Regulations (Preambles to Final Rules) - Table of Contents|
| Record Type:||Occupational Exposure to Methylene Chloride|
| Title:||Section 8 - VIII. Summary of the Final Economic Analysis|
VIII. Summary of the Final Economic Analysis
In its Final Economic and Regulatory Flexibility Analysis document, OSHA addresses the significant issues related to technological and economic feasibility and small business impacts raised in the rulemaking process. The Final Economic Analysis is also OSHA's most comprehensive explanation of the standard's practical impact on the regulated community; in the Final Economic Analysis, OSHA explains in detail the Agency's findings and conclusions concerning pre-standard (baseline) conditions, such as exposure levels, in establishments in the regulated community, and discusses how and why the requirements of the standard are expected to eliminate significant risk to the extent feasible. This document also sets forth OSHA's Final Regulatory Flexibility Analysis and the analyses required by Executive Order 12866. This Federal Register preamble and the Final Economic Analysis are integrally related and together present the fullest statement of OSHA's reasoning concerning this standard. The Final Economic and Regulatory Flexibility Analysis, together with supporting appendix material, has been placed in the rulemaking docket for methylene chloride (Ex. 129).
* Describe the need for a standard governing occupational exposure to methylene chloride;
* Identify the establishments and industries potentially affected by the standard;
* Evaluate the costs, benefits, economic impacts and small business impacts of the standard on affected firms;
* Assess the technological and economic feasibility of the standard for affected establishments, industries, and small businesses;
* Evaluate the availability of effective non-regulatory approaches to the problem of occupational exposure to methylene chloride; and
* Present changes designed to reduce the impact of the standard on small firms while meeting the objectives of the OSH Act.
Need for the Standard
OSHA's final methylene chloride (MC) standard covers occupational exposures to this substance, one of the most widely used of all organic solvents, in general industry, construction, and shipyard employment. In all, about 237,000 employees are estimated to be exposed to MC. These workers are exposed to MC in many different ways, including the manufacturing, formulation, distribution, and use of MC-containing products. The most common uses of MC are in paint stripping, metal cleaning, and furniture stripping.
Workers exposed to MC are at significant risk of developing cancer, heart and liver effects, and central nervous system impairments, as well as eye, skin, and mucous membrane irritation. Animal bioassays have shown MC to be carcinogenic in mice and rats of both sexes, and epidemiologic studies in workers have produced suggestive evidence of its carcinogenicity in humans. Acute overexposure to the vapors of MC can lead to central nervous system depression, respiratory paralysis, and death: OSHA receives fatality reports every year involving workers who have died using MC to perform such tasks as stripping floors and removing paint. To protect all MC-exposed workers from these adverse health effects, the final standard lowers the airborne concentration of MC to which workers may be exposed from the current permissible exposure limit (PEL) of 500 ppm as an 8-hour time-weighted average (8-hour TWA) to 25 ppm, and from the Agency's current short-term limit of 1000 ppm as an acceptable ceiling, or 2000 ppm as an acceptable peak above the acceptable ceiling for 5 minutes in any 2-hour period, to a short-term exposure limit (STEL) of 125 ppm, averaged over 15 minutes. (For a detailed discussion of the risks posed to workers by exposure to MC, see the Quantitative Risk Assessment and Significance of Risk sections of the preamble, above.) OSHA's final MC standard is similar in format and content to other health standards issued under Section (6)(b)(5) of the Act. In addition to setting PELs, the standard requires employers to monitor the exposures of workers; establish regulated areas when exposures may reasonably be expected to exceed one of these PELs; implement engineering and work practice controls to reduce employee exposures to MC; provide respiratory protection to supplement engineering controls where these are not feasible, are insufficient to meet the PELs, or in emergencies; provide other protective clothing and equipment as necessary for employee protection; make industrial hygiene facilities (such as eyewash and emergency showers) available in certain circumstances; provide medical surveillance; train workers about the hazards of MC (as required by OSHA's Hazard Communication Standard); and keep records relating to the standard. The contents of the standard are explained briefly in Chapter I of the Final Economic Analysis and in detail in the Summary and Explanation (Section X of the preamble, below).
Chapter II of the economic analysis describes the uses of methylene chloride and the industries in which such use occurs. Employee exposures to MC are analyzed on the basis of "application groups," i.e., groups of firms that use MC to perform a particular function, such as metal cleaning or industrial paint stripping, regardless of the particular industry in which the use takes place. The methodology used by OSHA in the analysis is appropriate when a ubiquitous chemical like MC is used to perform the same function in many kinds of firms in many industries, because the processes used, employee exposures generated, and controls in place or needed to achieve compliance are the same, whether the process takes place in a machine shop, on board ship, or on a construction site. For example, because the process of using MC to strip paint or coatings from an object is essentially the same whether the object being stripped is a spray paint booth, boat, church pew, or automobile, and the exposures generated during the process are similar in important respects, it is appropriate to analyze such activities as a group. However, OSHA's technological feasibility and cost analyses reflect the fact that job classifications and work processes may differ within a given application group. Table VIII-1 shows the application groups analyzed in the economic analysis, and the numbers of MC-using establishments, MC-exposed workers, and estimated volume of MC handled annually by establishments in each application group.
