[Federal Register Volume 62, Number 223 (Wednesday, November 19, 1997)]
[Notices]
[Pages 61890-61896]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-30140]
[[Page 61889]]
_______________________________________________________________________
Part IV
Environmental Protection Agency
_______________________________________________________________________
Termilind Limited; Notice and Order of Revocation of Registrations;
Notice
Federal Register / Vol. 62, No. 223 / Wednesday, November 19, 1997 /
Notices
[[Page 61890]]
ENVIRONMENTAL PROTECTION AGENCY
[OPP-68017; FRL-5755-7]
Termilind Limited; Notice and Order of Revocation of
Registrations
AGENCY: Environmental Protection Agency (EPA).
ACTION: Notice; Notice and Order of Revocation of Registrations and
Final Determination Governing Sale and Use of Existing Stocks.
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SUMMARY: In March of 1996, EPA issued registrations for two end use
napthalenaecetic acid (NAA) products, Alphaspra 200 (EPA Registration
Number 67223-2) and Alphaspra 800 (EPA Registration Number 67223-1) to
Termilind Limited (Termilind). On August 2, 1996, Amvac Chemical
Corporation (Amvac) filed a petition to cancel the Termilind
registrations based upon assertedly false certifications that Termilind
would use Amvac-registered material to formulate its products. Amvac
filed a second petition in October of 1996 asking EPA to deny
Termilind's application for a technical NAA registration based upon an
assertion that Termilind misappropriated data to support the
application. EPA has determined that Termilind submitted misleading
materials in support of its applications for end-use registrations, and
that the registrations would not have been granted absent this
misleading information. On August 6, 1997, EPA issued a Decision
granting Amvac's petition in this regard and revoking the end-use
registrations. In that same Decision, EPA denied Amvac's petition to
deny Termilind's application for technical registration. The revocation
Decision, and a subsequent determination concerning the sale and
distribution of existing stocks of the revoked products, are published
in this Notice.
DATES: The revocation Decision was effective as to Termilind on August
6, 1997. The Decision and existing stocks determination are effective
as to all other persons on November 19, 1997. Any person interested in
requesting an informal hearing should submit such a request by January
20, 1998.
ADDRESSES: Request for a formal hearing should be addressed to: Robert
Perlis, Office of General Counsel (2333), Environmental Protection
Agency, 401 M St., SW., Washington, DC 20460.
FOR FURTHER INFORMATION CONTACT: By mail: James J. Jones, Registration
Division, Office of Pesticide Programs, Environmental Protection
Agency, 401 M St., SW., Washington, DC 20460. Office location,
telephone number, and e-mail address: Rm. 713, 1921 Jefferson Davis
Hwy., Arlington, VA, 703-305-5446, e-mail:[email protected].
SUPPLEMENTARY INFORMATION: Unit I. of this document contains the
Agency's August 6, 1997 decision on the petition to revoke the
registrations, and Unit II. consists of the Agency's existing stocks
determination.
I. Decision on Amvac's Petition to Revoke Termilind Limited's
Registrations
Petitioner Amvac Chemical Corporation (Amvac) seeks immediate
revocation of respondent Termilind Limited's (Termilind)
registrations for two end use naphthaleneacetic acid (NAA)
registrations, Alphaspra 200 (EPA Registration No. 67223-2) and
Alphaspra 800 (EPA Registration No. 67223-1). Amvac also seeks
revocation of Termilind's technical NAA registration, (EPA
Registration No. 67223-22). Amvac claims that the end use
registrations were obtained through willful misrepresentation of the
source of technical NAA, and that the technical registration was
obtained through the submission of data ``stolen'' or
``misappropriated'' from Amvac. Amvac asserts, as well, that the
willful nature of Termilind's acts authorizes summary revocation of
the subject registrations without resort to the procedural
requirements of section 6(b), the cancellation provision of the
Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA). We
grant the petition with respect to the two end use registrations,
and deny the petition with respect to the technical registration.
Legal Background
The sale, distribution and use of pesticides in the United
States is regulated by the Federal Insecticide, Fungicide, and
Rodenticide Act. 7 U.S.C. 136-136y. Under FIFRA, with certain
limited exceptions, a pesticide may not be sold or distributed
unless it is registered. Id. 136a(a), 136j(a)(1)(A). In order for a
pesticide to qualify for registration, the Environmental Protection
Agency (EPA) must determine that it will not cause unreasonable
adverse effects on the environment when used in accordance with
widespread and commonly recognized practice. Id. 136a(c)(5)(C)-(D).
To make this finding, EPA reviews data on product chemistry,
toxicology, and environmental fate, among other subjects. See 40 CFR
part 158 (data requirements for registration). The data reviewed
must be supplied by the registrant; it is not generated by the
Agency. Id. Because the volume of data received and reviewed by the
Agency is extremely large, EPA is unable to investigate each
statement, study and item of data received for potential fraud or
misrepresentation. Thus, to a great degree, the Agency must rely on
the good faith and integrity of registrants if it is to fulfill its
mandate of protecting human health and the environment from
unreasonable risk.
A registrant can fulfill its obligation to submit much of the
data required for registration by formulating its product with an
existing registered pesticide purchased from another producer. See 7
U.S.C. 136a(c)(2)(D); 40 CFR 152.85 (Formulators' exemption).1
The premise behind the formulators' exemption is that the purchase
price of the registered material compensates the original registrant
for the cost of data generation. See id.
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1 7 U.S.C. 136a(c)(2)(D) reads as follows:
Exemption--no applicant for registration who proposes to
purchase a registered pesticide from another producer in order to
formulate such purchased pesticide into the pesticide that is
subject of the application shall be required to --
(i) submit or cite data pertaining to such purchased product; or
(ii) offer to pay reasonable compensation otherwise required by
paragraph (l)(D) of this subsection for the use of any such data.
40 CFR 152.85 reads as follows:
(a) FIFRA section 3(c)(2)(D) excuses an applicant from the
requirement to submit or cite data pertaining to the safety of any
ingredient (or mixture of ingredients) contained in his product that
is derived solely from one or more EPA-registered products which the
applicant purchases from another producer.
