It's no secret that managing the product returns supply chain is different from handling the traditional outbound, or "forward" logistics, function—a fact that makes "reverse logistics" daunting to many practitioners.

You can add this to the list of challenges: Many returns contain hazardous materials, an inconvenient truth that often goes unnoticed by retailers.

For manufacturers, this is generally not a problem. They know their products' properties and handle returns in compliance with the laws and regulations that govern hazmat transportation, distribution, and storage. Retailers' employees, though, don't always recognize the potential hazards inherent in some consumer products. As a result, they may unknowingly violate federal laws and regulations.

Such ignorance puts companies at risk for penalties, lawsuits, employee injury, and property damage. And the risk isn't going away. Due to retailers' increasingly liberal returns policies, the volume of hazardous consumer goods in the reverse logistics stream is likely to increase, according to experts. Consumers' "voracious appetite for consumer electronics and the shrinking lifespan of these devices" means that hundreds of millions of potentially hazardous products are returned or discarded annually on a worldwide basis, says Joe King, vice president of sales, aftermarket solutions, for third-party logistics service provider ModusLink.

That's why it's more important than ever that reverse logistics operations be fully compliant with hazmat laws and regulations, not only at the warehouse or returns center but also at the retail store level. Costly though that may be, the potential consequences of failing to ensure compliance—possibly life-threatening injuries to employees and customers, lawsuits, enormous fines, and damage to facilities—are far worse.

Here's a look at the extent of this troubling situation, the reasons behind it, and what can be done about it.

Wait—that's hazardous?
A surprising number of consumer products are regulated as hazardous materials. Some, like household cleaners and solvents, are fairly obvious, says Keith Anderson, senior director of regulatory compliance for Inmar, a third-party logistics company. But the average person may not think of items like health and beauty care products, aerosols, and batteries as hazardous, he says.

Most consumer electronics, including televisions, cameras, mobile handsets, computer monitors, and printers, contain materials that could be considered hazardous, says King. "Televisions, for example, are built with electronic circuit boards, glass, and color cathode ray tubes (CRTs), which often contain hazardous materials such as lead and mercury, as well as lesser-known toxins like cadmium, chromium, antimony, beryllium, and brominated flame retardants," he explains.

Sometimes only parts of consumer goods are subject to regulation, says Robert Jaffin, who teaches an online course in hazmat reverse logistics for the American Public University. Seemingly innocuous components like the toner in printer cartridges or the ink in dry-erase markers become a health and regulatory risk when a commercial entity accepts them as returned goods, he says.

Some items that were not subject to regulation when purchased by the consumer may be hazardous when they are returned, notes Jack Currie, administrator of the Council on Safe Transportation of Hazardous Articles (COSTHA) and president of the regulatory compliance firm Currie Associates. Examples include construction, camping, and lawn and garden equipment powered by gasoline, kerosene, or propane. If these machines have been used, then there will be fuel, oil, and—most dangerous of all—volatile vapor in the fuel tanks, fuel lines, and engines, he says.

Regulated products that were properly packaged, documented, and handled when shipped to a retailer's distribution center often aren't recognized as hazmats when consumers return them. That's partly due to a lack of awareness among store associates, many of whom are working in part-time, seasonal, or high-turnover positions and may not have been fully trained in hazmat regulatory compliance or even overlooked altogether.

As a result, Currie says, it's common for customer service or stockroom associates to toss hazardous (and frequently incompatible) items in any handy cardboard box or returnable tote, and then return them—undeclared, unprotected, and often mislabeled—to a warehouse or distribution center.

The presence of hazardous materials in returned consumer goods poses both legal and safety risks for reverse logistics operations, experts say. However, steps can be taken to minimize those risks and comply with applicable regulations. While not a comprehensive list, the following tips from the experts we consulted for this article can get a company headed in the right direction:

• Follow the same hazmat policies and procedures you use in forward logistics in your reverse logistics operations. All of the legal and safety requirements that apply to outbound shipments also apply to returns. That includes documentation, labeling, packaging, transportation, mitigation and safety plans, and training, Anderson says. Make sure the returned-goods areas of facilities have the necessary safety equipment, and that insurance coverage reflects these hazmat-related activities and conditions, Jaffin advises.
• Train the right people. Experts recommend that anybody who could be called on to handle returned consumer goods, whether at a customer service desk, in a stockroom, in transportation, or at the warehouse or returns center, receive job-appropriate hazmat safety training.
• Teach employees to recognize "red flags." Rather than focus on specific products, think in terms of categories that are likely to contain hazardous materials. Employees should know, for example, that all lighting, aerosols, home electronics, cleaning supplies, pet care products, perfumes and nail polishes, and lawn and garden care products—to name just a few—could contain hazardous materials, and they should handle all such returns accordingly.
• Pay attention to packaging. Whether at the customer service desk, in the stockroom, or at the shipping dock, employees need to know they can't randomly toss an assortment of items into any available box, Currie says. Returned consumer goods containing hazardous materials must be properly packaged and secured in accordance with Department of Transportation (DOT) regulations before they're sent to a warehouse or returns center. Jaffin points out that companies are required by law to report improperly packaged hazmat shipments to DOT. "You have accepted considerable responsibility if you receive and open those shipments," he warns.
• Segregate incompatible merchandise. Train store and stockroom associates to separate products that could produce a dangerous reaction. Currie cites one case where retail associates shipped a drum containing water-activated fumigants together with bottles of cleaning fluids to a returns center. A single leak would have released toxic gas—with potentially fatal consequences for anyone who opened the drum at the warehouse. And don't package food or consumables with "ORM-D" items—consumer packaged goods classified as hazardous by DOT. Because of the risk of contamination, the consumables may no longer be fit for use and will have to be destroyed.
• Be aware that some returned consumer goods must be treated as hazardous waste. Because returned items that are leaking, damaged, or have expired must sometimes be classified as hazardous waste, a hazardous waste program should be in place at the retail location, DC, and reverse logistics operation, recommends Anderson of Inmar. That will require registration as a hazardous waste generator, employee training, a designated hazardous waste storage area, and compliance with a number of specific regulatory requirements.
• Send in the experts. Even with training, retail associates who handle customer returns may need additional support to ensure they're complying with all of the applicable regulations. Some consumer product manufacturers help out by providing approved packaging and instructions for returns, while some power equipment makers send out contractors to clean fuel systems in returned merchandise before it's shipped anywhere. Consider sending consultants, third-party logistics specialists, or your own in-house experts to conduct audits and train associates at the store level. Or you may decide to hand returns management over to a third party. But don't assume that all reverse logistics services are handling your materials properly, cautions King of ModusLink. Ask for copies of documented procedures—not just for direct providers, but also for their vendors, he says.