Table VIII-1. -- Methylene Chloride Application Groups ______________________________________________________________________ |Estimated | |Estimated |Estimated |number of |Estimated |number of |MC handled Application group |MC-using |total |exposed |(millions |establish-|employ- |workers(*)|of lbs) | ments | ment(*) | | ________________________|__________|___________|__________|___________ Methylene Chloride | | | | Manufacturing..........| 4 | 1,664 | 84 | 469.20 Distribution/Formulation| | | | of Solvents............| 320 | 84,004 | 1,701 | 189.65 Metal Cleaning: | | | | Cold Degreasing and | | | | Other Cold Cleaning: | 23,717 | 901,232 | 94,537 | 32.56 Open-Top Vapor | | | | Degreasing.........| 278 | 27,105 | 608 | 14.87 Conveyorized | | | | Vapor Degreasing...| 45 | 2,920 | 75 | 1.13 Semiconductors.....| 239 | 217,960 | 1,392 | 0.40 Printed Circuit | | | | Boards.............| 141 | 77,795 | 298 | 13.98 Aerosol Packaging.......| 52 | 4,142 | 520 | 25.21 Paint Remover | | | | Manufacturing..........| 80 | 6,134 | 200 | 136.85 Paint Manufacturing.....| 49 | 8,909 | 229 | 3.54 Paint Stripping: | | | | Aircraft Stripping....| 300 | 266,826 | 2,470 | 13.17 Furniture Stripping...| 6,152 | 23,592 | 7,872 | 23.26 Other Industrial | | | | Paint Stripping......| 35,041 | 2,312,721 | 46,605 | 59.36 Flexible Polyurethane | | | | Foam Manufacturing......| 100 | 9,800 | 600 | 50.32 Plastics and Adhesives | | | | Manufacturing and Use...| 3,487 | 1,186,040 | 10,481 | 41.90 Adhesive Production...| 165 | 56,254 | 497 | ........... Adhesive Use..........| 1,753 | 596,291 | 5,269 | ........... Injection Molding.....| 80 | 27,211 | 240 | ........... Lamination............| 1,323 | 450,031 | 4,070 | ........... Mold Release..........| 165 | 56,254 | 497 | ........... Ink Use: | | | | Ink and Ink Solvent | | | | Manufacturing.........| 15 | 2,010 | 58 | 3.68 Ink Solvent Use in | | | | Printing...............| 11,869 | 197,619 | 39,481 | 3.68 Pesticide Manufacturing | | | | and Formulation........| 60 | 1,440 | 120 | 9.58 Pharmaceutical | | | | Manufacturing..........| 108 | 70,223 | 1,431 | 39.53 Solvent Recovery........| 34 | 932 | 137 | 32.10 Film Base | | | | Manufacturing..........| 1 | 45,000 | 500 | 8.90 Polycarbonate | | | | Manufacturing..........| 4 | 1,898 | 67 | 6.70 Construction............| 9,504 | 63,115 | 24,896 | 2.44 Shipyards...............| 25 | 85,212 | 3,040 | 0.47 Total, all | | | | application groups.....| 91,624 | 5,598,293 | 237,496 | (**) ________________________|__________|___________|__________|___________ Footnote(*) In most cases, the estimated number of establishments in each application group was based on the volume flow of MC in 1990 divided by the estimated MC use per facility. The estimated number of establishments was multiplied by the total number of employees per establishment and exposed employees per establishment as reported in CONSAD's survey. Footnote(**) Netting out rehandling, estimated total consumption equals 469.2 million pounds manufactured, minus 129.1 million pounds exported, + 19.3 million pounds imported, + 32.10 million pounds recovered from used solvent. The column does not sum to 391.5 million pounds because non-consumptive uses such as production, distribution and formulation, and solvent recovery are included. Sources: CONSAD, HSIA, PRMA, Office of Regulatory Analysis.
In all, OSHA analyzed 28 application groups. These application groups include, among others, methylene chloride manufacturing, paint manufacturing, metal cleaning, polyurethane foam manufacturing, plastics and adhesives manufacturing, ink use, pharmaceuticals, and construction and shipyards. A total of 91,624 establishments are estimated to be potentially affected by the standard. These establishments employ a total of 5.6 million employees, of whom 237,496 are estimated to be exposed to MC in the course of their work. The application groups with the largest numbers of directly exposed employees are the Metal Cleaning, All Other Industrial Paint Stripping, and Ink Solvent Use groups. In many facilities, MC is used only by a small number of employees; the average number of MC-exposed employees per establishment covered by the final rule is only 2.6 employees.