(b) If the product contains one or more ingredients eligible for
the formulators' exemption, the applicant need not comply with the
requirements of Secs. 152.90 through 152.96 with respect to any data
requirements pertaining to the safety of any such ingredient,
provided that he submits to the Agency a certification statement
containing the following information . . .
(1) Identification of the applicant, and of the product by EPA
registration number or file symbol;
(2) Identification of each ingredient in the pesticide that is
eligible for the formulators' exemption, and the EPA registration
number of the product that is the source of that ingredient;
(3) A statement that the listed ingredients meet the
requirements for the formulators' exemption;
(4) A statement that the applicant has submitted (either
previously or with the current application) a complete, accurate and
current Statement of Formula; and
(5) The name, title and signature of the applicant or his
authorized representative and the date of signature.
(c) An applicant for amended registration is not required to
submit a new formulators' exemption statement, if the current
statement in Agency files is complete and accurate.
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In the case of certifying eligibility for the formulators'
exemption, good faith on the part of applicants is critical. When an
applicant certifies that it will formulate its product using a
registered pesticide as the active ingredient, it is excused from
the requirement of submitting data pertaining to the safety of that
ingredient. See id. Instead, the Agency bases its risk analysis of
that ingredient on the data received from the registrant of the
original product. If the applicant does not then use the registered
product cited, the risk assessment performed by the Agency, and any
safety finding premised upon it, are unreliable--they may not
reflect the nature or contents of the new product. Thus the Agency's
ability to carry out its mandate of protecting human health and the
environment is undermined.
Regulatory History
Termilind cited Amvac Chemical Corp. of Los Angeles California
as the source of the technical NAA active ingredient in
[[Page 61891]]
applications for two end use NAA registrations submitted to EPA in
September 1995. Termilind also certified to EPA that it was eligible
for the formulators' exemption. On the basis of that information,
EPA granted the two registrations in March of 1996.
In July 1996, EPA Region X issued a Stop Sale, Use, or Removal
Order (SSURO) prohibiting the sale or distribution of Termilind's
two end use NAA products. Records obtained by EPA from an Oregon
Department of Agriculture investigation revealed that technical NAA
product had been shipped from Seoul, South Korea by Inchema Company,
to Oregon California Chemicals Inc. (Or-Cal), a contractor for
Termilind. EPA issued the SSURO on the grounds that the Agency
believed that ``the supplier of [NAA] for the [end use products] is
different than what was listed in [Termilind's] confidential
statement of formula [CSF] for these products'' in violation of
FIFRA section 12(a)(1)(C) (unlawful to distribute or sell pesticide
composition of which differs at time of distribution from
composition described in CSF). 7 U.S.C. 136j(a)(1)(C). The order
remained in effect until September 23rd, when Termilind amended the
CSFs of the two products to reflect the use of its own technical
NAA, which was registered by EPA that same month. This matter was
followed up with a Warning Letter, mailed to Termilind on December
16, 1996, in which Region X confirmed the Agency's conclusion that a
violation of FIFRA section 12(a)(1)(C) had occurred. Id.
On August 2, 1996, Amvac submitted its first petition for
revocation, which concerned the two Termilind end use registrations.
In the petition, Amvac claimed that the registrations were issued
based on ``false certifications to EPA. . . that Termilind's two
products would be formulated from Amvac's EPA-registered technical
naphthalene acetic acid (NAA) and thus qualify for the formulators'
exemption.'' Amvac stated that it was the only source of registered
technical NAA, and that although Termilind cited Amvac as its source
of technical NAA in the registration materials submitted for two end
use products, neither Amvac nor any of its distributors had sold any
technical NAA to Termilind. Amvac claimed, as well, that neither it
nor its distributors had discussed sales of technical NAA with
Termilind.
In early October, shortly after the SSURO was lifted, Amvac
submitted a second petition for revocation, this one concerning the
registration of Termilind's technical NAA product. In that petition
Amvac asserted that ``Termilind willfully misappropriated
confidential business information (CBI) to obtain the Technical
Registration,'' and requested that the registration be revoked on
that basis.
Amvac asserts that in 1994 it entered into an arrangement with
Shin Young C-Tech Co., Ltd. (C-Tech), a South Korean company, and
its U.S. agent, Inchema, Inc., whereby C-Tech/Inchema would
manufacture technical NAA for Amvac. In its second petition, Amvac
stated that it supplied CBI to C-Tech/Inchema for the purposes of
carrying out this business arrangement. The CBI was allegedly the
subject of a confidentiality agreement, pursuant to which C-Tech/
Inchema was forbidden to disclose it to third parties for any
purpose. It is this CBI which Amvac claims Termilind
``misappropriated'' and submitted to EPA in support of a technical
NAA registration.
Amvac failed to serve copies of either petition on Termilind,
arguing in each that the willful nature of Termilind's conduct
warranted summary revocation, without prior notice or an opportunity
to be heard. Amvac cited section 558 of the Administrative
Procedures Act (APA) as authority for this proposition.2
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2 Section 558(c) of the APA reads in pertinent part:
Except in cases of willfulness or those in which public health,
interest or safety requires otherwise, the withdrawal, suspension,
revocation, or annulment of a license is lawful only if, before the
institution of agency proceedings therefor, the licensee has been
given--
(1) notice by the agency in writing of the facts or conduct
which may warrant the action; and
(2) opportunity to demonstrate or achieve compliance with all
lawful requirements.
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EPA forwarded copies of the two petitions to Robert Fisher,
Termilind's regulatory agent. A copy of the first petition was
mailed to Mr. Fisher on September 5, 1996; a copy of the second was
sent on November 25. Termilind did not respond to either petition.
On December 6, EPA formally invited Termilind to respond to the
allegations contained in the two petitions and set a deadline of
December 20 for receipt of a response.
