Charged-up
Industry bitter over U.S. proposal to tighten air transport rules for lithium batteries.
By Eric Kulisch
The U.S. government's attempt to enhance safety procedures for carriage of lithium batteries on aircraft would add significant disruption and expense to supply chains for portable electronics, medical devices and other common products, according to manufacturers, retailers and air carriers.
Industry groups are loudly asking the Pipeline and Hazardous Materials Safety Administration (PHMSA), part of the Department of Transportation, not to proceed with new regulations on the popular power packs, which they say are at odds with international standards and would not achieve the intended safety benefits and would cost billions of dollars.
It's estimated that more than 3.3 billion lithium cells and batteries were transported worldwide in 2008, representing an 83 percent increase since 2005. In reality, the transport totals are greater because many batteries are shipped several times during the manufacturing and distribution process before reaching their final destination.
'Given the prevalence of lithium batteries in today's marketplace and the substantial changes to existing procedures that would be required, the proposed rule would have a widespread adverse economic impact,' said Daniel Fernandez, secretary-general of The International Air Cargo Association (TIACA), in a statement. 'This fact is not sufficiently acknowledged in PHMSA's cost-benefit analysis, which underestimates the volume of lithium battery shipments, the scope and cost of new training requirements and the impact on shipping costs, and omits any consideration of impact on key sectors such as retailers and consumers.'
PHMSA, maligned by House Democrats and the DOT's inspector general for lax enforcement of hazmat transportation regulations, is promulgating the rule under pressure from Congress. A House Transportation and Infrastructure Committee investigation last year into a special permits process also drew attention to the fact that PHMSA had fallen behind in issuing lithium battery regulations. Chairman James Oberstar rebuked PHMSA officials for being 'cozy' with industry for issuing too many special permits without reviewing applicants' safety records and granting blanket permits to trade associations. He also began to question the agency's funding levels during debate about reauthorizing surface transportation and hazmat safety programs. The DOT reacted by reassigning some top PHMSA officials.
The current proposal includes many provisions contained in a bill advanced last fall by the Transportation and Infrastructure Committee that instructs PHMSA to issue a rule regarding safe transport of lithium cells and batteries on planes. The bill, since stalled in the House, and the rulemaking follow the recommendations of the National Transportation Safety Board (NTSB) resulting from an investigation of an in-air fire that destroyed a UPS cargo plane and most of its load (including lithium batteries) after landing at Philadelphia International Airport in February 2006. The NTSB was unable to determine the cause of the fire.
Two key parts of the rule would eliminate regulatory exemptions on hazardous materials for small lithium cells and batteries when included in an air shipment, and limit stowage of lithium cell and battery shipments aboard planes to cargo compartments accessible to the crew or locations equipped with a Federal Aviation Administration-approved fire suppression system, unless transported in an FAA-approved container.
Terminating the exemptions (except for extremely small, low-energy batteries packed with equipment) would force shippers and carriers to treat bulk shipments and individual packages as full hazardous material. The rule would require special packaging and complete hazmat markings, labels and documentation, including a form notifying the pilot of the quantity and location of lithium batteries on board the plane.
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Shippers and air carriers would also be required to offer training on the regulatory requirements for shipping lithium batteries as Class 9 hazardous materials. The rule would even cover retail stores, Internet resellers and others that ship individual devices with the batteries or offer lithium battery recycling for products they sell, forcing employees that prepare packages for transport to take a full hazmat training course and become certified.
Lithium-ion batteries are used in products such as cell phones, digital cameras, power tools, laptop computers, camcorders, carbon monoxide detectors, and MP3 players. The batteries are volatile because they contain a flammable lithium salt electrolyte solvent. Metal lithium batteries are used in products such as medical devices, computer memory, security devices, calculators, and as replaceable batteries. They are non-rechargeable.
Lithium batteries have a much higher energy density and longer life compared to alkaline, nickel cadmium and nickel metal hydride batteries.
The DOT banned the shipment of non-rechargeable lithium batteries (unless packed with or contained in equipment) from passenger aircraft in late 2004. Non-rechargeable batteries pose a severe threat because lithium fires cannot be extinguished by Halon 1301, an FAA-certified fire suppressant. Rechargeable lithium batteries are not as flammable and can be put out by fire extinguishers.
There have been 44 incidents of fire, smoke or heat involving lithium batteries on aircraft since 1991, according to the FAA and NTSB. Other incidents have been noticed on airport loading ramps, in warehouses, and in carry-on or checked baggage, including about a dozen lithium ion incidents. In 2006, some computer makers recalled millions of lithium-ion batteries after several incidents in which batteries caught fire. Regulators say defective or jostled lithium ion batteries can overheat or short-circuit, which could release an intense electric charge capable of starting a fire.