Chapter III of the analysis assesses the technological feasibility of the final standard's requirements, and particularly its PELs, for firms in the 28 application groups identified in the Industry Profile. OSHA finds, based on an analysis of exposure data taken on workers performing the MC-related tasks identified for each application group, that compliance with the standard is technologically feasible for establishments in every application group studied. With few exceptions, employers will be able to achieve compliance with both PELs through the use of engineering controls and work practices. The few exceptions are certain maintenance activities, such as vessel cleaning, which have traditionally involved the use of respiratory protection, and operations in two applications where the supplemental use of respirators may be necessary. These operations are centrifuge unloading and dryer loading at one bulk pharmaceutical manufacturing facility operated by Abbott Laboratories, and operations involving access to and entering of the roll coating machine used by the Eastman Kodak Company to make film base.
The exposure data relied on by OSHA in making its technological feasibility determinations have been compiled in a database that contains thousands of MC exposure results (see Appendix B of this analysis) taken by OSHA compliance officers, consultation program consultants, MC-using companies, and interested parties. These data show that many facilities in many of the affected application groups have already achieved the reductions in employee exposures required by the final rule. In addition, the exposures of many employees in many job categories in a number of the application groups have been reduced to levels that are close to those required by the standard. OSHA's analysis of technological feasibility analyzes employee exposures at the operation or task level to the extent that such data are available. In other words, the analysis identifies relevant exposure data on a job-category-by-job category basis to permit the Agency to pinpoint those MC-exposed workers and job operations that are not yet under good process control and will thus need additional controls (including improved housekeeping, maintenance procedures, and employee work practices) to achieve compliance. Costs are then developed (see Chapter V of the economic analysis) for the improved controls needed to reach the new levels.
The benefits that will accrue to MC-exposed employees and their employers are substantial and take a number of forms. Chapter IV of the analysis describes these benefits, both in quantitative and qualitative form. First, based on a physiologically-based pharmacokinetic (PBPK) model, OSHA estimated that, if all 237,000 employees were exposed at the existing 8-hour TWA exposure limit of 500 ppm for an occupational lifetime of 45 years, a total of 29,862 excess cancer deaths would occur, or 126 excess cancer deaths per 1,000 workers. If, however, the 237,000 employees were exposed to the final standard's PEL of 25 ppm for 45 years, 8533 excess cancer deaths would be expected (3.6 per thousand workers). However, few workers are currently being exposed to 500 ppm of MC as an 8-hour TWA. The actual exposure levels of most affected workers are considerably lower, and, when these exposure levels, rather than 500 ppm, are used as the baseline, the PBPK model estimates that 1405 cancer deaths will be averted over a 45-year period. By reducing the total number of MC-related cancer deaths from 1,804 deaths to 399 deaths over 45 years, the standard will save an average of 31 cancer deaths per year. Table VIII-2 shows these risk estimates.
Table VIII-2. -- Lung Cancer Risk Over 45 Years for Workers Exposed At Current Exposure Levels and at the Levels Expected After Implementation of the Final Standard ______________________________________________________________________ |0-12.5 | 12.5-25 | 25 | 25-50 | 50-100 ____________|_________|___________|___________|___________|___________ Lifetime | | | | | Excess | | | | | Cancer | | | | | Risk | | | | | (per | | | | | thousand | | | | | workers)(*)| 0.91 | 2.71 | 3.60 | 5.53 | 11.98 Baseline | | | | | Number | | | | | of | | | | | Workers | | | | | Exposed....| 141,323 | 26,464 | 162 | 22,839 | 23,903 Estimated | | | | | Excess | | | | | Deaths | | | | | in | | | | | Baseline | | | | | (Existing | | | | | PEL)(**)...| 129 | 72 | 1 | 126 | 286 Predicted | | | | | Number | | | | | of | | | | | Workers | | | | | Exposed | | | | | at New | | | | | PEL........| 159,825 | 28,441 | 49,229 | 0 | 0 Predicted | | | | | Excess | | | | | Deaths at | | | | | New PEL(**)| 146 | 77 | 176 | 0 | 0 ____________|_________|___________|___________|___________|___________ Table VIII-2. -- Lung Cancer Risk Over 45 Years for Workers Exposed At Current Exposure Levels and at the Levels Expected After Implementation of the Final Standard - Continued ______________________________________________________________________ |100-200 | 200-350 | 350-500 | 500+(***)| Total ____________|_________|___________|___________|___________|___________ Lifetime | | | | | Excess | | | | | Cancer | | | | | Risk | | | | | (per | | | | | thousand | | | | | workers)(*)| 28.45 | 61.75 | 104.44 | 125.78 | .......... Baseline | | | | | Number | | | | | of | | | | | Workers | | | | | Exposed....| 14,803 | 3,281 | 1,297 | 3,422 | 237,495 Estimated | | | | | Excess | | | | | Deaths | | | | | in | | | | | Baseline | | | | | (Existing | | | | | PEL)(**)...| 421 | 203 | 135 | 430 | 1,804 Predicted | | | | | Number | | | | | of | | | | | Workers | | | | | Exposed | | | | | at New | | | | | PEL........| 0 | 0 | 0 | 0 | 237,495 Predicted | | | | | Excess | | | | | Deaths at | | | | | New PEL(**)| 0 | 0 | 0 | 0 | 399 ____________|_________|___________|___________|___________|___________ Footnote(*) Based on OSHA's final estimate using the PBPK model, as presented in the Quantitative Risk Assessment section of the Preamble. Footnote(**) Computed as level of lifetime risk times the number of exposed workers. Footnote(***) For workers exposed to levels of greater than the current PEL of 500 ppm, the risk estimate is that associated with a lifetime exposure to 500 ppm. Source: Office of Regulatory Analysis; OSHA; Department of Labor.
