EO12866_CAA Part 82A 2060-AU26 Final FRN_20191217
                                                                      6560-50-P
ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 82
[EPA-HQ-OAR-2016-0271; FRL-XXXX-X]
RIN: 2060-AU26
Protection of Stratospheric Ozone: Adjustments to the Allowance System for Controlling HCFC Production and Import, 2020-2029; and Other Updates
AGENCY: Environmental Protection Agency (EPA).
ACTION: Final rule.
SUMMARY: The U.S. Environmental Protection Agency is allocating production and consumption allowances for specific hydrochlorofluorocarbons, a type of ozone-depleting substance, for the years 2020 through 2029. These hydrochlorofluorocarbons may be used to service certain equipment manufactured before 2020. The EPA is also updating other requirements under the program for controlling production and consumption of ozone-depleting substances, as well as making edits to the regulatory text for improved readability and clarity. These updates include revising the labeling requirements for containers of specific hydrochlorofluorocarbons; prohibiting the transfer of hydrochlorofluorocarbon allowances allocated through this rulemaking into allowances for hydrochlorofluorocarbons that have already been phased out; requiring the use of an electronic reporting system for producers, importers, exporters, transformers, and destroyers of controlled ozone-depleting substances; revising and removing recordkeeping and reporting requirements; improving the process for petitioning to import used ozone-depleting substances for reuse, including by creating more flexibility for imports of used halon from certain halon banks and exempting imports of aircraft bottles containing halon 1211 for hydrostatic testing from the petition process; creating a certification process for importing both used and virgin ozone-depleting substances for destruction; and restricting the sale of known illegally imported substances. This rule includes clarifications to the certification requirements for methyl bromide quarantine and preshipment uses. The EPA is also adding polyurethane foam systems containing ozone-depleting chlorofluorocarbons to the list of nonessential products. Lastly, the Agency is updating the definition of "destruction" as used in the context of the production and consumption phaseout and removing obsolete provisions.
DATES:  Amendatory instructions 9 and 11 are effective on [insert date of publication in the Federal Register]. Amendatory instructions 2 through 8, 10 and 12 through 20 are effective [insert date 30 days from date of publication in the Federal Register.]
Operational Dates:  For operational purposes under the Clean Air Act, the amendments to
40 CFR §§82.15(g)(5)-(7) and 82.16 are effective as of [insert date of signature] and the amendments to 40 CFR §§82.3, 82.4, 82.9, 82.10, 82.12, 82.13, 82.14 , 82.15(b), 82.15(g)(8), 82.23, 82.24, Appendix K to Subpart A of Part 82, 82.62, 82.64, 82.66, 82.104, 82.106, and 82.270 are effective as of [insert date 30 days from date of publication in the Federal Register.]
ADDRESSES: The EPA has established a docket for this action under Docket ID No. EPA-HQ-OAR-2016-0271. All documents in the docket are listed on the www.regulations.gov website. Although listed in the index, some information is not publicly available, e.g., confidential business information or other information whose disclosure is restricted by statute. Certain other material, such as copyrighted material, is not placed on the Internet and will be publicly available only in hard copy form. All other publicly available docket materials are available electronically through www.regulations.gov.
FOR FURTHER INFORMATION CONTACT: Katherine Sleasman, Stratospheric Protection Division, Office of Atmospheric Programs, Mail Code 6205T, 1200 Pennsylvania Avenue, N.W., Washington, D.C., 20460; telephone number<PHONE_NUMBER>; email address<EMAIL_ADDRESS>You may also visit the Ozone Protection website of the EPA's Stratospheric Protection Division at https://www.epa.gov/ods-phaseout for further information about reporting and recordkeeping, other Stratospheric Ozone Protection regulations, the science of ozone layer depletion, and related topics.
SUPPLEMENTARY INFORMATION:
Effective Dates. Portions of this rule are effective less than 30 days from publication in the Federal Register. Section 553(d) of the Administrative Procedure Act (APA), 5 U.S.C. chapter 5, generally provides that rules may not take effect earlier than 30 days after they are published in the Federal Register. This rule constitutes "the promulgation or revision of regulations under subchapter VI of [the CAA] (relating to stratosphere and ozone protection)" and as such it is covered by the rulemaking procedures in section 307(d) of the Clean Air Act (CAA). See CAA section 307(d)(1)(I). Section 307(d)(1) of the CAA states that: "The provisions of section 553 through 557 * * * of Title 5 shall not, except as expressly provided in this section, apply to actions to which this subsection applies." Thus, section 553(d) of the APA does not apply to this rule. The EPA is nevertheless acting consistently with the policies underlying APA section 553(d) in making a portion of the revisions finalized in this rule effective immediately, while the remainder of the rule will be effective 30 days after publication. APA section 553(d) allows an effective date less than 30 days after publication for any rule that "grants or recognizes an exemption or relieves a restriction" (see 5 U.S.C. 553(d)(1)). The purpose of the general rule in Section 553(d) of the CAA that 30 days must be provided between publication and the effective date is to "give affected parties a reasonable time to adjust their behavior before the final rule takes effect." Omnipoint Corp. v. Fed. Commc'n Comm'n, 78 F.3d 620, 630 (D.C. Cir. 1996); see also United States v. Gavrilovic, 551 F.2d 1099, 1104 (8th Cir. 1977) (quoting legislative history).  However, when the Agency grants or recognizes an exemption or relieves a restriction, affected parties do not need a reasonable time to adjust because the effect is not adverse.
      The EPA has determined that portions of this rule that are effective fewer than 30 days from publication in the Federal Register relieve a restriction because those revisions allocate allowances for the production and consumption of HCFC-123 and HCFC-124 for the years 2020 through 2029, giving affected entities greater flexibility to produce and consume these HCFCs, and, because the allowances being allocated include allowances for calendar year 2020, ensure the allowances will be available to producers and consumers of these HCFCs to allow for continued production and import of these HCFCs in 2020.
      The EPA has also determined that certain other portions of this rule that are effective fewer than 30 days from publication in the Federal Register grant or recognize an exemption or relieve a restriction because these revisions would allow for the import and use of HCFC-123 for servicing fire suppression equipment manufactured before January 1, 2020, as well as allow the use of HCFC-123 as a refrigerant in equipment manufactured on or after January 1, 2020 but before January 1, 2021 under certain conditions. These revisions also remove an obsolete requirement and thus relieve the restrictions associated with that requirement.
      Accordingly, it is in keeping with the policy underlying the APA for the regulatory amendments to 40 CFR 82.15(g)(5)-(7) and 82.16 to take effect immediately. Finally, this CAA section 307(d) rule is promulgated upon signature and widespread dissemination. For operational purposes under the CAA, the EPA is making the amendments to 40 CFR 82.15(g)(5)-(7) and 82.16 and the corresponding portions of the preamble effective as of [insert date of signature] which is the date of signature.
Acronyms and Abbreviations. The following acronyms and abbreviations are used in this document.
ACE/ITDS  -  Automated Commercial Environment/International Trade Data System
ARFF  -  Aircraft Rescue and Fire Fighting
CAA  -  Clean Air Act
CBP  -  Customs and Border Protection
CDC  -  Centers for Disease Control and Prevention
CDX  -  Central Data Exchange
CFC  -  Chlorofluorocarbon
CFR  -  Code of Federal Regulations
CROMERR  -  Cross-Media Electronic Reporting Regulation
DOT  -  Department of Transportation
EIA  -  Environmental Investigation Agency
EPA  -  Environmental Protection Agency
FAA  -  Federal Aviation Administration
FR  -  Federal Register
GPEA  -  Government Paperwork Elimination Act
HARC  -  Halon Alternatives Research Corporation
HCFC  -  Hydrochlorofluorocarbon
HRC  -  Halon Recycling Corporation
HTSA  -  Harmonized Tariff Schedule of the United States Annotated
Montreal Protocol  -  Montreal Protocol on Substances that Deplete the Ozone Layer
MOP  -  Meeting of the Parties
MT  -  Metric Ton
NFPA  -  National Fire Protection Association
ODP  -  Ozone Depletion Potential
ODS  -  Ozone-Depleting Substance
Parties to the Montreal Protocol, or Party  -  Nations and regional economic integration organizations that have consented to be bound by the Montreal Protocol on Substances that Deplete the Ozone Layer
QPS  -  Quarantine and Preshipment
RACA  -  Request for Additional Consumption Allowances
SNAP  -  Significant New Alternatives Policy
TEAP  -  Technology and Economic Assessment Panel
UNEP  -  United Nations Environment Programme
Table of Contents
I. General Information
 Does this Action Apply to Me?
 What Action Is the Agency Finalizing?
 What Is the Agency's Authority for this Action?
 What Are the Incremental Costs and Benefits of this Action?
II. Background
III. Final Rule and Response to Comments
   A. Allocation of HCFC Allowances for the Years 2020 Through 2029
   B. Allocation of HCFC-123 Consumption Allowances
      C.	De minimis Exemption for the Use of HCFC-123 in Chillers
      D.	Addition of Fire Suppression Servicing Uses to the HCFC Phaseout Schedule
      E.	Revisions to Labeling Requirements
      F.	Allocation of HCFC-124 Production and Consumption Allowances
   G.	Changes to Transfer of Allowance Provisions in 40 CFR §82.23
   H. 	Changes to Import Requirements
   I. 	Electronic Reporting and Updates to Other Provisions of the Production and Consumption Control Program
   J. 	Addition of Polyurethane Foam Systems Containing CFCs to the Nonessential Products Ban
   K. 	Updates to 40 CFR §§82.3, 82.104, and 82.270 Related to Destruction
   L. 	Removal of Obsolete Provisions in 40 CFR §§82.3, 82.4, 82.9, 82.10, 82.12, 82.13, 82.16, and 82.24
   M. 	Other Comments Not Related to the Proposal
IV. Economic Analysis
V. Statutory and Executive Order Reviews
 Executive Order 12866: Regulatory Planning and Review and Executive Order 13563: Improving Regulation and Regulatory Review
 Executive Order 13771: Reducing Regulations and Controlling Regulatory Costs
 Paperwork Reduction Act (PRA)
 Regulatory Flexibility Act (RFA)
 Unfunded Mandates Reform Act (UMRA)
 Executive Order 13132: Federalism
 Executive Order 13175: Consultation and Coordination with Indian Tribal Governments
 Executive Order 13045: Protection of Children from Environmental Health and Safety Risks
 Executive Order 13211: Actions that Significantly Affect Energy Supply, Distribution, or Use
 National Technology Transfer and Advancement Act (NTTAA)
 Executive Order 12898: Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations
 Congressional Review Act

I. General Information
A. Does this Action Apply to Me?
	You may be potentially affected by this final action if you manufacture, process, import, or distribute into commerce certain ozone-depleting substances (ODS) and mixtures. The North American Industrial Classification System (NAICS) codes have been provided to assist you and others in determining whether this action might apply to certain entities. Potentially affected entities may include but are not limited to:
 Air-Conditioning and Warm Air Heating Equipment and Commercial and Industrial Refrigeration Equipment Manufacturing (NAICS 333415)
 Air-Conditioning Equipment and Supplies Merchant Wholesalers (NAICS 423620)
 Basic Chemical Manufacturing (NAICS 3251)
 Chlorofluorocarbon Gas Manufacturing and Import (NAICS 325120)
 Farm Product Warehousing and Storage (NAICS 493130)
 Farm Supplies and Merchant Wholesalers (NAICS 424910)
 Flour Milling (NAICS 311211)
 Fire Extinguisher Chemical Preparations Manufacturing (NAICS 325998)
 Fruit and Nut Tree Farming (NAICS 1113)
 General Warehousing and Storage (NAICS 493130)
 Greenhouse, Nursery, and Floriculture Production (NAICS 1114)
 Hazardous Waste Treatment and Disposal, Cement Manufacturing, Clinker (NAICS 327310)
 Hazardous Waste Treatment and Disposal, Incinerator, Hazardous Waste (NAICS 562211)
 Industrial Gas Manufacturing (NAICS 325120)
 Materials Recovery Facilities (NAICS 562920)
 Other Aircraft Parts and Auxiliary Equipment Manufacturing (NAICS 336413)
 Other Chemical and Allied Production Merchant Wholesalers (NAICS 424690)
 Other Crop Farming (NAICS 1119)
 Pesticide and Other Agricultural Chemical Manufacturing (NAICS 325320)
 Plumbing, Heating, and Air-Conditioning Contractors (NAICS 238220)
 Portable Fire Extinguishers Manufacturing (NAICS 339999)
 Postharvest Crop Activities (except Cotton Ginning) (NAICS 115114)
 Research and Development in Physical, Engineering, and Life Sciences (NAICS 541710)
 Rice Milling (NAICS 311212)
 Soil Preparation, Planting, and Cultivating (NAICS 115112)
 Vegetable and Melon Farming (NAICS 1112)
	This list is not intended to be exhaustive, but rather provides a guide for readers regarding entities likely to be affected by this action. Other types of entities not listed in this section could also be affected. If you have any questions regarding the applicability of this action to a particular entity, consult the person listed under FOR FURTHER INFORMATION CONTACT.
