Chemical Weapons Convention Regulations
 
ASSESSMENT OF THE COSTS AND BENEFITS OF BXA REGULATION:
Chemical Weapons Convention Regulations and Declaration Forms

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November 29, 1999

 

Introduction

Pursuant to Executive Order 12866, agencies are required to submit a cost/benefit analysis for regulations that have been determined by the Administrator of OIRA to be significant within the scope of section 3(f)(1). The executive order requires that the following be undertaken:

• (i) An assessment, including the underlying analysis, of benefits anticipated from the regulatory action (such as, but not limited to, the promotion of the efficient functioning of the economy and private markets, the enhancement of health and safety, the protection of the natural environment, and the elimination or reduction of discrimination or bias) together with, to the extent feasible, a quantification of those benefits;
• (ii) An assessment, including the underlying analysis, of costs anticipated from the regulatory action (such as, but not limited to, the direct cost both to the government in administering the regulation and to businesses and others in complying with the regulation, and any adverse effects on the efficient functioning of the economy, private markets (including productivity, employment, and competitiveness), health, safety, and the natural environment), together with, to the extent feasible, a quantification of those costs; and
• (iii) An assessment, including the underlying analysis, of costs and benefits of potentially effective and reasonably feasible alternatives to the planned regulation, identified by the agencies or the public (including improving the current regulation and reasonably viable nonregulatory actions), and an explanation why the planned regulatory action is preferable to the identified potential alternatives.

The Bureau of Export Administration has drafted a regulation to implement the Chemical Weapons Convention in the territory of the United States pursuant to Public Law 105-277, Division I, and Executive Order 13128, section 3. This report assesses the costs and benefits associated with the regulation, as required by E.O. 12866, both in terms of its economic effects and its effects on the national security and foreign policy of the United States. The report also assesses the costs and benefits of reasonably feasible alternatives to the planned regulation.

Background

The Chemical Weapons Convention (CWC) is a multilateral arms control and non-proliferation treaty that seeks to achieve an international ban on chemical weapons (CW). The Convention prohibits, inter alia, the use, development, production, acquisition, stockpiling, retention, and direct or indirect transfer of chemical weapons. Furthermore, each State Party to the Convention is required to make initial and annual declarations on all facilities which produce, process, consume, transfer, or import/export toxic chemicals and their precursors as specified in three lists or schedules of chemicals contained in the Convention's Annex on Chemicals. In addition to traditional CW agents, the Schedules include chemicals that have both large-scale commercial uses and CW applications (referred to as "dual-use chemicals"). Information is also required on facilities which produce a broad class of chemicals referred to as "unscheduled discrete organic chemicals" or "UDOCs".

Signed by the United States in Paris on January 13, 1993 and submitted to the United States Senate on November 23, 1993 for its advice and consent to ratification, the CWC became binding on the United States when it ratified the Convention on April 25, 1997. The Convention entered into force on April 29, 1997. To date, the CWC has been signed by 170 countries and ratified by over 120.

The United States is obligated by Article VI of the Convention to: (1) report data on certain chemical activities by U.S. entities; (2) impose certain trade controls; and (3) permit the inspection of certain U.S. facilities by international Inspection Teams from the Organization for the Prohibition of Chemical Weapons (OPCW). Therefore, on October 21, 1998, the United States enacted the Chemical Weapons Convention Implementation Act of 1998 (Pub. L. 105-277, Division I) (CWCIA or the "Act"), which, inter alia:

• authorizes the promulgation of regulations to require declarations by U.S. chemical and related industries;
• sets forth procedures for international inspection of U.S. commercial facilities;
• directs the establishment of a "National Authority" to serve as the liaison between the U.S. and the international organization, the OPCW; and
• prohibits all persons within the United States, as well as all U.S. nationals outside the United States from engaging in activities prohibited under the Convention.

Executive Order 13128 authorizes the Commerce Department to issue regulations necessary to implement the Act and U.S. obligations under Article VI and related provisions of the Convention. Therefore, on July 21, 1999, the Department of Commerce published its Chemical Weapons Convention Regulations (CWCR) implementing the CWCIA in accordance with the Executive Order as a proposed rule (15 CFR Parts 710 Through 721). Following review of public and interagency comments to the proposed rule and incorporation of necessary changes, the Department is publishing the revised CWCR as an interim rule.

