Formaldehyde Emissions from Composite Wood Products Regulations: SOR/2021-148

Canada Gazette, Part II, Volume 155, Number 14

Registration
SOR/2021-148 June 17, 2021

CANADIAN ENVIRONMENTAL PROTECTION ACT, 1999

P.C. 2021-590 June 17, 2021

Whereas, pursuant to subsection 332(1)footnote a of the Canadian Environmental Protection Act, 1999footnote b, the Minister of the Environment published in the Canada Gazette, Part I, on June 29, 2019, a copy of the proposed Formaldehyde Emissions from Composite Wood Products Regulations, and persons were given an opportunity to file comments with respect to the proposed Regulations or to file a notice of objection requesting that a board of review be established and stating the reasons for the objection;

Whereas, pursuant to subsection 93(3) of that Act, the National Advisory Committee has been given an opportunity to provide its advice under section 6footnote c of that Act;

And whereas, in the opinion of the Administrator in Council, pursuant to subsection 93(4) of that Act, the proposed Regulations do not regulate an aspect of a substance that is regulated by or under any other Act of Parliament in a manner that provides, in the opinion of the Administrator in Council, sufficient protection to the environment and human health;

Therefore, His Excellency the Administrator of the Government of Canada in Council, on the recommendation of the Minister of the Environment and the Minister of Health, pursuant to subsection 93(1) of the Canadian Environmental Protection Act, 1999footnote b, makes the annexed Formaldehyde Emissions from Composite Wood Products Regulations.

Formaldehyde Emissions from Composite Wood Products Regulations

Interpretation

Definitions

1 The following definitions apply in these Regulations.

ASTM
means ASTM International, formerly known as the American Society for Testing and Materials. (ASTM)
ASTM D6007
means the standard ASTM D6007, entitled Standard Test Method for Determining Formaldehyde Concentrations in Air from Wood Products Using a Small-Scale Chamber. (ASTM D6007)
ASTM E1333
means the standard ASTM E1333, entitled Standard Test Method for Determining Formaldehyde Concentrations in Air and Emission Rates from Wood Products Using a Large Chamber. (ASTM E1333)
component part
means a product into which a composite wood panel or a laminated product is incorporated and that is a finished good or is to be contained in one. (composant)
composite wood panel
means any of the following products:
  • (a) hardwood plywood;
  • (b) particleboard;
  • (c) medium-density fibreboard;
  • (d) thin medium-density fibreboard. (panneau de bois composite)
composite wood product
means a composite wood panel, a laminated product, a component part or a finished good. (produit de bois composite)
Directive
means the Directive concerning testing for formaldehyde emissions, dated June 2021 and published by the Government of Canada on its website. (directive)
finished good
means any product into which a composite wood panel or a laminated product is incorporated and that is to be sold to an end-user but does not include site-built buildings or site-built building improvements. (produit fini)
hardboard
means a panel composed of cellulosic fibres, consolidated under heat and pressure in a hot press by one of the following processes:
  • (a) a wet process;
  • (b) a dry process that uses phenolic resin or a resin in which there is no formaldehyde as part of the resin cross-linking structure; or
  • (c) a wet-formed and dry-pressed process. (panneau dur)
hardwood plywood
means a decorative panel that is manufactured for non-structural applications and that is made from plies of veneer that are glued to a core of composite or veneer or a combination of composite and veneer. (contreplaqué de feuillus)
laminated product
means a product that is
  • (a) composed of a veneer that is glued to a core or platform consisting of a composite wood panel or veneers; and
  • (b) made by a manufacturer of component parts or finished goods for incorporation into the component parts or finished goods. (produit lamellé)
medium-density fibreboard
means a panel that is greater than 8 mm in thickness and that is composed of cellulosic fibres made by dry forming and dry pressing a resinated fibre mat but does not include hardboard. (panneau de fibres à densité moyenne)
particleboard
means a panel composed of discrete particles of cellulosic material consolidated under pressure with resin but does not include a panel composed of cellulosic material made from fibres, flakes or strands. (panneau de particules)
production line
means a set of operations and equipment used to make composite wood panels or laminated products in one facility. (chaîne de production)
product type
means a type of composite wood panel or laminated product, made by the same manufacturer with the same type of resin, that differs from another product type based on its composition and formaldehyde emissions. (type de produit)
thin medium-density fibreboard
means a panel that has a maximum thickness of 8 mm and that is composed of cellulosic fibres made by dry forming and dry pressing a resinated fibre mat but does not include hardboard. (panneau de fibres à densité moyenne mince)
TSCA Title VI
means Part 770, subchapter R (Toxic Substances Control Act), chapter I, Title 40 of the United States Code of Federal Regulations, entitled Formaldehyde Standards for Composite Wood Products, as amended from time to time. (titre VI de la TSCA)
veneer
means a sheet of wood or woody grass with a maximum thickness of 6.4 mm that is rotary cut, sliced or sawed from a log. (placage)

Incorporation by reference

2 In these Regulations, any reference to a standard is to be read as a reference to the most recent version of that standard.

Application

Application

3 Subject to section 4, these Regulations apply in respect of any composite wood product that contains formaldehyde.

Non-application

4 These Regulations do not apply in respect of

Prohibitions

Import, sell or offer for sale

5 A person must not import, sell or offer for sale a composite wood product that contains formaldehyde unless

Emission Limits and Testing

Composite Wood Panels and Laminated Products

Emission limits — primary testing

6 (1) Formaldehyde emissions from a composite wood panel or laminated product must not exceed the following limits when the panel or product is tested in accordance with paragraph 7(1)(b):

Additional emission limit

(2) Formaldehyde emissions from a composite wood panel or laminated product must not exceed the applicable correlated limit that is established in accordance with Section 3 of the Directive and verified by a third-party certifier when the panel or product is tested in accordance with paragraph 8(1)(b).

Primary testing

7 (1) A manufacturer of composite wood panels or laminated products must, for each product type,

Frequency

(2) The selection, testing and verification must be performed four times annually, during the following periods:

Equivalence of test methods

(3) For the purpose of paragraph (1)(b), a manufacturer that decides to test the specimen in accordance with the requirements set out in ASTM D6007 must have an accredited laboratory establish the equivalence of ASTM D6007 to ASTM E1333 in the manner set out in Section 2 of the Directive and have the equivalence verified by a third-party certifier. The manufacturer must have the equivalence re-established and verified annually for the first three consecutive years after the day on which equivalence is established and every two years after that as well as

Exemption — laminated products

(4) A manufacturer of laminated products is not required to have the selection, testing and verification referred to in subsection (1) performed for a product type if

Quality control testing

8 (1) A manufacturer of composite wood panels or laminated products must, for each product type,

Frequency — selection and testing

(2) The selection and testing referred to in paragraphs (1)(a) and (b) must be performed

Frequency of verification

(3) The verification referred to in paragraph (1)(c) must be performed on a quarterly basis.

Correlation of results

(4) For the purpose of paragraph (1)(b), the manufacturer must

Exemption — laminated products

(5) A manufacturer of laminated products is not required to perform the selection and testing referred to in subsection (1) — or have the selection and testing performed — and have the testing verified for a product type if

Reduced-frequency testing — panels

(6) Despite paragraph (2)(b), a manufacturer of particleboard, medium-density fibreboard or thin medium-density fibreboard may perform the selection and testing — or have the selection and testing performed — in accordance with paragraphs (1)(a) and (b)

Test chamber conditions and operation

9 A manufacturer must ensure that the conditions and operation of the formaldehyde test chamber that is used to perform testing using ASTM E1333 or ASTM D6007 are, despite the requirements in those test methods, in accordance with the requirements set out in Table 1 of Section 4 of the Directive.

Composite Wood Panel Made with a No-added-formaldehyde Resin

General rule

10 (1) Despite subsections 7(2) and 8(2) and (3), if formaldehyde emissions from composite wood panels of a product type made with a no-added-formaldehyde resin that are measured during testing set out in subsection (2) do not exceed the limits set out in subsection (3), the manufacturer may have specimens of the product type selected and tested and the testing verified on the reduced-frequency basis set out in subsection (4).

Selection, testing and verification

(2) For the purpose of subsection (1), the manufacturer must, in accordance with subsection 7(1), have one specimen selected and one test performed and verified and, in accordance with subsection 8(1), it must select 13 specimens and perform 13 tests – or have the specimens selected and the tests performed – and have the tests verified over a period of three months during which the product type is manufactured.

Emission limits

(3) For the purpose of subsection (1), the formaldehyde emission limits are

Reduced-frequency testing

(4) For the purpose of subsection (1), the manufacturer must have one specimen selected and one test performed and verified in accordance with subsection 7(1) every two years to ensure that the formaldehyde emissions do not exceed the applicable limit set out in paragraph (3)(a) or (b), as the case may be.

Change in resin or process

(5) Despite subsection (1), if there is a change in the manufacturing process or in either the amount or formulation of resin used in the manufacture of the product type referred to in subsection (1) that might affect formaldehyde emissions, the manufacturer must have at least one specimen selected and, for each specimen, have one test performed and verified in accordance with subsection 7(1), and it must select at least one specimen and, for each specimen, perform one test – or have the specimen selected and the test performed – and have the test verified in accordance with subsection 8(1) to ensure that formaldehyde emissions do not exceed the applicable limit set out in paragraph (3)(a) or (b), as the case may be.

Change in resin type

(6) Despite subsection (1), if there is a change in the type of resin used in the manufacture of composite wood panels of a product type, the manufacturer may no longer have a specimen selected and a test performed and verified on the reduced-frequency basis unless the product type again meets the conditions under this section for reduced-frequency selection, testing and verification.

Composite Wood Panel or Laminated Product Made with an Ultra-low-emitting-formaldehyde Resin

General rule

11 (1) Despite subsections 7(2) and 8(2) and (3), the manufacturer of a product type made with an ultra-low-emitting-formaldehyde resin may,

Selection, testing and verification

(2) For the purpose of subsection (1), the manufacturer must, in accordance with subsection 7(1), have two specimens selected and two tests performed and verified and, in accordance with subsection 8(1), it must select 26 specimens and perform 26 tests – or have the specimens selected and the tests performed – and have the tests verified over a period of six months during which the product type is manufactured.

Emission limits

(3) For the purpose of paragraph (1)(a), the formaldehyde emission limits are

Reduced-frequency testing

(4) For the purpose of paragraph (1)(a), to ensure that the formaldehyde emissions do not exceed the applicable limit set out in any of paragraphs (3)(a) to (d), as the case may be, the manufacturer must

Additional emission limits

(5) For the purpose of paragraph (1)(b), the formaldehyde emission limits are

Further-reduced-frequency testing

(6) For the purpose of paragraph (1)(b), the manufacturer must have two specimens selected and two tests performed and verified in accordance with subsection 7(1) every two years to ensure that the formaldehyde emissions do not exceed the applicable limit set out in paragraph (5)(a) or (b), as the case may be.

Change in resin or process

(7) Despite subsection (1), if there is a change in the manufacturing process or in either the amount or formulation of resin used in the manufacture of the product type referred to in subsection (1) that might affect formaldehyde emissions, the manufacturer must have at least one specimen selected and, for each specimen, have one test performed and verified in accordance with subsection 7(1), and it must select at least five specimens and, for each specimen, perform one test – or have the specimens selected and the tests performed – and have the tests verified in accordance with subsection 8(1) to ensure that formaldehyde emissions do not exceed the applicable limits set out in subsection (3) or (5), as the case may be.

Change in resin type

(8) Despite subsection (1), if there is a change in the type of resin used in the manufacture of a product type, the manufacturer may no longer select specimens and perform tests – or have them selected and performed – and have tests verified on the reduced-frequency basis in subsection (4) or (6), as the case may be, unless the product type again meets the conditions under this section for reduced-frequency selection, testing and verification.

Specimens

Selection

12 (1) A specimen of a composite wood panel or laminated product that is representative of the entire lot must be selected from a bundle, but not from the top or bottom of the bundle.

Composite wood panel or laminated product

(2) The specimen of a composite wood panel or laminated product selected must be in an unfinished condition and without a topcoat.

Dead-stacked or wrapped

(3) The specimen must be dead-stacked or wrapped airtight between the time of selection and the start of specimen conditioning.

Handling of specimen

13 The specimen must be handled in accordance with the requirements set out in section 9.1 of ASTM D6007.

Shipping of specimen

14 During shipment of the specimen,

Inspection of wrapping

15 (1) As soon as feasible after a specimen arrives at an accredited laboratory, the person responsible for the specimen must inspect the wrapping for signs of damage.

Wrapping unopened

(2) The wrapping must not be opened until specimen conditioning occurs.

Rejection of specimen

(3) The person responsible for the specimen must reject the specimen if

Specimen conditioning

(4) The manufacturer must ensure that the specimen is conditioned in accordance with Table 1 of Section 4 of the Directive and that the conditioning is initiated within 30 days after the day on which the composite wood panel or laminated product is manufactured.

Non-compliant Lot

Exceeding limit

16 (1) A composite wood panel or laminated product is considered to be part of a non-compliant lot if formaldehyde emissions from the panel or product exceed the applicable limit set out in subsection 6(1) or the correlated limit referred to in subsection 6(2) when the panel or product is tested in accordance with paragraph 7(1)(b) or 8(1)(b), respectively.

Handling

(2) If a manufacturer of composite wood panels or laminated products manufactures a non-compliant lot, the manufacturer must either destroy it, dispose of it at a waste disposal site or treat and re-test it until formaldehyde emissions do not exceed the applicable limit set out in subsection 6(1) or the correlated limit referred to in subsection 6(2).

Treatment

(3) For the purpose of subsection (2), a non-compliant lot is treated by

Re-test

(4) For the purpose of subsection (2), a non-compliant lot is re-tested by the selection and testing of one specimen from the lot and the verification of the test in accordance with subsection 7(1), or by the selection and testing of three specimens from three bundles of the lot and the verification of the tests in accordance with subsection 8(1), and averaging the results of the three tests.

