BUILDING BRIDGES IN THE APPAREL CHAIN IAF LEGAL NEWSLETTER

ISSUE 2, Januari 2011

IN THIS NEWSLETTER IAF LEGAL SECTION BY Developments in customs, trade and public procurement

Developments in in- tellectual property protection

Regulatory America (US) and at the international Introduction level. Sidley Austin reports on several “Bridges were built, and the IAF is more recent legal developments, many of which professional now. But there are new goals touch upon ground-breaking issues. to reach. We want to bring more value For questions related to any of the items added to our members”, says the new IAF covered in each issue you can contact: President Mr. Harry van Dalfsen. These were some words during his speech at the Arnoud Willems in Brussels 26th IAF Apparel Convention in E: [email protected] Hong Kong. Or One of the actions that follow from this idea is a new information flow. All of you Brenda Jacobs in Washington receive the monthly newsletter already. E: [email protected] However we would like to introduce an addition namely the IAF Legal Newsletter. Please note that this newsletter does not This is a separate newsletter that you re- constitute legal advice and does not nec- ceive from us regularly and it has been essarily represent the views of the IAF, established in association with Sidley Aus- nor of Sidley Austin LLP. tin LLP.

This special legal issue of the IAF newslet- ter seeks to bring our members informa- tion on legal developments in the Euro- pean Union (EU), in the of

INTERATIONAL APPAREL FEDERATION

Any observations, comments, additions, questions? Please send an e-mail to: [email protected]

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Contents

1. Developments in customs, trade and public procurement

1.1 Overview of the EU‟s preferential duty systems

1.2 Developments under the EU‟s Generalized System of Preferences

1.3 European Union is one step closer to adopting mandatory country of origin labelling

1.4 The EU publishes a proposal to repeal obligation to present proof of origin on importation of textile products

1.5 The European Commission publishes a proposal to formally liberalize trade of textiles between the EU and Uzbekistan

1.6 US House of Representatives votes in favor of 100-percent local content requirement in US defense procurement of tex- tiles and apparel

2. Developments in intellectual property protection

2.1 US Congress to consider extending intellectual property protection to designs

3. Regulatory

3.1 EU adopts stricter rules for emissions from industrial installations

3.2 Nanotechnology update

1. Developments in customs, trade and public procurement

1.1 Overview of the EU’s preferential duty systems

The World Trade Organization (“WTO”) sets the legal framework for trade relations between its members (over 150). According to the WTO rules, its members are not allowed to treat products differently depending on their origin. For example, the EU is not allowed to give preferential access to imports from Argentina, to the detriment of imports from for instance Chile or China.

However, the WTO rules provide exceptions that allow members to conclude free trade agreements (Article XXIV GATT), and grant preferential treatment to developing countries by using the so-called „Enabling Clause‟. The EU believes that preferential trade agreements help developing and least-developed countries (“LDCs”) with their economic and political development. There- fore, the EU has concluded several trade agreements, both multilateral and bilateral, it has even extended preferences unilater- ally.

Multilateral agreements

The EU is a model of economic development through regional integration. This explains why the EU often resorts to signing free trade agreements with other regional groupings; It believes that regional trade agreements lead to increased regional integration, and improved trade relations between its members.

For example, the EU has concluded, and is still in the process of negotiating, Economic Partnership Agreements (“EPAs”) with African, Caribbean and Pacific countries (“ACP”). These EPAs seek to integrate these countries into the world economy by pro- moting trade and furthering their economic development. As a result of the EPAs, products from ACP countries can enter the EU market free of import duties since 1 January 2008. However, import duties on EU exports to ACP countries will only gradually be removed.

Bilateral agreements

The EU has concluded numerous bilateral trade agreements with its trading partners, for example, with Israel, , Mexico, South Africa, South Korea, etc. Furthermore, negotiations regarding new agreements are in progress with India, Malaysia, and several other countries.

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Under these agreements, which are also notified as derogations to the WTO rules, trade is liberalized between the EU and the other country. This means that all goods originating in e.g., Israel, can enter the EU free of customs duties, provided they meet the rules of origin for that agreement.

