| COMMITMENTS AND CONTINGENT LIABILITIES | COMMITMENTS AND CONTINGENT LIABILITIES Litigation and Environmental Matters Under the Separation and Distribution Agreement, liabilities, including cost and expenses, associated with litigation and environmental matters that primarily related to the materials science business, the agriculture business or the specialty products business were generally allocated to or retained by Dow, Corteva or the Company, respectively, through retention, assumption or indemnification. Related to the foregoing, at September 30, 2019, DuPont has recorded (i) a liability of $33 million (although it is reasonably possible that the ultimate cost could range up to $112 million above the amount accrued) for retained or assumed environmental liabilities, (ii) a liability of $3 million for retained or assumed litigation liabilities, and (iii) an indemnification liability related to legal and environmental matters of $58 million . Liabilities associated with discontinued and/or divested operations and businesses of Historical Dow generally were allocated to or retained by Dow. The allocation of liabilities associated with the discontinued and/or divested operations and businesses of Historical EID is discussed below. The liabilities allocated to and assumed by Dow and Corteva are reflected as discontinued operations of the Company at December 31, 2018. Such liabilities assumed by Dow as of the consummation of the Dow Distribution on April 1, 2019, include the following matters discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, (the “Annual Report”) and Quarterly Report on Form 10-Q for the three-month period ended March 31, 2019, (the “First Quarterly Report”): Asbestos Related Matters of Union Carbide Corporation, Urethane Matters, Rocky Flats Matter, Dow Silicones Chapter 11 Related Matters, Midland Off-Site Environmental Matters, Dow Silicones Midland, Michigan, Freeport, Texas, Plaquemine, Louisiana and St. Charles, Louisiana Steam-Assisted Flares Matters, Freeport, Texas, Facility Matter, Mt. Meigs, Alabama Matter, Union Carbide Matter and Union Carbide - Seadrift, Texas and, with indemnity from DuPont and Corteva, the Sabine Plant, Orange Texas-EPA Multimedia Inspection. Such liabilities assumed by Corteva as of the consummation of the Corteva Distribution on June 1, 2019, include the following matters discussed in the Company’s Annual Report and the First Quarterly Report: La Porte Plant, La Porte, Texas - Crop Protection-Release Incident Investigation and La Porte Plant, La Porte, Texas - EPA Multimedia Inspection. Discontinued and/or Divested Operations and Businesses ("DDOB") Liabilities of Historical EID Under the Separation and Distribution Agreement and the Letter Agreement between Corteva and DuPont, DDOB liabilities of Historical EID primarily related to Historical EID’s agriculture business were allocated to or retained by Corteva and those primarily related to Historical EID’s specialty products business were allocated to or retained by the Company. Historical EID DDOB liabilities not primarily related to Historical EID’s agriculture business or specialty products business (“Stray Liabilities”), are allocated as follows: • Generally, indemnifiable losses as defined in the Separation and Distribution Agreement, (“Indemnifiable Losses”) for Stray Liabilities, to the extent they do not arise out of actions related to or resulting from the development, testing, manufacture or sale of PFAS, defined below, (“Non-PFAS Stray Liabilities”) that are known as of April 1, 2019 are borne by Corteva up to a specified amount set forth in the schedules to the Separation and Distribution Agreement and/or Letter Agreement. Non-PFAS Stray Liabilities in excess of such specified amounts and any Non-PFAS Stray Liabilities not listed in the schedules to the Separation and Distribution Agreement or Letter Agreement are borne by Corteva and/or DuPont up to separate, aggregate thresholds of $200 million each, (as to Corteva or DuPont, the " $200 Million Threshold"), to the extent Corteva or DuPont, as applicable, incurs an Indemnifiable Loss. Once Corteva’s or DuPont’s $200 Million Threshold is met, the other would generally bear all Non-PFAS Stray Liabilities until meeting its $200 Million Threshold. After the respective $200 million thresholds are met, DuPont will bear 71 percent of such losses and Corteva will bear 29 percent of such losses. • Generally, Corteva and the Company will each bear 50 percent of the first $300 million (up to $150 million each) for Indemnifiable Losses arising out of actions to the extent related to or resulting from the development, testing, manufacture or sale of per- or polyfluoroalkyl substances, which include collectively perfluorooctanoic acids and its salts (“PFOA”), perfluorooctanesulfonic acid (“PFOS”) and perfluorinated chemicals and compounds (“PFCs”) (all such substances, “PFAS” and such Stray Liabilities referred to as “PFAS Stray Liabilities”). Indemnifiable Losses to the extent related to PFAS Stray Liabilities in excess of $300 million generally will be borne 71 percent by the Company and 29 percent by Corteva, unless either Corteva or DuPont has met its $200 Million Threshold. In that event, the other company would bear all PFAS Stray Liabilities until that company meets its $200 Million Threshold, at which point DuPont will bear 71 percent of such losses and Corteva will bear 29 percent of such losses. • Indemnifiable Losses incurred by the companies