Petitions for Rulemaking, Defect and Noncompliance Orders; Standards Enforcement and Defect Investigations; Defect and Noncompliance Reports; Record Retention; and Defect and Noncompliance Notification

DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

49 CFR Parts 552, 554, 573, 576, and 577

[Docket No. 93-68; Notice 2]

RIN 2127-AD83

Petitions for Rulemaking, Defect and Noncompliance Orders;

Standards Enforcement and Defect Investigations; Defect and

Noncompliance Reports; Record Retention; and Defect and Noncompliance

Notification

AGENCY: National Highway Traffic Safety Administration, DOT.

ACTION: Final rule.

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SUMMARY: The National Highway Traffic Safety Administration (NHTSA) is

amending several provisions of its regulations that pertain to its

enforcement of the provisions of Chapter 301 of Title 49 of the United

States Code (49 U.S.C. 30101-169, formerly the National Traffic and

Motor Vehicle Safety Act), with respect to manufacturers' obligations

to provide notification and remedy without charge to owners of motor

vehicles or items of motor vehicle equipment that have been determined

not to comply with a Federal motor vehicle safety standard or to

contain a defect related to motor vehicle safety.

Some of the rules published today implement provisions added by the

Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA),

regarding requirements for notification of certain vehicle lessees and

for a second notification to owners of recalled vehicles and items of

motor vehicle equipment in the event that NHTSA determines that the

original notification has not resulted in an adequate number of

vehicles or items of equipment being returned for remedy.

This rule also amends the regulation governing NHTSA's

consideration of petitions for rulemaking or for an investigation of an

alleged safety-related defect or a noncompliance with a Federal motor

vehicle safety standard (49 CFR part 552) and NHTSA's procedures

following an initial determination that a safety-related defect exists.

49 CFR part 554. The rule also makes several changes in the regulations

governing the form and content of defect and noncompliance reports

submitted to NHTSA by manufacturers (49 CFR part 573); and to the

agency's record retention requirements. 49 CFR part 576. Finally, this

rule amends various sections of 49 CFR part 577 regarding the

requirements for notification to owners, purchasers, dealers and

lessees of safety-related defects and noncompliances.

DATES: Effective date: The amendments made in this rule are effective

May 5, 1995.

Any petitions for reconsideration must be received by NHTSA no

later than May 5, 1995.

ADDRESSES: Any petitions for reconsideration should refer to the docket

and notice number of this notice and be submitted to: Docket Section,

Room 5109, National Highway Traffic Safety Administration, 400 Seventh

Street, SW., Washington, DC 20590. (Docket Room hours are 9:30 a.m.-4

p.m., Monday through Friday.)

FOR FURTHER INFORMATION CONTACT: Jonathan D. White, Office of Defects

Investigation, National Highway Traffic Safety Administration, 400

Seventh Street, SW, room 5319, Washington, DC 20590; (202) 366-5227.

SUPPLEMENTARY INFORMATION: These amendments are being adopted by NHTSA

after considering comments received from numerous sources in response

to a Notice of Proposed Rulemaking (NPRM) published on September 27,

1993. 58 FR 50314. NHTSA received comments on some or all of the

proposed amendments from the following: ABAS Marketing, Inc. (Strait

Stop); American Honda Motor Company (Honda); American Automobile

Manufacturers Association (AAMA); Association of International

Automobile Manufacturers (AIAM); Advocates for Highway and Auto Safety

(Advocates); AM General Corporation (AM General); Blue Bird Body

Company (Blue Bird); CIMS; Center for Auto Safety (CAS); Fleetwood

Enterprises, Inc. (Fleetwood); The Kelly-Springfield Tire Company

(Kelly-Springfield); Motor and Equipment Manufacturers' Association

(MEMA); Mack Trucks, Inc. (Mack); Midland-Grau Heavy Duty Systems, Inc.

(a subsidiary of Echlin, Inc.) (Midland); Navistar International

Transportation Corporation (Navistar); National Automobile Dealers

Association (NADA); R.L. Polk & Company (Polk); Sierra Products, Inc.

(Sierra); Truck Manufacturers; Toyota Motor Corporate Services of North

America (Toyota); and Volkswagen of America, Inc (Volkswagen). The

reasons for the proposals were fully discussed in the NPRM.

Not all of the amendments proposed in the NPRM are being adopted as

final rules today. With respect to the proposed amendment of 49 CFR

part 577 regarding the duty of manufacturers to notify dealers of

defects and noncompliances that are determined to exist, discussed in

the NPRM (see 58 FR at 50320), NHTSA has decided that it needs

additional time to consider the appropriate action to take in light of

the issues raised by some of the commenters. Since these issues do not

affect the remaining proposed amendments, the agency has decided to

issue a final rule with respect to those amendments while it resolves

the issues relating to dealer notification.

The regulatory provisions amended by this final rule implement the

National Traffic and Motor Vehicle Safety Act of 1966, as amended

(``Act''), which was originally set out at 15 U.S.C. 1381 et seq.

Recently, as part of a comprehensive codification of transportation

laws, the Act was reenacted as Chapter 301 of Title 49 of the United

States Code. Pub.L. 103-272 (July 5, 1994). Congress specified in

section 6(a) of the statute that the codification is not to be

construed as making any substantive changes, but changed the wording of

almost every section. Some of these changes affect the wording of

sections of NHTSA's regulations that are being amended in this final

rule. The agency believes it is desirable that the language of its

regulations be consistent with that used in the statute. Therefore,

this rule also makes technical amendments to the regulations covered by

this notice to make their wording conform to the language used in the

recodification. Any such amendments will be noted in the appropriate

section of the preamble. The agency emphasizes that, because

[[Page 17255]] Congress did not intend the changes in terminology to be

substantive, these amendments are technical only and do not alter the

meaning of the regulations.

Amendments to Part 552--Petitions for Rulemaking and for Defect and

Noncompliance Investigations

Part 552 implements the citizen petition provisions of 49 U.S.C.

30162 (formerly section 124 of the Act). This rule adopts the proposed

amendments to 49 CFR 552.6 and 552.8 in order to remove any possible

ambiguity with regard to the factors that NHTSA may consider when

deciding whether to grant or deny a citizen petition. The new language

of Sec. 552.8 makes it clear that the regulation does not limit NHTSA's

discretion to consider factors such as resource allocation, agency

priorities, and likelihood of success in litigation which might arise

from the order, when deciding whether to grant or deny petitions filed

pursuant to the Act. The amendment also deletes the reference in

Sec. 552.6 to a determination by the Associate Administrator that there

is a ``reasonable possibility'' that the requested order will be

issued.

While the amended regulation lists some specific factors that the

agency may consider in deciding whether to grant or deny the petition,

the listing is not intended to be exhaustive. It does not preclude the

agency from considering factors not listed. The rule does not require

the agency to consider all factors listed, nor does it set an order of

priority in which the factors must be considered.

Two commenters, CAS and Advocates, expressed the view that the

proposed amendment is too broad or vague, that it should specify safety

as the first factor that NHTSA should consider, and that it should list

certain other specific factors that the agency must consider. While

safety is certainly one factor that the agency will consider, these

commenters fail to recognize that the regulation is intended to be

consistent with the broad discretion given to NHTSA by the Act to grant

or deny petitions. The United States Court of Appeals for the District

of Columbia Circuit recognized the breadth of the discretion conferred

by the Act in Center for Auto Safety v. Dole, 846 F.2d 1532 (D.C. Cir.