Unilateral trade preferences

Finally, the EU has implemented unilateral trade preferences to support developing countries. For example, the EU adopted the Generalized System of Preferences (“GSP”), under which 176 developing countries receive duty-free access or a tariff reduction on the imports of their products in the EU.

The GSP regime covers over 6300 products, over half of which are non-sensitive products and therefore receive duty-free access. The remaining products are considered sensitive, in particular agricultural, textile, , apparel, carpets and items, and benefit from different degrees of tariff reduction. For example, textile and clothing receive a reduction of 20% on the ad valorem duty rate.

The EU‟s GSP scheme consists of several other preferential regimes:

The Everything but Arms (“EBA”) initiative is a special arrangement for LDCs. Under this arrangement, the 50 LDCs are given duty free access to the EU for all their products, except arms and ammunition. The Generalized System of Preferences Plus (“GSP+”) offers additional preferences to GSP countries that ratify and im- plement international standards in the fields of human rights, labor standards, sustainable development and good govern- ance.

Therefore, even in the absence of bilateral or multilateral trade agreements between the EU and another country, it is very likely that imports from that other country still benefit from preferential duty treatment based on one of the GSP mechanisms.

The role of origin rules

Even though there is substantial overlap between the EU‟s various preferential agreements and arrangements, the rules of origin between these mechanisms often vary considerably. This means, for example, that while a product may be deemed to originate in one country for the purpose of the GSP, it may not fulfill the criteria of the rules of origin set in a bilateral trade agreement. This creates a complex maze of rules of origin that is difficult to navigate for foreign producers. In particular, producers may think they do not qualify for preferential origin, while in fact they do.

1.2 Developments under the EU’s Generalized System of Preferences

1.2.1. Forthcoming revision of the EU’s Generalized System of Preferences

The GSP Regulation 732/2008 is currently being revised. In view of the Lisbon Treaty, the EU is looking at a complete overhaul of its GSP system with a view to simplifying it and making it easier to access. The EU aims to have a new GSP in place by 1 Janu- ary 2014. Currently, the consultations and preparations are ongoing. The EU aims to present a proposal for a new GSP in 2012 and have it adopted in 2013 for entry into force 1 January 2014.

The review includes the following:

The criteria for beneficiary countries/sectors. Will China still qualify for GSP, should there still be a distinction between sec- tors and countries. Based on recent statistics, GSP preferences were re-established for six countries: Algeria was re- established in the GSP for exports of mineral products, and India for exports of jewelry, pearls, etc. The criteria for graduation and de-graduation of beneficiary countries. The graduation triggers either a removal or a re- establishment of tariff preferences whenever an individual country‟s performance on the EU market over the past three years exceeds or falls below a set threshold. The criteria for eligibility for GSP+. The list of products entitled to preferential treatment including their (non) sensitivity.

Companies with an interest in GSP should consider getting involved now to ensure their interests are adequately safeguarded in this review.

1.2.2. EU adopts new rules of origin for its Generalized System of Preferences

In November 2010, the EU adopted new rules of origin for products imported under its GSP as laid down in Commission Regula- tion No 1063/2010 of 18 November 2010 (“GSP Origin Regulation”). The new rules benefit imports from developing countries, and in particular those in the textiles and clothing sector.

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Rules of origin are used to determine the origin of goods, and whether these goods originate in countries covered by the EU‟s preferential trade agreements. This, in turn, determines whether the goods will be imported into the EU subject to preferential duty -free treatment.

To be considered as originating in a country covered by a preferential trade agreement, the goods must either be wholly obtained (e.g., grown, mined, harvested or raised) in that country, or the goods must have been sufficiently processed in that country. The latter is the most important for the textiles and apparel industry.

The previous rules of origin applied under the GSP were widely seen as too complex for developing countries and least devel- oped countries. As a result, the benefits the GSP offered were underutilized. The revised GSP origin rules aim at simplifying the existing rules and at providing additional flexibility for developing countries and LDCs. The overall idea of the European Commis- sion is also that these revised GSP origin rules will serve as a basis for all future trade agreements concluded by the EU.