In addition to cancer deaths, the standard is estimated to prevent 3 deaths per year from MC's acute central nervous system and carboxyhemoglobinemic effects. (Carboxy-hemoglobinemia is the inability of the blood to carry sufficient oxygen to supply the heart muscle; because methylene chloride interferes with the blood's ability to carry oxygen, exposure to it places susceptible individuals, such as those with silent cardiovascular disease, pregnant women, and smokers, at greater risk.) OSHA receives reports every year of workers who have succumbed to MC's acute CNS toxicity while they were engaged in such tasks as floor stripping. For example, the Agency recently received a fatality report on two young workers who died after pouring 14 gallons of MC on a squash court they were refinishing. Both of these employees lost consciousness, collapsed, and subsequently died of respiratory failure. In addition, MC exposures above the level at which the final rule's STEL is set -- 125 ppm -- are also associated with acute central nervous system effects, such as dizziness, staggered gait, and diminished alertness, all effects that can lead to workplace accidents. OSHA estimates that as many as 30,000 to 54,000 workers will be protected by the final rule's STEL from experiencing CNS effects and episodes of carboxyhemoglobinemia every year. Moreover, exposure to the liquid or vapor forms of MC can lead to eye, skin, and mucous membrane irritation, and these material impairments will also be averted by compliance with the final rule. Finally, contact of the skin with MC can lead to percutaneous absorption and systemic toxicity and thus lead to additional cases of cancer that have not been taken into account in the benefits assessment presented in Chapter IV of the Final Economic Analysis.
The costs employers in the affected application groups are estimated to incur to comply with the standard total $101 million in 1994 dollars. These costs, which are presented in Chapter V of the full economic analysis, are annualized over a 10-year horizon at a discount rate of 7 percent. Table VIII-3 shows annualized costs by provision of the standard; the most costly provisions are those requiring engineering controls, protective clothing and eye protection, and medical surveillance for MC-exposed workers. These three provisions together account for approximately 75 percent of the standard's compliance costs.
Table VIII-3. -- Annualized Costs by Provision _____________________________________________________________________ | Annualized Provision | Costs ____________________________________________________|________________ Engineering Controls................................| $38,773,642 Respirators.........................................| 6,374,083 Monitoring..........................................| 9,849,577 Protective Clothing and Eye Protection..............| 29,578,340 Emergency Eyewash and Shower........................| 3,183,486 Medical Surveillance................................| 7,986,493 Leak and Spill Detection Program....................| 3,703,286 Regulated Areas.....................................| 150,884 Recordkeeping.......................................| 652,121 Training............................................| 196,656 Understanding Regulation and Developing Training....| 777,132 |______________ Subtotal......................................| 101,225,701 Costs of Substitution...............................| 237,336 |______________ Total.........................................| 101,463,037 ____________________________________________________|______________ Source: Office of Regulatory Analysis; OSHA; Department of Labor.
Table VIII-4 analyzes compliance costs by application group and shows that the Cold Cleaning application group, which is in the larger Metal Cleaning grouping, and the Furniture Stripping application group, which is in the larger Paint Stripping category, will incur the largest costs of compliance (though not necessarily the largest economic impacts). These costs reflect the high exposures and relative lack of control measures currently existing in many establishments in these two application groups. In other words, because MC exposures are poorly controlled in so many cold cleaning and furniture stripping facilities, employers in these industries will be required by the standard to implement control measures to protect their employees from the significant risk of MC exposure.
Table VIII-4. -- Annualized Costs by Methylene Chloride Application Groups _____________________________________________________________________ | Annualized Application group | costs _____________________________________________________|_______________ Methylene Chloride Manufacturing.....................| 8,150 Distribution/Formulation of Solvents.................| 794,099 Metal Cleaning: | Cold Degreasing and Other Cold Cleaning............| 26,950,869 Open-Top Vapor Degreasing..........................| 371,096 Conveyorized Vapor Degreasing......................| 97,253 Semiconductors.....................................| 247,666 Printed Circuit Boards.............................| 217,479 Aerosol Packaging....................................| 297,999 Paint Remover Manufacturing..........................| 229,724 Paint Manufacturing..................................| 89,697 Paint Stripping: | Aircraft Stripping.................................| 8,148,754 Furniture Stripping................................| 10,689,840 All Other Industrial Paint Stripping...............| 24,413,924 Flexible Polyurethane Foam Manufacturing.............| 4,252,861 Plastics and Adhesives Manufacturing and use.........| 5,417,950 Adhesive Production | Adhesive Use | Injection Molding | Lamination | Mold Release | Ink and Ink Solvent Manufacturing....................| 23,518 Ink Solvent Use......................................| 3,360,723 Pesticide Manufacturing and Formulation..............| 106,060 Pharmaceutical Manufacturing.........................| 311,708 Solvent Recovery.....................................| 49,829 Film Base Manufacturing..............................| 47,454 Polycarbonate Manufacturing..........................| 4,651 Construction.........................................| 14,922,000 Shipyards............................................| 518,544 | ______________ Total, all application groups..................| 101,463,037 _____________________________________________________|_______________ Source: Office of Regulatory Analysis; OSHA; Department of Labor.
