**NRC INSPECTION MANUAL** CQV/EQV

INSPECTION PROCEDURE 43004

INSPECTION OF COMMERCIAL-GRADE DEDICATION PROGRAMS

PROGRAM APPLICABILITY: 2504, 2507, 2700

43004‑01 INSPECTION OBJECTIVES

01.01 To verify that the dedicating entity=s commercial-grade dedication
program satisfies the requirements of Appendix B to 10 CFR Part 50
(Appendix B) with regard to the procurement and acceptance of
commercial-grade items (CGIs) for use as basic components in accordance
with 10 CFR Part 21.

01.02 To verify that the dedicating entity=s process for dedicating
CGIs, as implemented, meets the applicable portions of Appendix B and
provides reasonable assurance that CGIs will perform their intended
safety function.

43004‑02 INSPECTION REQUIREMENTS

02.01 Verify that the dedicating entity has established adequate
controls for performing technical evaluations of items or services to be
dedicated. This includes the review of materials, parts, equipment, and
processes for suitability of application as established in Criterion III
of Appendix B.

02.02 Verify that the dedicating entity has established adequate
controls for the acceptance of a CGI using the criteria established in
Criterion VII of Appendix B.

02.03 Verify that the dedicating entity has properly developed and
implemented a plan for commercial-grade dedications.

43004‑03 INSPECTION GUIDANCE

The inspector should verify that the entity inspected has a dedication
program that meets the applicable portions of Appendix B and 10 CFR Part
21.

03.01 Verify that the dedicating entity has established adequate
controls for the technical evaluation of the items or services to be
dedicated.

a.  [Technical Evaluations.]{.underline} Technical evaluations are
    conducted and documented by the responsible engineering
    organization. Technical evaluations identify the necessary technical
    and quality requirements that ensure the item will meet the intended
    design conditions. These requirements should include:

    1.  Determination of the item=s safety function, performance
        requirements, component/part functional classification, and
        application requirements (e.g., service conditions).

    2.  Review of the vendor=s technical data as well as industry
        operating experience, including feedback from previous
        dedication activities, NRC bulletins and information notices,
        supplier information letters, available industry data, and
        customer feedback to identify relevant technical information
        that may affect the suitability of the item.

    3.  Performance of a Failure Modes and Effects Analyses (FMEA) to
        identify the credible failure mechanisms of the item in the
        specific application under consideration.

    4.  The identification of the item=s critical characteristics based
        on the information developed above that will assure the
        suitability of all parts, materials, and services for their
        intended safety-related applications. Factors that should be
        considered include:

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(a) The important design, material, and performance characteristics that
    have a direct effect on the item\'s ability to accomplish its
    intended safety function.

(b) Active/passive safety-related functions, system safety/non-safety
    interfaces, and system compatibility under all design basis
    conditions.

(c) Any changes in design, material, or manufacturing process that could
    impact the functional characteristics of the item.

(d) Appropriate interface with the vendor to identify and characterize
    the design and functional parameters of specific parts.

(e) The number and nature of the critical characteristics are to be
    based on the intended safety function, application requirements,
    complexity, credible failure modes and effects, and performance
    requirements of the item.

(f) Those critical characteristics that cannot be effectively verified
    during post-receipt inspection and testing should be identified in
    order to

> apply an appropriate verification method during the manufacturing
> process.
>
> The identified critical characteristics that are important for the
> item to perform its safety function, as determined in the technical
> evaluation, are to be verified. Not all design requirements need to be
> considered critical characteristics; however, licensees or applicants
> must assure the suitability of all parts, materials, and services for
> their intended safety-related applications. This may involve the
> performance of surveys, special tests and/or inspections, or source
> verification on commercial-grade vendors as part of the vendor
> selection process to verify the adequacy of the vendor controls (see
> Acceptance Methods section below).

1.  Determination of the appropriate verification methods for each
    critical characteristic.

2.  Identification of the acceptance criteria for the verification
    method used consistent with the plant-specific application.

