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EA-02-043 - J. L. Shepherd and Associates

June 11, 2002

EA 02-043

Mr. J. L. Shepherd
President
J. L. Shepherd and Associates
1010 Arroyo Ave.
San Fernando, CA 91340

SUBJECT:   NOTICE OF VIOLATION AND PROPOSED IMPOSITION OF CIVIL PENALTY – $19,200
(NRC Inspection Report No. 01-201 and Investigation Report No. 4-2001-027)

Dear Mr. Shepherd:

This refers to the inspection conducted on May 29-31, 2001, and the investigation conducted between June 22, 2001, and January 17, 2002, at your San Fernando, California, facility. The inspection was conducted as a result of an April 17, 2001, letter from the French Competent Authority raising concerns about noncompliance of your August 15, 2000, shipment of a transportation package undergoing multilateral approval. The U.S. Nuclear Regulatory Commission (NRC) staff conducted an inspection of the returned package at J. L. Shepherd & Associates (JLS&A) facility to determine if JLS&A had delivered for export a transportation package, Model No A-0109 irradiator in an A-0117 overpack, that was not of the design allowed under the Certificate of Compliance (CoC) No. 6280. The inspection report was issued to you on July 16, 2001. The investigation was conducted, in part, to determine if JLS&A, an NRC licensee, in San Fernando, California, deliberately failed to comply with a CoC regarding the packaging and shipment of radioactive material. A factual summary of the investigation report was provided to you in a letter dated March 7, 2002. You and members of your staff attended a predecisional enforcement conference at NRC Headquarters on April 3, 2002.

Based on the information developed during the inspection and investigation and the information that you provided during the conference, the NRC has determined that violations of NRC requirements occurred. These violations are cited in the enclosed Notice of Violation and Proposed Imposition of Civil Penalty, and the circumstances surrounding them are described in detail in the subject inspection report and the investigation factual summary. The violations are based on JLS&A's willful failure to comply with CoC No. 6280 with regard to fabrication and shipment of packages. The violations are significant for a number of reasons. The irradiators were not built in accordance with an approved design and tested as required in 10 CFR Part 71, but were shipped. The actual safety consequences associated with this shipment were small because the package was exported and imported without incident and the radiation levels were within regulatory requirements. However, the potential safety consequences are significant if one considers the possible impact of shipping an unapproved package design that has not been demonstrated to meet the transportation package approval standards and the impact of JLS&A's actions on the NRC's ability to perform its regulatory function to approve Type B package designs. Changes made to the packages were extensive, including but not limited to the use of different blocking and bracing materials, different shielding materials, and different dimensions. None of these changes were reviewed to determine what effect they had on the package. You and members of your staff were aware of the requirement to submit changes to the irradiator and overpack designs to the NRC for approval, but failed to do so. You were first made aware of this requirement in 1991 and again in 1999, when the NRC identified that the Model A-0117 overpacks did not meet their CoC. You and members of your staff failed to thoroughly address the problem and implement adequate corrective actions to correct the problem and ensure that shipments made from JLS&A met the approved CoCs. Therefore, these violations are categorized collectively in accordance with the "General Statement of Policy and Procedure for NRC Enforcement Actions" (Enforcement Policy), NUREG-1600 as a Severity Level II problem.

In accordance with the Enforcement Policy, a base civil penalty in the amount of $9,600 is considered for a Severity Level II problem. Because this problem was committed willfully, the NRC considered whether credit was warranted for Identification and Corrective Action in accordance with the civil penalty assessment process in Section VI.C.2 of the Enforcement Policy. With regard to identification, the problem was identified by the NRC in response to questions raised in the April 17, 2001, letter from the French Competent Authority. Thus JLS&A is not deserving of identification credit. With regard to corrective actions, the package was not in conformance with the CoC when it was shipped and changes were made only after the NRC issued an Order, dated July 3, 2001, withdrawing approval for the JLS&A Quality Assurance Program. Therefore, credit for corrective actions was not given.

To emphasize the importance of accurate and complete information and compliance with the regulations, I have been authorized, after consultation with the Director, Office of Enforcement, to issue the enclosed Notice of Violation and Proposed Imposition of Civil Penalty (Notice) at twice the base amount of $19,200 for the Severity Level II problem. In addition, issuance of this Notice constitutes escalated enforcement action, that may subject you to increased inspection effort.

In addition, based on the information developed during the inspection and investigation and the information that you provided during the conference, the NRC determined that one additional violation of NRC requirements occurred that does not warrant imposition of a civil penalty. This violation addressed a failure to assign an independent quality assurance manager. This violation is cited in the enclosed Notice and the circumstances surrounding it are described in detail in the subject inspection report and investigation factual summary. The remaining apparent violations addressed in NRC Inspection Report No. 01-201 were determined to be addressed in the Severity Level II problem.