Notice of non-compliance to purchaser

(5) A person that has sold a composite wood panel or laminated product from a non-compliant lot must provide written notice of the non-compliance to the purchaser within two days after the day on which they become aware of the non-compliance.

Notice of non-compliance to Minister

(6) If the person referred to in subsection (5) is the manufacturer or importer, it must also provide written notice of the non-compliance to the Minister within the timeframe set out in that subsection.

On receipt of notice

(7) A manufacturer of component parts or finished goods and an importer or seller of composite wood panels or laminated products that purchases a composite wood panel or a laminated product from a non-compliant lot and receives a notice referred to in subsection (5) must

Component parts or finished goods

(8) Subsection (7) does not apply to a manufacturer of component parts or finished goods or to an importer or seller of composite wood panels or laminated products that receives a notice of non-compliance under subsection (5) after the composite wood panel or laminated product is incorporated into a component part or finished good.

Accredited Laboratory

Accredited laboratory

17 Any testing to measure formaldehyde emissions from a composite wood panel or laminated product performed for the purposes of these Regulations must be performed by a laboratory that meets the following conditions at the time of the testing:

Third-party Certifier

Qualifications

18 For the purpose of section 19, a third-party certifier must meet the following conditions:

Declaration of certification

19 (1) A manufacturer may produce a declaration of certification for a product type that it manufactures if it has documentation demonstrating that

Contents of declaration

(2) The declaration of certification must include

Invalidity — declaration of certification

(3) A declaration of certification ceases to be valid for a product type if

New declaration of certification

(4) After a declaration of certification ceases to be valid for a product type, the manufacturer may amend the declaration to reflect that it is valid again for the product type or produce a new declaration of certification for that product type if it has documentation demonstrating that

Labelling

Composite wood panels

20 (1) Subject to section 23, a manufacturer or importer of composite wood panels must ensure that a label that includes the following information is affixed, at the time of their sale, to the composite wood panels, the bundle that contains them or their packaging:

Copy of label

(2) Subject to section 23, a person that purchases a composite wood panel from a manufacturer or importer referred to in subsection (1) may sell it or offer it for sale without the associated label if

Definition of CANFER

(3) For the purposes of the statement referred to in subparagraph (1)(c)(ii) and 21(1)(c)(ii), CANFER is a reference to these Regulations.

Other composite wood products

21 (1) Subject to section 23, a manufacturer or importer of laminated products, component parts or finished goods must ensure that a label that includes the following information is affixed, at the time of their sale, to the laminated products, component parts or finished goods, the bundle that contains them or their packaging:

Copy of label

(2) Subject to section 23, a person that purchases a laminated product, component part or finished good from a manufacturer or importer referred to in subsection (1) may sell it or offer it for sale without the associated label if

Optional information

22 A label referred to in subsection 20(1) or 21(1) may also include

Area less than or equal to 929 cm2

23 A composite wood product does not require a label if the area of its largest surface is less than or equal to 929 cm2.

Form of label

24 A label referred to in subsection 20(1) or 21(1) must be in the form of a stamp, tag or sticker that is securely affixed to the product in a visible location.

Appearance of information

25 The information on a label referred to in subsection 20(1) or 21(1) must

Record Keeping

Manufacturer — panels or laminated products

26 (1) A manufacturer of composite wood panels or laminated products must maintain a record of the following information and documents, in English or French or both languages:

Retention period and location

(2) The information and documents included in the record must be retained for a period of five years after the day on which they are made at one of the following locations:

Disclosure to Minister

(3) On request, the manufacturer must provide the Minister with any of the information and documents referred to in subsection (1).

Purchaser

(4) On request, the manufacturer must make any of the information or documents referred to in paragraph (1)(a) available to a person that purchases a composite wood panel or laminated product from the manufacturer.

Additional disclosure to Minister

(5) On request, the manufacturer must provide the following information to the Minister:

Timeframe for additional disclosure

(6) The manufacturer must provide the information referred to in subsection (5) to the Minister in English or French or both languages within 40 days after the day on which the request is made or, if the information is to be translated from a language other than English or French, within 60 days after the day on which the request is made.

Manufacturer — exempted laminated products

27 (1) A manufacturer of laminated products referred to in subsections 7(4) and 8(5) must maintain a record of the following information and documents in English or French or both languages:

Retention period and location

(2) The information and documents included in the record must be retained for a period of five years after the day on which they are made at one of the following locations:

Disclosure to Minister

(3) On request, the manufacturer must provide the Minister with any of the information and documents referred to in subsection (1).

Importer — composite wood panels or laminated products

28 (1) An importer of composite wood panels or laminated products must maintain a record of the following information and documents in English or French or both languages:

Retention period and location

(2) The information and documents included in the record must be retained for a period of five years after the day on which they are made at one of the following locations:

Disclosure to Minister

(3) On request, the importer must provide the Minister with any of the information and documents referred to in subsection (1).

Additional disclosure to Minister

(4) On request, the importer must provide the following information to the Minister in relation to the composite wood panels or laminated products that the importer imports:

Timeframe for additional disclosure

(5) The importer must provide the information referred to in subsection (4) to the Minister in English or French or both languages within 40 days after the day on which the request is made or, if the information is to be translated from a language other than English or French, within 60 days after the day on which the request is made.

Manufacturer or importer — component parts or finished goods

29 (1) A manufacturer or importer of component parts or finished goods must retain, in English or French or both languages, a copy of the declaration of certification referred to in section 19 for the product types that are incorporated into the component parts or finished goods.

Exempted laminated products

(2) Despite subsection (1), for any laminated product referred to in subsections 7(4) and 8(5) that is incorporated into a component part or finished good, the manufacturer or importer must retain a copy of the declaration of certification referred to in section 19 only for any composite wood panel that constitutes the core or platform of the laminated product.

Manufacturer — component parts or finished goods

(3) A manufacturer of component parts or finished goods must retain, in English or French or both languages, in relation to any composite wood panels or laminated products that were acquired in order to be incorporated into the component parts or finished goods and that are part of a non-compliant lot,

Retention period and location

(4) The declaration referred to in subsections (1) and (2) and the notice and information must be retained for a period of five years after the day on which they are made at one of the following locations:

Disclosure to Minister — manufacturer or importer

(5) On request, the manufacturer or importer must provide the Minister with a copy of the declaration referred to in subsections (1) and (2) and the manufacturer must provide the Minister with a copy of any written notice and information referred to in subsection (3).

Additional disclosure to Minister — importer

(6) On request, the importer must provide the following information to the Minister:

Timeframe for additional disclosure

(7) The importer must provide the information referred to in subsection (6) to the Minister in English or French or both languages within 40 days after the day on which the request is made or, if the information is to be translated from a language other than English or French, within 60 days after the day on which the request is made.

Seller — composite wood products

30 (1) A person that sells or offers for sale composite wood products must retain, in English or French or both languages, a copy of the declaration of certification referred to in section 19 for the product types that it sells or offers for sale and for the product types that are incorporated into the component parts or finished goods that it sells or offers for sale.

Exempted laminated products

(2) Despite subsection (1), for any laminated product referred to in subsections 7(4) and 8(5) that the person referred to in subsection (1) sells or offers for sale or that is incorporated into a component part or finished good that the person sells or offers for sale, the person must retain a copy of the declaration of certification referred to in section 19 only for any composite wood panel that constitutes the core or platform of the laminated product.

Retention period and location

(3) The declaration referred to in subsections (1) and (2) must be retained for a period of five years after the day on which it is made at one of the following locations:

Reporting

Information to Minister

31 (1) Every person that manufactures, imports, sells or offers for sale a composite wood product that contains formaldehyde must provide the Minister with the following information in writing:

Timeframe

(2) The person must provide the information within 60 days after the later of the day on which these Regulations come into force and the day on which it commences the manufacturing, importing, selling or offering for sale.

Requirement to update

(3) If any of the information changes, the person must provide updated information to the Minister no later than the 30th day after the day on which the change occurs.

Transitional Provisions

Composite wood product

32 These Regulations do not apply to a composite wood product that is manufactured in Canada or imported before the day on which these Regulations come into force if the person that manufactures, imports, sells or offers for sale the composite wood product retains in its records documentation establishing the date of the product's manufacture or import, as the case may be.

Laminated product

33 Sections 5 to 9, 11 to 19 and 26 to 30 do not apply in respect of a laminated product, excluding the core or platform, until the day that is five years after the day on which these Regulations come into force.

Coming into Force

After publication — 18 months

34 These Regulations come into force 18 months after the day on which they are published in the Canada Gazette, Part II.

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Executive summary

Issues: Formaldehyde in indoor air can cause irritation of the eyes, nose, and throat and some evidence indicates it may worsen asthma symptoms, especially in children. At higher levels, such as those that have been measured in some workplace environments, formaldehyde has been associated with cancer of the nasal passageways. Composite wood products are a known source of formaldehyde in indoor environments. At present, there are no Canadian regulations that set out limits on the formaldehyde emissions released from these products. Although voluntary industry standards do exist, there is a concern that some products currently imported and sold in Canada may emit formaldehyde at levels that exceed these voluntary standards and could pose a risk to human health.

Description: The Formaldehyde Emissions from Composite Wood Products Regulations (the Regulations) prohibit the import, sale or offer for sale of composite wood products that emit formaldehyde above established limits. In order to facilitate regulatory harmonization and help establish a level international playing field, the Regulations align with the United States (U.S.) Rule, Toxic Substances Control Act, Title VI (TSCA Title VI), to the extent possible. The Regulations require that composite wood panels and laminated products be tested regularly according to specific emissions test methods and meet emission limits in order to be compliant. Finished goods, such as furniture or flooring, must only incorporate composite wood panels and laminated products that have been tested and that have met the emission limits in order to be compliant with the Regulations. All composite wood products must be labelled prior to being sold in Canada, or the seller must keep a copy of the label and have it available upon request. Composite wood products that already have a bilingual label indicating compliance with the U.S. Rule will be recognized as compliant with Canadian labelling requirements. This will simplify requirements and reduce costs for industry.

The administrative differences between the Regulations and the U.S. Rule have been minimized where possible, and are not expected to limit the ability of manufacturers to comply with the technical requirements of both regulations.

The Regulations will require that, in addition to meeting the formaldehyde emission limits, composite wood panels and laminated products must also be certified by a third-party certifier (TPC) prior to import or sale. Composite wood products that have been certified under TSCA Title VI will be accepted as certified under the Regulations. For composite wood products that have not been certified under TSCA Title VI, the Regulations align with the U.S. Rule on the third-party certification framework to the extent possible, although some differences exist as a result of different legislative frameworks in each country. In addition to regulatory requirements for test data to be verified as part of the certification process, recommended TPC activities will be described in guidance. The third-party certification pertains only to enhancing oversight of regulated products. It does not remove any of the enforceable elements from the regulations proposed in the Canada Gazette, Part I, but rather provides an additional layer of oversight by a third party.

Manufacturers of composite wood panels and laminated products will be expected to keep extensive records of testing, and to make those records available to the Minister of the Environment upon request. Importers and retailers will need to keep statements of certification for their products. Some additional requirements to obtain information from manufacturers exist for importers. In addition, the Regulations will also require all regulated businesses to self-identify by informing the Minister of the Environment of which regulated activity they are involved in and their contact information.

The Regulations will come into force 18 months after their publication in the Canada Gazette, Part II. Most products imported or sold in Canada will need to comply with the applicable requirements once the Regulations come into force. However, the emission requirements specific to laminated products will not take effect until five years after the Regulations come into force, nor will testing and certification requirements for laminated products. Furthermore, the Regulations would not apply to products manufactured in Canada or imported before the coming-into-force date, so long as records are available to demonstrate the date of manufacture.

Rationale: While the Government of Canada has regulations to help reduce formaldehyde exposure in outdoor air, there are currently no regulations limiting formaldehyde released into indoor air in Canadian homes from composite wood products. The U.S. Rule establishing formaldehyde emission limits for composite wood products has been in place since 2018, and California has had similar regulations in effect since 2009. Most Canadian manufacturers of composite wood products export to the U.S., which requires that those products be compliant with the formaldehyde emissions set out in the U.S. Rule.

Canada imports substantial quantities of composite wood products from China and other overseas countries. Regulatory standards for formaldehyde emissions are needed to prevent international companies that manufacture high-emitting formaldehyde composite wood products that can no longer be sold in U.S. from selling those products on the Canadian market, increasing the risk to the health of Canadians. Moreover, on the manufacturing side, failure to align regulations with the U.S. could put Canadian manufacturers at a disadvantage. In 2017, the House of Commons unanimously agreed to adopt regulations on formaldehyde emissions from composite wood products and to ensure the Regulations are similar to the U.S. Rule.

There has been significant interest in the Regulations, with 38 comments submitted during the public consultation period. Stakeholders have shown strong support for the Regulations, especially the regulated community. A key element added to the regulations as a result of public comments is the incorporation of a third-party certification framework that is similar, to the extent possible, to the one in the U.S. Rule.

The 10-year costs to government from 2022 to 2031 (in $2019 CAD, discounted to 2020 at a 3% discount rate) are estimated to be $2.3 million, and the costs to industry over the same period are estimated to be $8.3 million for these Regulations. Using a break-even approach, if at least 460 cases of childhood asthma can be prevented due to the Regulations between 2022 and 2031, then the Regulations will provide a net societal benefit.