B. What Action Is the Agency Finalizing?
      The EPA is finalizing a number of revisions to the production and consumption control program for ODS in 40 CFR part 82, subpart A, which are divided into "class I" and "class II" substances. The EPA is finalizing, as proposed (see 84 FR 41510, August 14, 2019), the allocations of annual allowances for hydrochlorofluorocarbon (HCFC)-123 and HCFC-124 for the years 2020 through 2029 to be used for servicing certain equipment manufactured before January 1, 2020.
Table 1  -  Final HCFC-123 and HCFC-124 Allowance Allocation, 2020 through 2030 (MT)

                                     2020
                                     2021
                                     2022
                                     2023
                                     2024
                                     2025
                                     2026
                                     2027
                                     2028
                                     2029
                                     2030
                                   HCFC-123
                                  Consumption
                                      650
                                      650
                                      650
                                      570
                                      490
                                      410
                                      330
                                      250
                                      170
                                      90
                                       0

                                  Production
                                       0
                                       0
                                       0
                                       0
                                       0
                                       0
                                       0
                                       0
                                       0
                                       0
                                       0
                                   HCFC-124
                                  Consumption
                                      200
                                      200
                                      200
                                      175
                                      150
                                      125
                                      100
                                      75
                                      50
                                      25
                                       0

                                  Production
                                      200
                                      200
                                      200
                                      175
                                      150
                                      125
                                      100
                                      75
                                      50
                                      25
                                       0

For HCFC-123 and HCFC-124 allowances, the EPA identified a total number of allowances to be allocated and then determined calendar-year allowances equal to a percentage of each company's baseline.
      The EPA is revising subpart A, as proposed, to add servicing of existing "fire suppression equipment" to the authorized uses of newly produced or imported (i.e., virgin) quantities of HCFC-123 and HCFC-124 during the years 2020 through 2029. To facilitate compliance, the EPA is finalizing, with minor modifications from the proposal, the labeling requirements for containers of fire suppression agent containing HCFC-123 in subpart E. To align with existing regulations that prohibit the production and import of phased-out HCFCs, in particular HCFC-22, the Agency is finalizing its proposal to modify the inter-pollutant allowance transfer provisions authorized by section 607 of the CAA to prohibit transfers into ODS that are already phased out. The Agency is also finalizing as proposed the de minimis exemption from the use prohibition in section 605(a) of the CAA to allow virgin HCFC-123 to be used for the manufacture, through December 31, 2020, of chillers that meet specific criteria.
      For changes to the import of ODS, the EPA is finalizing changes to the process for petitions to import used ODS for reuse that will meet the Agency's goals of reducing the burden on importers while ensuring the Agency has adequate information to verify that the material being imported is used, as well as making other modifications to this process as proposed. Such changes require collection of additional information when the EPA needs additional verification to make a determination whether the material has been previously used in considering petitions to import used ODS for reuse. Other changes remove data elements that are no longer necessary. Of particular note, the Agency is: 1) reducing the information requirements when importing halon from a "halon bank" so long as the EPA receives an official letter from the appropriate government agency in the country where the material is stored that indicates that the halon is used and that the halon bank is authorized to collect used halon; 2) allowing submission of an application for an export license or an official government communication from the appropriate government agency in the country of export in lieu of the license itself; 3) clarifying that the Agency will request additional information when additional verification is needed before issuing a non-objection notice, and 4) providing flexibility for the timing of import.
      The Agency is also finalizing changes, with limited modification from the proposal, to establish a new certification process for the import of ODS (used and virgin) for destruction in the United States. This new process requires importers of ODS to provide less information on the source of the material than when petitioning to import for reuse, but requires more information on the chain of custody and submission of verification that the imported material is destroyed after destruction has occurred.
      The EPA is exempting imports of aircraft bottles containing halon 1211, a potent ODS used as a fire suppression streaming agent, for hydrostatic testing from the import petition process to make it easier for companies to service fire suppression equipment, which promotes proper maintenance of these bottles and prevents the emission of halon 1211.
      The Agency is prohibiting the sale or offer for sale or distribution of any ODS that the seller knows, or has reason to know, has been imported into the United States without consumption allowances or is otherwise not subject to an exemption.
      The EPA is also finalizing as proposed other updates to the production and consumption control program, including requiring the use of an electronic reporting system for producers, importers, exporters, transformers, and destroyers of ODS in 40 CFR §§82.3, 82.13, 82.14, 82.23, and 82.24 and clarifying the certification requirements for methyl bromide quarantine and Preshipment (QPS) uses in 40 CFR §§82.4 and 82.13. The EPA is also finalizing the addition of polyurethane foam systems containing chlorofluorocarbons (CFCs) to the list of nonessential products. This rule also updates provisions in 40 CFR §§82.3, 82.104, and 82.270 related to destruction technologies and the definition of "destruction" as used in the context of the production and consumption phaseout. Lastly, the EPA is removing outdated and obsolete provisions related to the allocation and transfer of class I ODS credits and allowances, and the associated recordkeeping and reporting requirements, that are no longer in use in subpart A.
C. What Is the Agency's Authority for this Action?
	Several sections of the CAA provide authority for the actions finalized by the EPA in this rulemaking. Section 603 provides authority to establish monitoring and reporting requirements for ODS. Sections 604 and 605 provide authority to phase out production and consumption of class I and class II substances, respectively, and to restrict the use of class II ODS. Section 606 provides the EPA authority to establish a more stringent phaseout schedule than that set out in sections 604 and 605 based on (1) current scientific information that a more stringent schedule may be necessary to protect human health and the environment, (2) the availability of substitutes, or (3) to conform to any acceleration under the Montreal Protocol on Substances that Deplete the Ozone Layer (Montreal Protocol). Section 607 provides the EPA with authority to issue production and consumption allowances and to authorize allowance transfers, including inter-pollutant and inter-company transfers. Section 610 directs the EPA to issue regulations that identify nonessential products that release class I substances into the environment (including any release during manufacture, use, storage, or disposal) and prohibit any person from selling or distributing any such product, or offering any such products for sale or distribution, in interstate commerce. Section 611 requires the EPA to establish and implement labeling requirements for containers of, and products containing or manufactured with, class I or class II ODS.
      The EPA's authority for this rulemaking is supplemented by section 114, which authorizes the EPA Administrator to require recordkeeping and reporting in carrying out any provision of the CAA (with certain exceptions that do not apply here). Section 301 further provides authority for the EPA to "prescribe such regulations as are necessary to carry out [the EPA Administrator's] functions" under the CAA. Additional authority for electronic reporting comes from the Government Paperwork Elimination Act (GPEA) (44 U.S.C. 3504), which provides: "(1) for the option of the electronic maintenance, submission, or disclosure of information, when practicable as a substitute for paper; and (2) for the use and acceptance of electronic signatures, when practicable."
      Additional information on the EPA's authority to establish and manage an allocation system for the phaseout of class I and class II substances is provided in prior EPA actions (see 58 FR 65018, December 10, 1993 and 68 FR 2820, January 21, 2003).
D. What Are the Incremental Costs and Benefits of this Action?
      The EPA considered the incremental costs and benefits associated with this rulemaking, which primarily stem from changes to reporting and recordkeeping requirements. This action requires electronic submissions through the Agency's Central Data Exchange (CDX), creates a streamlined Certification of Intent to Import ODS for Destruction, exempts halon 1211 in aircraft bottles from the import petitions process, and adds a recordkeeping requirement for certain distributors of methyl bromide for QPS applications. The EPA estimates the overall annual cost savings to reporters as a result of reductions in reporting elements, streamlining forms, and added efficiencies to be approximately $13,000 per year. The EPA also estimates a one-time cost of approximately $4,000 to redesign labels on containers of fire suppression agents. In addition, the EPA performed a screening analysis of the impact on small businesses and found that there will be no additional costs imposed on them. See the docket for the screening analysis on small business. A more detailed discussion is included in Section IV.
II. Background
      The United States was one of the original signatories to the Montreal Protocol and ratified it on April 12, 1988. After ratification, Congress enacted, and President George H.W. Bush signed into law, the CAA Amendments of 1990, which included Title VI on Stratospheric Ozone Protection, codified as 42 U.S.C. Chapter 85, Subchapter VI, to ensure that the United States could satisfy its obligations under the Montreal Protocol, in addition to establishing complementary measures such as the national recycling and emission reduction programs under section 608 and the labeling requirements under section 611, among others.
      The 1992 Copenhagen Amendment to the Montreal Protocol created the stepwise reduction schedule, subsequently revised, and the eventual phaseout of HCFC consumption. The next milestone is a commitment to reduce HCFC consumption by 99.5 percent below the baseline by January 1, 2020, with consumption for the years 2020 through 2029 restricted to the servicing of refrigeration, air-conditioning, and fire suppression equipment existing on January 1, 2020. This is referred to as the "servicing tail." In November 2018, the Parties to the Montreal Protocol agreed to add fire suppression equipment existing on January 1, 2020 to the list of permissible servicing tail uses.
      The United States has chosen to implement the Montreal Protocol phaseout schedule of HCFCs on a chemical-by-chemical basis that employs a "worst-first" approach focusing on the earlier phaseout of certain chemicals with higher ozone depletion potential (ODP). In 1993, the EPA established a phaseout schedule to eliminate HCFC-141b first, to greatly restrict HCFC-142b and HCFC-22 next, and to subsequently place restrictions on all other HCFCs ultimately leading to a complete phaseout of all HCFCs by 2030 (see 58 FR 15014, March 18, 1993 and 58 FR 65018, December 10, 1993).
      The EPA designed the allowance program to implement the production and consumption controls of the CAA and to facilitate an orderly phaseout. To control production, the EPA allocated production allowances to producers of specific ODS. To control consumption, the EPA allocated consumption allowances to producers and importers of specific ODS. In the allowance program, the EPA allocates "calendar-year" or "annual" allowances to companies who expend them when they produce or import ODS. The allowances can be traded among companies both domestically and internationally (between countries that are Parties to the Protocol), with certain restrictions. Allocation of production and consumption allowances for most class I substances (CFCs, methyl chloroform, carbon tetrachloride, and halons) ended by 1996, and in 2005 for methyl bromide. Production and consumption allowances for class II substances (HCFCs) will be reduced to zero in 2030.
      Since the EPA is implementing the HCFC phaseout on a chemical-by-chemical basis, it allocates and tracks production and consumption allowances on an absolute kilogram basis for each chemical. An allowance is the unit of measure that controls production and consumption of ODS. The EPA allocates allowances for specific years; they are valid between January 1 and December 31 of a given control period (i.e., calendar year). In previous rulemakings, the EPA has allocated calendar-year allowances equal to a percentage of the baseline for the controlled substance for a given control period. A calendar-year allowance represents the privilege granted to a company to produce or import one kilogram (not ODP-weighted) of the specific controlled substance. The EPA allocates two types of calendar-year allowances -- production allowances and consumption allowances. To produce an HCFC, an allowance holder must expend both production and consumption allowances. To import an HCFC, an allowance holder must expend only consumption allowances. An allowance holder exporting HCFCs for which it has expended consumption allowances may obtain a refund of those consumption allowances upon submittal of proper documentation to the EPA. Production and import of virgin HCFCs without allowances are prohibited except for transformation, destruction, transshipments, or heels (40 CFR §82.15(a) and (b)).
      Under the chemical-by-chemical phaseout schedule for HCFCs established by EPA regulations, as discussed above, the EPA stopped allocating production and consumption allowances for HCFC-141b as of 2003; for HCFC-225ca/cb as of 2015; and for HCFC-22 and HCFC-142b as of 2020.
