| COMMITMENTS AND CONTINGENT LIABILITIES | COMMITMENTS AND CONTINGENT LIABILITIES Litigation, Environmental Matters, and Indemnifications The Company and certain subsidiaries are involved in various lawsuits, claims and environmental actions that have arisen in the normal course of business with respect to product liability, patent infringement, governmental regulation, contract and commercial litigation, as well as possible obligations to investigate and mitigate the effects on the environment of the disposal or release of certain substances at various sites. In addition, in connection with divestitures and the related transactions, the Company from time to time has indemnified and has been indemnified by third parties against certain liabilities that may arise in connection with, among other things, business activities prior to the completion of the respective transactions. The term of these indemnifications, which typically pertain to environmental, tax and product liabilities, is generally indefinite. The Company records liabilities for ongoing and indemnification matters when the information available indicates that it is probable that a liability will be incurred and the amount of the loss can be reasonably estimated. As of June 30, 2023, the Company has recorded indemnification assets of $28 million within "Accounts and notes receivable - net" and $239 million within "Deferred charges and other assets" and indemnification liabilities of $237 million within "Accrued and other current liabilities" and $268 million within "Other noncurrent obligations" within the Condensed Consolidated Balance Sheets. The Company’s accruals for indemnification liabilities related to the binding Memorandum of Understanding (“MOU”) between Chemours, Corteva, EIDP and the Company and to the DowDuPont ("DWDP") Separation and Distribution Agreement and the Letter Agreement between the Company and Corteva (together the “Agreements”) discussed below, are included in the balances above. Additionally, as of June 30, 2023 the Company has recognized a liability of $400 million related to the settlement agreement between Chemours, Corteva, EIDP and DuPont related to the aqueous film-forming foams multi-district litigation, as discussed below. PFAS Stray Liabilities: Future Eligible PFAS Costs On July 1, 2015, EIDP, a Corteva subsidiary since June 1, 2019, completed the separation of EIDP’s Performance Chemicals segment through the spin-off of Chemours to holders of EIDP common stock (the “Chemours Separation”). On June 1, 2019, the Company completed the separation of its agriculture business through the spin-off of Corteva, Inc. (“Corteva”), including Corteva’s subsidiary EIDP. On January 22, 2021, the Company, Corteva, EIDP and Chemours entered into the MOU pursuant to which the parties have agreed to release certain claims that had been raised by Chemours including any claims arising out of or resulting from the process and manner in which EIDP structured or conducted the Chemours Separation, and any other claims that challenge the Chemours Separation or the assumption of Chemours Liabilities (as defined in the Chemours Separation Agreement) by Chemours and the allocation thereof, subject in each case to certain exceptions set forth in the MOU. In connection with the MOU, the confidential arbitration process regarding certain claims by Chemours was terminated in February 2021. The parties have further agreed not to bring any future, additional claims regarding the Chemours Separation Agreement or the MOU outside of arbitration. Pursuant to the MOU, the parties have agreed to share certain costs associated with potential future liabilities related to alleged historical releases of certain PFAS out of pre-July 1, 2015 conduct (“eligible PFAS costs”) until the earlier to occur of (i) December 31, 2040, (ii) the day on which the aggregate amount of Qualified Spend, as defined in the MOU, is equal to $4 billion or (iii) a termination in accordance with the terms of the MOU. PFAS refers to per- or polyfluoroalkyl substances, which include perfluorooctanoic acids and its ammonium salts (“PFOA”). The parties have agreed that, during the term of this sharing arrangement, Qualified Spend up to $4 billion will be borne 50 percent by Chemours and 50 percent, up to a cap of $2 billion, by the Company and Corteva. The Company and Corteva will split their 50 percent of Qualified Spend in accordance with the Agreements; accordingly, the Company's portion of the $2 billion is approximately $1.4 billion. At June 30, 2023, the Company had paid Qualified Spend of approximately $110 million against its portion of the $2 billion cap. After the term of this arrangement, Chemours’ indemnification obligations under the Chemours Separation Agreement would continue unchanged, subject in each case to certain exceptions set forth in the MOU. In order to support and manage any potential future eligible PFAS costs, the parties also agreed to establish an escrow account. The MOU provides that (1) no later than each of September 30, 2021 and September 30, 2022, Chemours shall deposit $100 million into an escrow account and DuPont and Corteva shall together deposit $100 million in the aggregate into an escrow account and (2) no later than September 30 of each subsequent year through and including 2028, Chemours shall deposit $50 million into an escrow account and DuPont and Corteva shall together deposit $50 million in the aggregate into an escrow account. Subject to the terms and conditions set forth in the MOU, each party may be permitted to defer funding in any calendar year beginning with 2022 through and including 2028. Additionally, if on December 31, 2028, the balance of the escrow account (including interest) is less than $700 