Issues

Composite wood products are a known source of formaldehyde in indoor environments. Formaldehyde in indoor air can cause irritation of the eyes, nose, and throat and some evidence indicates it may worsen asthma symptoms, especially in children. At higher levels, such as those that have been measured in some workplace environments, formaldehyde has been associated with cancer of the nasal passageways. At present, there are no Government of Canada regulations that set out limits for the amount of formaldehyde-containing resins that can be used in composite wood products imported or sold in Canada, or on the formaldehyde emissions released from these products. Although voluntary industry standards do exist, Canadian manufacturers of composite wood products have expressed concern that some products currently imported into and sold in Canada may give off formaldehyde emissions that exceed the standard and could pose a risk to human health.

In order to help reduce health risks to Canadians, the Government of Canada is publishing the Formaldehyde Emissions from Composite Wood Products Regulations (the Regulations). The Regulations will be enacted under the authority of the Canadian Environmental Protection Act, 1999 (CEPA). These Regulations will place limits on the allowable formaldehyde emissions from composite wood products imported into or sold in Canada.

These Regulations will align Canadian formaldehyde emission requirements for composite wood products with similar requirements already in place in the U.S. This alignment will help ensure a level international playing field, reduce the threat of high-formaldehyde-emitting composite wood products being sold in the Canadian marketplace and reduce unnecessary industry burden and economic costs associated with meeting the health objectives of the Regulations.

Background

General

Formaldehyde is a colourless gas that has a wide variety of uses and sources. It can be dissolved in liquids and used as a preservative, and it is often used as a component of glues or bonding agents. Formaldehyde gas has a sharp odour that is easily detectable at high levels.

Formaldehyde can be created by both natural and anthropogenic (resulting from human activity) sources. Normal biological processes in humans and many other animals generate small amounts of formaldehyde, and low levels of formaldehyde are present in the natural environment. Higher levels of formaldehyde can occur indoors as a result of human activity. Some formaldehyde sources include emissions from composite wood products and emissions generated by combustion, particularly cigarette smoking, use of fireplaces, and cooking fuels. Other sources of formaldehyde in homes include paints and varnishes, glues, floor finishes, and certain types of paper and cardboard.footnote 1

The health effects of exposure to formaldehyde have been well studied. While very low levels of formaldehyde are not considered to increase the risk of adverse health outcomes, elevated levels of formaldehyde exposure are known to cause a number of human health concerns.footnote 2 Short-term exposure to formaldehyde can cause acute health problems including irritation of the eyes, nose and throat and some evidence indicates it worsens asthma symptoms, particularly in children. Long-term exposure to lower levels of formaldehyde may also result in chronic problems including respiratory symptoms and allergic sensitivity in children. At particularly high exposure levels, well above the levels where irritation and inflammation begin to be noticeable, formaldehyde exposure may lead to cancer of the nasal passageways. Formaldehyde has been classified as a Group 1 carcinogen (i.e. considered carcinogenic to humans) by the International Agency for Research on Cancer (IARC).footnote 3 It is also listed as a toxic substance under Schedule 1 to CEPA.footnote 4

Formaldehyde has been extensively used in the manufacturing of composite wood products. Composite wood products are products that are made of multiple smaller pieces of wood glued together. The most well-known examples are plywood and particleboard, but other composite wood products exist such as medium-density fibreboard and laminated wood products. Formaldehyde is often used as one of the chemicals in the glues that hold these composite wood products together. Over time, products that have been manufactured with formaldehyde-based glues and resins give off formaldehyde emissions. These emissions are highest when the products are newly manufactured, and generally decline over time.

Composite wood products have many uses in Canadian homes, including use in furniture (especially the use of particleboard in inexpensive bookshelves and similar items), flooring, and wall paneling and trim. Off-gassing of formaldehyde from these products may be one of the main contributors to elevated formaldehyde levels and exposure in Canadian homes.

Statistics on total imports of formaldehyde-containing composite wood products are not available, but Canada does import significant volumes of products that may contain formaldehyde. In 2017, Canada imported $3.5 billion worth of manufactured wood products, including $1.5 billion worth of veneer, plywood, and engineered wood products. Imports of veneer, plywood, and engineered wood products have been steadily increasing since 2013, when they were only worth $1.1 billion. In 2017, Canada also imported $280 million worth of wood kitchen cabinets and countertops, $300 million worth of wooden office furniture, and $1 billion worth of “other” wooden household furniture.footnote 5

The U.S. and China combined account for 60% to 80% of Canadian imports across most product categories that include composite wood products. Both the U.S. and China have maintained a consistent market share of Canadian imports since 2010. Imports from the U.S. are slightly higher for unfinished products and those that require installation, while imports from China are slightly higher for finished wood products. While Canada does import significant volumes of manufactured wood products, including composite wood products, the domestic manufacturing industry is significantly larger than the import sector.

The state of California has had a formaldehyde emission standard for composite wood products for some time, and the U.S. Environmental Protection Agency (EPA) recently enacted a similar rule (see the “International risk management” section below). It is expected that most U.S. imports will meet the California/U.S. EPA standard. Imports from China and other overseas countries are expected to exceed the U.S. EPA emissions levels for formaldehyde more frequently than U.S. imports; however, comprehensive testing of imports establishing this has not been completed.

Canadian regulations and risk management

The Government of Canada has introduced and modified a number of regulations over the years to help reduce formaldehyde exposure. Fuel combustion is a common source of formaldehyde, and several recent fuel-combustion-related regulations have addressed formaldehyde emissions, including the Off-Road Compression-Ignition Engine Emission Regulations, the On-Road Vehicle and Engine Emission Regulations, the Off-Road Small Spark-Ignition Engine Emission Regulations, and the Marine Spark-Ignition Engine, Vessel and Off-Road Recreational Vehicle Emission Regulations.

Additionally, the importation, advertisement, or sale of urea formaldehyde-based foam insulation (UFFI) has been prohibited in Canada since 1980. The prohibition was originally set out in Part I of Schedule I to the Hazardous Products Act to address formaldehyde-related hazards to human health posed by UFFI. In 2011, with the coming into force of the new Canada Consumer Product Safety Act (CCPSA), the prohibition was transferred to Schedule II to the CCPSA. Under the CCPSA, the prohibition applies to the manufacture, import, advertisement, or sale of urea formaldehyde-based thermal insulation consumer products that are foamed in place to insulate buildings.

Residential Indoor Air Quality Guideline for formaldehyde

Health Canada's Residential Indoor Air Quality Guideline (RIAQG) for formaldehydefootnote 2 provides recommended health-based maximum exposure limits for formaldehyde in Canadian homes. The short-term and long-term limits, considered to be protective against adverse health effects in all individuals, including children with asthma, are as follows:

Health Canada measured formaldehyde levels in 500 homes between 1996 and 2015 in different cities across Canada. All homes had detectable levels of formaldehyde in indoor air, and approximately 8% of Canadian homes had formaldehyde levels above the recommended long-term exposure limit.

At present, there are no Government of Canada regulations that set out limits for formaldehyde released from composite wood products that can be used in Canadian homes.

Voluntary Canadian standard for composite wood products

In 2016, the Canadian Standards Association (CSA), working with industry and the Government of Canada, developed a voluntary standard for formaldehyde emissions from composite wood productsfootnote 7. This standard has effectively the same limits as the California regulation (see next section). Products that meet the voluntary standard can be labelled as such. Most Canadian manufacturers have indicated that their products already meet this standard; however, since the standard is voluntary, it is unknown the extent to which products on the Canadian market meet it.

International risk management

The health risks associated with formaldehyde have been noted by numerous international bodies such as the IARC and the World Health Organization (WHO), as well as foreign regulators such as the U.S. EPA.

In the U.S., the California Air Resources Board (CARB) evaluated formaldehyde exposure and found that one of the major sources of exposure is from inhalation of formaldehyde emitted from composite wood products containing urea-formaldehyde resins. CARB developed an airborne toxic control measure to limit formaldehyde emissions from composite wood products sold in the state. That measure has been in place since 2009.

In 2010, the U.S. Congress tasked the EPA with developing national regulations to manage formaldehyde emissions. The TSCA Title VI Rule, entitled Formaldehyde Emission Standards for Composite Wood Products, was published in July 2016, finalized in December 2016, and republished with amendments in October 2018. This rule requires composite wood products sold in or imported into the U.S. to comply with emission standards based on the CARB standards and also expanded the CARB requirements for a number of other categories of composite wood products. The U.S. Rule also includes requirements pertaining to testing, labelling, tracking, record keeping, certification, and stockpiling. The U.S. Rule came into force on June 1, 2018, for most composite wood products, but testing and certification requirements will come into force in March 2024 for laminated products.

In the European Union (EU), there is no harmonized limit value for formaldehyde in indoor air; however, the WHO Guideline for Indoor Air Quality for formaldehydefootnote 8 sets an exposure limit to 0.1 mg/m3. The European Chemicals Agency (ECHA) has proposed a restriction to keep formaldehyde concentrations in indoor environments below the WHO limit. The proposal would limit formaldehyde releases from consumer articles, including furniture made with composite wood products, marketed or used in the EU to < 0.124 mg/m3 (100 ppb) as measured in the air of a testing chamber. Legislation establishing these formaldehyde emission limits are in place in certain jurisdictions, including Germany, France, Italy, Sweden, Austria, and Denmark. Various other countries have also developed or implemented limits on formaldehyde emissions from composite wood products including Mexico, Japan, Australia, and New Zealand.

Potential impacts of the U.S. Rule for Canada

Should Canada not take action to align with the new U.S. national mandatory limits on emissions of formaldehyde from composite wood products, there could be consequences both for human health and for Canadian businesses. If international companies that manufacture high-emitting formaldehyde composite wood products are no longer able to sell their products in the U.S., there is a risk that they may try to sell those products on the Canadian market. It is unknown how significant this risk may be, but if Canada has less stringent regulations than the U.S. does, there is a risk that Canada could start to see significantly more imports of composite wood products that have high formaldehyde content. This will further increase the risk to the health of Canadians.

On the manufacturing side, failure to align regulations with the U.S. could put Canadian manufacturers at a disadvantage. Most Canadian manufacturers of composite wood products sell their products in both Canada and the U.S. If they face significantly different regulatory requirements in Canada and the U.S., manufacturers will be faced with three options: sell to only one market, which would result in a loss of sales; manufacture two separate product lines, one for each market, which would be inefficient; or manufacture a single product line that complies with both regulatory regimes, which would be costly and place them at a disadvantage relative to Canadian imports manufactured to a less stringent standard.

Objective

The primary objective of the Regulations is to reduce potential risks to the health of Canadians from exposure to formaldehyde by putting in place limits on allowable formaldehyde emissions from composite wood products. The secondary objective of the Regulations is to align Canadian requirements for composite wood products with similar requirements in the U.S. in order to help create a level playing field for Canadian businesses and importers associated with compliance across multiple regulatory regimes. Canadian composite wood manufacturers are already meeting the U.S. formaldehyde emission requirements, and requiring imported products to meet these same limits will remove any competitive advantage imports may gain by using cheaper, higher-emitting resins in their products.

Description

The Regulations will prohibit the import or sale of composite wood products that emit formaldehyde above established limits. Emission limits have been set for a number of composite wood products that are used for interior applications and contribute to the formaldehyde concentration in indoor air, such as particleboard, medium-density fibreboard (MDF) and hardwood plywood (HWPW). The Regulations do not establish formaldehyde emission limits for composite wood products that are used for structural and outdoor uses, such as oriented strand board (OSB) or structural plywood. In addition, the Regulations do not apply to products such as pallets and packaging materials that are not intended to be kept in people's homes, wood used in vessels and vehicles (other than mobile homes, motor homes, or recreational trailers), and a variety of highly specialized wood products. A full list of the non-applications is included in the Regulations.

The Regulations will establish maximum formaldehyde emission levels from composite wood products. These emission limits, expressed as the concentration of formaldehyde resulting from specific test methods, are the same as those in the U.S.:

In order to facilitate regulatory harmonization with the U.S. and to help establish a level international playing field, the Regulations have been aligned with the U.S. Rule to the extent possible. In addition to the emission limits, the scope of composite wood products to which the Regulations apply, and the required test methodology and frequency of testing under the Regulations are the same as those in the U.S. Rule. Following public and stakeholder consultations and analysis by the Departments of Health and the Environment, the Regulations were further aligned with the U.S. Rule in terms of the development of a third-party certification framework and product labelling. Some differences remain between the Regulations and the U.S. Rule with respect to record-keeping, reporting, and administrative requirements. These administrative differences have been included, and in some cases were required, to address unique Canadian circumstances and the Canadian legal and legislative framework. The administrative differences between the Regulations and the U.S. Rule have been minimized where possible, and are not expected to limit the ability of manufacturers to comply with both countries' technical requirements.

The third-party certification framework is a major component of the U.S. Rule that strengthens compliance and enforcement and provides some oversight of foreign manufacturers that export composite wood products into the U.S. Under this framework, TPCs carry out a number of activities in order to certify composite wood panels, including sample collection for testing, facility inspections, quality control data review, and report preparation and submission to the U.S. EPA. The U.S. EPA and the composite wood manufacturing industry in the U.S. felt that certification was critical to prevent high-emitting foreign product from being imported into the U.S.; therefore, the third-party certification framework has been embedded directly into the U.S. Rule. In alignment with the U.S., the Regulations require that, in addition to meeting the formaldehyde emission limits, composite wood panels and laminated products must also be certified by a qualified TPC prior to import or sale. Composite wood panels that have been certified under TSCA Title VI will be accepted as certified under the Regulations. The qualifications that a TPC must possess, including accreditation by a recognized accreditation body, scope of accreditation, and experience with specific test methods, will be set out in the Regulations, as will the test data that must be verified as part of the certification process.