in relation to PFAS Stray Liabilities up to $300 million (e.g., up to $150 million each) will be applied to each company’s respective $200 Million Threshold. Non-PFAS Stray Liabilities While DuPont believes it is probable that it will incur a liability related to Non-PFAS Stray Liabilities, such liability is not reasonably estimable at September 30, 2019. Therefore, at September 30, 2019, DuPont has not recorded an accrual related to Non-PFAS Liabilities. PFAS Stray Liabilities DuPont expects to incur costs and expenses such as attorneys’ fees and expenses and court costs in connection with the Chemours suit, described below. While such costs and expenses are Indemnifiable Losses, the Company will expense them as incurred in accordance with its accounting policy for litigation matters. The Company believes the probability of ultimate liability with respect to the Chemours suit is remote. Generally, The Chemours Company (“Chemours”), with reservations, including as to alleged fraudulent conveyance and voidable transactions, is defending and indemnifying Historical EID in the PFAS Matters discussed below. Although Chemours has refused the tender of the Company’s defense in the limited actions in which the Company has been named, DuPont believes it is remote that it will ultimately incur a liability in connection with these PFAS Matters. However, in the highly improbable event that Chemours is unable to pay or is successful in limiting its obligations under the Chemours Separation Agreement, defined below, it could impact the Company’s business, financial condition, results of operations and cash flows. Chemours Suit On July 1, 2015, Historical EID completed the separation of Historical EID’s Performance Chemicals segment through the spinoff of all the issued and outstanding stock of The Chemours Company (“Chemours”) to holders of Historical EID common stock. In connection with the spin, Historical EID and Chemours entered into a Separation Agreement (as amended, the "Chemours Separation Agreement"). Pursuant to the Chemours Separation Agreement, Chemours is obligated to indemnify Historical EID, including its current or former affiliates, against certain litigation, environmental and other liabilities that arose prior to the Chemours Separation. The term of this indemnification is generally indefinite and includes defense costs and expenses, as well as monetary and non-monetary settlements and judgments. In 2017, Historical EID and Chemours amended the Chemours Separation Agreement to provide for a limited sharing of potential future PFOA liabilities for a five-year period that began on July 6, 2017. The amended agreement provides that during that five- year period, Chemours will annually pay the first $25 million of future PFOA liabilities and, if that amount is exceeded, Historical EID will pay any excess amount up to the next $25 million , with Chemours annually bearing any excess liabilities above that amount. At the end of the five-year period, this limited sharing agreement will expire, and Chemours’ indemnification obligations under the Chemours Separation Agreement will continue unchanged. On May 13, 2019, Chemours filed suit in the Delaware Court of Chancery against Historical EID, Corteva and the Company in an attempt to limit its responsibility for the litigation and environmental liabilities allocated to and assumed by Chemours under the Chemours Separation Agreement. Chemours is asking the court to rewrite the Chemours Separation Agreement by either limiting Chemours’ liabilities or, alternatively, ordering the return to Chemours of all or a portion of a $3.91 billion dividend that Chemours paid to Historical EID, Chemours’ then-sole-shareholder, just prior to the spin of Chemours. DuPont and Corteva, acting jointly, have filed a motion to dismiss the lawsuit for lack of subject matter jurisdiction to which Chemours responded in October 2019. In addition, Corteva and DuPont have initiated an arbitration of the dispute as required under the Chemours Separation Agreement. DuPont's reply to Chemours' response is due in November after which the motion to dismiss will be before the judge. Before determining if the matter is arbitrated, as required under the Chemours Separation Agreement, or will proceed in the Court of Chancery, the judge typically would schedule oral argument on the motion. Indemnifiable Losses related to the Chemours suit are PFAS Stray Liabilities subject to the sharing arrangement between DuPont and Corteva, described above. PFAS Matters Historical EID is a party to legal proceedings relating to the use of PFOA and PFCs by its former Performance Chemicals segment. Indemnifiable Losses related to PFAS liabilities allocated to and assumed by Chemours under the Chemours Separation Agreement generally are PFAS Stray Liabilities subject to the sharing arrangement between DuPont and Corteva, described above. Personal Injury DuPont, which was formed after the spinoff of Chemours as a subsidiary of Historical EID and Historical Dow, is not named in the personal injury discussed below. In 2004, Historical EID settled a West Virginia state court class action, Leach v. DuPont, which alleged that PFOA from Historical EID’s former Washington Works facility had contaminated area drinking water supplies and affected the health of area residents. Historical EID has residual liabilities under the Leach settlement related to providing PFOA water treatment to six area water districts and private well