New Substance Notification in Canada

I. Overview of CEPA New Substance Notification Requirements The Canadian Environmental Protection Act (CEPA) is a law that addresses the responsibility of the Canadian Government to identify potential adverse effects on human health and the environment from chemicals and other substances. CEPA is co-administered by Environment Canada and Health Canada. CEPA was last amended in 1999, and is often referred to as “CEPA 1999.”

Under Section 81 of CEPA, persons that intend to manufacture or import “new” substances must comply with certain notification requirements prior to manufacture or import. Under Canada’s New Substance Notification (NSN) regulations, a substance is considered “new” if it is not listed on the Canadian Domestic Substances List (DSL). The notification requirements may require “upfront” base-set testing. Testing requirements for substances that exist in U.S. commerce but are “new” to Canada and for polymers may be reduced, but costs required to satisfy CEPA test data requirements can be a major factor in deciding to enter or to remain in Canadian chemical commerce. The initial CEPA NSN regulations can be found in the Canada Gazette, Part II, Vol. 128, No. 7, pp. 1443-95 (Apr. 6, 1994). The official guidance document entitled Guidelines for the Notification and Testing of New Substances: Chemicals and Polymers (Aug. 2001) (ISBN 0-660-56394-0) also is helpful and may be obtained from Environment Canada’s website.i Canada’s notification system operates much like an individual licensing process. Each manufacturer or importer of a new substance must submit one or more NSNs to Environment Canada within certain prescribed timeframes. This can be a burden because new substances stay “new” longer in Canada than in the U.S. under the U.S. Toxic Substances Control Act (TSCA). NSNs are reviewed by officials from both Environment Canada and Health Canada. Canada semantically subdivides all substances into three categories: chemicals, polymers, and biotechnology products. This document will focus on notification requirements for polymers and chemicals. To reflect their relative low toxicity, requirements for polymers often are more lenient. Environment Canada previously had requirements for substances that were manufactured or imported in quantities greater than 20 kilograms (kg) in any calendar year between January 1, 1987, and June 30, 1994. These transitional substances were subject to less burdensome data requirements, but the transitional provisions have officially expired. Canada prescribes testing new substances according to several Roman-numeraled “Schedules.” The Schedule that is required depends on the type of substance involved, and the annual or cumulative amount of substance intended to be manufactured in or imported into Canada. The practical effect is that extensive production volume monitoring is necessary to predict reporting requirements so that data can be developed and submitted without interrupting sales. Accordingly, it is important to maintain accurate estimates of the annual and accumulated total amount of a new substance to be manufactured or imported.

II. The Canadian Substance Inventories A. The DSL The Canadian Domestic Substances List (DSL) is the basis for determining whether a substance is new for the purposes of the CEPA. Substances on the DSL are considered to exist in Canadian commerce and do not require notification (unless they are subject to a “significant new activity” regulation, discussed below). Substances not on the DSL are considered to be new to Canada and are subject to notification. The DSL includes the list, published on May 4, 1994 in Part II of the Canada Gazette, and all additions or deletions subsequently published in the Canada Gazette. Substances may be included on the DSL based on either:

(1) commercial use in Canada between January 1, 1984 and December 31, 1986; or

(2) notification under the NSN requirements. Like the TSCA Chemical Substance Inventory (TSCA Inventory), the DSL has both confidential and non-confidential portions. If a substance identity is claimed as confidential, a masked name must be provided in accordance with specific masked name regulations.

Until recently, a substance could not be added to the DSL until certain volume triggers for manufacture or import of a substance had been exceeded and a “Notice of Excess Quantity” (NOEQ) had been filed with Environment Canada. However, on June 5, 2003, Environment Canada amended the NSN regulations to permit companies to seek the addition of a substance to the DSL by submitting a notice that manufacturing or import has begun, in advance of exceeding volume triggers.ii To be eligible for addition to the DSL, Environment Canada must have assessed the most comprehensive information package on the substance and determined that there is “no suspicion” the substance is toxic. This amendment alleviates the previous burdensome requirement for companies to track annual and accumulated volumes to determine when a substance is eligible for DSL listing.

It should be noted that if a company chooses not to file a “Notice of Manufacture/Import” (NOMI) and

delay listing the substance on the DSL, an NOEQ must be filed within 30 days of exceeding the required DSL listing threshold. In some cases, these thresholds might never be met by substances that are intrinsically low volume. The current DSL listing thresholds appear in Table 1, below.

