BREAKING NEWS: On May 25, the U.S. Supreme Court ruled against the EPA in a wetlands regulation challenge, limiting federal power over wetlands and boosting personal property rights over clean water.

The case (Sackett v. Environmental Protection Agency, No. 21-454) stemmed from Chantell and Mike Sackett’s 2004 purchase of an undeveloped plot of land about 300 feet from Priest Lake, one of the largest lakes in Idaho, near the U.S.-Canada border. In 2007, the couple began preparing construction of a home on it. But after placing sand and gravel fill on the lot, the EPA issued an administrative compliance order stating the property contained wetlands protected by the 1972 Clean Water Act (CWA) and that they needed a permit to build, which they had failed to obtain.

The ruling, in which the justices unanimously agreed on the outcome but differed on the legal reasoning, concluded that the Sacketts’ land does not fall under jurisdiction of the CWA, so the couple does not require a federal permit to build on the property. The decision ends a battle between the Sacketts and the federal government which began in 2007 when the EPA issued a compliance order against the couple, threatening tens of thousands of dollars in fines per day for continued construction of the Sacketts’ home in Idaho.

In reaching its broader legal conclusion, the Court ruled on a 5-4 vote in an opinion authored by Justice Samuel Alito that the CWA’s use of “waters” refers only to “geographic[al] features that are described in ordinary parlance as ‘streams, oceans, rivers, and lakes’ ” and to adjacent wetlands that are “indistinguishable” from those bodies of water due to a continuous surface connection. To assert jurisdiction over an adjacent wetland under the CWA, a party must establish “first, that the adjacent [body of water constitutes] … ‘water[s] of the United States’ (i.e., a relatively permanent body of water connected to traditional interstate navigable waters); and second, that the wetland has a continuous surface connection with that water, making it difficult to determine where the ‘water’ ends and the ‘wetland’ begins.”

Justice Brett Kavanaugh joined the Court’s three liberal justices, concurring in the overall judgment, but disagreeing with the majority’s new test. “By narrowing the act’s coverage of wetlands to only adjoining wetlands, the court’s new test will leave some long-regulated adjacent wetlands no longer covered by the Clean Water Act, with significant repercussions for water quality and flood control throughout the United States,” Kavanaugh wrote.

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On May 5, 2023, the SEC announced its first enforcement actions under Rule 22e-4 under the Investment Company Act of 1940, the SEC’s liquidity rule, specifically in the form of a lawsuit filed in federal court and a settled administrative proceeding—both of which stem from the same underlying violations of the rule by a registered mutual fund.  These actions provide important insight into the SEC’s commitment to enforcing new rules, and also send a broader message about board oversight responsibilities

The SEC’s Allegations

According to the SEC’s complaint filed on May 5, 2023 in the U.S. District Court for the Northern District of New York, between June 1, 2019, which was the compliance date for relevant aspects of the liquidity rule for smaller entities such as the fund in question, and at least June 16, 2020, approximately 21% to more than 26% of the fund’s net assets were invested in shares of a private medical device company. The SEC stated that the shares were not listed on any securities exchange or traded in any over-the-counter market and bore additional sale restrictions imposed by the subscription agreements pursuant to which they were acquired and by the issuing company’s operating agreement. The fund’s shareholder reports and financial statements identified the shares as illiquid and indicated that market quotations were not readily available for the shares both before and after the effective date of the liquidity rule. However, the securities were classified as “less liquid” for purposes of the liquidity rule. The SEC alleged that during this time, the fund’s president (who also served as the fund’s portfolio manager) and its chief compliance officer, chief financial officer, vice president and treasurer, as well as its two independent trustees (by virtue of their service on the valuation and audit committees), were aware of the illiquid nature of the shares.

The SEC alleged that, in the period leading up to the compliance date for the liquidity rule, both the fund’s external auditors and the outside attorney serving as fund counsel expressed concerns about the fund’s concentration in the restricted shares and the impending need to comply with the liquidity rule. Additionally, the complaint indicates that the fund’s investment in the restricted shares had been subject to scrutiny by the staff of the SEC’s Division of Investment Management, who in connection with reviews of the fund’s public disclosure had raised questions about the investment that remained unresolved as of the liquidity rule’s compliance date.

Continue Reading SEC Brings First Liquidity Rule        Enforcement Action
Rolls of galvanized steel sheet inside the factory or warehouse.
Rolls of galvanized steel sheet inside the factory or warehouse.

