COMMITMENTS AND CONTINGENT LIABILITIES

Guarantees

Indemnifications

In connection with acquisitions and divestitures, the company has indemnified respective parties against certain liabilities that may arise in connection with these transactions and business activities prior to the completion of the transaction. The term of these indemnifications, which typically pertain to environmental, tax and product liabilities, is generally indefinite. In addition, the company indemnifies its duly elected or appointed directors and officers to the fullest extent permitted by Delaware law, against liabilities incurred as a result of their activities for the company, such as adverse judgments relating to litigation matters. If the indemnified party were to incur a liability or have a liability increase as a result of a successful claim, pursuant to the terms of the indemnification, the company would be required to reimburse the indemnified party. The maximum amount of potential future payments is generally unlimited.

Obligations for Equity Affiliates & Others

The company has directly guaranteed various debt obligations under agreements with third parties related to equity affiliates, customers and suppliers. At December 31, 2016, the company had directly guaranteed $354 of such obligations. This amount represents 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 and suppliers. Assuming liquidation, these assets are estimated to cover approximately 23 percent of the $167 of guaranteed obligations of customers and suppliers. Set forth below are the company's guaranteed obligations at December 31, 2016:



	Short-Term		Long-Term		Total
Obligations for customers and suppliers¹:
Bank borrowings (terms up to 5 years)	$	149	$	18	$	167
Obligations for equity affiliates²:
Bank borrowings (terms up to 1 year)	161		—		161
Obligations for Chemours³:
Chemours' purchase obligations (final expiration - 2018)	15		11		26
Total	$	325	$	29	$	354


^1.	Existing guarantees for customers and suppliers, as part of contractual agreements.


^2.	Existing guarantees for equity affiliates' liquidity needs in normal operations.


^3.	Guarantee for Chemours' raw material purchase obligations under agreement with third party supplier.

Operating Leases

The company uses various leased facilities and equipment in its operations. The terms for these leased assets vary depending on the lease agreement.

Future minimum lease payments (including residual value guarantee amounts) under non-cancelable operating leases are $263, $233, $207, $158 and $123 for the years 2017, 2018, 2019, 2020 and 2021, respectively, and $219 for subsequent years and are not reduced by non-cancelable minimum sublease rentals due in the future in the amount of $2. Net rental expense under operating leases was $245, $271 and $249 in 2016, 2015 and 2014, respectively.

Litigation

The company is subject to various legal proceedings arising out of the normal course of its business including product liability, intellectual property, commercial, environmental and antitrust lawsuits. It is not possible to predict the outcome of these various proceedings. Although considerable uncertainty exists, management does not anticipate that the ultimate disposition of these matters will have a material adverse effect on the company's results of operations, consolidated financial position or liquidity. However, the ultimate liabilities could be material to results of operations in the period recognized.

PFOA

DuPont used PFOA (collectively, perfluorooctanoic acids and its salts, including the ammonium salt), as a processing aid to manufacture some fluoropolymer resins at various sites around the world including its Washington Works plant in West Virginia. At December 31, 2016, DuPont has an accrual balance of $117 related to the PFOA matters discussed below. Pursuant to the Separation Agreement discussed in Note 3, the company is indemnified by Chemours for the PFOA matters discussed below. As a result, the company has recorded an indemnification asset of $117 corresponding to the accrual balance as of December 31, 2016.

Since 2006, DuPont has undertaken obligations under agreements with the U.S. Environmental Protection Agency (EPA), including a 2009 consent decree under the Safe Drinking Water Act (the order), and voluntary commitments to the New Jersey Department of Environmental Protection (NJDEP). These obligations and voluntary commitments include surveying, sampling and testing drinking water in and around certain company sites and offering treatment or an alternative supply of drinking water if tests indicate the presence of PFOA in drinking water at or greater than the national health advisory level, even if provisional, as established from time to time by EPA. A provisional health advisory level was set in 2009 at 0.4 parts per billion (ppb) for PFOA in drinking water considering episodic exposure. In May 2016, EPA announced a health advisory level of 0.07 ppb for PFOA in drinking water considering lifetime versus episodic exposure. In January 2017, EPA announced it had amended the order to include Chemours, and to make the new health advisory level the trigger for additional actions by the companies, thus expanding the obligations to the EPA beyond the previously established testing and water supply commitments around the Washington Works facility. The company's accrual balance of $17 at December 31, 2016 related to these obligations and voluntary commitments reflects the impacts of the new health advisory level and expanded obligations under the amended order.

