Proposed Lithium Battery Rules Didn’t Weigh Retail Impact, CERC Says

In January, DOT’s Pipeline and Hazardous Materials Safety Administration (PHMSA) proposed rules that include lifting exemptions for air shipments of small lithium-ion and lithium-metal cells and the equipment packed with them. If the changes are adopted, manufacturers and distributors, including retailers that themselves air-freight the batteries from their stores, would need to declare and label those products as Class 9 hazardous materials when shipping them on cargo and passenger planes and package them in United Nations-standard containers certified for holding substances classified as medium-level threats.

"In addition to receiving goods by air, retailers process the servicing of products, and product returns, by air,” CERC said. “Products returned to a retailer for service or repair generally travel by air to a service center. In addition to massive and overly broad training requirements, the cost of service and repair for tens of thousands of SKUs would, according to standard Class 9 rates, be increased by $70 ($35 each way) -- in some cases, more than the original price of the product. The regulations leave no way to avoid this absurd cost."

Another way retailers would take a hit is through e-commerce operations “that offer customers express shipment options,” CERC said. “Consumers have come to expect the quick delivery of online purchases, and consider delivery time as an essential factor in weighing the convenience of ordering online against driving to a physical store location. The regulation would hit customers of conscientious retailers like CERC members very hard and in some cases may make shipping charges higher than the cost of the goods ordered."

The PHMSA has defended its proposed rules as enhancing safety “by ensuring that all lithium batteries are designed to withstand normal transportation conditions, packaged to reduce the possibility of damage that could lead to an accident, and accompanied by hazard communication information that ensures appropriate and careful handling by air carrier personnel and informs transport workers and emergency response personnel of actions to be taken in an emergency.” Since 1991, PHMSA and the Federal Aviation Administration “have identified over 40 air transport-related incidents and numerous additional non-transport incidents involving lithium batteries and devices powered by lithium batteries,” the agency said in its rulemaking notice.

CERC and its members “have examined the FAA compilation in search of any indication, from the hundreds of millions of subject shipments in and to the U.S. alone, of any problem arising in a shipment containing a lithium ion battery whose ultimate destination is a U.S. retailer, or is from a U.S. retailer,” it said. “None appears. Indeed it is not clear that any shipment destined to or from a retailer anywhere has ever been the subject of an incident. Many or most of the incidents pertain to shipments of batteries themselves,” including many not covered in the rulemaking, and “and many or most” of those happened outside the U.S., CERC said. “Incidents pertaining to products that contain batteries arise largely from checked or carry-on baggage, or from passenger use under questionable circumstances,” it said. “None appears to resemble the circumstances under which products containing lithium ion batteries are shipped to or from stores or distribution centers."

Single-store Hephner TV & Electronics in Wichita, Kan., is “a business that relies on knowing and caring for our customers,” and “we pay attention to any and all safety issues,” President Greg Hephner told the agency. “We have never heard of or encountered any problem in handling, receiving, storing or shipping lithium batteries, or products that contain lithium batteries.” Hephner said he and his family planned a spring break flight to Washington. “Among the commonplace items that the four of us expect to have on our persons and in our hand and checked baggage, I estimate we will cause to be transported about 20 lithium batteries on each airplane flight. None of these -- not even the checked baggage, which I assume will not be crew accessible during flight -- would be subject to these regulations."

Shipping charges “are not the only major expense that would be imposed” if the proposed rules go through, Best Buy said. “More than 5,000 Best Buy employees -- anyone in a store, a distribution center, or in the ‘web’ store who handles a product prior to shipment -- will have to receive special HAZMAT training,” the chain said. “This would be a continuous expense and diversion because employment at Best Buy and other retailers, in addition to being seasonal, is subject to significant annual turnover rates. The shipping and manifesting systems of stores and distribution centers would have to be entirely re-done. Product packaging systems would have to be re-done. The combined training, shipping, and manifesting expenses add additional millions of dollars in compliance costs, to Best Buy alone, that have not even been contemplated by PHMSA."

Arguing that safety is paramount, PHMSA has rejected all calls for extending the comment deadline past March 12. Instead, commenters urged the agency to extend its proposed compliance date longer than the 75 days after the final rule is published in the Federal Register. They also have urged the agency to do an “advance” rulemaking to allow further research into the issue while still imposing final rules expeditiously. The 75-day compliance schedule “is not adequate even to assess the scope of impact on Best Buy’s thousands of potentially affected SKUs, much less to take steps toward compliance,” the chain said. “For retailers, all such considerations are aggravated, additionally, by the retail back-to-school and holiday calendar -- roughly September though mid-January -- when systematic changes and other such diversions from customer service are demonstrably not feasible. Beyond such an assessment of scope, it is not presently evident to Best Buy how the out-of-scale impositions on product shipments and customer service could be avoided or ameliorated. Accordingly, Best Buy cannot at this time project a feasible timetable for compliance."

The PHMSA rulemaking’s estimate that 3.3 billion lithium batteries were shipped globally in 2008, the latest year for which data were available, was a gross underestimate, UPS told the agency. Its point was that the agency didn’t understate the safety threat, just the costs and burdens of industry compliance. The PHMSA estimated that the rules would cost industry $9 million the first year and a little more than $70 million over the first decade. Black & Decker, in comments to the PHMSA opposing the rules, said it has 274 SKUs containing lithium batteries. Changing their packaging to conform to the rules would cost the company $2.5 million a year, plus $535,000 in new tooling and documentation, it said.

UPS “reviewed the shipping activity of just seven of its 1.8 million customers,” it told the agency. “Even this cursory review revealed annual volumes in the UPS small package system easily exceeding 40 million shipments containing lithium cells and batteries with devices. Daily air shipments of lithium batteries just from these seven shippers would therefore be over 156,000 packages."

UPS “supports regulatory changes that increase safety,” it told the agency. “However, UPS believes that regulatory requirements should be closely tied to the root cause of any safety concerns, with an eye toward limiting unnecessary burdens on operations and commerce.” The company has analyzed the incidents in which its planes and employees were involved in lithium batteries overheating or causing fires, it said. It’s “aware of no instance in which the batteries responsible for these incidents were offered in compliance with the applicable regulations in effect at the time of shipment,” the company said. UPS isn’t surprised that PHMSA “has identified noncompliance as the primary cause of most lithium battery incidents,” it said. “UPS and PHMSA differ, however, on the appropriate regulatory response to such noncompliance.” It thinks that “full regulation of such batteries is not the answer, particular when such new regulations will only lead to confusion in the regulated community between new and existing regulations, and domestic and international standards. Safety is not improved in such circumstances.”