      The Montreal Protocol, the CAA, and the EPA regulations under 40 CFR 82 subpart A limit the permissible uses of newly produced or imported quantities of the remaining HCFCs (HCFC-123 and HCFC-124). Section 605(a) of the CAA makes it unlawful, starting January 1, 2015 to introduce into interstate commerce or use any virgin HCFCs unless they are used as a refrigerant in appliances manufactured prior to January 1, 2020, or are listed as acceptable for use as a fire suppression agent for nonresidential applications in accordance with section 612 of the CAA. In addition, prior to November 2018, Article 2F of the Montreal Protocol provided that the only permissible uses of HCFCs after January 1, 2020 were for the servicing of refrigeration and air-conditioning equipment existing on January 1, 2020. In a November 2018 adjustment to Article 2F, servicing of fire suppression and fire protection equipment existing on January 1, 2020 was added as an additional permissible use.  Section 614(b) of the CAA also provides that in the case of a conflict between any provision of the CAA and any provision of the Montreal Protocol, the more stringent provision shall govern. In sum, the combination of the CAA and the Montreal Protocol establish that the permissible uses of HCFCs after January 1, 2020 will be limited to servicing refrigeration, air-conditioning, and fire suppression equipment existing on January 1, 2020.
      The EPA notes that absent specific use restrictions, HCFCs can continue to be used after their production and import has ceased, for example, to service existing equipment such as refrigeration and air-conditioning systems. The EPA's intent has always been to facilitate a smooth transition to alternatives, which means avoiding stranding equipment that has not yet reached the end of its useful life. For example, used HCFC-22 that is recovered and reclaimed, or virgin material produced before the 2020 phaseout may continue to be used for as long as it is available to service existing HCFC-22 systems.
	 The Title VI phaseout regulations that reduce the number of allowances allocated over time is a central component of the United States' approach for protecting stratospheric ozone. The EPA limits how much ODS enters the market to meet the CAA and Montreal Protocol phaseout milestones. To smooth the phaseout steps, the EPA also takes complementary actions that reduce the demand for ODS, encourage recovery and recycling or reclamation of used ODS, allow for continued servicing to avoid stranding existing equipment, and encourage transition to alternatives that "reduce overall risks to human health and the environment."
      The EPA's most recent action related to the phaseout of HCFCs was a 2014 rule that allocated production and consumption allowances for HCFC-22, HCFC-142b, HCFC-123, and HCFC-124 for 2015-2019 (see 79 FR 64254, October 28, 2014). In that action, the EPA further implemented the provisions in section 605(a) of the CAA that limit production and consumption to servicing refrigeration and air-conditioning appliances and for use in fire suppression applications. That notice provides additional discussion of the history of the phaseout of HCFCs.
III. Final Rule and Response to Comments
      This section describes the rationale for the final actions taken in this rulemaking, summarizes and responds to the comments received on the proposal, and explains differences between the proposed rule and this final action.
A. Allocation of HCFC Allowances for the Years 2020 Through 2029
This section describes the factors that the EPA considered in developing its approach for issuing HCFC allowances for the next regulatory period that extends from 2020 through 2029. Additional relevant discussion is included in other portions of section III. Specifically, section III.B. provides more information on allowance allocations for HCFC-123 and section III.C. provides more information on allowance allocations for HCFC-124. As explained below, the EPA's allocation methodologies are consistent with the CAA, EPA regulations, and the obligations of the United States under the Montreal Protocol, and were supported by most commenters.
HCFC-123 and HCFC-124 are the two HCFCs not already slated for phaseout in the United States by 2020 under the "worst-first approach" described in the previous section. These HCFCs are currently used in the refrigeration, air-conditioning, and fire suppression sectors. The use of newly produced or imported quantities of these HCFCs is limited under the Montreal Protocol, the CAA, and the EPA's regulations. The EPA is relying on its authority under section 605(c) of the CAA to promulgate regulations phasing out the production and restricting the use of class II substances, subject to previous accelerations under section 606 (see 58 FR 65018, December 19, 1993 and 74 FR 66411, December 15, 2009). The EPA is making limited changes to the provisions on production, consumption, and use of class II ODS to provide flexibility for the years 2020 through 2029 consistent with the requirements of section 605 of the CAA and obligations of the United States under the Montreal Protocol.
      As stated in the proposal, the EPA considered a number of factors when developing an approach to allocating allowances for HCFC-123 and HCFC-124 for the years 2020 through 2029 including existing company-specific production and consumption baselines listed in 40 CFR §§82.17 and 82.19; the Agency's worst-first approach; the remaining permissible uses of HCFCs under section 605(a) of the CAA and the availability of alternatives for those uses; the quantity needed to meet the estimated servicing demand for each permissible use; the estimated quantity of HCFCs that will be available from recycling, reclamation, and potential stockpiling in advance of the 2020 phaseout step; and the transition that must occur by 2030 when HCFC production and consumption will be phased out completely. Further, the Agency has considered public comments on prior drafts of the report in the docket titled The U.S. Phaseout of HCFCs: Projected Servicing Demand in the U.S. Air Conditioning, Refrigeration, and Fire Suppression Sectors (2020-2030), December 2019, hereafter referred to as the 2019 Final Servicing Tail Report, and on the proposed allocation amounts and approaches, as discussed below and in other parts of section III.
      For HCFC-123 and HCFC-124 allowances, the EPA identified a total number of allowances to be allocated. These amounts are presented in Table 1 in Section I.B. above and match the proposed allowance allocations. Each company's calendar-year allowances are then calculated as a percentage of each company's baseline.[ ]Tables identifying the percentage of baseline production and consumption allowances allocated appear in 40 CFR §82.16(a). As noted, the EPA considered several factors when developing an approach to allocating allowances for HCFC-123 and HCFC-124. The first factor the EPA considered was the existing limitation on permissible uses of HCFCs and the availability of alternatives for those uses. Section 605(a) of the CAA limited the use of HCFCs beginning January 1, 2015. The statute provides that starting on that date, it shall be unlawful for any person to introduce into interstate commerce or use any class II substance unless such substance: (1) has been used, recovered, and recycled; (2) is used and entirely consumed (except for trace quantities) in the production of other chemicals; (3) is used as a refrigerant in appliances manufactured before January 1, 2020; or (4) is listed as acceptable under the Significant New Alternatives Policy (SNAP) program for use as a fire suppression agent for nonresidential applications. As detailed in the 2019 Final Servicing Tail Report, the EPA considered the estimated quantity of HCFC-123 and HCFC-124 that will be available from recycling, reclamation, and potential stockpiling in advance of the 2020 phaseout step. The EPA also considered the availability of alternatives with the understanding that it is typically best to service equipment with the same refrigerant or fire suppression agent it was designed to use.
      The SNAP program continues to review and list alternatives for applications that use HCFCs, including refrigeration and air-conditioning and fire suppression applications that use HCFC-123. Substitutes are listed under that regulatory program as acceptable, unacceptable, or acceptable subject to use restrictions for specific uses. Any future use of substitutes listed as acceptable subject to use restrictions must comport with any conditions of the SNAP program, if applicable. Currently, the SNAP program lists a number of acceptable substitutes for HCFCs for use as a fire suppression agent for nonresidential applications as well as in the refrigeration and air-conditioning sector, making a variety of allocation options practicable for the years 2020 through 2029.
      As noted previously, in addition to the statutory provisions in section 605 of the CAA, the EPA established a "worst-first approach" in 1993 which addressed which HCFCs may be produced and consumed and prioritized the phaseout of HCFCs based on their ODPs. These regulations can be found in 40 CFR §82.16. Consistent with that approach, the EPA is issuing allowances for production and consumption of only HCFC-123 and HCFC-124, as these are the remaining HCFCs that have not been phased out domestically.
      In 2020, the consumption cap of the United States for all HCFCs is 0.5 percent of the U.S. baseline, which equates to 76.2 ODP-weighted metric tons that could be available for servicing. Under section 605(c) of the CAA, the consumption of HCFCs by any person is also to be limited to the quantity consumed by that person during the baseline year. The EPA has implemented this requirement by limiting the number of annual allowances allocated for each chemical in 40 CFR §82.16. The consumption baseline is 2,014 MT (40 ODP-weighted MT) of HCFC-123 and 2,396 MT (53 ODP-weighted MT) of HCFC-124. Section 605(c) of the CAA thus prohibits the EPA from allocating allowances above that amount for each chemical. Consumption allowances are allocated to the entities listed in 40 CFR §82.19.
      In finalizing this action, the EPA considered the quantities of HCFC-123 and HCFC-124 needed to service equipment manufactured before 2020. These estimates are discussed in the 2019 Final Servicing Tail Report, which is available in the docket. The final report and allocations are based on demand projections contained in the EPA's Vintaging Model, recent market research, discussions with industry on current HCFC uses and trends, the expected availability of recovered, recycled/reclaimed, and reused material, and consideration of comments offered on the report during the public comment period on this rulemaking, as described below. The Agency made the April 2018 draft report available on its website and in the docket along with a Notice of Data Availability (see 83 FR 19757, May 4, 2018) and requested comment on the data and assumptions in the report. The EPA did not receive any comments on the draft report. As a result of the adjustment to Article 2F of the Montreal Protocol, the EPA revised the 2018 Draft Servicing Tail Report to reflect the demand for servicing fire suppression equipment manufactured before January 1, 2020 and disaggregated estimated demand for fire suppression to show estimated demand for servicing compared to demand for new equipment. The EPA consulted with industry on the estimate of future market demand for HCFC‐123 fire suppression applications. At the time the 2019 Draft Servicing Tail Report was published in August 2019, total demand (the manufacture of new equipment and the servicing of existing equipment) over the past several years had varied, but the average was approximately 260 MT per year. The EPA expected the demand for fire suppression servicing to be 35 to 90 MT per year based on projections from the Vintaging Model and feedback from industry.
      In the notice of proposed rulemaking for this action, the EPA sought comment on all aspects of the 2019 Draft Servicing Tail Report, including the projections for the fire suppression sector. The Agency received comments on the total demand for fire suppression during the comment period and has updated the report accordingly. The Agency also updated the reclamation and consumption values in the report to reflect the data reported for 2018.
      The last factor the EPA considered is the statutory 2030 phaseout date for production and import of HCFCs, with limited exceptions, under section 605(b)(2) and (c) of the CAA. In 2030, HCFC-123 and HCFC-124 must be phased out completely. As in prior phaseout steps for other HCFCs, the Agency's intent is to accomplish the statutory 2030 phaseout in a manner that achieves a safe and smooth transition to alternatives without stranding equipment. The EPA's goal is to allow equipment owners to continue servicing their HCFC-123 and HCFC-124 equipment throughout its expected lifetime. Experience with the HCFC-22 phaseout indicates that gradually decreasing allocation levels is a better approach than an abrupt cessation of allowances at the phaseout date, as it provides time and the right market signals for equipment owners to plan investments and transition to alternatives while also fostering recovery, recycling, and reclamation of HCFCs.
B. Allocation of HCFC-123 Consumption Allowances
      This section describes the EPA's proposal for annual HCFC-123 allocations, comments received on the proposal, the Agency's responses to those comments, and the final allocations for HCFC-123 in 2020 through 2029.
      The Agency proposed to issue consumption allowances for HCFC-123 for years 2020 through 2022 equal to the estimated 2020 demand for servicing existing refrigeration and air-conditioning and fire suppression equipment. The EPA proposed to then decrease the number of allowances issued in each subsequent year by an equal amount such that there would be zero allowances in 2030. The EPA explained that this allocation approach would meet the full estimated servicing demand in 2020 with newly imported HCFC-123 and the full estimated servicing demand in 2030 with reclaimed HCFC-123. The EPA also explained that allocating at the full estimated level of servicing demand in 2020 (650 MT)[ ]for the years 2020 through 2022 would allow time for the reclamation market to increase sales to the fire suppression sector. Currently, the reclamation market primarily services the refrigeration and air conditioning sector. Allocating above estimated demand for the years 2021 and 2022 (see the demand estimates in the 2019 Final Servicing Tail Report) will ensure supply for servicing existing refrigeration and air-conditioning, and fire suppression equipment while that transition occurs.
      The EPA also sought comment on two alternative approaches for determining how many HCFC-123 consumption allowances to issue. The first alternative approach would have issued allowances equal to the total modeled demand each year from 2020 through 2029 (which includes servicing of existing equipment and the manufacture of new equipment using reclaimed HCFC-123) minus the low end of the projection for reclamation each year from 2020 through 2029. This contrasts with the proposed allocation amounts which, as explained above, were not directly based on demand for the manufacture of new equipment using reclaimed HCFC-123 or the availability of reclaimed HCFC-123 and did not subtract allocations based on projections for reclamation as was proposed in Alternative 1. The Agency determined that reclaimed HCFC-123 could meet the demand for new fire suppression equipment, while also eventually providing HCFC-123 for servicing existing equipment. See Table 8 of the 2019 Draft Servicing Tail Report for more discussion of estimated reclamation.