In mid-April, a package containing lithium batteries exploded at a FedEx sorting center when the contacts generated an electrical arc, according to San Diego authorities. Nobody was hurt. A FedEx spokesman told the Associated Press that the batteries were nickel-cadmium.
Industry groups argue that there have been no in-flight incidents involving properly packaged batteries and that the FAA and PHMSA would do better to vigorously enforce existing U.S. regulations and harmonize them with recently updated international hazmat shipping standards to minimize complexity and shipper confusion. They stress their support for enhancing U.S. rules on transport of dangerous goods based on the international rules and note the DOT has not publicly indicated that it has taken any enforcement action against shippers responsible for offering non-compliant lithium batteries or devices that were involved in incidents.
The more stringent International Civil Aviation Organization standards governing the transport of lithium batteries by air went into effect last year requiring shippers to follow new weight limitations, and use distinctive labels to alert the carrier to the need for more careful handling and tracking.
The ICAO rules go beyond existing U.S. regulations.
ICAO now limits packages of lithium metal batteries to 2.5 kilograms (5.5 pounds) compared to 30 kg (66 pounds) under the DOT regulations. ICAO also limits lithium ion battery packages to 10 kg (22 pounds), while the DOT allows 30 kg packages.
And ICAO requires lithium ion handling labels on virtually every package, in contrast to the DOT requirement for a label only if there are more than 12 batteries in a box.
ICAO's standards for inner and outer packaging ' batteries or cells must be separated using plastic blister packs, or pasteboard, cushioning and dividers, to prevent short circuits and damage to terminals ' are consistent with, but more specific than, the U.S. DOT rules.
The U.S. government, international organizations and the private sector are trying to educate shippers and airlines about the new requirements, said George Kerchner, executive director of the Rechargeable Battery Association.
'If the DOT rule goes into effect, you're going to have a regulatory scheme that is completely out of sync with the rest of the world,' Kerchner said.
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| 'If the DOT rule goes into effect, you're going to have a regulatory scheme that is completely out of sync with the rest of the world.' | |
| George Kerchner ececutive director, Rechargeable Battery Association |
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The DOT argues that the international regulations, which it hasn't incorporated into U.S. law, don't go far enough and that lithium batteries should be regulated as fully hazardous material when shipped by air.
PHMSA justified the need for new regulations this way: 'The hazardous materials regulatory system has for decades proven its effectiveness in mitigating hazardous materials transportation risk. Shippers and operators understand this system and have included steps in their processes to ensure compliance.
'However, lithium batteries have largely operated outside of this structure through the use of exceptions. This current exception-based system has created a set of regulations that is not easily understood or enforced. This, coupled with the lack of required training, adds to the difficulty of ensuring compliance.'
The Transportation Trades Department of the AFL-CIO and the Airline Pilots Association support the PHMSA proposal, having long pushed for extending the bulk lithium battery prohibition in the cargo hold of passenger aircraft to cargo aircraft, crewmember notification and better labeling of bulk shipments.
Opponents say the government is reacting to anecdotal evidence without solid proof that lithium batteries spontaneously combust and cause fires onboard aircraft, or that they exacerbate fires that break out elsewhere in the cargo hold. They call for more study of safety issues related to the transport of lithium batteries to better understand the risks before PHMSA proceeds with a rulemaking. And they want the DOT to mount a vigorous public awareness campaign to educate shippers and users of lithium batteries about the existing shipping requirements.
The irony of PHMSA's attempt to severely restrict carriage of lithium batteries on aircraft is dramatized by the fact that lithium batteries are utilized through the new Boeing 787and Airbus A380 long-haul aircraft, Tom Ferguson, formerly a technical consultant for the Council on Safe Transportation of Hazardous Articles who recently joined Currie Associates, Inc., said.
Cargo fires can start for a number of reasons, including static electricity due to friction, metal rubbing on metal causing a spark, a short circuit of electronics and even equipment activating and releasing heat, he said.