users and to fund, through an escrow account, up to $235 million for a medical monitoring program for eligible class members. Members of the Leach class have standing to pursue personal injury claims for just six health conditions that an expert panel appointed under the Leach settlement reported in 2012 had a “probable link” (as defined in the settlement) with PFOA: pregnancy induced hypertension, including preeclampsia; kidney cancer; testicular cancer; thyroid disease; ulcerative colitis; and diagnosed high cholesterol. In 2017, Chemours and Historical EID each paid $335 million to settle the multi-district litigation in the U.S. District Court for the Southern District of Ohio (“Ohio MDL”), thereby resolving claims of about 3,550 plaintiffs alleging injury from exposure to PFOA in drinking water. The Ohio MDL settlement did not resolve claims of plaintiffs who did not have claims in the Ohio MDL or whose claims are based on diseases first diagnosed after February 11, 2017. There are several dozen claims pending in the Ohio MDL. Natural Resource Damage Claims, Aqueous Firefighting Foam and Other Claims DuPont, which was formed after the spinoff of Chemours as a subsidiary of Historical EID and Historical Dow, is named in certain of the actions discussed below. Natural Resource Damage Claims Eight suits have been filed by State Attorneys General in New Jersey ( four suits; one each relating to the Chambers Works, Parlin, Pompton Lakes and Repauno sites in New Jersey), New Hampshire, New York, Ohio and Vermont for alleged harm to natural resources, punitive damages, and present and future costs to cleanup contamination from certain PFAS compounds and to abate the alleged nuisance. The New Hampshire (NH), New York (NY), Ohio (OH) and Vermont (VT) suits name 3M, EID, Corteva, Chemours and the Company. Additional defendants are named in the NY and OH suits. These suits include causes of action based on allegations that the transfer by Historical EID of certain PFAS liabilities to Chemours prior to spinning off Chemours resulted in a fraudulent conveyance or voidable transaction. All four suits filed in New Jersey (NJ) name EID and Chemours. DuPont is a named party in the Parlin suit. The Parlin and Chambers Works suits include causes of action based on allegations that the transfer by Historical EID of certain PFAS liabilities to Chemours prior to spinning off Chemours resulted in a fraudulent conveyance or voidable transaction. The New Jersey Attorney General and New Jersey State Department of Environmental Protection filed two directives, one of which names DuPont. The directives seek information on the historical and current use of PFAS. Aqueous Firefighting Foam (“AFFF”) Approximately 150 lawsuits have been filed in different parts of the country against 3M, foam manufacturers and others; most of them are consolidated in multi-district litigation in federal district court in South Carolina (the “SC MDL”) . The claims involve alleged contamination of neighboring drinking and groundwater from the use of aqueous firefighting foams on military installations, air force bases, commercial airports and refineries. About 32 of the cases name EID and Chemours as defendants. The Company is also named in six of these cases. These six cases include causes of action based on allegations that the transfer by Historical EID of certain PFAS liabilities to Chemours prior to spinning off Chemours resulted in a fraudulent conveyance or voidable transaction. The claims against EID, Chemours and the Company involve alleged sales of PFOA and PFOS products to defendant foam manufacturers. EID and the Company have never made or sold firefighting foam, PFOS or PFOS containing products. Other Claims About 60 cases in total are pending in state courts in Maine (ME), North Carolina (NC) and NY; and in federal courts in NY (Northern and Southern District Courts), NC (Eastern District) and OH (Southern District). These suits are pending against 3M, EID, Chemours and various other defendants. The Company is named in one suit pending in the Eastern District NC. The causes of action vary by case but include causes of action for public nuisance, property damage, and water remediation. The Hardwick case is pending in the Southern District OH and seeks certification of a nationwide class of individuals who have detectable levels of PFAS in their blood serum. The suit was filed against several defendants in addition to Chemours and EID. The complaint specifically seeks, among other things, the creation of a “PFAS Science Panel” to study the effects of PFAS, but expressly states that the class does not seek compensatory damages for personal injuries. There are two actions pending in Eastern District NC against EID and Chemours, relating to discharges of PFCs, including GenX, into the Cape Fear River. GenX is a polymerization processing aid and a replacement for PFOA introduced by Historical EID which Chemours continues to manufacture at its Fayetteville Works facility in Bladen County, NC. One of these actions is a consolidated putative class action that asserts claims for damages and other relief on behalf of putative classes of property owners and residents in areas near or who draw drinking water from the Cape Fear River. The Company is named as a defendant, in the other action before the Eastern District NC. It is a consolidated action brought by various NC water authorities, including the Cape Fear Public Utility Authority and Brunswick County, that