On May 12, 2023, the U.S. Department of the Treasury and the Internal Revenue Service (IRS) issued Public Notice 2023-38, indicating their intent to propose regulations to address application of the rules that taxpayers must satisfy in order to qualify for the “domestic content” bonus tax credit established in the Inflation Reduction Act (IRA). The domestic content bonus tax credit –under Internal Revenue Code Sections 45Y and 48E – is an increased amount of federal tax credit that is otherwise separately available as production tax credit (PTC) or investment tax credit (ITC) for qualified facilities or energy projects that use a certain percentage of domestic content. It applies to clean energy projects that qualify for the existing renewable electricity PTC and ITC. Investments in newer clean energy technologies, such as energy storage facilities, can also qualify for the bonus credits.

Continue Reading Initial Guidance for the Domestic Content Bonus Credit Issued

FDA Guidance Seeks to Catch-Up to the Instagram and TikTok Era

Social media logos

The laws governing marketing prescription drugs have been well established for many years.  Consumers are accustomed to hearing a slew of warnings and conditions at the end of a television commercial for a prescription drug or seeing the fine print at the bottom of a magazine advertisement. Often the disclaimer includes a note that the consumer should ask his/her doctor or medical provider if the drug is right for them. But in the digital age, marketing prescription drugs is much more than a commercial on television or a print ad. Social media and the use of  influencers have completely changed the way consumers are introduced to prescription drugs, and the Food and Drug Administration (FDA) is trying to catch up to present day technology. This presents a dilemma nearly unique to the FDA, as the United States is only one of two countries (the other being New Zealand) that permit prescription drug marketing through social media.

Take, for example, the 2015 warning letter to Kim Kardashian regarding her Instagram post claiming a drug gave her relief from morning sickness, or the warning letter to her sister Khloe after her interview on talk show The View in 2021 was published to YouTube and made claims of a drug’s ability to aid in weight loss. The FDA’s concerns in both circumstances included issues that were not addressed by current guidance. Although Kim’s post included a URL to the company’s website, the website lacked required risk and benefit information. In Khloe’s situation, the casual nature of speaking with a talk show host about a range of lifestyle issues became an unintended advertisement.

The Kardashian sisters are not the only influencers considering drug advertising partnership opportunities today. The FDA last updated its guidance on marketing prescription drugs on social media in 2014—years before the Instagram platform became influencer driven and around the time TikTok came on the scene under a prior name. The guidance speaks mainly to the use of blogs and Facebook as the guidepost for marketing on social media platforms, leaving room for inconsistent interpretation and application from drug companies, marketing agencies, and influencers alike.

WHAT DOES THE CURRENT GUIDANCE  SAY?

The FDA is responsible for the regulating prescription drug promotion under the Food, Drug, and Cosmetic Act. See 21 U.S.C. 352(n),(q)-(r).Under the current regulations drugmakers must present a fair balance of risk and benefit information to consumers. But uniquely, social media platforms limit the amount of space, time, and characters that can be used in a post or communication.

The 2014 draft guidance regarding social media marketing suggests drugmakers include: (1) risk information in the body of the communication, rather than just providing a link to the risk information; and (2)  a link to a page with risk information only.  When communicating the benefits of a prescription drug, an advertiser should: (1) ensure that the benefit information is accurate and non-misleading, and includes all material facts within each individual post; (2) ensure that the benefit information is accompanied by risk information within each post; and (3) reconsider using the social media platform if it cannot communicate all benefit and risk information adequately in one post. When disclosing the risks of a prescription drug, an advertiser should: (1) present risk information with benefit information in each post; (2) include in each post the most serious risks associated with the product, (3) use a mechanism like a hyperlink to allow direct access to a more complete discussion of risk information, and (4) ensure that the prominence of risk information is comparable to that of the benefit information. While the FDA has not issued any final guidance, it currently relies on this draft guidance and states that it represents the agency’s position on social media marketing at this time.

GAPS IN GUIDANCE FOR 2023 SOCIAL MEDIA

The current guidance only addresses “static” posts like those that were published then on blogs, Facebook, or Twitter. But, unlike a static Facebook post, an Instagram story can continue into multiple posts, include “swipe up” links, involve non-scripted and live video, and is limited to the amount of words that would fit on the initial screen. Moreover, since the guidance was published in 2014, all forms of social media have expanded to include video, including video that exists only for a brief period of time and is then deleted automatically.  The nine-year-old guidance that currently governs advertisements clearly was not promulgated with an eye toward the interactive and versatile nature of today’s social media.