1988), on rehearing, vacating 828 F.2d 799 (1987). In that case, the

court specifically rejected an argument by CAS that NHTSA could not

consider factors other than safety in deciding whether to grant or deny

a petition for a safety-related defect or noncompliance proceeding.

Amendments to Part 554--Safety Defect and Standards Noncompliance

Decisions

NHTSA is also amending 49 CFR 554.10 and 554.11, which implement

the provisions of the Act governing initial and final decisions of

safety-related defect or noncompliance by the Secretary. 49 U.S.C.

30118(a) and (b) (formerly section 152 of the Act). Section 554.10 is

amended by deleting subsection (e) in its entirety; and Sec. 554.11 is

amended by deleting subsection (c), which provides that if the

Administrator decides that a failure to comply or a safety-related

defect ``does not exist,'' he or she will notify the manufacturer and

publish ``this finding'' in the Federal Register.

As stated in the NPRM, the Act does not require a decision by NHTSA

that a failure to comply or a safety-related defect does not exist.

And, as a practical matter, the Administrator rarely if ever makes an

affirmative decision that there is no failure to comply or no safety-

related defect. Rather, if the Administrator believes that the

information at his or her disposal does not warrant a final decision of

defect or noncompliance, the investigation is closed, subject to its

possible reopening if additional evidence is obtained.

To minimize the possibility that the public might be subject to

confusing assertions by manufacturers that there has been a decision

that a safety-related defect or noncompliance does not exist, the

agency has decided to adopt the amendments proposed in the NPRM. The

amended section will provide that if the Administrator elects,

following an initial decision under 49 U.S.C. 30118(a), to close an

investigation without making a final decision that a failure to comply

or a safety-related defect exists, he or she will notify the

manufacturer and will publish a notice of that closing in the Federal

Register.

Honda commented that the regulation should give the agency the

option of finding that a defect or noncompliance does not exist when it

closes an investigation. Its rationale is that in the absence of such a

decision, the public would be left in doubt about whether a vehicle did

or did not have the defect or noncompliance. The agency has no reason

to believe that the absence of such decisions in the past has been a

source of confusion for the public. It sees no significant safety

benefit to be gained from making such decisions; and continuing an

investigation until proof of such a negative could be obtained would

divert scarce resources from other areas.

NHTSA also will delete Sec. 554.10(e), which provides that if the

Administrator determines that a failure to comply or a safety-related

defect ``does not exist,'' he or she may, at his/her discretion, within

60 days invite interested persons to submit views on the investigation

at a public meeting as superfluous. The agency has never held a public

meeting following the closing of an investigation. However, if it

should so choose, it may do so even in the absence of such a

regulation. No commenter objected to this change.

Amendments to Part 573--Defect and Noncompliance Reports

NHTSA is amending several sections of 49 CFR part 573 regarding

leased vehicles; the timing and duration of remedy campaigns;

submission of draft owner notification letters to the agency; advance

submission of schedules for notification and availability of remedy

under certain circumstances; quarterly reports on the progress of

recall campaigns; identification by vehicle manufacturers of suppliers

of defective or noncompliant equipment; identification by equipment

manufacturers of vehicle manufacturers that have been supplied with

defective or noncompliant equipment; and requirements for submission of

information regarding the scope of a recall campaign in certain

instances.

Definitions

NHTSA is amending Sec. 573.4, ``Definitions,'' to include

definitions of the terms ``leased motor vehicle,'' ``lessor,'' and

``lessee,'' because those terms are not currently defined in part 573.

(These definitions will also be added to part 577.) The definition of

``leased motor vehicle'' is identical to that which appears in 49

U.S.C. 30119(f)(1). The definitions of ``lessor'' and ``lessee'' in

this amendment are consistent with the definition of ``leased motor

vehicle.''

Under the definitions proposed in the NPRM, only lessors that

leased five or more vehicles for a term of at least four months in the

year preceding the date of the notification would be covered by these

regulatory provisions. One commenter, NADA, suggested that the

definition of ``lessor'' be changed to make clear that the lessor is

the owner, as reflected on the vehicle's title, of any five or more

leased vehicles, as of the date of notification by the manufacturer of

the recall.

NHTSA believes that NADA's comment provides a useful clarification

of the term ``lessor,'' by adding the lessor is the owner as shown on

the vehicle's title. It is also reasonable to [[Page 17256]] limit the

term ``lessor'' to those who have ownership at the time of the

notification by the manufacturer of the recall, so that the obligations

of lessors would not be imposed on those who no longer owned the

recalled vehicle at that time.

NHTSA is also adopting an amendment to Sec. 573.4 which defines the

term ``readable form,'' to mean a form that is either readable by the

unassisted eye or by machine. As proposed, the definition required

parties submitting information in machine readable form to obtain prior

written approval from NHTSA's Office of Defects Investigation,

confirming that equipment needed to read the information is readily

available to NHTSA. Toyota commented that for all similar information

responses, once a manufacturer has obtained approval for the original

response in that form, it should not have to obtain approval for future

submissions in the same form. NHTSA believes that one-time approval of

a machine-readable format should suffice to ensure that the agency

receives information in a form which makes it accessible to it.

Requiring approval each time information is submitted would be

duplicative and would unnecessarily reduce the efficiency of the recall

notification process. Accordingly, the rule adopted today incorporates

the changes suggested by Toyota.

NHTSA does not believe a system that permitted oral approval, as

suggested by AAMA, would be workable. In the event that a question

arose about the agency's approval of a particular format, it would be

desirable to have a written record showing the scope of the approval.

Scope of Recall

The agency is amending 49 CFR 573.5(c)(2) to require, as part of

the manufacturer's report to NHTSA of its defect or noncompliance

decision, an explicit statement of how the population that will be

covered by the recall was identified and of how the recall population

differs from any similar vehicles or items of equipment that are not

covered by the recall. If the information is not available to the

manufacturer at the time of filing its part 573 report, it must so

state in that report and furnish an estimated date when it expects it

to be available. When there is such a delay, the manufacturer must

furnish the information to NHTSA within five Federal government working

days of when it becomes available.

Manufacturers often decide that a safety-related defect or

noncompliance exists in only some portion of their production of a

given model or item of equipment; for example, in vehicles or items of

equipment manufactured between certain dates, or in certain locations,

or with certain engines or options. On several occasions within the

past few years, manufacturers have had to revise the scope of their

recalls after they or NHTSA uncovered information indicating that

additional vehicles or equipment items contained the defect or

noncompliance.

Although some manufacturers have included information in their part

573 reports that explains the basis on which they selected the specific

vehicles or equipment items that will be covered by a recall, NHTSA's

current regulations do not explicitly require manufacturers to do so.

NHTSA has found that when this information is not provided, it has been

difficult to ascertain whether the scope of the recall proposed by the

manufacturer is adequate. The amendment will ensure that the agency has

the information it needs to ensure that the recall scope proposed by

the manufacturer is correct.

