global materials compliance handbook
TRANSCRIPT
JOHN PHYPER Atrion International Inc.
PHILIPPE DUCAS Atrion International Inc.
PETER J. BAISH Independent Contractor to Sandler & Travis Trade Advisory Services
A JOHN WILEY & SONS, INC., PUBLICATION
Innodata
0471494275.jpg
JOHN PHYPER Atrion International Inc.
PHILIPPE DUCAS Atrion International Inc.
PETER J. BAISH Independent Contractor to Sandler & Travis Trade Advisory Services
A JOHN WILEY & SONS, INC., PUBLICATION
Copyright © 2004 by John Wiley & Sons, Inc. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey. Published simultaneously in Canada.
No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, 978-750-8400, fax 978-646-8600, or on the web at
Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748-6011, fax (201) 748-6008.
Limit of Liability/Disclaimer of Warranty: While the publisher and author have their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.
For general information on our other products and services please contact our Customer Care Department within the U.S. at 877-762-2974, outside the U.S. at 317-572-3993 or fax 317-572-4002.
Wiley also publishes its books in a variety of electronic formats. Some content that appears in print, however, may not be available in electronic format.
Library of Congress Cataloging-in-Publication Data:
Phyper, John-David. Global materials compliance handbook / John Phyper, Philippe Ducas,
Peter J. Baish. p. cm.
ISBN 0-471-46739-1 (Cloth) 1. Hazardous substances—Transportation. I. Ducas, Philippe.
II. Baish, Peter. III. Title. T55.3.H3P59 2004 363.17—dc21
2003014217
10 9 8 7 6 5 4 3 2 1
www.copyright.com. Requests to the Publisher for permission should be addressed to the
To my wife, Christine, for her patience, and daughters, Megan and Madison, for constantly reminding me of the important things in life.
J.D.P. To my wife, Catherine, for her understanding and loving. Also to Stéphanie,
Pascale, and Pierre-Olivier, who are the most beautiful gifts of my life. P.D.
To my wife, Mary Alice, and children, Meg, Sarah, Liz, and P.T., I love you! P.J.B.
CONTENTS
1 Introduction 1
1.1. Overview, 1 1.2. Types of Legislation, 6 1.3. Government Enforcement, 8 1.4. Content, 10
References, 12
2 Chemical Registration, Notification, and Listing 15
2.1. Introduction, 15 2.2. Requirements for North America, 15
2.2.1. United States, 15 2.2.2. Canada, 21
2.3. European Requirements, 21 2.3.1. Current Requirements, 21 2.3.2. REACH Program, 27
2.4. Pacific Rim Requirements, 28 2.4.1. China, 28
vii
2.4.2. Australia, 32 2.4.3. Philippines, 35 2.4.4. Korea, 36 References, 39
3 Material Safety Data Sheets 41
3.1. Introduction, 41 3.2. Global MSDS Requirements, 42 3.3. North American Requirement, 53
3.3.1. United States Requirement, 53 3.3.2. U.S. Approach to GHS, 58 3.3.3. Canadian Requirements, 60 3.3.4. Mexican Requirement, 61
3.4. European Safety Data Sheets, 62 3.4.1. Overview of Labeling (Classification), 62 3.4.2. Substance Versus Preparation, 94 3.4.3. Environmental Classification, 96 3.4.4. SDS Format, 97 3.4.5. Languages, 99
3.5. Pacific Rim MSDS, 100 3.5.1. MSDS for Japan, 100 3.5.2. SDS for Korea, 114 3.5.3. SDS for China, 120 3.5.4. SDS for Australia, 123 3.5.5. SDS for Malaysia, 126 3.5.6. SDS for Thailand, 129
3.6. Global Harmonization System (GHS), 130 References, 143
4 Product Label Requirements 145
4.1. Introduction, 145 4.2. North America, 146
4.2.1. United States, 146 4.2.2. Canada, 149 4.2.3. Mexico, 154
4.3. Europe, 157 4.3.1. Information Contained on a European Label, 158 4.3.2. Final Choice of Risk and Safety Phrases, 158 4.3.3. Chemical Name(s) to Be Displayed on the
Label, 159 4.3.4. Choice of Danger Symbols, 160 4.3.5. Choice of Risk Phrases, 160 4.3.6. Choice of Safety Phrases, 161
viii CONTENTS
4.3.7. The EC Number, 162 4.3.8. The Dimensions of the Label for
Preparations, 162 4.3.9. Special Cases: Substances, 163 4.3.10. Special Cases: Preparations, 163
4.4. Pacific Rim, 163 4.4.1. Japan, 163 4.4.2. Korea, 164 4.4.3. China, 168 4.4.4. Australia, 170 4.4.5. Malaysia, 171 References, 176
5 Transport Requirements 177
5.1. Overview of Transport Legislation, 177 5.2. International Requirements, 181
5.2.1. United Nations (UN), 181 5.2.2. ICAO and IATA, 192 5.2.3. IMO, 193
5.3. North American Requirements, 197 5.3.1. U.S. DOT, 197 5.3.2. Canadian TDG, 203 5.3.3. Mexican, 212
5.4. European Requirements, 218 5.4.1. ADR, 218 5.4.2. EU Inland Waterways, 220 5.4.3. Navigation on the Rhine, 221 5.4.4. RID-OTIF, 223
5.5. Other Country Requirements, 223 5.5.1. Australia National Dangerous Goods Policy, 223 5.5.2. China Transport Packaging of Dangerous
Goods, 229 References, 232
6 Import Compliance 233
6.1. Change in Strategy at the Border, 233 6.1.1. Overview of Content, 233 6.1.2. Historical Perspective, 233
6.2. Import Compliance Issues, 235 6.3. Self-Assessments?, 237 6.4. Import Requirements of Individual Countries and Economic
Unions, 238 6.4.1. United States, 239
CONTENTS ix
6.4.2. Canada, 246 6.4.3. Mexico, 250 6.4.4. European Union, 255 6.4.5. Australia, 261 6.4.6. China, 266 6.4.7. Japan, 268 6.4.8. Korea, 273 6.4.9. Taiwan, 276 References, 277
7 Export Compliance 279
7.1. Overview, 279 7.2. General Export Control Legislation, 280 7.3. International Agreements for Export Control, 282 7.4. North America, 282
7.4.1. United States, 282 7.4.2. Canada, 291 7.4.3. Mexico, 294
7.5. European Union, 295 7.6. Pacific Rim, 297
7.6.1. Australia, 297 7.6.2. China, 300 7.6.3. Japan, 301 7.6.4. Korea, 304 7.6.5. Taiwan, 305
7.7. Corporate Export Compliance Programs, 306 References, 308
PART II MATERIAL COMPLIANCE SYSTEMS 309
8 Impact of Terrorism on the Supply Chain 311
8.1. Introduction, 311 8.2. Effect on Cargo Movements, 312 8.3. Dangerous Times: Next Attack?, 313 8.4. Countermeasures, 314
8.4.1. Tightening Legal Requirements, 314 8.4.2. Private Sector Partnerships, 316 8.4.3. Overseas Targeting of Container Freight, 317 8.4.4. U.S./Canadian Border Clearance and Security
Enhancements, 318 8.5. New Reality, 318
References, 320
x CONTENTS
9.1. Overview of Management System, 321 9.1.1. General Management System Principles, 322 9.1.2. Key Components of a MCS, 324 9.1.3. Reasonable Care, 328
9.2. Material Compliance Policy, 331 9.3. Planning, 332
9.3.1. Areas of Potential Risk, 332 9.3.2. Legal and Other Requirements, 334 9.3.3. Objectives and Targets, 335 9.3.4. Management Programs, 336
9.4. Implementation and Operations, 337 9.4.1. Structure and Responsibility, 337 9.4.2. Training, Awareness, and Competence, 338 9.4.3. Communications, 340 9.4.4. MCS Documentation, 341 9.4.5. Document Control, 343 9.4.6. Operational Control, 345 9.4.7. Emergency Preparedness and Response, 346
9.5. Checking and Corrective Action, 347 9.5.1. Monitoring and Measurement, 347 9.5.2. Nonconformance and Corrective and
Preventative Action, 348 9.5.3. Records, 349 9.5.4. MCS Audits, 350
9.6. Management Review, 352 References, 353
10 MCS–Information Systems 355
10.1. Introduction, 355 10.1.1. Overall MCS-IS Components, 355 10.1.2. Business Drivers, 358
10.2. Identifying Preferred Approach, 359 10.2.1. Documenting Business Requirements, 359 10.2.2. Documenting Current/Future Costs, 360 10.2.3. Maintain Status Quo, Build, or Buy?, 361
10.3. Implementation of Selected Solution, 366 10.3.1. Implementation Process, 366 10.3.2. Project Team, 370 10.3.3. Project Management, 372 10.3.4. Uncertainty of Implementation Costs, 376 10.3.5. Implementation Schedule, 376 10.3.6. Do’s and Don’ts, 378
CONTENTS xi
Application), 383 10.3.11. Legacy Data Migration, 383 10.3.12. Interfaces, 385 10.3.13. Testing, 386
10.4. Go Live and Post Implementation, 387 10.4.1. Going Live, 387 10.4.2. Maintenance, 388 Reference, 389
APPENDICES 391
1 Glossary 391 2 Audit/Inspection Checklists 397 3 Material Management Web Sites 423 4 Import/Export Web Sites 437 5 Occupational Exposure Limits Legislation 441
INDEX 459
xii CONTENTS
PREFACE
This book is primarily directed to assisting those individuals who are respon- sible for material compliance (MC). The term MC refers to activities and processes used to ensure an organization is compliant with legislation related to hazardous (regulated) goods across all aspects of its business; for example, purchasing, research and development, testing, manufacturing, selling, docu- menting and distribution of regulated materials. Currently, companies spend hundreds of billions of dollars to satisfy these regulatory requirements. Exam- ples of job functions related to MC include the following:
• Personnel who generate and distribute regulatory documents, e.g., safety data sheets, workplace safety cards, labels.
