Economic Analysis of the Third-Party Certification Framework for the Formaldehyde Standards for Composite Wood Products Proposed Rule

Economic and Policy Analysis Branch
Economics, Exposure and Technology Division
Office of Pollution Prevention and Toxics
              Office of Chemical Safety and Pollution Prevention
                     U.S. Environmental Protection Agency

                                     May 2013

                                Acknowledgment

EPA acknowledges the analytical and draft preparation support of Abt Associates Inc. of Cambridge, Massachusetts in the preparation of this report, provided under Contract No. EP-W-08-10.

 Notice

This is not an official guidance document and should not be relied upon to determine applicable regulatory requirements.  This document was prepared to provide economic information for the rulemaking process, and to meet various administrative and legislative requirements.  Due to the nature of the information available to EPA, the document contains various assumptions that may not reflect the regulatory determinations that an individual firm or organization would make were it to apply the rule's requirements to its specific circumstances.  Persons seeking information on specific regulatory requirements should consult 40 CFR Part 770, and the preamble for the regulatory action.

Mention of the names of specific companies, organizations, or entities does not constitute an endorsement by EPA.

Table of Contents

Notice
1	Summary of Economic Analysis	1
2	Certification System	5
2.1	Certification System Framework	5
2.2	Profile of Third Party Certifiers and Accreditation Bodies	8
3	Costs of the TSCA Title VI TPC Rule	13
3.1	Proposed Rule Requirements	13
3.2	Wage Rates Used in the Analysis	14
3.3	Costs to Accreditation Bodies	15
3.4	Third-Party Certifier Costs	17
3.5	Total Cost to TPCs	25
3.6	Total Costs of the Rule for U.S. Accreditation Bodies and TPCs	26
4	Impact Analyses	29
4.1	Paperwork Reduction Act Analysis	29
4.2	Regulatory Flexibility Act Analysis	30
4.3	Unfunded Mandates Reform Act (UMRA)	34
4.4	Executive Order 13132 - Federalism	35
4.5	Executive Order 13175 - Tribal Implications	35
4.6	Executive Order 13045 - Protection of Children	35
4.7	Executive Order 13211 - Energy Effects	35
4.8	National Technology Transfer and Advancement Act	36
4.9	Executive Order 12898  -  Environmental Justice	36
Appendix A: Wage Rates
Appendix B: Recordkeeping and Reporting Burdens
Appendix C:  Costs and Benefits of Electronic Reporting
Summary of Economic Analysis

This report presents an economic analysis of the U.S. Environmental Protection Agency (EPA)'s proposed Third Party Certification rule.  The Formaldehyde Standards for Composite Wood Products Act, which created Title VI of the Toxic Substances Control Act (TSCA), established formaldehyde emission standards for composite wood products (hardwood plywood, medium-density fiberboard, and particleboard) sold, supplied, offered for sale or manufactured in the United States.  Under TSCA Tile VI, manufacturers of composite wood products must comply with specific formaldehyde emission standards, and their compliance must be verified by a third party certifier (TPC).

Third-party certification involves a process by which a product, process or service is reviewed by a reputable and qualified independent third-party to verify that a set of norms, criteria, claims, practices or standards are being met. The standards used in a third-party certification process are typically voluntary consensus standards developed by nationally or internationally recognized standards-producing organizations or industry groups. TPCs are overseen by accreditation bodies (ABs), which provide an impartial verification of the competency of the TPCs.

The proposed TPC rule establishes a framework whereby ABs accredit TPCs so that the TPCs may certify composite wood product manufacturers under TSCA Title VI.  The proposed rule identifies the roles and responsibilities ABs and TPCs, as well as the criteria for participating in the program.  Under the proposed framework, participating ABs would accredit TPCs, audit TPCs, maintain records on their accredited TPCs, and report to EPA on TPCs' activities.  TPCs would be responsible for activities such as regularly auditing manufacturers, conducting and verifying formaldehyde emissions tests, and ensuring that manufacturer quality assurance and quality control procedures and testing comply with the requirements set forth in the TSCA Title VI rule.

Under the TSCA Title VI rule, participating accreditation bodies will need to familiarize themselves with the rule (in the first year), submit an application and enter into a recognition agreement with EPA (in the first year and every three years thereafter), and provide notifications and reports and keep records (every year).  As shown in Table 1-1, accreditation bodies are expected to incur costs of $1,685 in the first year, $1,070 in years with reapplication and recognition agreement resubmissions, and $633 in other years.

Table 1-1: Costs per Accreditation Body
Type of Cost
Cost (2010$)

First Year
Reapplication Years[1]
Non-Reapplication Years
Rule Familiarization
                                                                          $615
                                                                             $0
                                                                             $0
Application or Reapplication Process
                                                                            $88
                                                                            $88
                                                                             $0
Prepare Recognition Agreement
                                                                           $349
                                                                           $349
                                                                             $0
EPA Notification
                                                                            $57
                                                                            $57
                                                                            $57
TPC Notification
                                                                            $12
                                                                            $12
                                                                            $12
Recordkeeping
                                                                           $308
                                                                           $308
                                                                           $308
Reporting
                                                                           $256
                                                                           $256
                                                                           $256
Cost per Accreditation Body
                                                                         $1,685
                                                                         $1,070
                                                                           $633
[1] Accreditation bodies are required to reapply to the program every three years.

Eight accreditation bodies in the U.S. are assumed to participate in the TSCA Title VI program.  As shown in Table 1-2, total annual costs to U.S. accreditation bodies are estimated to be $13,480 in the first year, $8,560 in years when accreditation bodies must reapply to the program, and $5,064 in other years.  Annualized costs are estimated at $6,303 to $6,320 per year, depending on the discount rate.

Table 1-2: Total Costs for U.S. Accreditation Bodies
Type of Cost
Cost (2010$)

First Year
Reapplication Years[1]
Non-Reapplication Years
Cost per Accreditation Body
                                                                         $1,685
                                                                         $1,070
                                                                           $633
Number of U.S. Accreditation  Bodies
                                                                              8
                                                                              8
                                                                              8
Total Costs for U.S. Accreditation Bodies
                                                                        $13,480
                                                                         $8,560
                                                                         $5,064
                    Annualized Costs (30 years, 3 percent)
                                    $6,303
                    Annualized Costs (30 years, 7 percent)
                                    $6,320
[1] Accreditation bodies are required to reapply to the program every three years.

TPCs participating in the TSCA Title VI program will need to conform to several voluntary standards and guides by the International Organization for Standardization (ISO) and International Electrotechnical Commission (IEC).  Accreditations can cost TPCs up to $25,000 obtain and $5,000 per year to maintain, but most TPCs will already have all the necessary accreditations.  TPCs will also have to familiarize themselves with the rule and submit an application to the TSCA Title VI program (in the first year); reapply to the program (every three years); and submit notifications and reports and maintain records (every year).  As shown in Table 1-3, TPCs that already have all accreditations in place will incur an estimated cost of $2,090 in the first year, $1,475 in reapplication years, and $983 in non-reapplication years.  TPCs that need to obtain an additional accreditation will incur an estimated cost of $27,090 in the first year, $6,475 in reapplication years and $5,983 in non-reapplication years.

Table 1-3: Costs per TPC
Type of Cost
Cost (2010$)

First Year
Reapplication Years[2]
Non-Reapplication Years

Have Accred.
Need Accred.
Have Accred.
Need Accred.
Have Accred.
Need Accred.
Accreditation[1]
                                                                             $0
                                                                        $25,000
                                                                             $0
                                                                         $5,000
                                                                             $0
                                                                         $5,000
Rule Familiarization
                                                                           $615
                                                                           $615
                                                                             $0
                                                                             $0
                                                                             $0
                                                                             $0
Application or Reapplication Process
                                                                           $492
                                                                           $492
                                                                           $492
                                                                           $492
                                                                             $0
                                                                             $0
Manufacturer Notification and Recordkeeping
                                                                           $773
                                                                           $773
                                                                           $773
                                                                           $773
                                                                           $773
                                                                           $773
Annual Report and Notifications of Changes
                                                                           $210
                                                                           $210
                                                                           $210
                                                                           $210
                                                                           $210
                                                                           $210
Cost per TPC
                                                                         $2,090
                                                                        $27,090
                                                                         $1,475
                                                                         $6,475
                                                                           $983
                                                                         $5,983
[1] Two-thirds of TPCs are assumed to be accredited for all three standards required by the rule (ISO/IEC Guide 65, 17020, and 17025) and thus incur no cost for accreditation or reaccreditation.  One-third of TPCs will need to become accredited (and maintain accreditation) for one additional standard at a cost of $25,000 in the first year and $5,000 per year in subsequent years.
[2] TPCs are required to reapply every three years.  CARB TPCs are grandfathered in for the first year.

Nine TPCs in the U.S. are assumed to participate in the TSCA Title VI program.  Six of them are assumed to already have all the necessary accreditations, while three are assumed to need to obtain and maintain an additional accreditation.  As shown in Table 1-4, total annual costs to U.S. TPCs are estimated to be $93,810 in the first year, $28,275 per year in reapplication years, and $23,847 per year in the remaining years.  Total annualized costs are estimated at $27,232 to $28,123 per year, depending on the discount rate.

Table 1-4: Total Costs for U.S. TPCs
Type of Cost
Cost (2010$)

First Year
Reapplication Years[2]
Non-Reapplication Years

Have Accred.
Need Accred.
Have Accred.
Need Accred.
Have Accred.
Need Accred.
Cost per TPC
                                                                        $2,090
                                                                        $27,090
                                                                        $1,475
                                                                         $6,475
                                                                          $983
                                                                         $5,983
Number of U.S. TPCs
                                                                              6
                                                                              3
                                                                              6
                                                                              3
                                                                              6
                                                                              3
Total Cost by Accreditation Status
                                                                        $12,540
                                                                        $81,270
                                                                         $8,850
                                                                        $19,425
                                                                         $5,898
                                                                        $17,949
Total Costs for U.S. TPCs
                                                                        $93,810
                                                                        $28,275
                                                                        $23,847
Total Annualized Costs (30 years, 3%)
                                   $27,232
Total Annualized Costs (30 years, 7%)
                                   $28,123
[1] Two-thirds of TPCs are assumed to be accredited for all three standards required by the rule (ISO/IEC Guide 65, 17020, and 17025) and thus incur no cost for accreditation or reaccreditation.  One-third of TPCs will need to become accredited (and maintain accreditation) for one additional standard.
[2] TPCs are required to reapply every three years.  CARB TPCs are grandfathered in for the first year.

