Lubricant manufacturers are quickly learning that there is a substantial cost to complying with the U.S. Occupational Safety and Health Administrations revised Hazard Communication Standard, published March 26, 2012, as 29 CFR 1910.1200. More commonly known as HCS 2012, the standard aims to bring U.S. workplaces and products into conformance with the internationally adopted Globally Harmonized System of Classification and Labeling of Chemicals (GHS).
Overall, the cost for all U.S. industry to comply with the new standard was estimated to be $2.1 billion dollars, to be spent over the estimated four-year implementation period. Of that total, $408 million was associated with those companies which manufacture chemical products and therefore author Safety Data Sheets or SDSs. The balance was associated with the many, many users of chemical products, and includes their costs for employee training and management familiarization.
Perhaps most astonishingly, OSHA estimated that the costs for the lubricant industry – specifically, NAICS code 324191, Petroleum and Lubricating Oil and Grease Manufacturing – to convert its Material Safety Data Sheets and labels to the new GHS format were going to be over $110 million. Thats almost 27 percent of the total to be spent by all chemical manufacturing industries, and the highest of the 44 industry groups analyzed.
Deeper into the Data
These are not the total costs of the lubricants industrys Hazard Communications Standard programs, just the additional costs of compliance with the new provisions of HCS 2012. As the table on page 16 illustrates, the vast majority of that amount was estimated to be associated with the cost of reclassification of chemical hazards and revision of SDSs and labels.
Why is this cost so high? In part, it is because the entire process we use to determine the hazards of products we produce has changed, from hazard determination to hazard classification. This game-changer fundamentally alters the way chemists understand the raw materials and reaction products in the lubricants they formulate, and the way hazard communicators author SDSs and communicate the products hazards.
Another reason is that in total our industry manufactures thousands and thousands of unique formulations. In fact, the initial estimate OSHA first made of the volume of products for which new SDSs would need to be authored was seen to be too low. Speaking before the agency on March 2010, Cathy Novak, who was then president of the Independent Lubricant Manufacturers Association, testified that OSHA had underestimated the number of SDSs produced per firm in the lubricating oils industry. She said the average firm in the industry produced approximately 1,700 lubricating products requiring an SDS. OSHA accepted the estimate of 1,700 SDSs produced per firm in NAICS 324191 and, with 329 affected establishments in this industry, increased the number of affected SDSs by approximately 400,000 SDSs.
Thats a lot of SDSs! Lets look at this more closely so we can understand just why lubricants need so many.
Classification of Mixtures
Under HCS 2012, there has been a fundamental change in how the hazards of mixtures, the kind of product lubricant manufacturers produce, are estimated. In Appendix A to 1910.1200, Health Hazard Criteria, OSHA describes the tiered approach to hazards of mixtures and their classification. OSHA assumes that many firms will have actual test data for the many hazards a formulated product might have, such as for acute toxicity, eye and skin irritation, mutagenicity, reproductive toxicity and target organ toxicity.
Essentially, in the tiered approach OSHA prescribes, test data on the complete mixture are considered as the first tier in the evaluation, followed by the application of so-called bridging principles to classify formulations whose formulas are so similar to the tested formulations that the test data may be used to classify the closely-related-but-untested mixture. Lastly, if test data are not available and bridging principles cannot be used, classifications of mixtures are then determined by using the classifications of included raw materials and reaction products.
As a result, absent complete test data on all of their formulations, lubricant manufacturers must understand the formulation details and classifications of all of the raw materials they include in their formulations. That includes purchased mixtures – which additive suppliers are reluctant to disclose for some formulations. The result: hours and hours of analysis of information, including that publicly available in data bases such as that maintained by the European Chemicals Agency, so that the lubricant manufacturer can classify its products using the cut-off and concentration limit criteria described in detail in Appendix A.
Doing the Math
Heres an example of why such detailed information is needed. Lets say you produce a synthetic metalworking fluid formulation which contains 10 different chemical ingredients, one of which is a reaction product between an alkanolamine and an organic fatty acid you blend yourself. You dont have any test data yourself. In order to determine the skin irritation classification of the mixture, you have to have available the skin irritation classifications for all of the raw materials. Your formulation may be a Category 1 skin irritant if it contains 5 percent or more of skin Cat 1 ingredients. Even if not a Cat 1 skin irritant, it may be Category 2 skin irritant if:
a) the formulation contains more than 1 percent but less than 5 percent Cat 1 ingredients, or
b) 10 percent or more skin Cat 2 ingredients, or
c) if the sum of 10 times the concentration of skin Cat 1 ingredients plus the sum of skin Cat 2 ingredients is 10 percent or more.
Sound complicated? It is. But that is just one of 10 different hazards for which all available data for each of the included raw materials must be analyzed. The algorithm for eye irritation using the additivity approach requires calculation of five different combinations of included Cat 1 and Cat 2 skin or eye irritants. And that alkanolamine-organic fatty acid reaction product that you manufacture? Youll need to understand the hazard classification of that material as well.