Chapter VI of the economic analysis analyzes the impacts of compliance costs on firms in affected application groups. The standard is clearly economically feasible: on average, annualized compliance costs amount only to 0.18 percent of estimated sales and 3.79 percent of profits. For all but three application groups -- polyurethane foam blowing, furniture stripping, and construction -- compliance costs are less than 3 percent of profits, and for all but one application group -- furniture stripping -- annualized compliance costs are less than 0.5 percent of the value of sales. Table VIII-5 shows average compliance cost impacts across the many Standard Industrial Classification (SIC) codes potentially involved in the application groups studied.
Table VIII-5. -- Screening Analysis to Identify Possible Economic Impact of the Final MC Standard _____________________________________________________________________ | | Annualized costs of | Number of | compliance Application group |establishments|___________________________ | complying | As percent | As percent | | of sales | of profit __________________________|______________|_____________|_____________ Manufacture of MC.........| 4 | (*) | 0.04 Distribution/Formulation | | | of Solvents..............| 320 | 0.04 | 0.55 Metal Cleaning: | | | Cold Degreasing and | | | Other Cold Cleaning..| 23,717 | 0.01 | 0.18 Open-Top Vapor | | | Degreasing...........| 278 | 0.01 | 0.22 Conveyorized Vapor | | | Degreasing...........| 45 | 0.02 | 0.35 Semiconductors........| 239 | (*) | 0.05 Printed Circuit Boards| 141 | 0.02 | 0.41 Aerosol Packaging.........| 50 | 0.01 | 0.13 Paint Remover | | | Manufacturing............| 80 | 0.02 | 0.06 Paint Manufacturing.......| 49 | 0.01 | 0.04 Paint Remover Use (Paint | | | Stripping): | | | Aircraft Stripping | | | (Large Firms)........| 75 | 0.07 | 1.34 Aircraft Stripping | | | (Small Firms)........| 225 | 0.08 | 2.12 Furniture Stripping...| 6,152 | 2.04 | (**)39.40 All Other Industrial | | | Paint | | | Stripping............| 35,041 | 0.01 | 0.11 Flexible Polyurethane Foam| | | Manufacturing............| 100 | 0.32 | (**)9.23 Plastics and Adhesives | | | Manufacturing and Use....| 3,487 | 0.03 | 0.52 Ink and Ink Solvent | | | Manufacturing............| 15 | (*) | 0.03 Ink Solvent Use...........| 11,869 | 0.03 | 0.05 Pesticide Manufacturing | | | and Formulation..........| 60 | 0.01 | 0.35 Pharmaceutical | | | Manufacturing............| 108 | (*) | 0.03 Solvent Recovery..........| 37 | 0.05 | 0.85 Film Base.................| 1 | (*) | 0.01 Polycarbonates............| 4 | (*) | (*) Construction..............| 9,504 | 0.35 | (**)9.67 Shipyards.................| 25 | 0.07 | 1.72 All Application groups....| 91,625 | 0.18 | 3.79 __________________________|______________|_____________|_____________ Footnote(*) = less than .005%. Footnote(**) These relatively high impacts on profits assume that no price increase is possible. In all three cases, price increases of 2.1 percent or less would fully restore profits. In all of these application groups, most firms will be able to increase prices to offset their regulatory costs. In furniture stripping, a substantial portion of the market is for antique refinishing that involves MC use, a service which is relatively price insenstive. Soft flexible foam of the kind MC is used to make is an essential material in the construction of cushions of all types. In the construction sector, MC based paint stripping and foam blowing are essential operations of many of the jobs in which they are used. Sources: CONSAD; Dun & Bradstreet; Office of Regulatory Analysis, OSHA, Department of Labor. It is important to understand that OSHA's methodology tends to overestimate the economic impacts of the standard, for a number of reasons. For example, OSHA's cost methodology does not take into account the many simple and virtually cost-less improvements in employee work practices and housekeeping procedures that would enable many employers to achieve compliance with the final rule's PELs. In flexible polyurethane foam manufacturing, for example, OSHA's costs may be overestimated because it was assumed that no firms would substitute away from MC entirely, even though some firms have already done so (as described in Chapter III, Technological Feasibility). Despite the fact that OSHA's cost estimates are likely to be overestimates, OSHA decided to examine in greater detail the three application groups shown by the economic analysis to have the highest costs as a percentage of profits, i.e., furniture stripping, polyurethane foam manufacturing, and construction. In the furniture refinishing application group, compliance costs are 2.0 percent of the value of revenues and 39 percent of the value of before-tax profits. Approximately half of all furniture refinishing sales derive from antique refinishing, a market niche that is unlikely to be sensitive to a 2.0 percent change in price. Even in the area of used furniture refinishing, which constitutes the remaining half of the furniture refinishing market, a 2.0 percent price increase would be unlikely to significantly alter the amount of furniture being refinished. In general, price increases of this magnitude would be expected to result only in a very small drop in the demand for furniture refinishing. If this were not the case, normal business fluctuations, such as drops in the relative cost of new furniture or a major increase in the price of methylene chloride (such as has occurred in recent years) would also have had major impacts on the industry. In construction and polyurethane foam manufacturing, compliance costs for the average firm are 9.2 and 9.7 percent of profits, respectively. However, to offset these costs, construction