Table 1-5 summarizes the estimated costs attributable to the proposed rule.  The estimated total cost is $107,290 in the first year.  Total subsequent year costs range from $28,911 to $36,835 depending on whether it is a reapplication year for ABs and TPCs.  Annualized costs, calculated over a 30-year period at three and seven percent discount rates, are $33,535 to $34,443.

Table 1-5:  Summary of Costs to U.S. Accreditation Bodies and TPCs (2010$)
Type of Cost
U.S. ABs
U.S. TPCs
All Affected U.S. Firms

Have Necessary Accreditation
Need Additional Accreditation

Per Firm Costs: Year 1
                                    $1,685
                                    $2,090
                                    $27,090
                                       -
Per Firm Costs: Subsequent Years
                                $633 to $1,070
                                $983 to $1,475
                               $5,983 to $6,475
                                       -
Number of Affected Firms
                                       8
                                       6
                                       3
                                      17
Total Year 1 Costs
                                    $13,480
                                    $12,540
                                    $81,270
                                   $107,290
Total Costs: Subsequent Years
                               $5,064 to $8,560
                               $5,898 to $8,850
                              $17,949 to $19,425
                              $28,911 to $36,835
Total Annualized Costs (30-Years, 3 percent discount rate)
                                    $6,303
                                    $6,755
                                   $20,477
                                   $33,535
Total Annualized Costs (30-Years, 7 percent discount rate)
                                    $6,320
                                    $6,706
                                   $21,416
                                   $34,443

The rule will affect an estimated nine small entities in the U.S.  -  four accreditation bodies and five TPCs.  Some of the small entities are expected to be businesses, and others to be non-profit organizations.  The rule's impacts on small entities are analyzed by determining the ratio of costs to revenues for small businesses, and the ratio of costs to expenses for small non-profit organizations.  The cost impacts are then categorized as being under one percent, between one and three percent, and over three percent.

As shown in Table 1-6, there five small non-profits predicted to be affected by the rule, all of which are estimated to have cost impacts of less than one percent of expenses.  Four small businesses are predicted to be affected by the rule; two of them are estimated to have cost impacts of less than one percent of revenues, and two are estimated to have cost impacts between one percent and three percent of revenues.  No small entities are predicted to have cost impacts over three percent.

Table 1-6:  Summary of Small Entity Impacts
Entity Type

Number of U.S. Entities that are Small
Estimated Number of Small Entities with Impacts

Under One Percent
Between One and Three Percent
                              Over Three Percent
                                     TPCs
Non-profit
                                       2
                                       2
                                       0
                                       0

Business
                                       3
                                       1
                                       2
                                       0
                                      ABs
Non-profit
                                       3
                                       3
                                       0
                                       0

Business
                                       1
                                       1
                                       0
                                       0
                                   Combined
Non-profit
                                       5
                                       5
                                       0
                                       0

Business
                                       4
                                       2
                                       2
                                       0

Total
                                       9
                                       7
                                       2
                                       0

Certification System

Certification System Framework

The certification system under the proposed TSCA Title VI TPC rule is based on a framework of international standards organizations and existing voluntary consensus standards, accreditation and inspection oversight organizations, accreditation bodies, and third party certifiers, as described below.  See Figure 1 for a diagrammatic approach to the relationships between the organizations in the certification system framework.

	The certification system under the TSCA Title VI TPC rule will be similar, although not identical, to that under the California Air Resources Board's (CARB) Air Toxics Control Measure (ATCM) to reduce formaldehyde emissions from composite wood products.  Under the CARB ATCM, manufacturers of composite wood products must have their compliance with the emission standards verified by a TPC approved by CARB.  The CARB ATCM requires TPCs to: verify that composite wood product manufacturers are complying with the quality assurance requirements; verify formaldehyde emission test results; work with manufacturers to establish quality control limits for each product type and production line; provide independent inspections and audits of manufacturers and records; use laboratories that are certified by an accreditation body that is a signatory to the International Laboratory Accreditation Cooperation Mutual Recognition Arrangement; and provide an annual report to CARB.  In order to implement the ATCM, CARB directly evaluates and approves TPCs seeking to participate in the program.

International Standards Organizations

The International Organization for Standardization, known as ISO, is a non-governmental international standard-setting body comprising representatives from various national standards organizations.  The organization promulgates worldwide proprietary industrial and commercial standards.  The International Electrotechnical Commission (IEC) is a non-profit, non-governmental international standards organization that prepares and publishes International Standards for electrical, electronic and related technologies.  The IEC cooperates with the ISO when appropriate.  The use of the ISO/IEC prefix covers publications from ISO/IEC Joint Technical Committee on Information Technology, as well as conformity assessment standards developed by ISO's committee on conformity assessment (CASCO).

The ISO/IEC standards relevant to the TSCA Title VI TPC rule include ISO/IEC Guide 65, which specifies requirements for bodies operating product certification systems; ISO/IEC 17011, which specifies general requirements for accreditation bodies accrediting conformity assessment bodies; ISO/IEC 17020, which specifies requirements for competence of calibration and testing laboratories; and ISO/IEC 17025, which specifies the general requirements for laboratories to demonstrate they are competent to conduct testing and/or calibrations, including sampling.

Accreditation and Inspection Oversight Organizations

Accreditation and inspection oversight organizations ensure that their accreditation body members only accredit laboratories that are competent to do the work they undertake and are not subject to conflicts of interest.  They also establish mutual recognition arrangements among accreditation bodies to ensure that the results from accredited laboratories will be accepted anywhere in the world.  Examples of accreditation and inspection oversight organizations include the International Accreditation Forum, Inc. (IAF), and the International Laboratory Accreditation Cooperation (ILAC).

Figure 1.  TSCA Tile VI Proposed Third-Party Certification Framework
             International Organization for Standardization (ISO)

               International Electrotechnical Commission (IEC)

International Standards
Organizations
Develop consensus-based international
standards for quality management
and conformity assessment

                 International Accreditation Forum, Inc (IAF)
                          or equivalent organization
* Ensures AB conformance to ISO/IEC 17011[1]
* Require member ABs to be a signatory to MLA[2]
          International Laboratory Accreditation Cooperation (ILAC)
                          or equivalent organization
* Ensures AB conformance to ISO/IEC 17011[1]
* Require member ABs to be a signatory to MRA[3]
Accreditation and InspectionOversight Organizations
Ensure competency of Accreditation
Bodies and their conformance with
international standards:
* Ensures AB conformance to
ISO/IEC 17011[1]
* Ensure ABs are qualified to oversee
TPC conformance to ISO/IEC Guide 65
ISO/IEC17020 and/or ISO/IEC 17025

                                  AB Type #1
                                   Product
                              Accreditation Body
*  Recognition Agreement with EPA
*  Signatory to IAF MLA or equivalent
*  Ensure TPC conformance to ISO/IEC Guide  65 & ISO/IEC 17020
                                  AB Type #3
                     Product & Lab Accreditation Body
   *  Recognition Agreement with EPA
   *  Signatory to IAF MLA and ILAC MRA or equivalents
   *  Ensure TPC conformance to ISO/IEC Guide 65,  ISO/IEC 17020 & ISO/IEC 17025
Accreditation Bodies                   AB Type #2 Laboratory Accreditation Body
   *  Recognition Agreement with EPA
   *  Signatory to ILAC MRA or equivalent
   *  Ensure TPC conformance to ISO/IEC 17025
Ensure competency of TPCs; verify accuracy of emission test procedures;
monitor quality assurance programs, audit
and inspect TPCs and panel producers:
* Management systems conform to
ISO/IEC 17011
* Ensure TPC conformance to
applicable ISO/IEC Guides & Standards

Third Party Certifiers
                                    TPC #2
         Accredited by AB #3 (acting as both Product AB & Lab AB)

                                    TPC #1
             Accredited by AB #1 (Product AB) & AB #2 (Lab AB)
Ensure that panel producers are in compliance with statutory
formaldehyde emission standards:
* Management systems conform to
ISO/IEC Guide 65
* Conform to applicable ISO/IEC
Guides & Standards for
Product & Laboratory Certification
and Inspections
                               Panel Producer #4
                              Certified by TPC #2

                               Panel Producer #3
                              Certified by TPC #2

                               Panel Producer #2
                              Certified by TPC #1

                               Panel Producer #1
                              Certified by TPC #1

Composite Wood
Product Panel Producer

[1] ISO/IEC 17011  -  General Requirements for Accreditation Bodies Accrediting Conformity Assessment Bodies
[2] MLA  -  IAF's Multilateral Recognition Arrangement requires AB signatories to demonstrate they are capable of accrediting product certification bodies in conformance with ISO/IEC Guide 65  -  General Requirements for Bodies Operating Product Certification Systems and ISO/IEC 17020  -  General Criteria for the Operation of Various Types of Bodies Performing Inspection.
[3] MRA  -  ILAC's Mutual Recognition Arrangement requires AB signatories to demonstrate they are capable of accrediting testing laboratories in conformance with ISO/IEC 17025  -  General Requirements for the Competence of Testing and Calibration Laboratories.

Accreditation Bodies

An accreditation body (AB) is an organization that provides an impartial verification of the competency of a laboratory or TPC.  In the context of formaldehyde and composite wood products, ABs ensure that TPCs can verify the accuracy of the emission test procedures used by composite wood product manufacturers to conduct formaldehyde emissions tests; monitor manufacturer quality assurance programs; and provide independent audits and inspections of manufacturers' mills and testing facilities.  There are ABs located throughout the world.  ABs in the U.S. that are IAF or ILAC signatories include the AIHA Laboratory Accreditation Program (AIHA-LAP), the American Association for Laboratory Accreditation (A2LA), the American National Standards Institute (ANSI), Forensic Quality Services (FQS), the International Accreditation Service (IAS), the Laboratory Accreditation Bureau (L-A-B), the National Voluntary Laboratory Accreditation Program (NVLAP), and Perry Johnson Laboratory Accreditation, Inc. (PJLA).