After receiving and reviewing Termilind's response, EPA
determined that further development of both legal and factual issues
was warranted prior to issuing a decision. EPA sent an identical set
of questions to each party and, again, invited them to respond. Via
the same letter EPA established a series of procedures to govern
communications between Agency personnel and representatives of Amvac
or Termilind concerning the merits of the ongoing dispute.
In addition to petitioning EPA to revoke Termilind's
registrations, Amvac has also initiated legal proceedings against
Termilind in the United States District Court for the District of
Oregon, seeking, among other things, a preliminary injunction to
enjoin Termilind from maintaining any registrations for products
containing NAA, and to prohibit Termilind from selling, marketing or
distributing any product containing NAA. By order dated January 17,
1997, Amvac's motion was denied. The issue of whether Termilind
misappropriated CBI owned by Amvac and submitted such in support of
its technical NAA registration is still before the District Court.
Based on the materials submitted by both parties in response to
the questions posed by the Agency, EPA makes the following findings
of fact:
Findings of Fact
(1) Respondent Termilind Ltd. is a person and a registrant as
defined by FIFRA. (7 U.S.C. 136(s), (y))
(2) Petitioner Amvac Chemical Corp. is a person and a registrant
as defined by FIFRA. (7 U.S.C. 136(s), (y))
(3) Jerry Fitzsimmons is the president of Termilind, Ltd.
(Affidavit of Jerry Fitzsimmons, November 6, 1996, at 1)
(4) J. R. Fisher is the principal of Fisher and Associates, a
regulatory agent providing services to companies seeking
registration of products with EPA. (Affidavit of J. R. Fisher,
November 6, 1996, at 1)
(5) J. R. Fisher has been a regulatory agent providing services
to companies seeking registration of products with the EPA since
1981. (Affidavit of J. R. Fisher, December 31, 1996, at 2)
(6) J. R. Fisher prepared and submitted the application
materials for Termilind's end use registrations. (Affidavit of J. R.
Fisher, December 31, 1996, at 4)
(7) Shin Young C-Tech Co., Ltd. (C-Tech) is a South Korean
company. (Affidavit of Eric Wintemute at 4)
(8) Inchema, Inc. is the United States Agent for C-Tech.
(Affidavit of Eric Wintemute at 5)
(9) In or about July 1995, J. R. Fisher and Jerry Fitzsimmons
met with Hans Wessel and Steve Shim of Inchema regarding the
purchase of technical NAA. (Affidavit of J. R. Fisher, December 31,
1996, at 2)
(10) Inchema had manufactured technical NAA for Amvac.
(Affidavit of Eric Wintemute at 5)
(11) Amvac rejected the last batch of NAA produced by Inchema/C
Tech. (Affidavit of J. R. Fisher, November 6, 1996, at 2)
(12) Termilind was aware that the technical NAA it purchased
from Inchema/C-Tech had been rejected by Amvac. (Affidavit of J. R.
Fisher, November 6, 1996, at 2)
(13) Termilind cited Amvac Chemical Corp. of Los Angeles
California as the source of the technical NAA active ingredient in
its applications for two end use NAA registrations, submitted to EPA
in September 1995. (Affidavit of J. R. Fisher, November 6, 1996, at
2; Warning Letter issued to Termilind Ltd. by EPA Region 10,
December 16, 1996) These registrations were granted in March of
1996. (Alphaspra 800, EPA Registration No. 67223-1 granted March 15,
1996; Alphaspra 200, EPA Registration No. 67223-2 granted March 26,
1996)
(14) Termilind certified that it was eligible for the
formulators' exemption, 7 U.S.C. 136a(c)(2)(D); 40 CFR 152.85.
(Formulators' exemption statement submitted by Termilind)
(15) Termilind cited Amvac's product labels and material safety
data sheet in applications for end use NAA registrations submitted
to EPA in September 1995. (Affidavit of J. R. Fisher, December 31,
1996, at 3)
(16) Termilind had Inchema/C-Tech formulate unregistered
technical NAA into end use product for import into the United
States. These products bore Termilind's EPA registration number for
the end use NAA product Alphaspra 800. (Affidavit of J. R. Fisher,
November 6, 1996, at 2; affidavit of J. R. Fisher, December 31,
1996, at 4)
(17) Termilind did not obtain samples of, or perform any tests
upon, the technical NAA product used to formulate the Alphaspra 800.
(Affidavit of J. R. Fisher, December 31, 1996, at 3).
(18) Under 19 CFR 12.112, ``an importer desiring to import
pesticide or devices into
[[Page 61892]]
the United States shall submit to the Administrator a Notice of
Arrival of Pesticides and Devices . . . prior to the arrival of the
shipment in the United States.'' (emphasis added). Termilind did not
submit the required Notice of Arrival of Pesticides and Devices
until 3 months after the shipment of NAA product had arrived in the
United States from Korea. The Notice was filed only after EPA Region
X discovered NAA product shipped from Korea in the possession of Or-
Cal, a Termilind licensee. (Notice of Arrival submitted July 13,
1996)
(19) Termilind sold pesticide products formulated with
unregistered Inchema/C-Tech NAA in the United States. (Stop Sale,
Use, Or Removal Order issued to Termilind Ltd. by EPA Region 10,
July 3, 1996; Warning Letter issued to Termilind Ltd. By EPA Region
10, December 16, 1996)
(20) Termilind never purchased or attempted to purchase Amvac's
registered technical NAA from Amvac or any of its distributors.
(Petition for revocation submitted to EPA by Amvac October 9, 1996
at 4)
Decision
I.
In its second petition, dated October 9, 1996, Amvac claims that
Termilind's technical registration was obtained through the
submission of data ``stolen'' or ``misappropriated'' from Amvac. On
that basis, Amvac asserts that the Agency must revoke the technical
registration. We deny this petition on jurisdictional grounds.
EPA does not have the powers of a court of general jurisdiction.
Beyond the limited realm of data compensation, see 7 U.S.C.