For composite wood panels that have not been TSCA Title VI certified, certification provisions have been added to the Regulations. Due to differences in legislative authorities between the U.S. and Canada, the Regulations are not able to directly regulate third parties who are not manufacturers, importers, or sellers. As a result, the third-party certification framework under the Regulations differs from the U.S. framework in a number of areas. For instance, the Regulations do not require the TPC to perform facility inspections, establish quality control limits, approve testing reductions or exemptions, or prepare and submit annual reports to the Minister of the Environment. They do, however, require the TPC to verify that testing has been conducted properly, as per the regulations, and that the products meet the emission limits based on the test data. The Regulations align with the U.S. on the third-party certification framework to the extent possible, and many of the unregulated roles and responsibilities of a TPC pertaining to the certification of composite wood panels will be described in guidance.

All products subject to the Regulations must be labelled prior to being sold in Canada. In cases where products are bundled together, it may be sufficient to label the entire bundle rather than each individual item. The Regulations will recognize composite wood products affixed with U.S. labels (“TSCA Title VI compliant”). However, these labels must be bilingual (English and French), as required with all Canadian labels. As there are already many composite wood products in the Canadian market with U.S. labels, and there are no differences between the U.S. Rule and the Regulations in terms of the emission limits or the testing regime required to demonstrate compliance, this will simplify requirements and reduce costs for industry. For composite wood products without a U.S. label, the Regulations will have different labelling requirements for finished goods as opposed to composite wood panels. However, both types of products will require a statement of compliance with the Regulations (“CANFER compliant / conforme au CANFER”) in addition to the other label requirements provided in the Regulations.

Certain products may qualify for optional additional labelling statements if they meet additional standards. Products made without the use of formaldehyde can be labelled as “no added formaldehyde / sans formaldéhyde ajouté” or “NAF / SFA” products, while products that qualify as “ultra-low-emitting formaldehyde / à très faibles émissions de formaldéhyde” or “ULEF / TFEF” may be labelled as such. In both cases, specific testing requirements must be met in order to qualify for the optional label statements. Those requirements are outlined in the Regulations.

Composite wood products must be tested to ensure they meet the emission limits before they may be sold in or imported into Canada. It is important to distinguish the two types of composite wood products that are subject to the Regulations: composite wood panels and laminated products versus finished goods that have incorporated composite wood panels and laminated products (e.g. kitchen cabinets). The formaldehyde emission testing as set out in the Regulations only pertains to manufactured composite wood panels and laminated products. For finished goods to be compliant with the Regulations, they must incorporate compliant composite wood panels and laminated products that meet emission limits. Similarly, importers of panels and laminated products must ensure they have been certified and meet the emission limits, whereas importers of finished goods must ensure the panels used in the finished goods have been certified and comply with emission limits.

Composite wood panel and laminated product testing must be carried out on a routine basis, which is dependent upon the amount of manufacturing and product type, to ensure consistent emission levels (quality control). In addition, testing must be conducted on a quarterly basis by an accredited laboratory to demonstrate consistency between the routine quality control test results and the emission test results generated by an accredited laboratory, as well as to verify that products meet the regulatory emission limits. The specific requirements for accreditation are set out in the Regulations.

In certain cases, testing may be required less frequently, such as for manufacturers that are using no-added-formaldehyde or ultra-low-emitting-formaldehyde resins. The specific testing requirements and testing frequency vary depending on the type and volume of product being tested. The testing requirements under the Regulations will be essentially the same as the testing requirements under the U.S. Rule.

The Regulations will require extensive record keeping by manufacturers of composite wood panels and laminated products, but will not require an annual report. Rather, records will need to be provided to the Minister of the Environment upon request. In addition to detailed records of formaldehyde emission testing and non-complying lots, records of production levels, the name of the individual/company/facility responsible for testing, customer information, shipping information, and various other records as specified in the Regulations are also required to be kept by manufacturers. Manufacturer and importer record-keeping requirements have been expanded to include the statement of certification and key information about the certifying TPC. Importers of panels and laminated products must also obtain, upon request, records of quarterly product test results and must maintain records about non-complying lots. Importers of finished goods must keep statements of certification, and must obtain upon request basic information about TPCs for the panels used in their products. Retailers will be required to maintain statements of certification that the composite wood products they are offering for sale are compliant with the Regulations. They must also verify that the products they buy and sell are labelled appropriately. Some records, such as the statements of certification, must be maintained on site (e.g. manufacturing facility, retail outlet), whereas other records must be made available within thirty days. All records must be kept for a period of at least five years, and made available to the Minister of the Environment, upon request. The Regulations also require all regulated businesses to self-identify by informing the Minister of the Environment of which regulated activity they are involved in and their contact information.

Some of the technical elements of the Regulations are based on Canadian and international standards established by recognized standards organizations such as the CSA, ASTM International (ASTM), the American National Standards Institute (ANSI), the International Organization for Standardization (ISO), and the International Electrotechnical Commission (IEC). These standards are not directly written into the regulatory text. Rather, the Regulations make reference to the published standards. This approach, known as “incorporation by reference,” ensures that regulatory requirements are consistent with established and well-understood industry standards. The manner in which the standards are incorporated into the Regulations also ensures that the regulatory requirements will change if and when the published standards change. The technical aspects of the Regulations that have been incorporated by reference in external documents include technical details on testing methods, accreditation, and application/non-application of certain provisions. The Regulations provide further details on which standards are incorporated by reference and which specific elements are included as part of the Regulations. An internally generated document entitled, Directive Concerning Testing for Formaldehyde Emissions, is also incorporated by reference in the Regulations in a static manner. This will be an enforceable document, which houses technical aspects of the Regulations.

In addition, the Regulations Designating Regulatory Provisions for Purposes of Enforcement (Canadian Environmental Protection Act, 1999)footnote 9 [the Designation Regulations] will undergo a process of amendment in relation to the Regulations. The Designation Regulations identify provisions of various regulations made under CEPA as being subject to an enhanced fine range. These provisions are identified on the basis that violating them involves direct harm or risk of harm to the environment, or obstruction of authority.

The Regulations will come into force 18 months after their publication in the Canada Gazette, Part II. Most products imported into or sold in Canada will need to comply with the applicable standards and regulatory requirements once the Regulations come into force. However, emission limits, testing requirements and certification requirements will only come into force for laminated products five years after the Regulations come into force. Additionally, the Regulations will not apply to products with documentation proving that they were manufactured prior to the Regulations' coming into force. While some products manufactured in or imported into Canada prior to the coming-into-force date may have emission rates above the regulated limit, these products are representative of current composite wood products. Furthermore, as emission rates decrease over time, any products with higher emissions prior to the coming-into-force date will have much lower emission rates within a couple of years.

Regulatory development

Consultation

Consultation prior to the publication of the proposed Regulations in the Canada Gazette, Part I, and the publication of the proposed Directive Concerning Testing for Formaldehyde Emissions

Consultations prior to the publication of the proposed Regulations began on March 18, 2017, with the publication of a notice of intent (NOI) in the Canada Gazette, Part I, to develop regulations respecting formaldehyde in composite wood products. This was followed in April 2017 with a webinar series, attended by industry associations, manufacturers and retailers, which presented a general overview of the proposed regulatory approach, along with a voluntary information-gathering questionnaire that was used to solicit feedback on issues such as current compliance with the U.S. Rule and California's CARB requirements. In July 2017, a consultation document was published and further public comments were received from six industry associations, three health and environmental non-governmental organizations (NGOs), one national accreditation board, and one international trade organization.

In September 2017, the Departments hosted a stakeholder workshop, attended by stakeholders in upstream and downstream industry sectors, including a variety of composite wood product manufacturers, emission testing laboratories, retailers, and an Indigenous peoples representative, to review the regulatory approach. Other consultation activities included a seminar to the First Nations National Building Officers Association to inform officials of the rationale for the Regulations and how to recognize compliant labels. There has been very strong support for the Regulations from all stakeholders involved. All comments received during these consultations were taken into consideration when developing the proposed Regulations.

Consultation following the publication of the proposed Regulations in the Canada Gazette, Part I, and the proposed Directive Concerning Testing for Formaldehyde Emissions

The proposed Regulations were published in the Canada Gazette, Part I, on June 29, 2019, along with the proposed Directive Concerning Testing for Formaldehyde Emissions, published on the CEPA Environmental Registry website, which started a 75-day public comment period where interested parties were invited to submit their written comments. During the comment period, the Departments received 38 submissions from a range of stakeholders, including 20 industry associations, 6 regulated stakeholders, 4 non-regulated stakeholders, 1 laboratory, 1 environmental NGO, 5 Canadian citizens and 1 international citizen. All of the stakeholders that provided comments, including industry associations, regulated stakeholders and NGOs, were supportive of the Regulations.

The Regulations are technical in nature and a number of industry associations requested technical edits and modifications of the regulatory text to improve clarity. As a result, a number of definitions have been added, expanded or modified in the Regulations as have some of the standards being referred to in order to distinguish the products that are subject to the regulatory requirement from those to which the Regulations do not apply. Various regulated stakeholders also requested clarification on the requirements and the specific products that will be regulated.

During analysis by the Departments of policy issues arising from the public comments, several meetings were held with a small number of industry associations as well as the U.S. EPA and the CARB in order to better understand the potential implications of the changes proposed for the final Regulations. In addition, the Departments conducted targeted engagement with a limited number of stakeholders who were importers and retailers of composite wood products to obtain some representation from all types of regulated stakeholders. A summary of the main issues raised and the Departments' consideration of these issues is presented below.

Establishing a third-party certification program

Comment: Nine industry associations, one laboratory and two manufacturers of finished goods that incorporate composite wood products requested that a third-party certification program be included in the Regulations. One of the main objectives in developing the Regulations was to ensure that they were similar to the U.S. Rule. The proposed Regulations were largely harmonized with the U.S. in terms of the scope, the emission limits and the testing requirements. However, it did not include a third-party certification program, which is a major component of the U.S. Rule that provides oversight of foreign manufacturers that export composite products into the U.S. In the U.S., a third party who is accredited and recognized by the EPA must certify that a composite wood product has met the federal regulatory standard by following all the proper testing procedures and meeting required emission limits. The third-party certifier participates in sample collection, conducts inspections of foreign facilities, reviews data, approves exemptions, and prepares a rolled-up report for the EPA. The request to have a similar third-party oversight program in the Canadian regulations was the number one topic raised during the public consultation period. The strongest support for a third-party certification program came from the regulated parties themselves, as the vast majority of the Canadian wood composites industry is already meeting the U.S. TPC requirements in order to export their products to the U.S. and believes it will help level the international playing field.

Response: The Departments are developing the Regulations under CEPA, which does not have the legal authority to directly regulate third parties who are not manufacturers, importers or sellers, as is the case under the U.S. Rule. Under CEPA, the Government is unable to direct third parties to conduct sampling or inspections, or to approve exemptions; however, the Regulations will require that products imported or sold in Canada be certified by a third party, and will prescribe the qualifications of a third-party certifier. Despite not being able to harmonize with the U.S. third-party certification program, further consultation with key industry stakeholders indicated that some degree of third-party oversight was preferable to none. The Regulations incorporate a third-party certification system that aligns with the U.S. Rule to the degree possible.

This will include a mandatory requirement that a qualified TPC certifies that composite wood panels and laminated products meet the emission limits and that the testing processes as set out in the Regulations have been followed. The TPC is an accredited conformity assessment body that meets the relevant qualifications set out in the Regulations. In addition to the regular quality control testing within the mills, the Regulations will require a number of formaldehyde emissions tests be carried out by an accredited laboratory and verified by a TPC. Roles and responsibilities of the TPCs that cannot be entrenched within the Regulations (e.g. activities such as sample collection and inspections of facilities) will be described in guidance.

It should be noted that the TPC approach pertains only to enhancing oversight of regulated products. It does not remove any of the enforceable elements from the proposed Regulations, but rather provides an additional layer of oversight by a third party. This oversight will not be particularly burdensome, as the requirements are generally already being met by Canadian industry.

Labelling

Comment: Seven industry associations and two manufacturers of finished goods recommended that composite wood products with a U.S. label should be accepted as compliant with the Regulations. The labelling requirements in the proposed Regulations were more stringent than those required under the U.S. Rule. Furthermore, the majority of composite wood products already have a U.S. label stating, “TSCA Title VI compliant” and the stakeholders felt that adding another label with more complex messaging would be confusing to customers and add to administrative costs.

Response: The scope of products, emission limits and testing requirements are identical between the Regulations and the U.S. Rule; therefore, a product that is compliant with the U.S. requirements will be compliant with the Canadian emission limits and testing requirements. Harmonization with the U.S. is a secondary objective and, while it is not possible to harmonize completely, any additional requirements should not pose an undue burden on the industry. The Departments considered the impact of accepting composite wood products with U.S. labels as compliant with the Regulations and found it to be acceptable. However, composite wood products sold in Canada with U.S. labels will have to be bilingual to meet the requirements of the Official Languages Act.

Comment: Six industry associations indicated that the term “low-emitting formaldehyde,” used in the proposed Regulations as a default labelling statement for products that met the emission limit, had no value. Unlike the terms “no added formaldehyde” (NAF) or “ultra-low-emitting formaldehyde” (ULEF), “low-emitting formaldehyde” is not a term that is used in the wood composites industry. Therefore, in addition to adding unnecessary label wording, the term is confusing. The stakeholders suggested replacing the term with a compliance statement, such as “CANFER compliant,” where CANFER would represent the Regulations.

Response: For composite wood products that do not already have a U.S. label, the Departments have removed the labelling term “low-emitting formaldehyde” and replaced it with a statement indicating that the products are CANFER compliant. If warranted, a manufacturer may also include the terms “NAF” or “ULEF” on their product labels to indicate that they were made with no-added-formaldehyde or ultra-low-emitting-formaldehyde resins.