The Benefits of the Regulatory Action

As stated in the preamble to the Convention, the CWC seeks to achieve effective progress toward the general and complete disarmament by all nations of all weapons of mass destruction. Toward that end, member states of the CWC are determined, for the sake of all mankind, to completely exclude all possibilities of the use of chemical weapons in warfare and have agreed upon an extremely stringent set of prohibitions and verification measures as contained in the Treaty and its associated Annexes.

Public Safety and National Security Benefits

It is very difficult if not impossible to quantitatively assess the public safety and national security benefit of the Chemical Weapons Convention. Such benefits to the public due to defense spending and international arms control agreements are inherently non-quantifiable. Nevertheless, there is a clear benefit. Economic growth and stability is only possible in a safe and secure environment. With the end of the Cold War, future threats to U.S. security will come from local potentates and terrorist groups using or threatening to use chemical, biological, or nuclear weapons of mass destruction. Therefore, the CWC promotes and enhances our security by prohibiting, on a world wide basis, the use, development, production, acquisition, stockpiling, retention, and direct or indirect transfer of chemical weapons and is the first step in a global effort to eliminate weapons of mass destruction.

The data declarations and industry inspections mandated by the Act and implemented by this regulation fulfill U.S. obligations pertaining to the private sector under the CWC's verification regime. This verification regime is designed to ensure that all nations abide by CWC prohibitions and help to prevent rogue states or terrorist groups from acquiring chemical weapons. In ratifying the Convention and in implementing these verification measures, the U.S. Government fulfills its primary responsibility of protecting public safety and promoting national security. These CWC benefits, while non-quantifiable, are nevertheless real and significant.

Economic Benefits

U.S. industry exports $60 billion worth of chemicals per year, making this the largest U.S. export sector. As noted above, over 120 countries, including the United States' major trading partners accounting for most of U.S. chemical exports, are States Parties to the Convention. State Party obligations under the Convention include imposition of restrictions on trade with non-States Parties, including the prohibition of exports of Schedule 1 chemicals and the prohibition of exports and imports of Schedule 2 chemicals after April 28, 2000. The U.S. chemical industry will benefit from the United States' ratification and effective implementation of the Convention because its trade with other States Parties will not be subject to CWC trade restrictions. While the United States must impose trade restrictions against non-States Parties, trade with non-States Parties is far less in dollar value than trade with other States Parties. In addition, U.S. membership in the Executive Council of the OPCW allows the United States to play a key role in developing CWC policy and implementation measures, especially in the area of commercial facility inspection and verification procedures. Currently, U.S. citizens hold key positions in the finance, administration and verification divisions of the OPCW's Technical Secretariat and will provide an additional conduit for U.S. views on CWC policy and how that policy should preserve and protect economic growth.

Specific Provisions

Regulatory Purpose

The proposed regulation calls for the declaration by U.S. chemical and related industries of certain activities involving chemicals described in the CWC's Schedules of Chemicals and of activities involving certain other chemicals called unscheduled discrete organic chemicals (UDOCs). Bureau of Export Administration officials will review the collected information for completeness and accuracy and compile it into a report for transmittal to the U.S. National Authority (USNA) and subsequent presentation to the OPCW. The collected data will also be used by BXA officials to monitor the aggregate amount of Schedule 1 chemicals in the United States, and to prepare such additional reports as the USNA may reasonably require. All efforts at BXA will be aimed at minimizing the burden imposed on U.S. industry, protecting proprietary, confidential, and national security information to the maximum extent allowed under the law and the Convention, and to demonstrate and enforce U.S. compliance with the Convention.

Protection of Confidential Business Information

The "Confidentiality Annex" of the Convention protects Confidential Business Information by mandating that the OPCW require only the minimum amount of information necessary in order to carry out its responsibilities. The OPCW must establish a regime for restricting access to information provided by States Parties, evaluate all data received for CBI content, and ensure that CBI information is not released without proper safeguards and access controls.

Section 404 of the Act also addresses the protection of proprietary and confidential business information. Confidential business information, as defined by the Act, is exempt from disclosure under the Freedom of Information Act (FOIA). Confidential business information may only be disclosed to the Technical Secretariat and, in certain cases, to other States Parties, to Congressional committees with appropriate jurisdiction, and/or to law enforcement agencies for the enforcement of the Act or other laws. The USNA must notify the submitter if it intends to release information exempted from disclosure. Penalties are provided in the Act for the unlawful disclosure of confidential information collected under the Act by any individual, including a government official or OPCW inspector. The interim rule, in response to public comments, consolidates provisions for CBI in one part.