136a(c)(1)(F); 40 CFR 152.99, the Agency has neither the expertise
nor the authority to adjudicate conflicts regarding ownership of
intellectual property. As noted above, this very matter is currently
before the Federal District Court for the District of Oregon. A
court of general jurisdiction is a more appropriate forum for the
resolution of disputes of this nature. Accordingly, Amvac's second
petition, seeking revocation of Termilind's technical registration,
is denied.
II.
Amvac also seeks immediate revocation of Termilind's two end use
registrations, claiming that they were obtained through willful
misrepresentation of the source of the technical NAA used as the
active ingredient in the products. But for the misrepresentation,
Amvac contends, the registrations would not have been granted; thus
they are void ab initio. Amvac also asserts that in light of
Termilind's willful behavior, the Agency has inherent power to
revoke these registrations without resort to section 6 of FIFRA. We
agree.
As an initial matter, we must first address whether Termilind's
conduct was willful. Willful misconduct had been defined as ``an
intentional misdeed or such gross neglect of a known duty as to be
the equivalent thereof.'' Hutto Stockyard, Inc. v. USDA, 903 F.2d
299, 304 (4th Cir. 1990 (quoting Capitol Packing Co. v. United
States, 350 F.2d 67, 78-79 (10th Cir. 1965)); see also Capital
Produce Co. v. United States, 930 F.2d 1077, 1079 (4th Cir. 1991).
Termilind has not claimed that the material it purchased bore an
Amvac EPA approved label identifying it as a registered product.
Termilind did not purchase the material from Amvac or an Amvac
distributor. Moreover, Termilind conceded that it was aware that the
material had been rejected by Amvac. Nevertheless, Termilind
identified Amvac's registered technical NAA as its source of active
ingredient. Furthermore, Termilind certified that it was eligible
for the formulators' exemption. This behavior constitutes willful
misrepresentation.
Termilind cannot plausibly claim that its conduct was innocent.
Its regulatory agent, J. R. Fisher, had 15 years experience in
providing services to clients seeking registration of products with
the EPA; he cannot credibly argue ignorance of the law in
Termilind's defense. Moreover, common sense dictates that material
purchased from a party other than the registrant or its
distributors, that is known to have been rejected by the registrant,
is not that registrant's registered material. Termilind does not
claim that the material it purchased bore Amvac's label or EPA
registration number. Under no view of the facts was it reasonable
for Termilind to represent the product purchased from Inchema/C-Tech
as Amvac registered material. Nevertheless, Termilind cited Amvac's
product labels and material safety data sheet in its applications
for end use registrations. This conduct was consistent with an
intent to deceive the Agency about the origin of its technical
material, as was Termilind's failure to submit a timely Notice of
Arrival of Pesticides and Devices when the NAA material arrived from
Korea. If the Notice had been filed in a timely fashion it might
have drawn attention to the fact that Termilind, though citing Amvac
Chemical Corp. of Los Angeles, California as its source of
registered technical material, was receiving shipments of NAA
product from Korea. We conclude that Termilind's misrepresentation
was willful.3
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3As the above definition notes, ``wi1ful'' behavior
encompasses conduct that is grossly negligent as well as conduct
that is intentional. Thus, even if Termilind did not act with intent
to deceive the Agency, but was merely grossly neglectful of its
statutory duties, the outcome would be the same.
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We next address the Agency's authority to revoke a registration
summarily, without resort to section 6 of FIFRA, where the
registration was procured through willful misrepresentation.4
As a general rule, it is well accepted that ``every tribunal,
judicial or administrative, has some power to correct its own errors
or otherwise appropriately to modify its judgement, decree or
error.'' Alberta Gas Chemicals, Ltd. v. Celanese Corp., 650 F.2d 9,
13 (2d Cir. 1981) (quoting K. Davis, Administrative Law Treatise
section 18.09 at 606 (1958); Bookman v. United States, 453 F.2d
1263, 1265 (Ct. Cl. 1972) (same); see also Trujillo v. General
Electric Co., 621 F.2d 1084, 1086 (10th Cir 1980) (Administrative
agencies have inherent authority to reconsider their decisions since
power to decide carries with it power to reconsider) (quoting
Albertson v. Federal Communications Comm'n., 182 F.2d 397, 399 (D.C.
Cir. 1950)). Moreover, the Supreme Court and other courts have
recognized that administrative agencies have implied authority to
reconsider and correct errors, even where the applicable statue and
regulations do not explicitly grant such powers. Gun South Inc. v.
Brady, 877 F.2d 858, 862 (11th Cir. 1989) (listing cases). Courts
have relied on this implied power in holding that agencies have the
authority to revoke licenses improperly granted. See, e.g. Kudla v.
Mode, 537 F.Supp 87, 89-90 (E.D. Mich. 1982) (improperly granted
license revoked where licensee had failed to pass qualifying
examination; procedural protections afforded by statute do not
attach unless requirements for obtaining license have been met).
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4Petitioner claims pursuant to section 558(c) of the
Administrative Procedure Act that in light of Termilind's willful
misrepresentation, the Agency can revoke the registrations summarily
without providing notice or opportunity for comment. As this
decision documents, the Agency has given Termilind an opportunity to
respond to Petitioner's allegations and to submit supplemental
briefing. Thus, the Agency has given Termilind more process than
section 558(c) requires.
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More specifically, courts have recognized that agencies have the
inherent authority to correct errors and reverse judgements induced
by fraud or misrepresentation. Alberta Gas, 650 F.2d at 13 (``It is
a well established principle that an administrative agency may
reconsider its own decisions'. . . . It is hard to imagine a clearer
case for exercising this inherent power than when a fraud has been
perpetrated on the tribunal in its initial proceeding'') (citations
omitted); see also Hand v. Matchett, 957 F.2d 791, 794 (10th Cir.