Table 1: DSL Listing Quantity Thresholds

Type of Substance DSL Listing Threshold

Non-NDSL chemical substance 10,000 kg/yr or an accumulated total of 50,000 kg

NDSL-listed chemical substance

5,000 kg/yr or an accumulated total of 25,000 kg

Polymer 10,000 kg/yr or an accumulated total of 50,000 kg

Schedule VI polymers (e.g., low-concern, NDSL status)

1000 kg/yr or an accumulated total of 5000 kg

Becoming listed on the DSL can take several months, or longer. First, it can take a significant amount of time to develop and submit all of the data needed to support the required NSN(s). An NSN might or might not contain all of the data required to support a DSL listing. This could occur, for example, if only a Schedule VI notification is initially required, but a full Schedule VII notification would be required for larger production quantities of a substance. In addition, Environment Canada can require data for which it previously granted a waiver as a condition of listing on the DSL. Second, once all the data and notices are submitted, a substance is only eligible for addition to the DSL. Significant additional delay can be experienced because of Environment Canada’s policy that a substance is not officially listed on the DSL until a notice announcing its addition is published in the Canada Gazette. Although CEPA 1999 requires that Environment Canada add a substance to the DSL within 120 days of its eligibility for listing,iii the Canada Gazette is frequently published and notices announcing additions to the DSL appear infrequently and on an irregular basis. This potential delay in addition of a substance to the DSL can be important in instances in which customers will be the importers because in the absence of a DSL listing, a substance may only be imported by the NSN submitter.

Canada accepts DSL corrections as well as late DSL submissions for adding substances eligible for listing on the initial DSL. However, generally all NSN obligations must be fulfilled with regard to a late DSL nomination so there is little apparent regulatory advantage to making late nominations. Environment Canada accepts bona fide submissions from companies who seek to ascertain their notification obligations by inquiring as to whether a substance is listed on the confidential portion of the Canadian inventories.iv

B. The NDSL Canada has a second list of substances, called the Non-domestic Substances List (NDSL). The NDSL contains substances that are not on the DSL but are in commercial use in the U.S. As a basis for this list, Environment Canada initially used the 1985 version of the U.S. TSCA Inventory. More specifically, as initially published on January 26, 1991, the NDSL consisted of the 1985 version of the TSCA Inventory minus the

substances on the DSL. The NDSL also contains a listing of confidential substances that originated from the confidential part of the TSCA Inventory. These substances were listed on the confidential NDSL, however, only if the nominating company could demonstrate that the substance existed on the confidential TSCA Inventory.

Beginning in 1995, the NDSL has undergone annual revisions that have added or deleted substances incorporated into, or removed from, the TSCA Inventory five or more years before the date of the NDSL revision. Thus, the NDSL can be thought of as a list of substances not on the DSL and that “trails” the TSCA Inventory by approximately five years. Note, however, that substances on the TSCA Inventory that have restrictions imposed on their manufacture or import under TSCA as a result of a risk assessment by the U.S. Environmental Protection Agency (EPA) are not added to the NDSL. The five-year interval for NDSL listing can be reduced under an information sharing pilot project between the governments of U.S. and Canada, the Industry Coordinating Group for CEPA, and the U.S. American Chemistry Council. The pilot project, known as the “Four Corners Agreement,” began in 1996 and lasted until 1998. In September 1998, the “4 Corners” parties met and generally agreed that there were enough positive outcomes to shift from a pilot project to an on-going program, and to renew the agreement with a number of modifications. Embodied in the new agreement is a recognition that while having a substance added to the NDSL is the greatest benefit, it is not the only one. Due to the significant and rising costs of testing, individual companies that make Four Corners submissions may also benefit by obtaining waivers for some of the additional information requirements that they would face for substances not yet appearing on the NDSL. Accordingly, a Four Corners submission for a substance can result in earlier NDSL listing, data waivers, or no relief.

C. Significant New Activities

The 1999 amendments to CEPA include several provisions dealing with “significant new activities” (SNAc) in relation to the use of a substance. Essentially the SNAc regulations extend NSN requirements to any activity, with respect to a designated substance, that results or may result in the entry or release of a designated substance into the environment. SNAc requirements can apply to both substances on the DSL and those not on the DSL. SNAc provisions are similar to TSCA Significant New Use Rule (SNUR) provisions in the U.S.

