[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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    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