Hazardous Materials; Transportation of Lithium Batteries, 34729-34740 [05-11765]
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Federal Register / Vol. 70, No. 114 / Wednesday, June 15, 2005 / Proposed Rules
coverage of the rule or any part thereof
for small entities.
19. The objective in the Refarming
proceeding was to provide a means to
transition licensees to 6.25 kHz
technology. Migration to 12.5 kHz
technology was viewed as a stepping
stone to operation at 6.25 kHz
technology. However, requiring the use
of 6.25 kHz technology by a date certain
could impact some small entities
requiring them to upgrade their
communications systems before they
would otherwise do so. An alternative
would be to maintain the current rules,
which are intended to foster migration
to narrowband technology by way of
progressively more stringent type
certification requirements. We issue this
3rd Further NPRM to stay the
effectiveness of § 90.203(j)(5) of the
Commission’s rules and thereby ensure
that a January 1, 2005 deadline would
not injure any party while we consider
whether a change in the Commission’s
rules would benefit small entities and
other PLMR licensees.
Federal Rules That May Duplicate,
Overlap, or Conflict With the Proposed
Rules
None.
III. Ordering Clauses
20. Pursuant to sections 1, 2, 4(i), 301,
302, and 303 of the Communications
Act of 1934, as amended, 47 U.S.C. 151,
152, 154(i), 301, 302, and 303, and
§§ 1.421 and 1.425 of the Commission’s
rules, 47 CFR 1.421 and 1.425, it is
ordered that the Third Further Notice of
Proposed Rule Making is hereby
adopted.
21. It is further ordered that the
Commission’s Consumer Information
Bureau, Reference Information Center,
shall send a copy of this Third
Memorandum Opinion and Order,
Third Further Notice of Proposed Rule
Making including the Initial Regulatory
Flexibility Analysis, to the Chief
Counsel for Advocacy of the U.S. Small
Business Administration.
List of Subjects in 47 CFR Part 90
Communications equipment, Radio,
Reporting and recordkeeping
requirements.
Federal Communications Commission.
Marlene H. Dortch,
Secretary .
[FR Doc. 05–11476 Filed 6–14–05; 8:45 am]
BILLING CODE 6712–01–P
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DEPARTMENT OF TRANSPORTATION
Pipeline and Hazardous Materials
Safety Administration
49 CFR Parts 171, 172, 173, and 175
[Docket No. PHMSA–02–11989 (HM–224C)]
RIN 2137–AD48
Hazardous Materials; Transportation of
Lithium Batteries
Pipeline and Hazardous
Materials Safety Administration
(PHMSA), DOT.
ACTION: Initial regulatory flexibility
analysis.
AGENCY:
SUMMARY: The Pipeline and Hazardous
Materials Safety Administration
(PHMSA) is publishing this initial
regulatory flexibility analysis to aid the
public in commenting upon the
potential small business impacts of the
proposals in our April 2, 2002 notice of
proposed rulemaking to amend the
requirements in the Hazardous
Materials Regulations (HMR) on: (1)
Exceptions for ‘‘small’’ and for ‘‘midsize’’ batteries (i.e., cells up to 5 grams
of lithium content and batteries up to 25
grams of lithium content); and (2)
exceptions for aircraft passengers and
crew. These changes are being proposed
in order to clarify requirements to
promote safer transportation practices;
promote compliance and enforcement;
eliminate unnecessary regulatory
requirements; facilitate international
commerce; and make these
requirements easier to understand. We
will consider comments received to
improve our regulatory flexibility
analysis and in making our decision on
a final rule.
DATES: Written comments must be
received on or before August 1, 2005.
ADDRESSES: You may submit comments
(identified by DOT DMS Docket Number
PHMSA–02–11989 (HM–224C)) by any
of the following methods:
• Web site: https://dms.dot.gov.
Follow the instructions for submitting
comments on the DOT electronic docket
site.
• Fax: 202–493–2251.
• Mail: Docket Management Facility;
U.S. Department of Transportation, 400
Seventh Street, SW., Nassif Building,
PL–401, Washington, DC 20590–0001.
• Hand Delivery: Room PL–401 on
the plaza level of the Nassif Building,
400 Seventh Street, SW., Washington,
DC, between 9 a.m. and 5 p.m., Monday
through Friday, except Federal holidays.
• Federal eRulemaking Portal: Go to
https://www.regulations.gov. Follow the
online instructions for submitting
comments.
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Instructions: You must include the
agency name (Pipeline and Hazardous
Materials Safety Administration) and
the Docket number (PHMSA–02–11989
(HM–224C)) or the Regulatory
Identification Number (RIN 2137–AD48)
for this rulemaking at the beginning of
your comments. You should submit two
copies of your comments if you submit
them by mail. If you wish to receive
confirmation that PHMSA received your
comments, you must include a selfaddressed stamped postcard. Note that
all comments received will be posted,
without change, to https://dms.dot.gov
including any personal information
provided and will be available to
internet users. Please see the Privacy
Act section of this document.
Docket: For access to the docket to
read background documents and
comments received, go to https://
dms.dot.gov at any time or to Room PL–
401 on the plaza level of the Nassif
Building, 400 Seventh Street, SW.,
Washington, DC between 9 a.m. and 5
p.m., Monday through Friday, except
Federal holidays.
FOR FURTHER INFORMATION CONTACT: John
Gale, Office of Hazardous Materials
Standards, PHMSA, Department of
Transportation, 400 Seventh St., SW.,
Washington, DC 20590–0001,
Telephone (202) 366–8553.
SUPPLEMENTARY INFORMATION: In our
April 2, 2002 notice of proposed
rulemaking (NPRM) under this docket
(67 FR 15510), the Research and Special
Programs Administration (RSPA)—
PHMSA’s predecessor agency—
explained that lithium batteries and
equipment containing or packed with
lithium batteries are regulated as Class
9 materials unless they meet an
exception in the Hazardous materials
Regulations (HMR, 49 CFR Parts 171–
180). In that NPRM, RSPA proposed (1)
changes to test methods for lithium
batteries, (2) that excepted ‘‘small’’
batteries must be tested and each
package containing more than 24 cells
or 12 batteries must meet packaging
standards, including a maximum gross
mass, and have certain communication
of the hazards (marking and
accompanying documentation), (3)
elimination of the exception for ‘‘midsize’’ cells and batteries, and (4)
exceptions for airline passengers and
crew members to carry consumer
electronic devices and spare batteries
aboard aircraft, subject to limits on the
lithium content and number of spare
batteries.
Our April 2, 2002 NPRM did not
include an initial regulatory flexibility
analysis (IRFA) pursuant to the
Regulatory Flexibility Act (5 U.S.C. 603)
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because we concluded that the proposed
changes would not have a significant
economic impact on a substantial
number of small entities (5 U.S.C. 605).
We concluded that the costs associated
with testing ‘‘small’’ lithium batteries
would be incurred by lithium battery
manufacturers, which are not small
businesses. We also concluded that
most small businesses that offer lithium
batteries for transportation would make
smaller shipments (fewer than 24 cells
or 12 batteries) of ‘‘small’’ batteries and
would not have to meet the packaging
and hazard communication
requirements.
Comments to the proposed rule
indicated that some lithium battery
manufacturers are small businesses and
that the small shipment exception may
not sufficiently mitigate their burden.
On August 22, 2003, the Office of
Management and Budget returned
RSPA’s draft final rule in this
proceeding stating that, after
discussions with the Small Business
Administration, it believed that a full
IRFA should be prepared containing
‘‘additional information that will allow
RSPA to more fully address comments
disputing the need for regulating
lithium ion batteries,’’ with ‘‘as much
detail as possible on their cost
estimates,’’ and also to ‘‘gather
additional information on the number of
small businesses impacted and their
annual revenues.’’ Thereafter, RSPA
performed a threshold analysis and
determined that at least 52 small
businesses could be affected by the
proposed rule and that this number
could increase as the market for lithium
batteries and cells increases. Based on
the threshold analysis we concluded
that this IRFA was required because the
proposed rule may have significant
economic impact on a substantial
number of small businesses.
In an interim final rule (IFR)
published December 15, 2004, under
Docket No. PHMSA–04–19886 (HM–
224E, 69 FR 75208), we amended the
HMR to (1) prohibit the transportation
of primary (non-rechargeable) lithium
batteries and cells as cargo aboard
passenger-carrying aircraft, (2) adopt
conditions under which equipment
containing or packed with primary
lithium batteries and cells may be
transported aboard passenger-carrying
aircraft, and (3) require that packages of
small and mid-size primary lithium
batteries and cells (that are excepted
from Class 9) must be marked ‘‘Primary
Lithium Batteries—Forbidden for
Transport Aboard Passenger Aircraft’’
when transported by highway, rail,
vessel, or cargo aircraft. The IFR also
provides that lithium batteries are not
eligible for the ‘‘small quantity’’
exception in 49 CFR 173.4, but that
airline passengers and crew members
may carry consumer electronic and
medical devices containing lithium cells
or batteries, and spare batteries, in their
carry-on or checked baggage, up to a
maximum lithium content of each cell
and each battery. The prohibition and
restrictions adopted in this IFR apply to
both foreign and domestic passengercarrying aircraft entering, leaving, or
operating in the United States and to
persons offering primary lithium
batteries and cells for transportation on
any passenger-carrying aircraft. Aside
the exception for electronic devices and
spare batteries in airline passenger and
crew member baggage, the provisions
adopted in the IFR do not apply to
secondary (rechargeable) lithium
batteries (e.g., lithium ion batteries).
In a separate rulemaking proceeding,
the revised UN test methods for lithium
batteries were adopted in the HMR.
Docket No. PHMSA–04–17036 (HM–
215G), 69 FR 76043 (Dec. 20, 2004). For
these reasons, this IRFA does not
address the changes proposed in the
April 2, 2002 NPRM concerning test
methods or the exception for electronic
devices.
Description of the reasons that action
by the agency is being considered.
PHMSA believes that the current
regulations pertaining to the
transportation of lithium batteries and
cells are insufficient to prevent
potentially serious incidents resulting
from damage to these batteries and cells.
The potential for fires that are difficult
to extinguish from such incidents was
discussed in the preamble to the
proposed rule, which described two
fires involving lithium batteries (67 FR
15511). Changes to the international
regulations concerning the
transportation of lithium batteries and
cells, particularly the United Nations
Recommendations on the Transport of
Dangerous Goods (UN
Recommendations), were adopted to
address these safety issues. As a result,
the HMR is now inconsistent with the
UN Recommendations and, thus, makes
it more difficult to transport these
materials in international commerce.
Succinct statement of the objectives
of, and legal basis for, the proposed
rule.
The proposed rule will improve the
safety of transportation of lithium
batteries and cells by changing the test
methods for lithium batteries, revising
the exceptions for small batteries,
eliminating an exception for larger
batteries, adding exceptions for aircraft
passengers and crew, and making
editorial changes to clarify the
requirements.
To further clarify and describe these
changes, we have proposed to define
small, mid-size, and large categories for
lithium batteries and cells, as shown in
Table 1, where Li means Lithium and
ELC means equivalent lithium content.
Equivalent lithium content means, for a
lithium ion cell, the product of the rated
capacity, in ampere-hours, of a lithium
ion cell times 0.3. The equivalent
lithium content of a battery equals the
sum of the grams of equivalent lithium
contents contained in the component
cells of the battery.
TABLE 1.—BATTERY AND CELL CATEGORY DEFINITIONS
Small
(no more
than)
Cells:
Lithium
Lithium
Batteries:
Lithium
Lithium
Mid-size
(between)
Metal/Alloy ...................................................................................................................
Ion ................................................................................................................................
1 g Li
1.5 g ELC
1 g and 5 g Li
1.5 g and 5 g ELC
5 gLi
5 g ELC
Metal/Alloy ...................................................................................................................
Ion ................................................................................................................................
2 g Li
8 g ELC
2 g and 25 g Li
8 g and 25 g ELC
25 g Li
25 g ELC
This IRFA considers the following
specific changes to the HMR:
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1. Revise the exception for small
batteries.