1992) (self evident that university has inherent authority to revoke
improperly awarded degree where fraud shown); Colonial Penn
Insurance Co. v. Coil, 887 F.2d 1236, 1240 (revoking insurance
settlement procured through fraud); In Re Berman, 97 S.E. 2d 232,
235 (N.C. 1957) (board has inherent power, independent of statutory
authority, to revoke license improperly issued due to fraud or
misrepresentation); Schireson v. Shafer, 47 A.2d 665, 667 (Pa 1946)
(where license was procured by fraud licensing authority may revoke
it regardless of fact that fraud is not specified as ground for
revocation in statute); cf Hazel-Atlas Glass Co. V. Hartford-Empire
Co., 322 U.S. 238, 246 (1943) (reversing judgment in patent
infringement suit where both Patent Office and Court of Appeals were
influenced by fraudulent misrepresentations --``Public welfare
demands that the agencies of public justice be not so impotent that
they must always be mute and helpless victims of deception and
fraud.'') (overruled on other grounds). In the instant case, this
rule supports the proposition that EPA has inherent authority to
revoke Termilind's end use registrations. Indeed, courts have
recognized that administrative agencies, as guardians of the public
interest, have a duty to make corrections where they have relied on
erroneous information. Green County Planning Bd. v. Fed. Power
Comm'n, 559 F.2d 1227, 1233 (2d Cir. 1976; Hudson River Fishermen's
Ass'n v Federal Power Comm'n, 498 F.2d 827, 833 (1974); Borlem S.A.
Empreedimentos Indutriais v. U.S, 718 F. Supp 41, 47 (CIT 1989).
[[Page 61893]]
Termilind claims that revocation is the equivalent of
cancellation and can only be accomplished through section 6 of
FIFRA. In essence, Termilind asserts that a registrant that has
submitted false or misleading application materials, and thereby
induced the Agency to grant a registration erroneously, has the same
interest in the wrongly obtained registration, and is entitled to
the same procedural protections, as a registrant that acted in good
faith to meet the requirements for registration. We find it
implausible that Congress intended applicants who obtained
registrations through fraud to receive the procedural protections of
section 6.
Likewise, we find Termilind's argument that the Agency does not
have the authority to revoke registrations obtained through fraud or
misrepresentation, because FIFRA does not specifically describe such
a procedure, equally unpersuasive. As the legal analysis above
establishes, Agencies have inherent authority to redress fraud or
misrepresentation. See also Chevron U.S.A. v. Natural Resources
Defense Council, 467 U.S. 837, 843. 844 (1984) (``Sometimes the
legislative delegation to an agency on a particular question is
implicit rather than explicit. In such a case, a court may not
substitute its own construction of a statutory provision for a
reasonable interpretation made by the administrator of an
agency.''). Moreover, this conclusion is consistent with the
Agency's statutory duty under FIFRA to protect man and the
environment from the unreasonable adverse effects of pesticide use.
As noted above, Congress established a scheme in FIFRA that requires
registrants to supply the data necessary to establish and maintain
FIFRA registrations. The Agency, therefore, must be able to rely on
applicants to act with goodwill and integrity in submitting the
required data. In order to protect the integrity of the FIFRA
process and the safety of pesticide users and the public, the Agency
must have a swift and sure method of responding when the submission
of fraudulent or misleading application materials is discovered. If
unscrupulous applicants receive the same procedural protections as
honest ones, there is little incentive to be honest. Instead, the
dishonest applicants who obtain speedy registration through fraud or
misrepresentation are rewarded for their deception. Such an
interpretation of FIFRA is contrary to the EPA's mandate to protect
public health and the environment.
We wish to emphasize that the quality of the evidence available
to the Agency in this case was critical to the outcome. Sworn
statements of the parties were included in the record, and based on
these, the Agency was able to make the factual findings necessary to
underpin a revocation action with confidence. The Agency is very
unlikely to take similar actions in future cases unless allegations
of misrepresentation are supported by reliable and persuasive
evidence.
III.
As noted above, Amvac's petition to revoke Termilind's technical
registration is denied on the basis that, beyond its role in
resolving data compensation disputes, the Agency has neither the
expertise nor the jurisdictional competence to adjudicate
complicated issues regarding ownership of intellectual property
rights. Nevertheless, the Agency does intend to go forward with a
Notice of Intent to Cancel Termilind's technical registration, but
on alternative grounds.
Although there is no explicit fitness criterion among the
requirements for obtaining or holding a registration under FIFRA, as
a general matter, determining the ``fitness'' of an applicant to
hold a license or registration is recognized as a legitimate end of
licensing schemes. See Payne v. Fontenot, 925 F. Supp. 414, 423 (M.
D. La. 1995) (licensing body may require certain standards of
applicant; qualifications to hold license must have rational
connection to applicant's fitness). Furthermore, prior to granting a
registration, the Agency is required to determine that a pesticide
will not ``generally cause unreasonable adverse effects on the
environment'' when used in accordance with widespread and commonly
recognized practice. 7 U.S.C. 136a(c)(5). As a practical matter, in
making such a determination the Agency must rely on data and
certified statements submitted by the registrant. The Agency's
ability to make an accurate finding is therefore directly related to
the reliability of the material submitted. If the Agency knows that
a registrant has a history of willful misrepresentation, the
reliability of the materials submitted by that applicant is subject
to question. The Agency's ability to make an accurate finding that
the statutory standard for registration has been met is undermined
under such circumstances. A ``fitness'' or ``reliability'' criterion
can therefore properly be implied as a component of the
``unreasonable adverse effects'' standard. Cf. Cooley v. Fed. Energy
Regulatory Comm'n, 843 F.2d 1464, 1471 (D.C. Cir. 1988) (``Nothing
in [Federal Power Act] explicitly requires a finding of fitness.''
Commission is charged with considering all relevant public interest
factors; fitness of licensee-applicant is public interest factor);
see also Delaware River Development Corp., 10 F.P.C. 540, 550 (1951)
(``ethical and moral fitness'' considered in public interest
determination to grant permit); see generally Chevron U.S.A. v.
Natural Resources Defense Council, 467 U.S. 837, 843. 844 (1984)
(``Sometimes the legislative delegation to an agency on a particular
question is implicit rather than explicit. In such a case, a court
may not substitute its own construction of a statutory provision for
a reasonable interpretation made by the administrator of an
agency.'').