You are required to respond to this letter and 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 accordance with 10 CFR 2.790 of the NRC's "Rules of Practice," a copy of this letter, its enclosure(s), and your response will be made available electronically for public inspection in the NRC Public Document Room or from the Publicly Available Records (PARS) component of the NRC's document system (ADAMS). ADAMS is accessible from the NRC Web site at http://www.nrc.gov/reading-rm/adams.html (the Public NRC Library).

  Sincerely,

/RA/

Martin J. Virgilio, Director
Office of Nuclear Material Safety
   and Safeguards

Docket Nos. 71-0122, 71-6280
Approval No. 0122

Enclosures:
1. Notice of Violation and Proposed Imposition of Civil Penalty
2. NUREG/BR-0254 Payment Methods (Licensee only)

cc:
Don Irwin, Hunton & Williams
Rick Boyle, Department of Transportation
Michael Wangler, Department of Energy
Ed Bailey, State of California
Kathleen McCallester, State of Massachusetts

NOTICE OF VIOLATION
AND
PROPOSED IMPOSITION OF CIVIL PENALTY

J. L. Shepherd and Associates
San Fernando, California		   Docket No. 71-0122
Approval No. 0122
EA-02-043

During an NRC investigation conducted between June 22, 2001, and January 17, 2002, and an NRC inspection conducted on May 29-31, 2001, violations of NRC requirements were identified. In accordance with the "General Statement of Policy and Procedure for NRC Enforcement Actions," NUREG-1600, the NRC proposes to impose a civil penalty 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 particular violations and associated civil penalty are set forth below:

I.   Violations Assessed a Civil Penalty

A.   10 CFR 71.7(a) states, in part, that information provided to the Commission by a licensee must be complete and accurate in all material respects.

Contrary to the above, on December 29, 1999, JLS&A requested renewal of Certificate of Compliance No. 6280 dated January 11, 1995, and stated that "There have been no revisions to the package design since the last application..." This information was not complete and accurate in all material respects, in that the design of the A-0109 Irradiator had been changed on multiple occasions prior to December 29, 1999. Specifically, JLS&A revised the design of the A-0109 Irradiator on December 15, 1999, to include drawings A-0109-4068-1, and A-0109-4068-11 which revised or replaced the designs specified in drawings A-0109-A1, A-0109-10, and A-0109-20 listed in Certificate of Compliance No. 6280. This information was material to the Commission as it was used as the basis for the Commission's renewal of Certificate of Compliance No. 6280 on March 2, 2000.

B.   10 CFR 71.12(a) states that a general license is hereby issued to any licensee of the Commission to transport, or to deliver to a carrier for transport, licensed material in a package for which a license, certificate of compliance, or other approval has been issued by the NRC.

10 CFR 71.12(c)(2) states, in part, that the general license in 10 CFR 71.12 applies only to a licensee who complies with the terms and conditions of the Certificate of Compliance.

10 CFR 71.12(e) states, in part, that for a Type B package, the design of which was approved by NRC before April 1, 1996, the general license is subject to the additional restrictions of 10 CFR 71.13. 10 CFR 71.13 (a) states, in part, that a Type B package previously approved by NRC but not designated as B(U) or B(M) in the identification number of the NRC Certificate of Compliance, may be used under the general license of 10 CFR 71.12 with the condition that fabrication of the packaging was satisfactorily completed by August 31, 1986.

Certificate of Compliance No. 6280, dated March 2, 2000, Model No: A-0109 Irradiator in A-0117 Overpack, Condition 5(a), states in part that the Model No: A-109 Irradiator must be fabricated in accordance with JL Shepherd & Associates Drawings A-0109-A1, dated June 6, 1969; A-0109-10, dated February 3, 1970; and A-0109-20 dated February 5, 1970.

1.   Contrary to the above, as of July 17, 2000, JLS&A routinely transported and delivered licensed material to a carrier for transport under the general license pursuant to 10 CFR 71.12, and did not comply with the terms and conditions of Certificate of Compliance No. 6280. Specifically, on July 17, 2000, JLS&A transported a A-0109 Irradiator in a A-0117 Overpack from Ypsilanti, MI to Los Angeles, CA under the general license in 10 CFR 71.12, and the A-0109 Irradiator had not been fabricated in accordance with the design specified in Certificate of Compliance No. 6280. The A-0109 Irradiator had been fabricated from JLS&A Drawings A-0109-4068-1, and A-0109-4068-11, dated December 15, 1999, rather than drawings A-0109-A1, dated June 6, 1969; A-0109-10, dated February 3, 1970; and A-0109-20 dated February 5, 1970, as required by Certificate of Compliance No. 6280.

2.   Contrary to the above, JLS&A used a Type B package under the general license of 10 CFR 71.12 that was previously approved by the NRC and was not designated as B(U) or B(M) in the identification number of the NRC Certificate of Compliance, but had been fabricated after August 31, 1986. Specifically, between March 2000 and April 2001, JLS&A prepared and shipped a Model A-0109 Irradiator, Serial No. 3040, intended for Ethiopia, that had been fabricated on March 22, 2000. The Model A-0109 Irradiator, in a Model A-0117 Overpack, had previously been approved under NRC Certificate of Compliance No. 6280 and was not designated as B(U) or B(M) in the identification number of the NRC Certificate of Compliance.