Finally, Commerce's CWC Information Management System (IMS), which will collect, process, and store CWC-related data, was designed specifically as a separate stand-alone network and is not directly connected to other Commerce or agency networks. All collected declaration data will be physically and electronically isolated from other data in order to promote information security. The operating system which will be used is certified at Trusted Security Evaluation Criteria (TSEC) Level C2 and provides inherent protections for the security of data. Finally, all personnel with access to the collected information will possess national security clearances of the appropriate level.

Efforts to Minimize Burden and Avoid Regulatory Duplication

The information BXA will request from U.S. industry under the provisions of the CWC has not been obtained or asked for previously. A Defense Nuclear Agency (DNA) report (Domestic Reporting Requirement for Chemical Industry- DNA-TR-92-66) stated that existing state and federal government reporting requirements fail to provide the full and detailed information on the chemical industry needed to satisfy the annual data reporting requirements of the CWC and the international treaty community. The same conclusion was also drawn by the Office of Technology Assessment (OTA) in their report (The Chemical Weapons Convention: Effects on the U.S. Chemical Industry (OTA-BP-ISC-106) which stated "the information currently envisioned as necessary for CWC verification differs both quantitatively and qualitatively from that collected for internal management or for domestic regulatory purposes."

Some major discrepancies between the reporting requirements mandated by the CWC and by U.S. domestic environmental regulations are: chemicals relevant to the CWC are not all covered by the environmental regulations; environmental regulations are applicable only to chemical manufacturers, not to processors or consumers, which are covered under the CWC; and the reporting deadlines under the CWC are shorter than those required by the U.S. Environmental Protection Agency. Therefore, for these reasons the U.S. Government cannot "piggyback" on existing reporting requirements to meet its CWC declaration obligations.

Although the number of small businesses, organizations, or government bodies which are expected to respond under the annual reporting requirements of the CWCR is unknown, the interim rule implements a number of reporting changes suggested by industry which are designed to reduce the burden imposed on all companies. During a BXA initiated "field test" of the reporting documents, a number of key points were raised by industry which will minimize collection burden.

Several companies asked for clearer definitions and additional guidance in data declaration instructions. A telephone "hot-line" for forms completion assistance and a facsimile request line for chemical classification requests were also mentioned. The BXA's collection instruments will incorporate all of the above industry requests.

Also, at industry's request, Commerce deleted the previous form requirement for Harmonized Systems Tariff Codes (HS), dropped the requirement for submitting only original forms, and provided clarification of the thresholds and the specific forms which must be completed. Companies may now submit copies of all the forms, including the certification form. However, the certification form must have an original signature for each declaration or report in order for it to be legally binding. BXA has carefully considered all of the public comments received, with the objective of form simplification and reduced burden to industry. Industry burden has been reduced even further by developing the DESI software (Data Entry Software for Industry) which will make it easier for companies and organizations to complete declaration forms on their own computers and file electronically.

Finally, in response to public comments on the proposed rule, BXA has worked with other agencies to further minimize the burden on entities subject to the requirements of the CWCR. The interim rule incorporates a "round to zero" rule for Schedule 1 chemicals contained in mixtures as unintended or unavoidable byproducts or impurities below 0.5% aggregate. BXA believes that the production, import, or export of trace amounts of Schedule 1 chemicals as unintended or unavoidable byproducts or impurities does not pose a threat to the object or purpose of the Convention and has therefore crafted its revised rule to exempt these trace components. The interim rule also incorporates a uniform 30 percent concentration threshold for declaring the production, processing, consumption, import, or export of Schedule 2 chemicals and a 10 percent concentration threshold for the importation of Schedule 2 chemicals from non-State Parties to the Convention after April 28, 2000. BXA believes that the new thresholds for Schedule 2 mixtures are consistent with our treaty obligations and non-proliferation goals and will make implementation much less complicated for both industry and government. They will also create a more level playing field for our industry vis-a-vis our major trading partners and will avoid subjecting to declaration requirements consumers of Schedule 2 chemical products who pose no risk to the object and purpose of the Convention.