In particular, the revised GSP origin rules result in the following:

Simplification of origin rules

In general, the new GSP origin rules shift from product-specific rules to sector-specific rules. This means that companies produc- ing several products in a single sector will know with more certainty and simplicity what the rules are for all their products.

Less restrictive origin rules

Depending on the product or the sector, the rules are based on (i) the calculation of a maximum content of non-originating materi- als or, (ii) a change of tariff heading, or (iii) a specific processing requirement, or (iv) the use of wholly obtained inputs.

In general, finished products may include non-originating materials or parts provided their total value does not exceed 15% of the ex-works price of the finished product (previously this maximum was set at 10%). Beyond this limit, it is considered that the work- ing or processing carried out on the product is insufficient to confer origin.

For the textiles sector, the limit of non-originating materials that may be used in the final product varies between 10% to 70%. For example, if a company located in a developing country imports unembroidered fabric, it may subsequently claim preferential origin for its embroidered clothing accessories, handkerchiefs or , provided that the value of the imported unembroidered fabric does not exceed 40% of the ex-works price of the product. This means that, in order for this product to be conferred preferential origin, non-material costs (such as labor, overheads and profit) must represent at least 60% of the product‟s price.

Moreover, in the textile and clothing sector, single-stage processing (i.e., manufacture from fabric) is now allowed in many cases. Previously, the rules required two stages of processing (i.e., manufacture from yarn) in order to confer origin on a product. This effectively means that developing countries and LDCs will increasingly resort to importing fabric, rather than yarn or fibers, in or- der to manufacture clothes. The clothes will then, provided the above minimum processing requirements are met, be exported to the EU with preferential tariff treatment.

Revision of the cumulation rules

The GSP Origin Regulation relaxes the rules for regional cumulation, which allows countries with identical rules of origin to work together for the purpose of products eligible for preferential tariff treatment.

Simplification of the procedural rules: self-declaration

Finally, the GSP Origin Regulation revises and simplifies the procedures for claims of preferential origin. The rules are simplified at the outset, i.e., a self-declaration system replaces the current certification system, thereby allowing customs authorities to focus on post-clearance controls. Under the new system, statements of origin will be issued directly by exporters who will be registered in an electronic system.

The new origin rules will enter into force on 1 January 2011. These new rules are likely to result in increased trade between fabric- producing countries, clothing-producing countries, and clothing-consuming countries.

If you have any questions about these rules or how they operate in your specific situation, please do not hesitate to contact us.

1.3 European Union is one step closer to adopting mandatory country of origin labeling

Late October 2010, the European Parliament voted in favor of adopting a proposal for a regulation on the indication of the country of origin of certain products from third countries.

Currently, the EU does not have legislation on the use of origin marking for industrial or end user products. Rather, in 2005 the EU adopted a Directive that seeks to harmonize the conditions under which voluntary origin labels may be used. The Directive‟s

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IAF LEGAL NEWSLETTER primary purpose is to ensure consumers are not misled or confused by incorrect origin indications. This Directive for example does not define the meaning of “made in”, nor does it enable controls by customs authorities.

However, a number of the EU‟s trading partners already have mandatory origin labeling. This can be problematic for companies active in several countries, as they have to comply with different requirements.

The Commission proposal sought to introduce mandatory origin labeling for most industrial products, including heels, soles, arti- cles of apparel, clothing accessories, textiles and textile articles, footwear, bedding, cushions, etc.

The European Parliament introduced several amendments to the Commission‟s proposal that are certain to benefit clothing and textiles producers. For example, the European Parliament has shifted the scope of the Regulation from industrial products, to end consumer products. This means that not all goods that are imported into the EU will have to bear origin labeling, but only those that are destined for end consumers.