• Staff or third party contractors who train personnel on hazard communi- cation requirements and import/export legislation.
• Personnel involved in the purchase, importation, manufacture or use of hazardous (regulated materials).
• Personnel who take new orders, transport goods locally/internationally or export hazardous (regulated materials).
• Research personnel involved in the development of new/modified for- mulations or products.
The primary purpose of the hazard communication documents is to prevent injury to workers or consumers, identify potential danger to the environment and be able to quickly and effectively respond to an incident, for example, tanker spill along a roadway or consumption of product by a child.
xiii
The book was designed to assist readers to answer the following questions relative to their organization:
• What is MC legislation? • What components of global MC legislation should my business care
about? • How do I keep track of all this legislation? • What are the components of a good material compliance system (MCS)? • What is a MCS-information system (IS) and how can I incorporate one
into our business?
In many cases, a lack of knowledge or poor execution of global MC requirements has prevented companies from filling international orders. Most companies now realize that the successful management of MC activities pro- vides a competitive advantage for companies doing business globally, espe- cially as North America and Europe “de-industrialize” and companies move their businesses abroad to capture lower labor costs. Key components of a suc- cessful MC management program include a well-defined process, personnel knowledgeable in both regulatory matters and supply chain issues and tech- nology for information transfer.
xiv PREFACE
ACKNOWLEDGMENT
This handbook represents the efforts of more than the three authors.To ensure that the information has been presented properly and is current, the follow- ing experts reviewed draft versions of the chapters. All of the these people freely gave of their time and ideas and authors are indebted to each of them for their assistance: Leo Appelman, Azko Nobel Coatings; Frank Arcadi, Atrion International Inc.; Sarah K. Baish Milin; Joe Cella,Atrion International Inc.; Taco de Jong, Akzo Nobel Coatings; Gil Duhn, General Motors Corpo- ration; Steve Fogel, Applied Materials; Pierre Gravel, Canada Customs and Excise, Retired; Jerry Hagan, Atrion International Inc.; Scott Harter, Atrion International Inc.; Lea Johnson, Weyerhaeuser Corporation; Ian Jones, BP International Limited;Aad van Keulen,Atrion International Inc.; Sally Meier, IBM; Luc Seguin, Kemika XXI Inc.; Jill Thomas, Applied Materials; and Henk van Peske, Kodak Polychrome Graphics.
xv
1 INTRODUCTION
1.1 OVERVIEW
Whether a company operates facilities across the globe or merely imports or exports goods to a single jurisdiction, company personnel and their advisors must be aware and understand regulatory requirements pertinent to their activities. The term material compliance (MC) refers to activities and processes used to ensure an organization is compliant with legislation related to hazardous (regulated) goods across all aspects of its business, for example, purchasing, research and development, testing, manufacturing, selling, documenting, and distribution of regulated materials. Currently, companies spend hundreds of billions of dollars to satisfy these regulatory requirements.
In many cases, a lack of knowledge or poor execution of the requirements has prevented companies from filling international orders. More and more companies are realizing that the successful management of MC activities pro- vides them a competitive advantage. This is becoming more critical as North America and Europe companies move their businesses abroad to capture lower labor costs.
Within a company’s supply chain activity there are multiple areas that need to interact with a proper MC process. These include, as a minimum, the following:
1
Global Materials Compliance Handbook, Edited by John Phyper, Philippe Ducas & Peter J. Baish ISBN 0-471-46739-1 Copyright © 2004 by John Wiley & Sons, Inc.
• Review of suppliers’ Material Safety Data Sheets (MSDS) or Safety Data Sheets (SDS) to ensure material can be imported and that documenta- tion addresses pertinent regulatory requirements.
• Approval of vendors for specific chemicals, taking into consideration import/export legislation (e.g., embargos).
• Create Workplace Safety Cards (WSC), primarily in Europe, and labels using key information from suppliers’ MSDS/SDS and country-specific regulatory information.
• Train workers on how to use these chemicals and make the MSDS/SDS and WSC readily available.
• Use a new chemical within a research and development activity and identify potential regulated criteria that will be associated with new or mod- ified finished products (product optimization) that use this new chemical.
• Create MSDS/SDS and WSC for the newly design product. • Verify registration and import quantity limitations for targeted countries. • Verify the inventory listing for each substance (pure product) that is used
to create the new product. • Verify export information (banned list, embargo screening, etc.). • Create label (potentially multilingual) information for product selling and
shipment. • Send MSDS/SDS to client prior to shipment (distribution by mail, fax,
e-mail) in appropriate language and jurisdiction. • Create driver instruction cards, in appropriate language, for road ship-
ment (Tremcards). • Print all documentation needed with the shipment, addressing local
languages and legislation for areas through which the shipment may pass.
It is important to note that the primary “purpose” of the hazard communi- cation documents listed above is to prevent injury to workers or consumers, to identify potential danger to the environment, and to be able to quickly and effectively respond to an incident, for example, a tanker spill along a roadway or accidental consumption of product by a child.
To effectively manage MC on a global scale, the following are required:
• well-defined process • personnel knowledgeable in both regulator matters and supply chain
issues • technology for information transfer
Most companies who ship or receive goods internationally have developed material compliance systems (MCS) that address these regulatory require-
2 INTRODUCTION
ments. These MCS are typically labor intensive, address mainly the primary business location (e.g., U.S. or German operations only), and are not updated in a timely manner as legislation changes. More and more proactive compa- nies are automating the screening of orders and generation of regulatory doc- uments while incrementally expanding regulatory content to address global requirements.
This book provides guidance to companies importing, exporting, or trans- porting hazardous (dangerous) goods around the world. The terms hazardous and dangerous are used here in general context; both can have very specific meanings within particular legislation. Key issues addressed by the book include:
• proper classification of hazardous goods according to import/export, health and safety, and transportation legislation,
• review of prohibition rules related to shipments of hazardous goods to and from countries and product registration requirements,
• preparation of proper shipping/transportation documents, labels, WSC, and MSDS/SDS,
• proper screening of shipments to ensure compliance with import/export legislation,
• helpful hints on antiterrorism activities to ensure ongoing security of ship- ments, and
• development of global MCS and MCS information systems.
The book also provides information on the important components of suc- cessful MCS and MCS information systems. The proposed components were derived from the International Organization for Standardization quality (ISO 9000) and environmental (ISO 14000) series of standards and the U.S. Bureau of Industry and Security (BIS), formerly the Bureau of Export Administra- tion, Export Management System (EMS) guidelines. Components, if not prop- erly addressed, can quickly translate into:
• Development of new products that contain ingredient(s) that may cause significant risk and, in some cases, are banned from being imported into some countries.
• Delays and uncertainties in custom clearance that result in parts short- ages and the requirement to provide excess inventory.