million, Chemours will make 50 percent of the deposits and DuPont and Corteva together will make 50 percent of the deposits necessary to restore the balance of the escrow account to $700 million. Such payments will be made in a series of consecutive annual equal installments commencing on September 30, 2029 pursuant to the escrow account replenishment terms as set forth in the MOU. DuPont's aggregate MOU escrow deposits of $100 million, not including interest, at June 30, 2023 are reflected in "Restricted cash and cash equivalents" and at December 31, 2022 are reflected in "Restricted cash and cash equivalents - noncurrent"on the Condensed Consolidated Balance Sheets. Under the Agreements, Divested Operations and Businesses ("DDOB") liabilities of EIDP not allocated to or retained by Corteva or the Company are categorized as relating to either (i) PFAS Stray Liabilities, if they arise out of actions related to or resulting from the development, testing, manufacture or sale of PFAS; or (ii) Non-PFAS Stray Liabilities, (and together with PFAS Stray Liabilities, the “EIDP Stray Liabilities”). The Agreements provide that the Company and Corteva will each bear specified amounts plus an additional $200 million of Indemnifiable Losses, described below, in relation to certain EIDP Stray Liabilities. The Agreements further provide that the Company and Corteva will each bear 50 percent, $150 million each, of the first $300 million of total Indemnifiable Losses related to PFAS Stray Liabilities. When the companies meet their respective $150 million threshold, Indemnifiable Losses related to PFAS Stray Liabilities will be borne 71 percent by DuPont and 29 percent by Corteva. Indemnifiable Losses up to $150 million incurred for PFAS Stray Liabilities are credited against each company’s $200 million threshold. Corteva and DuPont have met their respective $150 million threshold for PFAS Stray Liabilities. As a result and in accordance with the Agreement, DuPont is bearing 71 percent of Indemnifiable Losses related to PFAS Stray Liabilities. At June 30, 2023, DuPont has accrued for future Qualified Spend and Indemnifiable Losses related to PFAS Stray Liabilities according. Since Corteva has met its $150 million threshold for PFAS Stray Liabilities and in the second quarter 2023, reached aggregate spend of $50 million for Indemnifiable Losses related to non-PFAS Stray Liabilities, Corteva has met the $200 million threshold. As a result and in accordance with the Agreements, DuPont now is generally responsible for managing the Non-PFAS Stray liabilities and until DuPont meets its $200 million threshold, is bearing all Indemnifiable Losses associated with Non-PFAS Stray Liabilities. Thereafter, DuPont will bear 71 percent and Corteva will bear 29 percent of Indemnifiable Losses related to Non-PFAS Stray Liabilities. At June 30, 2023, DuPont has accrued for future Indemnifiable Losses related to Non-PFAS Stray Liabilities accordingly. Indemnifiable Losses, as defined in the DWDP Separation and Distribution Agreement, include, among other things, attorneys’, accountants’, consultants’ and other professionals’ fees and expenses incurred in the investigation or defense of EIDP Stray Liabilities. In connection with the MOU and the Agreements, the Company has recognized the following indemnification liabilities related to eligible PFAS costs: Indemnified Liabilities Related to the MOU In millions Jun 30, 2023 Dec 31, 2022 Balance Sheet Classification Current indemnified liabilities $ 76 $ 66 Accrued and other current liabilities Long-term indemnified liabilities 124 120 Other noncurrent obligations Total indemnified liabilities accrued under the MOU 1 $ 200 $ 186 1. As of June 30, 2023 and December 31, 2022, total indemnified liabilities accrued include $152 million and $161 million, respectively, related to Chemours environmental remediation activities at their site in Fayetteville, North Carolina under the Consent Order between Chemours and the North Carolina Department of Environmental Quality (the "NC DEQ"). In addition to the above, as of June 30, 2023, the Company has recognized a liability of $400 million related to the settlement agreement between Chemours, Corteva, EIDP and DuPont related to the aqueous film-forming foams multi-district litigation, as discussed below. Future charges associated with the MOU would be recognized over the term of the agreement as a component of income from discontinued operations to the extent liabilities become probable and estimable. In 2004, EIDP settled a West Virginia state court class action, Leach v. E. I. du Pont de Nemours and Company, which alleged that PFOA from EIDP’s former Washington Works facility had contaminated area drinking water supplies and affected the health of area residents. 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 EIDP 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 2017 settlement did not resolve about 100 cases subsequently brought by Leach class members. On January 21, 2021, EIDP and Chemours entered into settlement agreements with plaintiffs’ counsel representing the Ohio MDL plaintiffs providing for a settlement of all but one of the approximately 100 cases (the “Settlement”). The total settlement amount was $83 million in cash with each of the Company and EIDP contributing $27 million and Chemours contributing $29 million. At June 30, 2021 the Company had paid in full its $27 million contribution. The Settlement was entered into solely by way of compromise and settlement and is not in any way an admission of liability or fault by the Company, Corteva, EIDP or Chemours. The personal injury case captioned “Abbott v. E. I. du Pont de Nemours and Company” was not included in the Settlement and is ongoing. In connection with the