The proposed TSCA Title VI TPC rule requires ABs to be either a signatory to IAF's Multilateral Recognition Arrangement (MLA) or the equivalent for inspection and lab competency; ILAC's Mutual Recognition Arrangement (MRA) or the equivalent for product certification competency; or both.  An AB that is an IAF signatory is responsible for ensuring that the TPC is in conformity with ISO/IEC Guide 65 and ISO/IEC 17020.  An AB that is an ILAC signatory is responsible for ensuring that a TPC is in conformity with ISO/IEC 17025.

Thus, TPCs will need to be accredited by two ABs unless their AB is a signatory to both ILAC and IAF (or equivalent oversight bodies).  In the TSCA Title VI program, a Product AB is an organization that is a signatory to the IAF MLA or the equivalent, and that can verify the accuracy of the test procedures and facilities used by manufacturers to conduct tests, monitor manufacturer quality assurance and quality control programs, and provide audits and inspections.  A Laboratory AB is an organization that is a signatory to the ILAC MRA, or the equivalent, and that is qualified to verify that testing and calibration laboratories can operate a quality management system, are technically competent, and are able to generate technically valid emissions results.

Third Party Certifiers

	The third-party certifiers (TPCs) are responsible for activities such as regularly auditing manufacturers, conducting and verifying formaldehyde emissions tests, and ensuring that manufacturer quality assurance and quality control procedures and testing complies with TSCA Title VI TPC rule.  Specific requirements include verifying that composite wood product manufacturers have adequate quality assurance controls and are complying with quality assurance and quality control requirements; verifying quality control test results compared with ASTM E-1333-96 test results by having laboratories conduct quarterly tests and evaluate test method equivalence; reviewing applications from manufacturers for reduced testing; working with manufacturers to establish quality control limits, and, if applicable, other limits for each product type and production line; informing manufacturers of criteria that will be used to determine if product lots are consistently exceeding the applicable quality control limit; inspecting and auditing manufacturers and their records at least quarterly; using a testing laboratory or laboratories that comply with ISO/IEC 17025; certifying composite wood product types that comply with requirements under TSCA Title VI; following ISO/IEC Guide 65; following ISO/IEC 17020 in the carrying out of their inspections of the manufacturers; providing an approved TPC number (supplied by the accrediting AB) to the manufacturer for labeling and recordkeeping; and using laboratories that participate in an annual inter-laboratory comparison or proficiency testing program.

In the example shown in Figure 1, TPC #1 is accredited by two ABs:  AB #1 (which is a signatory to the IAF MLA and acts as the Product AB) and AB #2 (which is a signatory to the ILAC MRA and acts a Laboratory AB).  TPC #2 is accredited by a single AB, AB #3, which is a signatory to both the IAF MLA and the ILAC MRA and acts as both a Product AB and a Laboratory AB.

Profile of Third Party Certifiers and Accreditation Bodies

Third Party Certifiers

CARB has approved nine TPCs located in the U.S. (although most of these U.S. TPCs provide services internationally).  Two of these TPCs are non-profit organizations, and the rest are businesses.  Table 2-1 lists the domestic TPCs approved by CARB, their NAICS code, the type of organization, the sales volume or expenditures and the number of employees for the TPC or its parent organization, the U.S. Small Business Administration's size threshold for the NAICS code, and the TPC's small entity status.

This analysis assumes that 9 U.S. entities will act as TPCs under the TSCA Title VI program, and uses existing CARB TPCs as a proxy for their size and characteristics, but that does not mean that all of the CARB TPCs will become TPCs under Title VI.  In reality, some of the CARB TPCs may choose not to participate in the federal program, and/or new entities may apply that are not part of the CARB program.

Size information was available for four of the nine U.S. TPCs, including the two non-profits.  The size of the TPCs ranges from a non-profit with 10 employees and $1.6 million in expenditures to a business with 2,500 employees in 125 offices with parent company that manages $3.1 billion in assets.

Under the Regulatory Flexibility Act (RFA), unless an agency establishes an alternate definition, the term "small organization" means any not-for-profit enterprise which is independently owned and operated and is not dominant in its field.  The RFA does not provide any guidance on how to judge whether an organization is dominant in its field.  Non-profit TPCs and accreditation bodies perform the same activities (such as conducting and verifying formaldehyde emissions tests, accrediting, and auditing) as their for-profit counterparts.  In order to interpret the RFA criteria for small organizations and treat all affected entities consistently, this analysis determines the size status of non-profits by applying the SBA size thresholds for the NAICS codes the non-profits are classified in.

Based on the data in Table 2-1, the two U.S. TPCs that are non-profits are classified as small entities, and two of the businesses are classified as large.  The size status for five CARB TPCs could not be determined using the data in Table 2-1, so the small entity analysis in Section 4.2 estimates a generic distribution of sizes based on Census data for the relevant NAICS codes.

TPCs come from a diverse set of industries  -  the six U.S.-based CARB TPCs for which Dun & Bradstreet listed an industry classification fall into five different NAICS codes.  Thus, the firms that are likely to seek TPC accreditation may be very different from each other in terms of size, organization, and financial condition.  Table 2-2 presents key industry summary statistics for these NAICS codes.  However, the domestic TPCs approved by CARB represent a very small share of the 142,000 firms in these industries.  And comparing Table 2-1 and Table 2-2, the CARB TPCs appear to be larger than the average firms in these industries.  Thus, these Census statistics may not be representative of current CARB TPCs or potential new TSCA Title VI TPCs.

Table 2-1: CARB-Approved Third Party Certifiers Based in the U.S.
Company Name
NAICS code
Organization  Type
Annual Sales Volume or Expenditures [1]
(millions $)
Total Employees
                             SBA Size Threshold:
                      Revenues ($ Millions) or Employees
Small Entity Status
Certification Services International, LLC
                                    Unknown
                                    Unknown
                                    Unknown
                                    Unknown
                                   Unknown
                                   Unknown
Composite Panel Association North America, Inc. (CPA)
                                    813910
                                  Non-Profit
                                     $3.0
                                      14
                                     $7.0
                                    Small
Forestwood Industries, Inc.
                                    Unknown
                                    Unknown
                                    Unknown
                                    Unknown
                                   Unknown
                                   Unknown
Hardwood Plywood and Veneer Association (HPVA)
                                    813910
                                  Non-Profit
                                     $1.6
                                      10
                                     $7.0
                                    Small
NTA Incorporated
                                    541330
                                Private Company
                                     $5.4
                                      80
                                     $4.5
                                    Large
PFS Corporation
                                    541611
                                Private Company
                                    Unknown
             According to company website, more than 100 employees
                                     $7.0
                                    Unknown

Professional Service Industries, Inc. (PSI), owned by Olympus Partners
                                    Unknown
                                Private Company
Unknown, but Olympus Partners website reports they manage $3.1 billion in assets.
Unknown, but PSI website reports they have more than 2,500 employees in 125 offices
                                   Unknown
               Assumed to be large because of reported assets.
Scientific Certification Systems (SCS)
                                    541380
                                Private Company
                                    Unknown
                        SCS web site lists 87 employees
                                     $12.0
                                   Unknown

TIMBERCO (dba TECO)
                                    561990
                                Private Company
                                    Unknown
                                      31
                                     $7.0
                                   Unknown
[1] Annual sales volume is reported for businesses, and annual expenditures are reported for non-profits
Sources: California Air Resources Board (CARB) 2011, Dun & Bradstreet 2011, U.S. Small Business Administration 2010 (size standards), and company web sites for data on their sales volume and employees (PSI 2012, PFS 2012, SCS 2012a and SCS 2012b)

Table 2-2: Industry Summary Statistics for NAICS Identified for U.S. Third Party Certifiers
NAICS
                                     Firms
                               Establish- ments
                               Revenues ($1000)
                              Number of Employees
                       Average Revenues per Firm ($1000)
                          Average Employees per Firm
541330 - Engineering services
                                                                         47,714
                                                                         58,391
                                                                   $187,531,866
                                                                        977,031
                                                                        $3,930
                                                                             20
541380 - Testing laboratories
                                                                          5,288
                                                                          6,549
                                                                    $12,386,831
                                                                        106,618
                                                                        $2,342
                                                                             20
541611 - Administrative management consulting services
                                                                         59,612
                                                                         61,583
                                                                    $67,994,053
                                                                        351,829
                                                                        $1,141
                                                                              6
561990 - All other support services
                                                                         12,888
                                                                         14,539
                                                                    $20,897,346
                                                                        195,544
                                                                        $1,621
                                                                             15
813910 - Business associations
                                                                         16,418
                                                                         17,028
                                                                    $22,482,137
                                                                        116,055
                                                                        $1,369
                                                                              7
Total
                                                                        141,920
                                                                        158,090
                                                                    311,292,233
                                                                      1,747,077
                                                                        $2,193
                                                                             12
Note that TPCs could potentially be classified in additional NAICS as well; as a result, this list may not be comprehensive.
Sources: U.S. Census Bureau 2010a; U.S. Census Bureau 2010b; U.S. Census Bureau 2010c; U.S. Census Bureau 2010d

Because Executive Order 12866, the Regulatory Flexibility Act, and the Unfunded Mandates Reform Act are all focused on entities located in the U.S., this analysis estimates costs and small entity impacts based on the expected number of domestic entities.  But because the approval requirements for information collection requests under the Paperwork Reduction Act is not limited to U.S. entities, the reporting and recordkeeping burden of the rule is calculated for both foreign and domestic entities.  Therefore, the analysis estimates the number of TPCs and ABs in other countries that are expected to participate in the Title VI program.

As shown in Table 2-3, there are a total of 27 CARB approved TPCs outside of the U.S., bringing the total number of CARB approved TPCs to 36.  For the purpose of calculating reporting and recordkeeping burden under the Paperwork Reduction Act in Section 4.1, this analysis assumes that there will be 9 domestic and 27 foreign TPCs under the Title VI program, the same number as under the CARB program.