So what should a drugmaker do when the post is an Instagram story or TikTok video instead of a static post? Who is liable for the failure to comply with unclear guidance? How can third party marketing agencies insulate themselves from the uncertainty that occurs when contracting with influencers?  How does the FDA account for the difficulties marketers face to monitor influencer posts that may be in video format and may exist for only 24 hours or even less? The guidance provides no clear answer.

WHAT IS THE FDA DOING ABOUT IT?

The FDA is clearly aware of the dangers of social media advertising today. In September 2022 it issued a notice cautioning consumers from engaging in trendy online challenges involving over the counter drugs. On the prescription drug front, in 2022 it commissioned four scientific studies of the health and safety impact of drug promotion on social media, to examine the effectiveness of (1) including substantive risk information in social media posts versus only providing a link to risk information and (2) including risks and benefits versus only risks on the linked landing page.  The results of the research highlight the many tradeoffs of using landing pages to list risk information. Notably, the study showed that (1) including the risk in the post increased the likelihood that participants would recognize the risk after the first and second viewings; (2) after the second viewing, including the risk decreased the likelihood that participants would click the landing-page link, and decreased the number of landing-page-only risks recognized; and (3) including the drug’s benefit on the landing page increased benefit recognition without negatively affecting risk recognition or risk perceptions.  FDA has not announced its next steps, but studies like this one often lead to new or updated rules or guidance.

BEST PRACTICES IN THE INTERIM

Until new guidance is issued, it is safest for companies to continue using static posts to promote prescription drugs. This will allow drug manufactures, marketing agencies, and influencers to work together to script compliant dialogue before finalizing a post. Another option is to submit marketing material to the FDA prior to posting. Although the FDA does not provide approvals for proposed advertisements, it will inform submitters that their submissions are noncompliant prior to issuing a warning letter or seeking other administrative action. The FDA created the pre-post submissions process to “provide opinions on proposed advertisements and labeling pieces before use.” Therefore, pre-post submissions can help demonstrate an advertiser’s desire to create compliant marketing material.  Advertisers may also want to seek legal advice from an experienced attorney to assist with any innovative marketing ideas that are not already addressed by current guidance.

By: Matthew A. Rossi and Eleanor Hudson Callaway

On Friday, April 14, 2023, the Supreme Court cleared the way for respondents in Federal Trade Commission (“FTC”) and Securities and Exchange Commission (“SEC”) administrative proceedings to challenge the constitutionality of those proceedings in federal district court while the administrative process is ongoing.  Typically, as required by statute, respondents challenging an administrative proceeding must first make such claims in the administrative proceeding itself and then, if necessary, in the federal courts of appeal after conclusion of the administrative proceeding.  

Background

The decision consolidated two separate cases: Axon Enterprise v. Federal Trade Commission and Securities and Exchange Commission v. Cochran.  Both cases involved challenges to administrative enforcement proceedings adjudicated by administrative law judges (“ALJs”).  In Cochran, the SEC brought an administrative proceeding against a certified public accountant alleging that she failed to comply with auditing standards in violation of the Securities Exchange Act of 1934 (“Exchange Act”).  In Axon, the FTC brought an administrative proceeding against a company, Axon Enterprise, Inc., alleging that Axon entered into a merger agreement with a competitor in violation of the Federal Trade Commission Act of 1914’s (“FTC Act”) prohibition on unfair methods of competition and consummated a merger that violated Section 7 of the Clayton Act.  Both respondents filed actions in federal district court seeking to enjoin the proceedings on the grounds that the two layers of “for good cause” removal protection afforded to ALJs by statute so insulates the ALJs from presidential authority that it violates the separation of powers, specifically Article II of the Constitution, which vests executive power in the President.  Axon also argued that the combination of the “prosecutor, judge, and jury” functions of the FTC renders all FTC enforcement actions unconstitutional under the Fifth Amendment’s Due Process Clause. 