AAMA and Blue Bird opposed the amendment on the ground that the

agency already has the authority to request this information in

individual cases as needed. AAMA also commented that requiring it in

all cases will be unduly burdensome, and that NHTSA does not need this

information for every recall. These were the only comments on this

proposal.

The fact that NHTSA has authority to ask for this information in

individual cases is not a reason for not requiring it across the board.

Requiring it by regulation will make NHTSA's oversight of the recall

process more efficient, because it will eliminate the need for the

agency to decide in each case whether to ask for the information.

Moreover, it will ensure that the information is available even in

those instances in which NHTSA might fail to request the information

because the need for it is not apparent at the time the manufacturer

submits its defect or noncompliance report.

NHTSA does not believe it is unduly burdensome to require this

information, which will ordinarily be readily available to the

manufacturer at the time it files its part 573 report. In making a

defect or noncompliance decision, the manufacturer is likely to have

identified the particular vehicles or items of equipment covered by the

recall, and it will, of necessity, have a basis for that

identification. The amendment does permit later filing when a

manufacturer does not have the information at the time the report is

submitted.

NHTSA also disagrees with AAMA's contention that the agency does

not ``need'' the information in every recall. Whenever the manufacturer

is recalling fewer than all similar vehicles or items of equipment, the

agency needs to know why the scope of the recall is limited in order to

ensure that the recall campaign adequately covers the population

affected by the defect or noncompliance. In the past, there have been

instances in which a manufacturer expanded the scope of a recall after

NHTSA obtained information showing that other vehicles or items of

equipment had the same defect or noncompliance. The delay in the

agency's learning about the additional defective or noncomplying

vehicles or equipment items exposed members of the public to a safety

risk that could have been avoided had the information explaining the

scope of the recall been available to NHTSA when the manufacturer first

notified NHTSA of its decision to recall.

Identification of Suppliers and Customers

NHTSA is amending Sec. 573.5(c)(2) to require the manufacturer of a

recalled vehicle or item of equipment to identify the supplier (if

different from the vehicle manufacturer) of any component or assembly

that contains the defect or noncompliance, and to require an equipment

manufacturer that decides that a defect or non-compliance exists in its

product to identify all manufacturers that purchased the defective or

non-complying components for use in new motor vehicles or new items of

equipment.

Both of these requirements will assist the agency in assuring at an

early point in the recall process that a recall encompasses all

vehicles and items of equipment that contain defective or noncomplying

components rather than being inappropriately limited to a single

manufacturer's production. Identification of the supplier will, at the

outset of the campaign, permit the agency to contact the supplier

promptly to ascertain whether the same component was distributed to

other manufacturers or as replacement equipment. Likewise, early

identification of the supplier's other customers (if any) will permit

the agency to contact the affected manufacturers sooner to apprise them

of their responsibilities under the Act once a defect or noncompliance

in an item of equipment has been identified.

AAMA, AM General and Blue Bird expressed views about this proposal.

AAMA and Blue Bird contended that such a requirement would be unduly

burdensome for manufacturers. The agency disagrees. In many instances,

manufacturers already provide this information to NHTSA when they are

[[Page 17257]] conducting a recall. Moreover, in most if not all

recalls, the manufacturer will know the particular component or

components that caused the defect or noncompliance in the completed

product, and will certainly be aware of the identity of the entity that

supplied the component. If the manufacturer believes that the defect or

noncompliance is not caused by a component or assembly from an outside

supplier, it need not provide any information in response to this

provision. Moreover, any burden is far outweighed by the safety benefit

of allowing the agency to identify other vehicles or items of equipment

with the same defective or noncompliant component.

Both Blue Bird and AAMA also noted that the agency already has the

authority to request this information in individual recalls. While this

statement is correct, it is not a reason for not adopting this

provision. The information required by the amendment is obviously more

accessible to the manufacturer than to the agency; the agency may not

be able to identify all cases in which it is appropriate to request

such information. Moreover, the amendment ensures that this type of

information will be available to NHTSA at the beginning of the recall

process. This will have the safety benefit of permitting earlier

identification of other vehicles or items of equipment with the same

defect or noncompliance, which will minimize the length of time that

the public is exposed to a safety risk because it avoids unnecessary

delay in making the remedy available to all affected owners.

Section 30102(b)(1) of Title 49 does not, as AAMA argues, prohibit

the agency from requiring manufacturers to provide this information for

components that are not replacement equipment as defined by that

section. That section merely states that the vehicle manufacturer, and

not the component manufacturer, is responsible for remedying a defect

or noncompliance in a component installed in a vehicle as original

equipment. It does not preclude NHTSA from obtaining information about

the identity of the manufacturer or supplier of components used as

original equipment. The agency does not intend to use the information

to hold the component manufacturer responsible for remedying the defect

or noncompliance. Its purpose is to learn from the latter whether any

other vehicle manufacturer used the same component in its vehicles, so

that the agency can then contact the manufacturer of those vehicles to

ascertain whether additional recalls should be conducted.

AM General expressed a concern that this provision could have an

adverse effect on suppliers whose components are identified by

manufacturers as defective, in instances where further examination

reveals that they are not in fact the cause of the defect or

noncompliance. The number of instances in which such incorrect

identification occurs is likely to be quite small because, in most

instances, the cause of the problem has already been identified by the

time the manufacturer makes its decision that there is a safety-related

defect or noncompliance. If a manufacturer is still uncertain as to

whether a defect or noncompliance is attributable to a component or

assembly from an outside supplier when it files its defect or

noncompliance report with NHTSA, the manufacturer's report should make

that uncertainty clear. Any adverse publicity that does erroneously

affect a supplier can be countered by publicizing the correct

information when it becomes available. Finally, the safety benefit of

having this information available to NHTSA, as described above, will

far outweigh the risk that, in a few instances, a supplier might be

incorrectly identified as the origin of a defective or noncomplying

product.

Schedule for Notification Campaigns

Although many recalls are implemented within a reasonable time of

the decision that a safety-related defect or noncompliance exists,

NHTSA has noted an increase in the number of recalls in which there has

been a significant delay between the manufacturer's decision that a

defect or noncompliance exists and the commencement of the

manufacturer's recall campaign. There have also been a limited number

of instances in which the duration of the campaign was inordinately

extended. The manufacturers in question have generally sought to

justify these delays and extensions on the basis that needed parts and/

or facilities were not available and it would therefore be pointless to

notify owners of the defect or noncompliance.

While such unavailability may in certain cases justify some delay,

it is important that the agency be aware of the manufacturer's

anticipated schedule at the earliest possible time in order to assure

that notification campaigns under the Act are commenced in a timely

fashion and completed within an appropriate time period. In addition,

in some instances, even if implementation of the remedy must be

deferred (e.g., because needed parts are not available), it is

appropriate for the manufacturer to send an interim notification to

advise consumers of actions they should take prior to repairs being

made. Finally, the agency needs to be able to respond to questions

about the timing of the recall from the public and/or the media.