Table 2-3: CARB-Approved Third Party Certifiers by Country
Country Where TPC is Located
Number of TPCs
Australia
                                       1
Austria
                                       1
Belgium
                                       1
China
                                       5
Czech Republic
                                       1
Denmark
                                       1
France
                                       1
Germany
                                       4
Hong Kong
                                       3
Indonesia
                                       1
Italy
                                       3
New Zealand
                                       1
Poland
                                       1
Spain
                                       1
Sweden
                                       1
Taiwan
                                       1
     Sub-total for TPCs outside the U.S.
                                      27
United States
                                       9
     Total
                                      36
Source: California Air Resources Board (CARB) 2011

Accreditation Bodies

There are eight ABs in the U.S. that are currently IAF or ILAC signatories. Table 2-4 lists the domestic ABs, their NAICS code, the type of organization, the sales volume or expenditures and the number of employees for the AB or its parent organization, the U.S. Small Business Administration's size threshold for the NAICS code, and the AB's small entity status.

This analysis assumes that 8 U.S. ABs will participate in the TSCA Title VI program, and uses the characteristics of the ABs in Table 2-4 as proxies to estimate the impacts of the rule.  This assumption may overestimate the number of affected entities, because some ABs that are IAF or ILAC signatories may not choose to participate in the TSCA Title VI program.  And it is unlikely that additional bodies will become signatories as a result of the TSCA Title VI TPC rule, because becoming a signatory to IAF, ILAC, or an equivalent organization is a time-intensive process that may take up to a year to complete (Personal Communication with IAS 2011).

Five of the domestic ABs that are IAF or ILAC signatories are non-profit organizations, so this analysis assumes that five similarly sized non-profit ABs will participate in the TSCA Title VI program.  Under the Regulatory Flexibility Act (RFA), unless an agency establishes an alternate definition, the term "small organization" means any not-for-profit enterprise which is independently owned and operated and is not dominant in its field.  The RFA does not provide any guidance on how to judge whether an organization is dominant in its field.  Non-profit TPCs and accreditation bodies perform the same activities (such as conducting and verifying formaldehyde emissions tests, accrediting, and auditing) as their for-profit counterparts.  In order to interpret the RFA criteria for small organizations and treat all affected entities consistently, this analysis determines the size status of non-profits by applying the SBA size thresholds for the NAICS codes the non-profits are classified in.  This results in an estimate that three small non-profits and one small business will participate in the TSCA Title VI program as ABs.

Table 2-4: U.S. Accreditation Bodies that are IAF or ILAC Signatories
                                 Company Name
                                  NAICS code
                             Organizat- ion  Type
                         Sales Volume / Expenditures
                                ($ Millions)[1]
                                Total Employees
                             SBA Size Threshold:
                                   Revenues
                           ($ Millions) or Employees
                              Small Entity Status
AIHA Laboratory Accreditation Programs, LLC [2]
                                    561990
                                  Non-Profit
                                    $14.9
                                      63
                                     $7.0
                                     Large
American Association For Laboratory Accreditation
                                    813920
                                  Non-Profit
                                    $10.6
                                      48
                                    $14.0
                                     Small
American National Standards Institute (ANSI)
                                    813910
                                  Non-Profit
                                    $31.3
                                      122
                                     $7.0
                                     Large
Forensic Quality Services, Inc.
                                    541990
                                  Non-Profit
                                     $0.6
                                       4
                                     $7.0
                                     Small
International Accreditation Service (IAS)
                                    813319
                                  Non-Profit
                                     $2.5
                                      54
                                     $7.0
                                     Small
Laboratory Accreditation Bureau
                                    541712
                                Private Company
                                     $0.4
                                       6
                                 500 employees
                                     Small
National Voluntary Laboratory Accreditation Program (NVLAP), operated by the National Institute of Standards and Technology (NIST)
                                       -
                              Federal Government
                                       -
                                       -
                                       -
                                     Large
Perry Johnson Laboratory Accreditation Inc.[3]
                                    541618
                                Private Company
                                    $17.0
                                      147
                                     $7.0
                                     Large
Notes: 1. Sales volume data are presented for businesses. Expenditure data are presented for non-profits.
2.  Size data for AIHA Laboratory Accreditation Programs, LLC is based on the size of the parent organization, the American Industrial Hygiene Association (AIHA).
3. Sales volume and employee size data for Perry Johnson Laboratory Accreditation Inc. include D&B sales and employee data for "Perry Johnson Laboratory Accreditation" and the American Business Directory sales data for the related companies "Perry Johnson Inc" and "Perry Johnson Registrars".
Sources: American Business Directory 2011 (sales and employee data for Perry Johnson Inc. and Perry Johnson Registrars), Dun & Bradstreet 2011 (business sales volumes and employee data and NAICS codes for all entities), U.S. Internal Revenue Service 2009, 2010 (non-profit expenditures and employees), U.S. Small Business Administration 2010  (size standards), and company web sites for AIHA and Perry Johnson for relationships among entities in their family tree (AIHA-LAP LLC 2012, Perry Johnson & Associates 2012).

Table 2-5 lists the foreign countries with CARB-approved TPCs, the ILAC or IAF signatory ABs in that country, and their status as signatories for ISO/IEC Guide 65, 17020, and 17025.  It is not known which ABs these CARB-approved TPCs use.  However, every country with a CARB approved TPC also has an AB that is an IAF or ILAC signatory, and most of the ABs are signatories to all three relevant ISO/IEC standards.  The exceptions are Australia, New Zealand, and Hong Kong, each of which lacks an AB that is a signatory for ISO/IEC Guide 65.  However, there is a joint AB for Australia and New Zealand that is a signatory for ISO/IEC Guide 65, and there is an AB in China that is a signatory for ISO/IEC Guide 65.  Therefore, each foreign TPC could use a local AB for the TSCA Title VI program.

There are a total of 17 ABs shown in Table 2-5 that are IAF or ILAC signatories and are located in foreign countries with CARB-approved TPCs.  While EPA does not know whether these ABs accredit CARB TPCs or whether some CARB TPCs use ABs located outside their own country, for the purpose of calculating reporting and recordkeeping burdens under the Paperwork Reduction Act, the analysis in Section 4.1 assumes that there will be 17 foreign ABs that participate in the TSCA Title VI program.

Table 2-5: Summary of IAF or ILAC Signatory Accreditation Bodies in Foreign Countries with CARB TPCs
Country
                    Number of CARB-approved TPCs in Country
Accreditation Body
                                   ISO/IEC
                                   Guide 65
                                 ISO/IEC 17020
                                 ISO/IEC 17025
1. Australia
                                       1
National Association of Testing Authorities, Australia (NATA)

                                       X
                                       X
2. Australia and New Zealand

Joint Accreditation System of Australia and New Zealand (JAS-ANZ)
                                       X

3. Austria
                                       1
Bundesministerium fur Wirtschaft, Familie und Jugend (BMWA)
                                       X
                                       X
                                       X
4. Belgium
                                       1
Belgian Accreditation Structure (BELAC)
                                       X
                                       X
                                       X
5. China
                                       5
China National Accreditation Service for
Conformity Assessment (CNAS)
                                       X
                                       X
                                       X
6. Czech Republic
                                       1
Czech Accreditation Institute (CAI)
                                       X
                                       X
                                       X
7. Denmark
                                       1
Danish Accreditation (DANAK)
                                       X
                                       X
                                       X
8. France
                                       1
Comite Francais d'Accreditation (COFRAC)
                                       X
                                       X
                                       X
9. Germany
                                       4
Deutsche Akkreditierungsstelle GmbH
(DakkS)
                                       X
                                       X
                                       X
10. Hong Kong
                                       3
Hong Kong Accreditation Service (HKAS)

                                       X
                                       X
11. Indonesia
                                       1
National Accreditation Body of Indonesia
(KAN)
                                       X
                                       X
                                       X
12. Italy
                                       3
Sistema Italiano di Accreditamento
(ACCREDIA)
                                       X
                                       X
                                       X
13. New Zealand
                                       1
International Accreditation New Zealand
(IANZ)

                                       X
                                       X
14. Poland
                                       1
Polish Centre for Accreditation (PCA)
                                       X
                                       X
                                       X
15. Spain
                                       1
Entidad Nacional de Acreditacion (ENAC)
                                       X
                                       X
                                       X
16. Sweden
                                       1
Swedish Board for Accreditation and
Conformity Assessment (SWEDAC)
                                       X
                                       X
                                       X
17. Taiwan
                                       1
Taiwan Accreditation Foundation (TAF)
                                       X
                                       X
                                       X
Result: there are a total of 17 ABs that are IAF or ILAC signatories in foreign countries with CARB-approved TPCs
Sources:  IAF 2011; ILAC 2011; CARB 2011.

Costs of the TSCA Title VI TPC Rule

This section describes the proposed regulatory requirements for accreditation bodies and TPCs and presents the estimated costs for obtaining and maintaining accreditation.

Proposed Rule Requirements

EPA is proposing to administer the TPC program by developing recognition agreements with accreditation bodies.  The ABs would then process TPC applications and oversee the TPCs.

Requirements for Accreditation Bodies

As described in Section 2.1, the proposed rule would require ABs to be either a signatory to the International Laboratory Accreditation Cooperation (ILAC) Mutual Recognition Arrangement (MRA) or the equivalent for inspection and lab competency, the International Accreditation Forum, Inc. (IAF) Multilateral Recognition Arrangement (MLA) or the equivalent for product certification competency, or both.  EPA would also require that ABs:

      * Conform with ISO/IEC 17011, which lists the basic criteria for an international accreditation body who reviews and audits the TPC;
      * Submit an application to enter into a recognition agreement with EPA.  The application would include their contact information; documentation of their IAF MLA, ILAC MRA, or equivalent signatory status; and a description of any other qualifications related to performing product or laboratory accreditation.  The recognition agreement would need to be renewed every three years;
      * Notify EPA in the following instances: loss of signatory status; TPC application; TPC accreditation; TPC compliance failure; organization policy or management structure changes that could adversely affect accreditation program; and with checklists and other records documenting compliance with systems audits and on-site assessments;
      * Notify TPCs if the AB withdraws or is removed from the program;
      * Maintain records documenting TPC accreditation applications, and checklists and other records documenting compliance with systems audits and on-site assessments.  Applications must be retained for three years from the date they were submitted; and
      * Provide an annual report to EPA with the number of TPC applications received; the number of TPCs approved and denied; the names and contact information of all accredited TPCs; the number and locations of systems audits and on-site assessments; and the results of accredited TPC proficiency testing and inter-laboratory comparisons.

