What You Need to Know About Hazardous Materials Regulations Enforcement Actions
Glenn P. Wicks, Esq. and Kenneth Holloway
March 2007How should you react when an investigator from the Federal Aviation Administration calls or visits to inquire about your company’s shipment of paint thinner made via FedEx Air? What are the reasons why your company is receiving such a call? What concerns should your company have about this inquiry? To answer these questions you must understand how the hazardous materials regulations are enforced.
Last month, we discussed what you need to know about transporting hazardous materials, focusing on the basic HMR requirements: training, identifying, packaging, communicating and reporting. We also briefly described how the modal administrations of the Department of Transportation—the FAA, the Federal Motor Carrier Safety Administration, the Federal Railroad Administration, the Pipeline and Hazardous Materials Safety Administration and the United States Coast Guard (which resides in the Department of Homeland Security since 2003 but is sill in charge of enforcing the How should you react when an investigator from the Federal Aviation Administration calls or visits to inquire about your company’s shipment of paint thinner made via FedEx Air? What are the reasons why your company is receiving such a call? What concerns should your company have about this inquiry? To answer these questions you must understand how the hazardous materials regulations are enforced.
This article will give you an overview of the FAA’s process of enforcing the HMR requirements, from an initial inquiry to enforcement proceedings. The FAA is the DOT’s most prominent and aggressive enforcer of the HMR. Importantly, whenever a person ships hazardous materials by overnight express, it is likely that the package will be shipped by air and thus fall under the FAA’s enforcement jurisdiction. Examining how the FAA wields its HMR enforcement authority should assist companies in complying with the HMR. Moreover, while the HMR enforcement process varies to degrees within the DOT system, the recommendations and lessons related to FAA enforcement are applicable to other DOT administrations and other modes of transportation beyond aviation.
Under federal hazardous materials law, the secretary of the U.S. DOT is authorized to regulate the transportation of hazardous materials. However, the actual enforcement of the HMR is delegated to a specific modal administration such as the FAA, which has sweeping jurisdiction in enforcing the regulations. Each administration has its own platoon of inspectors, who enjoy broad investigative powers. Inspectors impose sanctions and penalties in accordance with the respective internal guidelines of the administration involved as well as relevant federal regulations. Regardless of which administration is in charge of investigation, it is important that your company interacts with the administration proactively. Your company cannot just sit back passively while the administration investigates and decides what level of sanction to levy on your company.
Investigate the Matter
The FAA’s response to an HMR violation consists of two distinct phases: investigation and enforcement. Unfortunately, what many companies fail to consider is that how they respond to investigation phase activities can be as important to the outcome as any action taken during the enforcement phase.
The first phase, investigations, is led by FAA inspectors and the Office of the Chief Counsel in accordance with standards of FAA Order 2150.3A. These guidelines, known as the Compliance and Enforcement Program, provide detailed instructions for implementing the investigation process as well as the enforcement process.
Most enforcement actions follow a predictable path. First, upon discovery of an improperly labeled, packaged or marked shipment of a hazardous material, the FAA typically dispatches an inspector to investigate the matter. The FAA inspector is obligated to begin a formal investigation if he has determined with reasonable certainty that hazardous material has been shipped. If this threshold is met, the FAA inspector begins the investigation by compiling a standard report, known as an Enforcement Investigative Record. As part of the EIR process, the investigator takes pictures of the materials and interviews all available witnesses. If possible, the inspector also will attempt to interview the person responsible for the shipment.
Second, the FAA sends a standard Letter of Investigation to the subject company requesting an explanation for the incident within 10 days and indicating that enforcement action might be taken. The receipt of the LOI is a critical moment in the investigation—a fact not widely recognized. Many companies simply fail to respond to the LOI or to a call from an FAA inspector. The FAA interprets a failure to respond to the LOI very negatively, leading to an increased likelihood that enforcement action will ensue. Many others respond by issuing a letter of apology for the oversight and explaining that they did not understand the regulations.
However, responding with a "mea culpa” letter may be a poor choice for several reasons. Admitting liability during the investigation phase may increase the likelihood of an enforcement action recommendation by the investigator and would make it very difficult to contest civil penalties that the FAA proposes later on. Acceptance of liability during this phase would potentially limit your options down the road without garnering much benefit for your company. Moreover, companies may be needlessly apologizing for a perceived infraction. For example, both shippers and the FAA are sometimes surprised to learn that just because a package has a label (such as "flammable”) that suggests the shipping of hazardous materials, it doesn’t necessarily mean that the material inside the package is actually hazardous according to the HMR. Your company should be absolutely sure of its own HMR violation before admitting any liability.
Thus, when responding to a LOI, a company may wish to obtain the services of an individual with significant experience FAA enforcement actions to assist the company in interpreting and applying the HMR and formulating its response to an LOI. Such expertise may pay dividends for a company by mitigating penalties or avoiding possible liability altogether.
