[Code of Federal Regulations]
[Title 40, Volume 17]
[Revised as of July 1, 2008]
From the U.S. Government Printing Office via GPO Access
[CITE: 40CFR82.9]

[Page 468-472]
 
                   TITLE 40--PROTECTION OF ENVIRONMENT
 
         CHAPTER I--ENVIRONMENTAL PROTECTION AGENCY (CONTINUED)
 
PART 82_PROTECTION OF STRATOSPHERIC OZONE--Table of Contents
 
              Subpart A_Production and Consumption Controls
 
Sec. 82.9  Availability of production allowances in addition to
baseline production allowances for class I controlled substances.

    (a) Every person apportioned baseline production allowances for 
class I controlled substances under Sec. 82.5 (a) through (f) of this 
subpart is also granted Article 5 allowances equal to:
    (1) 10 percent of their baseline production allowances listed for 
class I, Group I, Group III, Group IV, and Group V controlled substances 
listed under Sec. 82.5 of this subpart for each control period ending 
before January 1, 1996;
    (2) 15 percent of their baseline production allowances for class I, 
Group VI controlled substances listed under Sec. 82.5 of this subpart 
for each control period ending before January 1, 2005;
    (3) 15 percent of their baseline production allowances for class I, 
Group II controlled substances listed under Sec. 82.5 of this subpart 
for each control period beginning January 1, 1994, until January 1, 
2003;
    (4) 15 percent of their baseline production allowances for Class I, 
Group IV and Group V controlled substances listed under Sec. 82.5 of 
this subpart for each control period beginning January 1, 1996 until 
January 1, 2010;
    (b) Effective January 1, 1995, a person allocated Article 5 
allowances may produce class I controlled substances for export to 
Article 5 countries as under Sec. 82.11 and transfer Article 5 
allowances as under Sec. 82.12.
    (c) A company may increase or decrease its production allowances, 
its Article 5 allowances by trading with another Party to the Protocol 
according to the provision under this paragraph (c). A company may 
increase or decrease its essential-use allowances for CFCs for use in 
essential MDIs according to the provisions under this paragraph (c). A 
nation listed in appendix C to this subpart (Parties to the Montreal 
Protocol) must agree either to transfer to the person for the current 
control period some amount of production or import that the nation is 
permitted under the Montreal Protocol or to receive from the person for 
the current control period some amount of production or import that the 
person is permitted under this subpart. If the controlled substance is 
produced under the authority of production allowances and is to be 
returned to the Party from whom production allowances are received, the 
request for production allowances shall also be considered a request for 
consumption allowances under Sec. 82.10(c). If the controlled substance 
is produced under the authority of production allowances and is to be 
sold in the United States or to another Party (not the Party from whom 
the allowances are received), the U.S. company must expend its 
consumption allowances allocated under Sec. 82.6 and Sec. 82.7 in 
order to produce with the additional production allowances.
    (1) For trades from a Party, the person must obtain from the 
principal diplomatic representative in that nation's embassy in the 
United States a signed document stating that the appropriate authority 
within that nation has established or revised production limits or 
essential-use allowance limits for the nation to equal the lesser of the 
maximum production that the nation is allowed under the Protocol minus 
the amount transferred, the maximum production or essential-use 
allowances that are allowed under the nation's applicable domestic law 
minus the amount transferred, or the average of the nation's actual 
national production level for the three years prior to the transfer 
minus the production transferred. The person must submit to the 
Administrator a transfer request that includes a true copy of this 
document and that sets forth the following:
    (i) The identity and address of the person;
    (ii) The identity of the Party;
    (iii) The names and telephone numbers of contact persons for the 
person and for the Party;
    (iv) The chemical type, type of allowance being transferred, and the 
level of allowances being transferred;
    (v) The control period(s) to which the transfer applies; and

[[Page 469]]