Denial of a license on fitness grounds is not uncommon. See,
e.g. RKO General, Inc., v. Fed. Communication Comm'n, 670 F.2d 215,
232 (D.C. Cir. 1981) (F.C.C. did not abuse its discretion in denying
license renewal for lack of candor; ``[T]he Commission must rely
heavily on the completeness and accuracy of the submissions made to
it, and its applicants, in turn have an affirmative duty to inform
the Commission of the facts it needs in order to fulfill its
statutory mandate.''); see also ALRA Laboratories, Inc., v. Drug
Enforcement Agency, 54 F.3d 450, 452 (7th. Cir 1995) (DEA did not
abuse its discretion when it denied application for new license to
manufacturer and distributor of controlled substances where
manufacturer had not complied with recordkeeping requirements, had
shipped contaminated products, had his inventory seized and was
closed for 6 months, and was under indictment); Dep't Transp. Fed.
Highway Admin. v. Interstate Commerce Comm'n, 733 F.2d 105, 113
(D.C. Cir. 1984) (I.C.C.'s order granting certificate vacated where
evidence inadequate to establish applicant's fitness). The licensing
body is in the best position to make determinations regarding
applicant fitness, and its decisions are entitled to deference.
Ramanchar v. Sobol, 838 F. Supp. 100, 108 (S.D.N.Y. 1993) (licensing
authority entitled to deference in assessing risks posed by
licensee). Furthermore, when making licensing decisions ``an Agency
rationally may conclude that past performance is the best predictor
of future performance.'' ALRA, 54 F.3d at 452; Matsun Gyogyo Co., 2
O.R.W. 349 (NOAA 1980) (past violations should be significant factor
in determining whether to issue new permit); see also Dep't Transp.
Fed. Highway Admin., 733 F.2d at 112 (statements of good intentions
in future of limited value in assessing what applicant's future
conduct will be).
FIFRA itself does not limit the criteria that the Agency may
consider in making a safety calculus. Instead, as described above,
the statute dictates that the Agency must affirmatively find that a
product will not cause unreasonable adverse effects before a
registration may be granted. Common sense dictates that the Agency
must be permitted to consider all relevant criteria when performing
its analysis. As the discussion above illustrates, the integrity or
reliability of a registrant is highly germane to the Agency's
ability to make an accurate finding; if the Agency has reason to
suspect that materials submitted by a registrant are untrustworthy,
an affirmative safety finding cannot be made.
In this case the Agency has determined that Termilind has
submitted misleading materials in support of its applications for
registration. The Agency is therefore unable to rely on the veracity
of unsubstantiated materials submitted by Termilind. Under these
circumstances the Agency cannot affirmatively find that Termilind's
technical product will not generally cause unreasonable adverse
effects on the environment. Accordingly, it is the Agency's
intention to undertake a section 6 cancellation of Termilind's
technical NAA product in separate proceedings.
Order
For the reasons discussed above, EPA hereby revokes Termilind's
registrations for Alphaspra 200 (EPA Registration No. 67233-2) and
Alphaspra 800 (EPA Registration No. 67223-1). Existing stocks of
these products must be used in a manner consistent with label
directions.
Dated: August 6, 1997
/s/ Lynn R. Goldman
Assistant Administrator for Prevention, Pesticides and Toxic
Substances
II. Existing Stocks Determination
On August 6, 1997, in response to a petition filed by Amvac
Chemical
[[Page 61894]]
Corporation (``Amvac''), EPA revoked the registrations issued to
Termilind Limited (``Termilind'') for Alphaspra 200 (EPA Registration
No. 67223-2) and Alphaspra 800 (EPA Registration No. 67223-1) after
determining that Termilind had intentionally or willfully misidentified
in its application materials the source material from which it intended
to formulate the two products. In the Order attached to the Revocation
Determination, the Agency allowed use of existing stocks of the revoked
registrations, provided that such use is consistent with existing label
directions. The Order was silent on the question of whether existing
stocks could be sold or distributed.
EPA subsequently issued three clarifications addressing the
existing stocks issue. On August 18, 1997, the Acting Associate General
Counsel for Pesticides and Toxic Substances (Kevin Lee) explained in a
letter to counsel for Amvac that inasmuch as the Order resulted in the
termination of the registration of the products and did not authorize
any sale or distribution of the products, such further sale or use was
unlawful under section 3(a) of FIFRA (which generally prohibits the
sale and distribution of unregistered pesticides). On August 20, 1997,
the Agency issued a clarification to the Order which specifically
provided that ``no person may sell or distribute stocks of Alphaspra
200 and Alphaspra 800.'' This clarification was followed by a second
clarification issued on August 22, 1997, which stated that the
revocations ``shall be effective for dealers and distributors upon
publication in the Federal Register.'' Under the terms of this last
clarification, the Agency would not consider sale or distribution of
existing stocks by dealers and distributors to be unlawful until the
Revocation Determination was published in the Federal Register.
On August 18, 1997, Termilind filed a request for Reconsideration
and Stay of the Revocation Order. As part of that request, Termilind
asserted that EPA should permit sale and distribution of existing
stocks of the revoked products in a manner consistent with EPA's
Statement of Policy related to existing stocks issued in the Federal
Register of June 26, 1991 (56 FR 29362). Amvac filed a brief response
to Termilind's request on August 26, 1997, arguing, without responding
to any of the specific assertions made by Termilind, that
reconsideration would not be appropriate.
On August 29, 1997, EPA indicated in a letter to counsel for Amvac
and Termilind that the Agency intended to carefully consider and
resolve finally the existing stocks issues raised by the Revocation
Order. This Determination reflects the Agency's resolution of these
existing stocks issues.