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Large
(more
than)
a. Require testing of small batteries
formerly excepted under the HMR
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according to the UN Manual of Tests
and Criteria.
b. When a package contains more than
24 cells or 12 batteries, except when
installed in equipment, small batteries
must meet the following packaging and
shipping requirements:
• The package must be marked to
indicate that it contains lithium
batteries, and that special procedures
should be followed in the event that the
package is damaged;
• The package must be accompanied
by a document indicating that the
package contains lithium batteries and
that special procedures should be
followed in the event that the package
is damaged;
• The package must be capable of
withstanding a 1.2 meter drop test in
any orientation without damage to cells
or batteries contained in the package,
without shifting of the contents that
would allow short circuiting and
without release of package contents; and
• Except in the case of lithium cells
or batteries packed with or contained in
equipment, in packages not exceeding
30 kilograms (gross weight).
2. Remove the exception associated
with the shipment of mid-size batteries,
so that these batteries and cells must be
shipped as Class 9 hazardous materials.
The requirement to transport mid-size
batteries and cells as Class 9 hazardous
materials will not subject the batteries to
any additional testing; however,
employees who are involved with any
aspect of their transportation (including
preparing shipping papers) would be
now considered hazmat employees and
would be subject to the applicable
training requirements under the HMR.
Additionally, these shipments would
have to be made in UN performanceoriented packagings and marked,
labeled, and described on shipping
papers in accordance with the HMR.
3. Except from the HMR consumer
electronic devices (watches, calculating
machines, cameras, cellular phones, lap-
34731
top computers, camcorders, etc.)
brought onboard an aircraft by
passengers and crew. Also except from
the HMR passengers and crew carrying
spare batteries for consumer electronic
devices containing lithium or lithium
ion cells or batteries subject to quantity
and lithium content limits when carried
by passengers or crew member for
personal use. Each spare battery must be
individually protected so as to prevent
short circuits and carried in carry-on
baggage only. In addition, each spare
battery must not exceed the following:
(i) For a lithium metal or lithium alloy
battery, a lithium content of not more
than 2 grams per battery; or
(ii) For a lithium ion battery, an
aggregate equivalent lithium content of
not more than 8 grams per battery,
except that up to two batteries with an
aggregate equivalent lithium content of
more than 8 grams but not more than 25
grams may be carried.
These changes are summarized in
Table 2.
TABLE 2.—SUMMARY OF REQUIREMENTS BY BATTERY AND CELL CATEGORY
Small
Testing ..............
Shipping ............
Will be subject to UN Testing requirements ................ No change ....................................................................
Packages of more than 24 cells or 12 batteries (ex- Now subject to HMR as Class 9 (only required old
cept when installed in equipment) have new integUN Tests before).
rity and communication requirements.
Revise exceptions for passengers and crew for carrying consumer electronic devices and spare batteries
Description of and, where feasible, an
estimate of the number of small entities
to which the proposed rule will apply.
In recent years, the lithium battery
industry has undergone a
transformation from one serving a small,
niche-driven market to a rapidly
growing industry powering equipment
in a broad range of sectors (e.g., military,
manufacturing and medical), and being
used in a variety of consumer
electronics, including: laptop
computers, communications equipment,
and entertainment products. Primary or
non-chargeable batteries are used to
power a number of electronics and other
high-tech products, including digital
cameras, memory backup circuits,
security devices, calculators, and
watches. Rechargeable or secondary
lithium ion batteries are used in laptop
computers, camcorders, cell phones,
and other portable electronic devices.
The proposed rule would regulate the
transportation of primary and secondary
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15:28 Jun 14, 2005
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lithium batteries and cells. For this
analysis, we identified 109 businesses
potentially affected by the proposed
rule. Of these 109 businesses, 60 were
identified as small businesses based on
the size standards developed by the
Small Business Administration and
codified in 13 CFR 121.201. These small
businesses were identified using a
number of sources:
1. Energy source guides at https://
energy.sourceguides.com/businesses/
byP/batP/batt/btora/bType/lion/byB/
mfg/byN/byName.shtml and https://
energy.sourceguides.com /businesses/
byP/batP/batt/byB/mfg/byN/
byNameWeb.shtml
2. Batteries EZ Search at https://
www.industrialbatteries-ez.com/
industrialbatteries/
0028713_0028679_1.html
3. Portable Rechargeable Battery
Assocation (PRBA) Member List at
https://www.prba.org/member.html
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Large
No change.
4. Lexis-Nexis search ‘‘manufactures
lithium batteries’’
5. Thomas Register at https://
www.thomasregister.com/
6. Dun & Bradstreet financial and
other reports (through Westlaw)
7. Dun & Bradstreet financial and
other reports (through Electronics
Business on-line)
8. Hoover’s company database
9. Information Access company
database
10. Reference USA
11. US business directory
12. Disclosure incorporated database
13. PR newswire
14. Mergent Inc. reports
15. Investext group
16. Corporate websites
Table 3 presents the number of small
businesses impacted by the proposed
rule for each industry.
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Federal Register / Vol. 70, No. 114 / Wednesday, June 15, 2005 / Proposed Rules
TABLE 3.—NUMBER OF IMPACTED SMALL BUSINESSES BY NAICS CODE
Industries
NAICS code
Number
of small
businesses
Bare Printed Circuit Board Manufacturing ...............................................................................................................
Other Electronic Component Manufacturing ...........................................................................................................
Electromedical and Electrotherapeutic Apparatus Manufacturing ..........................................................................
Other Lighting Equipment Manufacturing ................................................................................................................
Storage Battery Manufacturing ................................................................................................................................
Primary Battery Manufacturing ................................................................................................................................
All Other Miscellaneous Electrical Equipment and Component Manufacturing ......................................................
Surgical and Medical Instrument Manufacturing .....................................................................................................
Surgical Appliance and Supplies Manufacturing .....................................................................................................
Electrical Apparatus and Equipment, Wiring Supplies, and Related Equipment Merchant Wholesalers ..............
Other Electronic Parts and Equipment Merchant Wholesalers ...............................................................................
Industrial Supplies Merchant Wholesalers ..............................................................................................................
Research and Development in the Physical, Engineering, and Life Sciences .......................................................
334412
334419
334510
335129
335911
335912
335999
339112
339113
423610
423690
423840
541710
1
3
1
1
21
8
7
2
1
8
4
1
2
Total ..................................................................................................................................................................
........................
60
Approximately one-third of all small
businesses identified are in NAICS
335911, Storage Battery Manufacturing.
Primary Battery Manufacturing, NAICS
335912, is among the next largest
categories of small businesses. Most of
the businesses in these two categories
are likely to have a significant portion
of their business related to lithiumbased products. Two of the firms that
were contacted indicated that the
lithium battery/cell business was a very
small component of their overall
business and that, while they have
entered that market in anticipation of its
growth, they would abandon the lithium
battery/cell market if the compliance
costs increased significantly.
Many of the small businesses
identified in this IRFA both
manufacture battery packs and
distribute batteries manufactured by
other companies. A total of 24
companies (40 percent) both
manufacture and distribute battery
packs. Battery manufacturing, as
applied in this context, entails the
packaging or assemblage of cells
manufactured primarily from foreign
sources into custom packs designed to
meet specific customer demands. Of the
60 small business identified, 18 (30
percent) only manufacture batteries and
18 (30 percent) exclusively distribute
batteries manufactured by other
companies.
We believed that electronic
equipment distributors would also be
impacted by this proposed rule and
contacted the Electronic Industries
Alliance. However, they indicated that
their industry is comprised primarily of
large businesses.
The many of the small businesses
impacted by this analysis described
themselves as ‘‘value-added’’ businesses
offering custom-designed batteries at
relatively low-volumes to long-time
military, medical, original equipment
manufacturers (OEMs) and high-tech
customers. Typically, the small
businesses were purchasing cells from
foreign sources and assembling them
into packs for customers. Batteries
offered by these small businesses tend
to be more complex with higher quality
and reliability standards, according to
the respondents. These small businesses
also develop computer and other
consumer electronic batteries for ‘‘aftermarket’’ sales.
Table 4 stratifies the small businesses
according to annual revenue. The
annual revenue of the 60 small
businesses identified for this
examination totals roughly $681 million
annually. There were nine small
businesses contacted to examine the
potential impact of the proposed rule on
their operations. The annual revenue of
these nine businesses impacted by the
NPRM totals approximately $217.1
million, or 31.9 percent of the total.
Annual revenues among all 60 small
businesses range from a low of $100,000
to a high of $98.7 million. As shown, 47
percent of the small businesses generate
less than $5 million in annual revenue,
while 65 percent generate less than $10
million. Of the nine small businesses
contacted, the sales-weighted before-tax
profit margin was approximately 21
percent. Applying the 21 percent beforetax profit margin to the annual revenue
estimates noted previously generates an
estimated $145 million of before-tax
profit for the small businesses affected
by the proposed rule. Among the small
businesses examined in this IRFA, the
average before-tax profit is, therefore,
estimated at $2.4 million annually.
Note, however, that these businesses do
not focus entirely on the manufacturing
and distribution of lithium batteries.
Thus, only a fraction of these profits are
attributable to lithium batteries.
TABLE 4.—SMALL BUSINESS SIZE BY ANNUAL SALES
Annual sales
Number
of small
businesses
0–499,999 ....................................................................................................................................
500,000–999,999 .........................................................................................................................
1,000,000–4,999,999 ...................................................................................................................
5,000,000–9,999,999 ...................................................................................................................
10,000,000–14,999,999 ...............................................................................................................
15,000,000–19,999,999 ...............................................................................................................
20,000,000–24,999,999 ...............................................................................................................
25,000,000–29,999,999 ...............................................................................................................
30,000,000–34,999,999 ...............................................................................................................
35,000,000–39,999,999 ...............................................................................................................
4
3
20
10
3
8
3
2
1
........................
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Percentage
of small
businesses
7
5
35
18
5
14
5
4
2
0
Cumulative
percentage
7
12
47
65
70
84
89
93
95
95
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Federal Register / Vol. 70, No. 114 / Wednesday, June 15, 2005 / Proposed Rules
TABLE 4.—SMALL BUSINESS SIZE BY ANNUAL SALES—Continued
Number
of small
businesses
Annual sales
40,000,000–44,999,999
45,000,000–49,999,999
50,000,000–54,999,999
55,000,000–59,999,999
60,000,000–64,999,999
65,000,000–69,999,999
70,000,000–74,999,999
75,000,000–79,999,999
80,000,000–84,999,999
85,000,000–89,999,999
90,000,000–94,999,999
95,000,000–99,999,999
Percentage
of small
businesses
Cumulative
percentage
...............................................................................................................
...............................................................................................................
...............................................................................................................
...............................................................................................................
...............................................................................................................
...............................................................................................................
...............................................................................................................
...............................................................................................................
...............................................................................................................
...............................................................................................................
...............................................................................................................
...............................................................................................................
........................
........................
1
........................
........................
1
........................
........................
........................
........................
........................
1
0
0
2
0
0
2
0
0
0
0
0
2
95
95
96
96
96
98
98
98
98
98
98
100
Subtotal .................................................................................................................................
Unknown ...............................................................................................................................
57
3
........................
........................
........................
........................
Total ...............................................................................................................................
60
........................
........................
Table 5 stratifies the small businesses
according to their number of employees.
The company with the lowest number of
employees had two employees and the
company with the highest number had
233 employees. The majority of the
small businesses (64 percent) have
fewer than 50 employees and the vast
majority of these businesses (85 percent)
have fewer than 100 employees.
TABLE 5.—SMALL BUSINESS SIZE BY NUMBER OF EMPLOYEES
Number
of small
businesses
Number of employees
Percentage
of small
businesses
Cumulative
percentage
1–10 .............................................................................................................................................
11–20 ...........................................................................................................................................
21–30 ...........................................................................................................................................
31–40 ...........................................................................................................................................
41–50 ...........................................................................................................................................
51–60 ...........................................................................................................................................
61–70 ...........................................................................................................................................
71–80 ...........................................................................................................................................
81–90 ...........................................................................................................................................
91–100 .........................................................................................................................................
101–110 .......................................................................................................................................
111–120 .......................................................................................................................................
121–130 .......................................................................................................................................
131–140 .......................................................................................................................................
141–150 .......................................................................................................................................
151–160 .......................................................................................................................................
161–170 .......................................................................................................................................
171–180 .......................................................................................................................................
181–190 .......................................................................................................................................
191–200 .......................................................................................................................................
201–210 .......................................................................................................................................
211–220 .......................................................................................................................................
221–230 .......................................................................................................................................
231–240 .......................................................................................................................................