Drinking Water Actions

In August 2001, a class action, captioned Leach v DuPont, was filed in West Virginia state court alleging that residents living near the Washington Works facility had suffered, or may suffer, deleterious health effects from exposure to PFOA in drinking water.

DuPont and attorneys for the class reached a settlement in 2004 that binds about 80,000 residents. In 2005, DuPont paid the plaintiffs’ attorneys’ fees and expenses of $23 and made a payment of $70, which class counsel designated to fund a community health project. The company funded a series of health studies which were completed in October 2012 by an independent science panel of experts (the C8 Science Panel). The studies were conducted in communities exposed to PFOA to evaluate available scientific evidence on whether any probable link exists, as defined in the settlement agreement, between exposure to PFOA and human disease.

The C8 Science Panel found probable links, as defined in the settlement agreement, between exposure to PFOA and pregnancy-induced hypertension, including preeclampsia; kidney cancer; testicular cancer; thyroid disease; ulcerative colitis; and diagnosed high cholesterol.

In May 2013, a panel of three independent medical doctors released its initial recommendations for screening and diagnostic testing of eligible class members. In September 2014, the medical panel recommended follow-up screening and diagnostic testing three years after initial testing, based on individual results. The medical panel has not communicated its anticipated schedule for completion of its protocol. The company is obligated to fund up to $235 for a medical monitoring program for eligible class members and, in addition, administrative costs associated with the program, including class counsel fees. In January 2012, the company established and put $1 into an escrow account to fund medical monitoring as required by the settlement agreement. Under the settlement agreement, the balance in the escrow amount must be at least $0.5; as a result, transfers of additional funds may be required periodically. The court appointed Director of Medical Monitoring has established the program to implement the medical panel's recommendations and the registration process, as well as eligibility screening, is ongoing. Diagnostic screening and testing has begun and associated payments to service providers are being disbursed from the escrow account; at December 31, 2016, less than $1 has been disbursed. While it is probable that the company will incur liabilities related to funding the medical monitoring program, such liabilities cannot be reasonably estimated due to uncertainties surrounding the level of participation by eligible class members and the scope of testing.

In addition, under the settlement agreement, the company must continue to provide water treatment designed to reduce the level of PFOA in water to six area water districts, including the Little Hocking Water Association (LHWA), and private well users.

Multi-District Litigation

Leach class members may pursue personal injury claims against DuPont only for the six human diseases for which the C8 Science Panel determined a probable link exists. At December 31, 2016 there were about 3,550 lawsuits, of which about 30 allege wrongful death, pending in various federal and state courts in Ohio and West Virginia. These lawsuits are consolidated in multi-district litigation (MDL) in the U.S. District Court for the Southern District of Ohio (the Court). The approximate number of lawsuits pending in the MDL remained constant year-over-year. However, the company has refined the number pending at December 31, 2016, in connection with updates to the table below. DuPont, through Chemours, denies the allegations in these lawsuits and is defending itself vigorously.

The table below approximates the number of lawsuits based on primary alleged disease.



Alleged Injury	Number of Claims
Kidney cancer	210
Testicular cancer	70
Ulcerative colitis	300
Preeclampsia	200
Thyroid disease	1,430
High cholesterol	1,340

In 2014, six cases from the MDL were selected for individual trial. In 2016, three of these cases, two kidney cancer and one ulcerative colitis, were settled for amounts immaterial individually and in the aggregate, and one case was voluntarily withdrawn by plaintiffs. The other two matters, (Barlett v DuPont, kidney cancer, and Freeman v DuPont, testicular cancer) were tried to jury verdicts in 2015 and 2016, respectively. The Bartlett jury awarded compensatory damages of $1.6 and no punitive damages. The company has appealed the Bartlett verdict to the U.S. Court of Appeals for the Sixth Circuit (the Sixth Circuit) which is expected to issue a ruling in the first half of 2017. In 2016, the Freeman jury awarded compensatory damages of $5.1 and $0.5 in punitive damages and attorneys’ fees. Pending a post-trial motion, the company will appeal to the Sixth Circuit.