The Costs of the Regulatory Action

Cost in public burden hours

The estimated first-year burden which will be placed on those members of private industry which are expected to have a CWC reporting obligation is 11,656 total hours. This hours burden is based upon the number of respondents estimated by the Department of State multiplied by the estimated number of hours to complete each type of declaration. The number of hours to complete each declaration is based on BXA's field test of the declaration forms with nine different companies.

*These estimates are based on the average time required to complete each page of the UDOC forms in our field test times the total number of pages in the Schedule 1 and 2 declarations. For example, for Schedule 1, this would be as follows:

(5.3 hours/4 UDOC pages) x 8 Schedule 1 pages = 10.6 hours.

**These estimates are derived from our field test. The sample size for Schedule 3 was two respondents. The sample size for UDOCs was four respondents.

***These estimates are based upon the estimated time required to complete the form per respondent (ten minutes) times the estimated number of responses per respondent (3) times the estimated number of respondents (36).

In addition to reporting obligations, the CWC and Public Law 105-277, Division I, Title I permit international inspections of U.S. commercial facilities. Approximately 40 inspections will be conducted per year in the United States. The average burden hours for each inspection is 576.33, based on the average hours associated with mock inspections of one Schedule 1 facility and one Schedule 2 facility and the average time required to prepare a report of inspection related costs. Therefore, the total burden hours related to inspections is estimated to be 23,053 hours (576.33 hours x 40 facilities).

Costs in Dollars

Cost to Industry

Reporting Burden Cost: For its estimate of cost to industry in dollars, BXA has assumed that an industry representative gathering data and filling out declarations to comply with declaration reporting requirements would be equivalent to a GS 13 Government employee at an annual salary of $56,160 ($27/hour) . Multiplied by our estimated hour burden of 11,656 hours, this gives a burden cost for filing declarations of $377,654.

11,656 hours x $27/hour x 1.2 (20% Overhead) = $377,654

Inspection Burden Cost: BXA estimates that the cost to each respondent related to an inspection, including preparation, on-site activities, and inspection report is $54,172. This is based on the average costs related to a mock inspection at a Schedule 1 and Schedule 2 facility in the United States. Preparation includes, but is not limited to, reviewing declarations previously submitted, providing information to be included in a draft facility agreement, identifying confidential business information, and developing a pre-inspection briefing for inspectors about the facility.

$54,172 x 40 inspections/year = $2,166,880 burden cost for inspections.

Total Burden Cost

$377,654 + $2,166,880 = $2,544,534.

BXA anticipates that the total annual cost to industry will drop each year as companies become more familiar with hosting inspections and completing declaration forms and learn to take advantage of new electronic reporting software with user-friendly interfaces and optical character reading capabilities currently being developed.

In addition to the estimated $2.5 million dollars in direct costs resulting from CWC reporting and verification obligations, businesses and other entities, particularly small ones, potentially could suffer additional indirect, though non-quantifiable, costs due to their involvement with inspections when they could be engaging in profitable activities. BXA will make every effort to work with facility officials to minimize these costs. Inspections will be managed to limit costs (both direct and indirect) borne by private facilities and to protect their proprietary and confidential business information.

The interim rule contains a minor increased declaration requirement, because it implements an OPCW Conference of State Parties Decision (C-I/DEC.38), to include a requirement for an "additionally planned activities declaration" for all changes in planned production, processing, or consumption of Schedule 2 chemicals or in planned production of Schedule 3 chemicals. BXA anticipates receiving no more than 20 additional declarations due to the added requirements. BXA believes that these additional declarations will be offset by reductions in declaration requirements included in the interim rule, including the uniform 30% mixtures exemption for Schedule 2 chemicals and the additional UDOCs exemptions. Therefore, BXA has not changed its burden hours estimates or cost estimates.

Cost to the Government

Declarations and reports:

The estimated annualized cost to the Department of Commerce for declarations and reports is $1,081,528. A major portion of this estimate is the cost for personnel to receive, validate, process and archive the data and to implement the reporting requirements. The chart below provides a breakout of the annualized estimate cost of the collection. The annual cost is based on the annual salaries of the 9 full-time Federal employees working on the project and 4 full-time and 6 part-time employees that will provide contractual support to the project. Also included is the annual cost for equipment and printing needs.

Other U.S. Government agencies will incur costs for data declarations under the CWC. Commerce, however, does not have knowledge of the costs to be incurred by these agencies.