When a SNAc Notice is issued, a substance is added to the DSL with a SNAc flag once it meets all

eligibility criteria. In this case, importers, manufacturers and users must submit the information specified within the SNAc notice if they wish to manufacture, import or use the substance outside the scope of activities specified in the SNAc notice. When a SNAc Notice is issued but the substance is not added to the DSL because it does not meet the eligibility criteria, all importers/manufacturers must comply with the NSN requirements by submitting the appropriate prescribed requirements. When information is submitted in compliance of a SNAc notice, Environment Canada and Health Canada must assess it within the time period specified in the SNAc Notice.

D. Existing Substances CEPA 1999 also provides for the review of substances listed on the DSL. Specifically, Section 73 of

CEPA requires that by September 2006 the Ministers of the Environment and Health categorize the substances that are on the DSL and that have not already been subject to notification and assessment as a new substance for the purpose of identifying the substances on the List that, in their opinion and on the basis of available information: (1) may present, to individuals in Canada, the greatest potential for exposure; or (2) are persistent or bioaccumulative in accordance with the regulations, and inherently toxic to human beings or to non-human organisms, as determined by laboratory or other studies. Further action may be taken for substances found to be of concern. III. Exemptions From NSN Requirements Certain types of substances do not require an NSN. These include:

(1) Any mixture that is a combination of substances and does not itself produce a substance that is different from the substances that were combined.v

(2) Any manufactured item formed into a specific physical shape or design during

manufacture and has, for its final use, a function or functions dependent in whole or in part on its shape or design.

(3) Any animate matter that is, or any complex mixtures of different molecules that are,

contained in effluents, emissions or wastes that result from any work, undertaking or activity.

(4) Transient reaction intermediates that are not isolated and are not likely to be released

into the environment.

(5) Impurities, contaminants and partially unreacted materials the formation of which is related to the preparation of a substance.

(6) Substances produced when a substance undergoes a chemical reaction that is

incidental to the use to which the substance is put or that results from storage or from environmental factors.

(7) Substances that are loaded on a carrier outside Canada and moved through Canada to

a point outside Canada.vi To avoid regulatory duplication, CEPA was amended in 1999 to include a provision whereby substances regulated by other Canadian laws are exempt from the NSN requirements. This “Scheduling of Other Acts” exercise ended September 13, 2001 and resulted in the listing of various Acts and regulations in Schedule 2 (new substances that are chemicals or polymers) and Schedule 4 (new substances that are animate products of biotechnology) of CEPA. This exercise resulted in the Canadian Food and Drugs Act (FDA), the Fisheries Act (FA) and the Health of Animals Act (HAA) not being listed under CEPA. Although in the meantime CEPA

will act as the “safety net,” the appropriate agencies have begun putting into place measures towards having these Acts listed under Schedules 2 and/or 4 of CEPA. IV. NSN Filing Requirements Submissions must be made on the NSN form, Form 04-2622E (04/2000). This form is divided into two sections: Part A addresses administrative information and substance identity, and Part B is for physiochemical and toxicity test results and associated technical information. In addition to the information required by Parts A and B, there are several other components to a complete NSN. The package must include items such as full toxicity study reports, slice data associated with gel-permeation chromatography (GPC) analysis, descriptions of all study procedures (including procedures associated with molecular weight determinations), and waiver requests (including the justifications for such requests). A complete NSN package must clearly substantiate confidential business information (CBI) claims and chemical identity masking requests. Estimates of manufacture or import volumes for three years, use, disposal, and information on the mode of transportation, and a Canadian material safety data sheet (MSDS) must be provided. A submitter must also identify any other governments that have reviewed the substance. The specific information that must be contained in an NSN depends on whether the substance is a chemical or a polymer, its production or import volumes, and whether any exemptions from full notification requirements apply. Threshold volumes must be calculated on a calendar year basis, and relate to the net amount of new substance, not the quantity of formulation containing the chemical. For example, if 10,000 kilograms of “Formulation A” containing 13% of new “Chemical B” is imported during a calendar year, then the annual importation quantity of new “Chemical B” would be 1,300 kilograms. The principal data Schedules for substances that are not polymeric (i.e., chemicals) and that are not intended solely for research and development (R&D), export-only, or site-limited use, are Schedules I, II, and III. Schedules VI, VII, and VIII are the three principal Schedules for notifying polymers under CEPA. Schedules I and VI, the least onerous Schedules, require the chemical and trade names for the substance, its Chemical Abstracts Service Registry Number (CASRN), a description of its intended use, an MSDS, and existing data relating to the health and safety of the substance. Submitters are not required to generate new test data to support these Schedules. Data requirements increase in the higher numbered Schedules. These Schedules require testing to develop acute or subchronic toxicity, biodegradability, mutagenicity, and skin irritation and sensitization data. Manufacture, use, disposal information, and emergency planning information might also be required. The time needed to develop data can substantially add to the overall time it takes to prepare and submit an NSN. Table 2 identifies the volume thresholds, review periods, and estimated time necessary to develop data for the most commonly used NSN Schedules but does not reflect the requirements for substances subject to reduced notification requirements (e.g., NDSL-listed substances). The estimates depend on laboratory availability and assume that testing is performed consistent with good laboratory practices.