Additionally, the European Parliament introduced the possibility that the required “made in” labeling be affixed on the product in English, and not exclusively in the language of the Member State in which the goods are to be marketed. This amendment is im- portant for manufacturers in third countries, as they may not always know, at the time of manufacturing, which country the goods are destined for. This therefore removes any need for costly and time-consuming re-labeling and re-packaging of products upon importation.

It is however important to note that the current Proposal creates a distinction between imported products, and EU products. In- deed, only products that are imported into the EU, and that are covered by the Regulation, must bear an indication of origin. As this measure constitutes a technical regulation, it may be possible for foreign producers to raise arguments of discrimination and trade restriction under the rules of the WTO.

The European Council will now have to vote on the Proposal. If it approves all the amendments introduced by the Parliament, the Regulation will be adopted and will enter into force. However, if the Council does not agree with the Parliament‟s amendments, the adoption of the Regulation will be delayed until the two institutions agree about the text.

If you have any questions about the proposed Regulation on origin labeling, its compatibility with WTO-law, or if you wish to be informed about possibilities of having your views heard in the legislative proposal, do not hesitate to contact us.

1.4 The EU publishes a proposal to repeal obligation to present proof of origin on importation of textile products

In October 2010, the Commission put forward a proposal to repeal Regulation (EC) 1541/98, which imposes an obligation on im- porters of textiles to produce proof of origin upon importation.

Regulation 1541/98 had been adopted with a view to ensuring that measures of quantitative restriction applied on textiles were correctly applied and respected. As a result, importers of textiles in the EU were required to present either proof of origin (a decla- ration of origin on the invoice of the goods) or a certificate of origin for each consignment.

Recognizing that most quantitative restrictions on textiles have now been abolished, the EU is proposing to remove the obligation to present proof of origin for imported textiles. This should remove the time-consuming and costly process of obtaining certification of origin for each consignment of goods.

The Parliament and Council have not yet voted on this proposal. As no major opposition is expected to this proposal, it will proba- bly be adopted within the next six to 12 months.

1.5 The European Commission publishes a proposal to formally liberalize trade of textiles between the EU and Uz- bekistan

The EU and the Republic of Uzbekistan signed a Partnership and Cooperation Agreement (“PCA”), which entered into force in 1999. This PCA sought to liberalize trade between the EU and Uzbekistan, in particular by prohibiting discriminatory practices and quantitative restrictions. However, the agreement explicitly excluded trade in textile products from its discipline.

Instead, trade in textile products was covered by a separate bilateral agreement, concluded in 2000. This agreement however lapsed on 31 December 2004, thereby creating a situation of uncertainty for EU and Uzbek textile companies.

Despite the agreement lapsing, it is reported that trade in textiles between the EU and Uzbekistan has not substantially been af- fected. Both parties nevertheless felt the need to formally include textiles in their PCA in a Protocol.

The new protocol will provide legal certainty to textile companies in the EU and Uzbekistan. In particular, companies will now be in a position to formally oppose any discriminatory or trade restrictive practices in the sector.

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1.6 US House of Representatives votes in favor of 100-percent local content requirement in US defense procure- ment of textiles and apparel

On 15 September, the US House of Representatives voted in favor of H.R. 3116, the Berry Amendment Extension Act, which seeks to amend the Homeland Security Act of 2002. If adopted, this Act would impose a 100-percent local content requirement for procurement of textiles and apparel.

Indeed, the Act would prohibit the Secretary of the Department of Homeland Security from procuring certain items directly related to national security interests (including clothing, tents, or natural fiber products) that are not grown, reprocessed, reused, or pro- duced in the US.

The Bill, which has the support of the American Apparel & Footwear Association, the American Manufacturing Trade Action Coali- tion and the National Council of Textile Organizations, introduces exceptions applicable in limited circumstances. This 100- percent US input requirement is not applicable:

to the extent that it is not possible to procure satisfactory quality and sufficient quantity of the covered products; to procurement by vessels in foreign waters; to emergency procurement, and to purchases for amounts not greater than the simplified acquisition threshold of USD 100,000.

