Audits Advised for Dangerous-Goods Transport
This Opinion piece appears in the March 23 print edition of Transport Topics. Click here to subscribe today.
By Forest Himmelfarb
Vice President,
Software and Services
Labelmaster
Almost every U.S. company annually conducts a financial audit. But some trucking executives may not be aware that another kind of audit may be just as critical to their company’s financial stability and the public’s safety.
Audits by the Pipeline and Hazardous Materials Safety Administration and the Federal Aviation Administration evaluate a firm’s regulatory compliance and operational practices in the shipment of dangerous goods. Transport companies and shippers would do well to conduct their own audits of these practices before the feds step in.
Almost every industry involved in any type of manufacturing and distribution transports materials classified as hazardous. These include nail polish, perfumes, batteries, air bags, aerosols, paint, common chemicals such as lubricants and adhesives, numerous electronics products and much more. About 1.4 million dangerous-good shipments occur daily.
An audit of shipment procedures for such goods is vital. The financial repercussions from noncompliance could be devastating in the form of penalties and civil liability legal actions.
For example, a large chemical manufacturer purchased noncompliant labels that featured improper color, dimensions and specifications. When one of its customers recognized the improper labeling, it demanded the deficiencies be corrected, costing the manufacturer $180,000.
Over the past five years, PHMSA and FAA have issued nearly $50 million in penalties to shippers for failing to meet hazardous-materials regulations.
If a carrier determines a shipment does not comply, it can mandate compliance before delivery is made. This requirement can significantly and negatively affect the shipper’s supply chain and customers expecting to receive their orders on time.
Also, improper packaging or labeling can lead to accidents and fatalities.
When conducting an in-house audit, there are issues that often pose major obstacles to the production of a thorough, objective and effective evaluation. Among them:
• The need to identify which division of the company is best suited to conduct the audit. Some companies may assign the project to its environmental, health and safety group. But this department usually has many areas of responsibility, including the myriad OSHA regulations. If assigned to logistics, warehousing and shipment personnel, their focus is to move products from A to B as quickly and cost-effectively as possible. This group, therefore, must strive to balance that goal with adherence to shipment regulations.
• Dangerous-goods regulations are specific to the type of materials transported and often are revised annually. Companies may not have personnel with in-depth knowledge of the various rules and their accompanying nuances.
• Companies may believe their current dangerous-goods transport procedures are sufficient, based on years of applying the same practices without any problems from enforcement agencies, carriers or customers. This routine can create a false sense of security. It takes only one penalty, lawsuit or accident to change that mindset.
An audit covers two vital phases — the assessment of compliance levels across a number of key areas and a detailed summary of specific recommendations to improve existing processes and implement best practices.
It is beneficial to utilize audit tools designed to “mimic” regulators to help identify operational gaps. Examples of key areas to assess include:
• Current compliance procedures and strategies.
• Availability of required regulatory documents in appropriate shipping and receiving locations.
• Packaging, labeling and documentation for outgoing shipments.
• Loading of outgoing trailers and trucks.
• Readiness for dangerous-goods incidents and employee- safety issues.
• Training plans and records.
• Receiving incoming dangerous goods.
• Security plans for dangerous goods stored at third-party distribution locations.
It is important to prioritize the compliance findings to determine which need to be addressed immediately.
For example, categorize findings by severity from most severe to less. A “Category A” finding represents a potential hazard and safety risk. Category B reveals a potential violation of applicable sections of regulations from leading bodies (e.g., 49 CFR, ICAO or IMDG). Category C represents a potential failure to follow established or published corporate procedures. Category D represents a potential failure to meet industry standards.
Depending on the category, failure to remediate may result in serious injury or death, civil penalties, possible actions by PHMSA or undue exposure of governmental oversight.
To offset these consequences, an audit should detail a plan of action, such as:
• Improvements of processes that have a likelihood of leading to regulatory compliance.
• Identification of processes not currently formalized, documented or consistently implemented.
• Steps to rectify gaps between existing situations and regulatory requirements and/or best practices.
• Identification of opportunities for cost savings.
• Identification of practices to reduce the likelihood of carrier rejections.
• Recommendations for development of dangerous-goods policy documents and standard operating procedures.
These recommendations should include design tools and jobs aids to facilitate and standardize compliance at different locations of the company. The report also should outline the kinds of employee-training programs needed to address operational gaps identified by the assessment.
After new procedures and programs are in place, it is important to stay up-to-date with new rules and mandates from regulatory agencies. This requires ongoing education on the regulations and using annual audits as a standard best practice.
Labelmaster develops products that help industries comply with regulations governing the safe handling and transport of hazardous materials.