A. Legal Authority
Under section 6(a)(1) of FIFRA, the Administrator may permit the
continued sale and use of existing stocks of a pesticide whose
registration is suspended or canceled under section 3, 4, or 6 of
FIFRA, to such extent, under such conditions, and for such uses as the
Administrator determines is not inconsistent with the purposes of
FIFRA. As noted above, EPA issued a Policy Statement in 1991 outlining
the policies that would generally be followed in making such existing
stocks determinations. The legal issue presented is whether section
6(a)(1) and the Policy Statement apply to the situation addressed in
the Revocation Determination.
The Agency concluded in its Revocation Determination that it has
the inherent authority to correct an erroneous registration decision
induced by fraud or willful misrepresentation, and that such authority
is inherent in the authority to issue registrations in the first place.
The Agency's authority to issue pesticide registrations stems from
section 3 of FIFRA. It thus seems to follow that the inherent authority
to revoke a registration induced by fraud or misconduct also stems from
section 3 of FIFRA. The question then becomes: Is the revocation a
``cancellation under section 3'' for purposes of section 6(a)(1) of
FIFRA?
The Agency has concluded that there is no meaningful distinction
between a revocation and a cancellation, and that the revocation of
Termilind's registration was a cancellation under section 3 giving the
Agency authority over the sale and use of existing stocks. Whether the
action is called a revocation or cancellation, the defining element of
the action is the termination of a license (or in this case, pesticide
registration) previously issued by the Agency. Cancellation is the term
used in FIFRA for the termination of a registration; the word
``revocation'' does not appear in the statute in this context.
Moreover, in this particular case, the license issued by the Agency
does not just confer something of value to the licensee (registrant); a
pesticide registration allows a pesticide product to enter the stream
of commerce where the interests of third parties come into play. When a
pesticide registration terminates, for whatever reason, the termination
can have immediate consequences for all these third parties. Unless the
Agency has determined otherwise under section 6(a)(1) or has issued a
regulation under section 3(a) of FIFRA, existing stocks of an
unregistered pesticide may be used by any person with impunity, without
regard to any conditions that would have applied to the use while the
product was still registered.5 Sale and distribution of an
unregistered pesticide, on the other hand, is unlawful under FIFRA
unless the Agency allows such sale or distribution pursuant to section
6(a)(1). Such a prohibition on sale or distribution would also apply to
commercial ``for-hire'' applications of the unregistered product.6
A determination that a revocation is not a cancellation under section 3
would leave the Agency essentially powerless to effectively condition
the use of existing stocks (even if such conditions were necessary to
prevent unreasonable adverse effects on the environment), and would
also leave the Agency powerless to authorize the sale of existing
stocks, even by third parties who had no involvement in the activities
giving rise to the revocation and even where there are no health,
safety, or environmental reasons to disallow continued sales and where
a revocation may trigger the otherwise unnecessary disposal of existing
stocks of the revoked product. The Agency is declining to interpret
FIFRA in a manner that would suggest that Congress intended to give the
Agency the authority to terminate registrations without giving the
Agency authority to deal with the existing stocks consequences of such
terminations. The Agency concludes that a revocation of a registration
based upon misconduct in the inception of the registration is a
cancellation under FIFRA section 3, and provides the Agency authority
under section 6(a)(1) to regulate the sale, distribution, and use of
existing stocks of a revoked product.
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5 Such use need not be consistent with the terms of the
previously-approved labeling of the product. Section 12(a)(2)(G)
makes it a violation of FIFRA to use any registered pesticide in a
manner inconsistent with its labeling; there is no similar provision
making it unlawful to use an unregistered pesticide in a manner
inconsistent with its labeling.
6 FIFRA section 2(gg) exempts from the definition of sale or
distribution only the commercial application of registered
pesticides.
---------------------------------------------------------------------------
B. Provisions for Existing Stocks
For the reasons stated above, the Agency concludes that it has the
authority under FIFRA section 6(a)(1) to issue an order regulating the
sale, distribution, and use of existing stocks of revoked products.
Under that section, such sale or use may be permitted to the extent,
and under such conditions, as
[[Page 61895]]
will make the sale and use consistent with the purposes of FIFRA.
The Agency set forth in its Policy Statement on existing stocks the
general policies it will apply when making decisions under section
6(a)(1). In particular, the Agency concluded that it will focus on two
issues in making existing stocks determinations: whether the sale or
use of existing stocks may pose unreasonable adverse effects on the
environment, and whether the registrant (or conceivably some other
party) has failed to comply with an obligation of registration. As a
general matter, the Agency concluded in the Policy Statement that
existing stocks determinations where the Agency has significant risk
concerns will be made on a case-by-case basis, with sale and use
generally allowed only if supported by a risk/benefit balancing. In
situations where there are no significant risk concerns, the Policy
would generally allow non-registrants to sell, distribute, and use
existing stocks until such stocks are exhausted (provided that all
existing label directions are met). The sale and distribution of
existing stocks by registrants under the Policy generally hinges upon
whether (and when) the registrant failed to comply with an obligation
of registration. The Policy is silent on whether supplemental
distributors (under 40 CFR 152.132) should be treated like registrants
or like other distributors of pesticide products.7
---------------------------------------------------------------------------
7 It should also be noted that the Policy Statement does
not address the issue of what existing stocks provisions are
appropriate for situations such as the one involving Termilind,
where the Agency concludes that a registration would not have been
issued in the first place in the absence of misconduct by the
applicant for registration.
---------------------------------------------------------------------------
The first issue of concern under the Policy Statement is whether
the Agency has risk concerns with the existing stocks of the revoked
products. This is an issue that has been discussed by both parties in
various papers related to Amvac's Petition. The Agency expressed a
concern in its Revocation Order related to Termilind's technical
registration that the Agency has difficulty finding that a product will
not result in unreasonable adverse effects on the environment if a
registrant makes false statements to the Agency. In such circumstances,
the Agency cannot rely on scientific data submitted by a registrant or
on the registrant's compliance with its obligations under section
6(a)(2) to submit additional adverse effects information to the Agency.
Where the Agency is unable to rely on material submitted by a
registrant, the Agency cannot make the affirmative findings necessary
to a determination that a product will not cause unreasonable adverse
effects on the environment.
