40 CFR 84.19 – Transfers of allowances
(a) Inter-company transfers. As of January 1, 2022, a person (“transferor”) may transfer to any other person (“transferee”) any quantity of the transferor’s production allowances, consumption allowances, or application-specific allowances for use by the same type of application, as long as the following conditions are met:
(1) An offset equal to five percent of the amount of allowances transferred will be deducted from the transferor’s production allowance balance if a transfer is made of production allowances, or deducted from the transferor’s consumption allowance balance if a transfer is made of consumption allowances. In the case of transferring application-specific allowances, one percent of the amount of allowances transferred will be deducted from the transferor’s application-specific allowance balance.
(2) The transferor must submit to the relevant Agency official a transfer claim setting forth the following:
(i) The identities and addresses of the transferor and the transferee;
(ii) The names, telephone numbers, and email addresses of contact persons for the transferor and the transferee;
(iii) The type of allowances being transferred, including the specific application (if applicable), for which allowances are to be transferred;
(iv) The quantity (in MTEVe) of allowances being transferred;
(v) The total cost of the allowances transferred;
(vi) The amount of unexpended allowances of the type and for the year being transferred that the transferor holds under authority of this subpart as of the date the claim is submitted to EPA;
(vii) The quantity of the offset to be deducted from the transferor’s allowance balance; and
(viii) For transfers of application-specific allowances, a signed document from the transferee certifying that the transferee will use the application-specific allowances only for the same application for which the application-specific allowance was allocated.
(3) The relevant Agency official will determine whether the records maintained by EPA indicate that the transferor possesses unexpended allowances sufficient to cover the transfer claim as of the date the transfer claim is processed. The transfer claim is the quantity in EVe to be transferred plus the quantity of the offset. The relevant Agency official will take into account any previous transfers, any production, and allowable imports and exports of regulated substances reported by the transferor. Within three working days of receiving a complete transfer claim, the relevant Agency official will take action to notify the transferor and transferee as follows:
(i) The relevant Agency official will issue a non-objection notice to both the transferor and transferee indicating if EPA’s records show that the transferor has sufficient unexpended allowances to cover the transfer claim. In the case of transfers of production allowances or consumption allowances, the relevant agency official will reduce the transferor’s balance of unexpended allowances by the quantity to be transferred plus five percent of that quantity. In the case of transfers of application-specific allowances the relevant agency official will reduce the transferor’s balance of unexpended allowances by the quantity to be transferred plus one percent of that quantity. The transferor and the transferee may proceed with the transfer when the relevant agency official issues a non-objection notice. However, if EPA ultimately finds that the transferor did not have sufficient unexpended allowances to cover the claim, the transferor and transferee will be liable for any violations of the regulations of this subpart that occur as a result of, or in conjunction with, the improper transfer.
(ii) The relevant Agency official will issue an objection notice disallowing the transfer if EPA’s records show that the transferor has insufficient unexpended allowances to cover the transfer claim, that the transferor has failed to respond to one or more Agency requests to supply information needed to make a determination, or that the transferor or transferee has been notified of an impending administrative consequence and therefore is disallowed from transferring allowances in accordance with § 84.35. Either transferor or transferee may file a notice of appeal, with supporting reasons, with the relevant Agency official within 10 working days after receipt of the objection notice. The official may affirm or vacate the disallowance. If no appeal is filed electronically by the tenth working day after notification, the disallowance shall be final on that day.
(4) The transferer and transferee must maintain a copy of the transfer claim and a copy of EPA’s non-objection or objection notice for five years.
(5) An entity does not need to follow the procedures in this paragraph (a) to expend allowances possessed by another entity that is majority owned by it, it majority owns, related to it through majority ownership, or commonly owned with it.
(b) International transfers of production allowances—(1) Requests. A person may request to increase or decrease their production allowances for a specified control period through transfers of such allowances with a person in a foreign country if the applicable conditions in this paragraph are met. Once transferred, all allowances transferred consistent with this paragraph will function as a production allowance, as defined in § 84.3.
(i) Timing of requests. Any request for an increase or decrease in production allowances based on an international transfer under this paragraph must be submitted by October 1 of the year prior to the calendar year in which the transferred allowances would be usable.
(ii) Timing of the transfer. International transfers under this paragraph will be deemed to occur, and the transferred allowances will be usable, as of January 1 of the calendar year to which the transfer applies.
(2) Transfer from a person in a foreign country—information requirements. (i) A person requesting to change their production allowances based on a transfer from a person in a foreign country must submit to the relevant Agency official at the time the international transfer is requested a signed document from an official representative in that country’s embassy in the United States stating that the appropriate authority within that country has revised the domestic production limits for that country equal to the lowest of the following three production quantities and identifying which of the following three production quantities was lowest:
(A) The maximum production level permitted in § 84.7(b) in the year of the international transfer minus the quantity of production allowances (in exchange value-weighted kilograms) to be transferred;
(B) The maximum production level for the applicable regulated substances that are allowed under applicable law (including the foreign country’s applicable domestic law) minus the quantity of production allowances (in exchange value-weighted kilograms) to be transferred; or
(C) The average of the foreign country’s actual national production level of the applicable regulated substances for the three calendar years prior to the year of the transfer minus the quantity of production allowances (in exchange value-weighted kilograms) to be transferred.
(ii) A person requesting a revision based on a transfer from a foreign country (“transferee”) must also submit to the relevant Agency official a true copy of the document that sets forth the following:
(A) The identity and address of the transferee;
(B) The foreign country authorizing the transfer;
(C) The names, telephone numbers, and email addresses of contact persons for the transferee and for the person in the foreign country;
(D) The name of the chemical and quantity (in kilograms) of production being transferred;
(E) Documentation that the foreign country possesses the necessary quantity of unexpended production rights;
(F) The calendar year to which the transfer applies; and
(G) A signed statement from a responsible official describing whether the increased production is intended for export or the market in the United States.