The plaintiffs in Cochran and Axon based jurisdiction for their claims on the general federal question jurisdiction of federal district courts under 28 U.S.C. § 1331.  However, the district courts dismissed both actions for lack of subject matter jurisdiction.  In Cochran the district court held that the review scheme set forth in the Exchange Act, which provides for administrative review followed by appeal to the federal courts of appeal, implicitly divests federal district courts of jurisdiction over challenges to SEC proceedings.  The district court in Axon arrived at a similar holding based on the comparable review scheme provided in the FTC Act.  On appeal, the Ninth Circuit affirmed the district court’s decision in Axon, but the Fifth Circuit en banc reversed the district court’s Cochran decision, finding that Cochran’s claim “is not the type of claim Congress intended to funnel through the Exchange Act’s statutory review scheme.” Cochran v. SEC, 20 F.4th 194, 207 (5th Cir. 2021) (aff’d and remanded).

Supreme Court Decision

The Supreme Court held that the review schemes set forth in the Exchange Act and the FTC Act do not displace federal district court jurisdiction over Axon and Cochran’s constitutional challenges to the Commissions’ structures.  Justice Kagan, writing for the majority, explained that a statutory review scheme of the kind provided in the Exchange Act and FTC Act does not necessarily extend to every type of claim concerning agency action.  The Court identified three factors from Thunder Basin Coal Co. v. Reich to assist in determining whether the particular claims brought were of the type Congress intended to be reviewed within this statutory structure.  These factors ask: 1) whether “a finding of preclusion could foreclose all meaningful judicial review”; 2) whether the claim is “wholly collateral” to the routine review procedure; and 3) whether the claim is “outside the agency’s expertise.” Thunder Basin Coal Co. v. Reich, 510 U.S. 200 (1994).

For the first factor, Justice Kagan noted that although meaningful judicial review “does not usually demand a district court’s involvement,” the defendants’ injury of “being subjected to unconstitutional agency authority” including “having to appear in a proceeding before an unconstitutionally insulated ALJ . . . is impossible to remedy once the proceeding is over.” Axon Enterprise, Inc. v. Federal Trade Commission, Slip Opinion at 4. Second, the Court held that the constitutional claims raised “have nothing to do with the enforcement-related matters the Commissions regularly adjudicate” and therefore, “are collateral to any Commission order or rules from which review might be sought.” Id. For the third factor, the Court found that the parties’ claims are outside the Commissions’ expertise, reasoning that “agency adjudications are generally ill suited to address structural constitutional challenges like those maintained here.” Id. (citing Carr v. Saul, 141 S. Ct. 1352 (2021)).

Conclusion

The Axon decision provides respondents in SEC and FTC administrative proceedings an immediate path to raise constitutional challenges to those proceedings in federal district court.  This development is just the most recent of several defeats for agency administrative proceedings in recent years.  For example, in 2021 the Supreme Court held that SEC ALJs were unconstitutionally appointed. Lucia v. Securities and Exchange Commission, 138 S. Ct. 2044 (2018). Just last year the Fifth Circuit held that SEC ALJs were unconstitutionally insulated from removal and that SEC administrative proceedings to impose monetary penalties for fraud were unconstitutional.  Jarkesy v. Securities and Exchange Commission, 34 F.4th 446 (5th Cir. 2022) (cert. granted). Our article on that decision may be found here.

Going forward, respondents in FTC or SEC administrative proceedings may raise constitutional challenges to the agencies’ structures and seek to enjoin the proceedings in federal district court.  This may make administrative proceedings more time consuming and difficult for the agencies involved.  The SEC in particular has moved away from bringing contested enforcement actions in administrative proceedings, preferring instead to file suit in federal court.  Similarly, the FTC can, and typically does, file an action for preliminary and permanent injunctive relief in federal court, prior to (or instead of) commencing an administrative action.  The Axon decision will likely reinforce this trend.

On April 13, the Federal Trade Commission (“FTC”) sent a Notice of Penalty Offenses to approximately 670 companies detailing conduct that the FTC claims violates the prohibition on unfair or deceptive trade practices set forth in Section 5 of the FTC Act.  The noticed offenses include failure to adequately substantiate claims made in marketing and advertising about products, particularly health benefit claims and claims of efficacy.  All product claims must be supported by competent and reliable evidence as of the time of the claim.  Claims of health or safety benefits, or that the product is effective in the cure, mitigation, or treatment of serious disease, must satisfy much higher evidentiary standards.