The Berry Amendment however mentions that this local content requirement should be implemented in full respect of the US‟s international obligations. This raises the question of whether this amendment will also cover products originating in countries party to the WTO‟s Government Procurement Agreement (“GPA”), to which the US is also a party. Parties to the GPA have indeed committed to liberalize procurement opportunities, and not to discriminate between local and foreign producers or service- providers in public procurement.

The Bill must now be approved by the Senate and signed by the President before becoming law.

In parallel to this development, the EU announced in November 2010 that it would examine measures to increase leverage in its trade relations with other countries. In particular, it wants to tackle protectionist policies in public procurement. Due to the eco- nomic crisis, for example, a number of countries have instituted “Buy Local” programs, which favor local over foreign products and services. The European Commission has stated: “We will continue to press for more opening of procurement abroad, and we will in particular fight against discriminatory practices.”

While defense procurement is of a particular nature, as it has traditionally been an area in which local content requirements were tolerated, the new EU policy is sure to liberalize additional public procurement markets to producers from all countries.

2. Developments in intellectual property protection

2.1 US Congress to consider extending intellectual property protection to fashion designs

Fashion designs have traditionally not been protected under US intellectual property laws. This stems in particular from the fact that clothes are seen as having a utilitarian value, and US copyright law does not protect “useful” articles.

A recent Bill introduced before the US Congress may however bring important developments to this field. Indeed, the Design Pi- racy Prohibition Act (H.R. 2196) and the Innovative Design Protection and Piracy Prevention Act (S. 3728) would provide a three- year term of copyright protection for fashion designs. Protected items would include clothing ( and outerwear), , duffel bags, tote bags, belts, gloves, footwear and eyeglass frames.

However, both Acts will not provide identical protection to fashion designs. For example, under the Innovative Design Protection and Piracy Prevention Act, protection arises upon the design‟s creation, without the need for formal registration of the design. On the contrary, registration is a prerequisite under the Design Piracy Prohibition Act. Moreover, under the Innovative Design Protec- tion and Piracy Prevention Act, the design must be a sufficiently “unique, distinguishable, non-trivial and non-utilitarian variation over prior designs for similar types of articles” to be protected. No such requirement exists under the Design Piracy Prohibition Act.

Similarities between the two Acts nevertheless do exist. Indeed, both bills would offer copyright protection for the appearance of an article of apparel as well as its ornamentation. Both bills would prohibit the creation, importation, sale, or distribution of any article the design of which has been copied from a protected fashion design (or from an image of it), without the consent of the registered design owner.

There are, however, some limitations to liability, relating for example to the fact that (i) the article in dispute is original and not sub- stantially similar or identical to the protected design, (ii) the article reflects a trend (i.e., a newly popular concept or idea that is in immediate demand), (iii) the article is the result of independent creation, etc.

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Penalties for infringement of these provisions range from USD 250,000 or USD 5 per copy (under the Design Piracy Prohibition Act) or USD 50,000 or USD 1 per copy (under the Innovative Design Protection and Piracy Prevention Act).

If adopted, these Acts are sure to benefit innovative clothing and apparel producers. However, they will also need to be more cau- tious of drawing inspiration from existing designs and models.

Companies will however have to wait a little longer before being able to rely on these Acts, as it is not likely that they will be adopted within the next year.

If you have any question about how these Acts may affect your company or your production of apparel, do not hesitate to contact us.

3. Regulatory

3.1 EU adopts stricter rules for emissions from industrial installations

In November 2010, the EU adopted the Industrial Emissions Directive (“IED”), which consolidates and expands on seven existing directives in the field of industrial emissions. This IED applies stricter limits on air pollution and lays down rules on the prevention and control of pollution resulting from industrial activities. In particular, it sets strict limits on emissions of pollutants such as sul- phur dioxide, oxides of nitrogen, and airborne dust.