Comment: One industry association and a manufacturer of finished goods indicated that having one set of labelling requirements for both composite wood panels and finished goods did not align with the U.S. and was problematic for a number of reasons. In particular, while lot numbers were useful to track composite wood panels, most finished goods do not have lot numbers associated with them. Finished goods produced in any given facility may include composite panels from a number of different production lots that may have been produced in different mills, and may incorporate a number of different types of composite wood panels. For this reason, finished goods are usually tracked with a manufacture date rather than lot number. These stakeholders requested that the date of manufacture replace the lot number for finished good.

Response: For composite wood products that do not already have a U.S. label, the Regulations will have different labelling requirements for composite wood panels and finished goods in order to reflect industry realities and to align with the U.S. Rather than a lot number, finished goods labels will include the name of the manufacturer and the date of manufacture of the good.

Comment: Several manufacturers of finished goods indicated that the prescriptive requirements pertaining to label appearance, such as requiring a box around label language or requiring a certain font size or colour, may cause existing labels to become obsolete. These stakeholders believed that stand-alone labels for formaldehyde emissions do not add value, as there may be required information, such as the manufacturer name and date of manufacture, already on finished good product labels. Some finished goods, such as office furniture, are subject to many different labelling requirements to the point where it can be challenging to find adequate space on the finished good to contain all the required label information. Finished goods manufacturers also indicated that requiring labels to remain throughout the useful life of the product was excessive and that the label should only be required throughout the commercial supply chain and until it reached the final customer.

Response: The Regulations will remove the prescriptive elements pertaining to the appearance of the label, requiring only that the label be clear and legible. The requirement that a label remain legible throughout its useful life was also removed. These changes will better align with the labelling requirements under the U.S. Rule.

Non-compliant lots

Comment: Four industry associations and one manufacturer of composite wood products indicated that requiring three consecutive small-scale quality control tests to exceed the emission limits was too lenient in defining wood composite products as being non-compliant. They recommended adding provisions for re-testing and describing what is to be done with non-compliant lots. Furthermore, they requested that the Regulations be aligned with the U.S. Rule by limiting the requirement to notify downstream purchasers of non-compliant panels, such that notification does not need to take place if the panels have already been incorporated into a component part or finished good. They indicated that tracing individual panels down the supply chain is extremely difficult once they have been incorporated into finished goods.

Response: In consideration of these comments, the Departments have updated the Regulations to strengthen the quality control test failures and to include information on the handling of non-compliant panels, including treatment and re-testing. Furthermore, the requirements for notification were removed in cases where non-compliant panels have already been incorporated into finished goods, to align with industry realities and the U.S. Rule.

Sell-through provision

Comment: While one industry association agreed that a modest sell-through provision was important to allow for an orderly and responsible transition into compliance, another industry association requested that any material manufactured or imported into Canada prior to the coming-into-force date be grandfathered. A manufacturer of composite wood products indicated that they intentionally retain supplies that are older than the proposed three-year sell-through period in order to satisfy customer requests for discontinued material for repairs. They requested that the sell-through period be removed for products in Canada before the coming-into-force date so that they will not be forced to destroy this older material that should have lower formaldehyde emissions through off-gassing while it has “aged” in their warehouses.

Response: There is abundant evidence that formaldehyde emissions from composite wood products decrease over time, and therefore products sold three years after their manufacture date are likely to have emissions below the regulated limits, even if the emissions were initially above the limits. The Regulations were modified so that composite wood products manufactured before the coming-into-force date will not be subject to the Regulations so long as the manufacturer, importer or seller can provide documentation proving that it was manufactured before the coming-into-force date.

Comment: One NGO commented that the sell-through provision was too lenient and could lead to composite wood products being stockpiled and later sold at cheaper prices, causing them to end up in affordable housing units.

Response: As the emission rates decrease over time, any product manufactured prior to the coming-into-force date will have reduced emissions. If composite wood products made prior to the coming-into-force date were stockpiled, it is not expected that it would pose a significant increase in risk to human health.

Coming into force

Comment: An industry association, a Canadian manufacturer, and a major importer of finished goods indicated that the proposed 180-day coming-into-force timeline was too short to meet the regulatory requirements, properly train suppliers, and establish procedures to ensure compliance. These stakeholders requested extending the coming-into-force date to between one year and 18 months after publication of the Regulations.

Response: The Departments considered the request and extended the coming-into-force date to 18 months following publication of the final Regulations. This should allow sufficient time for regulated parties to adapt to the new requirements in the Regulations.

Reporting and record keeping

Comment: Five industry associations representing both panel manufacturers and manufacturers of finished goods had concerns with the requirement to physically maintain records within Canada. While they agreed that it was reasonable to require a manufacturer to provide records for inspection within an appropriate timeframe, the requirement to maintain those records in Canada would pose an unreasonable burden upon foreign manufacturers.

Response: It is the policy of the Department of the Environment's Enforcement Branch that under CEPA, records must be kept at the civic address of the person's principal place of business in Canada or, upon notification to the Minister, at any other place in Canada where the records can be inspected. Minor changes were made to better align with this policy, but the requirement has not been removed. It should be noted that for importers and retailers, the only record required to be kept on hand is a statement of certification. Importers have some additional record-keeping requirements, but will have 30 days to obtain those records.

Comment: Three industry associations and one exporter of composite wood products to Canada provided comments expressing their concern with the record-keeping requirements for importers and retailers of finished goods. Importers and retailers would be expected to have basic records of purchasing compliant materials, such as the name of the finished good manufacturer and date of purchase. However, these stakeholders felt it would be an unreasonable additional burden to ask them to maintain records pertaining to the original panels incorporated into the finished goods. As a finished good may contain parts of multiple of different panels, each of which may be produced by a different manufacturer, the record-keeping burden could be substantial in some cases.

Response: The record-keeping requirements have been modified with the addition of a third-party certification framework. Importers of finished goods will need to be able to provide the name of the manufacturer and the date of manufacture of the panels used in their products upon request within 30 days, and will be required to have a statement of certification available. Retailers will only be required to have a statement of certification available.

Comment: Four industry associations and three finished goods manufacturers provided comments recommending to remove the requirements for manufacturers to track all Canadian customers to whom composite wood products are sold. The comments stated that while the total manufacturing or sales are standard data for a company to keep, the data being requested for each person in Canada to whom a composite wood product is sold would be overwhelming, while also not aiding with enforcement. In addition to perceptions of government overreach, these stakeholders argued that tracking individual customers could lead to privacy concerns and the unanticipated burden to safely maintain this data once collected.

Response: In response to the stakeholders' concerns regarding the requirement of tracking individual customers of composite wood products, the Departments have modified the Regulations to specify that record keeping pertains only to the direct purchaser of the composite wood product. Manufacturers are not required to continue to track subsequent purchases down the supply chain. The total volume of composite wood products manufactured and sold in Canada will remain as a record-keeping requirement. These requirements align with those under the U.S. Rule.

Health effects

Comment: A stakeholder representing the formaldehyde resin industry commented that the Regulatory Impact Analysis Statement (RIAS) should include new studies on asthma and health effects associated with formaldehyde. Furthermore, one NGO commented that the RIAS made assumptions regarding adequate ventilation in homes that underestimate indoor air exposure to formaldehyde.

Response: The statements regarding asthma and ventilation in the RIAS were based on Health Canada's most recent human health risk assessment of formaldehyde in indoor air, and reflect the scientific literature available at the time of the assessment. Minor revisions to the wording of the RIAS have been made to reflect the concerns.

Modern treaty obligations and Indigenous engagement and consultation

As required by the Cabinet Directive on the Federal Approach to Modern Treaty Implementation, an assessment of modern treaty implications was conducted on the Regulations. The assessment did not identify any modern treaty implications or obligations.

Instrument choice

To achieve the objective of reducing potential risks to the health of Canadians from exposure to formaldehyde emissions from composite wood products, two options were considered: the development of regulations and the status quo. Non-regulatory options were not considered, as there is already an important voluntary standard for formaldehyde emissions in place (CSA O160 standard) in Canada.

Regulatory options

In 2018, the U.S. Rule to regulate formaldehyde emissions from composite wood products came into force. A misaligned regulatory landscape between Canada and the U.S. could disadvantage Canada, both from human health and Canadian business standpoints. In addition, a Private Member's Motionfootnote 10 was unanimously agreed to in the House of Commons on May 3, 2017, to adopt regulations on formaldehyde emissions from composite wood products and to ensure the regulations are similar to the U.S. Rule. Moreover, stakeholders are continuously supportive of development of regulations to reduce emissions of formaldehyde from composite wood products.

Two enabling Acts of Parliament were considered for the development of regulations: CEPA and the CCPSA.footnote 11 Section 93 of CEPA provides the authority to make regulations with respect to a substance specified on Schedule 1 to CEPA (the List of Toxic Substances). In 2001, formaldehyde was found to be harmful to human health and the environment and was added to Schedule 1 to CEPA. Regulations have been published under CEPA to control formaldehyde emissions in outdoor air, but at present there are no regulations related to indoor air. The safety of consumer products that are manufactured, imported, advertised, or sold in Canada is governed by the CCPSA and its associated regulations. The CCPSA currently prohibits the manufacture, importation, advertisement and sale of urea formaldehyde-based thermal insulation, foamed in place, which is used to insulate buildings. The scope of the CCPSA is limited to consumer products, whereas CEPA allows for the regulation of the manufacturing, processing, use, import, and sale of toxic substances and includes regulating commercial and industrial products. A CEPA regulation would allow composite wood products to be regulated at the panel level as they are under the U.S. Rule.

Status quo

In 2006, Health Canada published a Residential Indoor Air Quality Guideline for formaldehydefootnote 2 that recommends health-based maximum exposure limits for formaldehyde in Canadian homes. Furthermore, in 2016, the Canadian Standards Association developed a voluntary standardfootnote 12 for formaldehyde emissions from composite wood products. However, as concerns remain that imported products with emissions not meeting the standard persist on the Canadian market, it is clear that a voluntary standard is not an effective mechanism by which to meet the objective.

CEPA regulations were therefore chosen as the most appropriate regulatory instrument.

Regulatory analysis

Benefits and costs

Regulatees

The Regulations will target businesses that manufacture composite wood panels (“upstream manufacturers”), businesses that manufacture component parts and final goods made from composite wood panels (“downstream manufacturers”), and businesses that import or sell goods made from composite wood panels (“importers/ retailers”). For the purposes of the impact analysis, it is not necessary to differentiate between importers and retailers, as the vast majority of businesses in this category are expected to both import and sell the same goods. Based on database searches and stakeholder consultations, it is believed that there are 38 upstream manufacturers, 202 downstream manufacturers, and 1 148 importers/retailers in Canada. Within those categorizations, 7 (18%), 134 (66%), and 1 027 (89%) respectively are small businesses.

In the U.S., all imported goods comprised of composite wood must be in compliance with the U.S. Rule. Because of this, the analysis assumes that all Canadian businesses that currently export to the U.S. are, de facto, already in compliance with the key requirements of the Regulations for the domestic market. Based on targeted surveys using emails and phone calls, it is believed that only 1 out of 38 upstream manufacturers does not currently export to the U.S. The proportion of downstream manufacturers that do not currently export to the U.S. is unknown, but is expected to be minimal. Specifically, all 68 large and medium downstream manufacturers are assumed to export to the U.S., along with 121 out of 134 (90%) small downstream manufacturers.

The proportion of imported goods made from composite wood that are currently compliant with the U.S. Rule (and therefore, de facto, already in compliance with the Regulations) is unknown. Trade data can be used to form an estimation using the value of imports as a proxy for the quantity of goods. In 2019, the value of imported veneer, plywood, and engineered wood product manufacturing totalled $1.5 billion, of which $706 million originated from the U.S. (49%).footnote 13 In the same year, the value of imported household and institutional furniture manufacturing, imported wood kitchen cabinet and counter top manufacturing, and imported wood office furniture and custom architectural woodwork manufacturing totalled $3.5 billion, of which $899 million originated from the U.S. (25%).footnote 14 It is unknown what proportion of those total import values relate to products that contain composite wood (as opposed to, for instance, solid wood). Assuming a proportion of 50%, the value of all imports that may be affected by the Regulations was $2.5 billion in 2019.

Given that all goods made from composite wood originating from the U.S. are compliant with the U.S. Rule, at minimum, 49% of imported panels and 25% of imported final goods are already in compliance with the Regulations. These proportions represent minimums because it is likely that significant amounts of imports from other countries are also in compliance with the U.S. Rule. Accordingly, to estimate a more realistic central case, all imports from the U.S. and 50% of imports from other countries are assumed to be in compliance with the U.S. Rule. Under this methodology, 66% of total imported products are estimated to be already in compliance with the Regulations. To obtain an estimate for the cost implications on retailers/importers, this value is applied to the number of importers/retailers in Canada. The final estimate is that 66% of the 1 148 importers/retailers (759 businesses) are already in compliance with the Regulations. A summary of the regulatee counts by group and size is presented in the table below.

Table 1: Regulatees, estimated counts by group and size (baseline)
Stakeholder group Firm size Compliant with U.S. Rule Not compliant with U.S. Rule
Upstream manufacturer Large/medium 31 0
Small 6 1
Downstream manufacturer Large/medium 68 0
Small 121 13
Retailer/importer Large/medium 80 41
Small 679 348
Compliance costs

Upstream manufacturers

Compliance costs for upstream manufacturers is comprised of the increased input cost to switch to compliant resin, as well as emissions testing and quality control testing.

Composite wood panels use resin to adhere component wood elements together. The U.S. EPA estimated that it costs an incremental $8 per thousand square feet on a 3/8-inch basis to switch from urea-formaldehyde resin to enhanced urea-formaldehyde resin (the cheapest alternative resin expected to result in compliance with U.S. Rule), and $64 per thousand square feet on the same basis to switch to low emission cores ($2013 USD).footnote 15 Using these values, the U.S. EPA estimated that the incremental cost for manufacturers to upgrade their raw materials is $10,412 ($2013 USD) per firm, annually, which is equal to $14,717 in $2019 CAD. For firms that are de facto already in compliance with the Regulations, the incremental cost is zero.