Table 2: NSN Data Requirements

NSN Schedule

Review Period

Standard Volume Threshold

Estimated Test Data Preparation Time

I 5 days 20 kg No new data required. Estimate at least one week required to research and compile relevant existing test data.

II 45 days over 1000 kg per year or an accumulated quantity of 5000 kg

Physicochemical tests: less than one month. Acute testing, skin irritation, skin sensitization, biodegradation and genotoxicity: one to two months.

III 90 days over 10,000 kg per year or an accumulated quantity of 50,000 kg

Physicochemical tests: less than one month. Acute testing, skin irritation, skin sensitization, biodegradation and genotoxicity: one to two months. Subchronic testing: four to six months.

VI 45 days over 1000 kg per year or an accumulated quantity of 5000 kg

No new data required. Estimate at least one week required to research and compile relevant existing test data.

VII 45 days over 10,000 kg per year or an accumulated quantity of 50,000 kg

Physical and chemical testing: less than one month. Acute testing skin irritation skin sensitization, biodegradation, and genotoxicity: one to two months.

VIII 90 days over 10,000 kg per year or more or an accumulated quantity of 50,000 kg

Physicochemical tests: less than one month. Acute testing, skin irritation, skin sensitization, biodegradation, and genotoxicity: one to two months. Subchronic testing: four to six months.

Based on information provided by laboratories, cost estimates for the tests for full notification packages (i.e., no data waivers) are shown in Table 3.

Table 3: Estimated NSN Test Costs (Canadian)

CEPA Schedule Number

Estimated Testing Cost ($, Canadian)

I or VI $0 - $1,000

II or VII $30,000 - $54,000

III or VIII $122,000 - $172,000

The conditions and test procedures used for the development and reporting of test data provided in NSNs must be consistent with the conditions and test procedures of the Organization for Economic Cooperation and Development (OECD) “Guidelines for Testing of Chemicals” current at the time of testing. The appropriateness of the OECD method for the substance must be determined, and any necessary modification should be made (including the use of an alternative method) to ensure the acceptability of test data. Any deviations from the OECD guidelines should be clearly noted and explained. The laboratory practices used to develop test data for a new substance notification must be consistent with the “Principles of Good Laboratory Practice” (GLP) set out by the OECD. For a new chemical, its transitional, product development, export-only, site-limited intermediate, or NDSL status changes the information required. New polymers also may be eligible for these categories of reduced notification. In addition, reduced NSN requirements apply if a polymer meets the “low-concern” criteria or if the polymer is manufactured solely from DSL-listed reactants, or if the new polymer meets the low-concern criteria and all of its reactants are listed on either the DSL or the NDSL. Under subsection 81(8) of CEPA, a request to waive the requirement for any of the prescribed information may be made. The decision to grant a waiver will be made, on a case-by- case basis, by officials within Environment Canada and Health Canada based on whether one or more of the criteria at paragraphs 81(8)(a)-(c) of CEPA are satisfied. The criteria include whether:

a) in the opinion of the Ministers, the information is not needed in order to determine whether the

substance is toxic or capable of becoming toxic;

b) a substance is to be used for a prescribed purpose or manufactured at a location where, in the opinion of the Ministers, the person requesting the waiver is able to contain the substance so as to satisfactorily protect the environment and human life;

c) it is not, in the opinion of the Ministers, practicable or feasible to obtain the test data necessary to generate the information.

