EA-98-163 - Breitling USA, Inc.

July 10, 1998

EA No. 98-163

Ms. Marie Bodman, President
Breitling USA, Inc.
2 Stamford Landing
Stamford, Connecticut 06902

SUBJECT:

NOTICE OF VIOLATION AND PROPOSED IMPOSITION OF CIVIL PENALTIES – $26,400 AND DEMAND FOR INFORMATION (NRC Inspection Report No. 999-90001/98-002)

Dear Ms. Bodman:

This letter refers to the Nuclear Regulatory Commission (NRC) inspection conducted at your facility in Stamford, Connecticut, on March 10, 1998, during which the NRC found that you had possessed, used (repaired) and distributed from your facility, between 1989 and 1998, more than 70,000 timepieces (watches) (containing up to 3.1 millicuries of tritium per timepiece) without an NRC license authorizing such activities. The inspection was conducted after the NRC contacted you in February 1998 following notification from the State of Connecticut that such activities may have been occurring at your facility. Previously, on March 6, 1998, the NRC issued a Confirmatory Action Letter (CAL), which confirmed your commitment to cease such distribution until the NRC issued a license authorizing such use. You submitted an application for an exempt distribution license with the NRC Office of Nuclear Material Safety and Safeguards (NMSS) on March 14, 1998, and NMSS issued a license on March 27, 1998. In addition, you submitted an application for a possession license with the NRC Region I office on March 15, 1998, and a license was issued on March 20, 1998.

In a letter dated April 6, 1998, the NRC forwarded to you the related inspection report. In that letter, the NRC informed you that you could either respond in writing to the results of the inspection, or request a predecisional enforcement conference. On April 16, 1998, Mr. Keith Brown of your staff contacted the NRC and requested a predecisional enforcement conference to discuss the apparent violations, their causes, and your corrective actions. The predecisional enforcement conference was held with him on May 7, 1998. A copy of the predecisional enforcement conference report was forwarded to you by separate correspondence on May 14, 1998.

Based on the inspection findings and the information you provided at the predecisional enforcement conference, the NRC has determined that two violations of NRC requirements occurred. The violations are described in the enclosed Notice of Violation and Proposed Imposition of Civil Penalty (Notice), and the circumstances surrounding the violations are described in detail in the subject inspection report. The violations involve the possession and use, as well as distribution, of NRC licensed material without possessing NRC licenses authorizing these activities. Furthermore, since you received the timepieces (watches) from your parent company in Switzerland and distributed them to jewelry shops in the United States, you did not qualify for the exemption set forth in 10 CFR 30.15(a) regarding such activities. The NRC is principally concerned that for an extended duration you operated your business outside the regulatory framework established to assure that the possession, use, and distribution of radioactive materials does not adversely affect public health and safety. Because you operated outside the regulatory framework, the NRC was unable to conduct inspections of your facility to determine whether the methods and controls you established for possessing, using, and distributing radioactive materials were in accordance with regulatory requirements established to protect public health and safety. In fact, during the inspection, the NRC identified contamination at your facility, although the amount of contamination was low and was subsequently cleaned.

The NRC is also concerned that your company had strong indications, beginning in early 1997, that you needed an NRC license, as Mr. Brown indicated at the predecisional enforcement conference. Mr. Brown also stated that in November 1997, your parent company in Switzerland, raised questions regarding regulation of tritium in the United States, and you sought advice from your staff, your in-house attorney, and an independent contractor as to whether you needed an NRC license. Although Mr. Brown admitted that he was informed by those parties that you probably needed an NRC license, he also stated that Breitling decided, given the holiday season, not to contact the NRC at that time, for fear that it could shutdown your business. Instead, another consultant was retained to confirm that an NRC license was needed. Furthermore, despite all of the indications that an NRC license was required, action was not taken to obtain a license until after the NRC inspection on March 10, 1998. The failure to act sooner to either obtain an NRC license, or contact the NRC to determine if a license was needed, constitutes, at a minimum, careless disregard of NRC requirements, which is considered willful within the context of the NRC Enforcement Policy. In the NRC's view, your company either made a conscious decision to remain in violation of NRC regulatory requirements to obtain economic benefit, or chose to carelessly disregard NRC regulatory requirements and not contact the NRC to determine whether NRC licenses were required.

