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The latest regulatory target: Batteries?

An obscure piece of regulation has the potential to wreck havoc on supply chains — and could boost the price of your iPad.

By Jia Lynn Yang, writer

The lithium-ion battery is the unsung hero of our gadget-obsessed times. It’s everywhere: in laptops, cameras, medical devices, BlackBerrys, yes, even iPads.

Regulators at the Department of Transportation are less thrilled with the rechargeable batteries and say they can self-combust in mid-flight, so they’re proposing stricter rules around their shipment.

The changes would affect a huge swath of companies, like UPS , Best Buy , Apple , and Medco , to name a few, and they’re not happy about it. Opponents say the rules being proposed by the DOT would seriously disrupt their supply chains.

Under the proposed regulation, which the DOT will finalize later this year, companies would have to reconfigure how they arrange products on every plane.

Critics say this will force companies to make more shipments to move the same number of products — resulting in higher costs for everyone, including consumers.

UPS, in a comment to the DOT, said a review of the shipping activity of just seven of its 1.8 million customers showed annual volumes of 40 million shipments containing lithium cells and batteries. Daily air shipments of lithium batteries just from these seven shippers, it said, would exceed 156,000.

The business interests are up against the Air Line Pilots Association, which has been prodding the chairman of the House Transportation Committee, Jim Oberstar (D-Minn.), to tighten the rules. The group points to a 2006 fire on a UPS cargo aircraft with the batteries on-board at Philadelphia International airport. The National Transportation Safety Board investigated the incident but did not determine the source of the fire.

But opponents of the new rule say past incidents have resulted from people breaking existing rules, and the additional rules go too far. If the DOT does approve them, it might have to figure out how to implement the changes in time for the all-important sales stretch leading to December. Because while consumers may not realize it, they’ll all be wanting lithium-ion batteries this Christmas.