Requirements for TPCS

The proposed rule would require that TPCs:

      * Conform to ISO/IEC Guide 65 (general requirements for bodies operation product certification systems) and ISO/IEC 17020 (general criteria for the operation of various types of bodies performing inspection);
      * Use a laboratory that conforms to ISO/IEC 17025 (requirements for competence of calibration and testing laboratories); and
      * Be qualified to administer the approved formaldehyde test methods they will be using.

       EPA would also require the following recordkeeping and reporting activities for TPCs:

      * Submit an application to the Product accreditation body every three years with domestic contact information; type of composite wood product(s) intended to be certified; and a description of experience with ISO/IEC Guide 65, ISO/IEC 17020, and the product(s) the intended to be certified;
      * Submit an application to the Laboratory accreditation body every three years with domestic contact information; and a description of experience with test method ASTM E-1333-96 and in evaluating correlation between tests, performing formaldehyde tests on composite wood products, and operating or using laboratories that comply with ISO/IEC 17025;
      * Maintain records for three years that document the certified manufacturers and products, including those approved for reduced testing; the results of inspections, audits, and emissions tests; the laboratories and tests used; and the methods and results for establishing test method correlations;
      * Provide an annual report to its accreditation body or bodies with a list of manufacturers and products certified during the previous year; a list of non-complying products or events; a list of laboratories and tests used by the TPC; and the results of inter-laboratory comparison or proficiency tests for laboratories used by the TPC; and
      * Inform accreditation body or bodies within 30 days of any changes in personnel qualifications, procedures, or laboratories used by the TPC.

Wage Rates Used in the Analysis

The proposed rule involves activities that may require efforts by employees in three labor classifications: managerial, technical, and clerical.  Costs for each activity are calculated by estimating the labor hours required in each labor category and multiplying those burdens by the wage rate for each labor category.  This section summarizes the estimated wage rate in each labor category.  Additional details are provided in Appendix A.

Loaded wage rates for managerial, technical, and clerical personnel are derived by combining data on wages and fringe benefits with estimates of overhead rates, following the methodology described in "Wage Rates for Economic Analysis of the Toxics Release Inventory Program" (EPA, 2002b).  Wage data for each labor category are provided by the Employer Costs for Employee Compensation (ECEC) Supplemental Tables available on the BLS website (U.S. Bureau of Labor Statistics (BLS) 2011).  The loaded wage rate for managerial labor is $66.78; for technical labor, $56.31; and for clerical labor, $25.65.  Table 3-1 presents the basic data used to calculate the loaded wage rates for all three categories of labor.
Table 3-1: Loaded Industry Wage Rates, 2010$
Labor Category
                                  Base Wages
                       Fringe benefits + overhead factor
                                 Loaded Wages
Managerial
                                   $42.42[a]
                                   1.57[b,c]
                                    $66.78
Professional/
Technical
                                   $36.57[a]
                                   1.54[b,c]
                                    $56.31
Clerical
                                   $16.72[a]
                                   1.53[b,c]
                                    $25.65
Notes:
a Base wages are estimated in the ECEC Supplemental Tables (U.S. Bureau of Labor Statistics (BLS) 2011).
b Fringe benefits are estimated in the ECEC Supplemental Tables (U.S. Bureau of Labor Statistics (BLS) 2011).
c An overhead rate of 17% of base wages is used here, based on methodology and assumptions in U.S. Environmental Protection Agency (EPA) 2002a, b.
Source:U.S. Bureau of Labor Statistics (BLS) 2011, U.S. Environmental Protection Agency (EPA) 2002a, b.

Costs to Accreditation Bodies

      The proposed TSCA Title VI TPC rule requires accreditation bodies to be signatories to IAF, ILAC or equivalent oversight bodies.  The process of becoming a signatory is time-intensive and may take up to a year to complete, so it is unlikely that additional bodies will become signatories as a result of the TSCA Title VI TPC rule (Personal Communication with IAS 2011).  Thus, costs are estimated assuming that only existing IAF and ILAC signatories will serve as accreditation bodies for the third-party certifiers under this regulation.  Therefore, the estimated incremental costs to the accreditation bodies related to the proposed rule will include:

         1. Rule Familiarization:  Reading the rule in order to understand the requirements;
         2. Application Submission:  Submitting an application to enter into a recognition agreement with EPA;
         3. Prepare Recognition Agreement:  If the application is approved, enter into a recognition agreement with EPA;
         4. EPA Notification:  Provide EPA with notifications in the following instances:  loss of signatory status; TPC application; TPC accreditation; TPC compliance failure; organization policy or management structure changes that could adversely affect accreditation program; and provide checklists and other records documenting compliance with systems audits and on-site assessments;
         5. TPC Notification:  Provide TPCs with notifications if the AB withdraws or is removed from the program;
         6. Recordkeeping:  Maintain records documenting TPC accreditation applications, and checklists and other records documenting compliance with systems audits and on-site assessments.  Applications must be retained for three years from the date they were submitted; and
         7. Reporting:  Provide an annual report to EPA with the number of TPC applications received; the number of TPCs approved and denied; the names and contact information of all accredited TPCs; the number and locations of systems audits and on-site assessments; and the results of accredited TPC proficiency testing and inter-laboratory comparisons.

      Accreditation bodies are required to renew their recognition agreement with EPA every three years.  This analysis assumes that accreditation bodies incur application submission and recognition agreement preparation costs in the first year and subsequently every three years thereafter.  Costs associated with EPA notification, TPC notification, recordkeeping and reporting are assumed to be incurred annually.  Rule familiarization is a one-time cost incurred in the first year.  As a result, accreditation bodies are expected to incur costs of $1,685 in the first year, $1,070 in reapplication years, and $633 in the non-reapplication years, as summarized below in Table 3-2 and described in more detail in Appendix B (see Table B-1 and Table B-3).  This analysis assumes that eight organizations in the U.S. will become accreditation bodies, resulting in estimated total annualized costs of $6,303 per year at a three percent discount rate, and $6,320 per year at a seven percent discount rate.

Table 3-2: Costs for Accreditation Bodies
Type of Cost
Cost (2010$) [1]

First Year
Reapplication Years [2]
Non-Reapplication Years [3]
Rule Familiarization
                                                                          $615
                                                                             $0
                                                                             $0
Application or Reapplication Process [1]
                                                                            $88
                                                                            $88
                                                                             $0
Prepare Recognition Agreement
                                                                           $349
                                                                           $349
                                                                             $0
EPA Notification
                                                                            $57
                                                                            $57
                                                                            $57
TPC Notification
                                                                            $12
                                                                            $12
                                                                            $12
Recordkeeping
                                                                           $308
                                                                           $308
                                                                           $308
Reporting
                                                                           $256
                                                                           $256
                                                                           $256
                          Cost per Accreditation Body
                                                                         $1,685
                                                                         $1,070
                                                                           $633
Number of U.S. Accreditation Bodies
                                                                              8
                                                                              8
                                                                              8
Total Costs for U.S. Accreditation Bodies
                                                                        $13,480
                                                                         $8,560
                                                                         $5,064
Total Annualized Costs (30 years, 3%) 4
                                         $6,303
Total Annualized Costs (30 years, 7%) 4
                                         $6,320
Notes:
1 See Table B-1 and Table B-3 for detailed description of these estimates.
[2] Under the proposed rule, accreditation bodies are required to reapply every three years. Reapplication is assumed to occur at the end of years 3, 6, 9, 12, 15, 18, 21, 24, 27, and 30.
[3] Non-reapplication years are years 2, 4, 5, 7, 8, 10, 11, 13, 14, 16, 17, 19, 20, 22, 23, 25, 26, 28, and 29.
4 Costs are annualized over thirty years for 3 and 7 percent discount rates using the following formula:
(present discounted value of 30-year stream-of-costs)*(discount rate*(1+ discount rate)30)/((1+ discount rate)[31]-1).  Rule familiarization, application costs, and recognition agreement costs are assumed to be incurred immediately and therefore are not discounted.  Other costs are discounted assuming that they are incurred at the end of each year.

	EPA is considering requiring accreditation bodies to submit their notifications and reports to the Agency electronically using the Central Data Exchange (CDX).  Appendix C discusses the incremental change in costs if EPA finalizes a mandatory electronic reporting requirement.  As shown in section C.1.4, the total annualized savings to U.S. accreditation bodies would be $1,193 per year at a 3 percent discount rate, and $1,146 per year at a 7 percent discount rate.

Third-Party Certifier Costs

Costs that TPCs may incur under the proposed rule can be classified into five categories:  (1) the cost of rule familiarization, (2) the cost of applying to the accreditation body in order to participate in the TSCA Title VI program, (3) the cost to obtain and maintain any necessary accreditations that the TPC does not already have, (4) the annual cost of providing notifications to manufacturers and of maintaining records, and (5) the cost of providing an annual report and other notifications to the AB or EPA.  To the extent that requirements in the TSCA Title VI rule are similar to requirements in the CARB rule, CARB-approved TPCs will incur relatively little additional cost to comply with EPA's rule.

Under the proposed rule, TPCs are required to apply for re-accreditation every three years.  As a result, application and accreditation costs are incurred every third year.  The costs associated with notifications, maintaining records, and providing an annual report are assumed to be incurred on an annual basis.  Rule familiarization is a one-time cost incurred in the first year.  Each of these types of costs is discussed in more detail in the subsections below.