Continue Reading FTC Issues New Notice of Penalty Offenses Concerning Substantiation of Product Claims

The FDA has recently stepped up its enforcement activity with respect to animal and pet food manufacturing. On February 8, 2023, the FDA announced an expansion of a voluntary recall for a Nestlé Purina dog food product. On March 10, 2023, the FDA announced a voluntary recall of cat and dog supplements distributed by Stratford Care USA due to elevated levels of vitamin A found in the supplements. And on March 14, 2023, the FDA published a warning letter issued to Primal Pet Foods, Inc. in relation to the company’s recall of its dog food product, stating the company had not taken sufficient steps to address operational and manufacturing deficiencies found during an FDA inspection of the manufacturing facility.

Continue Reading Navigating FDA Manufacturing Guidelines for Animal and Pet Food Products

There has been a flurry of activity at the federal level pertaining to per- and poly-fluoroalkyl substances (PFAS). Among the actions taken by the EPA are proposed rulemaking to designate two of the most widely used PFAS as hazardous substances under the Comprehensive Environmental Response, Compensation, and Liability Act (CERLCA) and, most recently, a proposed national primary drinking water regulation for six PFAS.

What are PFAS?

PFAS comprise thousands of individual compounds, two of the most common being perfluorooctane sulfonate (PFOS) and perfluorooctanoic acid (PFOA). Like all PFAS, PFOS and PFOA are persistent in the environment and, due to the fact that they repel oil and water, are resistant to typical environmental degradation processes such as chemical and microbial treatment technologies. As a result, they are widely distributed across all ecosystem trophic levels and are found in the soil, air, and groundwater at sites across the United States.

PFAS chemicals were first developed in the 1940s. They are human-made compounds that do not occur naturally in the environment but have been used in a wide variety of consumer products, such as nonstick materials, stain-resistant textiles, water-resistant textiles, cosmetics, cleaning products, paints, and food packaging (fast food wrappers, pizza boxes). They were also a primary component of firefighting foams used at many military installations and airports.

By 2002, the primary U.S. manufacturer of PFOS voluntarily phased out production of PFOS.[1] In 2006, eight major companies in the PFAS industry voluntarily agreed to phase out production of PFOA and PFOA-related chemicals by 2015.

Widespread Risks Associated with PFAS

PFOA and PFOS have been found in drinking water supplies, typically associated with manufacturing locations, industrial use or disposal. Due to the fact that PFAS are bioaccumulative, studies have found PFOS and PFOA in the blood samples of the general human population and wildlife, indicating that exposure to the chemicals is widespread. Human epidemiological studies found associations between PFOA exposure and high cholesterol, increased liver enzymes, decreased vaccination response, thyroid disorders, pregnancy-induced hypertension and preeclampsia, and cancer (testicular and kidney).

Because of their general pervasiveness, PFAS have likely been in the environment for a long period of time, and they are likely present at sites that have already been deemed closed by state or federal agencies. Further, existing treatment systems that might have been established at sites to address other contaminants of concern may be less effective at treating PFAS. However, technologies, including activated carbon, anion exchange, and high-pressure membranes, can remove PFAS as well as additional contaminants, such as disinfection byproducts, organic contaminants, certain heavy metals, and pesticides, from water systems.

Federal/National Regulations and Trends

PFAS Strategic Roadmap

In October 2021, the EPA released its PFAS Strategic Roadmap, which set out to highlight concrete actions the Agency would take across a range of environmental media and EPA program offices as it relates to PFAS contamination. The Roadmap included target dates to achieve each milestone and was guided by three primary goals: (1) research; (2) restrictions; and (3) remediation.

In November 2022, the EPA published a one-year progress report on its work performed since issuance of the PFAS Strategic Roadmap.

Proposed CERCLA Hazardous Substance Designation

On August 26, 2022, Michael S. Regan, the EPA Administrator, signed a Proposed Rule for the designation of two of the most widely used PFAS, PFOA and PFOS, including their salts and structural isomers, as hazardous substances under CERCLA. The public comment period for the proposal to designate PFOA and PFOS closed on November 7, 2022. The EPA is currently in the process of reviewing public comments and anticipates issuing an Advance Notice of Proposed Rulemaking to seek public comment on designating other PFAS chemicals as CERCLA hazardous substances. Issuance of a final rule is planned for August 2023.

If this designation is finalized, releases of PFOA and PFOS that meet or exceed the reportable quantity would have to be reported to the National Response Center. Additionally, the proposed rule would, in certain circumstances, facilitate making the polluter pay by allowing the EPA and other agencies to respond to releases or threats of releases of PFOA and PFOS as hazardous substances (CERCLA 104(a)(1)(A)) without first making a determination of imminent and substantial danger (CERCLA 104(a)(1)(B)).

