COMMITMENTS AND CONTINGENT LIABILITIES

6 Months Ended

Jun. 30, 2022

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENT LIABILITIES

COMMITMENTS AND CONTINGENT LIABILITIES

Environmental and Legal Proceedings

The Company is subject to environmental remediation laws and regulations in the countries in which we operate. Remediation costs are recorded in the condensed consolidated and combined financial statements when they become probable and reasonably estimable. The Company has estimated the probable liability associated with these environmental remediation matters to be approximately $23 million in the aggregate as of June 30, 2022. The $23 million estimated probable liability pertains to matters on property owned by the Company’s Russian operations, and as a result, is included in “Current liabilities held for sale” in the accompanying condensed consolidated balance sheet. The increase from the estimated probable liability of $15 million reported for these matters as of March 31, 2022 is due to increased strength of the Russian ruble.

In 2018, the Company discovered and voluntarily disclosed to the Russian environmental agency, Rosprirodnadzor (“RPN”) the presence of mercury contamination in sediment in a river tributary that traverses the Company’s mill property in Svetogorsk, Russia, and the authorities initiated an investigation. The mercury contamination resulted from the operations of a former chlor-alkali manufacturing plant on the mill site. Remediation of the river tributary was completed in 2020. The Company continues to remediate the soil and groundwater contamination associated with the chlor-alkali plant. Of the $23 million estimated probable liability for environmental remediation matters as of June 30, 2022, $17 million is associated with this matter.

In February 2022, the Company received from RPN a damage claim in the amount of approximately $9 million relating to alleged discharges of mercury, aluminum and lignin into the river in 2019 from the contaminated sediment at the Svetogorsk mill site. The Company has estimated the probable liability for this matter at approximately $2 million as of June 30, 2022, which estimate reflects the results of expert sampling and testing conducted by the Company for the presence of the pollutants claimed to be released in 2019.

The Company is involved in various other inquiries, administrative proceedings and litigation relating to environmental and safety matters, taxes (including VAT), personal injury, product liability, labor and employment, contracts, sales of property, intellectual property, tax, and other matters, some of which allege substantial monetary damages. See Taxes Other Than Payroll Taxes below for details regarding certain tax matters. Assessments of lawsuits and claims can involve a series of complex judgments about future events, can rely heavily on estimates and assumptions, and are otherwise subject to significant uncertainties. As a result, there can be no certainty that the Company will not ultimately incur charges in excess of presently recorded liabilities. The Company believes that loss contingencies arising from pending matters including the matters described herein, will not have a material effect on the consolidated financial position or liquidity of the Company. However, in light of the inherent uncertainties involved in pending or threatened legal matters, some of which are beyond the Company's control, and the large or indeterminate damages sought in some of these matters, a future adverse ruling, settlement, unfavorable development, or increase in accruals with respect to these matters could result in future charges that could be material to the Company's results of operations or cash flows in any particular reporting period.

Taxes Other Than Payroll Taxes

In 2017, the Brazilian Federal Supreme Court decided that the state value-added tax (“VAT”) should not be included in the basis of federal VAT calculation, and in 2021, such court ruled on the definition of VAT. The rulings are final with no further rulings or action in this matter expected. We recognized a receivable as a result of such rulings. As of June 30, 2022, the receivable is $7 million after giving effect to the portion of the receivable that has been consumed by offsetting various taxes payable.

See Note 11 Income Taxes for a discussion of a goodwill amortization tax matter in Brazil.

We have other open tax matters awaiting resolution in Brazil, which are at various stages of review in various administrative and judicial proceedings. We routinely assess these tax matters for materiality and probability of loss or gain, and appropriate amounts have been recorded in our financial statements for any open items where the risk of loss is deemed probable. We currently do not consider any of these other tax matters to be material individually. However, it is reasonably possible that settlement of any of these matters concurrently could result in a material loss or that over time a matter could become material, for example, if interest were accruing on the amount at issue for a significant period of time. Also, future exchange rate fluctuations could be unfavorable to the U.S. dollar and significant enough to cause an open matter to become material. The expected timing for resolution of these open matters ranges from one year to ten years.