      The EPA also sought comment on a second alternative approach under which the EPA would issue 2,014 MT of HCFC-123 consumption allowances for each of the years 2020 through 2029. This is equal to 100 percent of the aggregate consumption baseline for HCFC-123 and is the maximum allocation allowed under section 605(c) of the CAA. This approach would allocate approximately half of the annual U.S. consumption cap allowed under the Montreal Protocol for HCFC-123 (40.3 ODP-weighted MT per year compared to 76.2 ODP-weighted MT).
      The EPA also proposed to issue zero production allowances for the years 2020 through 2029 because no companies produced HCFC-123 production in the baseline years of 2005 through 2007 (see 74 FR 66431, December 15, 2009). Under section 605(b)(1) of the CAA, it is unlawful for any person to produce any class II substance in an annual quantity greater than the quantity of such substance produced by such person during the baseline year.
(1) Summary of and Response to Comments on the HCFC-123 Allocation
	The EPA received supportive comments on the proposed allocation amount from Ingersoll Rand, a stationary air-conditioning manufacturer; National Refrigerants, a refrigerant distributor; Halon Alternatives Research Corporation (HARC), a non-profit trade association; and an anonymous commenter. Several commenters state that the proposal accurately reflects the amount of HCFC-123 needed for servicing refrigeration and air-conditioning and fire suppression equipment, the availability of reclaimed HCFC-123, and the amount of market demand. Hudson suggests that the Agency should reduce the allocation below the amounts in Alternative 1 and decrease each year as opposed to staying static in the first three years. The Environmental Investigation Agency (EIA), an environmental non-profit, also supports an allocation below Alternative 1, and another comment from a private citizen does not support an allocation for any HCFC production or consumption. American Pacific, the manufacturer of Halotron[(R)] I, a fire suppression agent blend containing HCFC-123, is supportive of allocating the maximum amount allowable under the CAA, consistent with Alternative 2 in the proposal. These comments and the Agency's responses are described in detail below.
 (2) Comments in Support of a Lower Allocation
	The EPA received comments that were supportive of a lower allocation. Hudson and EIA note that allocation levels could be lower considering the supply of reclaimed material. Hudson specifically notes that based on the 2019 Draft Servicing Tail Report, total demand for HCFC-123 could be met with Alternative 1. These commenters suggest the EPA should adopt a schedule that is more aggressive than Alternative 1 because the reclamation industry can provide 300 MT of HCFC-123 annually. They note that the reclamation industry has supplied nearly 85 percent of the estimated 300 MT volume over the past two years. Furthermore, Hudson states that the reclamation industry does not need any transition time to enter the fire suppression market because the industry is already servicing that market, and an accelerated schedule will spur the growth of reclamation and ensure more than adequate supply of HCFC-123 for both the refrigeration and air-conditioning and fire suppression markets. EIA also supports a lower allocation, noting that the supply of reclaimed HCFC-123 ranging from 180 to 270 MT annually over the past several years could allow the EPA to reduce allocations by 200 MT below expected demand to 450 MT, and then reduce by 45 MT annually until reaching zero in 2030. Both commenters note an allocation at or below Alternative 1 would be beneficial to the reclamation industry and the environment.
The EPA disagrees with commenters that the Agency should finalize a lower allocation than proposed. Starting the allocation levels below the estimated level of demand for servicing both fire suppression and refrigeration and air-conditioning equipment could strand serviceable fire suppression equipment or hinder the manufacture of new fire suppression equipment in the near term. Even though reclaimed and stockpiled HCFC-123 will be available in 2020, the primary concern is whether there is enough HCFC-123 for both near and longer term fire suppression and refrigeration and air-conditioning needs. Historically, the refrigeration and air-conditioning sector utilized the majority of that material as the historic practice of reclaimers and importers is to sell the ODS to refrigerant distributors. Based on their comment, we understand that Hudson may sell some reclaimed material to the fire suppression sector. However, that does not appear to be the norm among reclaimers. The Agency is concerned that decreasing the allocation too soon might not provide time for a broader fire suppression sector transition to reclaimed material for new systems as well as servicing. This could lead to shortages of HCFC-123 for fire suppression uses because, as discussed above, after January 1, 2020, recovered and recycled or reclaimed HCFC-123, as well as material stockpiled prior to 2020, is the only material that can be used to meet demand for new fire suppression equipment. Starting with allocation levels at the estimated level of demand for servicing both fire suppression and refrigeration and air-conditioning equipment means that imported HCFC-123 can be used to satisfy the servicing needs for existing equipment, making it more likely that reclaimed and stockpiled HCFC-123 will be available for the manufacture of new fire suppression equipment.
The EPA anticipates that the market for reclaimers and others involved in recovering used ODS for fire suppression purposes will change in the near future and may resemble the market for used halons to some extent given both halons and the blend of HCFC-123 are used in the fire suppression sector. While halon production and consumption were phased out in the United States in 1994 and globally in 2010, halon is still available for new equipment (e.g., for new aircraft and Aircraft Rescue and Fire Fighting (ARFF) vehicles). Eventually, domestic recovery and reclamation of HCFC-123 combined with imports of used and/or recycled HCFC-123 should meet demand potentially similar to how the demand for halon in the United States is met through transition to alternatives, successful management of halon banks, and imports under the petition process for used ODS (see 40 CFR §§82.13(g)(2) and 82.24(c)(3)). Ultimately, the EPA anticipates that like other ODS sectors, alternatives will be available for all applications that currently use halons and HCFCs. However, the fire suppression sector will benefit from the proposed level of allocation which recognizes the near-term changes to the market will be underway in 2020-2022. Therefore, it would not be prudent to base the allocation on the maximum amount of estimated reclamation in the early years or to decrease the allocation to zero too quickly. The fact the 2018 reclaim amount (240 MT) was lower than the 2017 reclaim amount (270 MT) further supports the Agency's determination that it is appropriate to provide the proposed level of allocation which is higher than Alternative 1 for the years 2020 through 2022. The EPA recognizes the necessity of reclaimed HCFCs to meet demand entirely after 2030 and therefore the final allocation level for HCFC-123 is less than the estimated level of servicing demand starting in 2023. In the longer term, this allocation sends appropriate market signals for a smooth and orderly transition by reducing the allocation after 2022 and completely phasing out the import of virgin HCFC-123 in 2030.
(3) Comments in Support of a Higher Allocation and Other Comments on the Proposed Allocation
      American Pacific supports a higher initial allocation of allowances and no decrease in allocation level. The commenter asks that the Agency consider the total demand for Halotron[(R)] I and notes their concern that the proposed allocation is too low and could strand existing equipment. American Pacific suggests that the EPA allocate the maximum allowable number of consumption allowances for HCFC-123 -- an approach presented as Alternative 2 in the proposal. American Pacific asserts that the allocation of 2,014 MT per year during the period 2020 through 2029 is warranted because Halotron[(R)] I has gained more acceptance as a lower ODP replacement to halon 1211 in fire suppression equipment, particularly in wheeled units. American Pacific states that it will continue to manufacture new fire suppression equipment with reclaimed and stockpiled material, and asserts that the estimated total demand for fire suppression as represented in the 2019 Draft Servicing Tail Report, at 260 MT is an underestimate. The commenter states that the total demand was over 300 MT in 2018 and that they expect demand in 2019 to be an additional 10 percent higher. American Pacific also asserts that the EPA's estimate of 90 MT of fire suppression servicing demand is low. For these reasons, they argue that annual allocation levels should start at 2,014 MT and be kept constant from 2020 through 2029.
      The EPA disagrees with the comment that an allocation higher than what the Agency proposed is warranted. First, the EPA responds that the increase in demand in 2018 and 2019 does not merit allocating at the level the commenter requests. Read together, CAA sections 605 and 614 and Article 2F of the Montreal Protocol limit the permissible uses of newly-produced and newly-imported HCFCs to servicing of refrigeration and air-conditioning equipment existing on January 1, 2020, and to servicing of fire suppression and fire protection equipment existing on January 1, 2020, and listed as acceptable for use as a fire suppression agent for nonresidential applications in accordance with section 612 of the CAA. Thus, when determining allocations for HCFC-123 and HCFC-124, the EPA focused on the amount of demand for these specific uses. Since virgin material cannot be used to manufacture new fire suppression equipment, it would not be reasonable for the EPA to base allocation amounts on demand for new equipment even if, as the commenter asserts, demand for their product is higher than historic levels. Nonetheless, based on the new information provided for 2018 sales, the EPA is revising the total demand estimate in the 2019 Final Servicing Tail Report issued with this rule. With 2018 demand being 300 MT, the five-year average reflected in the 2019 Final Servicing Tail Report increases to about 270 MT. A further 10 percent increase in demand in 2019 would result in a five-year average of approximately 280 MT. Furthermore, even if the EPA did consider demand for manufacturing new fire suppression equipment in addition to servicing demand, these figures, when added to servicing demand for refrigeration and air-conditioning equipment (560 MT in 2020), would remain below an allocation of 2,014 MT per year. Moreover, and as noted elsewhere in this section, consistently allocating allowances above total servicing demand would not support a smooth and orderly transition to alternatives, nor would it foster recovery, recycling and reclamation, which is needed as of January 1, 2020 for manufacturing new fire suppression equipment and in the longer term as HCFC-123 is phased out.
      The EPA also disagrees with the commenter's assertion that the Agency's servicing demand estimates are too low. As part of the development of the Servicing Tail Report, the Agency sought and received input from a variety of key industry stakeholders. The EPA has estimated total demand for HCFC-123 for fire suppression at 260 MT per year in the two previous drafts of the Servicing Tail Report based on average reported consumption of HCFC-123 for this use over the last several years. In the last version of the report issued in August 2019, the Agency included a servicing demand of 35 to 90 MT per year for fire suppression. These estimates were based on the best available information and during public review of those drafts, interested stakeholders did not provide any evidence to contradict the Agency's estimates of servicing demand. Recognizing the needs for fire suppression servicing and American Pacific's comment, the Agency's allocation for HCFC-123 is based on the high end of the range for servicing demand for Halotron[(R)] I fire extinguishers manufactured prior to 2020. The Agency's review of the data supported a number within the 35 to 90 MT range, but generally closer to the bottom half of that range. The commenter, however, provided no additional data to support increasing the estimate for servicing demand. For all of these reasons, the Agency concludes that it is appropriate to base the final allocation on the servicing demand estimate from the Servicing Tail Report as proposed.
      The commenter states that, based on their observations of the fire suppression industry, if EPA issues allowances at 2,014 MT, it is not likely that fire suppression equipment manufacturers and distributors would wait until 2029 to transition or be unprepared for the 2030 phaseout. Similarly, the commenter states that it is not necessary to provide a gradual decrease over time to guard against consumption levels that are higher than demand. They assert that consumption will always closely track demand given the sourcing of this material outside of the United States and that there is no reason to create excess inventory. American Pacific also comments that while there are multiple unknowns, in discussion with the industry, the use of newly-imported HCFC-123 should be less expensive than reclaimed HCFC-123. The EPA responds that one of the Agency's goals when setting the allocation level is to reach the 2030 phaseout step in a manner that achieves a safe and smooth transition to alternatives while allowing equipment owners to continue servicing their equipment within its expected lifetime. Issuing allowances significantly above demand would likely suppress the reclamation market and thus increase the likelihood of stranding equipment in 2030 and beyond. In the near term, this would adversely affect the availability of reclaimed HCFC-123 for the fire suppression sector because reclamation will be the only source of HCFC-123 for the manufacture of new fire suppression equipment once stockpiles of material imported prior to 2020 are exhausted. In the longer term, if the reclaim market is suppressed through 2029, there will be less ability to respond to the 2030 phaseout when the primary supply of HCFC-123 will be from the reclaim market. Ultimately this could result in stranded equipment after 2029. Experience with prior HCFC phaseout steps indicates that gradually decreasing allocation levels is better than an abrupt increase or decrease to foster recovery, recycling, and reclamation of HCFCs and an orderly transition to alternatives. Gradually reducing HCFC allowances fosters a safe and smooth transition and recycling/reclamation and is consistent with the EPA's approach in previous HCFC allocation rules (see 74 FR 66412, December 15, 2009; 76 FR 47451, August 5, 2011; 78 FR 20004, April 3, 2013; and 79 FR 64254, October 28, 2014).