Therefore, NHTSA proposed to amend 49 CFR 573.5(c)(8) to require

manufacturers to provide information about their schedule for owner

notification, along with a description of any factors that they

anticipated could interfere with the schedule. Under the proposal,

schedules would have been required for all recalls. In addition, the

NPRM proposed that if a manufacturer planned to begin the campaign more

than 30 days after its defect or noncompliance decision, or planned to

spread the notification campaign over more than 45 days, the

manufacturer would have to identify the basis for such a delay. In

addition, the NPRM proposed that if a manufacturer were unable to

follow the schedule it had originally submitted, it would have to

inform NHTSA promptly and submit a revised schedule.

AAMA opposed the proposal on several grounds: that it would make

NHTSA a participant in, rather than an observer of, the recall process;

that it would use manufacturer resources that would otherwise be

devoted to implementing the recall campaign; that it is unneeded

because most recall campaigns are implemented within a reasonable time;

and that the requirement for a schedule would not speed up the remedy

of vehicles because manufacturers would still need time to design and

test parts, design and test the remedy, and train personnel.

NHTSA, as the agency charged by Congress with enforcement of the

notification and remedy provisions of the Act, is of necessity a

``participant'' in the recall process. An integral part of this

responsibility is to ensure that manufacturers carry out their recall

obligations in a reasonable manner, which includes avoiding undue delay

in sending owners notification of the defect or noncompliance.

The agency does not believe that the requirement will divert

resources that would otherwise be used in the campaign; or that it will

cause a delay in the implementation of recall campaigns, as Blue Bird

commented. A manufacturer that determines that a recall is necessary

will necessarily have to develop a schedule for implementing the

recall. The proposal and the rule as adopted simply require that, for

those relatively rare recalls for which a delay is anticipated, the

schedule, along with [[Page 17258]] an explanation thereof, be provided

to NHTSA.

AIAM opposed the proposal because it did not believe that

manufacturers should be required to explain normal design, production,

and distribution delays. It argued that only unique delays in a

particular recall campaign, or delays of more than 75 or 90 days in

sending out notification, should have to be explained. Moreover, it

noted that foreign-based manufacturers need more than 30 days to

initiate notification and begin the remedy because of the need to be in

contact with their headquarters, and that it often takes more than 30

days to get an updated owner list from R. L. Polk.

The purpose of this provision is to ensure that the recall campaign

is initiated within a reasonable time after the defect or noncompliance

determination. NHTSA is not concerned with whether the delay is due to

ordinary or unique circumstances. Its interest is in whether it is

reasonable. The information the amendment requires is intended to

enable NHTSA to evaluate the reasonableness of the delay, and to

provide for interim notification where appropriate.

NHTSA believes that most notification campaigns can be commenced

within 30 days of a manufacturer's defect or noncompliance decision and

completed within 45 after they are commenced. However, to eliminate any

ambiguity in calculating time periods, and to provide manufacturers

with slightly more time, NHTSA has revised the final rule so that the

periods in question are calculated from the date of the notice to the

agency of the defect or noncompliance decision.

Based on past experience, and given the availability of telefax and

other rapid electronic means of communication, that time period should

be sufficient to allow manufacturers to obtain the information they

need, either from Polk or from parent companies or suppliers located

overseas. Moreover, if more time is required, the manufacturer need

only advise the agency and explain the basis for the delay. NHTSA will

not disapprove reasonable schedules for recall campaigns.

Advocates supported the requirement for a schedule, but also

suggested that manufacturers be required to notify all owners within 30

days of notifying NHTSA of the defect or noncompliance. Advocates

explained that any delays in the availability of the remedy could be

explained to owners in the notification letter. NHTSA believes that a

30-day requirement for notification under all circumstances is

unnecessarily rigid. It prefers to have the flexibility to decide on a

case-by-case basis whether a proposed schedule is unreasonable.

AM General opposed the proposal because it believed that the

manufacturer would be bound by the schedule, which would limit its

flexibility in conducting the recall campaign. It also expressed

concern that NHTSA needed to define more clearly the circumstances

under which it would take action against a manufacturer under this

section and what the action would be. Finally, it commented that NHTSA

normally is able to learn of problems with recall campaigns through its

regular interaction with manufacturers, and that the agency already has

sufficient means at its disposal to compel a manufacturer to act more

quickly.

Contrary to AM General's contention, the amendment does not

unreasonably limit manufacturer flexibility. The amendment clearly

states that if unexpected circumstances arise, that would result in

unanticipated delay, the manufacturer may submit a revised schedule. If

there are valid reasons for the delay, there would be no agency action

against the manufacturer.

Honda commented that a definition of the term ``campaign'' is

needed, to clarify whether it means notification to owners or the

availability of the remedy. The agency has revised the regulatory

language to clarify that the time periods triggering the need to submit

a schedule refer to owner notification. However, NHTSA has also added

language to clarify that if the remedy will not be available at the

time owners are notified of the defect or noncompliance, the

manufacturer's report must state when the remedy will be provided. This

requirement makes explicit what was already implicit in existing

Sec. 573.5(c)(8) (redesignated by this amendment as

Sec. 573.5(c)(8)(i)), which requires each manufacturer to include in

its report ``a description of its program for remedying the defect or

noncompliance.'' (Emphasis added.)

Based on its consideration of the comments received on the NPRM,

and on its experience in monitoring manufacturer compliance with the

notification and remedy requirements of the Act, NHTSA now believes

that it is not appropriate to require manufacturers to submit the

detailed scheduling information such as that proposed in the NPRM for

every recall campaign. Instead, the agency believes it is appropriate

to focus on recalls in which the manufacturer intends to delay

commencement or completion of the notification campaign to assure that

such delays are not unreasonable.

For recalls in which the manufacturer intends to commence owner

notification within 30 days, and to complete the notification campaign

within 75 days of notifying NHTSA, it is unlikely that the agency would

find that the schedule was unreasonable or would create a significant

safety problem. Accordingly, the detailed scheduling information

proposed in the NPRM will not be required for those recalls. (Of

course, NHTSA has the authority to require manufacturers to provide

scheduling and related information on a case-by-case basis, even apart

from these general regulatory requirements.)

In those cases where the manufacturer intends to exceed the time

periods set out in the amended final rule, there is a greater

likelihood that the remedy will not be available within a reasonable

time, as required by 49 U.S.C. 30120(c). Therefore, the amendment

adopted today retains the requirement proposed in the NPRM for filing a

schedule for the campaign and a detailed description of the factors on

which the proposed schedule is based in such instances. Such factors

will often include the time frame for development and testing of the

specific remedy for the defect or noncompliance, the time frame for

production of any necessary parts, and the anticipated date(s) for

distribution of those parts to dealers and/or owners.

The final rule also retains the requirement that if a manufacturer

becomes aware that circumstances will delay implementation of the

recall, it must promptly inform NHTSA of the reasons for the delay and

submit a new schedule. Such submission must also contain the basis for

the new schedule, which shall also be subject to disapproval by the

Administrator.

The preamble to the NPRM noted that a manufacturer that intended to

seek an exemption from the recall requirements of the Act pursuant to

49 U.S.C. 30118(d) and 30120(h) and 49 CFR part 556 on the basis that

the defect or noncompliance was ``inconsequential as it relates to

motor vehicle safety'' would have to advise the agency of its intention

to do so in its initial report under part 573. In its comments, AIAM

suggested that the schedule requirement be waived when a manufacturer

intends to file an inconsequentiality petition.

