July 2013

Make a Mistake? Get out your Checkbook!

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“It takes many good deeds to build a good reputation, and only one bad one to lose it.”  Benjamin Franklin

The U.S. Department of Transportation’s (DOT) Pipeline & Hazardous Materials Safety Administration (PHMSA) published its final rulemaking, HM-258, on April 17, 2013. It revises the minimum and maximum civil penalties for “knowingly” violating the federal hazardous materials transportation law, regulation, order, special permit or approval issued under that law.

The maximum civil penalty, as amended by the Moving Ahead for Progress in the 21st Century Act (MAP-21) signed into law on Oct. 1, 2012, is increased from $55,000 to $75,000 for each violation. The maximum civil penalty is increased from $110,000 to $175,000 for each violation that results in death, serious illness or injury to any person, or substantial destruction of property. In addition, the final rule eliminates the $250 minimum civil penalty that can be assessed, except for a violation of a training requirement. In those cases, the minimum civil penalty that is assessed for a training-related violation is increased from $250 to $450.

The effective date of the final rule was April 17, 2013. A copy of the rulemaking can be obtained at the following URL: http://www.gpo.gov/fdsys/pkg/FR-2013-04-17/pdf/2013-08981.pdf

“Knowlingly” Defined
Unfortunately, there are many respondents to a proposed civil penalty action that use the “unknowingly” defense when explaining their failure to comply with the Hazardous Materials Regulations. You will not find the term “knowingly” defined anywhere in the Hazardous Materials Regulations in 49 CFR subchapter C. One must read the Hazardous Materials Transportation Act, as amended, and precedent case law to see the term defined. The term is also defined in the U.S. Postal Service (USPS) Regulations at 39 United States Code (U.S.C.) § 3018.

Although the offender may not have any direct or indirect knowledge of the alleged offense(s), the DOT does not define the term “knowingly” violating the HMR as having direct or indirect knowledge. DOT defines “knowingly” as “…actual knowledge of the facts giving rise to the violation…” or “…that a reasonable person acting in the circumstances and exercising reasonable care would have had that knowledge.” To date, no one has ever used the “I’m not a reasonable person” or “I did not exercise reasonable care” defense successfully.

In short, it’s not what you knew, but what you should have known.

Hidden Hazardous Materials
Despite the increase in enforcement, sensitivity to security issues, and well publicized accidents and civil penalty cases, hazardous materials are still being shipped illegally through the mail and by common carriers.

Many shippers erroneously assume if a hazard warning label or shipping paper is not required, then the hazardous material is not regulated. I have heard more than one shipper say, on occasion, “Oh, its not regulated…it’s ORM-D!” That is precisely what ORM-D means: “Other Regulated Material, Category D.” In those cases where a shipper fails to provide the required Consumer Commodity ORM-D marking, the shipper may have “unknowingly” committed 24 separate, but distinct, hazardous materials violations, punishable by a civil penalty of up to $1.8 million.

The DOT is of the opinion that, if a shipper makes no effort to communicate the risks associated with a hazardous material by applying the required marks and labels, or preparing and offering a dangerous goods declaration, then the shipper is not entitled to any regulatory relief that they might have otherwise enjoyed had they made the effort to comply with the rules.

A simple mistake, such as leaving off the ORM-D marking on a fiberboard box that contains a dozen aerosol cans, for example, would subject the shipper to a maximum civil penalty of $1.8 million for failure to: properly mark and label the package with the correct, proper shipping name, identification number, hazard warning labels, package the materials into UN approved fiberboard boxes, and offer a dangerous goods declaration, which includes the correct basic description (in the order required), additional descriptive information, emergency response information and telephone number, packaging information, shipper’s certification and signature.

Furthermore, the DOT will tack on violations for not providing training, because the hidden hazardous materials shipment itself would constitute prima fascia evidence that the shipper was not properly trained.

All of the individual offenses arise of out the simple failure to properly mark the package with the minimum required marking—in this case, the proper shipping name (Consumer Commodity), and the hazard class (ORM-D), within a rectangle having dimensions at least one-quarter inch greater on all sides than the ORM-D designation itself. This is what regulatory enforcement agents call “stacking the case.” These types of cases are very hard to defend against and more often than not, the Respondent will pay a substantial penalty as a compromise to settle the proposed civil penalty.

Quite simply, under this new rule, if you make a mistake, get out your checkbook. Be prepared to pay a hefty fine if you “knowingly” or even “unknowingly” commit a violation of the HMR. I guess the best advice that I might offer to any shipper is this: “When in Doubt, Leave it Out!” If you’re not sure, don’t ship. Call and ask for assistance. SPRAY