Inspections

The estimated annualized cost to the government to host inspections in the United States is $4,409,600 ($110,240 of average/inspection x 40 inspections). This was based on the average cost of 2 mock inspections, and includes salaries for the host team, travel and per diem expenses, equipment for the host team (e.g., laptops) and testing inspection equipment used by international inspectors. The actual cost for an inspection will vary depending upon the facility to be inspected. For example, an inspection of a Schedule 1 facility may last 5 days, while inspection of a UDOC facility will last 2 days.

Recordkeeping Burden

In a previous section, we discussed the DNA and OTA studies on the effects and significance of the CWC for U.S. industry. Both studies concluded that the information required by the CWC is not available from another source.

Assuming ten pages of underlying records for each submitted form or letter (i.e., 100 pages for the largest of companies), and a five year storage requirement, as specified in the CWC Regulation (15 CFR Part 720), the total permanent storage of 500 pages of documents would be contained in a filing cabinet occupying 1.5 square feet of office space. Estimates of office space costs in the Washington, DC area range from $30/sq.ft. to $40/sq.ft. with an average value of $35/sq.ft./year. Applying this assumption to all 2201 estimated respondents gives an estimated recording keeping cost for this collection for five years of documents of $115,552 (1.5 sq.ft. x $35/sq.ft. x 2201 respondents). However, most respondents are anticipated to file far less than the anticipated 100 pages per largest of companies and hence will have much lower record keeping expenses.

The Costs and Benefits of Alternatives

In a previous section, we discussed the DNA and OTA studies on the effects and significance of the CWC for U.S. industry. Both studies concluded that the information required by the CWC is not available from another source. Therefore, BXA must publish regulations to require the appropriate information to comply with United States obligations under the CWC.

BXA's discretion in drafting the declaration forms and formulating the reporting requirements is limited by the Convention requirements. The OPCW has issued forms for States Parties to use in submitting declarations. In drafting the declaration forms and the CWCR, BXA has consistently made the reporting requirements as narrow as possible to ensure that only information required to be declared to the OPCW is to be reported to BXA. Other States Parties, have imposed much broader reporting requirements on their industries, with the government taking on the responsibility of determining which information must be forwarded to the OPCW.

In addition, there are certain declaration requirements of the Convention that are subject to interpretation. Until the Conference of States Parties establishes clear rules for these requirements, States Parties may use their national discretion to implement them. National discretion generally means a reasonable interpretation of the requirement. For such reporting requirements currently subject to national discretion, BXA has adopted the minimum requirements consistent with a reasonable reading of the Convention, keeping in mind its purposes and objectives. Several of these requirements are described below.

Unscheduled Discrete Organic Chemicals

The largest class of entities potentially subject to the requirements of the CWCR is the class engaged in production by synthesis of unscheduled discrete organic chemicals (UDOCs). It is important to note that the requirements only apply to producers of these chemicals and do not affect consumers, processors, exporters, or importers. The interim rule includes declaration exemptions for UDOCs based upon U.S. national discretion. These exemptions include: UDOCs produced by synthesis that are ingredients or by-products in foods designed for consumption by humans and/or animals; and products from refineries of crude oil, including sulfur-containing crude oil.

As noted earlier, some 1800 U.S. companies may produce UDOCs in excess of the CWC thresholds. There is a possibility that declared UDOC producers may be subject to inspections to verify the accuracy of their data declarations on or after April 29, 2000. The size of the group of companies or entities excluded by the above UDOC exemptions, among which are the plastics industry, the wine and beer industries, the petroleum refinery industry, and the human/animal foods industry is unknown, but is believed to be substantial.

A UDOC exemption codified in the CWCIA is for those coincidental byproducts of a UDOC manufacturing or production process that are not isolated or captured for use or sale during the process, and are routed to, or escape from the waste stream of a stack, incinerator, or wastewater treatment system or any other waste stream. The size of this group, which can include, for example, the pulp and paper industry, is unknown.

Scheduled Chemicals and Interpretation Scenarios

In the following paragraphs, BXA explores several scenarios which pose alternative options for industry declaration and reporting requirements based on the CWC declaration thresholds. In each case, BXA interpreted the treaty to select the option that quantitatively and qualitatively minimized a company's declaration and reporting burdens, thereby minimizing its opportunity for inspection and maximizing the protection of its confidential business information.