firms would need only to increase their revenues by 0.35 percent and foam blowing operations would need only to increase the price of their products by 0.32 percent. In construction, such price increases are unlikely to present a problem, since the use of MC is essential on many larger construction projects. For example, it is difficult to believe that demand for remodeling or renovation projects would be seriously altered by a 0.35 percent increase in the cost of the paint stripping portion of the job. In flexible polyurethane foam manufacturing, either MC or an appropriate substitute is essential to the production of low density, or soft, foam, and foam, in turn, is essential to the production of many kinds of furniture. Demand for such products is unlikely to change as a result of an 0.32 percent increase in the price of flexible foam. OSHA therefore concludes that even marginal firms in these three sectors -- furniture stripping, construction, and flexible foam blowing -- are unlikely to close as a result of the compliance costs of this standard. To ensure that the analysis of average impacts presented in the economic analysis did not obscure potentially significant economic impacts at the 4-digit SIC level, OSHA performed an in-depth analysis of the 4-digit SICs potentially involved in the Cold Cleaning and All Other Industrial Paint Stripping application groups. The results of this in-depth analysis are presented in Appendix D of the full economic analysis. In all, a total of 162 4-digit SICs potentially impacted by the standard in the Cold Cleaning group and more than 200 4-digit SICs in the Other Industrial Paint Stripping group were analyzed. Across all of the Cold Cleaning SICs, the average impact of the costs of compliance is 0.06 percent of revenues and 1.12 percent of profits. The largest impacts on profits occur in SIC 3412, Metal Barrels, Drums, and Pails, and SIC 3494, Valves and Pipe Fittings not elsewhere classified; in these cases, impacts on profits are 13.3 and 15.1 percent, respectively. In both of these cases, however, these impacts are explained by extremely low profit margins (less than .02 percent of sales, i.e., less than $2 per $10,000 in sales, in 1994). As a result, a price increase of less than one cent per $100 of revenue would leave profits unchanged. Such a price increase is feasible because an increase of this magnitude is unlikely to lead to significant changes in the demand for metal barrels or valves and pipe fittings. In no other 4-digit Cold Cleaning SIC did impacts reach even 5 percent of profits. Across all 200-plus Industrial Paint Stripping SICs, the average impact of the costs of compliance on revenues is 0.03 percent. The largest impact of costs on sales is 0.33 percent and occurs in SIC 7532, Auto Top, Body Repair, and Paint Shops (discussed further below). The average impacts of costs on profits across these SICs is 0.17 percent. The largest impacts on profits occur in SIC 3412, SIC 3494 (both discussed above), and in SIC 7532, Auto Tops, Body Repair and Paint Shops; in all three of these SICs, cost impacts are between 6 and 8 percent of profits. Again, the explanation for these impacts in SICs 3412 and 3494 is that their profit margin in 1994 was vanishingly low. The resulting price increases required to maintain profits are also extremely small, and OSHA concludes that such an increase is likely to take place in these cases. In SIC 7532, the other relatively high impact SIC, profit margins are relatively high (approximately 4.4 percent), and thus a small decline of this magnitude would have relatively little impact. Summary of the Regulatory Flexibility Analysis In its 1991 proposal, OSHA requested comments and information that would assist the Agency in identifying small-business users of MC and in structuring the final standard so that these users would be able to achieve the standard's worker protection goals in ways that would be technologically and economically feasible for them (56 FR 57041 to 57043). OSHA anticipated that, as stated in the proposal, the standard might have a significant economic impact on small entities in at least two application groups: firms with fewer than 20 employees that engage in stripping of paint from aircraft, and firms with fewer than 20 employees that engage in furniture stripping.(3) OSHA also requested comment concerning the standard's impact on small employers in light of the Regulatory Flexibility Act's mandate to consider and minimize impacts on small businesses, consistent with the purposes and criteria of the standard's enabling legislation (56 FR 57115 to 57121). __________ Footnote(3) As a result of data and information received from commenters and other information in the record, the Final Economic Analysis does not identify significant impacts or technologic or economic feasibility problems for aircraft stripping operations of any size. Many commenters identified additional application groups that include small establishments likely to have difficulty achieving all of the standard's protective goals if the requirements of the standard were structured in a one-size-fits-all manner. These commenters provided considerable data and identified many possible modifications and alternatives to the proposed standard that they believed would facilitate compliance and mitigate the standard's impact on MC-using establishments with fewer than 20 employees. None of the comments concerning small employer issues, whether in the context of economic or technological feasibility or the Regulatory Flexibility Act, disagreed with OSHA's basic premise that the fewer-than-20-employee cut-off was appropriate to distinguish between large and small MC-using businesses, was a useful