Settlement, plaintiffs' counsel filed a motion to terminate the Ohio MDL, which was later withdrawn. Subsequent to the withdrawal, plaintiffs' counsel has filed or indicated intent to file about a dozen new cases into the Ohio MDL. DuPont was not a named party in the Leach case or the Ohio MDL and is not a named party in the Abbott case or the new cases being filed into the Ohio MDL. As of June 30, 2023, there are various cases alleging damages due to PFAS which are discussed below. Such actions often include additional claims based on allegations that the transfer by EIDP of certain PFAS liabilities to Chemours resulted in a fraudulent conveyance or voidable transaction. With the exception of the fraudulent conveyance claims, which are excluded from the MOU, legal fees, expenses, costs, and any potential liabilities for eligible PFAS costs presented by the following matters will be shared as defined in the MOU between Chemours, EIDP, Corteva and DuPont. Beginning in April 2019, several dozen lawsuits alleging water contamination from the use of PFAS-containing aqueous film-forming foams (“AFFF”) were filed against EIDP and Chemours, in addition to 3M and other AFFF manufacturers. The majority of these lawsuits were consolidated in a multi-district litigation (the “AFFF MDL”). The AFFF MDL is captioned In Re: Aqueous Film Forming Foams (AFFF) Products Liability Litigation and is pending in the United States District Court for the District of South Carolina, (the “Court”). Since then, the AFFF MDL has grown and contains approximately 4,600 cases. Most of the actions in the AFFF MDL identify DuPont as a defendant only for fraudulent transfer claims related to the Chemours Separation and the DowDuPont separations. Generally, the AFFF MDL contains multiple types of lawsuits including, but not limited to, personal injury cases, state attorneys general natural resource damages cases, and water provider contamination cases. DuPont has never made or sold AFFF, perfluorooctanesulfonic acid ("PFOS") or PFOS containing products. On June 30, 2023, Chemours, Corteva, EIDP and DuPont entered a definitive agreement to comprehensively resolve all PFAS-related claims of a defined class of U.S. public water systems, including but not limited to water systems that are part of the AFFF MDL related to the use of aqueous film-forming foam, (the “Water District Settlement Agreement”). The defined class is composed of all Public Water Systems, as defined in 42 U.S.C § 300f, with a current detection of PFAS and all Public Water Systems, that are currently required to monitor for PFAS under the EPA’s Fifth Unregulated Contaminant Monitoring Rule (“UCMR 5”) or other applicable federal or state law. The matter captioned City of Stuart, Florida v. 3M Company, et al. is included in the settlement. The class does not include water systems owned and operated by a State or the United States government; small systems that have not detected PFAS and are not currently required to monitor for it under federal or state requirements; and, unless they otherwise request to be included, water systems in the lower Cape Fear River Basin of North Carolina. While it is reasonably possible that the excluded systems or claims could result in additional future lawsuits, claims, assessments or proceedings, the impact is not estimable at this time. The Water District Settlement Agreement addresses, among other things, the timing and logistics of the settlement payment and conditions under which the settlement might not proceed. The parties have agreed that the conditions to termination will include a walk-away right that enables Chemours, Corteva and DuPont to terminate the settlement if class member opt outs exceed specified confidential levels. The total settlement amount is $1.185 billion in cash, which Chemours, Corteva and DuPont will collectively contribute to a Qualified Settlement Fund (the “Water District Settlement Fund”). The amount that each of the companies will contribute to the water district fund was determined in accordance with the MOU with Chemours contributing 50 percent (about $592 million), and DuPont (about $400 million) and Corteva (about $193 million) together contributing the remaining 50 percent. The parties expect to utilize the MOU escrow account balance, currently reflected in "Restricted cash and cash equivalents" on the Condensed Consolidated Balance Sheets, among other sources, to make their respective contributions to the Water District Settlement Fund. On July 10, 2023, the Water District Settlement Agreement was submitted to the Court for preliminary approval together with a motion seeking certification of the proposed settlement class. The Companies expect preliminary approval within two months of the submission date and will fund the settlement in full and deposit the settlement amount into the Water District Settlement Fund within 10 business days of such approval. Final Court approval of the settlement is expected around six months after preliminary approval is received. As part of the approval process, the Court will establish a timetable for notice to class members, for hearings on approval, and for class members to opt out of the settlement. A court-appointed claims administrator, under the oversight of a court-appointed special master, will be responsible for the management, allocation, and distribution of the Water District Settlement Fund. Class counsel, subject to the Companies’ consent, will nominate the persons who, if approved by the Court, will serve as claims administrator and special master. At June 30, 2023, DuPont has recorded a liability of about $400 million in connection with the Water District Settlement Agreement, included in "Accrued and other current liabilities" within the Condensed