In January 2016, the Court determined that 40 cases asserting cancer claims, to be identified by plaintiffs' attorneys, would be scheduled for trial through year-end 2017. In the first two matters selected for trial, (Vigneron v DuPont and Moody v DuPont) plaintiffs make testicular cancer claims. After a fourth quarter 2016 trial, the Vigneron jury awarded compensatory damages of $2 and punitive damages of $10.5. Pending post-trial motions, the company will appeal to the Sixth Circuit. The Moody trial began in January 2017 and the jury is expected to render a verdict in the first quarter 2017. The remaining 38 trials are scheduled to begin each week starting in May 2017.

In 2016, the Court ordered the parties to participate in confidential, nonbinding mediation regarding global resolution of the MDL. This process continues.

At December 31, 2016, the company has established an accrual of $100 related to the MDL, representing the company’s estimate of the low end of the range of potential loss. While DuPont could incur liabilities in excess of the amount accrued, the upper end of the range of such loss cannot be reasonably estimated. The range of possible loss is unpredictable and involves significant uncertainty due to the uniqueness of individual plaintiff's claims and the company's defenses as to potential liability and damages on an individual claims basis, and the timing and outcome of the appellate process, among other factors. This type of litigation could take place over many years and interim results do not predict the final outcomes of cases.

Additional Actions

In the first quarter 2016, a confidential settlement was reached in the Ohio action brought by the LHWA claiming, “imminent and substantial endangerment to health and or the environment” under the Resource Conservation and Recovery Act (RCRA) in addition to general claims of PFOA contamination of drinking water. The cost of the settlement was paid by Chemours.

Under the Separation Agreement, all liabilities associated with the PFOA matters discussed above, including liabilities related to judgments, including punitive damages, or settlements associated with the MDL, are subject to indemnification by Chemours.

Environmental

The company is also subject to contingencies pursuant to environmental laws and regulations that in the future may require the company to take further action to correct the effects on the environment of prior disposal practices or releases of chemical or petroleum substances by the company or other parties. The company accrues for environmental remediation activities consistent with the policy set forth in Note 1. Much of this liability results from the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA, often referred to as Superfund), RCRA and similar state and global laws. These laws require the company to undertake certain investigative, remediation and restoration activities at sites where the company conducts or once conducted operations or at sites where company-generated waste was disposed. The accrual also includes estimated costs related to a number of sites identified by the company for which it is probable that environmental remediation will be required, but which are not currently the subject of enforcement activities.

Remediation activities vary substantially in duration and cost from site to site. These activities, and their associated costs, depend on the mix of unique site characteristics, evolving remediation technologies, diverse regulatory agencies and enforcement policies, as well as the presence or absence of potentially responsible parties. At December 31, 2016, the Consolidated Balance Sheet included a liability of $457, relating to these matters and, in management's opinion, is appropriate based on existing facts and circumstances. The average time frame, over which the accrued or presently unrecognized amounts may be paid, based on past history, is estimated to be 15-20 years. Considerable uncertainty exists with respect to these costs and, under adverse changes in circumstances, the potential liability may range up to $900 above the amount accrued as of December 31, 2016. Pursuant to the Separation Agreement discussed in Note 3, the company is indemnified by Chemours for certain environmental matters, included in the liability of $457, that have an estimated liability of $250 as of December 31, 2016 and a potential exposure that ranges up to approximately $500 above the amount accrued. As such, the company has recorded an indemnification asset of $250 corresponding to the company's accrual balance related to these matters at December 31, 2016.