TPC Rule Familiarization

The level of effort associated with rule familiarization was estimated based on professional judgment, and burden hours were multiplied by the corresponding labor category's wage rate as derived in Section 3.2 (U.S. Bureau of Labor Statistics (BLS) 2011) to estimate costs.  As shown in Table 3-3 below, the total cost for each firm is estimated to be $615 in the first year.

Table 3-3: Application Process Burden and Costs for TPCs, by Activity
Activity
Clerical Burden/Cost
Technical Burden/Cost
Managerial Burden/Cost
Total

(hours)[1]
(2010$)
(hours)[1]
(2010$)
(hours)[1]
(2010$)
(hours)[1]
(2010$)

(a)
(b)
(c)
(d)
(e)
(f)
(g)=(a)+(c)+(e)
(h)=(b)+(d)+(f)
Rule Familiarization
                                                                           0.00
                                                                         $0.00
                                                                           5.00
                                                                       $281.55
                                                                           5.00
                                                                       $333.90
                                                                          10.00
                                                                          $615
Notes: 1. Burden hours are based on best professional judgment.

TPC Application Process

The application process for TPCs includes completing a form with standard information about the firm and also describing the firms experience with the ISO/IEC standards.  The level of effort for these elements were estimated based on prior economic analyses (EPA 2011a), and burden hours were multiplied by the corresponding labor category's wage rate as derived in Section 3.2 (U.S. Bureau of Labor Statistics (BLS) 2011) to estimate costs.  As shown in Table 3-4 below, the total application cost for each firm is estimated to be $492 in reapplication years and $0 in non-reapplication years.  For more information, see Appendix B.

	A TPC must reapply every three years in order to participate in the TSCA Title VI program.  TPCs that are approved by CARB will be grandfathered under the TSCA Title VI rule for one year, provided that they are compliant with all other aspects of the TSCA Title VI rule.  To simplify the analysis, costs are calculated as though all Title VI TPCs are grandfathered in for one year, even though some of them may not have been approved by CARB.  Thus, costs are calculated assuming that reapplication occurs every third year starting three years after the rule is promulgated (i.e., in years 4, 7, 10, etc.).
Table 3-4: Application Process Burden and Costs for TPCs, by Activity
Activity
Clerical Burden/Cost
Technical Burden/Cost
Managerial Burden/Cost
Total

(hours)
(a)
(2010$)[1]
(b)
(hours)
(c)
(2010$)[1]
(d)
(hours)
(e)
(2010$)[1]
(f)
(hours)
(g)=(a)+(c)+(e)
(2010$)[1]
(h)=(b)+(d)+(f)
Product Accreditation Body Application Submission
Company Information (Name, Address, Telephone Number, and Email Address of Primary Contact) and Type of Composite Wood Products Applicant Intends to Certify[2]
                                                                              0
                                                                         $0.00
                                                                           0.04
                                                                         $2.25
                                                                           0.02
                                                                         $1.34
                                                                           0.06
                                                                         $3.59
Description of TPC's Experience or Ability in Product Certification and Complying with ISO/IEC Guide 65[3]
                                                                              0
                                                                         $0.00
                                                                           0.83
                                                                        $46.74
                                                                           0.51
                                                                        $34.06
                                                                           1.34
                                                                        $80.80
Description of TPC's Experience in the Composite Wood Product Industry with the Product(s) Intended to be Certified[3]
                                                                              0
                                                                         $0.00
                                                                           0.83
                                                                        $46.74
                                                                           0.51
                                                                        $34.06
                                                                           1.34
                                                                        $80.80
Description of TPC's Ability to Inspect and Properly Train and Supervise Inspectors Pursuant to ISO/IEC 17020[3]
                                                                              0
                                                                         $0.00
                                                                           0.83
                                                                        $46.74
                                                                           0.51
                                                                        $34.06
                                                                           1.34
                                                                        $80.80
Laboratory Accreditation Body Application Submission
Company Information (Name, Address, Telephone Number, and Email Address of Primary Contact; if foreign, name and address of an agent for service located in the U.S.)[2]
                                                                              0
                                                                         $0.00
                                                                           0.04
                                                                         $2.25
                                                                           0.02
                                                                         $1.34
                                                                           0.06
                                                                         $3.59
Description of TPC's Experience in Performing or Verifying Formaldehyde Testing on Composite Wood Products[3]
                                                                              0
                                                                         $0.00
                                                                           0.83
                                                                        $46.74
                                                                           0.51
                                                                        $34.06
                                                                           1.34
                                                                        $80.80
Description of TPC's Experience Operating or Using Laboratories that Comply with ISO/IEC 17025[3]
                                                                              0
                                                                         $0.00
                                                                           0.83
                                                                        $46.74
                                                                           0.51
                                                                        $34.06
                                                                           1.34
                                                                        $80.80
Description of TPC's Experience with Test Method ASTM E-1333-96 (2002) and Experience Evaluating Correlation between Test Methods[3]
                                                                              0
                                                                         $0.00
                                                                           0.83
                                                                        $46.74
                                                                           0.51
                                                                        $34.06
                                                                           1.34
                                                                        $80.80
                         TOTAL  -  REAPPLICATION YEARS
                                                                           0.00
                                                                         $0.00
                                                                           5.06
                                                                       $284.93
                                                                           3.10
                                                                       $207.02
                                                                           8.16
                                                                          $492
                       TOTAL  -  NON-REAPPLICATION YEARS
                                                                           0.00
                                                                          $0.00
                                                                           0.00
                                                                          $0.00
                                                                           0.00
                                                                          $0.00
                                                                           0.00
                                                                             $0
Notes: 1. Note that under the proposed rule, TPCs are required to apply for re-accreditation every three years.  As a result, reapplication costs are incurred every third year.
2. Based on the estimated burden associated with reporting "company information" (EPA 2011a).
3. Based on the estimated burden associated with answering substantiation questions when making plant site confidentiality claims (EPA 2011a).
Source: EPA 2011a

TPCs Obtaining Accreditation for the Required Standards

Through a series of telephone interviews, representatives from six TPCs that have been approved by CARB for formaldehyde testing provided information about the accreditations they already had, and the costs of receiving and maintaining the accreditation.  Several TPCs also spoke in general terms about the costs of accreditation.  The information collected from each TPC is included in Table 3-5.

As indicated in Table 3-5, the cost to TPCs of obtaining accreditation will depend on whether they have the systems and equipment in place to satisfy the accreditation requirements or whether they will have to establish these.  Based on the telephone interviews, the initial cost of obtaining a single accreditation is about $20,000 to $30,000 for each quality system.  This analysis uses the mid-point of the range, $25,000, as the cost estimate.  The cost would be about three times that if the firm needed to be newly accredited for all three relevant ISO/IEC standards (Guide 65, 17020, and 17025).  Based on discussions with the six TPCs, the analysis assumes that two-thirds of the CARB-certified TPCs will already have all three accreditations in place and that one-third will need to obtain one additional accreditation from an AB.  As a result, this analysis assumes that one-third of TPCs will incur a cost of $25,000 to obtain one additional accreditation, while two-thirds of TPCs will not incur any additional costs associated with obtaining additional accreditations.

In addition to obtaining the initial accreditation, the TPCs will need to maintain and renew their systems and testing certifications.  (A typical accreditation lasts for two years.)  Two of the six TPCs provided information on the cost of maintaining and renewing accreditations.  They reported costs that ranged from $5,000 to $15,000 per year associated with maintaining certification, such as paying audit fees to their AB.  Note that the systems and testing certifications for which the laboratories reported costs may cover more than the specific formaldehyde testing.  Therefore, these estimates may overstate costs if the labs would incur these costs even if they were not acting as TPCs under TSCA Title VI.  Because the audits include tests other than formaldehyde, this analysis uses $5,000 (the low end of the costs reported) as the annual reaccreditation cost for TPCs that need an additional accreditation.

As discussed above, based on discussions with the six TPCs, the analysis assumes that two-thirds of the CARB-certified TPCs will already be maintaining all three of the relevant accreditations (i.e., ISO/IEC Guide 65, 17020, and 17025) and that one-third of TPCs will need to maintain a single additional accreditation in order to participate in the TSCA Title VI program.  Thus, one-third of TPCs are assumed to incur an annual cost of $5,000 per year in subsequent years for maintaining one additional accreditation, while two-thirds of TPCs will not incur any additional costs associated with maintaining additional accreditations because they were already maintaining all of the necessary accreditations in the baseline.

In interviews with TPCs, three said they had excess capacity for additional testing and two said they could easily add extra capacity either by building additional chambers or subcontracting the work to accredited laboratories.  For example, one said that while they currently have 3 small chambers, within two months they could add 25 small chambers that would allow them to do 100 tests per day.  In addition, it would be possible to add large chamber capacity within a 3-6 month period.  The firms indicated that if the new equipment added were similar to what they already had in place, their accreditation body would allow for desk audit approval (which could be done quickly, instead of requiring a site visit prior to approval, which would take more time).  Therefore, this analysis assumes there is adequate existing testing capacity, and that no additional costs for adding additional testing capacity will be incurred.

Table 3-5: CARB TPCs Estimates of Previous Accreditation Costs
TPC
Estimated Cost of Accreditation
Other Information
NSF International [1]
About $5,000 for application process and between $5,000 for approval of 10 test processes to $20,000 for approval of 100 test processes.  (The tests are grouped in disciplines and priced for each discipline.  For this conversation the representative was discussing batteries of tests, for example toys have 10 tests.)
Estimated that it would cost about $10,000 every two years to get reaccredited (or $5,000 a year average).

PSI, Inc.
$5,000 to $6,000 if laboratory has accreditations, inspections, testing and quality systems in place. Estimated $50,000 to $60,000 to develop the accreditations, inspections, testing and quality systems if they are not in place.

SCS International
Estimated it cost about $9,000 to $15,000 to write manual and complete application. SCS already had the quality system in place.
Mentioned that CARB does not require ISO accreditation as long as the laboratory has demonstrated ISO equivalence. Getting ISO accreditation is expensive ($25,000). They do not have a lab but contract the testing portion out to labs that are ISO 17025 accredited.
NTA Incorporated
Estimated it cost $10,000 to set up their CARB accredited program. They were already an ISO product certification firm.