Given the importance of assuring that possession and use, as well as distribution of radioactive material, is properly controlled, and given the willful nature of the violations by senior individuals in your organization, the violations are classified at Severity Level II in accordance with the "General Statement of Policy and Procedure for NRC Enforcement Actions" (Enforcement Policy), NUREG-1600.

Civil penalties are assessed according to the Civil Penalty Assessment Factors in Section VI.B.2 of the NRC Enforcement Policy, which allows for consideration of discretion to ensure that the proposed civil penalty reflects the significance of the circumstances and conveys the appropriate regulatory message. After considering the regulatory significance of the violations, which included the inability of the NRC to conduct inspections of your activities, the duration of the violations, the costs of maintaining NRC licenses which you avoided during the period of noncompliance, and your failure to promptly contact the NRC once you had indications that the need for a license was likely, the NRC has determined, in accordance with Section VII.A.1.(a) of the Enforcement Policy, that it is appropriate to exercise enforcement discretion in this case and issue separate civil penalties in the amount of $13,200 for each of the two violations, resulting in a cumulative civil penalty of $26,400. The NRC arrived at the $13,200 amount for each civil penalty by tripling the base civil penalty amount of $4,400 for a Severity Level II violation listed in Tables 1A and 1B, Base Civil Penalties, of the Enforcement Policy.

In determining the amount of the civil penalty, recognition was given for corrective action. The NRC recognizes that you eventually initiated comprehensive corrective action, described at the conference, which included: (1) applying for an NRC license; (2) ceasing distribution of the materials; and (3) maintaining your operations in a shutdown condition until your license was issued. Consideration was also given to the length of time during which the NRC was unable to carry out its statutory responsibility. Between 1989 and 1998, Breitling USA, Inc. distributed approximately 70,000 timepieces containing byproduct material without a license in violation of NRC regulations. However, since the statute of limitations period for assessing civil penalties is only five years (28 U.S.C. 2462), the NRC only considered the period between August 1993 and March 1998 for purposes of determining the amount of the civil penalty.

Therefore, to emphasize (1) the importance of conducting NRC activities only after receiving an NRC license, and adhering to the terms and conditions of that license, and (2) the significance of willful violations, I have been authorized, after consultation with the Commission to issue the enclosed Notice of Violation and Proposed Imposition of Civil Penalty (Notice) in the amount of $26,400 for the violations described in the enclosed Notice. I also note that due to a recent revision to the Enforcement Policy issued on May 13, 1998, the NRC would have considered a much larger civil penalty had the violations continued past May of 1998 ( see Table 1A—Base Civil Penalties, item c, of the Enforcement Policy). ⁽¹⁾ In addition, issuance of this Notice constitutes escalated enforcement action that may subject you to increased inspection effort.

You are required to respond to this letter and enclosed Notice, and you should follow the instructions specified in the enclosed Notice when preparing your response. The NRC will use your response, in part, to determine whether further enforcement action is necessary to ensure compliance with regulatory requirements.

In addition to the civil penalty, given the willful nature of your failure to contact the NRC once you had indications that a license was probably needed, the NRC is also issuing a Demand for Information to you, pursuant to sections 161c, 161o, 182 and 186 of the Atomic Energy Act of 1954, as amended, and the Commission's regulations in 10 CFR 2.204 and 10 CFR 30.32(b), in order for the Commission to determine whether your license should be modified, suspended or revoked, or other enforcement action taken to ensure compliance with NRC regulatory requirements. In response to this Demand, you are required to submit to James Lieberman, Director, Office of Enforcement, U.S. Nuclear Regulatory Commission, Washington, D.C. 20555-0001, within 30 days of the date of this Demand for Information, in writing and under oath or affirmation:

(1) The reasons why Breitling's licenses should not be revoked;

(2) The reasons why the NRC should have confidence that Breitling will comply with regulatory requirements in the future and not engage in willful violations of those requirements.