The agency agrees that it would not be appropriate to require a

manufacturer that intends to petition for inconsequentiality to file a

schedule at the time it notifies the agency of a defect or

noncompliance, since no recall will take place if the petition is

granted. However, this does not mean that the schedule requirement

should be completely waived in such [[Page 17259]] circumstances, since

if the petition is denied, the manufacturer will have to conduct a

recall within a reasonable time thereafter. Therefore, NHTSA has added

a new Sec. 573.5(c)(8)(v) to clarify that the time periods for filing a

schedule for owner notification shall run from the date of the agency's

denial of the petition, whether or not the manufacturer appeals that

denial pursuant to 49 CFR 556.7.

The final rule also adds a new Sec. 573.5(c)(8)(vi) to require that

in the event a manufacturer that had informed NHTSA in its part 573

report that it intended to file a petition for an inconsequentiality

exemption does not do so within the 30-day period established by 49 CFR

556.4(c), the time frame for filing a schedule specified in

Sec. 573.5(c)(8)(ii) would begin to run from the end of that 30-day

period. If NHTSA finds that manufacturers are abusing this provision in

order to avoid filing the required schedules, it will take appropriate

action.

Submission of Proposed Owner Letters to the Agency

NHTSA is also amending 49 CFR 573.5(c) to add a requirement that

manufacturers submit to the agency for review, copies of their proposed

owner notification letters before, rather than after, the letter is

sent to owners. (In the NPRM, this proposed amendment was added to

paragraph (9) of Sec. 573.5(c). However, for the sake of clarity the

agency has decided that this requirement should be in a separate

paragraph. Accordingly, in the final rule, the requirement for

submission of proposed owner letters will be paragraph (10) of

Sec. 573.5(c). The paragraph on recall campaign numbers, designated as

(10) in the NPRM will now be paragraph (11).) The final rule provides

that the manufacturer must submit a proposed owner notification letter

to the Office of Defects Investigation (ODI) at least five Federal

government business days prior to the date it intends to begin mailing.

As noted in the NPRM, the purpose of this requirement is to allow NHTSA

to review a manufacturer's draft to ascertain whether it complies with

all statutory and regulatory requirements before mailing, since sending

a corrected letter after the first mailing causes unnecessary expense

and could confuse owners.

AAMA asserted that NHTSA lacks the statutory authority to

``dictate, edit or approve in advance'' a manufacturer's notification

to owners. The amendment does not purport to grant to the agency any

authority to ``dictate'' the precise wording of owner notification

letters. While NHTSA has the authority pursuant to 49 U.S.C. 30118(e)

(formerly section 156 of the Act) to order manufacturers to take

specified steps if it decides that they have not adequately carried out

their notification responsibilities, this amendment is part of a more

informal process. NHTSA's experience has been that when it identifies

deficiencies in a proposed owner notification letter, most

manufacturers are willing to make appropriate changes. In any event,

the fact that the agency may not be able to compel a manufacturer

legally to modify an owner notification letter at that stage does not

mean that the agency cannot or should not take steps to try to convince

manufacturers to make appropriate changes in an effort to maximize the

response to recall campaigns.

AAMA's fear that the regulation will lead to NHTSA's

``micromanaging'' the form and content of letters simply is not

warranted. The agency has neither the time nor the interest to get

involved in the minute details of rewriting owner notification letters

that meet statutory and regulatory requirements. The extent of its

involvement will be to ensure to the maximum possible extent that those

letters meet all such requirements.

Several commenters expressed concern that requiring such advance

review could unduly delay the recall notification process. Some also

suggested that the agency add a provision permitting a manufacturer to

send the letter if it has not heard from NHTSA within a specified time.

As noted above, this amendment does not provide NHTSA with the

authority to force a manufacturer to delay its owner notification

campaign until the agency approves the wording of the manufacturer's

proposed owner letter. Thus, the amendment is unlikely to add any delay

at all, since manufacturers almost always prepare drafts of owner

notification letters well before the actual mailing begins. In any

event, the amendment specifically authorizes the agency to waive this

requirement where warranted by safety considerations or other

appropriate factors.

Nevertheless, in order to ensure that the agency has adequate time

to review the draft letter and contact the manufacturer to resolve any

problems, the amendment requires the manufacturer to submit the

proposed letter by a means which allows verification that the letter

was received by ODI and indicates the date of receipt. The agency

encourages manufacturers to send their draft notification letters to

ODI by fax, at 202-366-7882 (primary) or 202-366-1767 (alternate).

Other means that provide verification of receipt are overnight delivery

(either by Express Mail or private delivery service) addressed to:

Office of Defects Investigation, National Highway Traffic Safety

Administration, 400 Seventh Street, SW., Room 5319, Washington, DC

20590; and hand delivery to ODI at that address. Neither first-class

mail nor certified mail would be acceptable because of lengthier

delivery times and/or the absence of proof of receipt.

Two commenters, AAMA and Truck Manufacturers, support the present

system, which requires manufacturers to submit copies of owner

notification letters to NHTSA only after mailing to owners. AM General

suggested amending the proposal to require sending copies of owner

notification letters to NHTSA on the same day they are mailed to

owners. AAMA states that there is no need for the amendment because

most letters already meet the requirements of part 577 and because many

manufacturers currently send draft copies of owner notification letters

to NHTSA in advance of mailing.

The fact that many manufacturers already seek out NHTSA's advance

approval is not an argument against the amendment. To the contrary, it

shows that it is practicable and desirable. Similarly, the fact that

most owner letters comply with regulatory requirements does not provide

a basis for not trying to assure that even more letters fully comply.

As pointed out in the NPRM, NHTSA has had several experiences in

which an owner notification letter has failed to comply with all of the

requirements of part 577. In such instances, it would rarely be

productive (and might be confusing and counterproductive) to require

the manufacturer to send a second, corrected letter. The amendment will

also increase the agency's ability to respond to questions about the

recall from the public and/or the media by ensuring that the agency is

informed about the specifics of the notification letter before the

manufacturer actually initiates the recall.

Finally, the agency views as neither necessary nor desirable

Toyota's suggestion that NHTSA incorporate in its regulations a

provision allowing it to waive requirements for owner notification

letters in certain instances, such as negotiated settlements. NHTSA's

broad discretion to enter into negotiated settlements of enforcement

matters has already been recognized by the courts. See Center for Auto

Safety v. Lewis, 685 F.2d 1381 (D.C. Cir. 1982). In any event, the

amendment as proposed and adopted specifically allows the agency to

waive this requirement. [[Page 17260]]

Quarterly Reports

NHTSA is amending 49 CFR 573.6(a) to establish specific due dates

for quarterly reports on the progress of ongoing recall campaigns. The

NPRM proposed to amend this section by establishing due dates for

quarterly reports on the twentieth calendar day after the close of each

calendar quarter.

Most commenters favored the idea of amending this provision. The

two that did not--Midland and Truck Manufacturers--favored maintaining

the present system largely because the proposed schedule would not give

enough time for some manufacturers (especially small companies that are

not computerized) to submit their reports. AAMA favored amending the

due dates, but also expressed the view that the dates in the proposal

would not allow some companies enough time. Kelly-Springfield expressed

the same view. The agency has decided to adopt the schedule suggested

by AAMA, which sets definite calendar dates on which the reports would

be due, but allows more time than the language proposed in the NPRM.