3.  Additional considerations for dedication of CGI for applications
    requiring environmental or seismic qualification:

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(a) Utilization of non-destructive methods to verify the critical
    characteristics of the item to provide reasonable assurance that
    each individual commercial-grade item will perform in the
    design-basis accident/event harsh environment (e.g., loss of coolant
    accident, high-energy line break, operating-basis earthquake,
    safe-shutdown earthquake). Like-for-like replacements should
    demonstrate performance equal to or better than the qualified
    prototype.

(b) The commercial-grade item=s safety function(s), functional
    performance requirements, and success criteria determinations should
    include design service conditions (harsh environment, seismic).

(c) Seismic and environmental qualification should be treated as
    critical characteristics to be verified.

    b.  Number range CHAPTER[Like-for-Like Commercial-Grade Item
        Replacements]{.underline}. A like-for-like replacement is a
        replacement of an item with one that is identical.
        Characteristics of like-for-like items are described below. A
        like-for-like replacement may be considered identical if:

-   The replacement item was purchased from the same vendor (successor
    companies may be accepted), provided all design, materials, or
    manufacturing processes are kept the same, or

-   The replacement item was purchased at the same time and the same
    vendor as the item it is replacing. For example, the item has the
    same manufacturing time frame as determined by the date purchased or
    date shipped from factory, date code, same batch or lot number.

> A like-for-like determination should not be based solely on the
> selection of a commercial-grade vendor with items manufactured to meet
> the same industry standards of the item that was originally supplied.
> Meeting the same industry standards may be a necessary condition, but
> is not a sufficient condition for a like-for-like determination.
>
> An equivalency evaluation is needed if:
>
> Differences from the original item are identified in the replacement
> item, then the item is not identical, but similar to the item being
> replaced, and an equivalency evaluation is necessary to determine if
> any changes in design, material, manufacturing process, safety, form,
> fit, function or interchangeability could impact the alternate
> replacement item=s ability to function under all design conditions
> (including design-basis event conditions) and ultimately the
> component\'s ability to perform its required safety function.

1.  Equivalency evaluations should not be used as the sole basis to
    accept a CGI for safety-related use. The identified critical
    characteristics should still be verified for acceptance of the item.

2.  If the dedicating entity can demonstrate that the replacement item
    is identical in its equivalency evaluation, then the safety
    function, design requirements and critical characteristics need not
    be redetermined. However, item acceptance, qualification of vendors
    and examination of products is still required.

03.02 Verify that the dedicating entity inspected has established
adequate controls for the acceptance of a CGI. The following are the
four acceptance methods:

a.  [Method 1: Special Test and Inspections.]{.underline} Special test
    and inspections should be used after the CGI is received for
    verification of critical characteristics to assure that the
    purchased material, equipment, or service, whether purchased
    directly or through contractors and subcontractors, meet the
    technical and quality requirements.

> Tests and inspections specified for acceptance are to be documented in
> a plan or checklist that should include:

-   The tests and inspections to be performed

-   The test methods and inspection techniques to be utilized

-   Verification of the identified critical characteristics consistent
    with the acceptance criteria determined in the technical evaluation

-   Documentation of the inspection and test results

> Receipt inspection activities should be used to establish and maintain
> traceability of CGIs.
>
> Inspections should include verification of objective evidence and
> performance of visual, dimensional, electrical, and mechanical
> inspections, or tests (as necessary) to assure product and material
> quality.

1.  Functional tests before installation and/or operational tests after
    installation may be performed to verify critical characteristics of
    the CGI.

> Measuring and test equipment should be properly calibrated. Qualified
> personnel should be used to perform the tests.