Waiver requests must be submitted in writing as part of a notification package and should include a well-documented rationale to support the request. Because rejection of a waiver request may result in a delay in the assessment, it is often prudent to discuss a proposed waiver request be with appropriate officials

at Environment Canada and Health Canada before the notification is submitted. If a waiver is granted the particulars of the waiver will be published in the Canada Gazette.vii Also, to reduce new compliance burdens, companies may take advantage of the possibility of obtaining waivers of information, using surrogate data, developing a test plan for a group of similar substances, using investment tax benefits offered by the Department of National Revenue’s research and development incentive programs, and invoking the process for early NDSL listing known as the “Four-Corners Agreement,” discussed above. All of these options require advance notification and negotiation with Environment Canada. V. Identity of Notifier, Canadian Agents Generally an NSN must be submitted by the Canadian manufacturer or importer of the substance(s) at issue. For purposes of making notifications for imported materials, Environment Canada wishes to ensure that there is a Canadian office or individual who is legally responsible for notification, compliance, and enforcement purposes so that it need not resort to international communication and extradition procedures. Thus, as discussed below, in some instances a Canadian agent is required to assist in notifying a substance.

With respect to notifying substances intended to be imported into Canada under CEPA, there are three relevant parties for purposes of this discussion: (1) the notifier; (2) the importer; and (3) a Canadian agent (if needed). How each of these parties relate to one another and the ramifications of the identities of each of these parties are discussed below in the context of various import scenarios.

Option 1: Canadian Importer as Notifier

For substances to be imported into Canada, notifications under CEPA are typically submitted or initiated

by the Canadian importer. If the importer of record of the substance is a Canadian company, no Canadian agent (discussed below) is required. Often a Canadian customer can act as the importer/notifier. If, for example, however, a U.S. manufacturer wishes to notify a substance under CEPA through its Canadian customer/importer and wishes to maintain certain information in the NSN as confidential, a “foreign supplier” NSN can be submitted whereby the importer would submit only very general information relating to the import of the substance, and the U.S. company would submit the bulk of the information needed to complete the NSN directly and confidentially to Environment Canada.

The disadvantage to this approach is that, unless a subsequent NSN is submitted by a subsequent

importer, until the notified substance is added to the DSL the initial importer/notifier is the only importer that can import the notified substance into Canada in quantities allowed by the NSN. Note, however, that Canadian companies can act as importers and can designate multiple customers as direct “ship to:” addressees. Of course, under this type of arrangement total import amounts are limited by the single NSN (i.e., since there is only a single importer/notifier the amounts shipped to all customers are combined for CEPA purposes). Once the substance at issue became added to the DSL, however, it could be imported into Canada by any importer in any amount.

Further, note that the CEPA NSN scheme is a licensing scheme, such that, in this case, import volume triggers, import volume limits, and notification requirements are specific to individual companies/importers. Thus, for example, if a foreign supplier has already submitted confidential information on a new substance for

one notifier/importer, the same information need not be submitted for other Canadian importers. Rather, the foreign supplier may send a letter of authorization to Environment Canada allowing cross-reference and use of information in the initial NSN to complete subsequent NSNs submitted by other Canadian importers of the same new substance. This allows each importer/notifier to have its own production quantity allowances under CEPA (i.e., the import amounts for each importer are not combined for CEPA purposes). This type of arrangement is known as a “matched” notification, and is a very useful way to provide for multiple Canadian customers.

Option 2: Non-Resident Importer Notification and Canadian Agent

If the importer of record of the substance to be notified under CEPA is not a Canadian company, a

second approach must be used. Under this approach, the non-Canadian notifier must obtain “Canadian importer status” as shown on Canadian Customs documentation and act as the Canadian importer of record with respect to each notified substance. Because the notifier is not physically located in Canada, under this approach a Canadian agent must be used and must sign the NSN form. Non-resident importers are treated for many purposes as if they are located in Canada even though they are not.