Under the final rule, manufacturers must file their quarterly reports

of recall campaign status no later than April 30 for the quarter ending

March 31, July 30 for the quarter ending June 30, October 30 for the

quarter ending September 30; and January 30 for the quarter ending

December 31, unless the specified filing date falls on a weekend or

Federal holiday. In such cases, the quarterly report would be due on

the next day on which the Federal government is open for business.

NHTSA believes that this schedule allows a reasonable amount of

time for all manufacturers, even those that are small and lack computer

facilities. Since the date is always the same, i.e., the 30th of the

given month, the agency believes it will be easier to keep track of

than Kelly-Springfield's suggestion, which was the last business day of

the month.

The NPRM also proposed to amend Sec. 573.6(b) by adding a new

paragraph (6) that would require both vehicle and equipment

manufacturers to indicate separately in their quarterly reports the

number of vehicles and items of equipment that are repaired and/or

returned by dealers prior to their first sale to the public. AAMA, AM

General, Blue Bird, and Truck Manufacturers opposed the proposal

because of the added cost and time that would be needed to prepare the

quarterly report. AAMA added that it saw no justification for such a

requirement. No other commenter opposed the proposal, with Midland

favoring it and Volkswagen taking a neutral position but giving

information on the time and cost entailed in making the changes that

would be needed to its computer system to track inventory return

information separately.

After reviewing these comments, the agency has decided to make the

requirement applicable only to equipment manufacturers, rather than to

both vehicle and equipment manufacturers as proposed in the NPRM. Under

49 U.S.C. 30116, defective and noncompliant motor vehicles in dealer

inventory must be, and usually are, repaired by the dealer prior to

sale to the public; whereas that section requires the manufacturer of

equipment to repurchase the defective or noncomplying items that are in

inventory at the time of the defect or noncompliance decision. In

addition, the agency believes that there is a greater need for the

agency to keep track of whether defective or noncomplying equipment is

being returned by dealers and retailers to manufacturers because of the

greater number of items that are involved in equipment recalls, the

higher percentage of items that are kept in the inventories of dealers

and retailers at any given time, and the greater likelihood that

dealer/retailer inventory will contain items subject to recall. In

addition, the agency is clarifying that manufacturers should include in

this category items returned prior to first sale to the public from all

retailers, not just ``dealers,'' as well as from distributors of the

items in question.

Recordkeeping for Leased Vehicles

NHTSA is amending 49 CFR 573.7 to require manufacturers to maintain

information concerning notification of owners of leased vehicles if the

manufacturer knows that a vehicle is leased, and to require lessors of

leased vehicles to maintain certain information concerning

notifications they send to the lessees of those vehicles. The final

rule adds a provision that was not in the NPRM: that the records with

respect to notification of lessees must be maintained for one calendar

year following the expiration of the lease. The agency added this

provision because it was necessary to make clear to lessors and

manufacturers how long these records must be maintained. The other

record retention requirements in part 573 specify a length of time for

which the records must be kept.

In the NPRM, NHTSA proposed to amend Sec. 573.7(a) to require the

manufacturer to identify those vehicles on its list of owners/

purchasers receiving notification which it knows to be leased. The

proposal would not have required a separate list of those vehicles that

were leased, but would have required that leased vehicles be clearly

identified as such. The agency also proposed to add a new

Sec. 573.7(d), which would have required each lessor notifying its

lessees of a defect or noncompliance to maintain a list of the names

and address of the lessees, to include the name and address of the

lessee, the VIN, and the date the lessor sent the notification to the

lessee. Based on the comments received on that proposal, which are

summarized below, the agency has decided to adopt a final rule which

differs in some respects from the original proposal.

AAMA, NADA, Polk, Truck Manufacturers and Toyota opposed the

proposal in the NPRM. AIAM supported the proposal with modifications.

AAMA, Truck Manufacturers and Toyota based their opposition on the

difficulty that manufacturers would have identifying which vehicles in

a recall are leased, and the cost and burden of developing a system

that would enable a manufacturer to keep track of this information.

Polk's opposition was based on the difficulty of ascertaining from

state vehicle registration records whether or not a vehicle is leased.

The agency notes that the proposal in the NPRM would have required

manufacturers to maintain records of notifications sent to ``known

lessors.'' This would not have required manufacturers to identify in

its records leased vehicles other than those it already knew to be

leased. However, because of the apparent misunderstanding of the extent

of the manufacturer's obligation under the first proposal, NHTSA is

implementing a revised and simplified version of this requirement,

which is intended to make clear that the lists maintained by

manufacturers under this section do not need to identify those vehicles

that are leased except to the extent that the manufacturer already has

that information at the time it sends the notification letter.

AAMA also noted that to assure that lessees receive notification of

a recall, it would be necessary to include language in the notification

letter directing lessors to notify lessees in all notification letters.

Although the first NPRM did not propose such a requirement, the agency

has decided, after considering comments on the proposed amendments to

part 577 regarding notification of lessees, that the simplest and most

effective way to ensure that lessees will be notified is to require

manufacturers to include in all [[Page 17261]] notification letters

sent to vehicle owners a statement that if the vehicle is leased, the

lessor must send the notification letter (or a copy thereof) to the

lessee. That amendment is discussed more fully elsewhere in this

notice.

NADA opposed the proposal to require each lessor to maintain a list

of the names and addresses of the lessees it has notified. NADA stated

that if lessors are required to forward all recall notification letters

to lessees, there is no need to require lessors to keep records of

those lessees to which it sent the letters. It also commented that it

would be unduly burdensome for small leasing companies to keep the

``detailed'' records that would be required by the proposal.

NHTSA notes that the obligation of lessors to keep records of all

lessees who have been notified of a recall is analogous to the

obligation of a manufacturer to keep records of those whom it has

notified. It is, however, less complex because, unlike the manufacturer

list, it does not need to be updated each quarter for status of the

remedy, and requires only a one-time entry for the date on which the

notification was sent to the lessee.

As stated in the NPRM, NHTSA has found the information maintained

by manufacturers pursuant to Sec. 573.7 to be useful in the agency's

efforts to evaluate whether manufacturers' notification and remedy

campaigns are adequate. Because Congress amended the Safety Act to

require lessors to send recall notifications to lessees (see 49 U.S.C.

30119(f)), NHTSA needs the same type of information from lessors in

order to evaluate whether lessors are adequately carrying out their

obligations. While the agency recognizes that this recordkeeping may

impose a burden on some lessors, that burden is outweighed by the

safety benefit of having such information available.

Copies of Manufacturer Communications

NHTSA is also amending Sec. 573.8 to clarify that the requirement

that manufacturers furnish NHTSA with copies of ``all notices,

bulletins and other communications * * * sent to more than one

manufacturer, distributor, dealer, or purchaser, regarding any defect

in his vehicles or items of equipment * * * whether or not such defect

is safety-related,'' applies to communications made by electronic

means. It is making the same amendment to Sec. 573.5(c)(9), which

requires manufacturers to send to NHTSA ``a representative copy of all

notices, bulletins, and other communications that relate directly to

the defect or noncompliance and are sent to more than one manufacturer,

distributor, dealer or purchaser,'' within five days of sending them to

the manufacturers, distributors, dealers or purchasers.