      Additionally, the commenter focuses on the fire suppression market exclusively and does not take into account the broader market for HCFC-123, including needs for servicing refrigeration and air-conditioning equipment, which will have servicing needs well beyond 2029. While the commenter asserts that it is not likely that the fire suppression industry would be unprepared for the 2030 phaseout if the EPA issues allowances at 2,014 MT, the commenter does not address the broader servicing market for HCFC-123, where refrigeration and air-conditioning account for significantly more demand. Based on other comments, the refrigeration and air-conditioning industry is supportive of a gradual reduction in allowances starting from 2020 estimated servicing demand for all allowed uses.
      In response to the comment about costs, the Agency has found that the price of HCFCs is not directly correlated to the amount of allowances allocated. For example, experience with the phaseout of HCFC-22 indicates that there can be temporary price changes but the wholesale price has fallen as the allocation gradually decreased over the past five years. The phaseout of HCFC-22 may not be identical to the remaining phaseout step for HCFC-123 given the addition of the fire suppression sector. The price to import and/or produce material does not necessarily match the wholesale price for various HCFCs, so there is no guarantee of a lower price from imported product versus reclaimed product. Supporting this point, the EPA understands from its interactions with reclaimers that they tend to sell their reclaimed product at or near the market price for virgin HCFCs. The Agency cannot conclude, based on the comments received, whether there is a difference in the price of HCFC-123 when sold for fire suppression compared to when it is sold as a refrigerant. The EPA agrees with the commenter that if the Agency allocated allowances well below estimated servicing demand, it is possible that prices would increase in the near term. However, that is not what the Agency is finalizing in this rule. Instead, this rule issues allowances above estimated demand for three years specifically to allow reclaimers time to shift their market to the fire suppression sector before reducing the number of allowances.
      The commenter further states that the proposed allocation would strand existing fire extinguishers including wheeled units costing between $125 to $4,000 for the telecommunications industry and for military applications. The EPA responds that the proposed allocation being finalized in this action accounts for the servicing of existing fire extinguishers. As discussed earlier in this section, the Agency estimated the demand for servicing Halotron[(R)] I fire extinguishers manufactured prior to 2020 to be between 35 to 90 MT per year. This estimate is based on industry feedback on the two draft Servicing Tail Reports that the Agency made available for public comment. The final allocation includes 90 MT based on the servicing demand for servicing fire suppression equipment and the commenter provided no data to support increasing the Agency's estimate for servicing demand or that the proposed allocation amount would strand existing inventory. As described in the 2019 Final Servicing Tail Report accompanying this action, the Agency estimates that the allocation finalized in this rule combined with reclaimed and recycled HCFC-123 will provide sufficient HCFC-123 to allow for servicing of refrigeration, air-conditioning, and fire suppression equipment, as well as the manufacture of new fire suppression equipment. The EPA finds no support for the assertion that the proposed allocation would strand any existing fire extinguishers.
      The EPA further notes that the fire suppression sector has a long history of using recovered and recycled/reclaimed ODS for both servicing and new equipment. There has been continuing demand for halons in newly-manufactured fire suppression equipment since halons were phased out in the United States in 1994. This demand for halons has been satisfied with recycled/reclaimed halons, ensuring equipment can be serviced and investments are not stranded.
Lastly, American Pacific asks the EPA to consider an updated ODP of 0.0098 for the purposes of analysis of environmental impact and comparison with alternatives to HCFC-123 in the fire suppression sector such as halon 1211, hydrofluorocarbons (HFCs), and fluoroketone based agents. The EPA responds that the Agency did not propose and is not finalizing any changes to the listed ODP for HCFC-123. The ODP for HCFC-123 as listed in Annex C to the Montreal Protocol and in Appendix A to 40 CFR part 82, subpart A is 0.02.
C. De Minimis Exemption for the Use of HCFC-123 in Chillers
      The EPA proposed to create a de minimis exemption from the use prohibition in section 605(a) of the CAA to allow virgin HCFC-123 to be used for the manufacture of chillers that meet specific criteria through December 31, 2020. The EPA received two comments on this proposal, from Ingersoll Rand and The Alliance, an industry coalition of fluorocarbon producers and users, both in support of the de minimis exemption. For the reasons cited in the proposal and reiterated in this notice, the Agency is finalizing the de minimis exemption from the use prohibition in section 605(a). This exemption aims to address a unique situation that has arisen because certain construction projects that ordered HCFC-123 chillers for installation in 2019 are behind schedule and the chillers may not be installed by the end of 2019. The EPA understands that many of the chillers and the virgin HCFC-123 to charge them are already on site at these construction projects and that companies purchased virgin HCFC-123 for charging these chillers with the expectation that they would be installed in 2019. Due to construction delays, the final steps in the manufacture of these chillers (including charging with refrigerant) may not occur until after January 1, 2020. Section 605(a) prohibits the introduction into interstate commerce or use of any class II substance with limited exemptions. Use of a virgin class II substance "as a refrigerant" is allowed only "in appliances manufactured prior to January 1, 2020." The EPA is creating a de minimis exemption from this prohibition to allow virgin HCFC-123 to be used for the manufacture of chillers that meet specific criteria through December 31, 2020. This exemption will only apply if the HCFC-123 chiller unit and other components were ready for shipment to a construction location and the components were specified for installation under a building permit or contract dated on or before the date of signature of the proposed rule (July 24, 2019), the HCFC-123 was imported prior to 2020 and is in the possession of the entity that will complete the manufacture of the appliance, and all refrigerant added to that appliance after December 31, 2020 is used, recovered, or recycled/reclaimed.
      (1)	Background
      As described in Section II of this notice, the CAA restricts introduction into interstate commerce and use of HCFCs over time with limited exceptions. The CAA prohibits the use of HCFCs to manufacture new appliances effective January 1, 2020, unless the HCFCs are used, recovered, and recycled. The CAA also phases out production and consumption of HCFCs, with an interim milestone in 2015 and the full phaseout in 2030. Additionally, the Montreal Protocol phases out the production and consumption of HCFCs as of January 1, 2020, while allowing a limited amount of new production and consumption for servicing existing refrigeration and air-conditioning appliances, servicing existing fire suppression and fire protection equipment, and other uses not relevant for the U.S. market. The EPA codified the CAA use and interstate commerce restrictions related to refrigeration and air-conditioning appliances at 40 CFR part 82, subpart A in prior rulemakings.
      As defined in the regulations, the term manufactured "for an appliance, means the date upon which the appliance's refrigerant circuit is complete, the appliance can function, the appliance holds a full refrigerant charge, and the appliance is ready for use for its intended purposes;..." Appliances used in commercial refrigeration, such as large chillers, and industrial process refrigeration typically involve more complex installation processes, which may require custom-built parts, and typically are manufactured on-site. Appliances, such as these, that are field charged or have the refrigerant circuit completed on-site, regardless of whether additional refrigerant is added or not, are manufactured at the point when installation of all the components and other parts are completed, and the appliance is fully charged with refrigerant and able to operate.
      The EPA learned that a limited number of HCFC-123 chillers specified for installation in 2019 may not be fully manufactured prior to January 1, 2020. The key uncharged components, in particular the chiller units themselves, were ready for shipment to the construction location in the first half of 2019. However, for some delayed projects, even though the units and refrigerant may already be on-site, the final steps to manufacture the appliance, in particular charging the chiller with refrigerant, may not occur until 2020. Thus, if no regulatory relief is provided, the virgin HCFC-123 could not be used to charge these chillers even if it has already been purchased and is on site.
      (2) De Minimis Exemption
      To provide flexibility to complete the manufacture of HCFC-123 chillers from components that are ready for shipment to a construction location, the EPA is creating a limited de minimis exemption to the use prohibition in 605(a). This exemption allows HCFC-123 to be used for the initial charging of certain chillers manufactured between January 1, 2020 and December 31, 2020 provided they meet specific conditions. The exemption will only apply if the HCFC-123 chiller unit and components are ready for shipment to a construction location and the components were specified for installation under a building permit or contract dated on or before the date of signature of the proposed rule (July 24, 2019), the HCFC-123 was imported prior to 2020 and is in the possession of an entity involved in the manufacture of the appliance, and all refrigerant added to that appliance after December 31, 2020 is used, recovered, or recycled/reclaimed.
      The EPA has implied authority to establish a de minimis exemption from the section 605(a) use restriction. The United States Court of Appeals for the District of Columbia Circuit has recognized that "[u]nless Congress has been extraordinarily rigid, there is likely a basis for an implication of de minimis authority to provide exemption when the burdens of regulation yield a gain of trivial or no value." Alabama Power Co. v. Costle, 636 F.2d 323, 360 - 61 (D.C. Cir. 1980). Further discussion of this authority can be found in the preamble to the proposed rule.
      The EPA concludes that it has authority to provide flexibility by creating a de minimis exemption to the 605(a) use prohibition. Section 605(a) is not extraordinarily rigid and is ambiguous as it does not speak directly to the circumstance presented here. In addition, providing flexibility is consistent with the statutory intent.
      The EPA does not view section 605(a) as "extraordinarily rigid." Title VI of the CAA can generally be summarized into three principal areas: the phaseout of the production and import of ODS (sections 602 - 607); the reduction of emissions of ODS via various means such as required servicing practices, restrictions on sale and distribution of products, and consumer education (sections 608 - 611); and the transition to alternatives that reduce overall risk to human health and the environment (section 612). Section 605 specifically addresses the phase-out of production and consumption of class II substances. For class II substances, section 605 established specific restrictions beginning in 2015 on use, introduction into interstate commerce and production, while establishing a complete phaseout of HCFCs in 2030. Congress' overall approach to the class II phaseout was generally less rigid than its approach to the class I phaseout, given the longer timeframes and the presence of only one intermediate reduction step (see section 605(b)). Given this context, the EPA does not view section 605(a) as "extraordinarily rigid."
      The EPA finds that section 605(a) is ambiguous as it does not speak directly to the circumstance presented for the situation described above. Section 605(a) does not explicitly address whether virgin HCFC-123 may be used in a chiller where all the chiller components were ready for shipment to a construction site before January 1, 2020 but where the initial charge is not completed until after January 1, 2020. Because the statute does not specify when manufacture is complete, it does not unambiguously prohibit the use of virgin HCFC-123 for the initial charge of chillers where all the chiller components were ready for shipment before January 1. 2020. Thus, the EPA has authority to resolve the ambiguity through regulation and determine whether the use prohibition should apply in this circumstance.
      The EPA views the de minimis exemption as consistent with statutory intent. The flexibility from the exemption will ensure the orderly phaseout of ODS and will be consistent with the past practice of preventing the stranding of existing appliances without being counter to the three principal areas of Title VI described previously. First, it will not contribute to additional production and consumption of HCFCs and thus will not inhibit the United States from reaching the CAA phaseout date of 2030 or complying with the Montreal Protocol. Second, these chillers will continue to be subject to the servicing practices and labeling requirements applicable to all ODS appliances. Third, it will not slow the transition to alternatives. As discussed below, the components to assemble these chillers have already been made ready for shipment and they have been purchased for installation. While these chillers may one day be retrofitted to an alternative, such as R-514A, Title VI does not require the retrofitting of existing equipment.
      In addition, rigid application of section 605(a) of the CAA in the unique circumstances presented here would "yield a gain of trivial or no value." Envtl. Def. Fund Inc. v. EPA, 82 F.3d 451, 455 (D.C. Cir. 1996) (internal quotation marks omitted). The EPA concludes that there will be no environmental benefit associated with rigidly applying 605(a). First, because the HCFC-123 used to initially charge these chillers must have been imported prior to 2020, existing allowances will not be expended. There will therefore not be any increase in U.S. consumption compared with the current allowed level of consumption for 2019. Second, this exemption will not encourage the manufacture of additional HCFC-123 chiller units because factory operations for making them have already ceased and the exemption will not permit such operations for additional units.
      The number of chillers eligible for this exemption is also anticipated to be small. Based on consultations with industry, the EPA understands that the manufacture of up to five percent of the chillers expected to be installed in 2019 could be delayed beyond January 1, 2020. The EPA expects the number of HCFC-123 chillers to be affected is 33. As detailed in the 2019 Final Servicing Tail Report, the EPA assumes an average charge size for an HCFC-123 commercial chiller is approximately 445 kg. Thus, the EPA estimates about 15 MT of HCFC-123 could be needed to complete the manufacture of chillers in 2020. This will equate to about 0.4 percent of all HCFCs allocated in 2019.