(3) Transfer to a person in a foreign country—Information requirements. A person requesting a transfer to a person in a foreign country must submit a request to the relevant Agency official that sets forth the following information:
(i) The identity and address of the person seeking to transfer the allowances (“transferor”);
(ii) The foreign country authorizing the transfer;
(iii) The names, telephone numbers, and email addresses of contact persons for the transferor and for the person in the foreign country;
(iv) The name of the chemical and quantity (in kilograms) of allowable production being transferred; and
(v) The calendar year to which the transfer applies;
(vi) A signed statement from a responsible official requesting that the relevant Agency official revise the number of production allowances the transferor holds such that the aggregate national production in the United States is equal to the lowest of the following three production quantities and identifying which of the following three production quantities was lowest:
(A) The maximum production level permitted in § 84.7(b) in the year of the international transfer minus the quantity of production allowances (in exchange value-weighted kilograms) to be transferred;
(B) The maximum production for the applicable regulated substances that are allowed under applicable law minus the quantity of production allowances (in exchange value-weighted kilograms) to be transferred; or
(C) The average of the United States’ actual national production level of the applicable regulated substances for the three calendar years prior to the year of the transfer minus the quantity of production allowances (in exchange value-weighted kilograms) to be transferred.
(4) Review of international transfer request to a foreign country. After receiving a transfer request that meets the requirements of paragraph (b)(3) of this section, the relevant Agency official may, at his/her discretion, consider the following factors in deciding whether to approve such a transfer:
(i) Possible economic hardships created by a transfer;
(ii) Potential effects on trade;
(iii) Potential environmental implications; and
(iv) The total quantity of unexpended production allowances held by entities in the United States.
(5) Notice of transfer. The relevant Agency official will review the submitted requests to determine whether the foreign country in which the person is located has enacted or otherwise established the same or similar requirements or otherwise undertaken commitments regarding the production and consumption of regulated substances as are contained in the AIM Act, within a reasonable time frame of the date of its enactment. If it is determined that these conditions are not met, the relevant Agency official will notify the requestor in writing that no transfers to or from the country can occur. If these conditions are satisfied such that transfers to or from the country can occur, the relevant Agency official will consider if the request meets the applicable requirements of paragraph (b) of this section. If the request meets the requirements of paragraph (b)(2) of this section for transfers from foreign countries and paragraph (b)(3) of this section for transfers to foreign countries, and if the relevant Agency official has not decided to disapprove the request based on consideration of factors listed in paragraph (b)(4) of this section if applicable, the relevant Agency official will notify the person in writing that the appropriate production allowances were either granted or deducted and specify the control period to which the transfer applies. Notifications of production allowances granted or deducted will be provided before January 1 of the calendar year to which the transfer applies.
(i) For transfers from a foreign country, such notification will reflect a revision of the balance of allowances held by the recipient of the transfer to equal the unexpended production allowances held by the recipient of the transfer plus the quantity of allowable production transferred from the foreign country minus an offset of five percent of the quantity transferred. The relevant Agency official will not adjust available allowances until the foreign country’s representative has confirmed the appropriate number of allowances were deducted in the foreign country.
(ii) For transfers to a foreign country, such notification will reflect a revision of the balance of production allowances for the transferor such that the aggregate national production of the regulated substance to be transferred is equal to the value the relevant Agency official determines to be the lowest of:
(A) The maximum production level permitted in § 84.7(b) in the year of the international transfer minus the quantity of production allowances transferred and minus an offset of five percent of the quantity transferred; or
(B) The maximum production level for the applicable regulated substances that is allowed under applicable law (in exchange-value weighted kilograms) minus the quantity of production allowances transferred and minus an offset of five percent of the quantity transferred; or
(C) The average of the actual annual U.S. production of the applicable regulated substances for the three years prior to the date of the transfer (in exchange-value weighted kilograms minus the quantity of production allowances transferred and minus an offset of five percent of the quantity transferred).
(6) Revised production limit for previous transferors. If the average actual U.S. production during the three most recent calendar years before the date of the transfer is less than the total allowable U.S. production for the applicable regulated substances permitted in § 84.7(b) for a calendar year for which international transfers are approved to occur, the aggregate allowed national U.S. production of those substances will be reduced by an additional amount beyond a simple deduction of the number of allowances reflected in the notifications under paragraph (b)(5)(ii)(B) of this section. In these circumstances, the relevant Agency official will revise the production limit for each transferor who obtained approval of a transfer of the applicable regulated substances to a foreign country in the same calendar year and notify each transferor of the revision in writing. The amount of the revision will equal the result of the following set of calculations:
(i) The total U.S. allowable production of the applicable regulated substances minus the average of the actual annual U.S. production of those substances during the three most recent calendar years prior to the calendar year of the transfer.
(ii) The quantity of production allowances for the applicable regulated substances transferred by the transferor in that calendar year divided by the total quantity of production allowances for those substances approved for transfer to a person in a foreign country by all the persons approved to make such transfers in that calendar year.
(iii) The result of paragraph (b)(6)(i) of this section multiplied by the result of paragraph (b)(6)(ii) of this section.
(iv) The unexpended production allowances held by the person minus the result of paragraph (b)(6)(iii) of this section.
(7) Effective date of revised production limits. If a revision is issued under paragraph (b)(6) of this section, the change in production allowances will be effective on the date that the notification is issued.