Consolidated Balance Sheets. The $400 million pre-tax charge is recorded in discontinued operations for the quarter ended June 30, 2023. There are also state attorneys general lawsuits against DuPont, outside of the AFFF MDL. These also claim environmental contamination by certain PFAS compounds but distinct from AFFF. Generally, the states raise common law tort claims and seek economic impact damages for alleged harm to natural resources, punitive damages, present and future costs to cleanup contamination from certain PFAS compounds, and to abate the alleged nuisance. Most of these actions include fraudulent transfer claims related to the Chemours Separation and the DowDuPont separations. In July 2021, Chemours, Corteva (for itself and EIDP) and DuPont reached a resolution with the State of Delaware for $50 million among other consideration, that avoids litigation and addresses potential natural resources damages from known historical and current releases by the companies in or affecting Delaware. In 2022, the companies paid the settlement consistent with the MOU; accordingly, DuPont paid $12.5 million. The settlement provides for a potential Supplemental Payment to Delaware up to a total of $25 million funded 50 percent by Chemours and 50 percent by Corteva and DuPont, jointly, under certain circumstances which are not deemed probable. In April 2021, a historic DuPont Dutch subsidiary and the Dutch entities of Chemours and Corteva, received a civil summons filed before the Court of Rotterdam, the Netherlands, on behalf of four municipalities neighboring the Chemours Dordrecht facility. The municipalities are seeking liability declarations relating to the Dordrecht site’s current and historical PFAS operations and emissions. The declarations are expected to be determined by the Court in the second half of this year. On March 24, 2023, the Cape Fear Public Utility Authority (“CFPUA”) filed a lawsuit in Delaware Chancery Court against EIDP, Chemours, Corteva, and DuPont alleging that the companies engaged in a series of corporate restructurings in order to evade PFAS liabilities. CFPUA asks for the court to unwind the Chemours spin off; the DowDuPont merger and subsequent separations; to find that DuPont and Corteva have assumed PFAS liabilities from EIDP and Chemours; to enjoin the defendants from distributing, transferring, capitalizing, or disposing of any proceeds from the sale of any business, segment, division or asset; and to impose a constructive trust over any such proceeds. In addition to the above matters, the Company is a named party in various other legal matters that make claims related to PFAS, for which the costs of litigation and future liabilities, if any, are eligible PFAS costs under the MOU and Indemnification Losses under the Agreements. There are pending cases that make claims related to PFAS that have been filed against Chemours and Corteva/EIDP in which the Company is not a named party, but for which the costs of litigation and future liabilities, if any, are or may be eligible PFAS costs under the MOU and Indemnification Losses under the Agreements. While Management believes it has appropriately estimated the liability associated with eligible PFAS matters and Indemnifiable Losses as of the date of this report, it is reasonably possible that the Company could incur additional eligible PFAS costs and Indemnifiable Losses in excess of the amounts accrued. These additional costs could have a significant effect on the Company’s financial condition and/or cash flows in the period in which they occur; however, costs qualifying as Qualified Spend are limited by the terms of the MOU. Other Litigation Matters In addition to the matters described above, the Company is party to 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. As of June 30, 2023, the Company has liabilities of $15 million associated with these other litigation matters. 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. In accordance with its accounting policy for litigation matters, the Company will expense litigation defense costs as incurred, which could be significant to the Company’s financial condition and/or cash flows in the period. 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 June 30, 2023, the Company had accrued obligations of $291 million for probable environmental remediation and restoration costs. These obligations are included in "Accrued and other current liabilities" and "Other noncurrent obligations" in the Condensed Consolidated Balance Sheets. 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. The accrued environmental obligations include the following: Environmental Accrued Obligations In millions Jun 30, 2023 Dec 31, 2022 Potential exposure above the amount accrued 1 Environmental remediation liabilities not subject to indemnity $ 41 $ 41 $ 116 Environmental remediation indemnified liabilities: Indemnifications related to Dow and Corteva 2 88 48 214 MOU related obligations (discussed above) 3 161 173 50 Other environmental indemnifications 1 1 2 Total environmental related liabilities $ 291 $ 263 $ 382 1. The environmental accrual represents management’s best estimate of the costs for remediation and restoration with respect to environmental matters, although it is reasonably possible that the ultimate cost with respect to these particular matters could range above the amount accrued. 2. Pursuant to the DWDP Separation and Distribution Agreement and Letter Agreement, the Company is required to indemnify Dow and Corteva for certain Non-PFAS clean-up responsibilities and associated remediation costs. 3. The MOU related obligations include the Company's estimate of its liability under the MOU for remediation activities based on the current regulatory environment. |