2.  Sampling plans for testing should be used in accordance with
    nationally recognized industry standards, and should have an
    adequate documented technical basis. This technical basis includes
    homogeneity, complexity of the item, lot/batch control for items,
    heat traceability for materials, and adequacy of the vendor=s
    controls as confirmed by a survey. Other means of demonstrating
    adequate lot/batch control may include satisfactory performance
    history and the results of receipt inspections/testing. When such
    methods are used as a basis for developing product sampling
    strategy, they should be supported by documented objective evidence.
    The CGI sampling process should be documented to develop the
    necessary objective evidence of the vendor=s ability to consistently
    provide acceptable items.

3.  When the verification of one or more critical characteristics is
    based on vendor-certified material test reports or certificates of
    conformance/compliance, the validity of these documents should be
    verified (see Method 2 below). The purchaser should verify that the
    vendor has established adequate traceability controls and that these
    controls are effectively implemented. When distributors are included
    in the supply chain, the activities of these distributors may need
    to be surveyed to ensure that traceability and proper storage
    conditions are maintained. Acceptance of an item using this method
    will be completed by performing a receipt inspection that includes
    the accompanying vendor=s certificate of conformance/compliance or
    certified material test report.

4.  Reliance on part number verification and certification documentation
    alone on receipt is insufficient to ensure the quality and
    suitability of commercially procured products.

> b\. [Method 2: Commercial-Grade Survey of Supplier]{.underline}.
> Commercial-grade surveys should be used when the purchaser desires to
> verify one or more critical characteristics based on the merits of a
> vendor=s commercial quality controls.
>
> Commercial-grade surveys should be conducted at a sufficient frequency
> to ensure that the process controls applicable to the critical
> characteristics of the procured item continue to be effectively
> implemented. Factors to be considered in determining the frequency of
> commercial-grade surveys include the complexity of the item, frequency
> of procurement, receipt inspection, item performance history, and
> knowledge of changes in the vendor\'s controls.
>
> Acceptance Method 2 should not be employed as the sole basis for
> accepting items from vendors with undocumented commercial quality
> control programs or with programs that do not effectively implement
> their own necessary controls.
>
> The entity should have a documented and effectively implemented
> program and/or procedures to control the critical characteristics of
> the item(s) being procured.

1.  The survey should be conducted by an individual(s) that is also
    trained in auditing and knowledgeable in the operation of the
    item(s) and the associated critical characteristics to be verified.
    The verification is accomplished by reviewing the vendor\'s
    program/procedures controlling these characteristics and observing
    the actual implementation of these controls in the manufacture of
    items identical or similar to the items being purchased.

2.  Critical characteristics that are not adequately controlled should
    be addressed by the contract requiring the vendor to institute
    additional controls or by utilizing other verification methods.

3.  If the vendor\'s controls are determined to be satisfactory,
    purchase orders for these items should invoke these controls as
    contract requirements by referencing the applicable
    program/procedure(s) and revision. Specific controls reviewed and
    accepted during the survey should be implemented during the
    manufacturing process.

4.  Commercial-grade survey plans should include the identification of
    the item or items for which the vendor is being surveyed,
    identification of the critical characteristics of these items that
    the vendor is expected to control, identification of the controls to
    be applied (program/procedure and revision), and a description of
    the verification activities performed.

5.  For survey reports prepared by third parties (e.g., a Nuclear
    Procurement Issues Committee (NUPIC) joint or member survey), the
    following factors should be considered:

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(a) Review and acceptance of the surveyors= procedure(s), checklists,
    and personnel (e.g., the NUPIC commercial-grade survey procedure and
    checklist).

(b) Ensure that the survey is critical characteristic-specific and plant
    application-specific.

(c) The survey report should demonstrate that the critical
    characteristics required for the purchaser\'s own application are in
    fact verified to be controlled by the vendor.

    7.  Actual handling of the item by a distributor should be addressed
        in terms of the distributor\'s controls (e.g., segregation of
        customer returns). However, other factors may be taken into
        account that may warrant the need for a distributor survey, such
        as:

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(a) The need for documented, verifiable traceability to the original
    equipment manufacturer.