The advantage to this approach is that a single NSN allows import for multiple customers within the quantity limitations allowed for a single importer. And, again, once the substance at issue is added to the DSL, it could be imported into Canada by any importer in any amount under CEPA. The disadvantage to this approach is that Canadian Importer status must be obtained. This is an additional procedure, requires separate filings and recordkeeping requirements, and has tax and customs implications. VI. Confidentiality NSN submitters can claim certain information as confidential, but they must substantiate their request for confidentiality for each item that is claimed CBI. The confidentiality privilege is satisfied by: (1) identifying which particular information is confidential by entering the letter “C” on the NSN form in the spaces provided; (2) providing the substantiation information prescribed in the Guidelines for the Notification and Testing of New Substances for each item claimed CBI; and (3) signing the general CBI Certification Statement on the NSN form. As noted above, third party submissions by foreign suppliers are allowed when providing CBI information to Canadian customers is undesirable. The procedure is to have the NSN identified as a foreign supplier submission, the Canadian importer initiates the NSN and provides administrative information, and the remainder of the NSN, which contains the confidential information, is submitted directly to Environment Canada by the foreign supplier. Companies are often surprised to learn that the highly “generic” chemical names accepted in the U.S. under TSCA are not acceptable by Environment Canada under CEPA. Canada’s procedure for “protecting” a confidential chemical identity is generally to mask a single element in the fully specific chemical name. This leaves much of the chemical identity exposed to public view. Justification of additional masking of the same precursor or masking of an additional precursor requires step-wise masked chemical name development and rationalization. This process is onerous because it requires scarce expertise, is tedious, and has no assured outcome.

Acceptable masked chemical names for polymers are particularly problematic if Canada does not accept the masking of more than one polymer precursor. In light of the differences in the degree of chemical identity protection between the two countries, companies might need to make a business decision: attempting to achieve the minimum level of chemical identity protection required before commercializing a substance new to Canada — or not commercializing substances in Canada whose chemical identities need to remain closely held trade secrets. VII. Polymers

Canada is more lenient in the regulation of polymers compared to non-polymers. For example, higher volumes of a new polymer not listed on the NDSL may be manufactured in or imported into Canada without an NSN filing and higher volumes are permitted before testing is required. In addition, reduced NSN filings are possible if a new polymer is: (1) listed on the NDSL; (2) a “low-concern” polymer; (3) manufactured solely from reactants that are listed on the DSL; (4) transitional; or (5) low-concern and meets (1), (3), or (4) or has all reactants listed on the DSL or NDSL. Any of these reduced notification statuses usually lower the filing requirement to a Schedule VII rather than a Schedule VIII. However, if a polymer is low-concern with status as either transitional, on the NDSL, having all reactants on the DSL, or having all reactants on the NDSL or DSL, a Schedule VI might be all that is required. It is important to note that the Canadian definition of a polymer is different than that in the U.S., so that certain substances considered to be polymers in the U.S., are not polymers in Canada. Canada’s polymer definition is intended to be consistent with the definition developed by the Organization for Economic Cooperation and Development (OECD). The U.S. EPA, however, has adopted the OECD polymer definition only for purposes of the TSCA polymer exemption. 40 C.F.R. § 723.250. Canada defines a polymer as:

(1) consisting of molecules characterized by the sequence of one or more types of monomer units;

(2) comprising a simple weight majority (>50 weight percent) of molecules containing at

least three monomer units covalently bound to at least one other monomer unit or reactant;

(3) consisting of less than a simple weight majority of molecules of the same molecular

weight;

(4) the molecules must be distributed over a range of molecular weights, and

(5) the differences in the molecular weights are primarily attributable to differences in the number of monomer units.

“Low-concern” polymers must satisfy a minimum, threshold number-average molecular weight; contain a maximum percentage of low molecular weight species; be chemically stable; and may not contain certain reactive or cationic components. “Low-concern” polymer requirements are essentially parallel to requirements for polymers under the TSCA polymer exemption in the U.S.viii

