
approach on this issue and invites the commenter to raise any concerns
with CBP, as appropriate.
    One commenter stated that EPA should revise the term ``Origin'' in
the HFC import advance-notice filing to ``country(ies) of Manufacture
for regulated substance(s)''. The Agency notes that under 40 CFR
84.31(c)(7)(xi) there is an existing requirement that ``Origin
Country'' must be reported as part of the advance notification. EPA's
proposed changes to 40 CFR 84.31(c)(7) did not explicitly include
modifications to the existing requirement to report ``origin country''
under 84.31(c)(7). EPA is not finalizing any change to that particular
data element, but does not believe any change is needed in

response to commenter's concern because EPA interprets this term
consistent with CBP's ``Country of Origin'' definition, which is ``the
country of manufacture, production, or growth of any article of foreign
origin entering the United States.'' \33\
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    \33\ https://www.cbp.gov/trade/rulings/informed-compliance-publications/marking-country-origin-us-imports.
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3. Clarify the Reporting of Heels
    EPA clarified in its proposal that the HTS Code for a regulated
substance, regardless of whether or not comprising a heel, must be
used, and not the HTS codes for U.S. goods returned or empty
containers. EPA did not make a specific proposal related to this
clarification, but rather included this statement in the proposal for
this rulemaking to communicate the Agency's expectation clearly to
stakeholders and the regulated community. One commenter did note its
support for this position and noted its opposition to loopholes that
mask illegal trade including the use of HTS code use for U.S. goods
returned or empty containers containing illegal refrigerant.
    One commenter expressed the opinion that heels do not warrant
additional scrutiny because associated losses are negligible and the
fact that heels comprise valuable product incentivizes maximum
recovery. EPA disagrees with the commenter's characterization that
EPA's concern and discussion on heels is unwarranted or that EPA's
clarification in the preamble would apply additional scrutiny to heels.
Rather, the Agency's clarification explained that consistent
requirements for the HTS Code apply to all imports of bulk HFCs,
whether those imports comprise heels or more filled containers. In this
particular section, the Agency is reiterating that the HTS Code for the
regulated substance must be used for the import of any regulated
substance. Reporting all volumes of regulated substances with the
applicable HTS Code for the contained HFCs regardless of value
facilitates accurate treatment of the imports of these regulated
substances under EPA regulations.
4. Changes to and Requirement of Importer of Record Information
    EPA proposed to require the submission of certain information
directly to EPA that had been voluntarily provided, in part, through
the importer of record form (EPA Form #5900-556). EPA proposed a
regulatory requirement 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. In
other words, an entity that anticipates being the importer of record
for a shipment of HFCs during calendar year 2024 must submit the
required information by November 15, 2023. If an entity is not issued
allowances directly from EPA, is the recipient of transferred or
conferred allowances and it is impracticable for the entity to submit
the importer of record form by November 15, EPA proposed that the
importer of record form be submitted within 15 calendar days of
receiving the Agency's non-objection notice for conferral or inter-
company transfer. EPA also proposed that if changes are necessary on
the importer of record form after its initial submission that those
changes be made at least 21 calendar days prior to any import of bulk
regulated substances for which the concerned entity will be the
importer of record after the change in information occurs.
    EPA proposed that if an entity receiving allowances (either
allocated directly by EPA or through a conferral or transfer) includes
subsidiaries, entities majority owned and/or controlled by the same
individual(s), and/or ``Doing Business As'' (DBAs) as part of its form,
the corporate structure of the entity receiving allowances must also be
provided, and the description of the corporate structure must, at a
minimum, explicitly show the relationship between the allowance holder
and each subsidiary, entity that is majority owned and/or controlled by
the same individual(s), and/or DBA. An entity also would need to
provide the owners, and their respective percentage of ownership, of
each subsidiary, entity that is majority owned and/or controlled by the
same individual(s), and DBA on the submitted form. EPA received no
comments on these proposals and is finalizing them as outlined in the
proposal for this rulemaking. As explained in the Allocation Framework
Rule and reiterated in section VIII.C of this preamble, movement of
allowances between a parent company and its subsidiaries, or among
companies that are commonly owned, may occur without a transfer (86 FR
55145). However, there may be instances where these corporate
relationships are not immediately clear to EPA. The importer of record
form provides information on corporate relationships to EPA, and
accounting for such instances would ensure not only that allowances are
being expended by the right entity, but also that reviews of shipments
are not unnecessarily delayed. In a similar manner, entities receiving
allowances may operate under different names, e.g., DBA, where it is
not immediately clear to the Agency that the DBA is associated with the
allowance holder. To further efficient and accurate review of imports
by EPA, the Agency reminds regulated entities of the importance of
ensuring that when an allowance holder or associated subsidiary, entity
that is majority owned and/or controlled by the same individual(s),
and/or DBA provides advance notification of import filed through a CBP-
authorized electronic data interchange system, such as the ABI, that
the importer of record number accurately aligns with the name of the
importer.
    EPA further proposed that an entity would need to indicate on the
required Importer of Record form how many allowances will be expended
by each other affiliated entity (e.g., subsidiaries, majority owned
and/or controlled), specifically a quantity of allowance that will be
expended by each affiliated entity identified by name and importer of
record number(s). EPA noted that it was considering, as an alternative,
requiring information as part of the advance notification requirement
of 40 CFR 84.31(c)(7) that would specify which entity was allocated the
allowances or received the allowances through a transfer that are
associated with an individual shipment. EPA did not receive comment on
either of these proposals and is not finalizing these requirements at
this time. After consideration of other requirements being finalized in
this rulemaking, the Agency has determined that these additional data
points are not needed given the finalization of requiring the importer
of record form.
    One commenter recommended that the ``Importer of Record'' should
reflect the name of the allowance holder on HFC import advance-notice
filings, customs documents, and quarterly reporting of imports. Another
commenter recommended EPA require that all advance notification of
import and associated CBP documents specifically list the name of the
Allowance Holder as it appears on EPA's allowance allocations as the
``importer of record.'' The commenter further requested that if a sub-
entity is involved in the shipment, that name should also be listed
along with the name of the Allowance Holder. The commenter believes
that requiring this additional information would facilitate tracking of
compliance for each participant's consumption allowances. As outlined
in section V.B. of this preamble, EPA is finalizing in this

rulemaking a requirement that only an importer of record can expend