C.   10 CFR 71.85 states, in part, that before the first use of any packaging for the shipment of licensed material, the licensee shall conspicuously and durably mark the packaging with its model number, serial number, gross weight, and a package identification number assigned by NRC, and that, before applying the model number to the packaging, the licensee shall determine that the packaging has been fabricated in accordance with the design approved by the Commission.

Contrary to the above, on multiple occasions, JLS&A did not determine that packaging had been fabricated in accordance with the design approved by the Commission before first use of the packaging. Specifically, JLS&A made shipments using 40 Model A-0109 Irradiators that had not been fabricated in accordance with the design approved by the Commission under Certificate of Compliance No. 6280.

D.   10 CFR 110.50(a)(7) requires that a licensee shall not proceed to export or import and shall notify the Commission promptly if he or she knows or has reason to believe that the packaging requirements of 10 CFR Part 71 have not been met.

Contrary to the above, in April 2001, JLS&A failed to promptly notify the Commission that a package, that JLS&A planned to import in accordance with 10 CFR Part 110, did not meet the packaging requirements of 10 CFR Part 71. In addition, JLS&A willfully imported the package after being notified that it did not meet the requirements of 10 CFR Part 71. Specifically, JLS&A was notified by the French Competent Authority on April 17, 2001, that a Model No. A-0109 Irradiator in an A-0117 Overpack package did not meet the requirements of 10 CFR Part 71, in that the package construction did not conform with the design approved under Certificate of Compliance No. 6280. After receiving the French notification, JLS&A did not notify the Commission, and imported the package.

This is a Severity Level II problem (Supplement V).
Civil Penalty – $19,200.
II.   Violations Not Assessed a Civil Penalty

A.   10 CFR 71.103(d) states, in part, that the persons and organizations performing quality assurance functions shall report to a management level that assures that the required authority and organizational freedom, including sufficient independence from cost and schedule, when opposed to safety considerations, are provided.

Contrary to the above, as of July 16, 2001, the Vice President responsible for customer service, sales, and technical support also served as the Acting Quality Assurance/Quality Control Program Plan Administrator. This organizational structure did not provide sufficient independence from cost and schedule considerations.

This is a Severity Level IV violation (Supplement V).

Pursuant to the provisions of 10 CFR 2.201, JLS&A is hereby required to submit a written statement or explanation to the Director, Office of Enforcement, U.S. Nuclear Regulatory Commission, with a copy to the Director, Office of Nuclear Material Safety and Safeguards, within 30 days of the date of this Notice of Violation and Proposed Imposition of Civil Penalty (Notice). This reply should be clearly marked as a "Reply to a Notice of Violation" and should include for each alleged violation: (1) admission or denial of the alleged violation, (2) the reasons for the violation if admitted, and if denied, the reasons why, (3) the corrective steps that have been taken and the results achieved, (4) the corrective steps that will be taken to avoid further violations, and (5) 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. Consideration may be given to extending the response time for good cause shown. 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 penalty proposed above or the cumulative amount of the civil penalties if more than one civil penalty is proposed, in accordance with NUREG/BR-0254 and by submitting to the Director, Office of Enforcement, U. S. Nuclear Regulatory Commission, Washington, DC 20555, a statement indicating when and by what method payment was made, or may protest imposition of the civil penalty 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 penalty will be issued. Should JLS&A elect to file an answer in accordance with 10 CFR 2.205 protesting the civil penalty, 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(s) 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 penalty should not be imposed. In addition to protesting the civil penalty, in whole or in part, such answer may request remission or mitigation of the penalty.

In requesting mitigation of the proposed penalty, the factors addressed in Section VI.C.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 JLS&A is directed to the other provisions of 10 CFR 2.205, regarding the procedure for imposing a civil penalty.

Upon failure to pay any civil penalty 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 penalty, unless compromised, remitted, or mitigated, may be collected by civil action pursuant to Section 234(c) of the Act, 42 U.S.C. 2282c.

The response noted above (Reply to Notice of Violation, statement as to payment of civil penalty, and Answer to a Notice of Violation) should be addressed to: Frank Congel, 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 Director, Office of Nuclear Material Safety and Safeguards.

Because your response will be made available electronically for public inspection in the NRC Public Document Room or from the Publicly Available Records (PARS) component of NRC's document system (ADAMS), to the extent possible, it should not include any personal privacy, proprietary, or safeguards information so that it can be made available to the public without redaction. ADAMS is accessible from the NRC Web site at http://www.nrc.gov/reading-rm/adams.html (the Public NRC Library). 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.

In accordance with 10 CFR 19.11, you may be required to post this Notice within two working days.

Dated this 11th day of June 2002

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