Forestwood Industries, Inc
For CARB, they needed ISO 17020 and Guide 65 which they did not have.  Each cost between $20,000 and $30,000 to get.  The application took one day to complete but gathering the information took longer.

PFS Corporation
PFS is a product testing laboratory and had IAS approval for testing formaldehyde. The cost of a new accreditation is at least $2,550 with $800 for additional fields of testing (formaldehyde could be considered a field) and another $250 for each facility.
It costs PFS about $15,000 to get an IAS on-site audit each year although the audit includes more than formaldehyde. The cost for a desk audit to add an additional small test chamber where existing small chambers have already been approved is $600, but it costs at least $2,000 for a standard inspection audit.
[1]NSF International was approved as a TPC by CARB, but has subsequently withdrawn from the program.
Sources: Personal Communication with Forestwood Industries 2011, Personal Communication with NSF International 2011a, b, Personal Communication with NTA Inc. 2011, Personal Communication with PFS Corporation 2011, Personal Communication with PSI 2011, Personal Communication with SCS International 2011.
Annual Cost of TPCs Notifications Relating to Manufacturers

	Under the proposed rule, TPCs would have to provide its third-party certifier number to any manufacturer receiving its TSCA Title VI certification services.  And should a TPC withdraw from the program or lose its accreditation, it would be required to notify all manufacturers that receive its TSCA Title VI certification services.

Upon request, TPCs must provide EPA with a list of the manufacturers and their product types certified, the results of inspections, audits, and emission tests conducted for each manufacturer and product type, the list of the TPCs laboratories, test methods, and test results, the methods and results for establishing test method correlations and equivalence and the list of manufacturers and products approved for reduced testing.  As shown in Table 3-6 below, the sum of these costs is approximately $773 per firm per year in all years.  For more information, see Appendix B.

Table 3-6: Annual Burden and Cost to TPCs of Notifications Relating to Manufacturers, by Activity
Activity
Clerical Burden/Cost
Technical Burden/Cost
Managerial Burden/Cost
Total

(hours)
(a)
(2010$)
(b)
(hours)
(c)
(2010$)
(d)
(hours)
(e)
(2010$)
(f)
(hours)
(g)=(a)+(c)+(e)
(2010$)
(h)=(b)+(d)+(f)
Notifications to EPA
Third Party Certifier Number[1]
                                                                              0
                                                                         $0.00
                                                                           0.04
                                                                         $2.25
                                                                           0.02
                                                                         $1.34
                                                                           0.06
                                                                         $3.59
Withdraw from Program or Lose Accreditation[1]
                                                                              0
                                                                         $0.00
                                                                           0.01
                                                                         $0.56
                                                                          0.005
                                                                         $0.33
                                                                          0.015
                                                                         $0.90
Recordkeeping and Reporting to EPA
List of Manufacturers and their Product Types (including Resins Used) Certified by TPC[2]
                                                                           0.75
                                                                        $19.24
                                                                            1.5
                                                                        $84.47
                                                                           0.75
                                                                        $50.09
                                                                              3
                                                                       $153.79
Results of Inspections, Audits, and Emission Tests Conducted for Each Manufacturer and Product Type[2]
                                                                           0.75
                                                                        $19.24
                                                                            1.5
                                                                        $84.47
                                                                           0.75
                                                                        $50.09
                                                                              3
                                                                       $153.79
List of the TPC's Laboratories, Test Methods (including Test Conditions and Conditioning Time), and Test Results[2]
                                                                           0.75
                                                                        $19.24
                                                                            1.5
                                                                        $84.47
                                                                           0.75
                                                                        $50.09
                                                                              3
                                                                       $153.79
Methods and Results for Establishing Test Method Correlations and Equivalence[2]
                                                                           0.75
                                                                        $19.24
                                                                            1.5
                                                                        $84.47
                                                                           0.75
                                                                        $50.09
                                                                              3
                                                                       $153.79
List of Manufacturers and Products Approved for Reduced Testing[2]
                                                                           0.75
                                                                        $19.24
                                                                            1.5
                                                                        $84.47
                                                                           0.75
                                                                        $50.09
                                                                              3
                                                                       $153.79
                                     TOTAL
                                                                           3.75
                                                                        $96.20
                                                                           7.55
                                                                       $425.14
                                                                          3.775
                                                                       $252.09
                                                                         15.075
                                                                          $773
Notes: 1. Based on best professional judgment and rule requirements.
2. Based on the estimated burden associated with "recordkeeping" (EPA 2011a).
Sources: BLS 2011, EPA 2011a

Cost of TPC Annual Reports and Notifications of Changes

Table 3-7 shows the cost of the required annual report to the accreditation bodies that lists the manufacturers and their products certified by TPCs during the previous year, the list of non-complying products or events by manufacturer, the list of laboratories and test methods used by the TPC, and the results of inter-laboratory comparison or proficiency testing for the laboratories used by the TPC.  The cost of notifying the accreditation body of any changes in personnel, procedure, or laboratory changes is also included.  The sum of these costs is approximately $210 per firm per year in all years.  For more information, see Appendix B.
Table 3-7: Annual TPC Burden and Costs for Reporting to Accreditation Body, by Activity
                                   Activity
                             Clerical Burden/Cost
                             Technical Burden/Cost
                            Managerial Burden/Cost
                                     Total

(hours)
(a)
(2010$)
(b)
(hours)
(c)
(2010$)
(d)
(hours)
(e)
(2010$)
(f)
(hours)
(g)=(a)+(c)+(e)
(2010$)
(h)=(b)+(d)+(f)
Annual Report to Accreditation Bodies
List of Manufacturers and their Products Certified by the TPC during the Previous Year (including Resins Used, and the Average and Range of Formaldehyde Emissions by Manufacturer, Resin, and Product Type)[1]
                                                                           0.25
                                                                         $6.41
                                                                            0.5
                                                                        $28.16
                                                                           0.25
                                                                        $16.70
                                                                              1
                                                                        $51.26
List of Non-complying Products or Events by Manufacturer[1]
                                                                           0.25
                                                                         $6.41
                                                                            0.5
                                                                        $28.16
                                                                           0.25
                                                                        $16.70
                                                                              1
                                                                        $51.26
List of Laboratories and Test Methods Used by the TPC[1]
                                                                           0.25
                                                                         $6.41
                                                                            0.5
                                                                        $28.16
                                                                           0.25
                                                                        $16.70
                                                                              1
                                                                        $51.26
Results of Inter-Laboratory Comparison or Proficiency Testing for the Laboratories Used by the TPC[1]
                                                                           0.25
                                                                         $6.41
                                                                            0.5
                                                                        $28.16
                                                                           0.25
                                                                        $16.70
                                                                              1
                                                                        $51.26
Accreditation Board Notification
Personnel Qualification Changes[2]
                                                                              0
                                                                         $0.00
                                                                           0.02
                                                                         $1.13
                                                                           0.01
                                                                         $0.67
                                                                           0.03
                                                                         $1.79
Procedure Changes[2]
                                                                              0
                                                                         $0.00
                                                                           0.02
                                                                         $1.13
                                                                           0.01
                                                                         $0.67
                                                                           0.03
                                                                         $1.79
Laboratory Change[2]
                                                                              0
                                                                         $0.00
                                                                           0.02
                                                                         $1.13
                                                                           0.01
                                                                         $0.67
                                                                           0.03
                                                                         $1.79
                                     TOTAL
                                                                              1
                                                                        $25.65
                                                                           2.06
                                                                       $116.00
                                                                           1.03
                                                                        $68.78
                                                                           4.09
                                                                          $210
Notes: 1. Estimated as one-third of the burden associated with "recordkeeping" (EPA 2011a).  Revised estimate based on best professional judgment.
2. Based on the estimated burden associated with reporting "company information" (EPA 2011a).
Sources: EPA 2011a

Total Cost to TPCs

Costs per TPC in the First Year

Table 3-8 presents the estimated costs for TPCs in the first year.  There are different cost estimates for TPCs that already have all of the necessary accreditations, and TPCs that need to obtain an additional accreditation.

Table 3-8: Costs per TPC in the First Year
Type of Cost
Cost (2010$)[1]

TPCs with All Necessary Accreditations
TPCs Obtaining One Additional Accreditation
Rule Familiarization
                                                                          $615
                                                                          $615
Application Process
                                                                          $492
                                                                          $492
Obtaining Accreditation
                                                                            $0
                                                                       $25,000
Manufacturer Notification and Recordkeeping
                                                                          $773
                                                                          $773
Annual Report and Notifications of Changes
                                                                          $210
                                                                          $210
                                     TOTAL
                                                                        $2,090
                                                                       $27,090

Costs per TPC in Subsequent Years

Table 3-9 presents the estimated costs incurred in subsequent years by TPCs.  Again, there are different cost estimates for TPCs that already have all of the necessary accreditations, and TPCs that need to obtain an additional accreditation.  And costs differ between years when the TPC must reapply to the accreditation body to participate in the TSCA Title VI program (which occurs every three years) and the alternate years.

Table 3-9: Costs per TPC in Subsequent-Years
                                Type of Cost[1]
                                Cost (2010$)[2]

TPCs with All Necessary Accreditations
TPCs Obtaining One Additional Accreditation
Reapplication Process
                                                                          $492
                                                                          $492
Reaccreditation
                                                                            $0
                                                                        $5,000
Manufacturer Notification and Recordkeeping
                                                                          $773
                                                                          $773
Annual Report and Notifications of Changes
                                                                          $210
                                                                          $210
                         TOTAL  -  REAPPLICATION YEARS
                                                                        $1,475
                                                                        $6,475
                       TOTAL  -  NON-REAPPLICATION YEARS
                                                                          $983
                                                                        $5,983
Notes: 1. Under the proposed rule, TPCs are required to apply for re-accreditation every three years.  As a result, reapplication and reaccreditation costs are incurred every third year.
2. Costs may not sum due to rounding.

Total Cost to U.S. TPCs

Table 3-10 summarizes the total costs to U.S. firms assumed to become TPCs under the TSCA Title VI program.  As indicated, the rule is expected to cost the affected TPCs a total of $93,810 in the first year, $28,275 in reapplication years, and $23,847 in non-reapplication years.  Annualized costs were also calculated, over a 30-year period, at three and seven percent discount rates.