way of characterizing the compliance abilities and limitations of affected employers and is an appropriate definition for purposes of the Regulatory Flexibility Act. Use of this numerical cut-off point captures 61 percent of all establishments potentially affected by the final rule. MC-users with fewer than 20 workers tend to have the characteristics of "mom-and-pop" businesses, whereas establishments with 20 or more workers are generally more sophisticated in terms of the technology they use and their management resources. The 20-employee threshold has also proved to be an agreed-on and useful cut-off point in past OSHA rulemakings (see, for example, the permit-required confined spaces standard (58 FR 4547) and the process safety management standard (57 FR 6402)). During Executive Order 12866 review, the Office of Advocacy of the Small Business Administration expressed its views concerning OSHA's small business definition. In a letter to OMB, the SBA's Chief Counsel for Advocacy stated in a letter dated August 16, 1996, that "[t]he regulatory alternatives developed, using OSHA's size standard of less than 20 employees, were somewhat beneficial to two of the three industries [furniture stripping, polyurethane foam blowing, and construction]. These industries, i.e., furniture stripping and construction, are predominantly micro businesses that fall into OSHA's definition of small" (Ex. 130). The Office of Advocacy was concerned, however, that the 20-employee cut-off did not adequately deal with the MC-using polyurethane foam manufacturing sector. (In this application group, the majority of establishments likely to experience significant economic impacts fall into the 20 to 99-employee size category.) "[T]he characteristics of the manufacturing sector indicate that the [20 employee] size standard was not appropriate in that industry for the purposes of regulatory flexibility." Id. The SBA concluded that OSHA should consider taking additional steps to address implementation burdens and the needs of the polyurethane foam manufacturing sector. Working with OMB and the SBA's Office of Advocacy to resolve this concern, OSHA reexamined the potential impacts of the standard on polyurethane foam manufacturing establishments in the 20 to 99 employee size category in the context of economic impact issues. As explained more fully in the Final Economic and Regulatory Flexibility Analysis, OSHA concluded that, even though members of this group were not small employers, some accommodation would be necessary to assure that employees working in establishments of this size in this industry would not receive less protection than all other MC-exposed employees. Accordingly, OSHA extended the engineering control implementation date for this group of establishments by one year. This extended phase-in is designed to enable this group of employers to plan for and accumulate the capital to finance needed controls, install them, and ensure their effective and consistent operation before the compliance deadline. OSHA's extensive feasibility studies and focus on small business issues resulted in a number of modifications that have made the standard more cost-effective for business while maintaining protection for workers. In addition, OSHA conducted an alternative screening analysis to measure the final rule's potential impacts on establishments in the regulated community using the SBA's size standards. For most application groups, this meant that OSHA examined the standard's economic impacts on firms at the 500 employee level. (Financial data are not available for cut-off points higher than 500 employees; thus, OSHA used that cut-off for all application groups.) In some cases, the SBA size standards are defined in terms of annual revenues, and for SICs so defined, OSHA translated these revenue figures into the appropriate employee size category. This SBA-based alternative screening analysis enabled the Agency to determine whether, by failing to look at potential impacts among firms in other size classes, significant impacts had been overlooked. The analysis conducted using the SBA size standards confirmed that any potentially significant economic impacts associated with the final rule occur among firms in the fewer-than-20-employee category, with one exception, i.e., firms in the 20-99 employee size category in the polyurethane foam manufacturing industry. (See the full Final Economic Analysis for additional detail.) For the final rule, OSHA has analyzed the costs of compliance as a percentage of profits, and costs as a percentage of revenues, for firms with fewer than 20 employees in every application group. This analysis identified significant economic impacts on a substantial number of small entities, and the Agency has accordingly conducted a full Final Regulatory Flexibility Analysis in accordance with the Regulatory Flexibility Act, as amended in 1996. The three application groups for which such impacts were identified were Furniture Stripping, Polyurethane Foam Blowing, and Construction. Table VIII-6 shows the results of this analysis in detail. The full regulatory flexibility analysis is presented in Chapter VI of the Final Economic and Regulatory Flexibility Analysis. The remainder of this section briefly summarizes that analysis. This rule is needed to prevent cancer deaths and other illnesses, as discussed in greater detail in the Health Effects Section (Section V of this Preamble). Section III of this preamble, Events Leading to the Final Standard, summarizes OSHA's efforts to assure input to this rulemaking by affected small firms. Table VIII-6 identifies the affected small firms by sector. OSHA estimates that a total of 56,000 small firms will be affected by this standard.