Extended scope to cover new installations and activities

The IED expands the scope of coverage to include new installations – such as small installations with a rated thermal input of at least 20 MWth – and new activities with an impact on the environment. In the production of textiles and clothing, the following activities will be covered:

- pre-treatment (operations such as washing, bleaching, mercerization) or dyeing of textile fibers or textiles where the treatment capacity exceeds 10 tons per day;

- tanning of hides and skins where the treatment capacity exceeds 12 tons of finished products per day;

- surface treatment of substances, objects or products using organic solvents, in particular for dressing, printing, coating, degreasing, waterproofing, sizing, painting, cleaning or impregnating, with an organic solvent consumption capacity of more than 150 kg per hour or more than 200 tons per year.

Stricter application of Best Available Techniques

Under the IED, industrial installations may only be operated if they have obtained an environmental permit from authorities, which certifies that they apply “best available techniques” (“BATs”). Moreover, the BATs requirement will become stricter, as EU Mem- ber States will no longer be able to depart from these BATs in granting permits unless justified by specific circumstances.

Stricter emission limit values

The IED also addresses the level of emissions for industrial installations. In particular, the new Directive sets lower emission limit values for certain categories of installations, such as large combustion plants, and for certain pollutants. These emission limit val- ues will be set by reference to BATs. Installations will have until 2016 to comply with the stricter limits.

The adoption of the new Industrial Emissions Directive will lead to more costs for industrial installations in the EU, as they adapt to these new requirements. If you have any questions relating to this measure, and how it will affect your business, do not hesitate to contact us.

3.2 Nanotechnology update

In previous IAF newsletters, we reported on updates in the field of nanotechnology. In particular, our last update focused on the EU‟s proposed controversial definition of nanomaterials. Since these updates, policymakers in the US, the EU, and at the interna- tional level have continued their efforts to keep pace with the rapid commercial development of nanotechnology. These efforts are driven in part by uncertainty regarding the safety of nanomaterials.

For example, the National Institute for Occupational Safety and Health (NIOSH) just released a study indicating that breathing nanoparticles might result in damaging health effects (http://www.cdc.gov/niosh/docs/2010-158/). These policy developments pro- vide opportunities to shape important regulatory policies that, depending upon the outcome, could enhance or hinder the commer- cial use of nanotechnology.

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3.2.3. National Nanotechnology Initiative Strategic Plan Out for Public Comment

On November 1, the White House‟s National Science and Technology Council released for public comment the National Nanotechnology Initiative (NNI) Strategic Plan. Comments must be submitted by November 30. The NNI is a 10-year old Federal interagency effort to coordinate R&D and enhance collaboration regarding nanotechnology, and includes the Environmental Pro- tection Agency (EPA), Food and Drug Administration (FDA), Department of

Energy, Consumer Product Safety Commission (CPSC), Department of Defense and Department of Transportation.

The 2011 budget provides nearly USD 1.8 billion for the NNI, distributed among the various participating agencies (the cumulative investment in the NNI since 2001 has been approximately USD 14 billion). The NNI Strategic Plan proposes the Federal govern- ment‟s key priorities for nanotechnology spending and policy, including major efforts aimed at environmental, health and safety and investing in several “signature initiatives,” including exploiting the benefits of nanotechnology to enhance solar energy tech- nologies (including batteries), developing new “sustainable industries” in the nanotechnology field, including optics and advanced materials, and accelerating the discovery and use of nanoscale fabrication processes to produce revolutionary materials and de- vices to advance the field of nanoelectronics.

Commenting on the NNI Strategic Plan offers an opportunity to influence the future priorities, actions and spending of the Federal government on nanotechnology.

3.2.4. EU and ISO Deliberating on Nanotechnology Labeling Guidance

The European Committee For Standardization (CEN) and the International Organization For Standardization (ISO) have jointly distributed for ballot and comment a document titled “Guidance on the labeling of manufactured nano-objects and products con- taining manufactured nano-objects,” ISO/TS 13830:2010. The international ballot/comment period closes on January 14, 2011, and any comments must be submitted through national standards bodies. The American National Standards Institute (ANSI) Technical Advisory Group (TAG) to ISO/TC 229 (the ISO Technical Committee working on nanotechnology standards) is currently developing US comments on the Labeling Guidance. Companies may participate in this process through the ANSI TAG and, for those that have operations outside the US, through the national standards bodies in the countries where they operate.

