October 2013

Knock, knock…We’re with the government… we’re here to help!

transportation-iconMany years ago I had developed a written procedure titled Receiving Government Inspectors. This was in response to an isolated incident whereby the client had badly mishandled the inspector’s visit by refusing a lawful inspection and insisting on a search warrant. As a result, the client received a very large civil penalty (more than $850,000), even though there were very few, if any, minor infractions of the Hazardous Materials Regulations. 
Later that year, I had to rely upon the same procedure when I suddenly received a Federal Aviation Administration inspector at my home! At the time, I was working from my home, having been in business for only a couple of years. Obviously, I was nervous when the agent flashed his badge and demanded entry. The inspector insisted on seeing our “…chemical storage facility, shipping docks, warehouse and offices,” so I invited him in and promptly showed him my kitchen pantry, driveway, garage, and dining room table. Satisfied, he left, scratching his head on the way out.
 
Immediate Actions
Before any regulatory agency inspection, companies should develop, implement and provide training on a procedure to deal with visits from federal, state or provincial, or local regulatory agencies. These include, but are not limited to, routine and non-routine visits from the Dept. of Transportation (DOT) (or its modal enforcement agencies), federal or state occupational safety and health administrations, environmental protection agencies, customs and border protection, health departments, fire marshals, solid waste management agencies, or even the local air quality or water quality management board.
When an inspector arrives at your facility, whether announced or unannounced, you should do the following:
 
Identify the Inspector
Ask to see his or her credentials, exchange business cards and write down the inspector’s name, agency, scope of the inspection and statutory authority they are inspecting under (e.g., 49 CFR subchapter C Hazardous Materials Regulations). In almost all cases, the inspector will offer a business card, show their badge and identification, and describe the scope of the inspection and why they have come to your facility.
 
Make Management Available
You should immediately notify facility management and make a corporate officer available to speak with the inspector. The corporate officer may delegate a person or persons to accompany the inspector or answer questions after an initial pre-brief meeting. I strongly recommend that the company designate one or more persons as “Compliance Managers” or “Facility Inspection Coordinators.” These persons should be trained in the proper protocol for receiving government visitors, prepare for agencies inspections, and be the initial “go-to guys” when the inspector arrives.
 
Determine the Scope
Ask the inspector to identify those activities of particular interest. By defining the scope of the inspection, this will limit what the inspector will see and will help you expedite the process. As indicated before, more often than not, the agency inspector will define the scope of the inspection (e.g., training records, shipping papers, chemical storage, etc.).
 
Advise Legal Counsel
Advise legal counsel of the inspection. However, the agency inspection should not be stalled pending discussions with counsel, unless the agency presents a search warrant, in which case you may want to have legal counsel present. You should discuss these procedures with internal or external legal counsel and incorporate their suggestions or requirements into your written procedures.
 
Accompany the Inspector
You should not leave an inspector unattended in a warehouse, shipping dock or offices. You should accompany the inspector to the precise area that he or she needs to see. Do not detour or offer to show the inspector areas outside of the scope of the inspection. However, inspectors may request to interview an employee without the presence of management. In such cases, the employee should be made available during business hours and asked if they want legal representation or another representative to be present during questioning.
 
Questions and Answers
Questions, if understood, should be answered truthfully and succinctly. Do not elaborate beyond the scope of the question. If there is something that your facility is doing above and beyond the minimum requirements, you may mention or explain it, provided it is relevant to the line of questioning. For example, if the DOT requires training every three years but your company provides training annually, that fact is worth mentioning as it will cast a positive light on your compliance program.
 
Photographs & Documents
Photographs and copies of documents may, and often are, taken by agents during the course of an inspection. I recommend that if the inspector takes a photo, you take the same photo from the same angle. You may ask the inspector to describe why he or she is taking the photograph. Be careful to ask what it is that they see and not question whether or not they should take the photograph. In some cases, the agent may be taking a photo for training purposes or to show a positive example of something that a company is doing correctly. Copies of documents taken by the inspector should be marked as “Confidential.” 
 
When in Doubt
Answer all questions that you are familiar with. If you do not understand the question, or if the line of questioning is outside of your expertise, it is perfectly acceptable to refer to the appropriate person who is qualified to answer, or to say “I don’t know, but I will find the appropriate person that can answer that.” You may also ask the inspector to pose the questions in writing, addressed to corporate counsel or to the designated contact. The worst thing that you can do is to guess and tell the inspector what you think they want to hear—particularly if the topic is not in your skill set.
 
Prepare a Memo
Prepare a memo or narrative description of the visit as soon as the inspector leaves. Include all relevant details of the inspection, including a description of the areas reviewed, persons interviewed, as well as copies of documents produced or requested, etc.
 
Follow-up
After the inspection, you should confer with management and counsel, discuss the scope of the inspection and review the Facility Inspection Report that the agent should leave following the inspection. If any discrepancies were noted during the inspection, they should be corrected immediately and documented thoroughly. 
Counsel should consider formulating a written response and defense in the event that an enforcement action (e.g., civil penalty case) is initiated, even though one may not be started for weeks or even months. In addition, facilities should review their corporate policies and compliance procedures and take appropriate steps to improve these programs.
 
Be Polite
Often a regulatory enforcement official will make a courtesy visit. In many cases, they will offer advice and counsel which should be accepted graciously. However, don’t be fooled—they are there to do a job. If that means initiating an enforcement action as a result of some infraction, they will carry out their responsibilities, even though they may be overly friendly and non-threatening. In most cases, the agent will be very professional and courteous. You should be the same. Try not to be defensiveness or controversial. If you disagree, or the agent is clearly wrong, make a written note of the finding or opinion and address it through management and counsel. 
Oh, and by the way, the case I referred to at the beginning of this article was eventually dismissed by the agency. The client learned a very powerful lesson and took the appropriate steps to correct the few deficiencies and implement a solid compliance program which is now a model for all industries.
If you would like a copy of this procedure that I wrote some years ago, please contact:
ShipMate, Inc. at +1 (310) 370-3600 or e-mail [email protected]  SPRAY