Under the Regulations, upstream manufacturers must undergo emissions testing once per quarter. According to a key industry association, it costs $500 per small chamber emissions test and $1,125 per large chamber emissions test ($2019 USD). Any firm wishing to use small chamber tests for primary testing must undergo a one-time equivalence test to demonstrate that their product obtains the same result in the small chamber as it does in the large chamber (which is considered the gold standard). This one-time equivalency test is comprised of 10 tests in the small chamber and 10 tests in the large chamber, the cost of which is accounted for in the upcoming “Administrative costs” subsection. It is assumed that all firms would want to use small chamber tests for their primary testing, since this option is less expensive in the long run. Additionally, organizations or industry associations qualified to carry out the emissions testing often charge a one-time fee of approximately $100 ($2019 USD) to open a new account. In total, one-time costs are $131 and annual costs are $5,242 per firm in $2019 CAD. For firms that are de facto already in compliance with the Regulations, the incremental cost is zero.

Upstream manufacturers must undergo ongoing quality control testing. The frequency of this testing is dependent on the type of composite wood panel produced, the production frequencies, and the number of product lines manufactured by each firm. For producers of HWPW or laminated products, the minimum number of quality control tests is once per month (12 tests annually) and the maximum is four times per week (208 tests annually), per product line. For producers of MDF or particleboard, the minimum number of tests is once per workday (260 tests annually) and the maximum is twice per workday if 24-hour production is assumed (520 tests annually), per product line.

Consultations with panel producers revealed that some firms switch their production between different product lines multiple times per day. To comply with the U.S. Rule, these manufacturers have had to undertake quality control testing each time that they switch to a different line. Anecdotally, one manufacturer of MDF or particleboard indicated that, due to the number of switches between product lines undertaken in the same day, they routinely conduct up to 14 quality control tests daily. It is assumed that all upstream manufacturers that switch between different product lines multiple times per day are large/medium businesses. Since there is only one small manufacturer of HWPW or laminated products identified as not currently exporting to the U.S., the cost analysis does not account for the exponential effect of switching between product lines on the frequency of testing.

Assuming two product lines per producer of HWPW or laminated products, and using the average of the minimum and maximum test frequencies, the result is $144,168 in annual costs per firm in $2019 CAD. Given the quantity of quality control tests required for producers of MDF or particleboard, those producers are expected to purchase their own small chambers to perform in-house testing. Based on quotes from equipment manufacturers, a small chamber costs $70,500 ($2019 USD) to purchase and install. Assuming two product lines per producer of MDF or particleboard, using the average of the minimum and maximum test frequencies, and assuming that the marginal cost to run each test is minimal ($10 per test), the result is $99,836 in one-time costs and $10,223 in annual costs per firm in $2019 CAD. For firms that are de facto already in compliance with the Regulations, the incremental cost is zero.

As articulated in the subsection “Regulatees,” 37 out of 38 upstream manufacturers are identified as currently exporting to the U.S. The one remaining identified firm is a producer of HWPW and laminated products. As such, that firm is expected to use an accredited laboratory for all testing as opposed to purchasing their own small chamber to perform in-house testing. A summary of the compliance costs for upstream manufacturers is presented in the table below.

Table 2: Upstream manufacturers, estimated compliance cost breakdown per firm ($2019 CAD)
Stakeholder group Number of stakeholders One-time costs Annual costs
HWPW/laminated products manufacturers or MDF/particleboard manufacturers compliant with U.S. Rule 37 0 0
HWPW/laminated products manufacturers not compliant with U.S. Rule 1 $131 $164,128
MDF/particleboard manufacturers not compliant with U.S. Rule 0 $99,968 $30,182

Downstream manufacturers and retailers/importers

Compliance costs for downstream manufacturers and retailers/importers are comprised of the incremental costs to make or import compliant goods.

In May 2020, the Departments performed targeted follow-up consultations with two major retailers: one multinational company and one Canadian company. Anecdotally, the multinational company indicated that they anticipate the Regulations would increase their supply chain costs by approximately 0.01%, while the Canadian company indicated an increase in their supply chain costs by approximately 2% to 3%. This difference is likely attributable to import volume scale between the two companies. Therefore, in order to estimate the increased cost to switch to compliant imports, a distinction between smaller businesses and larger businesses was made.

As indicated in the “Regulatees” subsection, the value of all imports that may be affected by the Regulations totalled $2.5 billion in 2019. Assuming that larger businesses are responsible for the lion's share of these imports (assumed at 98%), larger businesses imported $2.45 billion worth of goods while smaller businesses imported $49.9 million worth. As estimated in the “Regulatees” subsection, 66% of imported products are already in compliance with the Regulations, therefore $830.1 million and $16.9 million is attributable to products that are not yet compliant, imported by larger and smaller businesses respectively. The value attributable to larger businesses is scaled by 0.01%, while that of smaller businesses is scaled by 2.5% (average of 2% and 3%), rendering the total incremental increase in the cost of imports at $83,012 across all larger businesses, and $423,532 across all smaller businesses, in $2019 CAD.

Sharing that cost between the 10% of downstream manufacturers and 34% of retailers/importers that are not already compliant with the U.S. Rule, the estimated impact is $2,025 per large and medium business, and $1,173 per small business, in $2019 CAD. For firms that are de facto already in compliance with the Regulations, the incremental cost is zero.

A summary of the compliance costs for downstream manufacturers and retailers/importers is presented in the table below.

Table 3: Downstream manufacturers and retailers/importers, estimated compliance cost breakdown per firm ($2019 CAD)
Stakeholder group Number of stakeholders One-time costs Annual costs
Downstream manufacturers and retailers/importers already compliant with the U.S. Rule 948 (148 + 800) $0 $0
Large/medium downstream manufacturers and retailers/importers not compliant with the U.S. Rule 41 (0 + 41) $0 $2,052
Small downstream manufacturers and retailers/importers not compliant with the U.S. Rule 361 (13 + 348) $0 $1,173
Administrative costs

Administrative costs for upstream manufacturers, downstream manufacturers, and retailers/importers include small chamber equivalency testing, third-party certification, labelling, record keeping, training/familiarization with the regulatory requirements, self-identifying as regulatees and providing contact information to the Departments, and preparing and submitting reports to the Departments on demand.

As mentioned in the “Compliance costs” subsection, any upstream manufacturer wishing to use small chamber tests for primary testing must undertake one-time equivalency testing (10 tests in the small chamber and 10 tests in the large chamber) to demonstrate equivalency of results between the two methods. According to a key industry association, it costs $500 per small chamber emissions test and $1,125 per large chamber emissions test, in $2019 USD. As such, the one-time cost per firm for equivalency testing is $21,298 in $2019 CAD. For firms that are de facto already in compliance with the Regulations, the incremental cost is zero.

All testing (e.g. primary, quality control, equivalency) must be verified by a TPC. As articulated in the “Description” section, TPCs are not themselves regulated entities. The Regulations require upstream manufacturers to send their primary emissions test results and quality control test results to a TPC on a quarterly basis. Guidance documentation for TPCs will set out the expectation for those entities to conduct an initial inspection of each upstream manufacturer's facility and quarterly inspections thereafter. Since the costs for travel and inspection will ultimately fall on upstream manufacturers, these elements of the guidance have also been costed in the analysis. To fulfil the regulatory requirements and the elements set out in guidance, the U.S. EPA estimates a cost of $466 per inspection, $2,071 for travel per inspection, $259 per desk audit, and $73.60 per hour of labour (all in $2013 USD), for which the initial inspection takes eight hours, subsequent quarterly inspections take four hours, and desk audits take one hour.footnote 16 Altogether, one-time costs are $3,708 and annual costs are $21,935 per firm in $2019 CAD. For firms that are de facto already in compliance with the Regulations, the incremental cost is zero.

Upstream and downstream manufacturers must produce and adhere labels on all panels or products sold indicating the item's compliance with the Regulations. The one-time cost to develop these labels is estimated at $500 per firm. For firms that are de facto already in compliance with the Regulations, the one-time cost to update their existing labels is estimated at $100 per firm. Retailers/importers, however, must only keep labels intact, visible, and available to show to a compliance officer. The cost of this activity is expected to be minimal and is not estimated quantitatively.

All regulatees must establish and maintain a record-keeping system, estimated at an annual cost of $450 per firm. For firms that are de facto already in compliance with the Regulations, the annual cost to update their record-keeping system is estimated at $90 per firm.

For any firm that is not compliant with the U.S. Rule, familiarization with the administrative regulatory requirements and dissemination of the information is expected to take a person in the “senior management occupations” category 4.5 hours at a wage rate of $69.55 per hour (including overhead), for a total one-time cost of $313 per firm. For any firm that is de facto already in compliance with the Regulations, the same task is expected to take 1.5 hours to complete, for a total one-time cost of $104 per firm.

The Regulations also require all regulated businesses to self-identify by informing the Minister of the Environment of which regulated activity they are involved in and their contact information. This is a one-time requirement, though if a business's contact information were to change (e.g. change of address), they would be required to re-submit the information. This activity is expected to take a person in the “administrative and financial supervisors and administrative occupations” category 15 minutes to complete at a wage rate of $33.12 per hour, for a total one-time cost of $8.28 per firm.

Finally, the Minister of the Environment may request firms to submit reports including testing or import information upon request. Across all industry groups, this activity is estimated at 10% of stakeholders per year (139 out of 1 388 annually). This activity is expected to take a person in the “administrative and financial supervisors and administrative occupations” category one hour per year to complete at a wage rate of $33.12 per hour, for a total annual cost of $33.12 per firm. A summary of the administrative costs for all stakeholders is presented in the table below.

Table 4: Administrative cost breakdown per firm ($2019 CAD)
Requirement / stakeholder group Estimated number of stakeholders One-time costs Annual costs
Equivalency testing (upstream manufacturers not compliant with U.S. Rule) 1 $21,298 $0
Third-party certification (upstream manufacturers not compliant with U.S. Rule) 1 $3,708 $21,935
Labels (upstream manufacturers and downstream manufacturers not compliant with U.S. Rule) 14 (1 + 13) $500 $0
Labels (upstream manufacturers and downstream manufacturers already compliant with U.S. Rule) 226 (37 + 189) $100 $0
Records-keeping (firms not compliant with U.S. Rule) 403 (1 + 13 + 389) $0 $450
Records-keeping (firms already compliant with U.S. Rule) 985 (37 + 189 + 759) $0 $90
Familiarization with administrative requirements (firms already compliant with U.S. Rule) 985 (37 + 189 + 759) $104 $0
Familiarization with administrative requirements (firms not compliant with U.S. Rule) 403 (1 + 13 + 389) $313 $0
Self-identifying as regulatees and providing contact information 1,388 (38 + 202 + 1,148) $8 $0
Submitting reports (10% of all firms per year) 139 per year $0 $33
Government costs

The Minister of the Environment will incur incremental costs related to training, inspections, investigations, and measures to deal with any alleged violations, as well as compliance and promotion activities. With respect to the Regulations, the Minister of the Environment will incur a one-time cost of $118,537 to conduct a strategic intelligence assessment, and a one-time cost of $24,685 for enforcement training, in $2019 CAD. The Minister of the Environment will also incur $34,307 in annual costs for administration, coordination, and analysis to support enforcement activities for enforcement and compliance promotion activities. Annual enforcement costs are estimated at $263,818, broken down as follows: $135,440 for inspections (which includes operations and maintenance, transportation, and sampling costs) and measures to deal with alleged violations, $49,874 for investigations, $33,276 for prosecutions, and $10,921 for ongoing intelligence (all in $2019 CAD). Overall, the Government of Canada is estimated to incur one-time costs of $143,222, and annual costs of $263,818 in $2019 CAD.

Total costs and sensitivity analysis

Combining the compliance costs, administrative costs, and government costs presented in the subsections above, the Regulations are expected to induce one-time costs of $424,341, and annual costs of $1,231,028 in $2019 CAD. The 10-year total cost of the Regulations from 2022 to 2031 (in $2019 CAD, discounted to 2020 at a 3% discount rate) is estimated to be $10,595,051.

The cost analysis contains several assumptions that could have a significant impact on the total cost of the Regulations: the number of upstream manufacturers that are not currently compliant with the U.S. Rule, the average number of product lines produced by upstream manufacturers, the proportion of imports that are not currently compliant with the U.S. Rule, the proportion of the total value of imports associated with composite wood, and the proportion of the total value of imports associated with composite wood borne by large/medium importers relative to small importers. The assumptions for these parameters that were used in the analysis, along with the sensitivity cases to explore, are presented in the table below.

Table 5: Central case used and sensitivity cases to explore for parameters of interest
Parameter of interest Central case Sensitivity cases
Number of upstream manufacturers not currently compliant with the U.S. Rule 1 2
Average number of product lines per upstream manufacturer 2 1, 3
Proportion of imports not currently compliant with the U.S. Rule 34% 24%, 44%
Proportion of total value of imports associated with composite wood 50% 25%, 75%
Proportion of total value of imports associated with composite wood born by large/medium businesses 98% 95%

The total and marginal impact to the total 10-year cost of the Regulations (i.e. approximately $10.6 million) derived from each indicated change to key parameters is presented in the table below.