After reviewing your response, the NRC will determine whether further action is necessary to ensure compliance with regulatory requirements.

In accordance with 10 CFR 2.790 of the NRC's "Rules of Practice," a copy of this letter, its enclosure, and your response will be placed in the NRC Public Document Room (PDR). To the extent possible, your response should not include any personal privacy or proprietary information so that it can be placed in the PDR without redaction. If personal privacy or proprietary information is necessary to provide an acceptable response, then please provide a bracketed copy of your response that identifies the information that should be protected and a redacted copy of your response that deletes such information. If you request withholding of such material, you must specifically identify the portions of your response that you seek to have withheld and provide in detail the bases for your claim of withholding (e.g., explain why the disclosure of information will create an unwarranted invasion of personal privacy or provide the information required by 10 CFR 2.790(b) to support a request for withholding confidential commercial or financial information).

	Sincerely,
	Hubert J. Miller Regional Administrator

Docket No. 999-90001
License No. N/A

Enclosure: Notice of Violation Proposed Imposition of Civil Penalties

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NOTICE OF VIOLATION
AND
PROPOSED IMPOSITION OF CIVIL PENALTIES

Breitling USA, Inc. Station Electric Station, Unit 3

Docket No. 999-90001 License No. N/A EA 98-163

During an NRC inspection on March 10, 1998, violations of NRC requirements were identified. In accordance with the "General Statement of Policy and Procedure for NRC Enforcement Actions," (Enforcement Policy), NUREG-1600, the NRC proposes civil penalties pursuant to Section 234 of the Atomic Energy Act of 1954, as amended (Act), 42 U.S.C. 2282 and 10 CFR 2.205. The violations and associated civil penalties are set forth below:

A.

10 CFR 30.3 requires, in part, that except for persons exempt, no person shall receive, acquire, own, possess or use byproduct material except as authorized in a specific or general license issued pursuant to Title 10, Chapter 1, Code of Federal Regulations. 10 CFR 30.15(a) provides, in part, that persons who initially transfer for sale or distribution timepieces containing byproduct material are not exempt from the requirements for a license. Contrary to the above, between 1989 and March 1998, Breitling USA, Inc., received and possessed approximately 70,000 timepieces (watches), containing up to 3.1 millicuries of tritium per timepiece, without a valid NRC possession license, and was not exempt from the requirements for a license, since it received the timepieces from its parent company in Switzerland and distributed them to jewelry shops in the United States.(01012) This is a Severity Level II Violation (Supplement VI). Civil Penalty – $13,200

B.

10 CFR 30.3 requires, in part, that except for persons exempt, no person shall transfer byproduct material except as authorized in a specific or general license issued pursuant to Title 10, Chapter 1, Code of Federal Regulations. 10 CFR 30.15(a) provides, in part, that persons who initially transfer for sale or distribution timepieces containing byproduct material are not exempt from the requirements for a license. Contrary to the above, between 1989 and March 1998, Breitling USA, Inc., transferred (distributed) approximately 70,000 timepieces (watches), containing up to 3.1 millicuries of tritium per timepiece, without a valid NRC distribution license, and was not exempt from the requirements for a license, since it received the timepieces from its parent company in Switzerland and distributed them to jewelry shops in the United States. (01022) This is a Severity Level II Violation (Supplement VI). Civil Penalty - $13,200

Pursuant to the provisions of 10 CFR 2.201, Breitling USA, Inc. is hereby required to submit a written statement or explanation to the U.S. Nuclear Regulatory Commission, ATTN: Document Control Desk, Washington, D.C. 20555-0001, with a copy to the Regional Administrator, Region I, within 30 days of the date of the letter transmitting this Notice of Violation and Proposed Imposition of Civil Penalties (Notice). This reply should be clearly marked as a "Reply to a Notice of Violation" and should include for each alleged violation: (1) the reason for the violation, or, if contested, the basis for disputing the violation, (2) the corrective steps that have been taken and the results achieved, (3) the corrective steps that will be taken to avoid further violations, and (4) the date when full compliance will be achieved. Your response may reference or include previous docketed correspondence, if the correspondence adequately addresses the required response. If an adequate reply is not received within the time specified in this Notice, an order or a Demand for Information may be issued as to why the license should not be modified, suspended, or revoked, or why such other action as may be proper should not be taken. Where good cause is shown, consideration will be given to extending the response time.