(b) Presence and integrity of original equipment manufacturer
    packaging/markings, etc.

(c) The susceptibility of the item to undetectable damage or tampering.

(d) History or experience with the particular vendor and distributor(s).

> A survey of the distributor may not be necessary if there is a low
> probability of a distributor being able to have any effect on the
> condition of an item merely by having it in its physical possession,
> and where the distributor has rigorous controls on items during
> possession.
>
> Acceptance Method 2 should not be employed as the basis for accepting
> items from distributors unless the survey includes the part
> manufacturer(s) and the survey confirms adequate controls by both the
> distributor and the part manufacturer(s).

8.  The dedicating entity is responsible for the control of subsuppliers
    of parts, materials, or services. The dedicating entity is required
    to impose the necessary controls on subsuppliers consistent with the
    importance of the subcontracted item or service. Control of
    subsuppliers should also be adequately addressed by survey so that
    the supplier has an adequate basis to accept test results and
    certifications.

9.  A certificate of conformance or certified material test report by
    the original equipment manufacturer/vendor or material supplier may
    be acceptable, provided:

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(a) Documented, verified traceability to the original equipment
    manufacturer has been established, and

(b) The purchaser has verified that the original equipment manufacturer
    or material supplier has implemented adequate quality controls for
    the activity being certified.

    c.  [Method 3: Source Verification]{.underline}. Method 3 involves
        witnessing quality-related activities before releasing the CGI
        from the vendor or test laboratory facility to confirm by direct
        observation that the selected critical characteristics of the
        item being procured are satisfactorily controlled by the vendor.
        Source verification could also be used when specialized tests
        and/or inspections are required to verify selected critical
        characteristics and the equipment to perform these tests is
        available only at the vendor=s facilities.

        1.  Source verifications should be controlled by a documented
            plan. Factors to be considered in the plan include:

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(a) The identification of a specific process of interest that may be
    correlated with a manufacturing or testing phase.

(b) The verification method utilized to verify the critical
    characteristics for acceptance.

(c) Appropriate hold points to verify design, material, and performance
    characteristics during manufacture and/or testing relevant to the
    safety function of the item when those characteristics cannot be
    verified after the item has been completely manufactured.

(d) A dedicating entity inspector(s) who performs direct observations of
    the verification of a commercial-grade item=s critical
    characteristics and manufacture at the supplier facility. The
    inspector(s) should be a technical specialist skilled in audit
    practice and knowledgeable in operation of the item(s) and the
    associated critical characteristics to be verified.

(e) Documentation of the source verification results. This includes the
    critical characteristics for acceptance and the actual results
    obtained during verification. Deficiencies observed should be
    corrected by the supplier before shipping.

    2.  The dedicating entity inspector authorizes shipping and
        establishes initial traceability.

        d.  [Method 4: Acceptable Supplier/Item Performance
            Record]{.underline}. This method could be used to
            demonstrate one or more critical characteristics based upon
            documented acceptable item performance.

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1.  Examples of such documented performance records include: acceptable
    quality control of critical characteristics, or acceptable
    industry-wide performance. The use of industry-wide performance
    should not be employed alone unless the established documented
    performance record is based on industry-wide performance data that
    is directly applicable to the item\'s critical characteristics and
    the intended safety-related application.

> Information pertinent to the commercial-grade item=s quality of
> performance obtained from outside sources (e.g., operational event
> reports, NRC, vendor equipment technical information program, and
> Institute of Nuclear Power Operations) and from commercial-grade
> surveys, source verifications, receipt inspections, previous
> dedication or qualification, and operational history is factored into
> the dedication process.

2.  This method should be used in combination with one or more of the
    methods explained above to collect the objective evidence necessary
    to ensure acceptable historical performance of the supplier.