      Beyond the HCFC-123 needed for the initial charge, the EPA has analyzed whether the exemption could increase the servicing demand for HCFC-123 in the years 2020 through 2029 compared with not providing this flexibility. As an initial matter, the modeled servicing demand described in the 2019 Final Servicing Tail Report includes the demand from the appliances affected by this exemption. The report assumes that chillers expected to be manufactured in 2019 are manufactured in that year. Because the chillers that will be affected by this exemption were anticipated to be manufactured in 2019, they will not increase expected demand. This exemption will not alter the requirement that used, recovered, or recycled/reclaimed HCFC-123 be used for all subsequent servicing events on these chillers. Further, HCFC-123 chillers have very low leak rates, and thus the amount of replacement refrigerant will be low. Therefore, the EPA does not anticipate that future servicing demand will affect the market for reclaimed HCFC-123 in a manner that the EPA has not already considered when issuing allowance allocation amounts for 2020 through 2029.
      The exemption also contains numerous constraints that limit its potential impact. The exemption from the prohibition in section 605(a) of the CAA on use in appliances manufactured before January 1, 2020 will apply only for one year and only in a limited set of circumstances. It will apply only if the refrigerant used to manufacture the appliance was in the possession of an entity involved in the manufacture of the appliance and imported prior to January 1, 2020. In addition, any servicing of the equipment after December 31, 2020 will need to be done with HCFC-123 that is used, recovered, or recycled/reclaimed. Further, the exemption will not allow for the manufacture of additional chillers beyond those for which the components had already been made ready for shipment to a construction location and the components were specified for installation under a building permit or contract dated on or before July 24, 2019, the date of signature of the proposed rule.
      The de minimis exemption is consistent with past EPA practice in this program. The EPA, on past occasions, has provided limited flexibility in applying use restrictions and phaseout dates. The Agency has typically aimed to prevent the stranding of appliances and past investments while phasing out controlled substances. For example, a concern similar to the one at issue here came to the EPA's attention in 2009 when commenters requested a limited waiver from a regulatory prohibition on manufacturing HCFC-22 appliances that was to begin in 2010 (see 74 FR 66412, 66440-41, December 15, 2009). Commenters identified scenarios in which HCFC-22 appliances had been scheduled for use in projects, such as construction projects, prior to January 1, 2010, but in which, for a variety of reasons, their manufacture could not be completed prior to January 1, 2010. The EPA agreed to grant flexibility by providing an exemption from the regulatory deadline to allow HCFC-22 to be used as refrigerant in appliances manufactured between January 1, 2010 and December 31, 2011, if their components were manufactured prior to January 1, 2010, and were specified in a building permit or contract dated before January 1, 2010, for use on a project. The EPA explained that providing flexibility would not result in additional consumption of HCFCs because companies had previously produced or imported the HCFCs for use in the manufacture of appliances, and that providing flexibility did not affect long-term projections of servicing needs because this equipment was already planned to be installed in the previous year (see 74 FR 66441, December 15, 2009).
      The EPA also previously created a de minimis exemption from the statutory prohibition on the use of previously-imported virgin HCFCs. In a 2014 rule, the EPA created an exemption from the use prohibition in section 605(a) of the CAA to provide limited flexibility regarding the use of HCFCs for sectors other than refrigeration and air-conditioning and fire suppression. For example, the EPA allowed continued use of a small amount of material that was previously produced and/or imported using the appropriate allowances and in inventory prior to the CAA's 2015 use restriction for solvents. The EPA determined that the continued use of previously produced/imported material was consistent with past practices, that production and consumption would not be higher than that already allowed for, and that the environmental effect would be limited (see 79 FR 64254, October 28, 2014).
      The EPA also recognizes that for these specific circumstances, there could be negative impacts if the Agency does not provide flexibility. Without the flexibility, chiller manufacturers would not be able to use virgin HCFC-123 to initially charge and install new equipment even though that virgin HCFC-123 is already on-site. Granting flexibility allows the installation to continue using the HCFC-123 available and prevents further delay of the installation.
      For the reasons described above, the EPA is finalizing the proposal to establish a de minimis exemption to the use restriction in section 605(a) of the CAA and to revise 40 CFR §82.15(g)(5)(iii) to allow virgin HCFC-123 to be used for the initial charging of certain chillers manufactured between January 1, 2020 and December 31, 2020 provided they meet the conditions specified previously.
D. Addition of Fire Suppression Servicing Uses to the HCFC Phaseout Schedule
      The EPA is finalizing the proposal to allow for the continued production, consumption, introduction into interstate commerce, and use of HCFCs for servicing fire suppression equipment manufactured before January 1, 2020 consistent with section 605 of the CAA and the November 2018 adjustment to Article 2F of the Montreal Protocol. Specifically, the EPA is modifying 40 CFR §§82.15(g) and 82.16(e) to allow for HCFC-123 to be produced and imported, as well as introduced into interstate commerce and used, during the years 2020 through 2029, to service fire suppression equipment existing on January 1, 2020, so long as it is being used as a streaming agent listed as acceptable for use or acceptable subject to narrowed use limits for nonresidential applications in accordance with the §612 SNAP regulations. The EPA received four comments from American Pacific, HARC, Hudson, and The Alliance, which were all supportive of this proposal.
      Under the Montreal Protocol, the United States has committed to phase out HCFC production and consumption by January 1, 2020, other than production and consumption for certain narrowly defined uses in an amount up to 0.5 percent of baseline annually. Servicing refrigeration and air-conditioning equipment existing on January 1, 2020 had been the only recognized use under the Montreal Protocol. In 2018, the United States proposed adjusting the Montreal Protocol to add servicing of fire suppression equipment existing on January 1, 2020, as another allowed use. That proposal was based on extensive stakeholder consultation on HCFC needs during the years 2020 through 2029 and the EPA's analysis of available information, including the 2018 Draft Servicing Tail Report. In November 2018, the Parties to the Montreal Protocol decided to adopt an adjustment that, among other things, added to Article 2F "the servicing of fire suppression and fire protection equipment" existing on January 1, 2020, as a permissible use for newly produced or imported HCFCs. While the term "fire protection" can be understood in some contexts to refer broadly to all measures taken to protect persons or property from harm, the terms "fire protection" and "fire suppression" have been used interchangeably in the Montreal Protocol context to refer to suppressing or putting out fires through the use of chemical substances. Section 605(a) of the CAA uses the term "fire suppression." In addition, the EPA views "fire suppression" as the more precise term in the context of regulating ODS. The adjustment adopted in November 2018 entered into force on June 21, 2019.
      The EPA is modifying 40 CFR §82.16(e)(2) to permit the import of HCFC-123 for servicing fire suppression equipment manufactured before January 1, 2020. While the modified 40 CFR §82.16(e)(2) identifies the permissible uses for which HCFC-123 may be imported, this regulatory provision does not govern the allocation of production allowances for HCFC-123. Section 82.16(e), which establishes limits on the production and import of HCFC-123 starting on January 1, 2020, provides that HCFC-123 may not be produced or imported for any purposes other than the listed permissible uses. The revision adds "use as a fire suppression streaming agent in equipment manufactured before January 1, 2020 and listed as acceptable for use or acceptable subject to narrowed use limits for nonresidential applications" to the list of permissible uses. This revision allows for this additional use in the years 2020 through 2029.
      The EPA is also adding a new paragraph after 40 CFR §82.15(g)(4) to ensure consistency with the change to 40 CFR §82.16(e)(2). Section 82.15(g) establishes limits on the introduction into interstate commerce and use of certain HCFCs at certain dates in accordance with the worst-first approach discussed previously. Section 82.15(g)(4)(i) establishes limits that apply to many HCFCs including HCFC-123 and HCFC-124, effective January 1, 2015. The EPA is adding a new paragraph after 40 CFR §82.15(g)(4) that repeats the limits in 40 CFR §82.15(g)(4)(i) to clarify the permissible uses of HCFC-123 and HCFC-124 produced or imported after January 1, 2020. Consistent with the restrictions on production and import in the Montreal Protocol (as modified through the adjustment adopted in 2018) and 40 CFR §82.16, with regard to fire suppression, HCFC-123 produced or imported after January 1, 2020, may only be used for servicing fire suppression equipment manufactured before January 1, 2020. Existing inventories of HCFC-123 produced or imported prior to January 1, 2020, may continue to be used to manufacture and service new fire suppression equipment after January 1, 2020. This change ensures that the regulations are clear and consistent between 40 CFR §§82.15 and 82.16, and, as a practical matter, adds no additional limitations to those in 40 CFR §82.16.
      For the reasons described above, the Agency is taking final action to allow HCFC-123 to be used during the years 2020 through 2029 for servicing existing fire suppression equipment.
E. Revisions to Labeling Requirements
      To support compliance with the finalized regulations at 40 CFR §82.16(e)(2), the EPA is revising the existing labeling requirements in 40 CFR part 82, subpart E to reflect the limited ability to use virgin HCFC-123 for fire suppression servicing. Labeling containers of fire suppression agent containing HCFC-123 should increase awareness among individuals servicing fire suppression equipment about the restriction on the use of virgin HCFC-123 use and support compliance. The EPA is finalizing two different labels -- one for fire suppression agent composed of newly-imported HCFC-123, and one for fire suppression agent composed of reclaimed material or material imported prior to 2020. Together, these labels will ensure that users have enough information to determine which containers of fire suppression agent may be used in which equipment in order to comply with the revisions to the HCFC phaseout regulations. In response to comments from American Pacific, HARC, and The Alliance, the EPA is making minor modifications to the proposed labels.
      (1) Background
      As discussed previously in this section, starting January 1, 2020, virgin HCFCs may be used only for limited purposes. With respect to fire suppression equipment, HCFCs imported or produced on or after January 1, 2020, can be used only to service fire suppression equipment manufactured before January 1, 2020. HCFCs imported on or after January 1, 2020, cannot be used to manufacture new equipment or to service equipment manufactured after January 1, 2020. Only HCFCs that are reclaimed or were imported prior to 2020 may be used for those purposes.
      The only HCFC used in a fire suppression agent is HCFC-123, sold as part of a blend under the name Halotron[(R)] I. Clean agents like Halotron[(R)] I do not leave a residue, and are used in applications such as data centers, clean rooms, and aircraft where it will not damage high-value or life-saving equipment, thereby minimizing economic damages from a fire (e.g., shorter equipment downtime or lower costs to repair). There are three main fire suppression streaming end uses for which clean agents are used in the United States: (1) hand-held portables; (2) 150-pound wheeled units; and (3) Aircraft Rescue and Fire Fighting (ARFF) vehicles.
      As per the National Fire Protection Association (NFPA) and Department of Transportation (DOT) regulations at 49 CFR §180.250, all portable fire extinguishers must be maintained in a fully charged operable condition and undergo hydrostatic testing. NFPA is a codes and standards organization, accredited by the American National Standards Institute, that was established to minimize the risk and effects of fire by establishing criteria for building, processing, design, service, and installation around the world. According to NFPA criteria, fire extinguishers, which include portable hand-held devices and wheeled units, are recommended to undergo maintenance to ensure that an extinguisher will operate effectively and safely in the event of fire. Equipment should be recharged after being used to extinguish a fire, so that it may be usable again. Technicians who conduct hydrostatic testing, perform inspections, or recharge fire suppression equipment after a discharge may need additional information to aid in distinguishing between the permissible uses of specific containers of Halotron[(R)] I.
      Given that section 611 of the CAA already requires the labeling of containers of ODS, including Halotron[(R)] I, the Agency proposed modifying the label to support compliance with the section 605 requirement. Congress recognized that labeling requirements may be needed to effectively implement the phaseout of ODS. In 1993, the EPA established the labeling requirements for both class I and class II substances in 40 CFR part 82, subpart E (see 58 FR 8136, February 11, 1993). Containers in which ODS are stored or transported must bear a clearly legible and conspicuous warning label that can be read by consumers before they can be introduced into interstate commerce. Section 611 of the CAA provides specific language for the label: "Warning: Contains [insert name of substance], a substance that harms public health and environment by destroying ozone in the upper atmosphere." This is reflected in the implementing regulations at 40 CFR §82.106. According to section 611, the label must be "clearly legible and conspicuous." Labels generally should be within the principal display panel, the warning statement should be in sharp contrast to any background upon which it appears, and if there is any outer package for the container (e.g., cylinder, ISO tank, or other container), labels should be on the outside packaging. Specific requirements on the size, text, and location of the label are provided in 40 CFR §§82.106-82.110. Labeling of products manufactured with or containing HCFCs has been required under section 611 since 2015, and the EPA has not seen a movement away from these fire suppression agents due to that labeling requirements. Based on this experience, the EPA does not expect additional text being added to the label to cause a movement away from HCFC-123 based fire suppression agents.
