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Statement of Need: Formaldehyde is a colorless, flammable gas at room temperature that has a strong odor. It is found in resins used in the manufacture of composite wood products (i.e., hardwood plywood, particleboard and medium-density fiberboard). It is also found in household products such as glues, permanent press fabrics, carpets, antiseptics, medicines, cosmetics, dishwashing liquids, fabric softeners, shoe care agents, lacquers, plastics and paper product coatings. It is a by-product of combustion and certain other natural processes. Examples of sources of formaldehyde gas inside homes include cigarette smoke, unvented, fuel-burning appliances (gas stoves, kerosene space heaters), and composite wood products made using formaldehyde-based resins.

Summary of the Legal Basis: The Formaldehyde Standards for Composite Wood Products Act, which created Title VI of the Toxic Substances Control Act (TSCA), established formaldehyde emission standards for composite wood products (hardwood plywood, medium-density fiberboard (MDF), and particleboard) sold, supplied, offered for sale or manufactured in the United States. Under TSCA Title VI, manufacturers of composite wood products must comply with specific formaldehyde emission standards, and their compliance must be verified by a third-party certifier (TPC). In addition, Congress directed EPA to consider a number of elements for inclusion in implementing the regulations. These elements include: labeling, chain of custody requirements, sell-through provisions, ultra low-emitting formaldehyde resins, no added formaldehyde-based resins, finished goods, third-party testing and certification, auditing and reporting of TPCs, recordkeeping, enforcement, laminated products, and exceptions from the requirements of regulations promulgated for products and components containing de minimis amounts of composite wood products. TSCA Title VI requires EPA to promulgate implementing regulations by January 1, 2013.

Alternatives: TSCA Title VI establishes national formaldehyde emission limits for hardwood plywood, particleboard, and medium-density fiberboard and EPA has not been given the authority to change the limits. However, the notice of proposed rulemaking addresses the alternatives considered by EPA for the implementation of the statutory emission limits for various provisions of the rule. Most of these alternatives would have applied to both small and large entities but, given the number of small entities in the affected industries, some of these alternatives could affect many small entities. EPA made a concerted effort to keep the costs and burdens associated with this rule as low as possible while still ensuring compliance with the TSCA Title VI emissions standards. In developing the proposed rule, EPA considered the statutory requirements and the benefits from protection of human health and the environment, as well as the compliance costs imposed by the rule, both in general and on small entities. EPA took a number of steps to reduce the economic impacts of the rule where doing so was consistent with the statutory mandate.

Anticipated Costs and Benefits: EPA prepared an analysis of the potential impacts associated with the proposed rulemaking. This analysis is summarized in greater detail in Unit V.A. of the preamble for the proposed rule, and is briefly summarized here. Benefits: This proposed rule will reduce exposures to formaldehyde, resulting in benefits from avoided adverse health effects. For the subset of health effects where the results were quantified, the estimated annualized benefits (due to avoided incidence of eye irritation and nasopharyngeal cancer) are $20 million to $48 million per year using a 3% discount rate, and $9 million to $23 million per year using a 7% discount rate. There are additional unquantified benefits due to other avoided health effects. Costs: The monetized costs of this proposed rule are estimated at $72 million to $81 million per year using a 3% discount rate, and $80 million to $89 million per year using a 7% discount rate. Small Entity Impacts: This proposed rule is estimated to impact nearly 879,000 small businesses: Over 851,000 have costs impacts less than 1% of revenues, over 23,000 firms have impacts between 1% and 3%, and over 4,000 firms have impacts greater than 3% of revenues. Most firms with impacts over 1% have annualized costs of less than $250 per year. Effects on State, Local, and Tribal Governments: Government entities are not expected to be subject to the proposed requirements, which apply to entities that manufacture, fabricate, distribute, or sell composite wood products. The proposed rule does not have a significant intergovernmental mandate, significant or unique effect on small governments, or have Federalism implications. Environmental Justice and Protection of Children: This proposed rule is expected to increase the level of environmental protection for all affected populations without having any disproportionately high and adverse human health or environmental effects on any population, including any minority or low-income population or children.

Risks: Formaldehyde is both an irritant and a known human carcinogen. Depending on concentration, formaldehyde can cause eye, nose, and throat irritation, even when exposure is of relatively short duration. In the indoor environment, sensory reactions and various symptoms as a result of mucous membrane irritation are some potential effects from exposure. There is also evidence that formaldehyde may be associated with changes in pulmonary function and respiratory related effects. In addition, formaldehyde is a by-product of human metabolism; therefore, endogenous levels are present in the body.