The Labeling Guidance was initiated by CEN, largely in response to pressure from various EU stakeholders regarding the “public right to know” about the presence of nanomaterials in consumer products. Many concerns have been raised about the content of the Guidance, including whether the technical capability exists to implement it and the possibility that it might conflict with existing laws regarding labeling and communication about hazards in various jurisdictions. This document is important because though it is denominated as “guidance,” it could serve as a template for regulators, commercial entities and NGOs regarding nanotechnol- ogy and labeling. The Labeling Guidance has attracted the attention of several U.S. agencies, including EPA, FDA, CPSC and the Departments of Commerce and State.

3.2.5. ASTM International Launches Standards on Nanotechnology and Consumer Products

ASTM International is beginning work on standards for “nano-enabled” consumer products, with an initial focus that includes the detection and measurement of nanosilver in textiles and liquids. Among the projects that are being considered are standards for the assessment of nanosilver exposure from its use in textile and liquid consumer products. This development is important not only because of the national and international prestige of ASTM standards, but also because US regulatory agencies frequently play an important role in the development of such standards, sometimes signaling the views of such agencies and providing an opportunity to engage in a dialogue with them outside of the traditional regulatory processes. The first meetings in this initiative will be held on November 15 – 16 in San Diego.

3.2.6. Other Developments in the US

Nanotechnology continues to be the subject of activity under a number of regulatory programs, including:

Toxic Substances Control Act (TSCA): In the wake of the recent publication of a Significant New Use Rule (SNUR) for car- bon nano-tubes (75 Fed. Reg. 56,880 (Sept. 17, 2010), EPA has said that it intends in early 2011 to propose a TSCA §4 test rule to require companies to develop and report health effects information on multiwalled carbon nanotubes and nano- scale clays and alumina, and a TSCA §8(a) rule that would require manufacturers of nanoscale materials to notify EPA of certain information, including production volume, methods of manufacture and processing, and exposure and release infor- mation.

Federal Insecticide, Fungicide and Rodenticide Act (FIFRA): EPA announced in August that it is considering allowing the conditional use of a form of nanosilver as an anti-microbial pesticide to treat textiles, a proposal that has drawn many negative comments. This is the first time that EPA has expressly proposed to approve nanosilver for a use under FIFRA. More broadly, EPA has announced that it intends to require labeling of pesticides containing nanomaterials, and that it is considering using its data call-in authority under FIFRA to obtain information regarding the registrability of nano-scale ma- terials. A decision by EPA to use selectively its data call-in authority is viewed by industry as more acceptable than the Agency‟s possible new interpretation of FIFRA §6(a)(2) regarding reporting of “adverse effects” (submitted for OMB review in August), to require reporting to EPA the presence of nano-scale materials in already-registered and new pesticides. This 8

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interpretation would effectively create a presumption that the mere presence of nano-scale materials in pesticides is an “adverse effect.”

California: The Department of Toxic Substances Control (DTSC) is planning a second “data call-in” regarding nanomaterials (the first was announced in January 2009), aimed at gathering information on the toxicity of six metal nano- materials (nanosilver, nano zero-valent iron, nano titanium dioxide, nano zinc oxide, nano cerium oxide; and quantum dots). These materials are currently used in dozens of consumer products and cosmetics, agricultural pesticides, medical products, cell phones, solar panels, electronics; and other applications. DTSC has indicated it is initially seeking voluntary participation in this process, and formal data call-in letters have not yet been issued.

Arnoud R. Willems, Brenda Jacobs & Natalie van der Meulen, Sidley Austin LLP, ([email protected]). This contribu- tion does not constitute legal advice and does not necessarily represent the views of the IAF, nor of Sidley Austin LLP.

I N T E R N A T I O N A L A P P A R E L F E D E R A T I O N

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