9
13
4
7
5
2
2
4
0
4
1
0
1
0
4
2
0
0
0
0
0
0
0
1
15
22
7
12
8
3
3
7
0
7
2
0
2
0
7
3
0
0
0
0
0
0
0
2
15
37
44
56
64
68
71
78
78
85
86
86
88
88
95
98
98
98
98
98
98
98
98
100
Subtotal .................................................................................................................................
Unknown ...............................................................................................................................
59
1
........................
........................
........................
........................
Total ...............................................................................................................................
60
........................
........................
Description of the projected reporting,
recordkeeping, and other compliance
requirements of the proposed rule,
including an estimate of the classes of
small entities that will be subject to the
requirement and the type of professional
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skills necessary for preparation of the
report or record.
The compliance costs to small
businesses subject to the provisions in
the proposed rule are primarily related
to testing battery and cell designs,
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shipping of both prototypes and final
products, and the training required for
employees newly classified as hazmat
employees. Each of these will be
discussed separately. Additionally, we
will discuss the extent to which these
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additional compliance costs can be
passed on to the small businesses’
customers.
Testing
Based on the information presented in
the NPRM, threshold analysis,
regulatory evaluation and industry
comments, testing requirements would
be affected in the following manner.
1. The rule would remove the small
battery exception to testing
requirements. The following exceptions
would be removed from the HMR, thus
requiring that batteries falling into the
categories outlined below be tested in
accordance with the UN Manual of
Tests and Criteria.
• Liquid cathode cell—no more than
0.5 grams of alloy per cell
• Liquid cathode battery—no more
than 1 gram of lithium or lithium alloy
• Solid cathode cell—no more than 1
gram of lithium or lithium alloy per cell
• Solid cathode battery—no more
than 2 grams of lithium or lithium alloy
• Lithium ion cell—no more than 1.5
grams of equivalent lithium content
• Lithium ion battery—no more than
8 grams of equivalent lithium content
2. Exceptions to the battery testing
requirements would include:
• Batteries and cells that differ from
a tested type by a change of no more
than 0.1 gram or 20 percent by mass,
whichever is greater.
• Batteries that are of a design similar
to one that has been previously tested
under UN standards and contain
lithium content less than the original
design.
3. At present, small battery and cell
manufacturers and distributors are
required to test all mid-size and larger
batteries according to the 8 step
approach in the UN Manual of Tests and
Criteria. Estimated testing costs used for
this IRFA are those charged by outside
testing laboratories because virtually all
of the small companies send their
batteries to outside laboratories. The
cost to test a particular design prototype
ranges from approximately $5,000 to
$8,000. Testing cost estimates are based
on input provided by one independent
testing laboratory (Motorola) and
contacting nine businesses. These costs
do not include the costs of supplying
the test batteries (up to 24 for
rechargeable batteries) or the cost of
shipping the prototypes to the testing
lab. The primary reason for this is that
the tests are already required for any
cell or batteries that are shipped
internationally.
The major incremental cost under the
proposed regulation for the small
producers of lithium batteries and cells
will result from the required testing of
small batteries. To determine the
number of new design types requiring
testing, a series of questions were posed
to nine businesses. First, respondents
were asked to estimate the number of
total new designs that would be tested
this year and how they expected this
number to change in the next five years.
Respondents were asked to categorize
the new design types according to size
(small, mid-size, large) and type
(primary, rechargeable). Contacted
businesses were then asked to estimate
the fraction of the new design types that
could potentially be considered exempt
due to the following reasons: (a) They
are nearly identical to existing designs
(e.g., batteries and cells that differ from
a tested type by a change of no more
than 0.1 gram or 20 percent by mass,
whichever is greater) or (b) they will be
manufactured in production runs of
fewer than 100 batteries. The costs
associated with testing batteries falling
into these categories were excluded
from the analysis.
The costs associated with testing new
battery designs designated for
international shipment were also
excluded from the analysis. The basis of
this exclusion is that lithium batteries
that are manufactured within the U.S.
but subsequently transported by aircraft
to foreign destinations are already
transported in accordance with the
ICAO Technical Instructions, which
have adopted the U.N. test standards.
Thus, harmonization with the
international standards would not
impose any marginal costs on
businesses engaged in the international
transport of lithium batteries.
Table 6 shows the number of existing
designs subject to testing over the twoyear period following the effective date
of the proposed rule as well as the
number of new designs that would
require testing over a 5-year period for
the contacted businesses. As noted
previously, the nine contacted small
businesses comprise an estimated 31.9
percent ($217.1 million/$681.1 million)
of all small businesses affected by the
proposed rule in annual revenues. Thus,
to expand these results to the entire
population of small businesses, an
expansion factor of 3.1 ($681.1 million/
$217.1 million) was used to estimate the
total number of designs requiring testing
among all small businesses and these
figures are also shown in Table 6.
TABLE 6.—ANNUAL TESTING REQUIREMENTS
[Number of battery and cell designs]
Small businesses contacted
Year
2004
2005
2006
2007
2008
.................................
.................................
.................................
.................................
.................................
New designs
Previous
designs
Small
254
254
....................
....................
....................
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Mid-size
115
130
146
165
186
Two scenarios were developed to
reflect the costs for low- and high-end
estimates of $5,000 and $8,000 per test,
respectively. The costs for these
scenarios are shown in Tables 7 and 8.
There are no testing costs for mid-size
and large batteries because they are
already required to be tested. The
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All small businesses
Previous
designs
Large
61
72
84
100
118
2
2
2
2
2
Frm 00036
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Sfmt 4702
Small
797
797
....................
....................
....................
production and shipping costs are the
same for both estimates. The production
costs assume that an average of 20
batteries is required for testing each
design and that each battery produced
for testing costs approximately $50. The
shipping costs were determined by
averaging the FedEx Express 2-day
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New designs
360
406
458
516
582
Mid-size
Large
190
225
265
313
369
shipping costs for a package of 20 onepound batteries to Motorola’s Georgia
testing location from New York City,
Orlando, and Los Angeles. A certified
packaging weighing two pounds and
costing $5 was assumed and FedEx’s
$30 hazmat surcharge was included in
the shipping cost estimate.
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5
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34735
TABLE 7.—ANNUAL COSTS OF COMPLYING WITH TESTING REQUIREMENTS
[Low-end estimate]
2004
2005
2006
2007
2008
New designs
Previous
designs
Year
Production
Small
Mid-size
Shipping
Total
Large
Discounted
total
.................................
.................................
.................................
.................................
.................................
3,986,929
3,986,929
....................
....................
....................
1,801,334
2,030,941
2,289,815
2,581,687
2,910,761
....................
....................
....................
....................
....................
....................
....................
....................
....................
....................
1,157,653
1,203,574
457,963
516,337
582,152
85,087
88,463
33,660
37,951
42,788
7,031,004
7,309,907
2,781,439
3,135,975
3,535,702
7,031,004
6,831,689
2,429,416
2,559,889
2,697,370
Total ..........................
Avg .....................
7,973,858
1,594,772
11,614,539
2,322,908
....................
....................
....................
....................
3,917,679
783,536
287,949
57,590
23,794,026
4,758,805
21,549,368
4,309,874
Total
Discounted
total
TABLE 8.—ANNUAL COSTS OF COMPLYING WITH TESTING REQUIREMENTS
[High-end estimate]
2004
2005
2006
2007
2008
New designs
Previous
designs
Year
Production
Small
Mid-size
Shipping
Large
.................................
.................................
.................................
.................................
.................................
6,379,087
6,379,087
....................
....................
....................
2,882,135
3,249,506
3,663,704
4,130,698
4,657,218
....................
....................
....................
....................
....................
....................
....................
....................
....................
....................
1,157,653
1,203,574
457,963
516,337
582,152
85,087
88,463
33,660
37,951
42,788
10,503,962
10,920,630
4,155,328
4,684,987
5,282,158
10,503,962
10,206,196
3,629,424
3,824,345
4,029,733
Total ..........................
Avg .....................
12,758,173
2,551,635
18,583,262
3,716,652
....................
....................
....................
....................
3,917,679
783,536
287,949
57,590
35,547,064
7,109,413
32,193,660
6,438,732
As indicated in Table 7, the
incremental cost for the low-end
estimate over a five-year period for all
60 small businesses would be
$21,549,368, discounted at 7 percent per
year, while the discounted average
annual cost would be $4,309,874.1 For
the high-end estimate shown in Table 8,
the incremental discounted cost over a
five-year period would be $32,193,660
while the discounted average annual
cost would be $6,438,732. An average
annual discounted cost over the fiveyear period for the averaged low- and
high-end estimates would be about
$5,374,303 for the same companies.
For each company there would be an
estimated incremental discounted cost
of approximately $71,831 annually for
the low-end testing costs and about
$107,312 average for the discounted
high-end testing costs over the five-year
period. The average annual estimated
discounted testing cost per company
using the averaged high- and low-end
costs would be approximately $89,572.
Shipping
Currently, under 49 CFR 173.185,
lithium batteries and cells are required
to be shipped as Class 9 hazardous
materials with certain significant
exceptions. The proposed rules would
1 Annual costs are presented in present value
terms based on a real discount rate of 7 percent as
prescribed in the Office of Management and Budget
Circular A–94.
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eliminate one of these exceptions,
requiring mid-size batteries and cells to
be shipped as Class 9 materials. In
addition, new packaging integrity and
communication requirements now
apply to small batteries and cells
shipped in packages of more than 12
batteries or 24 cells, except when
installed in equipment.
To ship lithium cells and batteries as
Class 9 hazardous materials,
transporters must meet the following
requirements:
1. Packaging: Use only packaging that
meets Packing Group II performance
standards. (Packing must not exceed 5
kg (gross weight) for passenger aircraft
and must not exceed 35 kg (gross
weight) for cargo aircraft.
2. Marking: The following markings
must be applied to the packaging:
• Shipping name: Lithium batteries
• Identification Number: UN 3090
• Shipper’s Name and Address
• Name and address of company or
individual receiving batteries
• UN Specification Certification
3. Labeling: The Class 9 label must be
used.
4. Train personnel.
5. Shipping Papers: The following
information must be included on
shipping papers:
• Proper shipping name, hazard class,
identification number, and packing
group
• Number and type of packages
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• Total quantity of hazardous
materials
• Page number and total number of
pages
• Emergency telephone number
• Shipper’s certification
• Signature (Must be legibly signed
by a principal, officer, partner, or
employee of the shipper or his agent)
Based on the wide-ranging cost
estimates gathered from interviewing
selected small businesses for the
additional shipping costs for lithium
batteries and cells under the proposed
rules, we adopted estimates for:
(a) The increased cost to ship small
batteries and cells under the proposed
rules,
(b) The increased cost to ship midsized cells as Class 9 materials, and
(c) The increased cost to ship midsized batteries as Class 9 materials.
These estimates were primarily
developed from detailed data provided
from a single small business; however,
they were deemed to be reasonable
average costs considering the varying
estimates provided by other small
businesses with somewhat lesser detail.
These costs are $0.05 for each small
battery and cell, $0.261 for each midsized cell, and $0.313 for each mid-size
battery.
Table 9 shows the total number of
batteries and cells in normal production
runs (production units) that are
expected to be shipped to customers
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and also illustrates how the final
production shipping costs were
determined for the base year of the
analysis (2004).
TABLE 9.—PRODUCTION UNITS SHIPPED TO CUSTOMERS AND INCREMENTAL SHIPPING COSTS FOR 2004
Type
Units shipped
Cells:
Primary Lithium:
Small ..................................................................................................
Mid-size .............................................................................................
Large .................................................................................................
Lithium Ion:
Small ..................................................................................................
Mid-size .............................................................................................
Batteries:
Primary Lithium:
Small ..................................................................................................
Mid-size .............................................................................................
Large .................................................................................................
Lithium Ion:
Small ..................................................................................................
Mid-size .............................................................................................
Total ...................................................................................................
Table 10 shows the total annual
shipping costs for production deliveries
of lithium batteries and cells to
customers of the small businesses for
which shipment quantities were
obtained. These costs were adjusted to
Incremental
unit cost
Incremental
cost
Adjusted incremental cost
802,800
7,132
128
0.05
0.261
0.0
40,140
1,861
0
125,901
5,839
0
0
0
0.0
0.0
0
0
0
0
1,065,464
1,104,944
3,744
0.05
0.313
0.0
52,273
345,847
0
167,094
1,084,765
0
1,322,444
305,500
0.05
0.313
66,122
95,622
207,395
299,921
........................
........................