• Return or impoundment of goods as prohibited from entering/leaving a country due to prohibition on material, incorrect containers, or documentation.
• Monetary fines, civil and/or criminal prosecution. • Prohibitions on the import/export of goods by the company.
OVERVIEW 3
• Damage to company reputation as a result of incident or prosecution. • Audits of shipments and operations by government agencies.
The presence of a MCS by itself will not relieve an organization of crimi- nal and administrative liability under law if a violation occurs.A well-designed MCS, however, should greatly reduce the risk of noncompliance events and will serve as a mitigating factor during an investigation should a violation occur. This role of an effective MCS may be further highlighted as U.S. Customs implements its “informed compliance strategies” for importers; a strategy that shifts focus from a transaction-based operation to an account- based processing.
The evolution of global MC legislation related to business processes can be “generally” described as follows:
Command and control period—In the early 1980s, companies began implementing the precursor to MCS to ensure ongoing regulatory compliance. Their focus shifted from simply executing import/export and transportation, to managing the quality of the processes and resulting output.A shift that may have been accelerated by the United States’ introduction of the Enhanced Proliferation Control Initiative (EPCI) and a rewrite of Export Administra- tion Regulations (EAR). These regulations placed emphasis on the end use and end-users of the exported products. Companies quickly came to see cor- porate control of compliance processes and output as critical to meeting regulatory requirements, however, it was still considered a labor intensive “operational” issue, with a focus on only key manufacturing sites in the United States or Europe, depending upon the location of the company’s corporate headquarters.
Costs/risks aversion period—In the 1990s, most major corporations mas- tered (or believed they had) basic MC issues related to government reporting and refocused on cost reduction and risk aversion—especially when they real- ized how much money it was costing to ensure ongoing compliance.As a result, MCS moved from being an “operational” issue to a “tactical,” issue with a significant amount of MC transactions (document generation, screening, etc.) being automated or semi-automated. However, systems were still primarily U.S. or European Union (EU) regulatory focused, with other jurisdictions being addressed partially, if at all, using local personnel and storage of data with no central repository of MC information.
Management period—In the early 2000s, multinational companies began to reevaluate their MCS as they realized that their country-specific, independent, unilingual systems did not reinforce their integrated business process, but rather hindered it and were expensive to operate. In doing so, they also real- ized that the “ship button” present on a company’s internal/external Web system is linked to a series of time-consuming, manual activities that fre- quently involve complex regulatory matters or the processing of significant amounts of data.
4 INTRODUCTION
They also realized that a well-designed MCS that includes a central data repository of MC data, integrated with other key business systems, can:
• significantly reduce costs • promote dialogue with suppliers on hazard information and testing
requirements • standardize business processes • ensure trade and regulatory compliance • minimize business risks of current and proposed legislation • in the event of government action, show “reasonable care,” as per
U.S. Customs Informed Compliance Strategy, and potentially mitigate penalties
Examples of key business information systems include the following: Laboratory Information Management Systems (LIMS), courier tracking systems, formulation systems, Enterprise Resource Planning (ERP), Supply Chain Management (SCM), or Manufacturing Resource Planning (MRP) software systems, and government reporting/content databases, for example, specific requirements for interfacing with U.S., British, and Canadian Custom systems.
The overall business objective for most companies is to drive costs out of the supply chain and improve services levels. Key activities related to MCS that support this objective include:
• Ensuring compliance with global regulatory requirements. • Reducing the time period for preparation of new documents especially if
multi lingeral, and provide more accurate data. • Minimizing the time goods sit in customs, thereby decreasing the need for
excess inventories (especially customs holding areas). • Developing a single product that can be sold in numerous markets and
complies with legislation in every country rather then regional products that must be rolled out separately, avoiding costly product launch delays and, potentially, prohibitions on entering some markets.
• Potentially allowing chemists to run “what-if” scenarios to find out what the consequences of adding/eliminating a particular component are in terms of where it is to be sold.
• Integrate business information systems to minimize manual data entry.
These all have significant impact on costs, with some companies reporting decreases of up to 50% of supply chain costs and significant expansion to new markets.
By assessing MC issues at the “strategic” level, companies can account for
OVERVIEW 5
compliance strengths and weaknesses when deciding against which competi- tors, in which markets, using what products (to develop, introduce, or phase out), or how best to deploy company resources to maximize market opportu- nities. This new direction allows all personnel in the enterprise, from the shipping clerk to the CEO, to have visibility into compliance and hazardous materials issues impacting their decisions, from checking whether an MSDS is valid, to choosing to expand sales into a new country. Each person has access and the tools necessary to draw the right conclusions for minimizing costs and ensuring compliance at all levels.
It is important to note that automation can reduce cost and ensure high quality when processing large amounts of data. Significant cost savings, however, typically only come from the integration of systems, as it eliminates manual data entry as well as associated errors.
1.2 TYPES OF LEGISLATION
MC legislation has become significantly more complex over the last few years. Historically, some companies have believed that the generation of documen- tation in English, in conformance to U.S. legislation, is adequate to ship goods anywhere in the world. However, companies must be aware of and comply with local legislation (approximately 126 countries have local MSDS require- ments) and linguistic requirements. This legislation, when compiled, would fill several large bookshelves. In some areas, these requirements are significantly different, and potentially more stringent, than U.S. requirements, for example, the approach to MSDS used in the EU versus the United States.
Several types of instruments are used by government agencies to manage or regulate MC legislation:
• acts, statutes, regulations, directives, and standards • permits, certificates, licenses, and orders • local/municipal ordinances and by-laws • codes of practice, policies, criteria, objectives, and guidelines
Legislative bodies pass acts or statutes (laws passed by legislators). Acts or statutes are typically general in nature in terms of requirements and have a broader policy perspective. Regulations or directives are made pursuant to authority set out in an act or statute and provide specific operational details on the general powers listed in the act or statute. A bill is a proposed law that, following passage by the legislative body, becomes an act or statute. Typically, standards are numerical values stipulated in a statute regarding allowable levels, for example, emission levels, occupational exposures, etc.
In the United States, the rule-making process involves the publication of proposed regulations in the Federal Register, allowing the public an opportu-
6 INTRODUCTION
nity to comment on the regulation. The final regulation is also published in the Federal Register and has the effect and force of law when it becomes effective. Annually, the regulations are combined into the Code of Federal Regulations (C.F.R.).
It is important to note that there are three key dates for acts, statutes, regulations, and directives: publication of the proposed/draft legislation; the date final legislation is published (often referred to as the promulgation date); and the date the legislation or key components become effective (also referred to as the enforcement date). Typically, the more a piece of legislation will impact the business community, the longer the time period between the date of promulgation and enforcement date, for example, significant EU leg- islation typically has a transition period of 18 months. It is important to note that for some regulatory changes, for example, occupational exposure limits (OEL), the transition period, if any, may be very short, depending upon the jurisdiction.
Permits, certificates, or licenses are issued to specific parties by government agencies.Some acts, statutes, regulations,or directives require such instruments. Orders are issued to specific parties by government agencies,usually in response to failure by the party to comply with an act, statute, regulation, or directive, or on the strong suspicion that noncompliance has occurred or could occur.
Codes of practice, policies, criteria, objectives, and guidelines are used by government agencies to address many MC issues.Although not legally binding on their own, these types of instruments need to be reviewed and assessed as part of MC compliance. They can illustrate an agency’s position toward a par- ticular situation. If these are incorporated into the terms of a license, permit, or other approval, or referred to in a regulation or directive, these types of instruments can be legally binding.
There exist potentially five levels of legislation:
• international (e.g., United Nations) • regional (e.g., EU) • national (federal) • state or provincial • municipal
For the purpose of MC legislation, and thus this book, the primary focus is on the first three levels, that is, items of national concern. Generally provinces/states are not precluded from enforcing criteria more stringent than those required by federal laws, and are given considerable leeway to follow enforcement interpretations that may not be fully consistent with those applied at the federal level. Thus, the laws and interpretations used to apply and enforce federal laws may vary considerably from province/state to province/state and these variations may not be readily apparent.
Note that under the U.S. Constitution’s commerce clause (Article I, Section
TYPES OF LEGISLATION 7
8), Congress has the authority to regulate commerce with foreign nations, among several states, and with Indian tribes. If the courts find that the state statutes or regulations impermissibly burden interstate commerce, then they are found to be unconstitutional and unenforceable.