'If there was science that a possibility of fires from lithium batteries would lead to loss of life nobody would fly above the cargo hold,' said James Conway, executive director of the Express Delivery and Logistics Association.
| Minimum financial impact in regulation's first year: $264 million Minimum financial impact in subsequent years: $185 million Partial Breakdown: ' $95 million per year in annual payroll costs for new hazmat auditors. ' Almost $2 million to provide initial training to new auditors every 18 months. ' Unspecified costs to expand space at facilities for package acceptance audits. ' Unspecified administrative costs to rework and execute hazmat shipping contracts for customers. ' Unspecified costs from operational burdens such as limiting the use of air assets and adding steps to the sorting process. ' $28 million in annual payroll costs for additional staffing at airports to accommodate the extra workload for segregating cargo. ' $3.4 million for initial order of redesigned pallets. ' $500,000 to reprogram systems just at the Worldport hub in Louisville, Ky. ' $22.8 million to reconfigure aircraft with Class C cargo compartments. ' $12 million per year to ship UPS hand-held driver communication devices to repair sites. ' $30 million per year to provide air lift for shipments displaced by lower capacity on 757 and 767 aircraft if an access aisle is created for crew. ' $31 million in annual payroll costs at 13 global hubs for additional ramp personnel to handle more complicated aircraft loading procedures. ' $50 million to restructure its dangerous goods, small-package service in Europe, including new equipment, training and permitting. ' $21.8 million in one-time costs for new equipment for vehicles, driver permits and licenses and new dangerous goods training. ' $28 million in initial training for UPS drivers, hub and package operations personnel and specialists. ' The express delivery company said the proposed changes are so profound that it cannot predict with certainty the possible decrease in transportation demand. UPS said its calculations were based on ultra-conservative assumptions of 80,000 packages per day, which represents slightly more than half the daily lithium battery shipments (156,000) from just seven of its customers. |
'As cargo, lithium ion batteries present miniscule fire initiation risk and ' as testing by the FAA and others consistently has shown ' no greater fire propagation risk than many other materials carried as air cargo every day. Proponents of the proposed rule have only been able to make their case by obfuscating the difference between lithium metal primary batteries and the very different lithium ion batteries, and by exaggerating the risk of fire-initiating short circuit in a laptop computer or other device carried aboard an aircraft by a passenger ' a situation that is not only highly unlikely but, in any event, would not be addressed at all by this proposal,' the Rechargeable Battery Association said in its formal comments.
It accused the DOT of prejudicing the rulemaking process by transferring leaders of PHMSA's Office of Hazardous Materials Safety to other positions in the department and denying requests to extend the 60-day comment period due to the magnitude of the proposal.
In an April 7 letter to DOT General Counsel Robert Rivkin, 20 companies and trade associations, expressed fear that PHMSA planned to ram through a final rule without taking time to adequately review detailed comments from industry groups.
About 110 of the 115 comments in the public docket oppose the DOT's approach.
The National Association of Manufacturers and the Retail Industry Leaders Association, among other groups, asked Rivkin to make sure PHMSA followed all the rulemaking steps required by law.
'One reason for the significant differences between the requirements of the proposal and the ICAO standards is the intense political pressure that PHMSA has faced in recent months ' These conditions have not fostered an atmosphere that supports reasoned and unbiased analysis,' they wrote.
The industry coalition claimed PHMSA has neglected statutory instructions to promulgate hazmat regulations consistent with international standards, and failed to identify the most cost-efficient method for achieving safety goals or provide details supporting its narrow economic impact analysis, which it said skirted any consideration of the potential harm to the retail industry and small businesses. By doing so, the coalition said, PHMSA violated the Regulatory Flexibility Act's requirement for agencies to assess the economic impact of rules that may cost the private sector more than $100 million in any year.
Private sector organizations said PHMSA should have consulted them to help draft the rulemaking and minimize negative consequences. They asked the agency to change the process to an advance notice of public rulemaking to give stakeholders and regulators more time to analyze the implications of the rule and make sure it is based on real risks.
Cost vs. Benefit. PHMSA estimated the compliance costs to manufacturers and air carriers would be $9.3 million in the first year and $70.2 million over 10 years. It did not factor into its estimate higher potential handling fees by carriers, because it said any surcharge simply compensates the carrier and has zero net effect on the economy. The agency said the rule could eliminate the risk of about three lithium battery incidents aboard aircraft per year. Its cost-benefit analysis assumed savings from damage prevention at $99.2 million during the 10 years and that industry therefore would come out ahead by $29 million.
Industry groups contend that PHMSA significantly underestimated the costs to businesses and U.S. consumers, and would put U.S. companies at a competitive disadvantage serving overseas customers because their international counterparts would not face the same compliance costs. Shippers and carriers, they say, will face higher costs for paperwork, training, label and package supplies, logistics, lost transport and retail sales, computer system reprogramming and supply chain delays due to stowage requirements.
