Citizen Health & Safety
Growing Use of Third Parties to Certify Health and Safety Compliance Raises Troubling Questions
by Katie Greenhaw, 9/24/2013
In May, the U.S. Environmental Protection Agency (EPA) proposed two rules to protect the public from the risks of formaldehyde exposure. The first rule sets emissions standards for formaldehyde in composite wood products; the second establishes requirements for third-party certifications of products subject to those emissions limits. The use of third-party programs to assess regulatory compliance is growing as agencies try to stretch scarce resources, raising troubling questions about enforcement of important standards and safeguards.
EPA's proposed framework provides a timely illustration of the issues agencies must grapple with when they develop third-party certification programs. Most importantly, agencies must ensure that companies are following regulatory requirements and complying with crucial public health and safety standards.
Congress enacted the Formaldehyde Standards for Composite-Wood Products Act (FSA) in 2010 to address concerns about the public's exposure to formaldehyde emissions from manufactured products and building materials. The FSA expanded existing California standards and set national limits on the amount of formaldehyde that may be emitted from composite wood products, including hardwood plywood and particleboard. It also directed EPA to promulgate regulations by January 2013 to ensure compliance with the emissions limits, including regulatory provisions that address third-party testing and certification.
EPA's third-party certification framework is modeled on, but not identical to, California's program for verifying compliance with emissions limits. Under the proposed national framework, EPA would approve Accreditation Bodies (AB) to accredit qualified Third-Party Certifiers (TPC). Those TPCs would then be responsible for ensuring that composite wood panel producers are meeting EPA's standards. California's program directly approves TPCs, eliminating the need for ABs. EPA contends that using internationally recognized ABs will enhance the program by establishing a globally uniform process.
Congress directed EPA to establish a third-party certification program to ensure that products meet national formaldehyde emission standards. As is often the case with federal legislation, Congress left important implementation details to the agency. EPA's proposal outlines the roles and responsibilities of EPA, TPCs, and ABs, and also sets out criteria for program participation. While there are some general requirements for TPCs and ABs, the agency will address more specific implementation requirements in a later rulemaking.
EPA based its framework on existing third-party programs and proposes to use voluntary consensus standards as the general requirements for certification. EPA proposed the program framework before issuing the rest of the implementation regulations required by Congress to give stakeholders a chance to comment and understand how to participate in the program. Regulated composite wood products producers, potential TPCs, and other interested parties have until Sept. 25 to comment on the proposed framework.
Using Third Parties to Assess Compliance
Agencies sometimes use private third parties to conduct oversight of regulated entities and verify that they are in compliance with regulatory requirements. In a variety of programs, agencies have approved third parties to perform inspections, conduct testing, and identify violations. Third parties may be used to check compliance with voluntary standards as well as mandatory regulations. When agencies rely on third parties to certify that entities are complying with mandatory health and safety standards, the stakes are high.
When agency budgets are tight, the use of third parties may be viewed as a more cost-effective regulatory approach. But in order to be effective, third-party assessments must be reliable and accurate. Reliability is especially important when assessing compliance with mandatory standards that impact public health and safety. Third parties must be competent and unbiased in assessing compliance. Because third parties may be paid by the regulated producers or facilities, monitoring their objectivity and independence is crucial.
In 2012, the Administrative Conference of the United States (ACUS), an independent body that provides recommendations for improvement of federal agency procedures, issued a recommendation addressing some of the issues that arise when agencies develop third-party programs. ACUS based its recommendation on a comprehensive report prepared by consultant Lesley McAllister that surveyed eight significant third-party programs.
McAllister concluded that such programs may allow agencies to leverage private resources and conduct assessment activities on a larger scale than the agency could do directly. Based on the report, ACUS found that “third-party programs may be particularly effective when regulated products or processes are international in scope.” On the other hand, both the report and recommendation recognized that these programs have the potential to undermine regulatory goals and impose high costs.
Because of the risks and benefits associated with these programs, they must be carefully designed and operated to ensure they are effectively evaluating compliance and achieving the agency's regulatory goals. The increasing use of third-party programs by regulatory agencies underscores the importance of proper design and oversight for these programs.
Recent Third-Party Programs
Over the last five years, Congress enacted three different laws requiring the use of third parties to conduct testing and certification activities. In addition to the third-party program for formaldehyde emissions from composite wood products, Congress has required third-party testing and certification for food and product safety programs.
The Consumer Product Safety Improvement Act (CPSIA) of 2008 required children's products to be tested by an approved third-party laboratory to certify compliance with product safety rules. Third-party laboratories may test and certify products once accredited by the Consumer Product Safety Commission (CPSC) or a CPSC-designated AB. There are over 400 CPSC-accepted laboratories around the world. Both imported products and products manufactured domestically must be third-party tested and certified.
In 2011, Congress required the Food and Drug Administration (FDA) to establish a third-party program for imported foods. The Food Safety Modernization Act (FSMA) directed FDA to set up a program for accrediting third-party auditors to inspect and certify foreign food facilities and the food they produce. The FDA recently proposed procedures for accreditation and for monitoring and conducting oversight of participating ABs and auditors. The agency will then propose standards specifying what qualifications a certification body must have to qualify for accreditation. Similar to EPA, FDA says the third-party audit and certification program "is central to a global system."
All of these programs are designed to operate on an international scale by facilitating inspections and certifications of products and facilities outside the U.S. For EPA and CPSC, this means ensuring compliance with applicable standards for products manufactured domestically and abroad. EPA plans to rely on ABs that operate internationally to accredit and oversee certain TPCs.
Considerations for EPA Going Forward
As EPA reviews comments and works to finalize the details of its third-party certification framework, it should consider how to maximize the effectiveness of the program in guaranteeing that producers are meeting formaldehyde emissions standards. McAllister, author of the 2012 ACUS report, has identified several general metrics for assessing the success of third-party programs, including reliability, compliance rates, and the agency's capacity to run the program. While some of these metrics cannot be measured at this stage, the agency has the opportunity to help ensure the effectiveness of this program through its current rulemaking process.
EPA's proposal includes recordkeeping and reporting requirements that would help ensure reliability and accountability. The rule would allow EPA to inspect TPCs and ABs and revoke accreditation if necessary. EPA would also document and make publicly available certain information about TPCs, ABs, and panel producers.
EPA can improve the transparency of this program by implementing additional mechanisms currently under consideration. Specifically, EPA should require electronic reporting and make more information available on a publicly viewable database, including product information and inspection results. These actions will streamline the reporting process, improve reporting accuracy, increase accountability, and help instill public confidence in the program.
Once EPA has finalized the formaldehyde rules and operationalized the third-party program, the agency should conduct thorough oversight and confirm that the program is ensuring compliance with emissions standards. This oversight is particularly critical for programs where Congress has required the use of third parties to aid in the enforcement of public protections.