When finalized, this rule will strengthen the EPA’s ability to clean up sites contaminated with PFOA and PFOS and to hold responsible parties accountable for that cleanup.

While the current rulemaking addresses only two of the thousands of PFAS chemicals, the EPA has explicitly stated that it anticipates developing an Advance Notice of Proposed Rulemaking in the future to seek public comment on designating other PFAS chemicals as CERCLA hazardous substances as well.

Proposed National Primary Drinking Water Regulation

In May 2016, the EPA established drinking water health advisories of 70 parts per trillion (0.07 micrograms per liter (μg/L)) for the combined concentrations of PFOS and PFOA. Above these levels, the EPA recommended that drinking water systems take steps to assess contamination, inform consumers and limit exposure.

In February 2019,[2] the EPA issued a PFAS Action Plan which described the EPA’s approach to identifying and understanding PFAS, approaches to addressing current PFAS contamination, preventing future PFAS contamination, and effectively communicating with the public about PFAS. The Action Plan described broad actions that the EPA had underway to address challenges with PFAS in the environment including:

Most recently, on March 14, 2023, EPA announced the proposed National Primary Drinking Water Regulation (NPDWR) for six PFAS including PFOA, PFOS, perfluorononanoic acid (PFNA), hexafluoropropylene oxide dimer acid (HFPO-DA, commonly known as GenX Chemicals), perfluorohexane sulfonic acid (PFHxS), and perfluorobutane sulfonic acid (PFBS).

Specifically, the EPA is proposing the establishment of legally enforceable maximum levels allowed in drinking water, called Maximum Contaminant Levels (MCLs), for PFOA and PFOS as individual contaminants, and PFHxS, PFNA, PFBS, and HFPO-DA as a PFAS mixture. The EPA is also proposing health-based, non-enforceable Maximum Contaminant Level Goals (MCLGs) for these six PFAS.

CompoundProposed MCLGProposed MCL
PFOAZero4.0 parts per trillion3 (ppt, also expressed as ng/L
PFOSZero4.0 ppt
PFNA1.0 (unitless) Hazard Index41.0 (unitless) Hazard Index
PFHxS1.0 (unitless) Hazard Index41.0 (unitless) Hazard Index
PFBS1.0 (unitless) Hazard Index41.0 (unitless) Hazard Index
HFPO-DA1.0 (unitless) Hazard Index41.0 (unitless) Hazard Index

The proposed rule would also require public water systems to:

  • Monitor for these PFAS, building upon the EPA’s long established monitoring frameworks where monitoring frequency depends on previous results;
  • Notify the public of the levels of these PFAS, if monitoring detects these PFAS at levels that exceed the proposed regulatory standards; and
  • Reduce the levels of these PFAS in drinking water if they exceed the proposed standards. This could include removing these chemicals through various types of treatment or switching to an alternative water supply that meets the standard.

Monitoring and reducing PFAS in drinking water will require significant investments in water infrastructure. The Bipartisan Infrastructure Law provides $9 billion to invest in drinking water systems impacted by PFAS and other emerging contaminants including $4 billion in investment through the Drinking Water State Revolving Funds (DWSRF), including a requirement that states dedicate 25% of these resources to disadvantaged communities or public water systems serving fewer than 25,000 people as well as an additional $5 billion to communities as grants through the EPA’s new Emerging Contaminants in Small or Disadvantaged Communities (EC-SDC) Grant Program, which promotes access to safe and clean water in small, rural, and disadvantaged communities while supporting local economies. States and communities can further leverage an additional nearly $12 billion in the DWSRF dedicated to making drinking water safer, and billions more that the federal government has annually provided to fund DWSRF loans.

The EPA is requesting public comment on the proposed regulation. The public comment period will open following the proposed rule publishing in the Federal Register. Public comments can be provided at that time at www.regulations.gov under Docket ID: EPA-HQ-OW-2022-0114.

The EPA held an informational webinar about the proposed PFAS NPDWR on March 16, 2023, and will be holding an additional informational webinar on March 29, 2023. The webinar recordings and presentation materials will be made available to the public. The EPA will also be holding a public hearing on May 4, 2023, where members of the public can register to attend and provide verbal comments to the EPA on the rule proposal. Registration is required to attend, and the last day to register to speak at the hearing is April 28, 2023.