1.3 GOVERNMENT ENFORCEMENT
Failure to comply with MC legislation may result in the following government agency responses:
• Delays in clearing of goods by customs personnel • Audit of shipments and operations • Orders to perform specific activities • Return or impoundment of goods as prohibited from entering/leaving
a country due to prohibition on material, incorrect containers, or documentation
• Prohibitions on the import/export of goods by the company • Monetary fines (ranging from ticketable offences to several million
dollars depending upon offence and jurisdiction), criminal prosecution of employees and executives, and civil prosecution of the company.
One of the largest fines to date was against Sony Corporation by the Dutch authorities for importing game consoles containing cadmium levels above the limit allowed under regulations. Sony corporation estimated an impact on sales of approximately EUR 110 million and on operating profit of approximately EUR 52 million, including costs of rework, on a consolidated basis for the fiscal year ending March 31, 2002 (S&EA EN, 2002).
In many cases, the fine associated with incorrect MC document (e.g., MSDS or transportation manifest) is relatively minor, however, the resulting impact from personnel using this documentation can be catastrophic (e.g., damage from spillage/fires/explosions resulting from the incorrect storage of haz- ardous materials or inappropriate response to an emergency condition result- ing in worker injury/death and damage to equipment/property).
An example of this type of incident is the explosion at the Motiva Refin- ery in Delaware City, Delaware, in July 2002.The incident resulted in the death of an employee, injury to eight other workers, and the release of a large quantity of acid into the Delaware River, killing fish and other aquatic life. A spark from the work crew’s welding tools ignited hydrocarbon vapors from a 415,300-gallon spent sulfuric acid storage tank. Motiva’s MSDS for spent sul- furic acid did not include important information about the mixture’s flamma- bility. In addition, Motiva had assigned a zero for the National Fire Protection Association (NFPA) rating on the MSDS (US CSHIB, 2002).
A commonly asked question by companies when discussing a government
8 INTRODUCTION
agency’s response, outside of the United States, is “do they really enforce the legislation?” The answer is that, unfortunately for workers and the public, the response depends upon the jurisdiction. In almost all developed countries, any event that triggers injury to workers or the public, loss of life, or sig- nificant damage to the environment will result in significant penalties and government intervention. In nondeveloped countries, the response can vary significantly.
In the United States, enforcement has been relatively steady for MC legis- lation, and, if anything, is increasing related to import/export of hazardous goods because of the threat of terrorism. Many developing nations are also taking a much more stringent look at what hazardous goods are being imported/exported.
The EU is starting to increase enforcement activities via the European Clas- sification and Labelling Inspections of Preparations (ECLIPS), including SDS. The objective of the ECLIPS project is first to assure a harmonized European enforcement of the Directive 99/45/EEC (legislation related to SDS) and sec- ondly to show the necessity of appropriate classification and labelling as well as complete and correct SDS of dangerous preparations, also focusing on chemicals classified as carcinogenic, mutagenic, and/or toxic for reproduction.
Main goals of this project include the following:
• exchange of information and experience between the member states to avoid differences in the way the directive is enforced in the different member states and as a consequence to avoid different competitiveness of the relevant enterprises
• finding enforcement strategies for each country that are suited for its national situations
• reduction of risks to workers, public and environment requires high quality of safety data sheets and an appropriate classification and label- ing of preparations containing dangerous substances
• equal market conditions • correct labeling of dangerous preparations as a tool to attract attention
of the users (workers and public in large) in order to interfere in the buying decision
Agreement on ECLIPS was reached in the following countries: Austria, Belgium, Denmark, France, Finland, Greece, Germany, Ireland, The Nether- lands, Norway, Spain, and Sweden. The Czech Republic and Slovakia are interested in the project as observer. A working group, consisting of Austria, Germany, Spain, and Sweden, has adapted the ECLIPS project proposal.
The project is currently in the operational phase, whereby the national authorities are selecting companies and inspections of the companies will be carried out. Inspections will include:
GOVERNMENT ENFORCEMENT 9
• checking whether preparations are classified and labeled correctly, • checking safety data sheets, and • support and information for the companies.
To review what happens to companies that do not comply with U.S. regu- latory requirements, please review the U.S. government BIS Web site under “Press Release” or compliance and enforcement section of the U.S. EPA web site.
1.4 CONTENT
This text provides easy to understand guidance on MC to shipping/receiving personnel, safety inspectors, MSDS/label authors, and transportation and logistics managers. It also provides senior management insight into the com- plexities of shipping goods globally and a quick guide to the basic components of well-run MCS and MCS-IS. The book was designed to assist readers answer the following questions relative to their organization:
• What is MC legislation? • What components of global MC legislation should my business care
about? • How do I keep track of all this legislation? • What are the components of a good MCS? • What is an MCS-IS and how can I incorporate one into our business?
This book is divided into two parts: Part 1 is an overview of global MC leg- islation and requirements imposed on organization that import, export, and/or transport hazardous (dangerous) goods and Part 2 covers Material Compli- ance Systems. In this part of the book, MC, MCS—Information Systems, and antiterrorism activities are discussed. The latter is provided to assist compa- nies respond to a new business risk that can have a profound impact on the movement of hazardous goods.
If a chapter deals with regulatory requirements, we have subdivided the section into the following geographic regions: North America, Europe, and Pacific Rim. North America addresses legislation pertinent to the United States, Canada, and Mexico. In the EU sections, legislation pertinent to the current 15 EU member states is addressed: Austria, Belgium, Denmark, France, Finland, Germany, Greece, Ireland, Italy, Luxembourg, The Nether- lands, Portugal, Spain, Sweden, and the United Kingdom. Where information was available, we also tried to address countries that have a high probability of being accepted as EU member states in 2003: Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, and Slovenia. In the Pacific Rim sections the five largest trading partners with the United States were selected: Japan, China, Taiwan, Korea, and Australia.
10 INTRODUCTION
The following are brief descriptions of each section of the book and how they assist readers in addressing key business requirements:
Part I—Regulatory Requirements Chapter 2 covers chemical registration, notification, and listing as derived
from product registration and national inventory legislation. This type of legislation can prohibit a material from being allowed into a country, limit its use (e.g., research and development), or require a company to provide a significant amount of documentation as part of a very timely registration process.
Chapter 3 addresses the regulatory requirements related to generation and distribution of MSDS, the second most generated document in many organizations. Efforts are underway to harmonize the requirements around the world, however, individual countries continue to put forward their unique requirements that in several instances result in a conflict between jurisdictions.The concept of a single system is still seen by many as an elusive dream.
In Chapter 4, legislation pertinent to product label requirements is pre- sented. The chapter deals primarily with precautionary labels for prod- ucts and shipments and presents the key requirements in an easy to understand format that promotes comparison jurisdiction.
Chapter 5 presents requirements related to transportation of haz- ardous goods. These include the classification and preparation of ship- ping documents for all modes of transportation: air, water, rail and roadway.
Chapter 6 provides an overview of global import compliance. Key compo- nents include classification, prohibitions, custom notification and foreign trade zone execution.
Chapter 7 presents information on export compliance in a manner similar to Chapter 2. The key components include classification, prohibitions (e.g., restricted parties and embargoes), and customs notification.
Part II—Material Compliance Systems Chapter 8 covers the impact of terrorism on the supply chain. Topics
addressed include effect on cargo movements, planning for the next attack, and countermeasures.
Chapter 9 presents the basic components of material compliance systems along with the proposed links to well-defined business systems, that is, the International Organization for Standardization (ISO) publications on quality and environment management systems and the U.S. BIS Export Management Systems (EMS) guidelines.
Chapter 10 discusses key issues associated with MCS–Information Systems: business drivers for implementing a MCS-IS, overall components of MCS, needs analysis/financial feasibility studies, preimplementation, implementation activities, and ongoing system maintenance.
CONTENT 11
There are appendixes, that list the following: a glossary of terms: govern- ment audit/inspection checklists; material compliance Web sites; import and export Web sites; and legislation on occupational exposure limits.
REFERENCES
U.S. Chemical Safety & Hazard Investigation Board (US CSHIB), 2002. “Investigation Report Refinery Incident (1 killed, 8 injured, offsite environmental impact).” Report No. 2001-05-I-DE. September.
Social & Environmental Activities Environmental News (S&EA EN), 2002. “Sony Europe Press Statement on Temporary Halt of Shipments of Some Sony Models in Europe.”
