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DOT Moves to Streamline “Reverse Logistics” Transportation Regulations

October 2014

The U.S. Department of Transportation's (DOT) Pipeline and Hazardous Materials Safety Administration (PHMSA) is nearing the end of a long regulatory process intended to streamline the safe processing and return of small quantities of consumer goods that are classified as hazardous materials.  In early August, PHMSA published proposed rules that would establish a new set of exemptions to the hazardous material transportation regulations for small quantities of certain hazardous materials in “reverse logistics” supply chains.  79 Fed. Reg. 46,748 (August 11, 2014).  Comments are due on November 10.

Broadly speaking, “reverse logistics” is the process by which retail products are returned by the retailer to the distributor or manufacturer, in effect “reversing” the flow of new goods.  For purposes of this rule, PHMSA has defined “reverse logistics” to mean “the process of moving goods from their final destination for the purpose of capturing value, recall, replacement, proper disposal, or similar reason.”

The proposed rule is split into two portions:  the first is a new, general reverse logistics exemption intended to cover a broad range of products in the retail sector, the second is an amendment to existing exemption for lead-acid batteries.

On the retail side, PHMSA's rulemaking was initially spurred by a 2008 petition for rulemaking from the Council on the Safe Transportation of Hazardous Articles Inc. (COSTHA).  COSTHA requested that PHMSA help retailers more efficiently return small quantities of hazardous materials to the manufacturer or distributor.  Efficient supply chain logistics continue to gain importance in modern retail environments, and have long included return mechanisms.  However, under the current regulatory framework, some items such as perfumes, automotive parts, medical supplies, and batteries become hazardous waste when discarded or returned to the manufacturer.  Transporting these products thus can pose significant challenges to retailers and shippers.

PHMSA has proposed exempting consumer products in many hazard classes (1.4 , 2.1, 2.2, 3, 4.1, 5.1, 5.2, 6.1, 6.2, 8, and 9) from most hazardous waste transportation requirements, when certain conditions are met.  These would be eliminated as long as the exempted products are packaged in specified packaging that meet a list of standards (e.g., “leak tight for liquids and gases”).  Shipments of all exempted consumer products must also be marked with hazard communication notices.  And most of the products are subject to weight limitations on the volume of such material that can be shipped in a single shipment.

Perhaps most importantly to retailers, employees involved in the reverse logistics shipments of exempt consumer products would be required to receive only limited training specific to the requirements of this new rule.  These training requirements are much less onerous than would be required if the employee were required to become fully trained,  as is the case today.

Second, PHSMA's proposed rule would amend a separate regulation which already covers the reverse logistics shipment of lead-acid batteries to better enable automotive battery distributors and retailers to efficiently return batteries for recycling.  This portion of the proposal was initiated by a petition for rulemaking submitted in 2010 by the Battery Council International (BCI), a trade association of lead-acid battery manufacturers, distributors, retailers, and recyclers.

Over the past several decades, the lead-acid battery industry has developed an efficient reverse logistics supply chain which moves used lead-acid batteries for recycling.  Often, these reverse logistics shipments use the same trucks that deliver new batteries to several retail outlets.  This is colloquially referred to as a “milk run.”  However, under the current rule, some have argued that the truck can only pick-up returned batteries from a single store on each trip.  This makes little sense from an economic or energy-efficiency standpoint.

In an effort to further streamline that process, the lead-acid battery manufacturers and reverse logistics providers asked PHMSA to clarify the regulations so they are clear that used batteries can be picked up from multiple locations in a single milk run trip.  PHMSA has proposed to agree with BCI's request.

This rulemaking has received significant attention and support from manufacturers, retailers and logistics providers alike.  Most industry commenters have strongly supported PHMSA's efforts to streamline these processes, particularly in light of the continuing focus in the retail sector on reducing delays and costs in logistics chains.  And both portions of PHMSA's rule are expected to move forward as envisioned by industry and PHMSA .