Canada has a “two-percent rule” for polymers that is very similar to that used in the U.S. under TSCA for purposes of naming polymers. Specifically, only those monomers and other reactants used or incorporated at greater than two percent need appear in the name. Thus, a polymer in Canada is exempt from notification if it is manufactured by modifying a polymer already on the DSL by using reactants, no one of which may constitute more than two weight percent of the polymer. The term modifying refers to the amount of additional reactant that either has been incorporated into the structure of the polymer or the amount charged to the polymerization reactor. All precursors used in Canada to manufacture other substances must be listed on the DSL. However, reactants that are used outside of Canada to manufacture other substances need not be listed on the DSL. But, to determine if a “low-concern” polymer is eligible for reduced NSN filing status, all substances intentionally used in the manufacture of the polymer must be on the DSL or NDSL, irrespective of their percentage, if they are intended to become chemically part of the polymer composition. This requirement applies whether the polymer is manufactured in Canada or imported. In other words, to be eligible for Schedule VI, a “low-concern” polymer must be manufactured solely from reactants that are listed on the DSL or NDSL. A favorable ruling from Environment Canada has made it easier to import certain polymers into Canada by relaxing the above requirement for polymer intermediates (or “prepolymers”) used to manufacture polymers. Until 1998, Environment Canada had been interpreting the language manufactured solely from reactants as applying to the specific reactants that are used directly to manufacture a polymer. This meant that a polymer was not eligible for reduced notification if a polymeric intermediate used to manufacture the polymer was not listed on the DSL or the NDSL even though the precursors of the polymeric intermediate were so listed. It is now Environment Canada’s position that, for purposes of determining polymer notification requirements, it is the status of its precursors, rather than the polymeric intermediate itself, which counts in most cases. Because it is more likely for polymer precursors than polymers to be listed on the DSL or NDSL, the result of this interpretation is that the less burdensome Schedule VI, rather than Schedule VII, can be used for many low-concern polymers. Environment Canada has issued written documentation of its position on the use of prepolymers in the manufacture of low-concern polymers (Notice 2-98). Keller and Heckman assisted in obtaining this interpretation from Environment Canada. VIII. Research and Development Canada views R&D as activities undertaken primarily to create or improve a product or process and determine its technical viability and performance properties. R&D activity includes systematic investigation or research by means of experimentation or analysis other than test marketing. No NSN filing is needed for R&D activity for a chemical substance if the quantity is limited to 1000 kilograms per year or an accumulated total of more than 5,000 kilograms. Once this amount is exceeded, the chemical substance is subject to notification and regulation as a product development (PD) substance. For R&D polymers, a Schedule XI is required once the 1000 kilograms per year or 5,000 accumulated kilograms limits are reached. When polymer R&D activity exceeds 10,000 kilograms per year or an accumulated quantity of 50,000 kilograms, it is subject to notification and regulation as a PD substance. Schedule XI requires information on the composition of the R&D polymer, an MSDS, and a brief statement (that should not exceed a few sentences in length) describing the research activity that is being conducted.

A PD substance is an R&D chemical in the process of being evaluated before full commercialization in a single program that lasts two years or less (e.g., pilot plants, production trials, or customer trials other than test marketing), in order to modify the technical specifications of the R&D substance in response to performance requirements of potential customers. Test marketing, which is focused on the competitive market capability of the substance, is not included in this definition. The creation or improvement of the substance remains the focus of PD status. The PD category includes chemicals being toll manufactured for domestic or foreign customers that are conducting research. PD filings are reviewed within 21 days, but are valid for only two years. In addition, Environment Canada requires updates every six months. Therefore, it may be advantageous for manufacturers or importers to file normal NSNs for R&D substances with longer development periods, at least from a recordkeeping and reporting standpoint. Once a substance is commercialized (including for test marketing) it is subject to the normal chemical substance triggers and information Schedules. IX. Enforcement Environment Canada may impose fines of up to $200,000 dollars (Canadian) and six months in prison for failure to notify under CEPA. Several other violations, including the failure to notify newly discovered toxicity information as required under Section 17 of CEPA, and the manufacture or import of a substance that has not been notified, carry fines of up to $1 million (Canadian) and imprisonment of up to three years. As a policy matter, however, Environment Canada recognizes that education is an effective tool in ensuring compliance with the law. The Agency continues to encourage companies to file “late” NSN submissions, and companies have not been penalized for doing so. Thus, the regulatory climate in Canada encourages education and compliance with NSN requirements. However, this climate could change at any time. X. Fees

Effective January 1, 2003, Canada implemented the New Substances Fees Regulations to help recover part or all of the costs involved in processing and assessing NSNs. The final regulations were published on November 6, 2002, in the Canada Gazette, Part II, Vol. 136, No. 23.ix Environment Canada’s “Guide to the New Substances Fees Regulations for the Notification of Chemicals and Polymers, and Other Services” is available on its website.x The applicable fees depend on: (1) the type of notification (e.g., a Schedule VI); and (2) the notifier’s annual sales in Canada.