seek actual and punitive damages as well as injunctive relief. In addition, an action is pending in North Carolina state court on behalf of about 200 plaintiffs who own wells and property near the Fayetteville Works facility. The plaintiffs seek damages for nuisance allegedly caused by releases of certain PFCs from the site. Of the 60 cases, 46 are consolidated in a purported class action in NY state court brought on behalf of Hoosick Falls, NY real property owners or lessors, those receiving drinking water from the Hoosick Falls municipal water authority or private wells. Six of these cases include causes of action based on allegations that the transfer by Historical EID of certain PFAS liabilities to Chemours prior to spinning off Chemours resulted in a fraudulent conveyance or voidable transaction. Other Litigation Matters In addition to the specific matters described above, the Company is party to other claims and lawsuits arising out of the normal course of business with respect to product liability, patent infringement, governmental regulation, contract and commercial litigation, and other actions. Certain of these actions may purport to be class actions and seek damages in very large amounts. It is the opinion of the Company’s management that the possibility is remote that the aggregate of all such other claims and lawsuits will have a material adverse impact on the results of operations, financial condition and cash flows of the Company. Environmental Matters Accruals for environmental matters are recorded when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated based on current law and existing technologies. At September 30, 2019, the Company had accrued obligations of $75 million for probable environmental remediation and restoration costs, comprised of $33 million retained and assumed following the Distributions and $42 million of indemnified liabilities. These obligations are included in "Accrued and other current liabilities" and "Other noncurrent obligations" in the interim Condensed Consolidated Balance Sheets. This is management’s best estimate of the costs for remediation and restoration with respect to environmental matters for which the Company has accrued liabilities, although it is reasonably possible that the ultimate cost with respect to these particular matters could range up to $175 million above the amount accrued at September 30, 2019. Consequently, it is reasonably possible that environmental remediation and restoration costs in excess of amounts accrued could have a material impact on the Company’s results of operations, financial condition and cash flows. Inherent uncertainties exist in these estimates primarily due to unknown conditions, changing governmental regulations and legal standards regarding liability, and emerging remediation technologies for handling site remediation and restoration. At December 31, 2018, the Company had accrued obligations of $51 million for probable environmental remediation and restoration costs. Pursuant to the Separation and Distribution Agreement, the Company's is required to indemnify certain clean-up responsibilities and associated remediation costs. The accrued environmental obligations of $75 million as of September 30, 2019 includes amount for which the Company indemnifies Dow and Corteva. At September 30, 2019, the Company has indemnified Dow and Corteva $8 million and $34 million , respectively. Guarantees Obligations for Equity Affiliates & Others The Company has directly guaranteed various debt obligations under agreements with third parties related to equity affiliates, and customers. At September 30, 2019 and December 31, 2018, the Company had directly guaranteed $193 million and $199 million , respectively, of such obligations. These amounts represent the maximum potential amount of future (undiscounted) payments that the Company could be required to make under the guarantees. The Company would be required to perform on these guarantees in the event of default by the guaranteed party. The Company assesses the payment/performance risk by assigning default rates based on the duration of the guarantees. These default rates are assigned based on the external credit rating of the counterparty or through internal credit analysis and historical default history for counterparties that do not have published credit ratings. For counterparties without an external rating or available credit history, a cumulative average default rate is used. In certain cases, the Company has recourse to assets held as collateral, as well as personal guarantees from customers. Assuming liquidation, these assets are estimated to cover approximately 25 percent of the $28 million of guaranteed obligations of customers. The following table provides a summary of the final expiration year and maximum future payments for each type of guarantee: Guarantees at September 30, 2019 Final Expiration Year Maximum Future Payments In millions Obligations for customers 1 : Bank borrowings 2020 $ 28 Obligations for non-consolidated affiliates 2 : Bank borrowings 2019 $ 165 Total guarantees $ 193 1. Existing guarantees for select customers, as part of contractual agreements. The terms of the guarantees are equivalent to the terms of the customer loans that are primarily made to finance customer invoices. Of the total maximum future payments, $28 million had terms less than a year. 2. Existing guarantees for non-consolidated affiliates' liquidity needs in normal operations. |