If you dont have acute toxicity test data for your formulation, you will need to have available acute toxicity information for all of the included ingredients.
Until raw material manufacturers complete the classification process for their products, lubricant formulators are obligated to research available information from other sources such as the European Chemical Agencys Classification and Labeling database (https://echa.eruopa. eu/information-on-chemicals). There, lubricant manufacturers will find that European manufacturers and users dont always agree on classifications of even such basic chemicals as triethanolamine. It is up to you to choose which classification to use, the consensus classification or, perhaps, the most conservative.
And once youve established the classification for that 10-ingredient synthetic metalworking fluid, there are 1,699 more products waiting.
An Economic Litmus Test
OSHA, in its analysis of any new rule, needs to determine whether the rule is economically feasible. Part of that test is whether the cost of compliance exceeds 1 percent of revenues or exceeds 5 percent of an affected industrys profits. OSHA concluded that in no industry size class – including the lubricant industry – do the annualized costs exceed 0.28 percent of revenues or 3.3 percent of profits. (Federal Register Vol. 77, No. 58, p. 17661.)
OSHA examined the impact of HCS 2012 on all small petroleum, lubricating oil and grease manufacturers with respect to their costs as a percentage of revenues and profits. Its analysis of an estimated 261 small firms showed total annualized costs of hazard communication (costs over 20 years with a discount factor added) were almost $6 million a year. While the cost of HCS 2012 as a percentage of profits was very high – 3.28 percent – it did not exceed 5 percent. While that may not exceed OSHAs statutory limit, thats a lot of money lubricant manufacturers might have put to good use somewhere else!
OSHA then went further and looked at very small entities in our industry, firms with 20 or fewer employees. OSHA estimated there are 176 such entities. Each, OSHA said, would have to produce more than 310 chemical products, each with its own SDS and label, to get to the agencys level of significance. OSHA suggests even the very smallest firms in our business would not produce SDSs and labels without the assistance of specialized computer software, which OSHA assumes most small firms do not now use. OSHA believes even these very small firms would instead invest in appropriate software to lower their costs, as most larger firms do. (Federal Register Vol. 77, No. 58, p. 17668.)
What else did OSHA suggest companies in our industry might do? OSHA said firms producing large numbers of chemical products commonly do so because they sell a variety of different mixtures with similar ingredients. Once appropriate test data for the ingredients of these mixtures has been developed, using the bridging principles outlined in Appendix A, OSHA says small firms developing SDSs and labels for each mixture would take far less than the seven hours per chemical product it had estimated for small firms to convert to the GHS system. However, OSHA did not include the costs of product testing in these estimates of cost of compliance. Product testing, as many manufacturers know, can be very costly.
OSHA concluded that there are not a substantial number of small entities or very small entities that would have significant economic impacts from this rule as a result of producing a very large number of distinct chemical products (p. 17668). As a result, OSHA concluded, the rule met the economically feasible bar the law imposed.
What Will It Really Cost Me?
OSHA estimates that the time a very small entity might spend to reclassify a product and modify an SDS is seven hours. The table on page 18 summarizes the estimates and the amount of time and associated costs for large, medium and small sized firms to classify a single lubricant mixture.
Large firms with more staff, OSHA acknowledges, are going to enjoy some economies of scale: Those firms will spend on average three hours per SDS and an additional $208 for software modifications. (Thats a number OSHA has used to estimate the cost – per SDS – of buying or leasing or hiring the software to get this job done).
If you calculate the cost of the people who do the job of actually reviewing your product formulas and reclassifying them as described above, and add to that the cost of purchasing, leasing or hiring the software, and also to train your employees, OSHA estimates youll find your costs will range from a low of $406 per product for a large firm, to $538 per product for a mid-size firm, to up to perhaps $670 for a small firm, per product.
A larger company that manufactures 500 unique lubricant formulations might be facing over $200,000 of additional compliance costs. A smaller firm, say one which produces just 100 products, could well be looking at close to $70,000 in compliance costs over that four-year HCS implementation period.
Now you can see why the numbers in our industry are so high. By OSHAs own calculations, the steps of reviewing ingredient raw materials and then, from the ingredient classification data developed, classifying each product, are not going to be inexpensive. Many lubricant manufacturers will be looking at six-figure HCS 2012 implementation costs when everything is added up.
What Do I Do Next?
If youre a lubricant manufacturer and have not already done so, develop a written HCS 2012 implementation plan right now. Include an estimate of costs for purchasing or leasing SDS database software, or for hiring an authoring service.
Your plan needs to address employee training, too. The first compliance date for training your staff on label elements and the globally harmonized SDS format is Dec. 1, 2013 – barely nine months away. OSHAs Hazard Communication web page (www.osha.gov/dsg/hazcom/ index.html) contains a wealth of information, including several OSHA Quick Cards which you can use right away to begin your training.
The sooner you begin, the sooner you will be done and the less costly this will be.