12 INTRODUCTION
PHILIPPE DUCAS Atrion International Inc.
PETER J. BAISH Independent Contractor to Sandler & Travis Trade Advisory Services
A JOHN WILEY & SONS, INC., PUBLICATION
Innodata
0471494275.jpg
JOHN PHYPER Atrion International Inc.
PHILIPPE DUCAS Atrion International Inc.
PETER J. BAISH Independent Contractor to Sandler & Travis Trade Advisory Services
A JOHN WILEY & SONS, INC., PUBLICATION
Copyright © 2004 by John Wiley & Sons, Inc. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey. Published simultaneously in Canada.
No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, 978-750-8400, fax 978-646-8600, or on the web at
Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748-6011, fax (201) 748-6008.
Limit of Liability/Disclaimer of Warranty: While the publisher and author have their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.
For general information on our other products and services please contact our Customer Care Department within the U.S. at 877-762-2974, outside the U.S. at 317-572-3993 or fax 317-572-4002.
Wiley also publishes its books in a variety of electronic formats. Some content that appears in print, however, may not be available in electronic format.
Library of Congress Cataloging-in-Publication Data:
Phyper, John-David. Global materials compliance handbook / John Phyper, Philippe Ducas,
Peter J. Baish. p. cm.
ISBN 0-471-46739-1 (Cloth) 1. Hazardous substances—Transportation. I. Ducas, Philippe.
II. Baish, Peter. III. Title. T55.3.H3P59 2004 363.17—dc21
2003014217
10 9 8 7 6 5 4 3 2 1
www.copyright.com. Requests to the Publisher for permission should be addressed to the
To my wife, Christine, for her patience, and daughters, Megan and Madison, for constantly reminding me of the important things in life.
J.D.P. To my wife, Catherine, for her understanding and loving. Also to Stéphanie,
Pascale, and Pierre-Olivier, who are the most beautiful gifts of my life. P.D.
To my wife, Mary Alice, and children, Meg, Sarah, Liz, and P.T., I love you! P.J.B.
CONTENTS
1 Introduction 1
1.1. Overview, 1 1.2. Types of Legislation, 6 1.3. Government Enforcement, 8 1.4. Content, 10
References, 12
2 Chemical Registration, Notification, and Listing 15
2.1. Introduction, 15 2.2. Requirements for North America, 15
2.2.1. United States, 15 2.2.2. Canada, 21
2.3. European Requirements, 21 2.3.1. Current Requirements, 21 2.3.2. REACH Program, 27
2.4. Pacific Rim Requirements, 28 2.4.1. China, 28
vii
2.4.2. Australia, 32 2.4.3. Philippines, 35 2.4.4. Korea, 36 References, 39
3 Material Safety Data Sheets 41
3.1. Introduction, 41 3.2. Global MSDS Requirements, 42 3.3. North American Requirement, 53
3.3.1. United States Requirement, 53 3.3.2. U.S. Approach to GHS, 58 3.3.3. Canadian Requirements, 60 3.3.4. Mexican Requirement, 61
3.4. European Safety Data Sheets, 62 3.4.1. Overview of Labeling (Classification), 62 3.4.2. Substance Versus Preparation, 94 3.4.3. Environmental Classification, 96 3.4.4. SDS Format, 97 3.4.5. Languages, 99
3.5. Pacific Rim MSDS, 100 3.5.1. MSDS for Japan, 100 3.5.2. SDS for Korea, 114 3.5.3. SDS for China, 120 3.5.4. SDS for Australia, 123 3.5.5. SDS for Malaysia, 126 3.5.6. SDS for Thailand, 129
3.6. Global Harmonization System (GHS), 130 References, 143
4 Product Label Requirements 145
4.1. Introduction, 145 4.2. North America, 146
4.2.1. United States, 146 4.2.2. Canada, 149 4.2.3. Mexico, 154
4.3. Europe, 157 4.3.1. Information Contained on a European Label, 158 4.3.2. Final Choice of Risk and Safety Phrases, 158 4.3.3. Chemical Name(s) to Be Displayed on the
Label, 159 4.3.4. Choice of Danger Symbols, 160 4.3.5. Choice of Risk Phrases, 160 4.3.6. Choice of Safety Phrases, 161
viii CONTENTS
4.3.7. The EC Number, 162 4.3.8. The Dimensions of the Label for
Preparations, 162 4.3.9. Special Cases: Substances, 163 4.3.10. Special Cases: Preparations, 163
4.4. Pacific Rim, 163 4.4.1. Japan, 163 4.4.2. Korea, 164 4.4.3. China, 168 4.4.4. Australia, 170 4.4.5. Malaysia, 171 References, 176
5 Transport Requirements 177
5.1. Overview of Transport Legislation, 177 5.2. International Requirements, 181
5.2.1. United Nations (UN), 181 5.2.2. ICAO and IATA, 192 5.2.3. IMO, 193
5.3. North American Requirements, 197 5.3.1. U.S. DOT, 197 5.3.2. Canadian TDG, 203 5.3.3. Mexican, 212
5.4. European Requirements, 218 5.4.1. ADR, 218 5.4.2. EU Inland Waterways, 220 5.4.3. Navigation on the Rhine, 221 5.4.4. RID-OTIF, 223
5.5. Other Country Requirements, 223 5.5.1. Australia National Dangerous Goods Policy, 223 5.5.2. China Transport Packaging of Dangerous
Goods, 229 References, 232
6 Import Compliance 233
6.1. Change in Strategy at the Border, 233 6.1.1. Overview of Content, 233 6.1.2. Historical Perspective, 233
6.2. Import Compliance Issues, 235 6.3. Self-Assessments?, 237 6.4. Import Requirements of Individual Countries and Economic
Unions, 238 6.4.1. United States, 239
CONTENTS ix
6.4.2. Canada, 246 6.4.3. Mexico, 250 6.4.4. European Union, 255 6.4.5. Australia, 261 6.4.6. China, 266 6.4.7. Japan, 268 6.4.8. Korea, 273 6.4.9. Taiwan, 276 References, 277
7 Export Compliance 279
7.1. Overview, 279 7.2. General Export Control Legislation, 280 7.3. International Agreements for Export Control, 282 7.4. North America, 282
7.4.1. United States, 282 7.4.2. Canada, 291 7.4.3. Mexico, 294
7.5. European Union, 295 7.6. Pacific Rim, 297
7.6.1. Australia, 297 7.6.2. China, 300 7.6.3. Japan, 301 7.6.4. Korea, 304 7.6.5. Taiwan, 305
7.7. Corporate Export Compliance Programs, 306 References, 308
PART II MATERIAL COMPLIANCE SYSTEMS 309
8 Impact of Terrorism on the Supply Chain 311
8.1. Introduction, 311 8.2. Effect on Cargo Movements, 312 8.3. Dangerous Times: Next Attack?, 313 8.4. Countermeasures, 314
8.4.1. Tightening Legal Requirements, 314 8.4.2. Private Sector Partnerships, 316 8.4.3. Overseas Targeting of Container Freight, 317 8.4.4. U.S./Canadian Border Clearance and Security
Enhancements, 318 8.5. New Reality, 318
References, 320
x CONTENTS
9.1. Overview of Management System, 321 9.1.1. General Management System Principles, 322 9.1.2. Key Components of a MCS, 324 9.1.3. Reasonable Care, 328
9.2. Material Compliance Policy, 331 9.3. Planning, 332
9.3.1. Areas of Potential Risk, 332 9.3.2. Legal and Other Requirements, 334 9.3.3. Objectives and Targets, 335 9.3.4. Management Programs, 336
9.4. Implementation and Operations, 337 9.4.1. Structure and Responsibility, 337 9.4.2. Training, Awareness, and Competence, 338 9.4.3. Communications, 340 9.4.4. MCS Documentation, 341 9.4.5. Document Control, 343 9.4.6. Operational Control, 345 9.4.7. Emergency Preparedness and Response, 346
9.5. Checking and Corrective Action, 347 9.5.1. Monitoring and Measurement, 347 9.5.2. Nonconformance and Corrective and
Preventative Action, 348 9.5.3. Records, 349 9.5.4. MCS Audits, 350
9.6. Management Review, 352 References, 353
10 MCS–Information Systems 355
10.1. Introduction, 355 10.1.1. Overall MCS-IS Components, 355 10.1.2. Business Drivers, 358
10.2. Identifying Preferred Approach, 359 10.2.1. Documenting Business Requirements, 359 10.2.2. Documenting Current/Future Costs, 360 10.2.3. Maintain Status Quo, Build, or Buy?, 361
10.3. Implementation of Selected Solution, 366 10.3.1. Implementation Process, 366 10.3.2. Project Team, 370 10.3.3. Project Management, 372 10.3.4. Uncertainty of Implementation Costs, 376 10.3.5. Implementation Schedule, 376 10.3.6. Do’s and Don’ts, 378
CONTENTS xi
Application), 383 10.3.11. Legacy Data Migration, 383 10.3.12. Interfaces, 385 10.3.13. Testing, 386
10.4. Go Live and Post Implementation, 387 10.4.1. Going Live, 387 10.4.2. Maintenance, 388 Reference, 389
APPENDICES 391
1 Glossary 391 2 Audit/Inspection Checklists 397 3 Material Management Web Sites 423 4 Import/Export Web Sites 437 5 Occupational Exposure Limits Legislation 441
INDEX 459
xii CONTENTS
PREFACE
This book is primarily directed to assisting those individuals who are respon- sible for material compliance (MC). The term MC refers to activities and processes used to ensure an organization is compliant with legislation related to hazardous (regulated) goods across all aspects of its business; for example, purchasing, research and development, testing, manufacturing, selling, docu- menting and distribution of regulated materials. Currently, companies spend hundreds of billions of dollars to satisfy these regulatory requirements. Exam- ples of job functions related to MC include the following:
• Personnel who generate and distribute regulatory documents, e.g., safety data sheets, workplace safety cards, labels.