Responding carefully to the LOI also presents the opportunity for a company that did, in fact, violate the HMR to take proactive steps that may incline the FAA to reduce or even avoid any resulting sanction. A company that immediately responds to an LOI by making appropriate changes in its shipping procedures and taking other corrective measures is likely to receive more favorable treatment from the FAA than would a company that takes corrective action only after a civil penalty is proposed. Since your company should examine its HMR compliance internally, regardless of the level of eventual penalty, to avoid future infractions, taking this step immediately after receiving a LOI would be highly recommended.
Beyond the Investigation
Upon completion of the investigation, the FAA inspector forwards the case to FAA legal counsel with the EIR. This record typically includes witness statements, airway bills, shipment photos and material data safety sheets. The EIR also contains the inspector’s recommendation. Legal counsel must weigh the totality of the evidence presented in the EIR along with the recommendations of the inspector when deciding to pursue an enforcement action.
If the FAA counsel decides to pursue an enforcement action, the FAA is required to move forward with the action within two years. In practice, if an investigation takes place and no letter closing the matter is received within a short period a time, often within six to nine months after the investigation effort ends, your company can expect to receive a Notice of Proposed Civil Penalty. If the FAA decides that criminal sanctions should be pursued, the matter ultimately will be referred to the Department of Justice.
If a company receives a Notice of Proposed Civil Penalty, it then has several options: (1) paying the penalty as proposed; (2) submitting evidence showing that no violation of the regulations occurred; (3) proposing a lesser penalty and waiving all further rights to a hearing if the amount is accepted by the FAA; (4) requesting an informal conference; and (5) requesting a formal hearing. When contemplating these alternatives, your company should review all the EIR and related documents since they serve as the record and basis for all enforcement decisions. It should be noted that once the FAA proposes an enforcement action, the party under investigation may obtain a redacted version of the EIR under the Freedom of Information Act.
Of the available options, an informal conference will often be the best method of dealing with enforcement action. Such a conference offers the company the opportunity to informally discuss and attempt to settle the matter with the FAA. Additionally, settlement discussions provide a company with a chance to make its legal case without the expense of a formal adjudication. Based on our experience, such an approach is worthwhile as FAA counsel have proven quite reasonable when presented with a well-reasoned legal argument and mitigating circumstances. There is very little downside to this option, as the content of an informal conference can only be used by the FAA as evidence in a formal hearing for limited purposes.
If a settlement is agreed to by the parties, the FAA will issue an Order of Civil Penalty. The amount of the civil penalty as well as the specific violations will be included in the order. As a part of the settlement the FAA may, based on the facts and circumstances of a particular case, agree to permit the party to neither admit nor deny the allegations. The FAA will also consider a number of factors in determining the sanctions, including the financial ability to pay such sanctions, and in some instances will agree to reduce the amount of the penalty.
If a settlement cannot be reached through an informal conference, the matter may be appealed to an Administrative Law Judge at the Department of Transportation for a formal hearing. As a practical matter, the expense and work of a formal hearing has rarely been warranted in the past. Given the large sanctions the FAA is now issuing, however, a company that reasonably believes the FAA has erred in its determination may conclude that pursuing a formal adjudication of the matter is worthwhile.
In closing, the various administrations of the DOT each employ distinct measures in performing their HMR enforcement responsibilities. However, like the FAA, these administrations broadly incorporate a two-step process of investigation and enforcement. Therefore, the recommendations presented in this article responding to FAA’s HMR enforcement actions could be readily applied to other administrations’ enforcement actions.
A company that is concerned about avoiding or possibly minimizing sanctions related to HMR violations, regardless of transportation mode, should bear in mind the following summary points: 1) respond to the investigation proactively, but do not necessarily admit wrongdoing; 2) invest in the services of an HMR expert to determine whether, in fact, there has been a violation of the HMR prior to responding to the investigation; 3) if there has been a violation, take corrective steps immediately; 4) use the investigative report from the administration to decide how best to respond to a proposed sanction, and 5) pursue the matter first through the informal conference process to determine whether settlement is an appropriate option.
If a settlement is not possible and the record supports your conclusion, then your company may wish to challenge the sanction through an appropriate hearing process.
About the Authors
Glenn P. Wicks, Esq. is president of The Wicks Group PLLC, a Washington, D.C., firm that provides legal and consulting services to transportation interests on regulatory and commercial matters.
Kenneth Holloway is vice president of Safety Specialists Inc., a Charlotte, N.C., training and consulting company that provides services regarding hazardous materials and dangerous goods.
For More Information
The Wicks Group provides ongoing compliance advice to major shippers and transporters of hazardous materials. The Wicks Group also advises clients on enforcement matters relating to the shipment of hazardous materials. Wicks may be reached at (202) 457.7790 or via fax at (202) 457.7799 or firstname.lastname@example.org.
Holloway may be reached at (704) 573.0955 or via fax at (704) 545.5130 or email@example.com.