      In revising the labeling requirements, the EPA is relying on authority under section 605(c) of the CAA to issue regulations phasing out the production and consumption and restricting the use of class II substances that may be needed for compliance. Since HCFC-123 may be used both to manufacture new fire suppression equipment, which can only be done with HCFC-123 imported prior to January 1, 2020 or reclaimed/recycled material, and to service existing equipment, the EPA identified modified labeling as the lowest cost option to ensure that newly-produced HCFC-123 only be used to service existing equipment.
      Specifically, the EPA proposed to require the following text be added to the label for containers of fire suppression agent containing HCFC-123 imported on or after January 1, 2020:
"Do not use to service equipment manufactured on or after January 1, 2020." The Agency also took comment on whether to modify the label on material containing HCFC-123 imported prior to January 1, 2020, or that is recycled/reclaimed to clarify for individuals servicing fire suppression equipment that all uses are allowed. Specifically, the EPA proposed the following second sentence could be added to the existing label for containers of Halotron[(R)] I made with recycled/reclaimed HCFC-123 or HCFC-123 imported before 2020 that reads "Not restricted to use in servicing pre-2020 equipment."
      In addition to knowing whether containers contain recycled/reclaimed HCFC-123 or HCFC-123 imported before 2020 versus virgin HCFC-123, users will need to be able to know the date of manufacture of fire suppression equipment. They will need to be able to distinguish fire suppression agents that may be used only for servicing equipment manufactured before January 1, 2020 from fire suppression agents that may be used for manufacturing new equipment or servicing equipment regardless of the date of manufacture. The Agency sought comment on these points and others.
      (2) Summary of and Response to Comments
      American Pacific, HARC, and The Alliance support labels on all containers of Halotron[(R)] I. Both American Pacific and HARC suggest the language on the label for virgin or newly imported HCFC-123 containers should be more positive than the proposed language. American Pacific suggests the label read "Use only for recharge of equipment manufactured before January 1, 2020." American Pacific and HARC are also supportive of an additional label for reclaimed products and American Pacific suggests the additional label should read "Can be used for all Halotron[(R)] I new production and all recharge activities." Commenters confirmed that users should be able to identify the date of equipment manufacture using existing methods as is the case with refrigeration and air-conditioning equipment. However, without additional labeling of containers of fire suppression agents that contain HCFC-123, it may not be possible for users to distinguish containers that may only be used to service fire suppression equipment manufactured before January 1, 2020, from other containers.
      In response to the comments received, the EPA concludes that modifications to the existing label language are necessary to ensure that users have enough information to determine which containers of fire suppression agent may be used in which equipment, in order to comply with the regulatory revisions described in this rule. Therefore, the EPA is finalizing labeling requirements for containers of fire suppression agent containing HCFC-123 with modifications to the language proposed. For containers with virgin HCFC-123 imported on or after January 1, 2020, the Agency is requiring the following label: "WARNING: Contains [insert name of substance], a substance which harms public health and environment by destroying ozone in the upper atmosphere. Use only for recharge of equipment manufactured before January 1, 2020."
      For fire suppression agents that are recycled/reclaimed or imported prior to January 1, 2020, the Agency is finalizing the following label: "WARNING: Contains [insert name of substance], a substance which harms public health and environment by destroying ozone in the upper atmosphere. For use in any equipment." The statement, "For use in any equipment" conveys the same meaning as the text provided by American Pacific ("Can be used for all Halotron[(R)] I new production and all recharge activities") but is simpler, avoids mentioning a patented product, and is analogous to the label for newly-imported material. It clarifies for the user that HCFC-123 that was imported prior to January 1, 2020, or that is recycled/reclaimed can be used for either the manufacture of new equipment or for servicing existing and new equipment. The Agency is modifying the required label at 40 CFR §82.106 accordingly.
      The EPA also took comment on whether the manufacturer of Halotron[(R)] I can designate specific containers for servicing existing equipment, whether multiple containers would create a burden for industry, and whether technicians would be able to locate manufacture dates on fire suppression equipment. American Pacific states it will establish a second product identification for the Halotron[(R)] I that is manufactured with newly-imported HCFC-123 imported after January 1, 2020. The name of this product will be "Halotron[(R)] I Recharge Only for Equipment Made Before 1-1-20." American Pacific states that the Halotron[(R)] I container will be labeled prominently with multiple distinctive large yellow or equivalent striping that is in contrast to the current standard Halotron[(R)] I container, which has two green stripes. American Pacific notes the standard bulk container will continue to be manufactured using newly-imported HCFC-123 imported before January 1, 2020, or with recycled/reclaimed HCFC-123. Both American Pacific and HARC assert that the maintenance of two differently labeled containers will not result in a burden on the industry. The EPA appreciates the steps American Pacific intends to take to ensure the proper use of HCFC-123.
American Pacific and HARC provided comments on the EPA's intended approach to assist technicians with identifying which container to use for servicing fire suppression equipment and outreach. For servicing ARFF vehicles, the EPA explained how to identify that information in the proposal for this rulemaking and recommends that technicians inspect the manufactured date on the vehicle. American Pacific states that the methods for identifying the year of manufacture of ARFF vehicles is accurate and notes that manufacturers report the year of manufacture as a ten-digit VIN on the Information Data plates, which are typically located on the floor, dashboard, or door jamb on the driver's side in ARFF vehicles. American Pacific states that they plan to highlight the distinction between the two products in updated filling/maintenance guidance manuals that provide sales materials for ARFF Vehicle original equipment manufacturers and airports users.
For fire extinguishers, American Pacific states the EPA accurately described the method for identifying the date of manufacture in the proposal for this rulemaking. American Pacific notes that historically, however, some of the UL listed fire extinguishers were not approved by the DOT, which was referred to as "309 exempt," but all extinguisher labels as per the UL follow-up listing requirements will show a year of manufacture. HARC also supports the EPA's intention to develop outreach material with the final rule and is interested in working with the EPA to help develop and distribute such material. The EPA is appreciative of the outreach efforts American Pacific intends to pursue and is appreciative of the clarification for ARFF vehicles and fire extinguisher date of manufacture. The EPA intends to work with stakeholders to develop educational materials and conduct outreach to technicians, distributors, and service providers.
F. Allocation of HCFC-124 Production and Consumption Allowances
      The Agency received two supportive comments and one comment opposed to allocations for HCFCs generally. Based on comments received on the proposed allocation amount for HCFC-124 and the Agency's analysis, the EPA is finalizing HCFC-124 production and consumption allowances in the years 2020 through 2029 as proposed.
      As noted in the 2019 Final Servicing Tail Report, HCFC-124 consumption was approximately 250 MT per year between 2012 and 2017 and reclamation was minimal. More recent sales data from the California Air Resources Board, discussions with industry, and annual consumption and production data indicate that demand for HCFC-124 is between 100 and 200 MT. As explained in the previous discussion about HCFC-123 allowance allocations, providing HCFC-124 allowances significantly in excess of demand would not foster a smooth and orderly transition. Thus, the EPA proposed to allocate 200 MT for the first three years and then gradually decrease the allocation over the next seven years by an equal amount each year.
      National Refrigerants and an anonymous commenter support the proposed allocation of HCFC-124. The anonymous commenter states that Alternative 2 in the proposal is inconsistent with the gradual decrease in volume over the phase out period and may prevent the establishment of sufficient volume of reclaimed material to serve remaining servicing needs post-2030, as described in the 2019 Draft Servicing Tail Report.
      The EPA responds that it agrees that reducing the allocation gradually is the appropriate choice so that equipment owners have time to transition to alternatives and/or develop relationships to rely on recycled and/or reclaimed HCFC-124.The EPA is finalizing the allocation for consumption and production of HCFC-124 at 40 CFR §82.16(a) as proposed. As stated previously, the Agency's goal is to ensure that servicing needs can be met, while also encouraging recovery and reuse and transition to alternatives. Providing consistent allocations for the first three years will assist in establishing an inventory of HCFC-124 to be used for servicing throughout the allocation period and past the phaseout date for the expected lifetimes of all existing equipment. The EPA does not want to strand existing equipment because of an inadequate supply of HCFC-124. This allocation supports this goal because it accounts for allowed end uses of HCFC-124 that may not be captured by the Vintaging Model (e.g. use of niche refrigerant blends containing HCFC-124 to service equipment manufactured before 2020). Regarding the comment that allowances are not needed, the Agency references the previous discussion in this section under the HCFC-123 allocation, as similar considerations apply for HCFC-124. In addition, an HCFC-124 allocation is necessary because there is minimal reclamation of HCFC-124. This allocation level is within the limit established by the CAA and Montreal Protocol and will decrease over time to foster transition to alternatives prior to the January 1, 2030 phaseout date.
G. Changes to Transfers of Allowance Provisions in 40 CFR §82.23
      The EPA is explicitly prohibiting calendar-year inter-pollutant transfers of HCFC-123 and HCFC-124 to phased-out HCFCs. The Alliance comment is supportive of limiting inter-pollutant transfers, and the EPA is finalizing the provision as proposed.
      Under section 607 of the CAA, the EPA has issued regulations at 40 CFR §82.23 which provide for both inter-pollutant and inter-company transfers of allowances for class II ODS under certain conditions. In an inter-pollutant transfer, an allowance holder converts allowances for one class II ODS into allowances for another class II ODS (40 CFR §82.23(b)). The EPA is finalizing changes in 40 CFR §82.23(b) to ensure clarity for the regulated community. The change is intended to minimize confusion and reduce the likelihood that an allowance holder will mistakenly seek an inter-pollutant transfer of HCFC-123 or HCFC-124 allowances to phased-out HCFCs such as HCFC-22. This change does not have a practical effect on the ability of allowance holders to legally produce or import phased-out ODS given the prohibition in 40 CFR §82.16. Inter-pollutant transfers between HCFC-123 and HCFC-124 also may continue so long as the newly produced or imported HCFC-123 and HCFC-124 are for an allowed use, such as for servicing refrigeration and air-conditioning appliances manufactured before January 1, 2020.
      The Alliance commented that they support the EPA's proposal to explicitly prohibit transfers into ODS that are already phased out. Given the comment and the fact that the EPA received several inquiries prior to this rulemaking about whether inter-pollutant transfers from HCFC-123 or HCFC-124 to HCFC-22 will be allowed after the phaseout of HCFC-22, the EPA is finalizing the proposed change to make clear that calendar-year inter-pollutant transfers of HCFC-123 and HCFC-124 to phased-out HCFCs are prohibited.
H. Changes to Import Requirements
      Under sections 604, 605, and 606 of the CAA, the EPA restricts the import of ODS consistent with both the CAA and the Montreal Protocol. As discussed previously in Section II of this notice, importing virgin ODS requires the importer to expend consumption allowances. By controlling the number of allowances and knowing who holds those allowances, the EPA ensures that the United States meets its phaseout obligations. Used ODS can be imported without consumption allowances, and generally without use restrictions, if certain conditions are satisfied. Imports of used ODS are regulated under 40 CFR §82.13(g)(2)-(3) (for imports of used class I substances) and 40 CFR §82.24(c)(3)-(4) (for imports of used class II substances).
      The EPA proposed and is finalizing a number of changes to update the data collection requirements related to the import of ODS, as described in further detail below. Such changes require collection of additional information when the EPA considers petitions to import used ODS to verify whether the material has been previously used. Other changes remove data elements that the EPA no longer needs. The EPA is also finalizing a procedure for imports of both used and virgin ODS when they are imported for destruction, exempting aircraft bottles containing halon 1211 imported for hydrostatic testing from the petition process, and finalizing as proposed the prohibition on the sale of illegally imported ODS.
      Because some of these regulatory revisions relate to the petitions process for imports of used ODS, some background on the petitions process under the regulations that were in place prior to this rulemaking may provide useful context. Under that process, anyone wanting to import used ODS must submit a petition to the Agency, and the EPA must provide a "non-objection notice" approving the import for it to proceed. The petition to import a used ODS must contain certain information, which the EPA uses to verify whether the ODS is used. Required information includes: a description of the previous use of the substance; the identity of source facilities from which the material was recovered; a contact person at each source facility; the name, make, and model number of the equipment from which the material was recovered at each source facility; a best estimate of when the material was removed; and an export license from the appropriate government agency from the country of export (see 40 CFR §§82.13(g)(2) and 82.24(c)(3)). After review, the EPA responds to the petition by issuing either a "non-objection notice," which allows the import to proceed, or an "objection notice," which has the effect of prohibiting the import because a non-objection notice is required for the lawful import of such material.
