The escalating cost of non-compliance

By John V Currie -- Logistics Management, 6/1/1998

In a recent press release, the Federal Aviation Administration (FAA) announced that it had proposed a record fine of $2.5 million against SabreTech Inc. for a violation of the hazardous-materials regulations. That particular violation, the agency says, caused the crash of ValueJet Flight 592 on May 11, 1996.

Since that tragic day, the U.S. Department of Transportation has been ratcheting up the level of fines against violators who ship everything from exotic chemicals to drugs, cosmetics, and even automobile parts in an attempt to get the attention of those responsible for regulatory compliance. No modal administration in the DOT has been more active on this front than the FAA. Six-figure fines have become commonplace, and it has been reported that last year the FAA levied an all-time record of $2.2 million in fines. The proposed fine against SabreTech alone would set a new record this year. And not just money is at stake: In one recent case involving the intentional misrepresentation of cargo, the FAA called in the FBI to press criminal charges. In addition to a $600,000 fine, the president of the company is looking at 11 years in jail. Have they gotten your attention yet?

Over the past year, the FAA has made other changes to assure those who ship dangerous goods by air that it means business. For example, the agency has hired 118 additional inspectors--and they are catching violators! To handle this burgeoning caseload, the FAA also has increased its legal staff to ensure that these cases are settled within the statutory limitation of Title 14, CFR.

Publicity also has become one of the agency's new tools. In what I believe is an unprecedented enforcement technique, the FAA now issues press releases with the names of the accused and the proposed penalty before the ink is dry on the violation notice and before the accused can present any defense. It does so even though the actual settlement of these cases may be as much as two years later.

Although most enforcement cases historically have involved shippers of hazardous materials, the FAA also is cracking down on freight forwarders, consolidators, and carriers, including air carriers, that are lax in their hazardous-materials acceptance procedures and employee training. Repeat violations by the same company mean that fines will multiply, so you can expect that these organizations will be taking a closer look at the cargoes they handle. Some fear, however, that this increased attention to compliance may result in even more undeclared cargo as some shippers, unfamiliar with or confused by the exacting air-transport regulations, may go underground in a sort of backlash against the FAA's efforts.

In a recent presentation at the COSTHA (Conference on Safe Transportation of Hazardous Articles) annual forum, Chuck Lovinski, manager of the FAA's Dangerous Goods and Security Division, said, "It may seem like we're spending all our time catching the bad guys. But actually, the most important part of our work is education. I don't believe the majority of people, given training on the right way to ship something, would intentionally do something to endanger the lives and safety of others." To which I might add, "And if they do...they'd better be able to afford it!"

John V. Currie's firm, Currie Associates Inc., provides hazardous-materials transportation safety and compliance audits, consulting services, customized training manuals, and public and in-house seminars. He may be contacted at 1118 Bay Road, Lake George, NY 12845. Phone: (518) 761-0668. Fax: (518) 792-7781. E-mail: currie@netheaven.com.