If you contest this enforcement action, you should also provide a copy of your response to James Lieberman, Director, Office of Enforcement, United States Nuclear Regulatory Commission, Washington, DC 20555-0001. Under the authority of Section 182 of the Act, 42 U.S.C. 2232, this response shall be submitted under oath or affirmation.

Within the same time as provided for the response required above under 10 CFR 2.201, the Licensee may pay the civil penalties by letter addressed to the Director, Office of Enforcement, U.S. Nuclear Regulatory Commission, with a check, draft, money order, or electronic transfer payable to the Treasurer of the United States in the amount of the civil penalty proposed above, or the cumulative amount of the civil penalties if more than one civil penalty is proposed, or may protest imposition of the civil penalties in whole or in part, by a written answer addressed to the Director, Office of Enforcement, U.S. Nuclear Regulatory Commission. Should the Licensee fail to answer within the time specified, an order imposing the civil penalties will be issued. Should the Licensee elect to file an answer in accordance with 10 CFR 2.205 protesting the civil penalties, in whole or in part, such answer should be clearly marked as an "Answer to a Notice of Violation" and may: (1) deny the violation listed in this Notice, in whole or in part, (2) demonstrate extenuating circumstances, (3) show error in this Notice, or (4) show other reasons why the penalties should not be imposed. In addition to protesting the civil penalties in whole or in part, such answer may request remission or mitigation of the penalties.

In requesting mitigation of the proposed penalties, the factors addressed in Section VI.B.2 of the Enforcement Policy should be addressed. Any written answer in accordance with 10 CFR 2.205 should be set forth separately from the statement or explanation in reply pursuant to 10 CFR 2.201, but may incorporate parts of the 10 CFR 2.201 reply by specific reference (e.g., citing page and paragraph numbers) to avoid repetition. The attention of the Licensee is directed to the other provisions of 10 CFR 2.205, regarding the procedure for imposing a civil penalties.

Upon failure to pay any civil penalties due which subsequently has been determined in accordance with the applicable provisions of 10 CFR 2.205, this matter may be referred to the Attorney General, and the penalties, unless compromised, remitted, or mitigated, may be collected by civil action pursuant to Section 234c of the Act, 42 U.S.C. 2282c.

The response noted above (Reply to Notice of Violation, letter with payment of civil penalties, and Answer to a Notice of Violation) should be addressed to: James Lieberman, Director, Office of Enforcement, U.S. Nuclear Regulatory Commission, One White Flint North, 11555 Rockville Pike, Rockville, MD 20852-2738, with a copy to the Regional Administrator, U.S. Nuclear Regulatory Commission, Region I.

Because your response will be placed in the NRC Public Document Room (PDR), to the extent possible, it should not include any personal privacy, proprietary, or safeguards information so that it can be placed in the PDR without redaction. If personal privacy or proprietary information is necessary to provide an acceptable response, then please provide a bracketed copy of your response that identifies the information that should be protected and a redacted copy of your response that deletes such information. If you request withholding of such material, you must specifically identify the portions of your response that you seek to have withheld and provide in detail the bases for your claim of withholding (e.g., explain why the disclosure of information will create an unwarranted invasion of personal privacy or provide the information required by 10 CFR 2.790(b) to support a request for withholding confidential commercial or financial information). If safeguards information is necessary to provide an acceptable response, please provide the level of protection described in 10 CFR 73.21.

Dated at King of Prussia, Pennsylvania
this 10th day of July 1998

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¹ Effective May 13, 1998, the base civil penalty for a Severity Level I violation was changed from $5,500 to $11,000 for large material users.