602,866
1,890,913
reflect the costs for all 60 small
businesses and then discounted using a
7 percent discount rate. The discounted
costs for the five-year analysis period
are $10,916,110, which equates to a
discounted annual average of
$2,183,222 per year. On a discounted
annual basis, each small business would
be expected to incur $36,387 in
additional shipping costs to comply
with the proposed rules.
TABLE 10.—ANNUAL INCREMENTAL SHIPPING COSTS TO CUSTOMERS
Production runs
Year
2004
2005
2006
2007
2008
Incremental
cost
Adjusted incremental cost
Total
Discounted
total
.................................................................................................................
.................................................................................................................
.................................................................................................................
.................................................................................................................
.................................................................................................................
602,866
691,466
793,088
909,645
1,043,331
1,890,913
2,168,812
2,487,552
2,853,137
3,272,450
1,890,913
2,168,812
2,487,552
2,853,137
3,272,450
1,890,913
2,026,927
2,172,725
2,329,010
2,496,536
Total ..........................................................................................................
Average Annual .................................................................................
Average Annual/Company .................................................................
........................
........................
........................
........................
........................
........................
........................
........................
........................
10,916,110
2,183,222
36,387
Training
As mentioned previously, lithium
batteries and cells are now required to
be shipped as a Class 9 hazardous
material with certain significant
exceptions. The proposed rules would
eliminate one of these exceptions,
requiring all mid-size batteries and cells
to be shipped as Class 9 materials. One
of the requirements for shipping lithium
batteries and cells as a Class 9
hazardous material is that all hazmat
employers must ensure that their
hazmat employees receive training in
general awareness of hazmat regulatory
requirements, function-specific training
related to the material they are
handling, security awareness training
and safety training including emergency
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response and protective measures.
Hazmat training must:
• Take place before the employee can
work with hazardous materials.
Exceptions: The employee works under
the direct supervision of a trained
employee and the training is completed
within 90 days of their hire or transfer
into the job.
• Be done at least every three years
for all hazmat employees. Training done
by another employer can be used to
meet these requirements.
• Be maintained for each employee
for at least the past three years and for
at least 90 days after the end of the
employee’s employment. This record
must include:
—The employee’s name,
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—The most recent training completion
date,
—A description, copy or location of the
training materials,
—The name and address of the person
providing the training, and
—Certification that the employee has
been trained and tested.
All small companies that ship lithium
batteries or cells as Class 9 hazardous
materials must train hazmat employees
in accordance with the provisions of the
HMR. Based on the data conducted for
this IRFA, all of the small battery
companies were assumed to be shipping
some batteries as Class 9 hazmat. This
means that each company currently has
a cadre of hazmat-trained employees
and has therefore already made a
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considerable financial investment in
employee training.
Two different approaches have been
used by small companies to train their
employees. The first approach is to hire
an outside expert to visit the company
periodically (perhaps every two years)
and present training on current and
proposed changes to the hazmat
regulations. The employees who attend
these sessions would typically be
trained as trainers and they, in turn,
would train other workers as needed.
The second approach to training is for
a company to select one employee as
their training expert. This employee
would be exposed to a periodic (every
two years) specialized off-site course
providing expert training in hazardous
materials. The trained employee returns
to their company and trains other
employees by conducting a series of
hazmat training sessions.
Although costs differ for the various
elements of these two training
approaches, the research conducted for
this IRFA indicates that the total costs
to train one hazmat employee is
approximately the same for both
approaches. However, this analysis is
focused on incremental costs
represented by the need for small
businesses to provide hazmat training to
any additional employees needed to
handle lithium batteries or cells that
would newly be classified as hazmat as
a result of the proposed regulations. As
Table 11 shows, the estimated
incremental discounted cost for training
over a five-year period for all 60 small
businesses would be $72,565 while the
average annual discounted cost would
be about $14,513. This cost is based on
an estimated cost to train one hazmat
employee of about $352, computed as
the average of the estimates from three
small businesses. Considering that
slightly less than one employee per
company needs additional training (0.83
34737
employees per company based on
contacted businesses), the average
annual cost per small business is $242.
To illustrate the costs associated with
training employees, one of the three
businesses sharing detailed training cost
information noted that it pays an
experienced external trainer $1,500 to
teach a detailed six-hour class on the
handling of hazardous materials. There
are six employees in attendance, whose
average pay is $15/hour. With an
average fringe benefit rate of 28.1
percent, total labor costs associated with
class attendance is $692.2 A human
resources manager is charged with all
data entry and recordkeeping
requirements associated with hazardous
material training and certification. The
recordkeeping cost is $154 ($20/hour @
6 hours + fringe benefits). The total cost
to train these six employees is $2,346
and the average cost per employee is
$391.
TABLE 11.—ANNUAL INCREMENTAL TRAINING COSTS
Employees
with
certification
Year
2004
2005
2006
2007
2008
Additional employees requiring certification
Incremental
cost
Adjust. incremental cost
Discounted
total
.....................................................................................
.....................................................................................
.....................................................................................
.....................................................................................
.....................................................................................
376
426
482
546
618
15
17
19
22
25
5,273
5,970
6,759
7,652
8,663
12,923
14,630
16,563
18,752
21,229
12,923
13,673
14,467
15,307
16,195
Total ..............................................................................
Average Annual .....................................................
Average Annual/Company .....................................
........................
........................
........................
........................
........................
........................
........................
........................
........................
........................
........................
........................
72,565
14,513
242
Summary of Costs
Testing is by far the dominant added
cost that would be mandated by the
proposed regulation account for 66
percent of total costs in the low-end
estimate and 74 percent of total costs in
the high-end estimate. Shipping costs
The incremental costs incurred by
small businesses to implement the
regulations in the proposed rule are
summarized in Tables 12 and 13.
account for 35 and 26 percent,
respectively, of the total low- and highend cost estimates. In both estimates,
training costs are approximate 0.2
percent of total costs.
TABLE 12.—SUMMARY OF COSTS TO SMALL BUSINESSES
[Low-end estimate]
Year
2004
2005
2006
2007
2008
Testing
Training
Shipping
Total
Discounted
.....................................................................................
.....................................................................................
.....................................................................................
.....................................................................................
.....................................................................................
$7,031,004
7,309,907
2,781,439
3,135,975
3,535,702
$12,923
14,630
16,563
18,752
21,229
$1,890,913
2,168,812
2,487,552
2,853,137
3,272,450
$8,934,839
9,465,221
5,221,448
5,898,286
6,662,887
$8,934,839
8,846,001
4,560,615
4,814,759
5,083,085
Total ..............................................................................
Average Annual .....................................................
Average Annual per Company ..............................
23,794,026
........................
........................
84,097
........................
........................
12,672,863
........................
........................
36,182,682
........................
........................
32,239,299
6,447,860
107,464
2 Fringe benefits data based on Bureau of Labor
Statistics, National Compensation Survey,
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Employer Cost for Employee Compensation, Total
Benefits, Private Industry All Workers.
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TABLE 13.—SUMMARY OF COSTS TO SMALL BUSINESSES
[High-end estimate]
Year
2004
2005
2006
2007
2008
Testing
Training
Shipping
Total
Discounted
.....................................................................................
.....................................................................................
.....................................................................................
.....................................................................................
.....................................................................................
$10,503,962
10,920,630
4,155,328
4,684,987
5,282,158
$16,540
18,971
21,759
24,957
28,625
$1,890,913
2,168,812
2,487,552
2,853,137
3,272,450
$12,407,798
13,075,943
6,595,337
7,447,298
8,409,344
$12,407,798
12,220,508
5,760,623
6,079,214
6,415,448
Total ..............................................................................
Average Annual .....................................................
Average Annual per Company ..............................
35,547,064
........................
........................
110,853
........................
........................
12,672,863
........................
........................
47,935,720
........................
........................
42,883,590
8,576,718
142,945
Examining the midpoint between the
low- and high-end estimates, the total
cost over the five-year analysis period
(in current dollars) for all 60 small
businesses is $37,561,444. On an annual
basis, this is $7,512,289 and it equates
to an average cost per company per year
of $125,205 in constant dollars. The
average cost per company represents an
arithmetic mean or the value obtained
by dividing the sum of total costs by the
total number of companies examined in
the IRFA. Thus, the average cost
estimate cannot be uncritically applied
to the operations of every company
operating in the lithium battery
industry. The 60 small businesses
examined with this IRFA encompass a
broad range of operations, as evidenced
by the spectrum of annual revenues
presented in Table 4. The costs
associated with complying with the
proposed rule are primarily driven by
the number of new battery designs
requiring testing and the volume of
shipments of newly designated Class 9
packages. Based on the responses
provided by the smaller firms examined
within this IRFA, the evidence suggests
smaller marginal costs for these small
firms due to their limited size and scale
of operations. That is, smaller firms
generally develop fewer new battery
designs and ship fewer batteries
compared to the larger firms operating
within the lithium battery industry.
There are exceptions to this rule, of
course, and to the extent any firms
regardless of size develop a larger
number of new designs to meet the
demands of the market place (e.g., small
firms filling a high volume of custom
orders), the costs associated with the
new testing requirements could be
greater.
As noted previously, the annual
revenue of the 60 small businesses
examined in this IRFA total roughly
$681 million, while estimated profits
are approximately $145 million
annually. Thus, $7.5 million in annual
costs is equal to roughly 1.1 percent and
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5.2 percent of annual revenues and
profits, respectively.
Competitive Impacts of the Rule on
Small Businesses
The question of who bears the costs
associated with the proposed rule is
central to the issue of industry burden.
Will the costs be borne by the company
or be passed along to the consumer? If
battery manufacturers pass these costs
along to consumers, will battery sales be
adversely impacted by these costs? The
term for the relationship to changes in
quantity demanded in response to
changes in price is known as elasticity.
The price elasticity of demand for a
product is equal to the change in
quantity demanded divided by the
change in price. Price-sensitive or
elastic goods are those where an
increase in price is offset by a reduction
in the quantity demanded. Examples of
price-elastic goods include theater
tickets, fur coats, and sail boats. Thus,
for each percent that the price of these
items grows, there is at least a one
percent decline in sales. Price-inelastic
goods are those where price increases
proportionally more than demand
decreases. Examples of price-inelastic
goods include gasoline, medical
services, bread, and milk.
The proposed rule would increase the
cost of production for the affected small
manufacturers and distributors. A
company selling a perfectly inelastic
good could increase its price without
adversely affecting sales, while in the
case of perfectly elastic products,
companies cannot pass along any of the
higher costs of production without
losing their customers. Because goods
sold in the marketplace demonstrate a
range of elasticities and some
respondents indicated that costs could
be passed along to consumers while
others indicated that costs would be
entirely absorbed by industry, the costs
of the proposed regulation are likely to
be borne by both producers and
consumers. The actual distribution of
the costs among producers and
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Fmt 4702
Sfmt 4702
consumers under the proposed rule is
not known.
Description of any significant
alternatives to the proposed rule that
minimize significant economic impacts
on small entities while accomplishing
the agency’s objectives. The proposed
rule is designed to improve the safety of
the transportation of lithium batteries
and cells. Any alternatives to the
proposed rule should result in similar
safety benefits to warrant their
consideration. We considered a number
of possible alternatives:
1. Except batteries and cells
transported by motor vehicle for the
purposes of recycling from Class 9
hazmat requirements. The
circumstances under which these
materials would be shipped are
essentially the same as those for
disposal. The proposed rule provides an
exception for lithium batteries and cells
being transported by motor carrier for
disposal as long as they are protected
against short circuits and packed in a
strong outer packaging conforming to
the requirements of §§ 173.24 and
173.24a.
2. Provide manufacturers with four
years, as opposed to two, to comply
with the new testing requirements for
existing small battery designs. This
would ease the burden on small
businesses by spreading out their
compliance costs over twice the period,
reducing the present value of the testing
costs. This option would reduce the
present value testing cost burden on the
manufacturers by 2.8 percent, resulting
in an average annual discounted testing
costs per company from roughly
$89,572 to $87,075.
3. Adopt a small production run
exception from the testing requirements.
The UN Recommendations provide for a
small production run exception of 100
batteries or cells. Some small businesses
felt that this number was too small to be
effective and indicated that a higher
number (e.g., 1000) would be more
appropriate. Other companies indicated
that they rarely make small production
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runs. One company stated that a
threshold of 100 batteries or cells would
cover 75 percent of their business and
that a threshold of 250 would cover 85
to 90 percent of their business.