For the sake of clarity, in the scenarios, the Schedule 2A.(2) chemical, PFIB: 1,1,3,3,3-Pentafluoro-2-(trifluoromethyl)-1-propene (CAS Reg. No.382-21-8) will be used. While the examples are specific, the principles contained therein are applicable to all other Schedule 2 and Schedule 3 chemicals, and should serve to demonstrate BXA's approach towards the development of the proposed CWCR and its policy of minimizing burden on entities subject to the requirements of the CWCR.

Several activities trigger the Convention's requirement for a Schedule 2 chemical declaration. These are contained in the CWC Verification Annex (CWC/VA), Part VII, which describes the regime for Schedule 2 chemicals and facilities related to such chemicals. Two main declaration requirements are set forth below.

CWC Verification Annex, Part VII, paragraph 1:

"The initial and annual declarations to be provided by each State Party pursuant to Article VI, paragraphs 7 and 8*, shall include aggregate national data for the previous calendar year on the quantities produced, processed, consumed, imported and exported of each Schedule 2 chemical, as well as a quantitative specification of import and export for each country involved."

* (Article VI paragraphs 7 and 8 of the Convention refer to the time frame for submitting declarations).

CWC Verification Annex, Part VII, paragraph 3:

"Initial and annual declarations are required for all plant sites that comprise one or more plant(s) which produced, processed or consumed during any of the previous three calendar years or is anticipated to produce, process or consume in the next calendar year more than:

(a) 100 kg of any other chemical listed in Schedule 2, part A [i.e. PFIB];

Scenario 1. The National Aggregate will only include totals of declared facilities.

In order to provide the national aggregate, the United States will not require that all facilities that produce, process, consume, import or export Scheduled chemicals report on their activities. Rather, the United States will compile the aggregate from data submitted by facilities whose activities exceeded specified declaration threshold quantities. In other words, the requirements of both paragraphs 1 and 3 of Part VII will be satisfied with data submitted pursuant to paragraph 3.

In CWC/VA, Part VII, paragraph 1 above, there is the reference to "aggregate national data." This term is not defined in the CWC. A broad reading of this phrase would be the comprehensive national information on the sum of all Schedule 2 chemicals and associated activities. For purposes of the present discussion, this aggregation will be termed the "aggregate theory." It will be seen that the declaration of Schedule 2 chemicals and their activities can be refined through narrower interpretations of this "aggregate" language. These refinements are demonstrated in scenarios 2, 3, and 4.

Scenario 2. What triggers a declaration under CWC/VA, Part VII, paragraph 3 - step 1?

Plant site X has three plants, A, B, and C, all engaged in PFIB activities. However, during the previous 3 years (i.e., the 3-year look back), none of the plants, A, B, or C, individually produced, processed, or consumed PFIB in excess of 100 kilograms. In the previous calendar year: plant A produced 90 kg, processed 50 kg, and consumed 50 kg; plant B produced 30 kg, processed 30 kg, and consumed 30 kg; plant C produced 10 kg, processed 10 kg, and consumed 10kg. Does plant site X have an annual declaration requirement?

No. Arguably plant site X is declarable under the "aggregate chemical theory". In this scenario, plant site X has an aggregate PFIB production activity of (90 + 30 + 10) kg, a sum exceeding the 100 kg threshold for PFIB. If this line of reasoning is followed, then all plants contributing to the aggregate production must be declared. However, BXA has deemed that for declaration purposes, at least one plant on a plant site must individually exceed the declaration threshold for an activity. Following BXA's line of reasoning, none of the plants, A, B, or C, is declarable because no one plant, A, B, or C, individually exceeded the threshold for a single chemical and activity. Accordingly, plant site X is not required to make a declaration. The size of the group of companies or entities excluded by this interpretation is unknown.

Scenario 3. What triggers a declaration under CWC/VA, Part VII, paragraph 3 - step 2?

Plant site Y has 3 plants, D, E, and F, on it, all engaged in PFIB activities. During the previous calendar year: plant D produced 50 kg, processed 50 kg, and consumed 50 kg; plant E produced 30 kg, processed 30 kg, and consumed 30 kg; plant F produced 10 kg, processed 10 kg, and consumed 10 kg. Does plant site Y have an annual declaration requirement?