Table 6: Total and marginal impact per parameter of interest, sensitivity cases vs. central case ($2019 CAD)
Parameter of interest Lower bound sensitivity case Upper bound sensitivity case Difference from central case
Number of upstream manufacturers not currently compliant with the U.S. Rule N/A $12.2M + $1.6M
Average number of product lines per upstream manufacturer $10.0 M $11.2M ± $0.6M
Proportion of imports not currently compliant with the U.S. Rule $9.0 M $12.2M ± $1.6 M
Proportion of total value of imports associated with composite wood $8.5M $12.M ± $2.1M
Proportion of total value of imports associated with composite wood born by large/medium businesses N/A $15.8M + $5.2M

To obtain the full range of the sensitivity analyses, all of the parameters can be set to the lowest bound simultaneously, then set to the highest bound simultaneously. In doing this, the extreme lower bound estimated 10-year cost of the Regulations is $6,902,011 (−$3.7 million from central), and the extreme upper bound estimated 10-year cost of the Regulations is $27,892,872 (+$17.3 million from central). Since the central case contains mainly conservative estimations, it is not considered likely that the “true” cost of the Regulations could reach the extreme upper bound estimate of the sensitivity analysis.

Health benefits to Canadians

It is not possible at this time for the Departments to be able to estimate the incremental reduction in formaldehyde emissions in indoor environments resulting directly from the Regulations. Instead, we estimated the prevalence and incidence of certain health impacts associated with the current long-term guidance in-home exceedance levels and built a sensitivity analysis around the possible contribution of composite wood products to these exceedance levels. In other words, this quantification allows for an understanding of the scale of the health impacts associated with formaldehyde emissions, and the potential contribution of composite wood products to those emissions.

Key health effects identified in the RIAQG for formaldehyde are sensory irritation, respiratory and allergic effects, and cancer.footnote 2 The health effects described here are based on a quantitative analysis of sensory irritation and respiratory effects, in the context of real-world formaldehyde levels measured in Canadian homes. However, some values in the calculations are hypothetical and may not represent health effects empirically measured in the Canadian population. Data were not available to support an analysis of allergy or cancer impacts. However, cancer effects are not expected at the levels of formaldehyde exposure within indoor air of residences.

Indoor air levels of formaldehyde measured in Canadian homes

Health Canada measured formaldehyde concentration in homes and other indoor environments in Quebec City, Prince Edward Island, Regina, Montréal, Halifax, Edmonton, and Ottawa from 1996 to 2015. In these studies, formaldehyde concentrations ranged from 0.3 to 229 μg/m3 in Canadian homes, with mean levels of 10 to 40 μg/m3.footnote 17,footnote 18,footnote 19,footnote 20 Over 8% of all homes had average concentrations that exceeded Health Canada's long-term exposure limit of 50 μg/m3, and 0.4% of all homes exceeded the short-term exposure limit of 123 μg/m3. Furthermore, over 22% of all homes had one or more measurement over the course of the studies that exceeded 50 μg/m3. If we extrapolate these results to all Canadian homes, nearly 400 000 homes with children have average formaldehyde levels greater than the Health Canada long-term guideline, and nearly 20 000 homes with children exceed the short-term guideline.

Eye irritation cases potentially attributable to indoor air levels of formaldehyde

Short-term exposure to levels of formaldehyde higher than those found in residential settings elicits sensory irritation, including eye, nose and throat irritation. Common effects include eye watering, burning of eyes, nose, and throat, runny nose, and cough. Residential epidemiological studies have shown that sensory irritation can also occur at levels measured in Canadian homes over the long term.

Eye irritation is the most sensitive of these effects in human studies. The U.S. EPA conducted a dose-response analysis of eye irritation reported by mobile home residents in two epidemiological studies.footnote 21,footnote 22,footnote 23 The studies are residential indoor air studies of a random sample of mobile home residents in California and Wisconsin that reported that formaldehyde exposure was a significant predictor of numerous irritant symptoms, including burning eyes. Hanrahan (1984) presented a graph of the prevalence of burning eyes for exposures from 100 to 800 ppb (123 to 992 μg/m3). As Liu (1991) reported results in terms of cumulative exposure, the results from Hanrahan (1984) were more appropriate for the development of a dose-response curve. Furthermore, the climate of Wisconsin is more similar to the Canadian climate than California, thus the results reported by Hanrahan (1984) are more likely to be representative of a Canadian concentration-response.

The U.S. EPA (2012) developed an equation to predict the prevalence of burning eyes at any level of formaldehyde exposure. Using this equation, the calculated values for prevalence of burning eyes at 50 μg/m3 and 123 μg/m3 are 0.004 and 0.038, respectively. Thus, exposure to formaldehyde concentrations over 123 μg/m3 results in an excess risk of 3.3 cases per hundred for a two-week period (i.e. the time period as reported in Liu, 2002). For the purposes of this analysis, we assumed that “burning eyes” is a reasonable proxy for “eye irritation,” and that the risk extends to the whole population of Canada in homes with formaldehyde levels that exceed 123 μg/m3.

Potential cases of eye irritation associated with indoor air levels of formaldehyde:

Population × excess risk × homes at risk × adjustment to 1 year

37 647 977 × 0.033 × 0.004 × 26 = 128 178

Population of Canada (2020 projection) = 37 647 977 (Statistics Canada, 2015)
Excess risk in homes >123 μg/m3 formaldehyde (2 week) = 3.3 per hundred
Canadian homes >123 μg/m3 formaldehyde = 0.4%

Based on this analysis, an excess 128 000 cases of eye irritation per year may be attributable to indoor air levels of formaldehyde.

Discussion: Eye irritation

Both studiesfootnote 22,footnote 23 have the benefit of using in-home measurements showing a concentration-response in the range of exposures that are relevant to Canadian homes, and measure in-home formaldehyde at the same time as the reported symptoms. Both studies used randomized subject selection and controlled for key potential confounders, including age, gender and smoking history. The sampling time and method used to measure formaldehyde in Hanrahan (1984) were less reliable than the method used by Liu (1991); however, the concentration-response was consistent between the two studies. Neither study considered the effects of potential co-pollutants, such as other VOCs or mould, and both used self-reported measures of symptoms (rather than an objective measure such as a doctor's diagnosis), which can lead to less valid results in some studies.

In our analysis, we predicted the prevalence of burning eyes at 50 μg/m3 formaldehyde using an equation developed by the U.S. EPAfootnote 21 because no effects were reported at this level in Hanrahan (1982). The reported symptom of “burning eyes” from the study was presumed to be a reasonable proxy for “eye irritation,” and the risk to the reported population of adults aged 20 to 64 was extrapolated to apply to the whole population. Residential formaldehyde concentrations from the Health Canada city studiesfootnote 17,footnote 18,footnote 19,footnote 20 were assumed to be representative of all homes in Canada, although those studies focussed primarily on single detached or attached homes, and did not include mobile homes or apartments.

Table 7 considers the possible contribution of composite wood products to indoor air levels of formaldehyde.

Childhood asthma incidence and prevalence potentially attributable to indoor air levels of formaldehyde

The Health Canada long-term guideline for formaldehyde (50 μg/m3) was based on respiratory effects reported in epidemiological studies. In a case-control study of children aged 6 months to 3 years, Rumchev (2002)footnote 24 found that residential formaldehyde levels (8-hour samples, summer and winter) were significantly associated with a diagnosis of asthma during an emergency room visit. No effects were found in children exposed to 10 to 29 μg/m3 or 30 to 49 μg/m3 formaldehyde, and a non-significant increase in risk was observed at 50 to 59 μg/m3. A statistically significant increase in the odds of asthma was observed in children exposed to 60 μg/m3 formaldehyde or higher, compared to children exposed to less than 10 μg/m3 (OR 1.39, p < 0.05).

Health effects were calculated in terms of both incidence (new cases) and prevalence (existing cases) of childhood asthma.

Incidence of asthma

The 2011–2012 incidence rate of asthma in Canada among children aged 5 to 19 is 0.7%.footnote 25 Using 0.7% as the risk of new cases in the general population and the odds ratio of 1.39 for new diagnoses of asthma due to exposure to over 60 μg/m3, a relative risk of 1.39 was calculated. Based on the data from the Health Canada city studies (in which 22.4% of homes sampled had one or more formaldehyde measurement over 50 μg/m3), and the calculated relative risk, the Population Attributable Fraction (PAF) for exposure to over 50 μg/m3 is 0.080. For the purposes of this analysis, we assumed that the risk calculated here applies to the entire population of Canada under 20 years. The length of the case identification period in Rumchev (2002) is not reported, but to enable calculations we assume here that it was one year. The equation used to calculate excess incidence of childhood asthma associated with formaldehyde levels in indoor air is presented below.

Potential incidences of asthma associated with indoor air levels of formaldehyde:

PAF × population at risk × new cases per year

0.080 × 8 151 844 × 0.007 = 4 468

Population attributable fraction = 0.080
Population of Canada under 20 years (2020 projection) = 8 151 844 (Statistics Canada, 2015)
New asthma cases per year (2011–2012) = 0.7% of population (Statistics Canada, 2018)

Based on this analysis, approximately 4 500 new cases of childhood asthma per year may be attributed to excess formaldehyde from composite wood products. This accounts for approximately 8% of all new childhood asthma cases per year in Canada. Table 8 provides a sensitivity analysis based on our confidence in the Rumchev (2002) results and considers the possible contribution of composite wood products to indoor air levels of formaldehyde.

Prevalence of asthma

The 2011–2012 prevalence of asthma among children aged 5 to 19 is 17.7% (Statistics Canada, 2018). To calculate the impact of indoor air levels of formaldehyde on prevalence of asthma, the PAF and prevalence values were used in the equation below.

Potential prevalence of asthma associated with indoor air levels of formaldehyde:

PAF × population × new cases per year

0.080 × 8 151 844 × 0.177 = 114 848

Population attributable fraction = 0.080
Population of Canada under 20 years (2020 projection) = 8 151 844 (Statistics Canada, 2015)
Prevalence of asthma cases (2011–2012) = 17.7% (Statistics Canada, 2018)

Based on the assumptions and calculations stated above, approximately 115 000 existing cases of childhood asthma could potentially be attributed to indoor air formaldehyde levels, accounting for approximately 8% of all childhood asthma cases in Canada.

Uncertainty discussion: Childhood asthma cases

The most recent Health Canada RIAQG for formaldehyde concluded that formaldehyde may increase the risk of asthma, particularly in the young.footnote 2 Since the publication of the RIAQG, multiple studies and risk assessments have supported a link between formaldehyde exposure and asthma, and asthma was cited as a non-monetized health effect in the U.S. EPA economic analysis for the U.S. Rule.footnote 26,footnote 27,footnote 28

The study used in this analysis was the key study for the non-cancer endpoint and the development of the long-term guideline for formaldehyde. Rumchev (2002) used individual in-home measurements to show a concentration-response in a range of exposures that are relevant to Canadian residential exposures. Cases were identified based on diagnoses of asthma made by doctors, and logistic regression was used to control for key confounders (although co-pollutants were not included).

Rumchev (2002) studied children under three years, who may be more sensitive to the effects of formaldehyde than older children due to their smaller airways. However, in our analysis, we considered it a reasonable assumption that the risk could be applied to the whole population under 20 years.

For the purposes of assigning an economic value, the resulting risk of asthma was assumed to apply to a single year, although, based on the study reporting, the cases were identified over an unknown period of less than two years.

As with the eye irritation scenario, residential formaldehyde concentrations from the Health Canada city studiesfootnote 17,footnote 18,footnote 19,footnote 20 were assumed to be representative of all homes in Canada, although those studies focussed primarily on single detached or attached homes and did not include mobile homes or apartments.

Potential share of health impacts attributable to composite wood (sensitivity analysis)

Eye irritation sensitivity analysis

The contribution of composite wood products to indoor formaldehyde levels is unknown. Since multiple factors can contribute to residential formaldehyde levels, 50%, 25%, and 10% were selected as increasingly conservative contributions to analyze eye irritations due to composite wood products (Table 7).

Table 7: Sensitivity analysis for health impact of formaldehyde exposure on eye irritation
Note: Values have been rounded to two significant digits.
Contribution of composite wood products to overall indoor formaldehyde emissions Number of cases of eye irritation per year
50% 64 000
25% 32 000
10% 13 000

In consideration of the sensitivity analysis, 13 000 to 64 000 eye irritation cases per year may be attributed to excess formaldehyde from composite wood products.

Childhood asthma sensitivity analysis

As discussed in the uncertainty section, the asthma diagnoses reported in Rumchev (2002) may have been influenced by the increased sensitivity to formaldehyde in very young children. Again, since multiple factors can contribute to residential formaldehyde levels, 50%, 25%, and 10% were selected as increasingly conservative contributions to analyze incidence (Table 8) and prevalence (Table 9) of childhood asthma due to composite wood products.

Table 8: Sensitivity analysis for health impact of formaldehyde exposure on annual incidence of childhood asthma
Note: Values have been rounded to two significant digits.
  Percent of asthma cases applied (Rumchev, 2002)
Contribution of composite wood products to overall indoor formaldehyde emissions 100% 50% 30%
50% 2 200 1 100 670
25% 1 100 560 340
10% 450 220 130
Table 9: Sensitivity analysis for health impact of formaldehyde exposure on annual prevalence of childhood asthma
Note: Values have been rounded to two significant digits.
  Percent of asthma cases applied (Rumchev, 2002)
Contribution of composite wood products to overall indoor formaldehyde emissions 100% 50% 30%
50% 57 000 29 000 17 000
25% 29 000 14 000 8 600
10% 11 000 5 700 3 400

In consideration of the sensitivity analysis, 130 to 2 200 incident (new) cases per year and 3 400 to 57 000 prevalent (existing) cases of childhood asthma per year may be attributed to excess formaldehyde from composite wood products.

Valuation of health impacts from formaldehyde emissions from composite wood products

To gain an understanding of the potential scale of health impacts from high-emitting composite wood products, each of the estimates in the sensitivity analysis for eye irritation and childhood asthma prevalence have been monetized (selecting both incidence and prevalence would result in double counting). Economists use the willingness-to-pay approach to value avoided welfare impacts. This approach incorporates treatment costs, lost productivity, and pain and suffering estimates. All values in this section are in 2019 Canadian dollars. Present values were calculated to the year 2020 using a 3% discount rate.