The EPA will issue a final PFAS NPDWR after reviewing public comments provided on the proposed NPDWR and anticipates finalizing the regulation by the end of 2023.

It is clear that the EPA is moving forward with its PFAS initiative. Stay tuned for future updates as the rules are finalized and as additional rulemaking comes forward.

[1] Technical Fact Sheet – PFOS and PFOA. United States Environmental Protection Agency. November 2017. EPA 505-F-17-001.

[2] An EPA PFAS Action Plan: Program Update was issued by the USEPA in February 2020.

[3] Using EPA methods 533 and 537.1, both government and private laboratories can now effectively measure 29 PFAS, including the six PFAS the EPA is proposing to regulate, at very low levels in drinking water – including at the levels proposed as MCLs.

[4] To prevent health risks from mixtures of certain PFAS in drinking water, the EPA is proposing to use this Hazard Index calculation to regulate PFHxS, GenX Chemicals, PFNA, and PFBS in public water systems. To determine the Hazard Index for these four PFAS, water systems would monitor and compare the amount of each PFAS in drinking water to its associated Health Based Water Concentration (HBWC), which is the level below which no health effects are expected for that PFAS. Water systems would add the comparison values for each PFAS contained within the mixture. If the value is greater than 1.0, it would be an exceedance of the proposed Hazard Index MCL for PFHxS, GenX Chemicals, PFNA, and PFBS.

Last month, the United States, along with other G7 members, stepped up efforts to curtail Russia’s evasion of western sanctions adopted to impede Russia’s invasion of Ukraine. It has been reported in the press that U.S. components are showing up in weapons systems used against Ukraine and from firms that produce high-technology equipment ultimately sold to Russian defense entities.  Likewise, restricted U.S. commercial products are ending up in Russian hands. Now more than ever, U.S. companies must strictly follow the “Know Your Customer” compliance principles.

The U.S. government has long touted the “Know Your Customer” principle as a basic element of a robust export compliance program. To guard against efforts by purchasers to evade sanctions, U.S. companies should perform enhanced due diligence to ensure that a purchaser (1) is trustworthy, (2) will comply with applicable U.S. laws, and (3) will not divert (or allow to be diverted) restricted U.S. products for ultimate use by Russia, a military end-use or by Russian consumers. Additional measures for ensuring compliance include (i) end-use and end-user certificates, (ii) incorporating warranties on trade and sanctions compliance in contractual documents, and (iii) above all, continued monitoring of customers.  If at any time a U.S. company identifies any “red flags” such as reluctance to provide end-use and end-user information, or a request to ship goods to a freight forwarder, it should halt all shipments until those “red flags” are resolved.

As indicated in guidance from the U.S. Department of Commerce’s Bureau of Industry and Security (BIS), U.S. exporters “have a duty to exercise due diligence to inquire regarding the suspicious circumstances and ensure appropriate end-use, end-user, or ultimate country of destination in the transactions [an exporter] propose[s] to engage in.” If any concerns remain, the exporter must refrain from going through with the transaction. Otherwise, BIS may conclude that the exporter chose to “self-blind.” If a violation occurs, BIS could find the circumstances to be egregious, constituting grounds for higher penalties or fines than would be assessed had the exporter taken steps to resolve the “red flags.” In certain circumstances, violations can lead to criminal or civil inquiries by the U.S. Department of Justice.

Taking steps to “Know Your Customer” is a must for all U.S. businesses. Though BIS’s guidance is geared towards U.S. exporters, all U.S. companies should take care to avoid, minimize and mitigate supply chain risks. Simply put, the duty to exercise due diligence relates not only to exports, but also to reexports and in-country transfers. That is, the risk extends beyond a company’s own actions; what happens downstream in the supply chain matters.  Financial and reputational damages can be quite severe.  Now more than ever, it is important to ask the right questions and seek advice as to whether your company is doing enough to protect itself. 

We are pleased to launch the Federal Regulatory and Enforcement Insider. Federal agency regulations are pervasive and reach nearly every corner of life.  Our teams of regulatory and enforcement lawyers, in DC and beyond, bring many years of experience in navigating their complexities.  Here you will find news and updates about the development and enforcement of federal regulations, and insight into how they may affect the business community.  Bookmark this page, sign up for the RSS feed, and make us part of your regular reading!