• Staff or third party contractors who train personnel on hazard communi- cation requirements and import/export legislation.
• Personnel involved in the purchase, importation, manufacture or use of hazardous (regulated materials).
• Personnel who take new orders, transport goods locally/internationally or export hazardous (regulated materials).
• Research personnel involved in the development of new/modified for- mulations or products.
The primary purpose of the hazard communication documents is to prevent injury to workers or consumers, identify potential danger to the environment and be able to quickly and effectively respond to an incident, for example, tanker spill along a roadway or consumption of product by a child.
xiii
The book was designed to assist readers to answer the following questions relative to their organization:
• What is MC legislation? • What components of global MC legislation should my business care
about? • How do I keep track of all this legislation? • What are the components of a good material compliance system (MCS)? • What is a MCS-information system (IS) and how can I incorporate one
into our business?
In many cases, a lack of knowledge or poor execution of global MC requirements has prevented companies from filling international orders. Most companies now realize that the successful management of MC activities pro- vides a competitive advantage for companies doing business globally, espe- cially as North America and Europe “de-industrialize” and companies move their businesses abroad to capture lower labor costs. Key components of a suc- cessful MC management program include a well-defined process, personnel knowledgeable in both regulatory matters and supply chain issues and tech- nology for information transfer.
xiv PREFACE
ACKNOWLEDGMENT
This handbook represents the efforts of more than the three authors.To ensure that the information has been presented properly and is current, the follow- ing experts reviewed draft versions of the chapters. All of the these people freely gave of their time and ideas and authors are indebted to each of them for their assistance: Leo Appelman, Azko Nobel Coatings; Frank Arcadi, Atrion International Inc.; Sarah K. Baish Milin; Joe Cella,Atrion International Inc.; Taco de Jong, Akzo Nobel Coatings; Gil Duhn, General Motors Corpo- ration; Steve Fogel, Applied Materials; Pierre Gravel, Canada Customs and Excise, Retired; Jerry Hagan, Atrion International Inc.; Scott Harter, Atrion International Inc.; Lea Johnson, Weyerhaeuser Corporation; Ian Jones, BP International Limited;Aad van Keulen,Atrion International Inc.; Sally Meier, IBM; Luc Seguin, Kemika XXI Inc.; Jill Thomas, Applied Materials; and Henk van Peske, Kodak Polychrome Graphics.
xv
1 INTRODUCTION
1.1 OVERVIEW
Whether a company operates facilities across the globe or merely imports or exports goods to a single jurisdiction, company personnel and their advisors must be aware and understand regulatory requirements pertinent to their activities. The term material compliance (MC) refers to activities and processes used to ensure an organization is compliant with legislation related to hazardous (regulated) goods across all aspects of its business, for example, purchasing, research and development, testing, manufacturing, selling, documenting, and distribution of regulated materials. Currently, companies spend hundreds of billions of dollars to satisfy these regulatory requirements.
In many cases, a lack of knowledge or poor execution of the requirements has prevented companies from filling international orders. More and more companies are realizing that the successful management of MC activities pro- vides them a competitive advantage. This is becoming more critical as North America and Europe companies move their businesses abroad to capture lower labor costs.
Within a company’s supply chain activity there are multiple areas that need to interact with a proper MC process. These include, as a minimum, the following:
1
Global Materials Compliance Handbook, Edited by John Phyper, Philippe Ducas & Peter J. Baish ISBN 0-471-46739-1 Copyright © 2004 by John Wiley & Sons, Inc.
• Review of suppliers’ Material Safety Data Sheets (MSDS) or Safety Data Sheets (SDS) to ensure material can be imported and that documenta- tion addresses pertinent regulatory requirements.
• Approval of vendors for specific chemicals, taking into consideration import/export legislation (e.g., embargos).
• Create Workplace Safety Cards (WSC), primarily in Europe, and labels using key information from suppliers’ MSDS/SDS and country-specific regulatory information.
• Train workers on how to use these chemicals and make the MSDS/SDS and WSC readily available.
• Use a new chemical within a research and development activity and identify potential regulated criteria that will be associated with new or mod- ified finished products (product optimization) that use this new chemical.
• Create MSDS/SDS and WSC for the newly design product. • Verify registration and import quantity limitations for targeted countries. • Verify the inventory listing for each substance (pure product) that is used
to create the new product. • Verify export information (banned list, embargo screening, etc.). • Create label (potentially multilingual) information for product selling and
shipment. • Send MSDS/SDS to client prior to shipment (distribution by mail, fax,
e-mail) in appropriate language and jurisdiction. • Create driver instruction cards, in appropriate language, for road ship-
ment (Tremcards). • Print all documentation needed with the shipment, addressing local
languages and legislation for areas through which the shipment may pass.
It is important to note that the primary “purpose” of the hazard communi- cation documents listed above is to prevent injury to workers or consumers, to identify potential danger to the environment, and to be able to quickly and effectively respond to an incident, for example, a tanker spill along a roadway or accidental consumption of product by a child.
To effectively manage MC on a global scale, the following are required:
• well-defined process • personnel knowledgeable in both regulator matters and supply chain
issues • technology for information transfer
Most companies who ship or receive goods internationally have developed material compliance systems (MCS) that address these regulatory require-
2 INTRODUCTION
ments. These MCS are typically labor intensive, address mainly the primary business location (e.g., U.S. or German operations only), and are not updated in a timely manner as legislation changes. More and more proactive compa- nies are automating the screening of orders and generation of regulatory doc- uments while incrementally expanding regulatory content to address global requirements.
This book provides guidance to companies importing, exporting, or trans- porting hazardous (dangerous) goods around the world. The terms hazardous and dangerous are used here in general context; both can have very specific meanings within particular legislation. Key issues addressed by the book include:
• proper classification of hazardous goods according to import/export, health and safety, and transportation legislation,
• review of prohibition rules related to shipments of hazardous goods to and from countries and product registration requirements,
• preparation of proper shipping/transportation documents, labels, WSC, and MSDS/SDS,
• proper screening of shipments to ensure compliance with import/export legislation,
• helpful hints on antiterrorism activities to ensure ongoing security of ship- ments, and
• development of global MCS and MCS information systems.
The book also provides information on the important components of suc- cessful MCS and MCS information systems. The proposed components were derived from the International Organization for Standardization quality (ISO 9000) and environmental (ISO 14000) series of standards and the U.S. Bureau of Industry and Security (BIS), formerly the Bureau of Export Administra- tion, Export Management System (EMS) guidelines. Components, if not prop- erly addressed, can quickly translate into:
• Development of new products that contain ingredient(s) that may cause significant risk and, in some cases, are banned from being imported into some countries.
• Delays and uncertainties in custom clearance that result in parts short- ages and the requirement to provide excess inventory.