This particular concern with Termilind's registrations does not
apply with much, if any, force to the existing stocks issue presented
here. While the source used by Termilind to manufacture its end-use
products was not the source originally identified by Termilind in its
applications, the identity of the source is not in dispute. The papers
filed with the Agency by both sides provide the Agency with ample
confidence that the existing stocks were manufactured with NAA source
material supplied by Inchema. The question then becomes whether the
Agency has confidence that the material supplied by Inchema was NAA of
sufficient quality to allow the Agency to conclude that the existing
stocks of revoked material can be used without causing unreasonable
adverse effects on the environment.
The Agency has concluded, based on a number of factors, that there
is reasonable assurance that the Inchema material is of sufficient
quality to resolve any possible concerns associated with the sale,
distribution, or use of existing stocks. Sampling performed of
Termilind material did not reveal any problems with the product. While
Amvac declined to accept the Inchema NAA provided to Termilind, the
Agency is unaware of any allegations by Amvac that Inchema NAA lacks
sufficient quality to support a registration.8 There has
been no material presented by Amvac to challenge Termilind's assertion
that Amvac's refusal to accept the Inchema NAA was based upon anything
other than a dispute over price. The Agency previously accepted the
quality of Inchema NAA as a source for Termilind's products when it
approved amendments to Termilind's registrations to correctly reflect
the source of NAA used in those products. Based on all these factors,
the Agency has no reason to suspect that the NAA products made by
Termilind differ meaningfully in quality from other NAA products on the
market, and does not believe that sale or use of existing stocks of
such products would result in unreasonable adverse effects on the
environment.9
---------------------------------------------------------------------------
8Indeed, Amvac's allegations that Inchema has
misappropriated Amvac proprietary technology, as well as Amvac's
previous use of Inchema as a source of its own NAA and the absence
of any submittals by Amvac under section 6(a)(2) of FIFRA discussing
quality problems associated with Inchema's production of NAA, seem
to suggest that Amvac has no dispute with the quality of material
produced by Inchema.
9Indeed, the only difference between a risk/benefit balancing
for NAA generally and a balancing for the existing stocks is that a
ban on existing stocks would require that the stocks be disposed of.
Legal or illegal disposal of existing stocks could have financial
and/or environmental consequences that tip the risk/benefit balance
even further towards allowance of the use of existing stocks.
---------------------------------------------------------------------------
The only reason to disapprove the sale, distribution, or use of
existing stock is to punish the misconduct that resulted in the
registration of the products in the first place, and to deter future
such misconduct. As noted earlier, this particular situation was not
addressed in the Policy Statement, and the Agency has concluded that
the Policy Statement does not provide significant guidance on how to
deal with misconduct similar to Termilind's. It is clear that
prohibiting sale, distribution, and/or use of existing stocks may
result in hardships on relatively ``innocent'' third parties. On the
other hand, allowing continued sale, distribution, or use of existing
stocks would be ``unfair'' to registrants of competing registered
products (such as Amvac in this case) that presumably are complying
with the provisions of FIFRA, and would tend to minimize the
repercussions to Termilind in this case and serve as less of a
disincentive for others to include incorrect or false information in
their applications for registration.
After considering carefully these issues, the Agency has determined
that it is appropriate to prohibit all further sale or distribution by
any person of the revoked products, except the application of existing
stocks by for-hire applicators so long as the applicator does not
deliver any unapplied pesticide to the person for whom the application
is performed. The Agency reached this determination based primarily on
the nature of the misconduct in this particular case and its conclusion
that the use by pesticide registrants of source material different than
the source material identified in the statement of formula submitted to
the Agency is a very serious matter. In general, where the Agency
revokes a registration because of misconduct involved in its inception,
the Agency believes it inappropriate to allow the company involved in
the misconduct to derive any benefit from its actions. The only way for
the Agency to maximize the likelihood that Termilind will not profit at
all from its actions is to prohibit all sale and distribution of the
revoked products. In addition, the Agency believes it appropriate to
send the strongest possible message to any company that may be
considering the use of unregistered source material in its production
of registered product notwithstanding the fact that the
[[Page 61896]]
registration is predicated on use of a registered source material. Put
simply, the Agency generally does not intend to allow resale by any
person of pesticide products that were not produced in compliance with
FIFRA.
The Agency does intend to allow continued use of the revoked
products, including use by for-hire applicators, provided that such use
is consistent with the labeling of the products. The Agency does not
believe that a prohibition on further use would be realistically
enforceable in the absence of the devotion of significant resources to
such enforcement, and given the conclusion reached on the likelihood of
no unreasonable adverse effects on the environment, the Agency does not
believe this issue merits the expenditure of such significant
resources. The Agency is also concerned that a prohibition on use could
lead to unnecessary and unsupervised disposal of revoked products by
users.
The Agency recognizes that in data suspension cases under section
3(c)(2)(B) of FIFRA, adversely affected persons have a right to a
hearing on existing stocks issue. While no such right is provided for
revocations such as the one involved here, the Agency believes it
appropriate in this particular case, given the novelty of the issues
and the absence of any guidance for revocations in the existing stocks
Policy Statement, to provide any person adversely affected by this
existing stocks determination with an informal hearing opportunity
before the Agency if such person wishes to seek reconsideration of this
determination. If this opportunity for an informal hearing is pursued,
the Agency will consider all issues raised relevant to the existing
stocks determination. Any person interested in requesting an informal
hearing should submit such a request within 60 days, in writing, to
Robert Perlis, Office of General Counsel (2333), Environmental
Protection Agency, 401 M St., SW., Washington, DC 20460. Requests
should include the nature of the person's objection to the
determination, the nature of the proposed changes to the determination,
and the bases for the objections and changes.
List of Subjects
Environmental protection, Pesticides and pests.
Dated: October 31, 1997.
Lynn R. Goldman,
Assistant Administrator for Prevention, Pesticides and Toxic
Substances.
[FR Doc. 97-30140 Filed 11-18-97; 8:45 am]
BILLING CODE 6560-50-F