The Rechargeable Battery Association estimates the 10-year cost to the U.S. economy at $8.5 billion. It said PHMSA's flawed methodology led it to overestimate the rule's benefits by $200 million and that industry would require 18 months, not the 75 days stated in the rulemaking, to gear up for the changes without impacting production and logistics schedules for the upcoming Christmas season. Companies would be able to comply within 90 days with a rule that adopted the ICAO standards, it said.
Other groups agreed on the need for an 18-month implementation period.
The rulemaking would apply to any U.S.-registered aircraft operating anywhere in the world. 'If I'm a Japanese shipper and I've got a Japanese-registered aircraft sitting on the tarmac, I'm not going to use UPS because their requirements would be much more stringent,' Kerchner said.
Airlines, which are struggling to stem heavy losses during the economic downturn, can ill afford such unintended erosion of their revenue streams, Rep. John Mica, the ranking Republican on the Transportation and Infrastructure Committee, said in a March 10 letter that asked PHMSA Administrator Cynthia Quarterman to revise the proposal.
Consumer electronic products account for $70 million in annual revenue at United Airlines and $50 million, or 8 percent of total freight revenue, at American Airlines, he said.
Hundreds of millions of products with lithium ion batteries were shipped in the United States alone last year.
The Air Transport Association said the U.S. airline industry stands to lose $300 million in the first year of regulation and more than $100 million in subsequent years ' 25 times the total PHMSA estimated as the cost for all industries combined. And the Express Association of America ' representing DHL, FedEx, UPS and TNT ' said the requirement for crew accessibility could cost one of its members (UPS, based on information in Mica's letter) $775 million per year just on its 31 weekly Asia-origin flights.
UPS said it would also incur at least $95 million in annual payroll costs to hire more hazmat auditors to inspect shipments and another $2 million for training them. It would also have to expand space at thousands of facilities in order to have room to conduct millions of additional inspections.
The U.S. Chamber of Commerce claimed it could not find one company that believed their individual business costs would be below PHMSA's industry-wide estimate.
'Transportation safety is an important goal, but you cannot neglect your responsibility to ensure the benefits to aviation safety are appropriately balanced to the level of impact to airlines and business that are affected by the NPRM,' Mica told Quarterman.
Air freight companies will immediately implement hazmat surcharges of $35 to $40 per package, which would cost consumers who receive direct parcel shipments of laptops, digital cameras, cell phones and MP3 players almost $1.5 billion per year, the Consumer Electronics Association said in formal comments on the proposed rulemaking.
The rule would also discourage recycling, it said, because the fees would cost another $600 million for people who mail back laptops and cell phones to manufacturers for proper disposal. Similarly, the hazmat fees would hit both ways for manufacturers that have to honor a warranty, opening the possibility they would use ground transport and take longer to return the product to the customer.
Another worry is that companies will incur extra costs to educate consumers, some of whom may mislead couriers about the contents to avoid paying extra fees. The Air Transport Association expressed concern that some shippers may utilize the U.S. Postal Service, which is not subject to federal hazmat rules, to circumvent the new requirements and transport undeclared lithium cells and batteries. And, the battery industry said, the rule undermines U.S. efforts to develop hybrid and electric power sources for the automobile industry.
The CEA said improper packing contributed to nine battery incidents, and two minor injuries, in 2008 out of 3.3 billion lithium batteries transported as air cargo worldwide. It argued that the risk of injury is tiny compared to the millions of flights used to transport the batteries in single parcels for direct-to-home delivery of products or as bulk shipments.
The DOT responds that the increase in the number of batteries transported by air increases the risk of further incidents even if the incident rate remains the same.
Companies are weighing a range of options to deal with the potential new regulatory environment, from shipping by sea, to rerouting air shipments, holding more inventory or shipping devices without batteries.
Several trade associations warned that electronics manufacturers might reconfigure their Asia/North America supply chains by relocating U.S. distribution centers across the border, bringing air freight into Canada and Mexico through foreign air carriers, and then trucking the shipments to the United States. Speed to market is critical to realizing the full value of high-tech products in an industry characterized by rapid turnover of models.
Makers of medical devices, such as pacemakers and defibrillators, and the aerospace industry have also expressed concern that the rulemaking could significantly impact their ability to ship products with lithium batteries, as well as replacement batteries, in a timely manner.
TIACA complained that the proposed restrictions would impose undue financial hardship on the battered air cargo industry and reduce capacity for the popular power source. It too said a better approach is to align U.S. rules with the ICAO standards.