• Return or impoundment of goods as prohibited from entering/leaving a country due to prohibition on material, incorrect containers, or documentation.
• Monetary fines, civil and/or criminal prosecution. • Prohibitions on the import/export of goods by the company.
OVERVIEW 3
• Damage to company reputation as a result of incident or prosecution. • Audits of shipments and operations by government agencies.
The presence of a MCS by itself will not relieve an organization of crimi- nal and administrative liability under law if a violation occurs.A well-designed MCS, however, should greatly reduce the risk of noncompliance events and will serve as a mitigating factor during an investigation should a violation occur. This role of an effective MCS may be further highlighted as U.S. Customs implements its “informed compliance strategies” for importers; a strategy that shifts focus from a transaction-based operation to an account- based processing.
The evolution of global MC legislation related to business processes can be “generally” described as follows:
Command and control period—In the early 1980s, companies began implementing the precursor to MCS to ensure ongoing regulatory compliance. Their focus shifted from simply executing import/export and transportation, to managing the quality of the processes and resulting output.A shift that may have been accelerated by the United States’ introduction of the Enhanced Proliferation Control Initiative (EPCI) and a rewrite of Export Administra- tion Regulations (EAR). These regulations placed emphasis on the end use and end-users of the exported products. Companies quickly came to see cor- porate control of compliance processes and output as critical to meeting regulatory requirements, however, it was still considered a labor intensive “operational” issue, with a focus on only key manufacturing sites in the United States or Europe, depending upon the location of the company’s corporate headquarters.
Costs/risks aversion period—In the 1990s, most major corporations mas- tered (or believed they had) basic MC issues related to government reporting and refocused on cost reduction and risk aversion—especially when they real- ized how much money it was costing to ensure ongoing compliance.As a result, MCS moved from being an “operational” issue to a “tactical,” issue with a significant amount of MC transactions (document generation, screening, etc.) being automated or semi-automated. However, systems were still primarily U.S. or European Union (EU) regulatory focused, with other jurisdictions being addressed partially, if at all, using local personnel and storage of data with no central repository of MC information.
Management period—In the early 2000s, multinational companies began to reevaluate their MCS as they realized that their country-specific, independent, unilingual systems did not reinforce their integrated business process, but rather hindered it and were expensive to operate. In doing so, they also real- ized that the “ship button” present on a company’s internal/external Web system is linked to a series of time-consuming, manual activities that fre- quently involve complex regulatory matters or the processing of significant amounts of data.
4 INTRODUCTION
They also realized that a well-designed MCS that includes a central data repository of MC data, integrated with other key business systems, can:
• significantly reduce costs • promote dialogue with suppliers on hazard information and testing
requirements • standardize business processes • ensure trade and regulatory compliance • minimize business risks of current and proposed legislation • in the event of government action, show “reasonable care,” as per
U.S. Customs Informed Compliance Strategy, and potentially mitigate penalties
Examples of key business information systems include the following: Laboratory Information Management Systems (LIMS), courier tracking systems, formulation systems, Enterprise Resource Planning (ERP), Supply Chain Management (SCM), or Manufacturing Resource Planning (MRP) software systems, and government reporting/content databases, for example, specific requirements for interfacing with U.S., British, and Canadian Custom systems.
The overall business objective for most companies is to drive costs out of the supply chain and improve services levels. Key activities related to MCS that support this objective include:
• Ensuring compliance with global regulatory requirements. • Reducing the time period for preparation of new documents especially if
multi lingeral, and provide more accurate data. • Minimizing the time goods sit in customs, thereby decreasing the need for
excess inventories (especially customs holding areas). • Developing a single product that can be sold in numerous markets and
complies with legislation in every country rather then regional products that must be rolled out separately, avoiding costly product launch delays and, potentially, prohibitions on entering some markets.
• Potentially allowing chemists to run “what-if” scenarios to find out what the consequences of adding/eliminating a particular component are in terms of where it is to be sold.
• Integrate business information systems to minimize manual data entry.
These all have significant impact on costs, with some companies reporting decreases of up to 50% of supply chain costs and significant expansion to new markets.
By assessing MC issues at the “strategic” level, companies can account for
OVERVIEW 5
compliance strengths and weaknesses when deciding against which competi- tors, in which markets, using what products (to develop, introduce, or phase out), or how best to deploy company resources to maximize market opportu- nities. This new direction allows all personnel in the enterprise, from the shipping clerk to the CEO, to have visibility into compliance and hazardous materials issues impacting their decisions, from checking whether an MSDS is valid, to choosing to expand sales into a new country. Each person has access and the tools necessary to draw the right conclusions for minimizing costs and ensuring compliance at all levels.
It is important to note that automation can reduce cost and ensure high quality when processing large amounts of data. Significant cost savings, however, typically only come from the integration of systems, as it eliminates manual data entry as well as associated errors.
1.2 TYPES OF LEGISLATION
MC legislation has become significantly more complex over the last few years. Historically, some companies have believed that the generation of documen- tation in English, in conformance to U.S. legislation, is adequate to ship goods anywhere in the world. However, companies must be aware of and comply with local legislation (approximately 126 countries have local MSDS require- ments) and linguistic requirements. This legislation, when compiled, would fill several large bookshelves. In some areas, these requirements are significantly different, and potentially more stringent, than U.S. requirements, for example, the approach to MSDS used in the EU versus the United States.
Several types of instruments are used by government agencies to manage or regulate MC legislation:
• acts, statutes, regulations, directives, and standards • permits, certificates, licenses, and orders • local/municipal ordinances and by-laws • codes of practice, policies, criteria, objectives, and guidelines
Legislative bodies pass acts or statutes (laws passed by legislators). Acts or statutes are typically general in nature in terms of requirements and have a broader policy perspective. Regulations or directives are made pursuant to authority set out in an act or statute and provide specific operational details on the general powers listed in the act or statute. A bill is a proposed law that, following passage by the legislative body, becomes an act or statute. Typically, standards are numerical values stipulated in a statute regarding allowable levels, for example, emission levels, occupational exposures, etc.
In the United States, the rule-making process involves the publication of proposed regulations in the Federal Register, allowing the public an opportu-
6 INTRODUCTION
nity to comment on the regulation. The final regulation is also published in the Federal Register and has the effect and force of law when it becomes effective. Annually, the regulations are combined into the Code of Federal Regulations (C.F.R.).
It is important to note that there are three key dates for acts, statutes, regulations, and directives: publication of the proposed/draft legislation; the date final legislation is published (often referred to as the promulgation date); and the date the legislation or key components become effective (also referred to as the enforcement date). Typically, the more a piece of legislation will impact the business community, the longer the time period between the date of promulgation and enforcement date, for example, significant EU leg- islation typically has a transition period of 18 months. It is important to note that for some regulatory changes, for example, occupational exposure limits (OEL), the transition period, if any, may be very short, depending upon the jurisdiction.
Permits, certificates, or licenses are issued to specific parties by government agencies.Some acts, statutes, regulations,or directives require such instruments. Orders are issued to specific parties by government agencies,usually in response to failure by the party to comply with an act, statute, regulation, or directive, or on the strong suspicion that noncompliance has occurred or could occur.
Codes of practice, policies, criteria, objectives, and guidelines are used by government agencies to address many MC issues.Although not legally binding on their own, these types of instruments need to be reviewed and assessed as part of MC compliance. They can illustrate an agency’s position toward a par- ticular situation. If these are incorporated into the terms of a license, permit, or other approval, or referred to in a regulation or directive, these types of instruments can be legally binding.
There exist potentially five levels of legislation:
• international (e.g., United Nations) • regional (e.g., EU) • national (federal) • state or provincial • municipal
For the purpose of MC legislation, and thus this book, the primary focus is on the first three levels, that is, items of national concern. Generally provinces/states are not precluded from enforcing criteria more stringent than those required by federal laws, and are given considerable leeway to follow enforcement interpretations that may not be fully consistent with those applied at the federal level. Thus, the laws and interpretations used to apply and enforce federal laws may vary considerably from province/state to province/state and these variations may not be readily apparent.
Note that under the U.S. Constitution’s commerce clause (Article I, Section
TYPES OF LEGISLATION 7
8), Congress has the authority to regulate commerce with foreign nations, among several states, and with Indian tribes. If the courts find that the state statutes or regulations impermissibly burden interstate commerce, then they are found to be unconstitutional and unenforceable.