4. Retain the current exemption from
the shipping requirements for mid-size
lithium ion batteries and cells. This
alternative is based on the belief by
some small businesses that the
flammability hazard for lithium ion
34739
batteries and cells is far lower than for
lithium metal or lithium alloy batteries
and cells. This alternative would reduce
annualized shipping costs per company
by $5,613 annually, from $35,391 to
$29,778, as shown in Table 14.
TABLE 14.—COST SAVINGS FROM KEEPING THE CURRENT EXEMPTION FOR MID-SIZE LITHIUM ION BATTERIES AND CELLS
Total incremental cost
Year
2004
2005
2006
2007
2008
Adjusted incremental cost
Total
Discounted
total
.................................................................................................................
.................................................................................................................
.................................................................................................................
.................................................................................................................
.................................................................................................................
507,244
574,246
650,098
735,970
833,184
1,590,992
1,801,146
2,039,060
2,308,399
2,613,316
1,590,992
1,801,146
2,039,060
2,308,399
2,613,316
1,590,992
1,683,314
1,780,994
1,884,341
1,993,686
Total ..........................................................................................................
Average Annual .................................................................................
Average Annual/Company .................................................................
........................
........................
........................
........................
........................
........................
........................
........................
........................
8,933,328
1,786,666
29,778
5. Increase the lower threshold for
lithium ion mid-size batteries and cells.
This would result in more batteries and
cells falling into the small category.
These materials would have already
been subject to the UN tests and would
be subject to the increased integrity and
communication requirements for small
batteries but would not be subject to the
Class 9 shipping requirements being
proposed for mid-size batteries. This
would create a $0.211 savings for cells
and a $0.263 savings for batteries for an
annualized savings of approximately
$4,717 per company, from $35,391 to
$30,674, as shown in Table 15.
TABLE 15.—COST SAVINGS FROM A LOWER THRESHOLD FOR MID-SIZE LITHIUM ION BATTERIES
Total incremental cost
Year
2004
2005
2006
2007
2008
Adjusted incremental cost
Total
Discounted
total
.................................................................................................................
.................................................................................................................
.................................................................................................................
.................................................................................................................
.................................................................................................................
522,519
591,539
669,675
758,133
858,275
1,638,903
1,855,385
2,100,463
2,377,914
2,692,013
1,638,903
1,855,385
2,100,463
2,377,914
2,692,013
1,638,903
1,734,005
1,834,626
1,941,086
2,053,723
Total ..........................................................................................................
Average Annual .................................................................................
Average Annual/Company .................................................................
........................
........................
........................
........................
........................
........................
........................
........................
........................
9,202,343
1,840,468
30,674
There are incremental differences in
the properties of lithium metal or
lithium alloy batteries and cells and
lithium ion batteries and cells. These
differences are recognized in the higher
threshold limits between the small and
mid-size categories for lithium ion
products. Some organizations have
argued that an equivalent level of safety
could be maintained if the threshold
between small and mid-size batteries
were increased from 8 to 16 as long as
the state of charge of the batteries was
not more than 50 percent of the design
rated capacity.3 The aggregate
equivalent lithium content of lithium
ion batteries and cells has increased
significantly in portable consumer
3 Informal document presented to the 25th
Session (July 5–14, 2004) of the United Nations
Sub-Committee of Experts on the Transport of
Dangerous Goods (TDG) by the International
Electrotechnical Commission (IEC). ‘‘Changes to
special provision 188 for lithium batteries: Request
for comments.’’ UN/SCETDG/25/INF.54.
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15:28 Jun 14, 2005
Jkt 205001
products since the thresholds were
established and this increase has
focused more attention on those
thresholds. However, a major concern
with adopting thresholds tied to a state
of charge is how the state of charge of
a battery in transportation could be
measured in the field to verify that it is
in compliance with the regulations.
6. Except small, single-cell batteries
from testing requirements if the cells
have already passed the UN T1–T8 tests.
This alternative is highly desired by
those small businesses that manufacture
these batteries. They argue that the
characteristics of these batteries, from a
safety standpoint, are essentially the
same as for the component cells from
which they are made. We do not have
sufficient data to determine how many
battery designs would be covered by
this alternate exception; however
several companies and the PRBA
indicated that the cost implications for
them would be very significant.
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Fmt 4702
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7. Require that small batteries be
shipped as Class 9 hazmat but not
require testing unless they are being
shipped internationally by air. This
alternative recognizes that international
regulations require testing of batteries
and cells that are being shipped
internationally. While the incremental
cost of shipping these materials as Class
9 hazmat is greater than shipping them
with the increased integrity and
communications requirements of the
proposed rule ($0.211 more for cells and
$0.263 more for batteries), eliminating
the testing requirements would provide
significant overall cost savings. This
alternative would eliminate the costs
associated with testing small battery
designs, thus resulting in an annualized
savings of $89,537 per company.
Conversely, it would increase shipping
costs by roughly $46,812 annually. The
annualized net savings per company of
this alternative would, therefore, be
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Federal Register / Vol. 70, No. 114 / Wednesday, June 15, 2005 / Proposed Rules
$42,725, as compared to implementing
the proposed rule in its entirety.
While it is possible that these
alternatives might provide similar safety
benefits to the proposed rule while
reducing costs to the regulated
community, PHMSA still believes,
based on our current research and
information, that the proposed rule
offers the best approach for ensuring the
safe transportation of lithium batteries
and cells. PHMSA is open to
consideration of these alternatives based
on the comments received in response
to this IRFA.
Identification, to the extent
practicable, of all relevant federal rules
that may duplicate, overlap, or conflict
with the proposed rule. PHMSA is
unaware of any duplicative,
overlapping, or conflicting federal rules.
As we stated above, there are
international rules that address the
transportation of lithium batteries and
cells and this proposed rule attempts to
improve the harmonization with those
rules. We seek comments and
information about any other rules which
may be relevant to the transportation of
lithium batteries and cells.
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15:28 Jun 14, 2005
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Questions for Comment to Assist
Regulatory Flexibility Analysis: Please
provide comment or information on any
or all of the provisions in the proposed
rule with regard to their impact on small
entities or on the cost estimates in this
interim regulatory flexibility analysis.
We are particularly interested in
comments concerning the following:
1. The categorization and
identification of the affected small
businesses. Are there additional
categories of small business that would
be impacted by the proposed rules? For
example, are we correct that there are
not a significant number of electronic
equipment distributors that are small
businesses?
2. The distribution of lithium batteries
and cells among the three size
categories. This allows proper
calculation of the batteries and cells that
would be subject to new testing and
shipping requirements.
3. The estimated costs for testing the
various battery and cell types.
4. The estimated shipping costs for
both production and prototype batteries
and cells, including packaging, marking,
labeling, etc.
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Fmt 4702
Sfmt 4702
5. The estimated training costs for
hazmat employees and the number of
employees that would become hazmat
employees as a result of this rule and its
requirement that some batteries and
cells currently exempt from being
shipped as Class 9 hazardous materials
would no longer be exempt.
6. Ways in which the rule could be
modified to reduce any costs or burdens
for small entities yet maintaining a
consistent level of safety.
7. Any relevant Federal, State, or local
rules that may duplicate, overlap, or
conflict with the proposed rule.
8. Industry rules or policies that
would require small entities to
implement business practices that
would already comply with the
requirements of the proposed rule.
Issued in Washington, DC on June 8, 2005,
under authority delegated in 49 CFR part
106.
Robert A. McGuire,
Associate Administrator for Hazardous
Materials Safety.
[FR Doc. 05–11765 Filed 6–14–05; 8:45 am]
BILLING CODE 4910–60–P
E:\FR\FM\15JNP1.SGM
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]]>Agencies
[Federal Register Volume 70, Number 114 (Wednesday, June 15, 2005)]
[Proposed Rules]
[Pages 34729-34740]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-11765]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF TRANSPORTATION
Pipeline and Hazardous Materials Safety Administration
49 CFR Parts 171, 172, 173, and 175
[Docket No. PHMSA-02-11989 (HM-224C)]
RIN 2137-AD48
Hazardous Materials; Transportation of Lithium Batteries
AGENCY: Pipeline and Hazardous Materials Safety Administration (PHMSA),
DOT.
ACTION: Initial regulatory flexibility analysis.
-----------------------------------------------------------------------
SUMMARY: The Pipeline and Hazardous Materials Safety Administration
(PHMSA) is publishing this initial regulatory flexibility analysis to
aid the public in commenting upon the potential small business impacts
of the proposals in our April 2, 2002 notice of proposed rulemaking to
amend the requirements in the Hazardous Materials Regulations (HMR) on:
(1) Exceptions for ``small'' and for ``mid-size'' batteries (i.e.,
cells up to 5 grams of lithium content and batteries up to 25 grams of
lithium content); and (2) exceptions for aircraft passengers and crew.
These changes are being proposed in order to clarify requirements to
promote safer transportation practices; promote compliance and
enforcement; eliminate unnecessary regulatory requirements; facilitate
international commerce; and make these requirements easier to
understand. We will consider comments received to improve our
regulatory flexibility analysis and in making our decision on a final
rule.
DATES: Written comments must be received on or before August 1, 2005.
ADDRESSES: You may submit comments (identified by DOT DMS Docket Number
PHMSA-02-11989 (HM-224C)) by any of the following methods:
Web site: https://dms.dot.gov. Follow the instructions for
submitting comments on the DOT electronic docket site.
Fax: 202-493-2251.
Mail: Docket Management Facility; U.S. Department of
Transportation, 400 Seventh Street, SW., Nassif Building, PL-401,
Washington, DC 20590-0001.
Hand Delivery: Room PL-401 on the plaza level of the
Nassif Building, 400 Seventh Street, SW., Washington, DC, between 9
a.m. and 5 p.m., Monday through Friday, except Federal holidays.
Federal eRulemaking Portal: Go to https://
www.regulations.gov. Follow the online instructions for submitting
comments.
Instructions: You must include the agency name (Pipeline and
Hazardous Materials Safety Administration) and the Docket number
(PHMSA-02-11989 (HM-224C)) or the Regulatory Identification Number (RIN
2137-AD48) for this rulemaking at the beginning of your comments. You
should submit two copies of your comments if you submit them by mail.
If you wish to receive confirmation that PHMSA received your comments,
you must include a self-addressed stamped postcard. Note that all
comments received will be posted, without change, to https://dms.dot.gov
including any personal information provided and will be available to
internet users. Please see the Privacy Act section of this document.
Docket: For access to the docket to read background documents and
comments received, go to https://dms.dot.gov at any time or to Room PL-
401 on the plaza level of the Nassif Building, 400 Seventh Street, SW.,
Washington, DC between 9 a.m. and 5 p.m., Monday through Friday, except
Federal holidays.
FOR FURTHER INFORMATION CONTACT: John Gale, Office of Hazardous
Materials Standards, PHMSA, Department of Transportation, 400 Seventh
St., SW., Washington, DC 20590-0001, Telephone (202) 366-8553.
SUPPLEMENTARY INFORMATION: In our April 2, 2002 notice of proposed
rulemaking (NPRM) under this docket (67 FR 15510), the Research and
Special Programs Administration (RSPA)--PHMSA's predecessor agency--
explained that lithium batteries and equipment containing or packed
with lithium batteries are regulated as Class 9 materials unless they
meet an exception in the Hazardous materials Regulations (HMR, 49 CFR
Parts 171-180). In that NPRM, RSPA proposed (1) changes to test methods
for lithium batteries, (2) that excepted ``small'' batteries must be
tested and each package containing more than 24 cells or 12 batteries
must meet packaging standards, including a maximum gross mass, and have
certain communication of the hazards (marking and accompanying
documentation), (3) elimination of the exception for ``mid-size'' cells
and batteries, and (4) exceptions for airline passengers and crew
members to carry consumer electronic devices and spare batteries aboard
aircraft, subject to limits on the lithium content and number of spare
batteries.
Our April 2, 2002 NPRM did not include an initial regulatory
flexibility analysis (IRFA) pursuant to the Regulatory Flexibility Act
(5 U.S.C. 603)
[[Page 34730]]
because we concluded that the proposed changes would not have a
significant economic impact on a substantial number of small entities
(5 U.S.C. 605). We concluded that the costs associated with testing
``small'' lithium batteries would be incurred by lithium battery
manufacturers, which are not small businesses. We also concluded that
most small businesses that offer lithium batteries for transportation
would make smaller shipments (fewer than 24 cells or 12 batteries) of
``small'' batteries and would not have to meet the packaging and hazard
communication requirements.