    (vi) For increased production intended for export to the Party from 
whom the allowances would be received, a signed statement of intent to 
export to the Party.
    (vii) In the case of transferring essential-use allowances, the 
transferor must include a signed document from the transferee 
identifying the CFC MDI products that will be produced using the 
essential-use allowances.
    (2) For trades to a Party, a person must submit a transfer request 
that sets forth the following:
    (i) The identity and address of the person;
    (ii) The identity of the Party;
    (iii) The names and telephone numbers of contact persons for the 
person and for the Party;
    (iv) The chemical type, type of allowance being transferred, and the 
level of allowances being transferred; and
    (v) The control period(s) to which the transfer applies.
    (3) After receiving a transfer request that meets the requirements 
of paragraph (c)(2) of this section, the Administrator may, at his 
discretion, consider the following factors in deciding whether to 
approve such a transfer:
    (i) Possible creation of economic hardship;
    (ii) Possible effects on trade;
    (iii) Potential environmental implications; and
    (iv) The total amount of unexpended production or essential-use 
allowances held by a U.S. entity.
    (v) In the case of transfer of essential-use allowances the 
Administrator may consider whether the CFCs will be used for production 
of essential MDIs.
    (4) The Administrator will issue the person a notice either granting 
or deducting production allowances, Article 5 allowances, or essential-
use allowances, and specifying the control period to which the transfer 
applies, provided that the request meets the requirement of paragraph 
(c)(1) of this sections for trades from Parties and paragraph (c)(2) of 
this section for trades to Parties, unless the Administrator has decided 
to disapprove the trade under paragraph (c)(3) of this section. For a 
trade from a Party, the Administrator will issue a notice that revises 
the allowances held by the person to equal the unexpended production, 
Article 5, or essential-use allowances held by the person under this 
subpart plus the level of allowable production transferred from the 
Party. For a trade to a Party, the Administrator will issue a notice 
that revises the production limit for the person to equal the lesser of:
    (i) The unexpended production allowances, essential-use allowances, 
or Article 5 allowances held by the person under this subpart minus the 
amount transferred; or
    (ii) The unexpended production allowances, essential-use allowances, 
or Article 5 allowances held by the person under this subpart minus the 
amount by which the United States average annual production of the 
controlled substance being traded for the three years prior to the 
transfer is less than the total production allowable for that substance 
under this subpart minus the amount transferred. The change in 
allowances will be effective on the date that the notice is issued.
    (5) If after one person obtains approval for a trade of allowable 
production of a controlled substance to a Party, one or more other 
persons obtain approval for trades involving the same controlled 
substance and the same control period, the Administrator will issue 
notices revising the production limits for each of the other persons 
trading that controlled substance in that control period to equal the 
lesser of:
    (i) The unexpended production allowances or Article 5 allowances 
held by the person under this subpart minus the amount transferred; or
    (ii) The unexpended production allowances or Article 5 allowances 
held by the person under this subpart minus the amount by which the 
United States average annual production of the controlled substance 
being traded for the three years prior to the transfer is less than the 
total allowable production for that substance under this subpart 
multiplied by the amount transferred divided by the total amount 
transferred by all the other persons trading the same controlled 
substance in the same control period minus the amount transferred by 
that person.

[[Page 470]]

    (iii) The Administrator will also issue a notice revising the 
production limit for each person who previously obtained approval of a 
trade of that substance in that control period to equal the unexpended 
production allowances or unexpended Article 5 allowances held by the 
person under this subpart plus the amount by which the United States 
average annual production of the controlled substance being traded for 
the three years prior to the transfer is less than the total allowable 
production under this subpart multiplied by the amount transferred by 
that person divided by the amount transferred by all of the persons who 
have traded that controlled substance in that control period. The change 
in production allowances or Article 5 allowances will be effective on 
the date that the notice is issued.
    (d) Effective January 1, 1996, there will be no trade in production 
or consumption allowances with other Parties to the Protocol for class I 
controlled substances, except for class I, Group VI, methyl bromide.
    (e) Until January 1, 1996 for all class I controlled substances, 
except Group VI, and until January 1, 2005 for class I, Group VI, a 
person may obtain production allowances for that controlled substance 
equal to the amount of that controlled substance produced in the United 
States that was transformed or destroyed within the United States, or 
transformed or destroyed by a person of another Party, in the cases 
where production allowances were expended to produce such substance in 
the U.S. in accordance with the provisions of this paragraph. A request 
for production allowances under this section will be considered a 
request for consumption allowances under Sec. 82.10(b).
    (1) Until January 1, 1996, for all class I controlled substances, 
except Group VI, and until January 1, 2005, for class I, Group VI, a 
person must submit a request for production allowances that includes the 
following:
    (i) The name, address, and telephone number of the person requesting 
the allowances, and the Employer Identification Number if the controlled 
substance is being exported;
    (ii) The name, quantity, and level of controlled substance 
transformed or the name, quantity and volume destroyed, and the 
commodity code if the substance was exported;
    (iii) A copy of the invoice or receipt documenting the sale of the 
controlled substance, including the name, address, contact person and 
telephone number of the transformer or destroyer;
    (iv) A certification that production allowances were expended for 
the production of the controlled substance, and the date of purchase, if 
applicable;
    (v) If the controlled substance is transformed, the name, quantity, 
and verification of the commercial use of the resulting chemical and a 
copy of the IRS certificate of intent to use the controlled substance as 
a feedstock; and,
    (vi) If the controlled substance is destroyed, the verification of 
the destruction efficiency.
    (2) Until January 1, 1996 for all class I controlled substances, 
except Group VI, and until January 1, 2005, for class I, Group VI, the 
Administrator will review the information and documentation submitted 
under paragraph (e)(1) of this section and will assess the quantity of 
class I controlled substance that the documentation and information 
verifies was transformed or destroyed. The Administrator will issue the 
person production allowances equivalent to the controlled substances 
that the Administrator determines were transformed or destroyed. For 
controlled substances completely destroyed under this rule, the Agency 
will grant allowances equal to 100 percent of volume intended for 
destruction. For those controlled substances destroyed at less than a 98 
percent destruction efficiency, the Agency will grant allowances 
commensurate with that percentage of destruction efficiency that is 
actually achieved. The grant of allowances will be effective on the date 
that the notice is issued.
    (3) Until January 1, 1996 for all class I controlled substances, 
except Group VI, and until January 1, 2005, for class I, Group VI, if 
the Administrator determines that the request for production allowances 
does not satisfactorily substantiate that the person transformed or 
destroyed controlled substances as claimed, or that modified allowances 
were not expended, the Administrator