       The EPA established the petition process to import used class I ODS (under sections 603 and 604 of the CAA) in 1998 (see 63 FR 41626, August 4, 1998) and in 2003 (see 68 FR 2819, January 21, 2003) for class II ODS (under sections 603 and 605 of the CAA) given concern that some importers were circumventing the production and import controls by importing virgin class I and class II substances that had been intentionally mislabeled as used. Sections 604, 605, and 606 of the CAA provide statutory authority for controlling the import of ODS, including the petition process. Section 603 of the CAA requires reporting of the amount of ODS imported on a quarterly basis or on a basis determined by the Administrator. To the extent that these regulatory revisions finalized in this action involve recordkeeping and reporting of information, the EPA also relies upon its authority under section 114 of the CAA, which authorizes the EPA to require recordkeeping and reporting in carrying out any provision of the CAA (with certain exceptions that do not apply here).
 	The petition process has generally been effective at providing information that allows the EPA to verify that ODS are used before they are imported, and accordingly, for many aspects of the existing process, the Agency did not propose and is not finalizing any changes in this rulemaking. However, over years of implementation, the EPA has identified potential areas for improvement. These include the fact that the existing requirements for detailed source information are often difficult to satisfy if the imported material comes from a halon bank, i.e., a physical facility where halon recovered from different sources is aggregated. Much of this halon was sent to the banks with limited or no records of its origins or use. Additionally, current regulations exempted only halon 1301 aircraft bottles from the petition process for hydrostatic testing, yet aircraft bottles containing halon 1211 are also imported for such testing and importers must petition the Agency and receive a non-objection notice for those bottles under the existing process. The petition process also did not distinguish imports of used ODS that are intended to be destroyed from imports that are intended to be reclaimed for continued use, even though the Agency recognizes that the verification requirements do not need to be as rigorous when the ODS are to be destroyed. Further, the existing regulations did not provide a specific mechanism to pre-approve the import of virgin material for destruction, resulting in delays at the port of entry while the EPA verified the shipment. In addition, the EPA remains concerned about the potential for illegal import of ODS and wanted to take steps to strengthen the Agency's ability to enforce the phaseout of ODS. To address these and other issues, the EPA proposed and is now finalizing revisions to the regulations for imports, as described in the following sections.
i. Changes to the Petition Process to Import Used ODS for Reuse in 40 CFR §§82.13 and 82.24
      The EPA proposed changes to the petition process that would generally reduce burden on importers while still allowing the Agency to verify that only used material is being imported. Of particular note, the Agency proposed to: 1) reduce the information requirements when importing class I ODS from a "bank" so long as an official letter is provided from the appropriate government agency in that country where the material is stored that attests that a class I substance is "used"; 2) allow submission of an application for an export license in lieu of the license itself; 3) authorize the Agency to request additional information when additional verification is needed before issuing a non-objection notice, and 4) provide flexibility for the timing of import.
       In soliciting comments on the proposal, the Agency was particularly interested in whether streamlining the petition process, including to facilitate imports of material from banks for class I ODS, in particular halon, would affect compliance with the prohibition on import of virgin ODS. The EPA welcomed suggestions from stakeholders on how the petition process could be streamlined while ensuring compliance. The Agency received comments on the definition of "banks" and whether the proposed flexibilities should be restricted to halon, the requirement to provide an export license, extending the reduced information requirements to class II substances, the possibility that the EPA might request purity information in considering a petition, the import of used HFCs containing trace quantities of ODS, and the timing of imports after a non-objection notice has been issued.
Taking into account the comments received, the EPA is finalizing changes to the petition process that will meet the Agency's goals of reducing the burden on importers while continuing to provide mechanisms to verify that the material being imported is used. As described in greater detail below and based on the comments received, the EPA is finalizing two changes to what it proposed. First, the Agency is narrowing the definition of "bank" which as proposed encompassed all ODS, though only used in reference to class I ODS, to "halon bank." Second, the Agency is allowing not only an application for an export license in lieu of the license itself, as was proposed, but also an official communication from the appropriate government agency in the country of export. For the following changes, the EPA received no adverse comments and is finalizing the proposed revisions because the Agency concludes that the revisions are warranted based on the rationale articulated in the proposal and in this notice: 1) requiring that petitions include email addresses in contact information (while removing the requirement to provide fax numbers) and commodity codes for the material, and 2) providing one year from the date stamped on a non-objection notice for import to occur. In general, the EPA anticipates these changes will increase the availability of used ODS in the United States and thus help to provide a greater supply of used material for servicing existing equipment, which might otherwise be retired before the end of its useful life.
With respect to the proposal to remove the requirement for some source information for class I substances stored in either a national government bank or a privately-operated bank authorized by a national government with the submission of an official letter from the appropriate government agency verifying that the class I substances are in fact used, the EPA received comments from Hudson and National Refrigerants in support of the proposal. In contrast, the Halon Recovery Corporation (HRC), a non-profit trade association for halon users, and an anonymous commenter suggest narrowing the exemption to only halon banks rather than all class I ODS. HRC notes that the import petition process has been structured around the refrigeration and air-conditioning sector, and as such, these requirements have been difficult for halon recyclers to meet. Banks do not typically have the complete information required by the EPA's petition process, especially since the material may have been recovered decades ago, when records of source and use were not kept. HRC states that, unlike CFCs, there is a large installed base of fire suppression equipment that requires future servicing and retrofitting that equipment to use alternatives may not always be feasible. HRC also notes that it is aware of only a few enforcement actions taken by the Agency for the illegal importation of halons. The anonymous commenter states their concern for reducing information requirements in a petition to import used class I substances is due to the potential for misuse, which would be contrary to the Agency's effort to prohibit sale of illegally imported controlled substances. The commenter suggests a change may be needed for halon, as there is a large installed base that may require future servicing, and since retrofitting that equipment for the use of alternative substances may not be feasible, but there is not the same need or demand for other class I substances. The commenter advises that changes should be specific to halon, and the Agency should maintain the existing requirements for other class I substances.
      While a couple of commenters were supportive of finalizing the revisions as proposed, due to concerns other commenters raised about the potential for illegal imports of class I ODS, the EPA is finalizing provisions that are more limited than those proposed by finalizing the definition of "halon bank" in 40 CFR §82.3 (rather than "bank") and restricting the provisions in 40 CFR §§82.13(g)(2)(iii) and (xv) to material from a "halon bank." In light of the recently discovered unexpected emissions of CFC-11 measured in the atmosphere and concern from commenters regarding potential for misuse of the petition process, the Agency is finalizing revisions that are narrower than the proposal and is only providing this flexibility for halon banks.
      The EPA's decision is based in part on the need for used halons exceeding the need for other used class I ODS. The Montreal Protocol's Technology and Economic Assessment Panel (TEAP) issued a report in September 2018, available in the docket, noting continued demand for halons, in particular for servicing fire suppression equipment for civilian aviation. Civil aircraft will continue to need halon to meet fire protection requirements for lavatory bottles, handheld extinguishers, engine nacelles, auxiliary power units, and cargo compartments until there is a transition to alternatives for all applications on new aircraft as well as to service the civil aircraft fleet. The EPA agrees with the comment that there is a large installed base of fire suppression equipment that requires future servicing and retrofitting that equipment to use alternatives may not always be feasible, and this point supports its decision.
      Since production and consumption of halons were phased out in the United States and other non-Article 5 countries in 1994, many countries, organizations, and private sector companies established halon banks, which are physical locations where previously-used and recovered halons are aggregated from different sources and stored. The EPA agrees with the comment that banks do not typically have the complete information required by the EPA's petition process. When a used ODS is imported for reuse under the existing process, the import petition must contain information about the used ODS including contact information from each source facility from which the material was recovered and the name, make, and model number of the equipment from which the material was recovered. Petitioners sourcing used ODS from banks, therefore, rarely have enough records to provide all the information required in the petition process, and as a result the petitions are subject to denial. In considering these comments, the Agency recognizes that providing increased flexibility for halons, while still allowing the Agency to verify that only used material is being imported, allows for halon to be more easily sourced from overseas banks, increasing halon available to service aircraft, oil and gas facilities, and other fire suppression applications.
      To provide further response to the comment expressing concern that reducing the requirements for import petitions for used ODS could lead to potential misuse of the petition process, the Agency notes that it will continue to be able to request additional information from petitioners sourcing halon from banks. For instance, the Agency may request additional information on whether the country where the halon bank is located has production of halon for feedstock use or stockpiles of virgin halon. If petitioners fail to respond to requests from the Agency for additional information, the EPA may issue an objection notice on that basis, as clarified in revisions to 40 CFR §82.13(g)(3)(i)(A) finalized in this rulemaking.
      HRC also commented that restricting this relief to government banks or banks authorized by a national government unnecessarily limits its effectiveness. HRC states that national government ODS banks are not usually a source for halons for civilian uses because they are designated for military use, and many national governments do not "authorize" privately-operated banks or reclamation facilities. HRC suggests the EPA define bank as "a facility run by a national government or privately run that collects and stores previously-recovered ozone-depleting substances for reuse at a later date."
      The EPA disagrees with the comment that the Agency amend the definition of "halon bank" to include privately-run banks regardless of whether they are government authorized. While the EPA supports the notion of providing more flexibility for imports of used halon to meet ongoing demand for halon, the Agency does not have sufficient information about the nature of such banks to determine whether or not such an expansion is appropriate at this time. In particular, the Agency would need to further consider whether it is possible to provide such flexibility while ensuring that doing so does not create an avenue for illegal imports of virgin halon into the United States. This is particularly important given the existence of stockpiles of virgin halon, for example halon 1211, and the ongoing production of halon for use as a feedstock. The Agency may consider if there are ways to establish such flexibility while ensuring compliance with the CAA and Montreal Protocol and may decide that it is appropriate to propose additional changes in a future rulemaking.
      The EPA is thus revising the regulations at 40 CFR §82.3 to add a definition for "halon bank" to mean a facility run by a national government or privately run and authorized by a national government that collects and stores previously-recovered halon for reuse at a later date. As described in 40 CFR §§82.13(g)(2)(iii) and (xv), if used halon is stored in a halon bank, the petitioner need not provide certain source information, though the petitioner should provide it if available so as to better allow the EPA to verify that the halon is used. The petitioner must indicate that the halon is from a halon bank by providing an official letter from the appropriate government agency in the country where the material is stored indicating that the halon is used and that the halon bank is authorized to collect used halon. The letter may also provide any additional information available to help demonstrate that the halon is used. Providing this official letter, does not mean that the EPA will automatically approve the petition as the EPA retains the right to request additional information and/or issue an objection notice if the information is insufficient.
      With regards to the petition process for used ODS more generally (including petitions for used halons from halon banks), the EPA is finalizing as proposed a provision stating that the Agency may request other information to verify substances are used before issuing a non-objection notice. This information could include, but is not limited to: photos of each unit that contained the used ODS, with serial numbers visible; photos of a representative sample of the cylinders, with serial numbers visible; a description of the facility from which the used ODS originates, including information regarding what is produced at the facility, the location of the facility, and how long the facility has been in the location; a description of each unit from which the used ODS originates; links to websites showing brochures, photographs, and/or descriptions of each different unit from which the used ODS originates; copies of the original, signed work orders authorizing collecting of the used ODS; copies of the paperwork showing that the company completed the work; copies of payment to the company that collected the used ODS for their services, with redactions for confidential or sensitive information such as bank account numbers; copies of business licenses from the government authorizing collection companies to do this type of work; and information on how transport will occur within the exporting country and to the United States. For used ODS from Europe, the EPA could request a screenshot of the European Commission export license; the name and contact information for the European Commission official who signed the Export License; and copies of all paperwork required for movement within the European Union, such as the "Notification document for transboundary movement/shipments of waste."
      The EPA is not collecting all such information for each petition and thus is not revising the regulatory text to require that it be provided in every petition. However, the Agency does wish to provide notice to petitioners that it may request additional information to confirm that the ODS is used and, as proposed, is amending the regulations in this rulemaking at 40 CFR §82.13(g)(3)(i)(A) to make clear that failure to provide such information when requested would be grounds for issuing an objection notice.