03.03 Review a representative sample of dedication packages to assess
whether procedures for dedication activities have been adequately
planned and implemented.

a.  Verify that the dedication process identifies those design,
    material, and performance characteristics relevant to the safety
    function as described in Section 03.01 of this procedure.

b.  Verify that the dedicating entity demonstrated that the critical
    characteristics are met using appropriate acceptance methods as
    described in Section 03.02 of this procedure.

03.04 [Definitions]{.underline}.

a.  [Basic component]{.underline}: A structure, system, component, or
    part thereof that affects its safety function necessary to assure:

-   The integrity of the reactor coolant pressure boundary;

-   The capability to shut down the reactor and maintain it in a safe
    shutdown condition; or

-   The capability to prevent or mitigate the consequences of accidents
    which could result in potential offsite exposures comparable to
    those referred to in 10 CFR 50.34(a)(1), 10 CFR 50.67(b)(2), or 10
    CFR 100.11, as applicable.

> Basic components are items designed and manufactured under a QA
> program complying with Appendix B to 10 CFR Part 50, or
> commercial-grade items which have successfully completed the
> dedication process.

In all cases, a basic component includes safety-related design,
analysis, inspection, testing, fabrication, replacement of parts, or
consulting services that are associated with the component hardware
whether these services are performed by the component supplier or
others.

b.  [Certificate of Compliance]{.underline}: A document attesting that
    the materials are in accordance with specified requirements.

c.  [Certified Material Test Report (CMTR)]{.underline}: A document
    attesting that the material is in accordance with specified
    requirements, including the actual results of all required chemical
    analyses, treatments, tests, and examinations.

d.  [Commercial-grade item]{.underline}: A structure, system, or
    component, or part thereof that affects its safety function, that
    was not designed and manufactured as a basic component.

e.  [Commercial-grade survey]{.underline}: Activities conducted by the
    purchaser or its agent to verify that a supplier of commercial-grade
    items controls, through quality activities, some or all of the
    critical characteristics of the designated commercial-grade items to
    be purchased. The verification can be used as a method to accept
    those characteristics. The commercial grade survey should include
    verification of the supplementary documentation and the effective
    implementation of the commercial-grade quality program.

f.  [Commercial-grade dedication package]{.underline}: An auditable
    collection of documents that is the result of the commercial-grade
    dedication process for a specific item and specific safety function.
    These documents contain the technical and quality basis for
    satisfying the commercial-grade item dedication process, and provide
    the objective evidence to reasonably assure that the dedicated
    commercial-grade item will perform its required safety function.

g.  [Critical characteristics]{.underline}: Those important design,
    material, and performance characteristics of a commercial-grade item
    that, once verified, will provide reasonable assurance that the item
    will perform its intended safety function.

h.  [Dedicating entity]{.underline}: The organization that performs the
    dedication process. Dedication may be performed by the manufacturer
    of the item, a third-party dedicating entity, and/or the licensee
    itself. The dedicating entity is responsible for identifying and
    evaluating deviations, reporting defects and failures to comply for
    the dedicated item, and maintaining auditable records of the
    dedication process. (10 CFR Part 21)

i.  [Dedication]{.underline}: An acceptance process undertaken to
    provide reasonable assurance that a commercial-grade item to be used
    as a basic component will perform its intended safety function and,
    in this respect, is deemed equivalent to an item designed and
    manufactured under an Appendix B, quality assurance program. This
    assurance is achieved by identifying the critical characteristics of
    the item (not required in like-for-like replacements) and verifying
    its acceptability by inspections, tests, or analyses performed by
    the purchaser or third-party dedicating entity after delivery
    (Method 1), supplemented as necessary by one or more of the
    following: commercial-grade surveys (Method 2), product inspections
    or witness at holdpoints at the manufacturer\'s facility (Method 3),
    and analysis of historical records for acceptable performance
    (Method 4). In all cases, the dedication process must be conducted
    in accordance with the applicable provisions of Appendix B. (10 CFR
    Part 21)

j.  [Engineering Judgment]{.underline}: A process of logical reasoning
    performed by a qualified individual that leads from stated premises
    to a conclusion. This process should be supported by sufficient
    documentation to permit verification by a qualified individual.