Table VIII-6. -- Sceening Analysis of Potential Economic Impacts on Small Firms
Manufacture of MC..........| 0 | NA | NA Distribution/Formulation of| | | Solvents..................| 139 | 3.0% | 0.2 Metal Cleaning: | | | Cold Degreasing and | | | Other Cold Cleaning....| 9,223 | 0.9 | 0.0 Open-Top Vapor | 0 | NA | NA Degreasing | | | Conveyorized | | | Vapor Degreasing.......| 11 | 2.4 | 0.1 Semiconductors..........| 0 | NA | NA Printed Circuit Boards..| 20 | 2.0 | 0.1 Aerosol Packaging..........| 10 | 0.7 | 0.1 Paint Remover Manufacturing| 34 | 0.3 | 0.1 Paint Manufacturing........| 7 | 0.1 | 0.0 Paint Remover Use (Paint | | | Stripping): | | | Aircraft Stripping | | | (Large Firms).........| 0 | NA | NA Aircraft Stripping | | | (Small Firms).........| 75 | 4.5 | 0.1 Furniture Stripping....| 5,901 | 41.5(*)| 2.2 All Other Industrial | | | Paint Stripping.......| 25,441 | 0.8 | 0.0 Flexible Polyurethane Foam | | | Manufacturing.............| 8 | 60.3(*)| 1.7 Plastics and Adhesives | | | Manufacturing and Use.....| 498 | 1.8 | 0.1 Ink and Ink Solvent | | | Manufacturing.............| 3 | NA | NA Ink Solvent Use............| 5,395 | 0.1 | 0.1 Pesticide Manufacturing and| | | Formulation...............| 40 | 6.6 | 0.2 Pharmaceutical | | | Manufacturing.............| 0 | NA | NA Solvent Recovery...........| 17 | 2.7 | 0.1 Film Base..................| 0 | NA | NA Polycarbonates.............| 0 | NA | NA Construction...............| 9,085 | 19.9(*)| 0.5 Shipyards..................| 0 | NA | NA All Application groups.....| 55,908 | 8.2 | 0.3
Sources: CONSAD; Dun & Bradstreet; Office of Regulatory Analysis, OSHA, Department of Labor.
The Summary and Explanation section of this preamble provides a description of the compliance requirements associated with this rule, and a paperwork burden analysis of the record keeping requirements is provided in the Collection of Information Request for Comment section at the beginning of this preamble. Based on comments regarding anticipated effects on small businesses, OSHA has reduced the final rule's overall paperwork requirements from those proposed and has refined some paperwork requirements to simplify compliance for small entities.
OSHA considered numerous regulatory alternatives and modifications to the requirements of the proposed standard (ranging from higher PELs, to 40-hour rather than 8-hour time weighted average exposure limits, to delayed implementation dates) that commenters believed might minimize significant economic impacts on small businesses. OSHA rejected those alternatives that clearly decreased the safety of workers in small establishments, but the Agency also adopted many regulatory changes that will improve small employers' ability to provide their employees with the same level of protection as that afforded workers in larger establishments. As explained more fully in the Final Economic Analysis and summarized in Table VIII-7, the final standard contains delayed implementation dates, reduced paperwork requirements, streamlined medical surveillance provisions and other accommodations that, in the Agency's judgment, will minimize any significant economic impacts of the standard on small employers to the extent necessary to enable them to meet the standard's protective goals.
Table VIII-7. Changes Made Since the Proposed Regulation To Reduce the Final Standard's Impacts on Small Businesses _____________________________________________________________________ Change to proposed regulation | Impact on small businesses ___________________________________|_________________________________ Firms with fewer than 20 employees | More performance oriented and given 3 years (rather than 1) to | flexible, reduces costs to achieve PEL using engineering | small businesses in first two controls. | years by 30 to 40%, allows | small businesses time to plan | major expenditures. Allows the use of licensed health | Provides greater flexibility. care professionals in addition to | physicians for medical | surveillance. | Laboratory tests are at the | Reduces costs of medical discretion of physician rather | surveillance by more than 14 than automatically required. | percent, more performance | oriented. Employees under 45 are required to | Reduces costs of medical have a physical every three years | surveillance by 30 percent. rather than annually. | Respirators required in regulated | Decreases respirator use and areas only when PEL is likely to | costs for small business. to be exceeded. | If MC is used less than 30 days per| Significantly reduces costs of year, monitoring may be conducted | monitoring for establishments with direct reading instruments. | making limited use of MC; this | provision will be especially | helpful in construction. Written compliance plans are no | Reduces paperwork. longer required................. | Hazard communication requirements | Reduces paperwork and costs. do not go beyond what is already | required by hazard communication | standard. | Employee re-training only as needed| More performance oriented, rather than annually. | reduces costs of training 80 | percent. Simplified recordkeeping for small | Reduces paperwork. businesses for exposure monitoring| data. | ___________________________________|_________________________________
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