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UNITED STATES NUCLEAR REGULATORY COMMISSION OFFICE OF NUCLEAR REACTOR REGULATION WASHINGTON, D.C. 20555 July 20, 1989 Information Notice No. 89-56: QUESTIONABLE CERTIFICATION OF MATERIAL SUPPLIED TO THE DEFENSE DEPARTMENT BY NUCLEAR SUPPLIERS Addressees: All holders of operating licenses or construction permits for nuclear power reactors. Purpose: This information notice is being provided to alert addressees to a possible problem with the certification of material furnished by Meredith Corporation, Pressure Vessel Nuclear (PVN) and Alloy & Carbon Steel Company, Incorporated (ALLOY) of Hillside, New Jersey. It is expected that recipients will review the information for applicability to their facilities and consider actions, as appropriate, to avoid similar problems. However, suggestions contained in this information notice do not constitute NRC requirements; therefore, no specific action or written response is required. Description of Circumstances: On May 4, 1989, the U.S. Department of Justice, District of New Jersey, issued information that corporate officers for PVN and ALLOY were indicted for their alleged roles in selling commercial-grade steel as military-grade steel which was used to build and repair U.S. Navy submarines and surface ships. The 27-count indictment rendered on May 4, 1989, by a Newark Federal Grand Jury, charges the defendants, some of whom are presently employees of PVN, with substituting commercial-grade steel for military-grade steel and fraudulently documenting the substitutions as meeting military specifications. From April 1984 through August 1985 the defendants allegedly caused nonconforming steel to be shipped to Department of Defense contractors. The defendants allegedly falsely marked and stenciled steel, created false documentation bearing the letterhead of various companies, falsely altered manufacturer issued certified material test reports (CMTRs), caused fraudulent chemical and physical test certificates to be prepared for tests that had not been performed, and prepared false certificates of conformance (C of Cs) for steel that did not conform to purchase requirements. Attachment I contains a copy of OVERT ACTS from the indictment that identifies faulty documents, heat numbers, and manufacturers' names. 8907140274 . IN 89-56 July 20, 1989 Page 2 of 3 Discussion: During NRC inspections of PVN conducted the weeks of November 2, 1988 and February 1, 1989, three examples of material supplied to ASME Section III requirements without adequate basis were discovered. In all three cases PVN purchased stock material and sold it as meeting the requirements of Section III without performing the upgrade testing required by NCA-3867.4(e). In addition, it was also noted that PVN had altered CMTRs received from American Tank and Fabricating Company (ATF). On material ATF had purchased from an ASME Quality Systems Certificate (QSC) holder as stock material and subsequently sold to PVN, PVN had removed ATF's name from the "Sold To" and "Shipped To" blocks of the CMTR and inserted PVN's name and address. Based on the indication that the material was purchased directly from an ASME QSC holder, the customer would not be looking for upgrade testing results nor suspect the material was not in conformance with code requirements. On June 13 and 14, 1989, Virginia Power conducted an audit of PVN. The audit examined a sample of purchase orders which consisted of 16 safety-related purchase orders, encompassing 30 individual line items of various types of safety-related materials. The 16 safety-related purchase orders were issued between September 1, 1988 and May 4, 1989. From the sample of 30 line items, Virginia Power auditors determined that in 3 cases PVN purchased material from unapproved suppliers and in 17 cases PVN supplied commercial grade material. In all 20 cases, PVN certified that the material met all the requirements of Virginia Power's purchase orders, including Appendix B to 10 CFR 50. However, there is no indication that PVN took any action to determine that the materials supplied were suitable for safety-related applications prior to certifying the material met the requirements of Appendix B. Addressees may wish to review nuclear procurements from these vendors to ensure that appropriate bases exist for the use of PVN or ALLOY supplied material. Further, addressees may wish to contact the steel mills identified as the manufacturer of the procured materials to confirm traceability of the material and to inform one of the NRC technical contacts listed below of any materials identified as not originating from the manufacturer indicated in the documentation or having material properties different from those indicated in the documentation. The NRC is interested in obtaining information on material supplied by PVN or ALLOY in which discrepancies have been found that are similar to those described above or in the indictment described in Attachment 1. The NRC is particularly interested in discrepancies discovered as a result of independent verification testing of chemical and mechanical properties and information on recent procurements. Addressee audits of material manufacturers and suppliers which include a review of the basis for certifications provided by vendors and the supporting tests and records of traceability can prevent problems such as those discussed above. Addressees may wish to review the adequacy of previous vendor audits and their general vendor approval process in light of Information Notice No. 88-35, "Inadequate Licensee Performed Vendor Audits" and the above information. . IN 89-56 July 20, 1989 Page 3 of 3 No specific action or written response is required by this information notice. If you have any questions about this matter, please contact one of the techni- cal contacts listed below or the Regional Administrator of the appropriate regional office. Charles E. Rossi, Director Division of Operational Events Assessment Office of Nuclear Reactor Regulation Technical Contacts: Ramon Cilimberg, NRR (301) 492-3220 Ed Baker, NRR (301) 492-0959 Attachments: 1. Overt Acts 2. List of Recently Issued NRC Information Notices . Attachment 2 IN 89-56 July 20, 1989 Page 1 of 1 LIST OF RECENTLY ISSUED NRC INFORMATION NOTICES ______________________________________________________________________________ Information Date of Notice No._____Subject_______________________Issuance_______Issued to_________ 89-45, Metalclad, Low-Voltage 7/6/89 All holders of OLs Supp. 1 Power Circuit Breakers or CPs for nuclear Refurbished With Substandard power reactors. Parts 89-55 Degradation of Containment 6/30/89 All holders of OLs Isolation Capability by a or CPs for nuclear High-Energy Line Break power reactors. 89-54 Potential Overpressurization 6/23/89 All holders of OLs of the Component Cooling or CPs for nuclear Water System power reactors. 89-53 Rupture of Extraction 6/13/89 All holders of OLs Steam Line on High or CPs for nuclear Pressure Turbine power reactors. 88-46, Licensee Report of 6/8/89 All holders of OLs Supp. 3 Defective Refurbished or CPs for nuclear Circuit Breakers power reactors. 89-52 Potential Fire Damper 6/8/89 All holders of OLs Operational Problems or CPs for nuclear power reactors. 89-51 Potential Loss of Required 5/31/89 All holders of OLs Shutdown Margin During or CPs for nuclear Refueling Operations power reactors. 88-88, Degradation of Westinghouse 5/31/89 All holders of OLs Supp. 1 ARD Relays or CPs for nuclear power reactors. 89-50 Inadequate Emergency 5/30/89 All holders of OLs Diesel Generator Fuel or CPs for nuclear Supply power reactors. 89-49 Failure to Close Service 5/22/89 All holders of OLs Water Cross-Connect or CPs for nuclear Isolation Valves power reactors. ______________________________________________________________________________ OL = Operating License CP = Construction Permit ..
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