[[Page 471]]

will issue a notice disallowing the request for additional production 
allowances. Within ten working days after receipt of notification, the 
person may file a notice of appeal, with supporting reasons, with the 
Administrator. The Administrator may affirm the disallowance or grant an 
allowance, as she/he finds appropriate in light of the available 
evidence. If no appeal is taken by the tenth day after notification, the 
disallowance will be final on that day.
    (f) Effective January 1, 1996, and until January 1, 2000, a person 
who was nominated by the United States to the Secretariat of the 
Montreal Protocol for an essential use exemption may obtain destruction 
and transformation credits for a class I controlled substance (except 
class I, Group VI) equal to the amount of that controlled substance 
produced in the United States that was destroyed or transformed within 
the United States in cases where the controlled substance was produced 
for other than destruction or transformation in accordance with the 
provisions of this subpart, subtracting an offset of 15 percent.
    (1) Effective January 1, 1996, and until January 1, 2000, a person 
must submit a request for destruction and transformation credits that 
includes the following:
    (i) The identity and address of the person and the essential-use 
exemption and years for which the person was nominated to the 
Secretariat of the Montreal Protocol;
    (ii) The name, quantity and volume of controlled substance destroyed 
or transformed;
    (iii) A copy of the invoice or receipt documenting the sale or 
transfer of the controlled substance to the person;
    (iv) A certification of the previous use of the controlled 
substance;
    (v) For destruction credits, a certification that the controlled 
substance was destroyed and a certification of the efficiency of the 
destruction process; and
    (vi) For transformation credits, an IRS certificate of feedstock use 
or transformation of the controlled substance.
    (2) Effective January 1, 1996, and until January 1, 2000, the 
Administrator will issue the person destruction and transformation 
credits equivalent to the class I controlled substance (except class I, 
Group VI) recovered from a use system in the United States, that the 
Administrator determines were destroyed or transformed, subtracting the 
offset of 15 percent. For controlled substances completely destroyed 
under this rule, the Agency will grant destruction credits equal to 100 
percent of volume destroyed minus the offset. For those controlled 
substances destroyed at less than a 98 percent destruction efficiency, 
the Agency will grant destruction credits commensurate with that 
percentage of destruction efficiency that is actually achieved minus the 
offset. The grant of credits will be effective on the date that the 
notice is issued.
    (3) Effective January 1, 1996, and until January 1, 2000, if the 
Administrator determines that the request for destruction and 
transformation credits does not satisfactorily substantiate that the 
person was nominated for an essential-use exemption by the United States 
to the Secretariat for the Montreal Protocol for the control period, or 
that the person destroyed or transformed a class I controlled substance 
as claimed, or that the controlled substance was not recovered from a 
U.S. use system the Administrator will issue a notice disallowing the 
request for additional destruction and transformation credits. Within 
ten working days after receipt of notification, the person may file a 
notice of appeal, with supporting reasons, with the Administrator. The 
Administrator may affirm the disallowance or grant an allowance, as she/
he finds appropriate in light of the available evidence. If no appeal is 
taken by the tenth day after notification, the disallowance will be 
final on that day.
    (g) International transfer of essential-use CFCs. (1) For trades of 
essential-use CFCs where the transferee or the transferor is a person in 
another nation (Party), the persons involved in the transfer must submit 
the information requested in Sec. 82.12(d)(2) and (d)(3), along with a 
signed document from the principal diplomatic representative in the 
Party's embassy in the United

[[Page 472]]

States stating that the appropriate authority within that nation has 
approved the transfer of the essential-use CFCs.
    (2) If the transfer claim is complete, and EPA does not object to 
the transfer, then EPA will issue letters to the transferor and the 
transferee indicating that the transfer may proceed. EPA reserves the 
right to disallow a transfer if the transfer request is incomplete, or 
if it has reason to believe that the transferee plans to produce MDIs 
that are not essential MDIs. If EPA objects to the transfer, EPA will 
issue letters to the transferor and transferee stating the basis for 
disallowing the transfer. The burden of proof is placed on the 
transferee to retain sufficient records to prove that the transferred 
essential-use CFCs are used only for production of essential MDIs. If 
EPA ultimately finds that the transferee did not use the essential-use 
CFCs for production of essential MDIs then the transferee is in 
violation of this subpart.

[60 FR 24986, May 10, 1995, as amended at 63 FR 41643, Aug. 4, 1998; 63 
FR 53290, Oct. 5, 1998; 65 FR 70804, Nov. 28, 2000; 67 FR 6360, Feb. 11, 
2002; 67 FR 21134, Apr. 29, 2002; 70 FR 77047, Dec. 29, 2005]