In its formal comments, TIACA said it is 'unaware of any FAA-approved container for the purposes of transporting lithium batteries, so that exception effectively offers no relief, at least for the foreseeable future. Additionally, on many passenger and cargo aircraft, there is limited cargo space that is crew accessible. Furthermore, while Class C cargo compartments are relatively common on passenger aircraft (and required on U.S. registered planes), that is not the case for many all-cargo freighters ' and retrofitting aircraft for a Class C compartment would be a costly endeavor, particularly in an industry that is still suffering through a severe downturn from the current recession.'
Class C compartments are areas of the cargo hold that have fire suppression systems.
'The odd thing about this rulemaking is you may actually see more lithium batteries and portable electronic equipment shipped on passenger aircraft because they have these compartments,' Kerchner said.
The Air Transport Association said the lack of an FAA-approved container for lithium batteries would force electronics shipments to crew-accessible areas.
'Most of the aircraft in ATA member freighter fleets have very few accessible positions, and these compartments are typically reserved for high-hazard materials already subject to accessibility requirements. Thus, if shipments of lithium batteries and electronic equipment such as laptop computers are carried under the proposed provisions, this could force the consolidation of battery shipments into the same compartments with high-hazard materials,' the voice of the U.S. airline industry said.
The requirements would create uncertainty among shippers about whether there is enough accessible space on a booked flight for their goods to prevent them from being bumped to the next flight out, requiring changes to manufacturing and order fulfillment schedules, Kerchner added.
'Absent significant changes to aircraft loading procedures, the rule would also dramatically shrink the capacity on cargo aircraft available for the transport of lithium ion cells and batteries. This would force manufacturers to redesign their sophisticated supply chains to rely more on ocean transport of cells and batteries, which in turn would lead to costlier and higher inventory levels and a loss of U.S. jobs,' the Rechargeable Battery Association said.
Ocean transport most likely is a choice of last resort for companies in the high-tech sector, but one that would have to be considered if air transport costs outweigh the cost of higher inventories, according to representatives from various industry sectors.
'The proposed new rule would have a significant adverse effect on air cargo operations, and it would be impossible to implement within a 75-day period, as proposed by PHMSA. It would require wholesale changes in air cargo operations and greatly limit the space available for lithium battery shipments. It would also require a complicated lading process under which operators would have to identify and limit any containers with lithium batteries and ensure that they are loaded only in approved locations. This would require a costly and difficult overhauling of cargo loading procedures, which are currently designed to maximize the number of containers that are loaded into available space,' said Fernandez, the TIACA chief.
Retrofitting cargo aircraft with crew accessible positions by creating an aisle down the middle of the plane would reduce cargo carrying capacity by up to 19 percent and require acquisition of redesigned pallets, according to UPS. It conservatively estimated that a minimum order of redesigned pallets needed to accommodate lithium battery volume in its system would exceed $3.4 million.
The Council on Safe Transportation of Hazardous Articles, and other industry groups, also criticized the potential requirement that defective batteries be returned to manufacturers by road or rail mode. COSTHA said companies may not have domestic facilities to diagnose or repair batteries. It recommended that PHMSA permit such air shipments using the same packaging techniques required for low production runs of batteries that have not been tested to United Nations standards for withstanding transportation conditions.
Adding more compliance procedures for lithium batteries doesn't make sense because PHMSA acknowledges in the proposed rulemaking that most incidents to date are due to non-compliance, Kerchner said.
'It's flawed logic that by adopting more complicated regulations shippers that currently don't comply are suddenly going to comply with the regulations. If shippers out there aren't aware of the current regulations, there's nothing to suggest they'll be aware of more complicated regulations,' he said.
The best way to reduce risk is to have consistent, global regulations that the majority of people can follow, concurred COSTHA's Ferguson, a former manager for dangerous goods at Delta Air Lines.
PHMSA is sending mixed signals about the potential danger of lithium batteries by characterizing them as a severe threat but still allowing their transport on passenger planes and then exempting small button batteries from the new regulations when the last several incidents investigated by the FAA have involved the very small batteries, he said.
Even banning lithium batteries on aircraft won't eliminate the risk because there are people who will still offer them for transportation without declaring that the contents are hazardous, he said. A ban on chemical oxygen generators was ignored in 1996 and caused the ValuJet crash in Florida even though the tanks are supposed to be banned from aircraft.
'If we were going for zero risk there would never be a plane that flew. Zero risk is not a realistic goal, even for hazardous material,' Ferguson said.
'You are more likely to be struck by lightning while getting bit by a shark after you've been hit by a meteorite than seeing a lithium battery cause an incident during transport.'