An unexpected fine for a hazardous materials violation can jolt a company. Even companies with robust systems for managing hazardous materials compliance can be surprised with a penalty due to the actions of a single employee who deviated from protocol or who simply wasn’t paying enough attention.

Fines for violations of the Hazardous Materials Regulations (known as the “HMRs”) can add up quickly. The maximum penalty for a violation of the HMRs is $75,000 per day, per violation. If, however, the violation results in death, serious illness, severe injury, or substantial destruction of property, the maximum penalty is $175,000 per day, per violation. The minimum penalty for a violation relating to training of employees is $450. Training violations usually get added on to more serious violations of the HMRs.

Shipping violations are often discovered when the carrier, i.e., UPS, Fedex, USPS, etc. notices a leaking or poorly packaged product. The carrier opens the package and discovers something that it suspects is a hazardous material. The carrier reports the incident to the Federal Aviation Administration (“FAA”) – the federal agency that oversees the HMRs –  but only sometimes reports to the company as a courtesy.

Once the FAA gets notice of the incident, it begins an investigation and sends a Letter of Investigation (“LOI”) to the company, which requires a response within 10 days. The FAA Guidance explains that an LOI serves two purposes: notifying the alleged violator of the investigation and providing the alleged violator an opportunity to tell its side of the story. However, make no mistake: any information the company includes in its LOI response will be used against it by the FAA to support a case against the company.

Too often, companies make the mistake of using the LOI response as an opportunity to “come clean” and admit to HMRs violation allegations. Companies should remember, however, that this type of mea culpa response can come back to haunt them and make the case against them very easy to prove.

This is not to suggest that a company should ignore the LOI – ignoring an LOI will erase any goodwill the company may have as a good corporate citizen. Instead, use the LOI response as an opportunity to set forth facts about the incident that may be mitigating factors but are not incriminating.  The company’s response should be carefully crafted to highlight its side of the story without admitting to anything. Companies should consider using receipt of the LOI as a trigger to get its HMR compliance up to par. It is especially important to address whatever caused the incident and fix the problem as soon as possible as the FAA will consider corrective action as a mitigating factor in deciding what the penalty should be.

Lawyers generally get brought into a case when a company gets a notice of violation which can be months or even years after the company has responded to an LOI. At that point, the company has generally admitted to the violations and the only thing a lawyer can do is try to negotiate the penalty down. We have found that the best practice is to contact a lawyer as soon as the company receives the LOI. A lawyer can assist the company in crafting a response that may mitigate the fines and violations and can suggest appropriate corrective actions that a company can take to demonstrate good corporate citizenship to the FAA.