The maximum fees payable for the assessment of a new substance is $2,625 (Canadian), where the

notifier’s annual sales in Canada are less than $40 million, and $3,500 in any other case. Fees apply not only to NSNs themselves, but to requests for searches of the confidential DSL or NDSL, masked name applications, and Four Corners Agreement submissions. In the absence of proof of annual sales, fees will be based on the highest sales level -- annual sales greater than $40 million. If, however, the notifier/importer provides sales reports for the company’s most recent fiscal period for sales in Canada (prepared in accordance with generally accepted accounting principles and certified by the notifier or the company’s financial manager) showing sales less than $40 million, the notification(s) will be eligible for reduced fees. Notifications received without the proper fee remittance will be considered incomplete.

XI. Related Canadian Requirements Chemical substances produced or distributed in Canadian commerce have been and continue to be subject to the Canadian Hazardous Products Act (CHPA). This law regulates prohibited, restricted, and controlled substances primarily in consumer products. For controlled substances, suppliers must comply with Workplace Hazardous Material Information System (WHMIS) regulations for labeling products, providing prescribed information on MSDS’s, and providing proper notification and education of employees on the safe use of hazardous substances. There also is a notification requirement under Section 34 of the Occupational Health and Safety Act administered by the Ontario Ministry of Labour. Section 34 requires companies to notify the Ministry of the intent to import, manufacture, distribute, or supply new chemical substances in Ontario. It generally is sufficient for purposes of satisfying this notification requirement to provide the Ministry of Labour with a copy of an NSN and a Canadian MSDS. The submission should include a cover letter which indicates that the filing is intended to comply with Section 34 of the Occupational Health and Safety Act. We also recommend that the submission be marked as confidential. These notifications are reviewed by the Ministry of Labour primarily to assess worker exposure. If new exposure or toxicity data relevant to worker handling issues becomes available, it also should be submitted to the Ministry of Labour. Submitters are not expected to generate any new information in this regard. This notification requirement only applies to new substances imported into Ontario. Prepared by: Keller and Heckman LLP January 2004

i See http://www.ec.gc.ca/CEPARegistry/guidelines/CPguide.PDF. ii “Regulations Amending the New Substances Notification Regulations,” SOR/2003-214. iii Under Section 83(6) of CEPA (the “green light” provision), Environment Canada is permitted at its discretion to allow manufacturers and importers of new substances to commence manufacture or import prior to the expiration of the assessment period. Note that this provision is discretionary and is not routinely invoked. iv Because most masked names under CEPA contain one or very few more masks, Keller and Heckman can also review the masked names on these lists to determine whether any likely prospects exist. This investigation might be more informative than, for example, inspecting the publicly-accessible confidential TSCA Inventory. v Mixtures derived from natural sources or complex reactions that cannot be characterized because their composition is too complex or variable (i.e., UVCBs) are considered single substances and are subject to notification. vi This exclusion applies even if there is a change of carrier during transit. However, if a substance is brought into Canada and stored for subsequent distribution, the substance is subject to the NSN regulations. vii The waiver notice will only contain: (a) the name of the person (or company) to whom the waiver is granted; and (b) the type of information to which it relates (e.g., Company X, biodegradability information). The notice will not specify the substance to which the waiver applies. viii Specifically, low-concern polymers/biopolymers include those polymers/biopolymers that: (a) are not described in items 1, 2, 3, or 4 of Schedule IX and have a number-average molecular weight greater than 10,000, and less than 2% of components have a molecular weight less than 500, and less than 5% of components have a molecular weight less than 1,000; (b) are not described in Schedule IX and have a number-average molecular weight greater than 1,000, and less than 10% of components have a molecular weight less than 500, and less than 25% of components have a molecular weight less than 1,000; or (c) are polyesters manufactured solely from reactants listed in Schedule X, or an anhydrous form of those reactants, other than the reactants or the anhydrous forms of these reactants that include both 1-butanol and 2-butenedioic acid (E). ix See http://canadagazette.gc.ca/partII/2002/20021106/pdf/g2-13623.pdf. x See http://www.ec.gc.ca/ceparegistry/documents/regs/nsfr_guid/nsfr_guid_e.pdf.