Only one commenter, AIAM, opposed this proposal. It stated that

NHTSA lacks the authority under the Act to require this ``additional''

information from manufacturers. AIAM's objection is misplaced. The

amendment does not increase the scope of the agency's existing

authority to require manufacturers to submit certain types of

information. It merely makes explicit a requirement that was already

inherent in the regulations as previously written.

Recall Identification Numbers

In order to minimize confusion during NHTSA's monitoring of recall

campaigns and to improve the agency's response to owners and

prospective purchasers, NHTSA is adding a new provision to part 573

(Sec. 573.5(c)(11)), which requires manufacturers to provide the

manufacturer's identification number for each recall if it is not

identical to the campaign number assigned by the agency. In the NPRM,

this amendment was designated Sec. 573.5(c)(10). However, the agency

has decided to redesignate it as Sec. 573.5(c)(11) in the final rule

because it has revised the numbering of the preceding paragraph. The

amendment is otherwise identical to that proposed in the NPRM. No

commenter raised any issues relating to this amendment.

Amendments to Part 576--Record Retention

NHTSA is amending 49 CFR 576.5 to provide that records concerning

malfunctions that may be related to motor vehicle safety and that refer

to a specific vehicle must be retained for eight years from the close

of the model year during which the vehicle was manufactured (i.e., the

date on which the last vehicle was produced for the model year). This

amendment differs from that proposed in the NPRM. In the amendment as

proposed, the eight-year time period began to run with the date the

vehicle was sold, and retention would also have been required for

records for five years after they were acquired or generated, if that

was later than eight years after the date of sale.

NHTSA decided to change the language from that proposed in the NPRM

after considering the comments of several manufacturers, whose

objections to the proposal focused principally on the requirement that

the eight years be counted from the date of sale. These manufacturers

asserted that a requirement that records be kept according to sale date

would be unworkable and unreasonably costly and burdensome. See

comments of AAMA, AIAM, Chrysler, Navistar and Toyota. These

commenters, as well as Blue Bird and Fleetwood, suggested that basing

the record retention requirement on the model year of production would

be more workable.

After careful consideration, NHTSA believes that the commenters

have raised legitimate concerns. The suggested alternative would be

more workable and less costly, and would not reduce the availability of

relevant records.

The agency has also decided to eliminate the language in the NPRM

that would have required manufacturers to maintain records for five

years from the date they were acquired or generated, if that would be

later than eight years from the date of sale. The number of records

that would be retained beyond those that are generated within the first

eight years after the model year of production is likely to be small.

Moreover, the potential benefits would be slight, since most

investigations of defects and noncompliances begin far earlier than

eight years after production. However, notwithstanding this amendment,

the agency retains the authority to require a manufacturer to retain

records for vehicles more than eight years old if it has an open

investigation of an alleged noncompliance or safety-related defect that

includes such vehicles.

Amendments to Part 577--Defect and Noncompliance Notification

The agency is amending several sections of 49 CFR part 577 to

revise the provisions regarding notification of safety-related defects

and noncompliances with Federal motor vehicle safety standards.

Definitions

NHTSA is amending Sec. 577.4, ``Definitions,'' to add definitions

of the terms ``lessor,'' ``lessee'' and ``leased motor vehicle.'' As

was the case with the amendment of the definition section of part 573

to incorporate these terms, the amendment to this section is being made

to implement 49 U.S.C. 30119(f), the statutory section that requires

that lessees of motor vehicles receive notification of safety-related

defects and noncompliances.

The definition of ``lessor'' adopted today is slightly different

from that in the NPRM. This is necessary to make it consistent with the

definition of the same term in part 573 as amended today. The agency

decided to adopt a suggestion of a commenter, NADA, that

[[Page 17262]] defines the lessor as the owner, as reflected on the

vehicle's title, of any five or more leased vehicles, as of the date of

notification by the manufacturer of the recall. The definitions adopted

today for the terms ``lessee'' and ``leased motor vehicle'' are the

same as those in the NPRM. No commenter objected to the proposed

changes in Sec. 577.4.

Marking of Recall Notification Envelopes

The agency is amending Sec. 577.5(a) to add a requirement for

marking the envelope in which recall notification letters are sent by

requiring that the envelope containing the notification bear, in all

capital letters, the words ``SAFETY,'' ``RECALL'' and ``NOTICE,'' in

any order. Other words may be included, and the type may be any size as

long as it is larger than that used for the address. The language must

be also be distinguishable from other wording on the front of the

envelope in some manner other than size, such as by typeface (e.g.,

bold, italic), color, and/or underlining.

This amendment differs slightly from the proposal in the NPRM. The

proposal would have required use of the phrase, ``SAFETY RECALL

NOTICE'' in boldface capital letters. In response, several commenters

suggested alternative wording. Others expressed the view that the

current system works well enough, that the proposal did not give

manufacturers enough flexibility, or that it would be too costly and/or

burdensome to change the envelopes now in use.

NHTSA believes that the cost of adding new wording to recall

notification envelopes will be relatively low, and will be outweighed

by the safety benefit of making it more likely that the recipient will

read the letter. Moreover, while the present system works well, in many

cases there is need for improvement in the rate of owner response to

recalls. Accordingly, the agency believes that it is appropriate to

require manufacturers to mark the outside of recall notification

envelopes to alert recipients to the importance of their contents.

However, there is merit to the view expressed in some comments that

more flexibility should be allowed than would have been permitted under

the proposal in the NPRM. The agency believes that the amendment

adopted today should satisfy concerns about flexibility in envelope

format while calling recipients' attention to the contents of the

envelope. However, to ensure that envelopes comply with regulatory

requirements, the amendment includes a requirement for one-time

submission of envelope format to the agency. Once a given format is

approved, the manufacturer need not submit its envelope format again

before using it for other recalls, unless there are changes.

This review will, like the agency review of draft notification

letters discussed earlier in this preamble, be limited to ensuring that

the envelope markings comply with the minimum requirements of the

regulations. The agency's experience with advance review of

notification letters has been that it makes the notification process

more efficient because it allows the manufacturer to correct any

aspects of the material that do not comply with the regulations before

undertaking the entire mailing. Advance review of envelope format would

doubtless have the same effect.

Notification for Leased Vehicles

NHTSA is amending Sec. 577.5 to add new subsections (h) and (i),

which establish requirements for notification of lessees of leased

vehicles concerning the existence of safety-related defects or

noncompliances in their vehicles.

As proposed in the NPRM, subsection (h) would have required a

manufacturer to send different notification letters, depending on

whether or not the vehicle was leased. The proposal would have required

the manufacturer to include language describing the lessor's duty to

provide notification to the lessee only in letters sent by the

manufacturer to a known lessor of a leased motor vehicle, and to

provide the lessor with a copy of the notification to be sent to

lessees.