1.3 GOVERNMENT ENFORCEMENT
Failure to comply with MC legislation may result in the following government agency responses:
• Delays in clearing of goods by customs personnel • Audit of shipments and operations • Orders to perform specific activities • Return or impoundment of goods as prohibited from entering/leaving
a country due to prohibition on material, incorrect containers, or documentation
• Prohibitions on the import/export of goods by the company • Monetary fines (ranging from ticketable offences to several million
dollars depending upon offence and jurisdiction), criminal prosecution of employees and executives, and civil prosecution of the company.
One of the largest fines to date was against Sony Corporation by the Dutch authorities for importing game consoles containing cadmium levels above the limit allowed under regulations. Sony corporation estimated an impact on sales of approximately EUR 110 million and on operating profit of approximately EUR 52 million, including costs of rework, on a consolidated basis for the fiscal year ending March 31, 2002 (S&EA EN, 2002).
In many cases, the fine associated with incorrect MC document (e.g., MSDS or transportation manifest) is relatively minor, however, the resulting impact from personnel using this documentation can be catastrophic (e.g., damage from spillage/fires/explosions resulting from the incorrect storage of haz- ardous materials or inappropriate response to an emergency condition result- ing in worker injury/death and damage to equipment/property).
An example of this type of incident is the explosion at the Motiva Refin- ery in Delaware City, Delaware, in July 2002.The incident resulted in the death of an employee, injury to eight other workers, and the release of a large quantity of acid into the Delaware River, killing fish and other aquatic life. A spark from the work crew’s welding tools ignited hydrocarbon vapors from a 415,300-gallon spent sulfuric acid storage tank. Motiva’s MSDS for spent sul- furic acid did not include important information about the mixture’s flamma- bility. In addition, Motiva had assigned a zero for the National Fire Protection Association (NFPA) rating on the MSDS (US CSHIB, 2002).
A commonly asked question by companies when discussing a government
8 INTRODUCTION
agency’s response, outside of the United States, is “do they really enforce the legislation?” The answer is that, unfortunately for workers and the public, the response depends upon the jurisdiction. In almost all developed countries, any event that triggers injury to workers or the public, loss of life, or sig- nificant damage to the environment will result in significant penalties and government intervention. In nondeveloped countries, the response can vary significantly.
In the United States, enforcement has been relatively steady for MC legis- lation, and, if anything, is increasing related to import/export of hazardous goods because of the threat of terrorism. Many developing nations are also taking a much more stringent look at what hazardous goods are being imported/exported.
The EU is starting to increase enforcement activities via the European Clas- sification and Labelling Inspections of Preparations (ECLIPS), including SDS. The objective of the ECLIPS project is first to assure a harmonized European enforcement of the Directive 99/45/EEC (legislation related to SDS) and sec- ondly to show the necessity of appropriate classification and labelling as well as complete and correct SDS of dangerous preparations, also focusing on chemicals classified as carcinogenic, mutagenic, and/or toxic for reproduction.
Main goals of this project include the following:
• exchange of information and experience between the member states to avoid differences in the way the directive is enforced in the different member states and as a consequence to avoid different competitiveness of the relevant enterprises
• finding enforcement strategies for each country that are suited for its national situations
• reduction of risks to workers, public and environment requires high quality of safety data sheets and an appropriate classification and label- ing of preparations containing dangerous substances
• equal market conditions • correct labeling of dangerous preparations as a tool to attract attention
of the users (workers and public in large) in order to interfere in the buying decision
Agreement on ECLIPS was reached in the following countries: Austria, Belgium, Denmark, France, Finland, Greece, Germany, Ireland, The Nether- lands, Norway, Spain, and Sweden. The Czech Republic and Slovakia are interested in the project as observer. A working group, consisting of Austria, Germany, Spain, and Sweden, has adapted the ECLIPS project proposal.
The project is currently in the operational phase, whereby the national authorities are selecting companies and inspections of the companies will be carried out. Inspections will include:
GOVERNMENT ENFORCEMENT 9
• checking whether preparations are classified and labeled correctly, • checking safety data sheets, and • support and information for the companies.
To review what happens to companies that do not comply with U.S. regu- latory requirements, please review the U.S. government BIS Web site under “Press Release” or compliance and enforcement section of the U.S. EPA web site.
1.4 CONTENT
This text provides easy to understand guidance on MC to shipping/receiving personnel, safety inspectors, MSDS/label authors, and transportation and logistics managers. It also provides senior management insight into the com- plexities of shipping goods globally and a quick guide to the basic components of well-run MCS and MCS-IS. The book was designed to assist readers answer the following questions relative to their organization:
• What is MC legislation? • What components of global MC legislation should my business care
about? • How do I keep track of all this legislation? • What are the components of a good MCS? • What is an MCS-IS and how can I incorporate one into our business?
This book is divided into two parts: Part 1 is an overview of global MC leg- islation and requirements imposed on organization that import, export, and/or transport hazardous (dangerous) goods and Part 2 covers Material Compli- ance Systems. In this part of the book, MC, MCS—Information Systems, and antiterrorism activities are discussed. The latter is provided to assist compa- nies respond to a new business risk that can have a profound impact on the movement of hazardous goods.
If a chapter deals with regulatory requirements, we have subdivided the section into the following geographic regions: North America, Europe, and Pacific Rim. North America addresses legislation pertinent to the United States, Canada, and Mexico. In the EU sections, legislation pertinent to the current 15 EU member states is addressed: Austria, Belgium, Denmark, France, Finland, Germany, Greece, Ireland, Italy, Luxembourg, The Nether- lands, Portugal, Spain, Sweden, and the United Kingdom. Where information was available, we also tried to address countries that have a high probability of being accepted as EU member states in 2003: Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, and Slovenia. In the Pacific Rim sections the five largest trading partners with the United States were selected: Japan, China, Taiwan, Korea, and Australia.
10 INTRODUCTION
The following are brief descriptions of each section of the book and how they assist readers in addressing key business requirements:
Part I—Regulatory Requirements Chapter 2 covers chemical registration, notification, and listing as derived
from product registration and national inventory legislation. This type of legislation can prohibit a material from being allowed into a country, limit its use (e.g., research and development), or require a company to provide a significant amount of documentation as part of a very timely registration process.
Chapter 3 addresses the regulatory requirements related to generation and distribution of MSDS, the second most generated document in many organizations. Efforts are underway to harmonize the requirements around the world, however, individual countries continue to put forward their unique requirements that in several instances result in a conflict between jurisdictions.The concept of a single system is still seen by many as an elusive dream.
In Chapter 4, legislation pertinent to product label requirements is pre- sented. The chapter deals primarily with precautionary labels for prod- ucts and shipments and presents the key requirements in an easy to understand format that promotes comparison jurisdiction.
Chapter 5 presents requirements related to transportation of haz- ardous goods. These include the classification and preparation of ship- ping documents for all modes of transportation: air, water, rail and roadway.
Chapter 6 provides an overview of global import compliance. Key compo- nents include classification, prohibitions, custom notification and foreign trade zone execution.
Chapter 7 presents information on export compliance in a manner similar to Chapter 2. The key components include classification, prohibitions (e.g., restricted parties and embargoes), and customs notification.
Part II—Material Compliance Systems Chapter 8 covers the impact of terrorism on the supply chain. Topics
addressed include effect on cargo movements, planning for the next attack, and countermeasures.
Chapter 9 presents the basic components of material compliance systems along with the proposed links to well-defined business systems, that is, the International Organization for Standardization (ISO) publications on quality and environment management systems and the U.S. BIS Export Management Systems (EMS) guidelines.
Chapter 10 discusses key issues associated with MCS–Information Systems: business drivers for implementing a MCS-IS, overall components of MCS, needs analysis/financial feasibility studies, preimplementation, implementation activities, and ongoing system maintenance.
CONTENT 11
There are appendixes, that list the following: a glossary of terms: govern- ment audit/inspection checklists; material compliance Web sites; import and export Web sites; and legislation on occupational exposure limits.
REFERENCES
U.S. Chemical Safety & Hazard Investigation Board (US CSHIB), 2002. “Investigation Report Refinery Incident (1 killed, 8 injured, offsite environmental impact).” Report No. 2001-05-I-DE. September.
Social & Environmental Activities Environmental News (S&EA EN), 2002. “Sony Europe Press Statement on Temporary Halt of Shipments of Some Sony Models in Europe.”
12 INTRODUCTION