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Move: Transporting Hazmat -- Know When You're Liable to be Liable

Nov. 11, 2013
When shipping hazardous materials, even small mistakes can lead to big consequences. Here's a guide to liability for shippers and carriers.

An unsecured load collapses and crushes a fragile container.

A faulty closure leaks hazardous chemicals.

Incompatible materials combine in transit and create a poisonous gas. 

These hazmat incident instigators are just the beginning of a long list. Even if a shipper does everything right and ensures that hazmat shipments are fully compliant with the Hazardous Materials Regulations (HMR), an incident in transit can seize the entire supply chain and delay goods from reaching customers. 

Shippers and carriers must be prepared to mitigate these incidents when they arise, know their legal responsibilities for protecting personnel and the public and understand how liability is determined in these situations.

Costs of Hazmat Incidents

In the event of a hazmat incident, shippers and carriers face immediate and direct costs, such as medical care, workmen's compensation, lost productivity and indirect costs, such as legal fees during post-injury litigation, increased insurance premiums, and the expense and time involved in hiring and training a replacement worker. 

Long-term consequences to hazmat incidents should also be considered. Damaged equipment must be repaired or replaced, lost material must be re-purchased, after-action reviews must be done, environmental contamination must be remedied and emergency protocols must be updated.  Additionally, it may cost time and money to store and dispose of destroyed product, which likely is now hazardous waste.   

Shipper and Carrier Responsibilities 

The HMR requires hazmat shippers to ensure their consignments are properly classified, described, packaged, marked, labeled, placarded and documented before transport [49 CFR 171.2(b)–(e) and 173.22].  It is especially critical that shippers ensure all packages are prepared and documented correctly because carriers can—and often do—rely on information provided by the shipper unless they have a reasonable expectation that the information is incorrect [49 CFR 171.2(f)].  Carriers are forbidden from accepting hazmat that is not properly prepared by the shipper.  

Hazmat shippers must also provide all hazmat employees with appropriate training to comply with applicable requirements.  Personnel who prepare hazmat shipments for transport are "hazmat employees" and must have general awareness, security awareness and function-specific training, as well as training on hazmat safety and security plan issues [49 CFR 172.704].

If an employee doesn't have proper training, his or her job could be done incorrectly and compromise other steps in the transportation process.  For example, a material that is classified incorrectly may be packaged in an inadequate or incompatible box or container.  The shipment will likely be marked and labeled incorrectly, leaving first responders without the information they need to respond to an incident in transit and putting them in unnecessary danger.  Failure to provide employees with the proper training is one of the most commonly cited violations of the HMR and the only violation with a mandatory minimum penalty assessment.   

Determining Liability and Assessing Penalties

Violations of the Hazardous Materials Regulations are subject to fines and penalties enforced primarily by the various agencies under the Department of Transportation, such as the Pipeline and Hazardous Materials Safety Administration (PHMSA), the Federal Motor Carrier Safety Administration (FMCSA), the Federal Aviation Administration (FAA), the Federal Railroad Administration (FRA), and the U.S. Coast Guard.  The regulations are codified in Title 49 of the Code of Federal Regulations, 49 CFR for short, Sections 171–180.  Civil penalties can be as high as $75,000 and are levied on a per-day, per-violation basis.  If a shipper fails to comply with the regulations, the DOT can assess a penalty whether or not the violations result in any actual harm to human health or the environment.

The process by which agencies impose fines and penalties generally consists of three phases.  First are the civil or criminal penalties: the business pays a fine for non-compliance. Second are the expenses to bring facility training and equipment "up to code."  Third are remediation projects: the business agrees to a reduced fine, but makes payments to State or local government agencies to help them purchase emergency response equipment or clean up pollution.

Serious hazmat incidents get reported to the National Response Center, operated by the U.S. Coast Guard, which forwards relevant information to the applicable response and enforcement agencies.  Depending on the nature of the materials and the incident, any number of other Federal or State agencies may visit the shipper's facility to look for regulatory violations (OSHA, for example).  Being subject to these inspections and investigations is costly in terms of time, even before any financial penalties are assessed.  If an agency penalizes a facility and the business appeals that decision, all parties involved should be prepared to shoulder administrative costs and legal fees associated with having their day in court.