k.  [Like-for-like Replacement]{.underline}: Replacement of an item with
    one that is identical.

l.  [Procurement Document]{.underline}: A contract that defines the
    technical and quality requirements that must be met in order to be
    considered acceptable by the purchaser.

m.  [Source Verification]{.underline}: Activities witnessed at the
    supplier\'s facilities by the purchaser or its agent before
    releasing the CGI from the vendor or test laboratory facility to
    confirm by direct observation that the selected critical
    characteristics are verified by the vendor.

n.  [Traceability]{.underline}: The ability to verify the history,
    location, or application of an item by means of recorded
    identification. Traceability to the manufacturer is required when
    the manufacturer is relied upon to verify one or more critical
    characteristics.

43004‑04 RESOURCE ESTIMATE

Inspection resources necessary to complete this inspection procedure are
estimated to be 160 hours of direct inspection per facility.

43004‑05 REFERENCES

10 CFR Part 21, \"Reporting of Defects and Noncompliance.\"

10 CFR Part 50, Appendix B, \"Quality Assurance Criteria for Nuclear
Power Plants and Fuel Reprocessing Plants.\"

U.S. Nuclear Regulatory Commission. Generic Letter 89-02, AActions to
Improve the Detection of Counterfeit and Fraudulently Marketed
Products.@ NRC: Washington, DC. March 21, 1989. (ADAMS Accession No.
ML031140060.)

U.S. Nuclear Regulatory Commission. Generic Letter 91-05, ALicensee
Commercial-Grade Procurement and Dedication Programs.@ NRC: Washington,
DC. April 9, 1991. (ADAMS Accession No. ML031140508.)

NRC Inspection Procedure (IP) 38703, ACommercial-Grade Dedication.@

ANSI/ASME NQA-1, \"Quality Assurance Program Requirements for Nuclear
Facility Applications,\" 1994 Edition

EPRI NP-5652, \"Guideline for the Utilization of Commercial - Grade
Items in Nuclear Safety-Related Applications (NCIG-07)\"

EPRI NP-6406, \"Guidelines for the Technical Evaluation of Replacement
Items in Nuclear Power Plants (NCIG-11)\"

EPRI NP-6629, \"Guidelines for the Procurement and Receipt of Items for
Nuclear Power Plants (NCIG-15)\"

EPRI NP-6630, \"Guidelines for Performance - Based Supplier Audits
(NCIG-16)\"

EPRI NP-6895, \"Guidelines for the Safety Classification of Systems,
Components, and Parts Used in Nuclear Power Plant Applications
(NCIG-17)\"

EPRI NP-7218, \"Guideline for the Utilization of Sampling Plans for
Commercial - Grade Item Acceptance (NCIG-19)\"

END

Attachment 1: Revision History

Attachment 1

Revision History For 43004

+--------+--------+-----------------------+------+-------+-------------+
| Comm   | Issue  | Description of Change | Trai | Tra   | Comment     |
| itment | Date   |                       | ning | ining | Resolution  |
| Tr     |        |                       | Ne   | Com­pl | Accession   |
| acking |        |                       | eded | etion | Number      |
| Number |        |                       |      | Date  |             |
+--------+--------+-----------------------+------+-------+-------------+
|        | 10     | Researched            | N/A  | N/A   | N/A         |
|        | /03/07 | commitments for 4     |      |       |             |
|        |        | years and found none. |      |       |             |
|        | CN 07  |                       |      |       |             |
|        | 030    | Initial issuance      |      |       |             |
+--------+--------+-----------------------+------+-------+-------------+
|        |        |                       |      |       |             |
+--------+--------+-----------------------+------+-------+-------------+
|        |        |                       |      |       |             |
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|        |        |                       |      |       |             |
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|        |        |                       |      |       |             |
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|        |        |                       |      |       |             |
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