Comments to the proposed rule indicated that some lithium battery
manufacturers are small businesses and that the small shipment
exception may not sufficiently mitigate their burden. On August 22,
2003, the Office of Management and Budget returned RSPA's draft final
rule in this proceeding stating that, after discussions with the Small
Business Administration, it believed that a full IRFA should be
prepared containing ``additional information that will allow RSPA to
more fully address comments disputing the need for regulating lithium
ion batteries,'' with ``as much detail as possible on their cost
estimates,'' and also to ``gather additional information on the number
of small businesses impacted and their annual revenues.'' Thereafter,
RSPA performed a threshold analysis and determined that at least 52
small businesses could be affected by the proposed rule and that this
number could increase as the market for lithium batteries and cells
increases. Based on the threshold analysis we concluded that this IRFA
was required because the proposed rule may have significant economic
impact on a substantial number of small businesses.
In an interim final rule (IFR) published December 15, 2004, under
Docket No. PHMSA-04-19886 (HM-224E, 69 FR 75208), we amended the HMR to
(1) prohibit the transportation of primary (non-rechargeable) lithium
batteries and cells as cargo aboard passenger-carrying aircraft, (2)
adopt conditions under which equipment containing or packed with
primary lithium batteries and cells may be transported aboard
passenger-carrying aircraft, and (3) require that packages of small and
mid-size primary lithium batteries and cells (that are excepted from
Class 9) must be marked ``Primary Lithium Batteries--Forbidden for
Transport Aboard Passenger Aircraft'' when transported by highway,
rail, vessel, or cargo aircraft. The IFR also provides that lithium
batteries are not eligible for the ``small quantity'' exception in 49
CFR 173.4, but that airline passengers and crew members may carry
consumer electronic and medical devices containing lithium cells or
batteries, and spare batteries, in their carry-on or checked baggage,
up to a maximum lithium content of each cell and each battery. The
prohibition and restrictions adopted in this IFR apply to both foreign
and domestic passenger-carrying aircraft entering, leaving, or
operating in the United States and to persons offering primary lithium
batteries and cells for transportation on any passenger-carrying
aircraft. Aside the exception for electronic devices and spare
batteries in airline passenger and crew member baggage, the provisions
adopted in the IFR do not apply to secondary (rechargeable) lithium
batteries (e.g., lithium ion batteries).
In a separate rulemaking proceeding, the revised UN test methods
for lithium batteries were adopted in the HMR. Docket No. PHMSA-04-
17036 (HM-215G), 69 FR 76043 (Dec. 20, 2004). For these reasons, this
IRFA does not address the changes proposed in the April 2, 2002 NPRM
concerning test methods or the exception for electronic devices.
Description of the reasons that action by the agency is being
considered. PHMSA believes that the current regulations pertaining to
the transportation of lithium batteries and cells are insufficient to
prevent potentially serious incidents resulting from damage to these
batteries and cells. The potential for fires that are difficult to
extinguish from such incidents was discussed in the preamble to the
proposed rule, which described two fires involving lithium batteries
(67 FR 15511). Changes to the international regulations concerning the
transportation of lithium batteries and cells, particularly the United
Nations Recommendations on the Transport of Dangerous Goods (UN
Recommendations), were adopted to address these safety issues. As a
result, the HMR is now inconsistent with the UN Recommendations and,
thus, makes it more difficult to transport these materials in
international commerce.
Succinct statement of the objectives of, and legal basis for, the
proposed rule.
The proposed rule will improve the safety of transportation of
lithium batteries and cells by changing the test methods for lithium
batteries, revising the exceptions for small batteries, eliminating an
exception for larger batteries, adding exceptions for aircraft
passengers and crew, and making editorial changes to clarify the
requirements.
To further clarify and describe these changes, we have proposed to
define small, mid-size, and large categories for lithium batteries and
cells, as shown in Table 1, where Li means Lithium and ELC means
equivalent lithium content. Equivalent lithium content means, for a
lithium ion cell, the product of the rated capacity, in ampere-hours,
of a lithium ion cell times 0.3. The equivalent lithium content of a
battery equals the sum of the grams of equivalent lithium contents
contained in the component cells of the battery.
Table 1.--Battery and Cell Category Definitions
----------------------------------------------------------------------------------------------------------------
Small (no more
than) Mid-size (between) Large (more than)
----------------------------------------------------------------------------------------------------------------
Cells:
Lithium Metal/Alloy............ 1 g Li 1 g and 5 g Li 5 gLi
Lithium Ion.................... 1.5 g ELC 1.5 g and 5 g ELC 5 g ELC
Batteries:
Lithium Metal/Alloy............ 2 g Li 2 g and 25 g Li 25 g Li
Lithium Ion.................... 8 g ELC 8 g and 25 g ELC 25 g ELC
----------------------------------------------------------------------------------------------------------------
This IRFA considers the following specific changes to the HMR:
1. Revise the exception for small batteries.
a. Require testing of small batteries formerly excepted under the
HMR
[[Page 34731]]
according to the UN Manual of Tests and Criteria.
b. When a package contains more than 24 cells or 12 batteries,
except when installed in equipment, small batteries must meet the
following packaging and shipping requirements:
The package must be marked to indicate that it contains
lithium batteries, and that special procedures should be followed in
the event that the package is damaged;
The package must be accompanied by a document indicating
that the package contains lithium batteries and that special procedures
should be followed in the event that the package is damaged;
The package must be capable of withstanding a 1.2 meter
drop test in any orientation without damage to cells or batteries
contained in the package, without shifting of the contents that would
allow short circuiting and without release of package contents; and
Except in the case of lithium cells or batteries packed
with or contained in equipment, in packages not exceeding 30 kilograms
(gross weight).
2. Remove the exception associated with the shipment of mid-size
batteries, so that these batteries and cells must be shipped as Class 9
hazardous materials. The requirement to transport mid-size batteries
and cells as Class 9 hazardous materials will not subject the batteries
to any additional testing; however, employees who are involved with any
aspect of their transportation (including preparing shipping papers)
would be now considered hazmat employees and would be subject to the
applicable training requirements under the HMR. Additionally, these
shipments would have to be made in UN performance-oriented packagings
and marked, labeled, and described on shipping papers in accordance
with the HMR.
3. Except from the HMR consumer electronic devices (watches,
calculating machines, cameras, cellular phones, lap-top computers,
camcorders, etc.) brought onboard an aircraft by passengers and crew.
Also except from the HMR passengers and crew carrying spare batteries
for consumer electronic devices containing lithium or lithium ion cells
or batteries subject to quantity and lithium content limits when
carried by passengers or crew member for personal use. Each spare
battery must be individually protected so as to prevent short circuits
and carried in carry-on baggage only. In addition, each spare battery
must not exceed the following:
(i) For a lithium metal or lithium alloy battery, a lithium content
of not more than 2 grams per battery; or
(ii) For a lithium ion battery, an aggregate equivalent lithium
content of not more than 8 grams per battery, except that up to two
batteries with an aggregate equivalent lithium content of more than 8
grams but not more than 25 grams may be carried.
These changes are summarized in Table 2.
Table 2.--Summary of Requirements by Battery and Cell Category
------------------------------------------------------------------------
Small Mid-size Large
------------------------------------------------------------------------
Testing............. Will be subject No change...... ................
to UN Testing
requirements.
Shipping............ Packages of Now subject to No change.
more than 24 HMR as Class 9
cells or 12 (only required
batteries old UN Tests
(except when before).
installed in
equipment)
have new
integrity and
communication
requirements.
Revise exceptions for
passengers and crew for
carrying consumer electronic
devices and spare batteries
------------------------------------------------------------------------
Description of and, where feasible, an estimate of the number of
small entities to which the proposed rule will apply.
In recent years, the lithium battery industry has undergone a
transformation from one serving a small, niche-driven market to a
rapidly growing industry powering equipment in a broad range of sectors
(e.g., military, manufacturing and medical), and being used in a
variety of consumer electronics, including: laptop computers,
communications equipment, and entertainment products. Primary or non-
chargeable batteries are used to power a number of electronics and
other high-tech products, including digital cameras, memory backup
circuits, security devices, calculators, and watches. Rechargeable or
secondary lithium ion batteries are used in laptop computers,
camcorders, cell phones, and other portable electronic devices.
The proposed rule would regulate the transportation of primary and
secondary lithium batteries and cells. For this analysis, we identified
109 businesses potentially affected by the proposed rule. Of these 109
businesses, 60 were identified as small businesses based on the size
standards developed by the Small Business Administration and codified
in 13 CFR 121.201. These small businesses were identified using a
number of sources:
1. Energy source guides at https://energy.sourceguides.com/
businesses/byP/batP/batt/btora/bType/lion/byB/mfg/byN/byName.shtml and
https://energy.sourceguides.com/businesses/byP/batP/batt/byB/mfg/byN/
byNameWeb.shtml
2. Batteries EZ Search at https://www.industrialbatteries-ez.com/
industrialbatteries/0028713_0028679_1.html
3. Portable Rechargeable Battery Assocation (PRBA) Member List at
https://www.prba.org/member.html
4. Lexis-Nexis search ``manufactures lithium batteries''
5. Thomas Register at https://www.thomasregister.com/
6. Dun & Bradstreet financial and other reports (through Westlaw)
7. Dun & Bradstreet financial and other reports (through
Electronics Business on-line)
8. Hoover's company database
9. Information Access company database
10. Reference USA
11. US business directory
12. Disclosure incorporated database
13. PR newswire
14. Mergent Inc. reports
15. Investext group
16. Corporate websites
Table 3 presents the number of small businesses impacted by the
proposed rule for each industry.
[[Page 34732]]
Table 3.--Number of Impacted Small Businesses by NAICS Code
------------------------------------------------------------------------
Number of
Industries NAICS code small
businesses
------------------------------------------------------------------------
Bare Printed Circuit Board Manufacturing 334412 1
Other Electronic Component Manufacturing 334419 3
Electromedical and Electrotherapeutic 334510 1
Apparatus Manufacturing................
Other Lighting Equipment Manufacturing.. 335129 1
Storage Battery Manufacturing........... 335911 21
Primary Battery Manufacturing........... 335912 8
All Other Miscellaneous Electrical 335999 7
Equipment and Component Manufacturing..
Surgical and Medical Instrument 339112 2
Manufacturing..........................
Surgical Appliance and Supplies 339113 1
Manufacturing..........................
Electrical Apparatus and Equipment, 423610 8
Wiring Supplies, and Related Equipment
Merchant Wholesalers...................
Other Electronic Parts and Equipment 423690 4
Merchant Wholesalers...................
Industrial Supplies Merchant Wholesalers 423840 1
Research and Development in the 541710 2
Physical, Engineering, and Life
Sciences...............................
-----------------
Total............................... .............. 60
------------------------------------------------------------------------
Approximately one-third of all small businesses identified are in
NAICS 335911, Storage Battery Manufacturing. Primary Battery
Manufacturing, NAICS 335912, is among the next largest categories of
small businesses. Most of the businesses in these two categories are
likely to have a significant portion of their business related to
lithium-based products. Two of the firms that were contacted indicated
that the lithium battery/cell business was a very small component of
their overall business and that, while they have entered that market in
anticipation of its growth, they would abandon the lithium battery/cell
market if the compliance costs increased significantly.
Many of the small businesses identified in this IRFA both
manufacture battery packs and distribute batteries manufactured by
other companies. A total of 24 companies (40 percent) both manufacture
and distribute battery packs. Battery manufacturing, as applied in this
context, entails the packaging or assemblage of cells manufactured
primarily from foreign sources into custom packs designed to meet
specific customer demands. Of the 60 small business identified, 18 (30
percent) only manufacture batteries and 18 (30 percent) exclusively
distribute batteries manufactured by other companies.
We believed that electronic equipment distributors would also be
impacted by this proposed rule and contacted the Electronic Industries
Alliance. However, they indicated that their industry is comprised
primarily of large businesses.
The many of the small businesses impacted by this analysis
described themselves as ``value-added'' businesses offering custom-
designed batteries at relatively low-volumes to long-time military,
medical, original equipment manufacturers (OEMs) and high-tech
customers. Typically, the small businesses were purchasing cells from
foreign sources and assembling them into packs for customers. Batteries
offered by these small businesses tend to be more complex with higher
quality and reliability standards, according to the respondents. These
small businesses also develop computer and other consumer electronic
batteries for ``after-market'' sales.