Liability and Supply-Chain Partners

Many hazmat shippers hire a third-party logistics partner to classify a shipment, and that partner may even package the shipment, mark and label it, document it and carry it away. This is a perfectly legal and legitimate process. However, per 49 CFR 173.1(b), the facility—NOT the contractor—is the "person who offers" the hazmat for transportation in commerce and is ultimately responsible for ensuring the hazmat was properly prepared. As a matter of regulatory compliance, a shipper's relationship to an outside contractor is the same as to a payroll employee. The shipper can put indemnity clauses in its contract agreement and perhaps recover damages from a contractor who makes a mistake or causes a regulatory violation, but the DOT will fine the shipper for any violation that occurs on behalf of a contractor.

When shippers rely on third-party logistics providers to prepare hazmat shipments, a few important questions should be asked:

  • Do these partners know they are accepting hazmat? 

  • If they know it's hazmat, are they fully aware of and able to comply with their regulatory, legal and commercial obligations to properly handle the shipment? 

  • If they need training, do they have it? 

  • Do they have the records to prove it? 

  • Does the shipper have the ability to audit the third parties' operations to make sure the work is done properly? 

  • Are they prepared for contingencies that may occur?

With one major exception, shippers are not required to thoroughly investigate the credentials of a carrier/transporter to whom they offer hazmat for transport.  The exception is that no person may offer to a motor carrier a high-consequence shipment of hazmat unless that motor carrier holds a FMCSA safety permit. [49 CFR 173.22(b); see also 49 CFR 385.403].  High-consequence materials include Class 7 radioactive materials and large quantities (more than 55 lbs.) of Division 1.1, 1.2 and 1.3 explosives.

Packages can be damaged during transport if they are mishandled or exposed to extreme conditions. When a package of hazmat leaks, spills or otherwise creates a hazard during transportation, the transporter is required to place the package in a salvage packaging [49 CFR 173.3(c)], finish delivery if possible and report the incident on DOT Form 5800.1.  An investigation will determine if the shipper or transporter is at fault for the incident, and penalties will be assessed when appropriate.

Minimize Liability and Risk Exposure

What can a hazmat shipper do to minimize the chance of incidents and mitigate issues that do occur?  Like many aspects of business management, regulatory compliance is all about administration. 

Whenever possible, formalize procedures. Checklists and standard operating procedures for employees can be useful to operations personnel who prepare shipments. Packing and shipping hazmat is exactly the sort of function that an SOP is for. In addition to checklists for a typical day at the facility, emergency procedures should also be formalized. 

Make sure all "hazmat employee" training is up to date and well documented.  The U.S. DOT requires hazmat employees to complete training once every three years.  For air shippers, the International Air Transport Association requires training once every 24 months.  Whenever possible, train employees who can serve as backup in an emergency to avoid delays and possible non-compliance. A record of training must be kept on file by the employer, and training records are often among the first items an inspector requests when visiting a facility. 

Another effective management practice is for shippers to thoroughly review all of their carriers. This review may include (but is not limited to) checking that carriers are properly registered with the DOT, that they have adequate insurance and that their drivers have the necessary commercial driver's license credentials.

When expanding, be sure to involve compliance officers during the planning phase.  With new materials or increases in volume, new standards may apply. The costs of hiring additional expertise, implementing new training or acquiring new equipment needed to comply should be considered before moving forward. 

Finally, once plans and procedures are in place, don't forget to review them on a regular basis.  Rules often change when new issues come to the regulators' attention and new mandates are handed down.  

Shippers can protect their business by ensuring compliance with the regulations, but when an incident occurs it is important to be prepared for the issues of liability that may follow.  By instituting an effective training program, formalizing procedures and keeping up to date with the latest regulations, shippers can reduce their liability and exposure to risk.  

James Griffin is lead researcher for Lion Technology (, providing regulatory training and support services for hazmat shipping, hazardous waste management, environmental law and workplace health and safety.

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