No. Under the "aggregateactivity theory", plant D produced, processed, and consumed a total of 150 kg of PFIB, exceeding the 100 kg threshold level. Since the treaty language reads produced, processed or consumed," BXA has deemed that the applicable threshold should apply to each activity separately. Accordingly, plant D does not have to be declared as each activity is below the threshold level of 100 kg. Because neither plant E nor F has a declaration requirement, either, plant site Y would not have a declaration requirement. In this scenario, the applicable threshold applies to each individual chemical in each separate activity. Therefore those plant sites engaged in activities with a specific Schedule 2 chemical would be excluded from a declaration requirement if the individual activity at each plant on the plant site is below the applicable threshold. The size of the group of companies or entities excluded by this interpretation is unknown.

Scenario 4. What triggers a declaration under CWC/VA, Part VII, paragraph 3 - step 3?

Plant site Z has three plants, G, H, and J, all engaged in PFIB activities. In a 3-year lookback, the threshold was exceeded only in the previous year. During the previous calendar year: plant G produced 110 kg, processed 50 kg, and consumed 50 kg; plant H produced 30 kg, processed 30 kg, and consumed 30 kg; plant J produced 10 kg, processed 10 kg, and consumed 10 kg. Does plant site Z have an annual declaration requirement?

Yes. Plant site Z has a declaration requirement. In this scenario, plant G has individually produced more than 100 kg. Therefore plant site Z must declare the production activity in its plant G. Note that there is an alternative point: Does the fact that plant G is over the declaration threshold mean that all production at plant site Z needs to be counted? The answer is "No." BXA has deemed that the actual amount at the plant must be reported if it exceeds the threshold for a specific activity. In short, plant site Z must only report the total production activity of 110 kg at plant G. Plant site Z is not required to report plant G's processing and consumption activities. Plant site Z need not report the activities at plants H and J because individually, their activities did not exceed the declaration threshold.

The above examples demonstrate BXA's systematic approach to narrowing the declaration requirement of Schedule 2 chemicals.

As mentioned, the principles contained in the above scenarios, except for the three-year look-back, can be applied to the declaration requirements for Schedule 3 chemicals. These requirements have a similar structure to those for Schedule 2 chemicals, and have also been interpreted to exempt from declaring those companies whose involvement with Schedule 3 chemicals is below specified thresholds. The number of companies or entities excluded by this interpretation is unknown.

The requirement for declarations of Schedule 1 chemicals is less flexible to interpretation for the reason that they are the most toxic and therefore subject to the strictest control.

Requirements for Chemical Mixtures

The OPCW has issued no decision regarding what concentrations of scheduled chemicals in mixtures must have before the amount of the chemical is subject to declarations requirements. Thus, the issue is open to national discretion. For the United States, the Act narrows the scope of the CWC declaration requirement by exempting certain chemical mixtures of Schedule 2 and 3 chemicals from declaration requirements. The Act prohibits the U.S. Government from requiring declarations concerning mixtures containing less than 10% of Schedule 2 chemicals or less than 80% of Schedule 3 chemicals. These are chemical mixtures containing precursors from which it is impractical and uneconomical to separate out usable amounts of the precursor material.

The interim rule implements a uniform 30% exemption for mixtures of Schedule 2 chemicals involved in production, processing, consumption, export, or import activities. The proposed rule provided for a 10% exemption for production, consumption, imports and exports, and a 30% exemption for processing. The uniform 30% rule is consistent with the mixtures rules adopted by our major trading partners, thereby providing a level international playing field for our industry, and reduces the burden and regulatory complexity of the CWCR. Because mixtures containing concentrations of Schedule 2 or 3 chemicals smaller than these thresholds present little threat of diversion to chemical weapons production, such mixtures are excluded from the reporting requirements of the CWCR.

Conclusion

Thus BXA believes that its proposed action, CWCR, has accurately embodied the mandates of the Chemical Weapons Convention for the U.S. chemical industry, while adhering to its policy objective of minimizing burden on industry and preventing the unauthorized disclosure of confidential business information.

The cost of not publishing regulations is a potential for a significant loss in national security and public safety. The CWC could fail without U.S. participation and would certainly be less effective at promoting the worldwide disarmament in chemical weapons. Given the relatively modest size of estimated Government and industry costs associated with this proposed regulation, the economic benefits of this alternative vastly outweigh its costs, both real and potential.