Table 4 stratifies the small businesses according to annual
revenue. The annual revenue of the 60 small businesses identified for
this examination totals roughly $681 million annually. There were nine
small businesses contacted to examine the potential impact of the
proposed rule on their operations. The annual revenue of these nine
businesses impacted by the NPRM totals approximately $217.1 million, or
31.9 percent of the total. Annual revenues among all 60 small
businesses range from a low of $100,000 to a high of $98.7 million. As
shown, 47 percent of the small businesses generate less than $5 million
in annual revenue, while 65 percent generate less than $10 million. Of
the nine small businesses contacted, the sales-weighted before-tax
profit margin was approximately 21 percent. Applying the 21 percent
before-tax profit margin to the annual revenue estimates noted
previously generates an estimated $145 million of before-tax profit for
the small businesses affected by the proposed rule. Among the small
businesses examined in this IRFA, the average before-tax profit is,
therefore, estimated at $2.4 million annually. Note, however, that
these businesses do not focus entirely on the manufacturing and
distribution of lithium batteries. Thus, only a fraction of these
profits are attributable to lithium batteries.
Table 4.--Small Business Size by Annual Sales
----------------------------------------------------------------------------------------------------------------
Number of Percentage of
Annual sales small small Cumulative
businesses businesses percentage
----------------------------------------------------------------------------------------------------------------
0-499,999....................................................... 4 7 7
500,000-999,999................................................. 3 5 12
1,000,000-4,999,999............................................. 20 35 47
5,000,000-9,999,999............................................. 10 18 65
10,000,000-14,999,999........................................... 3 5 70
15,000,000-19,999,999........................................... 8 14 84
20,000,000-24,999,999........................................... 3 5 89
25,000,000-29,999,999........................................... 2 4 93
30,000,000-34,999,999........................................... 1 2 95
35,000,000-39,999,999........................................... .............. 0 95
[[Page 34733]]
40,000,000-44,999,999........................................... .............. 0 95
45,000,000-49,999,999........................................... .............. 0 95
50,000,000-54,999,999........................................... 1 2 96
55,000,000-59,999,999........................................... .............. 0 96
60,000,000-64,999,999........................................... .............. 0 96
65,000,000-69,999,999........................................... 1 2 98
70,000,000-74,999,999........................................... .............. 0 98
75,000,000-79,999,999........................................... .............. 0 98
80,000,000-84,999,999........................................... .............. 0 98
85,000,000-89,999,999........................................... .............. 0 98
90,000,000-94,999,999........................................... .............. 0 98
95,000,000-99,999,999........................................... 1 2 100
-----------------
Subtotal.................................................... 57 .............. ..............
Unknown..................................................... 3 .............. ..............
=================
Total................................................... 60 .............. ..............
----------------------------------------------------------------------------------------------------------------
Table 5 stratifies the small businesses according to their number
of employees. The company with the lowest number of employees had two
employees and the company with the highest number had 233 employees.
The majority of the small businesses (64 percent) have fewer than 50
employees and the vast majority of these businesses (85 percent) have
fewer than 100 employees.
Table 5.--Small Business Size by Number of Employees
----------------------------------------------------------------------------------------------------------------
Number of Percentage of
Number of employees small small Cumulative
businesses businesses percentage
----------------------------------------------------------------------------------------------------------------
1-10............................................................ 9 15 15
11-20........................................................... 13 22 37
21-30........................................................... 4 7 44
31-40........................................................... 7 12 56
41-50........................................................... 5 8 64
51-60........................................................... 2 3 68
61-70........................................................... 2 3 71
71-80........................................................... 4 7 78
81-90........................................................... 0 0 78
91-100.......................................................... 4 7 85
101-110......................................................... 1 2 86
111-120......................................................... 0 0 86
121-130......................................................... 1 2 88
131-140......................................................... 0 0 88
141-150......................................................... 4 7 95
151-160......................................................... 2 3 98
161-170......................................................... 0 0 98
171-180......................................................... 0 0 98
181-190......................................................... 0 0 98
191-200......................................................... 0 0 98
201-210......................................................... 0 0 98
211-220......................................................... 0 0 98
221-230......................................................... 0 0 98
231-240......................................................... 1 2 100
-----------------
Subtotal.................................................... 59 .............. ..............
Unknown..................................................... 1 .............. ..............
=================
Total................................................... 60 .............. ..............
----------------------------------------------------------------------------------------------------------------
Description of the projected reporting, recordkeeping, and other
compliance requirements of the proposed rule, including an estimate of
the classes of small entities that will be subject to the requirement
and the type of professional skills necessary for preparation of the
report or record.
The compliance costs to small businesses subject to the provisions
in the proposed rule are primarily related to testing battery and cell
designs, shipping of both prototypes and final products, and the
training required for employees newly classified as hazmat employees.
Each of these will be discussed separately. Additionally, we will
discuss the extent to which these
[[Page 34734]]
additional compliance costs can be passed on to the small businesses'
customers.
Testing
Based on the information presented in the NPRM, threshold analysis,
regulatory evaluation and industry comments, testing requirements would
be affected in the following manner.
1. The rule would remove the small battery exception to testing
requirements. The following exceptions would be removed from the HMR,
thus requiring that batteries falling into the categories outlined
below be tested in accordance with the UN Manual of Tests and Criteria.
Liquid cathode cell--no more than 0.5 grams of alloy per
cell
Liquid cathode battery--no more than 1 gram of lithium or
lithium alloy
Solid cathode cell--no more than 1 gram of lithium or
lithium alloy per cell
Solid cathode battery--no more than 2 grams of lithium or
lithium alloy
Lithium ion cell--no more than 1.5 grams of equivalent
lithium content
Lithium ion battery--no more than 8 grams of equivalent
lithium content
2. Exceptions to the battery testing requirements would include:
Batteries and cells that differ from a tested type by a
change of no more than 0.1 gram or 20 percent by mass, whichever is
greater.
Batteries that are of a design similar to one that has
been previously tested under UN standards and contain lithium content
less than the original design.
3. At present, small battery and cell manufacturers and
distributors are required to test all mid-size and larger batteries
according to the 8 step approach in the UN Manual of Tests and
Criteria. Estimated testing costs used for this IRFA are those charged
by outside testing laboratories because virtually all of the small
companies send their batteries to outside laboratories. The cost to
test a particular design prototype ranges from approximately $5,000 to
$8,000. Testing cost estimates are based on input provided by one
independent testing laboratory (Motorola) and contacting nine
businesses. These costs do not include the costs of supplying the test
batteries (up to 24 for rechargeable batteries) or the cost of shipping
the prototypes to the testing lab. The primary reason for this is that
the tests are already required for any cell or batteries that are
shipped internationally.
The major incremental cost under the proposed regulation for the
small producers of lithium batteries and cells will result from the
required testing of small batteries. To determine the number of new
design types requiring testing, a series of questions were posed to
nine businesses. First, respondents were asked to estimate the number
of total new designs that would be tested this year and how they
expected this number to change in the next five years. Respondents were
asked to categorize the new design types according to size (small, mid-
size, large) and type (primary, rechargeable). Contacted businesses
were then asked to estimate the fraction of the new design types that
could potentially be considered exempt due to the following reasons:
(a) They are nearly identical to existing designs (e.g., batteries and
cells that differ from a tested type by a change of no more than 0.1
gram or 20 percent by mass, whichever is greater) or (b) they will be
manufactured in production runs of fewer than 100 batteries. The costs
associated with testing batteries falling into these categories were
excluded from the analysis.
The costs associated with testing new battery designs designated
for international shipment were also excluded from the analysis. The
basis of this exclusion is that lithium batteries that are manufactured
within the U.S. but subsequently transported by aircraft to foreign
destinations are already transported in accordance with the ICAO
Technical Instructions, which have adopted the U.N. test standards.
Thus, harmonization with the international standards would not impose
any marginal costs on businesses engaged in the international transport
of lithium batteries.
Table 6 shows the number of existing designs subject to testing
over the two-year period following the effective date of the proposed
rule as well as the number of new designs that would require testing
over a 5-year period for the contacted businesses. As noted previously,
the nine contacted small businesses comprise an estimated 31.9 percent
($217.1 million/$681.1 million) of all small businesses affected by the
proposed rule in annual revenues. Thus, to expand these results to the
entire population of small businesses, an expansion factor of 3.1
($681.1 million/$217.1 million) was used to estimate the total number
of designs requiring testing among all small businesses and these
figures are also shown in Table 6.
Table 6.--Annual Testing Requirements
[Number of battery and cell designs]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Small businesses contacted All small businesses
-------------------------------------------------------------------------------------------------------
Year New designs New designs
Previous --------------------------------------- Previous --------------------------------------
designs Small Mid-size Large designs Small Mid-size Large
--------------------------------------------------------------------------------------------------------------------------------------------------------
2004............................................ 254 115 61 2 797 360 190 5
2005............................................ 254 130 72 2 797 406 225 5
2006............................................ ........... 146 84 2 ........... 458 265 5
2007............................................ ........... 165 100 2 ........... 516 313 5
2008............................................ ........... 186 118 2 ........... 582 369 5
--------------------------------------------------------------------------------------------------------------------------------------------------------
Two scenarios were developed to reflect the costs for low- and
high-end estimates of $5,000 and $8,000 per test, respectively. The
costs for these scenarios are shown in Tables 7 and 8. There are no
testing costs for mid-size and large batteries because they are already
required to be tested. The production and shipping costs are the same
for both estimates. The production costs assume that an average of 20
batteries is required for testing each design and that each battery
produced for testing costs approximately $50. The shipping costs were
determined by averaging the FedEx Express 2-day shipping costs for a
package of 20 one-pound batteries to Motorola's Georgia testing
location from New York City, Orlando, and Los Angeles. A certified
packaging weighing two pounds and costing $5 was assumed and FedEx's
$30 hazmat surcharge was included in the shipping cost estimate.
[[Page 34735]]
Table 7.--Annual Costs of Complying with Testing Requirements
[Low-end estimate]
--------------------------------------------------------------------------------------------------------------------------------------------------------
New designs
Year Previous --------------------------------------- Production Shipping Total Discounted
designs Small Mid-size Large total
--------------------------------------------------------------------------------------------------------------------------------------------------------
2004............................................ 3,986,929 1,801,334 ........... ........... 1,157,653 85,087 7,031,004 7,031,004
2005............................................ 3,986,929 2,030,941 ........... ........... 1,203,574 88,463 7,309,907 6,831,689
2006............................................ ........... 2,289,815 ........... ........... 457,963 33,660 2,781,439 2,429,416
2007............................................ ........... 2,581,687 ........... ........... 516,337 37,951 3,135,975 2,559,889
2008............................................ ........... 2,910,761 ........... ........... 582,152 42,788 3,535,702 2,697,370
--------------
Total....................................... 7,973,858 11,614,539 ........... ........... 3,917,679 287,949 23,794,026 21,549,368
Avg..................................... 1,594,772 2,322,908 ........... ........... 783,536 57,590 4,758,805 4,309,874
--------------------------------------------------------------------------------------------------------------------------------------------------------
Table 8.--Annual Costs of Complying with Testing Requirements
[High-end estimate]
--------------------------------------------------------------------------------------------------------------------------------------------------------
New designs
Year Previous --------------------------------------- Production Shipping Total Discounted
designs Small Mid-size Large total
--------------------------------------------------------------------------------------------------------------------------------------------------------
2004............................................ 6,379,087 2,882,135 ........... ........... 1,157,653 85,087 10,503,962 10,503,962
2005............................................ 6,379,087 3,249,506 ........... ........... 1,203,574 88,463 10,920,630 10,206,196
2006............................................ ........... 3,663,704 ........... ........... 457,963 33,660 4,155,328 3,629,424
2007............................................ ........... 4,130,698 ........... ........... 516,337 37,951 4,684,987 3,824,345
2008............................................ ........... 4,657,218 ........... ........... 582,152 42,788 5,282,158 4,029,733
--------------
Total....................................... 12,758,173 18,583,262 ........... ........... 3,917,679 287,949 35,547,064 32,193,660
Avg..................................... 2,551,635 3,716,652 ........... ........... 783,536 57,590 7,109,413 6,438,732
--------------------------------------------------------------------------------------------------------------------------------------------------------
As indicated in Table 7, the incremental cost for the low-end
estimate over a five-year period for all 60 small businesses would be
$21,549,368, discounted at 7 percent per year, while the discounted
average annual cost would be $4,309,874.\1\ For the high-end estimate
shown in Table 8, the incremental discounted cost over a five-year
period would be $32,193,660 while the discounted average annual cost
would be $6,438,732. An average annual discounted cost over the five-
year period for the averaged low- and high-end estimates would be about
$5,374,303 for the same companies.