Societal cost of eye irritation

The welfare impact associated with an eye irritation case was derived from a U.S. EPA publication ($28, 2013 USD)footnote 26 and converted to $34 CAD (based on the exchange rate in 2013 and inflation to 2019 dollars). The value was then multiplied by the number of eye irritation cases derived in the sensitivity analysis.

Table 10: Societal cost of potential incidents of eye irritation cases caused by composite wood products
Notes: All valuations are in 2019 Canadian dollars. Numbers are rounded to two significant digits and totals may not add up due to rounding.
Contribution of composite wood products Eye irritation cases (2022 to 2031) Present value (2022 to 2031)
50% 640 000 $18M
25% 320 000 $8.8M
10% 130 000 $3.5M

Societal cost of childhood asthma

The economic valuation for childhood asthma cases assumes that each diagnosis is associated with a lifetime stream of impacts. To calculate lifetime impacts, the annual cost of illness estimate from Ismaila (2013) of $1,410 in 2011 CAD was used. This was estimated for children under the age of 14. These annual values were aggregated over a lifetime and a present value calculated using a 3% discount rate. It was assumed based on the study population in the Rumchev (2002) analysis that the diagnoses occurred at age 3. We also assumed 46% of cases persisted past the age of 18.footnote 29 The result was a per-case lifetime impact of an asthma diagnosis valued at $66,000 undiscounted or $29,000 when discounting future values by 3%. The per-case lifetime estimate was then multiplied by the number of asthma cases per year derived in the sensitivity analysis.

Monetized impacts include out-of-pocket expenses, health care system costs and lost productivity due to loss of work or cost of child care. These values are a conservative estimate as they do not take into account the full welfare impact associated with the pain and suffering of asthma symptoms. Typically, the full willingness to pay to avoid asthma risk would be used; however, these estimates were not available in the literature.

Table 11: Societal cost of potential asthma diagnoses caused by composite wood products
Notes: All valuations are in 2019 Canadian dollars. Numbers are rounded to two significant digits and totals may not add up due to rounding. Percent of asthma cases applied is from Rumchev (2002).
  Percent of asthma cases applied (Rumchev, 2002)
Contribution of composite wood products to overall indoor formaldehyde emissions 100% 50% 30%
Avoided asthma cases (2022 to 2031) Present value Avoided asthma cases (2022 to 2031) Present value Avoided asthma cases (2022 to 2031) Present value
50% 22 000 $520M 11 000 $260M 6 700 $150M
25% 11 000 $260M 5 600 $130M 3 400 $77M
10% 4 500 $100M 2 200 $51M 1 300 $31M

The results from the eye irritation and asthma sensitivity analyses show a potential total benefit from avoided attributable cases ranging from $34 million to $540 million over the 10-year regulatory analysis period. Allergic effects and cancer were identified in the RIAQG for formaldehyde.footnote 2 However, data were not available to support an analysis of allergy impacts, and cancer effects are not expected at the levels of formaldehyde exposure within indoor air of residences.

Cost-benefit statement
Table 12: Monetized costs (rounded)
Impacted stakeholder Description of cost 2022 2023 2031 Total (present value) Annualized value
Government Training, strategic intelligence assessment, and compliance promotion activities $410,000 $260,000 $260,000 $2,300,000 $270,000
Industry Upstream manufacturers $220,000 $190,000 $190,000 $1,600,000 $190,000
Downstream manufacturers $89,000 $39,000 $39,000 $370,000 $43,000
Retailer/importers $940,000 $740,000 $740,000 $6,300,000 $740,000
All stakeholders Total costs $1,700,000 $1,200,000 $1,200,000 $11,000,000 $1,200,000
Break-even analysis

Due to modelling limitations that prevent estimates of post-regulation product sales, the associated exposure reductions, and the timing of health benefits from reductions, the Departments are presenting a break-even analysis for additional context to the monetized costs. The break-even analysis calculates the number of annual asthma cases needed for the Regulations to result in a net benefit. The break-even analysis shows that if 46 asthma cases are avoided in each year from 2022 to 2031, the Regulations will be a net benefit. The 46 cases represent close to 1% of the asthma cases attributable to current in-home exceedance levels and are well below the lower bound of 130 cases per year estimated in the sensitivity analysis, which indicates an expected net benefit for the Regulations.

The analysis is an underestimate, as it only includes one health endpoint. Eye irritations and other nonmeasurable benefits were not included in the break-even analysis.

Small business lens

As indicated in the “Regulatees” subsection, there are an estimated 1 168 small businesses that will be impacted by the Regulations (7 upstream manufacturers, 134 downstream manufacturers, and 1 027 retailers/importers). While the Regulations do not contain any special provisions with respect to small businesses, a key objective was alignment with the emission requirements in the U.S., which the vast majority of Canadian manufacturers are currently meeting in order to export to the U.S. Furthermore, the health objective of the Regulations cannot be achieved unless all products derived from composite wood made or sold in Canada are subject to the same testing rigour and frequency and the same emission standards.

Among upstream manufacturers, it is believed that only one small business does not currently export to the U.S., and therefore, may not be compliant with the U.S. Rule. To be in compliance with the Regulations, this upstream manufacturer will have to undertake all the costs associated with switching to compliant resin, emissions testing, quality control testing, and third-party verification, as well as labelling and record keeping. By contrast, upstream manufacturers that are already in compliance with the U.S. Rule only need to undertake labelling and record keeping, since the other requirements are already being fulfilled.

The Regulations do not set out different administrative reporting requirements for small businesses. The analysis assumes that 10% of all regulatees per year will be requested to submit a report involving testing or import information to the Government, and this 10% is assumed to be evenly distributed across all small and medium/large businesses. The table below presents a summary of the cost impact to small businesses, drawing from the input costs presented in the “Compliance costs” and “Administrative costs” subsections.

Small business lens summary
Table 13: Total compliance and administrative costs
Totals Annualized value Present value
Total compliance cost $570,000 $4,900,000
Total administrative cost $280,000 $2,400,000
Total cost (all impacted small businesses) $850,000 $7,300,000
Cost per impacted small business $730 $6,200

One-for-one rule

The one-for-one rule applies, as the Regulations will result in an incremental change in administrative burden on businesses. Since incremental burden will increase, the Regulations count as an “IN” under the rule, which must be offset within the prescribed timeframe. In addition, since the Regulations will be a new regulatory title that introduces administrative burden, the Government must repeal an existing regulation within the prescribed timeframe. Inputs into the calculation and relevant assumptions were presented in the “Administrative costs” subsection. Those estimates were derived through consultations with stakeholders, and have been adjusted from 2019 Canadian dollars to 2012 Canadian dollars for the purpose of calculating the increase in administrative burden under the one-for-one rule. Using 2012 Canadian constant dollars, 2012 as the present value base year, and a 10-year timeframe from the year of registration (i.e. 2021 to 2030), the annualized average increase in administrative burden on businesses is approximately $145,000, or $104 per business.footnote 30

Regulatory cooperation and alignment

The Regulations are not related to a formal regulatory cooperation forum; however, regulatory alignment with the U.S. is a central aspect. While some provinces have established acceptable occupational exposure levels to formaldehyde, these levels do not address emissions from composite wood products or formaldehyde levels in homes. On May 3, 2017, a Private Member's Motionfootnote 10 was unanimously agreed to in the House of Commons to adopt regulations on formaldehyde emissions from composite wood products and to ensure the regulations are similar to the U.S. Rule. This regulatory alignment will help level the playing field in the international composite wood products market. It also supports Canadian businesses whereby Canadian manufacturers of composite wood products that sell their products in Canada and U.S. would be able to do so without having to take into account different regulatory requirements.

The Canadian Regulations are aligned with the U.S. Rule with respect to the emission limits, the scope of composite wood products and exemptions, test methodology, and frequency of testing. A third-party certification framework has been included in the Regulations since publication of the proposed Regulations in the Canada Gazette, Part I. The framework is similar to that in the U.S. Rule whereby there is enhanced oversight of imports, which will strengthen compliance verification of the Regulations. This framework sets out that composite wood panels must be certified as being compliant with the Regulations by a qualified TPC prior to import or sale. Certification of composite wood products will require international manufacturers to conduct testing in order for their products to be certified and imported into Canada. The qualification that a TPC must possess, including accreditation, scope of accreditation and experience with a specific test method, are similar to those set out in the U.S. Rule.

Composite wood product labelling requirements are set out in the Regulations. Given the similarities between the U.S. Rule and the Canadian Regulations, it was decided that the Government of Canada would recognize U.S. labels (“TSCA Title VI compliant”); however, these labels must respect bilingual requirements. Acceptance of U.S. labels may reduce costs for industry.

Some differences remain with respect to record keeping, reporting, and administrative requirements to address unique Canadian circumstances and the Canadian legal and legislative framework. Differences are minimized and are not expected to limit the ability of manufacturers to comply with the technical requirements of either regulatory tool.

Strategic environmental assessment

In accordance with the Cabinet Directive on the Environmental Assessment of Policy, Plan and Program Proposals, a strategic environmental assessment (SEA) was completed for Canada's Chemical Management Plan (CMP). The SEA indicated that the CMP will have a positive effect on the environment and human health.footnote 31

Gender-based analysis plus

A gender-based analysis plus (GBA+) concluded that the Regulations are not expected to have any negative impacts on particular groups of Canadians on the basis of sex, gender, race, or ethnicity.

Significantly more men than women are currently employed in the manufacturing of composite wood products in Canada. Many of the employees in this sector live in rural communities, and Indigenous Canadians are more highly represented in the forest industry sector than they are in many other industrial sectors.footnote 32 Canadian manufacturers have been largely supportive of the Regulations, so it is not expected there would be any negative employment impacts in the sector.

Canadian importers may assume some costs under the Regulations, but those costs are not expected to be large enough to result in significant job losses. A breakdown of importers by sex, gender, or race is not available, but since retail sales are fairly evenly spread across sex, gender, and race, it is expected that the Regulations will not put a significant strain on importers or retailers on the basis of their sex, gender, or race.

Reducing formaldehyde levels in Canadian homes will be beneficial to the health of all Canadians. Lower-income Canadians in particular are expected to benefit from the Regulations because they are more likely to buy inexpensive furniture or flooring made of composite wood, which may have higher emissions of formaldehyde. Further, since children are particularly susceptible to some of the health risks associated with formaldehyde exposure, such as asthma, the Regulations will be particularly beneficial for Canadian children and their parents. The health benefits will be the greatest for low-income households with a large number of children.

Implementation, compliance and enforcement, and service standards

Implementation

Most implicated products must comply with the Regulations when they come into force 18 months after publication in the Canada Gazette, Part II. However, laminated products will not be subject to testing or certification requirements until five years after the coming into force of the Regulations, and are only required to meet emission limits specific to the composite wood panel core of the product up until that time. Laminated products are, nevertheless, subject to labelling and certain record-keeping requirements upon the coming into force of the Regulations.

Once the Regulations come into force, the Government of Canada will carry out compliance promotion activities, including continued engagement with existing stakeholders, engagement with any newly identified stakeholders, the creation of guidance materials, and the posting of information on the Government's websites. The compliance promotion approach for the Regulations will include maintaining a stakeholder database, preparing and delivering compliance promotion materials, offering online information sessions, as well as responding to specific inquiries from stakeholders.

Performance measurement and monitoring

The Government of Canada will monitor compliance with the final Regulations and assess their performance over time with data collected through surveys and web tools, requests for records, verification of labels, product testing (assessing formaldehyde emission levels/trends from composite wood products), indoor air measurements, and enforcement activities (e.g. compliance rates). Specific performance outcomes (immediate, intermediate, and final) have been developed as part of the implementation strategy for the Regulations. Expected immediate outcomes are awareness and understanding of the regulatory requirements by regulated parties. Expected intermediate outcomes are compliance with regulatory requirements such as meeting emission limits, testing, labelling, certification and the provision of records upon request. The expected final outcome is the reduction of formaldehyde emissions from composite wood products to levels that are protective of human health. By achieving this final outcome, progress will be made toward the regulatory objective of reducing potential risks to the health of Canadians from exposure to formaldehyde.

A performance measurement report for the risk management of formaldehyde, which will include an evaluation of the success of the Regulations, will be made publicly available through Government of Canada websites.

Compliance and enforcement

The Regulations will be made under CEPA. Enforcement officers will, when verifying compliance with the Regulations, apply the Compliance and Enforcement Policy for CEPA.footnote 33 This Policy sets out the range of possible responses to alleged violations, including warnings, directions, environmental protection compliance orders, tickets, ministerial orders, injunctions, prosecution, and environmental protection alternative measures (which are an alternative to a court prosecution after the laying of charges for a CEPA violation). In addition, the Policy explains when the Government of Canada will resort to civil suits by the Crown for cost recovery.

To verify compliance, enforcement officers may carry out an inspection. An inspection may identify an alleged violation, and alleged violations may also be identified by the Departments' technical personnel or through complaints received from the public. Whenever a possible violation of any regulation is identified, enforcement officers may carry out investigations.

If, following an inspection or an investigation, an enforcement officer discovers an alleged violation, the officer will choose the appropriate enforcement action based on the following factors:

Contacts

Andrew Beck
Director
Risk Management Bureau
Safe Environments Directorate
Health Canada
269 Laurier Avenue West
Ottawa, Ontario
K1A 0K9
Email: hc.formaldehyde-formaldehyde.sc@canada.ca

Matthew Watkinson
Director
Regulatory Analysis and Valuation Division
Environment and Climate Change Canada
200 Sacré-Cœur Boulevard
Gatineau, Quebec
K1A 0H3
Email: ec.darv-ravd.ec@canada.ca