Table 3-10:  Total Costs to U.S. TPCs (2010$)
Cost Component
Cost (2010$)

TPCs with All Necessary Accreditation
TPCs Obtaining One Additional Accreditation
Total
Number of Affected Firms
                                       6
                                       3
                                       9
Per Firm Costs: Year 1
                                                                        $2,090
                                                                       $27,090
                                       -
Per Firm Costs: Reapplication Years
                                                                        $1,475
                                                                        $6,475
                                       -
Per Firm Costs: Non-reapplication Years
                                                                          $983
                                                                        $5,983
                                       -
Total First Year Costs
                                                                       $12,540
                                                                       $81,270
                                                                        $93,810
Total Reapplication Year Costs
                                                                        $8,850
                                                                       $19,425
                                                                       $28,275
Total Non-Reapplication Year Costs
                                                                        $5,898
                                                                       $17,949
                                                                       $23,847
30-Year Annualized Costs (3 percent discount rate)
                                                                        $6,755
                                                                       $20,477
                                                                       $27,232
30-Year Annualized Costs (7 percent discount rate)
                                                                        $6,706
                                                                       $21,416
                                                                       $28,123
Note: Costs are annualized over thirty years for 3 and 7 percent discount rates using the following formula: (present discounted value of 30-year stream-of-costs)*(discount rate*(1+ discount rate)[30])/((1+ discount rate)[31]-1).  Rule familiarization costs are assumed to be incurred immediately and therefore are not discounted. Other costs are discounted assuming that they are incurred at the end of each year.

	EPA is considering requiring TPCs to submit their notifications and reports to the Agency electronically using the CDX.  Appendix C discusses the incremental change in costs if EPA finalizes a mandatory electronic reporting requirement.  As shown in section C.1.4, the total annualized savings to U.S. TPCs would be $2,852 per year at a 3 percent discount rate, and $2,754 per year at a 7 percent discount rate.

Total Costs of the Rule for U.S. Accreditation Bodies and TPCs

This section calculates the total cost for U.S. TPCs and accreditation bodies as a result of the TSCA Title VI TPC rule.  While the costs analysis is limited to domestic entities, the burden analysis in Section 4.1 includes both foreign and domestic entities.

The different cost components of the rule (initial costs; notification, reporting, and recordkeeping costs; TPC reapplication costs; and AB reapplication costs) are incurred at different times and with different frequencies.  Figure 2 demonstrates how the different cost components occur over the first nine years, and how they are categorized into five different categories of years, depending on which component occurs in that year.  These same five categories are used in Table 3-11 and Table 3-12.   Table 3-11 presents the per-firm costs for accreditation bodies and TPCs in each of these categories of years.  Table 3-12 presents the total costs for the eight U.S. accreditation bodies and nine U.S. TPCs combined.  To estimate total costs, per-firm costs were multiplied by the number of affected firms.  Annualized costs were also calculated, over a 30-year period, at three and seven percent discount rates.

Figure 2.  Timing of Cost Components Over the First Nine Years of the Program
Cost Component
                                    Year 1
                                    Year 2
                                    Year 3
                                    Year 4
                                    Year 5
                                    Year 6
                                    Year 7
                                    Year 8
                                    Year 9
Initial costs
                                       X

Notification, reporting, and recordkeeping
                                       X
                                       X
                                       X
                                       X
                                       X
                                       X
                                       X
                                       X
                                       X
TPC reapplication

                                       X

                                       X

AB reapplication

                                       X

                                       X

                                       X
All TPCs are assumed to have been approved by CARB and thus grandfathered into the federal program for one year, so TPC reapplication occurs every 3 years starting in Year 4.  AB reapplication occurs every 3 years starting in Year 3.

Key
Description

Initial Applications for ABs (beginning of Year 1) and TPCs (end of Year 1)

Non-Reapplication Years for ABs, Non-Reapplication Years for TPCs

Non-Reapplication Years for ABs, Reapplication Years for TPCs

Reapplication Years for ABs, Non-Reapplication Years for TPCs

Reapplication Years for ABs, Reapplication Years for TPCs

Table 3-11: Cost per Year for Accreditation Bodies and Third Party Certifiers (2010$)
Year
ABs
TPCs

Have Necessary Accreditation
Need Additional Accreditation
Per Firm Costs: Year 1
                                                                        $1,685
                                                                        $2,090
                                                                       $27,090
Per Firm Costs: Years 2, 5, 8, 11, 14, 17, 20, 23, 26, 29 (Non-Reapplication Years for ABs, Non-Reapplication Years for TPCs)
                                                                          $633
                                                                          $983
                                                                        $5,983
Per Firm Costs: Years 3, 6, 9, 12, 15, 18, 21, 24, 27, 30 (Reapplication Years for ABs, Non-Reapplication Years for TPCs)
                                                                        $1,070
                                                                          $983
                                                                        $5,983
Per Firm Costs: Years 4, 7, 10, 13, 16, 19, 22, 25, 28 (Non-Reapplication Years for ABs, Re-Application Years for TPCs)
                                                                          $633
                                                                        $1,475
                                                                        $6,475

Table 3-12: Total Costs to U.S. Accreditation Bodies and Third Party Certifiers (2010$)
Year
U.S. ABs
U.S. TPCs
All Affected U.S. Firms

Have Necessary Accreditation
Need Additional Accreditation

Number of Affected Firms
                                                                              8
                                                                              6
                                                                              3
                                                                             17
Total Year 1 Costs
                                                                       $13,480
                                                                       $12,540
                                                                       $81,270
                                                                      $107,290
Total Costs in Years 2, 5, 8, 11, 14, 17, 20, 23, 26, 29 (Non-Reapplication Years for ABs, Non-Reapplication Years for TPCs)
                                                                        $5,064
                                                                        $5,898
                                                                       $17,949
                                                                       $28,911
Total Costs in Years 3, 6, 9, 12, 15, 18, 21, 24, 27, 30 (Reapplication Years for ABs, Non-Reapplication Years for TPCs)
                                                                        $8,560
                                                                        $5,898
                                                                       $17,949
                                                                       $32,407
Total Costs in Years 4, 7, 10, 13, 16, 19, 22, 25, 28 (Non-Reapplication Years for ABs, Re-Application Years for TPCs)
                                                                        $5,064
                                                                        $8,850
                                                                       $19,425
                                                                       $33,339
30-Year Annualized Costs
(3 percent discount rate)
                                                                        $6,303
                                                                        $6,755
                                                                       $20,477
                                                                       $33,535
30-Year Annualized Costs
(7 percent discount rate)
                                                                        $6,320
                                                                        $6,706
                                                                       $21,416
                                                                       $34,443
Note: Annualized costs are annualized over thirty years for 3 and 7 percent discount rates using the following formula: (present discounted value of 30-year stream-of-costs)*(discount rate*(1+ discount rate)30)/((1+ discount rate)[31]-1).  Rule familiarization, AB application costs, and AB recognition agreement costs are assumed to be incurred immediately and therefore are not discounted. Other costs are discounted assuming that they are incurred at the end of each year.

	EPA is considering requiring accreditation bodies and TPCs to submit their notifications and reports to the Agency electronically using the CDX.  Appendix C discusses the incremental change in costs if EPA finalizes a mandatory electronic reporting requirement.  As shown in section C.1.4, electronic reporting via CDX would reduce the annualized costs of the rule to U.S. accreditation bodies and TPCs from $33,535 to $29,490 per year at a 3 percent discount rate, a savings of $4,045 per year.  At a 7 percent discount rate, costs are estimated to decrease from $34,443 to $30,542, a savings of $3,900 per year.  There are additional unquantified improvements in efficiency and higher data quality due to electronic reporting.

Impact Analyses

In addition to the cost analysis presented in Chapter 3, several other types of impacts are important to consider in evaluating the effects of a regulation.  This chapter presents the incremental impact of the proposed TPC Rule on:

         Paperwork burden, as required by the Paperwork Reduction Act (PRA);
         Financial condition of small entities, as required by the Regulatory Flexibility Act (RFA);
         State and Local Governments, as required by the Unfunded Mandates Reform Act;
         Federalism, as required by Executive Order 13132 - Federalism;
         Tribal governments, as required by Executive Order 13175 - Consultation and Coordination with Indian Tribal Governments;
         The environmental health risk or safety risk to children due to the regulation, as required by Executive Order 13045 - Protection of Children From Environmental Health & Safety Risks;
         Whether voluntary consensus standards are used in its regulatory activities; and
         Low income and minority populations, as required by Executive Order 12898.

Paperwork Reduction Act Analysis

This section estimates the burden of reporting and recordkeeping for the proposed Third Party Certification rule.  It presents average annual burden and cost estimates for affected accreditation bodies and third party certifiers over the first three years of the program.  The labor hours and costs per firm are the same as those shown in Chapter 3  -  the sum of the rule familiarization, application, recordkeeping, and reporting burdens and costs.  However, the numbers of firms considered here are greater than in the cost analysis in Chapter 3 because both domestic and foreign firms are included.

Table 4-1 presents the PRA per-firm labor burdens and costs by the type of affected firm.  The total burden and cost are calculated by multiplying the burdens and costs per firm by the number of affected firms.

EPA is considering requiring accreditation bodies and TPCs to submit their notifications and reports to the Agency electronically using the CDX.  Appendix C discusses the incremental change in burden and costs if EPA finalizes a mandatory electronic reporting requirement.  As shown in section C.1.4, electronic reporting via CDX would reduce the average total burden hours for all 61 domestic and foreign respondents from 1,421 hours to 1,029 hours per year, a savings of 392 hours per year.
Table 4-1: Total PRA Burdens and Costs (2010$)
Firm Type
Number of Firms
Per Firm Burden and Cost
Total Burden and Cost

Labor
Non-Labor Cost
Labor
Non-Labor Cost

Hours
Cost

                                     Hours
                                     Cost

                                    Year 1
Domestic Accreditation Body
                                                                              8