---------------------------------------------------------------------------
\1\ Annual costs are presented in present value terms based on a
real discount rate of 7 percent as prescribed in the Office of
Management and Budget Circular A-94.
---------------------------------------------------------------------------
For each company there would be an estimated incremental discounted
cost of approximately $71,831 annually for the low-end testing costs
and about $107,312 average for the discounted high-end testing costs
over the five-year period. The average annual estimated discounted
testing cost per company using the averaged high- and low-end costs
would be approximately $89,572.
Shipping
Currently, under 49 CFR 173.185, lithium batteries and cells are
required to be shipped as Class 9 hazardous materials with certain
significant exceptions. The proposed rules would eliminate one of these
exceptions, requiring mid-size batteries and cells to be shipped as
Class 9 materials. In addition, new packaging integrity and
communication requirements now apply to small batteries and cells
shipped in packages of more than 12 batteries or 24 cells, except when
installed in equipment.
To ship lithium cells and batteries as Class 9 hazardous materials,
transporters must meet the following requirements:
1. Packaging: Use only packaging that meets Packing Group II
performance standards. (Packing must not exceed 5 kg (gross weight) for
passenger aircraft and must not exceed 35 kg (gross weight) for cargo
aircraft.
2. Marking: The following markings must be applied to the
packaging:
Shipping name: Lithium batteries
Identification Number: UN 3090
Shipper's Name and Address
Name and address of company or individual receiving
batteries
UN Specification Certification
3. Labeling: The Class 9 label must be used.
4. Train personnel.
5. Shipping Papers: The following information must be included on
shipping papers:
Proper shipping name, hazard class, identification number,
and packing group
Number and type of packages
Total quantity of hazardous materials
Page number and total number of pages
Emergency telephone number
Shipper's certification
Signature (Must be legibly signed by a principal, officer,
partner, or employee of the shipper or his agent)
Based on the wide-ranging cost estimates gathered from interviewing
selected small businesses for the additional shipping costs for lithium
batteries and cells under the proposed rules, we adopted estimates for:
(a) The increased cost to ship small batteries and cells under the
proposed rules,
(b) The increased cost to ship mid-sized cells as Class 9
materials, and
(c) The increased cost to ship mid-sized batteries as Class 9
materials.
These estimates were primarily developed from detailed data
provided from a single small business; however, they were deemed to be
reasonable average costs considering the varying estimates provided by
other small businesses with somewhat lesser detail. These costs are
$0.05 for each small battery and cell, $0.261 for each mid-sized cell,
and $0.313 for each mid-size battery.
Table 9 shows the total number of batteries and cells in normal
production runs (production units) that are expected to be shipped to
customers
[[Page 34736]]
and also illustrates how the final production shipping costs were
determined for the base year of the analysis (2004).
Table 9.--Production Units Shipped to Customers and Incremental Shipping Costs for 2004
----------------------------------------------------------------------------------------------------------------
Adjusted
Type Units shipped Incremental Incremental incremental
unit cost cost cost
----------------------------------------------------------------------------------------------------------------
Cells:
Primary Lithium:
Small................................... 802,800 0.05 40,140 125,901
Mid-size................................ 7,132 0.261 1,861 5,839
Large................................... 128 0.0 0 0
Lithium Ion:
Small................................... 0 0.0 0 0
Mid-size................................ 0 0.0 0 0
Batteries:
Primary Lithium:
Small................................... 1,065,464 0.05 52,273 167,094
Mid-size................................ 1,104,944 0.313 345,847 1,084,765
Large................................... 3,744 0.0 0 0
Lithium Ion:
Small................................... 1,322,444 0.05 66,122 207,395
Mid-size................................ 305,500 0.313 95,622 299,921
-----------------
Total................................... .............. .............. 602,866 1,890,913
----------------------------------------------------------------------------------------------------------------
Table 10 shows the total annual shipping costs for production
deliveries of lithium batteries and cells to customers of the small
businesses for which shipment quantities were obtained. These costs
were adjusted to reflect the costs for all 60 small businesses and then
discounted using a 7 percent discount rate. The discounted costs for
the five-year analysis period are $10,916,110, which equates to a
discounted annual average of $2,183,222 per year. On a discounted
annual basis, each small business would be expected to incur $36,387 in
additional shipping costs to comply with the proposed rules.
Table 10.--Annual Incremental Shipping Costs to Customers
----------------------------------------------------------------------------------------------------------------
Production runs
--------------------------------
Year Adjusted Total Discounted
Incremental incremental total
cost cost
----------------------------------------------------------------------------------------------------------------
2004............................................ 602,866 1,890,913 1,890,913 1,890,913
2005............................................ 691,466 2,168,812 2,168,812 2,026,927
2006............................................ 793,088 2,487,552 2,487,552 2,172,725
2007............................................ 909,645 2,853,137 2,853,137 2,329,010
2008............................................ 1,043,331 3,272,450 3,272,450 2,496,536
-----------------
Total....................................... .............. .............. .............. 10,916,110
Average Annual.......................... .............. .............. .............. 2,183,222
Average Annual/Company.................. .............. .............. .............. 36,387
----------------------------------------------------------------------------------------------------------------
Training
As mentioned previously, lithium batteries and cells are now
required to be shipped as a Class 9 hazardous material with certain
significant exceptions. The proposed rules would eliminate one of these
exceptions, requiring all mid-size batteries and cells to be shipped as
Class 9 materials. One of the requirements for shipping lithium
batteries and cells as a Class 9 hazardous material is that all hazmat
employers must ensure that their hazmat employees receive training in
general awareness of hazmat regulatory requirements, function-specific
training related to the material they are handling, security awareness
training and safety training including emergency response and
protective measures. Hazmat training must:
Take place before the employee can work with hazardous
materials. Exceptions: The employee works under the direct supervision
of a trained employee and the training is completed within 90 days of
their hire or transfer into the job.
Be done at least every three years for all hazmat
employees. Training done by another employer can be used to meet these
requirements.
Be maintained for each employee for at least the past
three years and for at least 90 days after the end of the employee's
employment. This record must include:
--The employee's name,
--The most recent training completion date,
--A description, copy or location of the training materials,
--The name and address of the person providing the training, and
--Certification that the employee has been trained and tested.
All small companies that ship lithium batteries or cells as Class 9
hazardous materials must train hazmat employees in accordance with the
provisions of the HMR. Based on the data conducted for this IRFA, all
of the small battery companies were assumed to be shipping some
batteries as Class 9 hazmat. This means that each company currently has
a cadre of hazmat-trained employees and has therefore already made a
[[Page 34737]]
considerable financial investment in employee training.
Two different approaches have been used by small companies to train
their employees. The first approach is to hire an outside expert to
visit the company periodically (perhaps every two years) and present
training on current and proposed changes to the hazmat regulations. The
employees who attend these sessions would typically be trained as
trainers and they, in turn, would train other workers as needed. The
second approach to training is for a company to select one employee as
their training expert. This employee would be exposed to a periodic
(every two years) specialized off-site course providing expert training
in hazardous materials. The trained employee returns to their company
and trains other employees by conducting a series of hazmat training
sessions.
Although costs differ for the various elements of these two
training approaches, the research conducted for this IRFA indicates
that the total costs to train one hazmat employee is approximately the
same for both approaches. However, this analysis is focused on
incremental costs represented by the need for small businesses to
provide hazmat training to any additional employees needed to handle
lithium batteries or cells that would newly be classified as hazmat as
a result of the proposed regulations. As Table 11 shows, the estimated
incremental discounted cost for training over a five-year period for
all 60 small businesses would be $72,565 while the average annual
discounted cost would be about $14,513. This cost is based on an
estimated cost to train one hazmat employee of about $352, computed as
the average of the estimates from three small businesses. Considering
that slightly less than one employee per company needs additional
training (0.83 employees per company based on contacted businesses),
the average annual cost per small business is $242.
To illustrate the costs associated with training employees, one of
the three businesses sharing detailed training cost information noted
that it pays an experienced external trainer $1,500 to teach a detailed
six-hour class on the handling of hazardous materials. There are six
employees in attendance, whose average pay is $15/hour. With an average
fringe benefit rate of 28.1 percent, total labor costs associated with
class attendance is $692.\2\ A human resources manager is charged with
all data entry and recordkeeping requirements associated with hazardous
material training and certification. The recordkeeping cost is $154
($20/hour @ 6 hours + fringe benefits). The total cost to train these
six employees is $2,346 and the average cost per employee is $391.
---------------------------------------------------------------------------
\2\ Fringe benefits data based on Bureau of Labor Statistics,
National Compensation Survey, Employer Cost for Employee
Compensation, Total Benefits, Private Industry All Workers.
Table 11.--Annual Incremental Training Costs
----------------------------------------------------------------------------------------------------------------
Additional
Employees with employees Incremental Adjust. Discounted
Year certification requiring cost incremental total
certification cost
----------------------------------------------------------------------------------------------------------------
2004............................ 376 15 5,273 12,923 12,923
2005............................ 426 17 5,970 14,630 13,673
2006............................ 482 19 6,759 16,563 14,467
2007............................ 546 22 7,652 18,752 15,307
2008............................ 618 25 8,663 21,229 16,195
-----------------
Total....................... .............. .............. .............. .............. 72,565
Average Annual.......... .............. .............. .............. .............. 14,513
Average Annual/Company.. .............. .............. .............. .............. 242
----------------------------------------------------------------------------------------------------------------
Summary of Costs
The incremental costs incurred by small businesses to implement the
regulations in the proposed rule are summarized in Tables 12 and 13.
Testing is by far the dominant added cost that would be mandated by the
proposed regulation account for 66 percent of total costs in the low-
end estimate and 74 percent of total costs in the high-end estimate.
Shipping costs account for 35 and 26 percent, respectively, of the
total low- and high-end cost estimates. In both estimates, training
costs are approximate 0.2 percent of total costs.
Table 12.--Summary of Costs to Small Businesses
[Low-end estimate]
----------------------------------------------------------------------------------------------------------------
Year Testing Training Shipping Total Discounted
----------------------------------------------------------------------------------------------------------------
2004............................ $7,031,004 $12,923 $1,890,913 $8,934,839 $8,934,839
2005............................ 7,309,907 14,630 2,168,812 9,465,221 8,846,001
2006............................ 2,781,439 16,563 2,487,552 5,221,448 4,560,615
2007............................ 3,135,975 18,752 2,853,137 5,898,286 4,814,759
2008............................ 3,535,702 21,229 3,272,450 6,662,887 5,083,085
-----------------
Total....................... 23,794,026 84,097 12,672,863 36,182,682 32,239,299
Average Annual.......... .............. .............. .............. .............. 6,447,860
Average Annual per .............. .............. .............. .............. 107,464
Company................
----------------------------------------------------------------------------------------------------------------
[[Page 34738]]
Table 13.--Summary of Costs to Small Businesses
[High-end estimate]
----------------------------------------------------------------------------------------------------------------
Year Testing Training Shipping Total Discounted
----------------------------------------------------------------------------------------------------------------
2004............................ $10,503,962 $16,540 $1,890,913 $12,407,798 $12,407,798
2005............................ 10,920,630 18,971 2,168,812 13,075,943 12,220,508
2006............................ 4,155,328 21,759 2,487,552 6,595,337 5,760,623
2007............................ 4,684,987 24,957 2,853,137 7,447,298 6,079,214
2008............................ 5,282,158 28,625 3,272,450 8,409,344 6,415,448
-----------------
Total....................... 35,547,064 110,853 12,672,863 47,935,720 42,883,590
Average Annual.......... .............. .............. .............. .............. 8,576,718
Average Annual per .............. .............. .............. .............. 142,945
Company................
----------------------------------------------------------------------------------------------------------------
Examining the midpoint between the low- and high-end estimates, the
total cost over the five-year analysis period (in current dollars) for
all 60 small businesses is $37,561,444. On an annual basis, this is
$7,512,289 and it equates to an average cost per company per year of
$125,205 in constant dollars. The average cost per company represents
an arithmetic mean or the value obtained by dividing the sum of total
costs by the total number of companies examined in the IRFA. Thus, the
average cost estimate cannot be uncritically applied to the operations
of every company operat