A number of commenters noted that to the extent that the proposed

amendment would require manufacturers to identify the vehicles in the

recall population that are leased, it would present a problem because

manufacturers often do not know which vehicles are leased and which are

not. For example, Polk opposed the proposal on the grounds that state

vehicle registration records do not identify lessors/lessees, so that

obtaining this information for notification purposes would be extremely

difficult. AIAM and Honda made similar comments.

Other commenters objected to notifying lessors or lessees

separately from other vehicle owners, or to the requirement that

manufacturers include a separate copy of the notification letter for

the lessee in the mailing to the lessor. See comments of NADA, Toyota

and Truck Manufacturers. These commenters suggested including in all

owner notification letters a statement of a lessor's obligation to

notify a lessee of the recall campaign.

NHTSA believes that there is merit to the concerns these commenters

have raised about this aspect of the proposal. In addition, to the

extent that the language of the proposal would have meant that only

owners of vehicles known by the manufacturer to be leased vehicles

would have received a notification that informed them of their

obligation to provide notification to lessees, it would have meant that

lessees of vehicles not known by the manufacturer to be leased--a

potentially large number--would not receive any notification of safety-

related defects or noncompliances and the availability of a remedy

without charge.

Accordingly, NHTSA has decided to modify subsection (h) to require

manufacturers to include in all notification letters a statement of

lessors' obligations regarding recall notification letters. If the

manufacturer is sending the letter to a recipient that it knows to be a

lessor of lessee of a leased vehicle it may use language that is not

identical to that in letters sent to recipients whose vehicles are not

known to be leased. However, in all cases, the letter must clearly

state the lessor's obligation under Federal law to provide notification

to lessees of its vehicles and to comply with regulations regarding

retaining records of notifications sent to lessees. The amendment does

not require the manufacturer to furnish the lessor with a separate copy

of the notification letter to be sent to lessees.

The final rule adopts Sec. 577.5(i) as proposed in the NPRM. That

subsection restates the requirement of 49 U.S.C. 30119(f), which

requires a lessor who receives notification of a safety-related defect

or noncompliance in a leased motor vehicle to send a copy of the

notification to the lessee of the vehicle. It adds to the statutory

language requirements that the lessor send the notification to the

lessee as prescribed by new Sec. 577.7(a)(2)(iv), which requires that

the notice be sent by first-class mail, and that it be sent to the

lessee no more than 10 calendar days from the date the lessor received

the notification from the manufacturer. Finally, it clarifies that the

requirement applies to all notifications, both initial and follow-up,

except where the manufacturer has notified all of a lessor's lessees

directly.

Timing of Owner Notification Letters

The agency is amending Sec. 577.7, ``Time and Manner of

Notification,'' with modifications from the language proposed in the

NPRM. Those changes [[Page 17263]] are based on its consideration of

the comments on the NPRM.

The NPRM proposed to amend Sec. 577.7(a)(1) to give the agency

authority to order a manufacturer to notify owners of a safety-related

defect or noncompliance on a specific date, when it finds that such a

letter would be in the public interest. A number of manufacturers

objected to the original proposal because it did not contain any

criteria upon which the decision would be based, and failed to require

NHTSA to consult with the manufacturer before deciding to order

notification on a specific date. The agency believes that it is

desirable to provide a list of criteria to assure both manufacturers

and the public that the decision is based on consideration of all

appropriate and relevant factors. It is also desirable to allow the

manufacturer to make its views known to the agency before the decision

is made.

Accordingly, the agency has modified the proposed regulatory

language by adding a list of factors that may be considered by the

agency, and a requirement that the agency consult with the manufacturer

before making the decision. The factors that may be considered include

the severity of the risk to safety; the likelihood of occurrence of the

defect or noncompliance; whether there is something that an owner can

do to reduce either the likelihood of occurrence of the defect or

noncompliance or the severity of the consequences; whether there will

be a delay in the availability of the remedy from the manufacturer; and

the anticipated length of any such delay. The agency may also consider

other factors relevant to whether early notification would be in the

interest of safety.

Several commenters objected to the proposed change on the grounds

that the agency already has the authority to require owner notification

on a specific date. NHTSA agrees with this statement, but does not

agree that it is a reason for not adopting this provision. The agency

believes that it is desirable to make this authority explicit because

there have been instances when manufacturers have refused to notify

owners of a safety-related defect or noncompliance in conformity with a

NHTSA request. Having a regulation authorizing the agency to require

notification on a date certain will make manufacturer compliance more

certain.

AAMA and Chrysler commented that the change is unnecessary because

the manufacturer, and not the agency, is in the best position to know

when early notification (i.e., notification prior to the time a remedy

is available) is warranted. NHTSA disagrees. As the agency charged by

statute with enforcing the notification and remedy requirements of the

Act, it is in the best position to consider objectively all of the

factors, including the safety of the public, that need to be

considered, and to give them appropriate weight. Based on some

manufacturers' past history of undue reluctance to comply with NHTSA

requests to notify owners of a defect or noncompliance prior to the

availability of a remedy, the agency believes that it is unwise to

entrust responsibility for making this judgment solely to the

manufacturer. Moreover, the changes made in the NPRM language to give

manufacturers the opportunity to submit their views should be adequate

to address concerns expressed by some manufacturers that their concerns

would not be considered.

The agency notes that it does not intend to exercise the authority

to designate a date for owner notification letters except in cases

where the commencement of the remedial campaign will be delayed

substantially and there appear to be safety benefits associated with a

prompt owner notification.

Advocates commented that all owners should be notified immediately

after the agency is informed of the existence of the defect or

noncompliance, so that they would be able to take measures to minimize

the effect of the defect or noncompliance until the remedy is

available. It proposes a two-step notification process for all recalls,

with the first owner notification to be sent within 30 days of agency

notification, and a second notice to be sent later regarding the

remedy. CAS also supported a 30-day deadline for notification in all

recalls.

As stated above in connection with the amendment to

Sec. 573.5(c)(8), the agency does not believe it would be productive to

establish a 30-day deadline for all recalls, or to institute a

mandatory two-step notification process for all recalls. Given that

recalls can vary widely in such matters as the number of items, the

severity of the hazard, the complexity of the remedy and the size and

resources of the manufacturer, the agency believes that an approach

that allows for flexibility in handling each recall individually is

preferable. Further, the two-step notification process introduces the

possibility of owner confusion. The agency believes that these factors,

along with the increased cost of sending a second owner letter, will

outweigh the safety benefit of such a process in most circumstances.

Timing of Notification to Lessees

The agency is also adding a new paragraph (iv) to subsection (a)(2)

of Sec. 577.7. The new paragraph requires that a lessor must send its

lessees a copy of the manufacturer's notification letter by first-class

mail within 10 days of receiving it. No commenter opposed this

proposal.

Disclaimers

NHTSA is amending Sec. 577.8, ``Disclaimers,'' to make clear that

that section's prohibition of disclaimers of the existence of a safety-

related defect or noncompliance applies equally to follow-up

notifications. The agency received no comments on this proposal.

Follow-up Notification

The final rule also adds a new Sec. 577.10, which sets forth the

criteria under which the agency will determine whether a manufacturer

must conduct a follow-up notification campaign and the requirements

applicable to such campaigns. This new section implements 49 U.S.C.

30119(e) (formerly section 153(d) of the Act), which authorizes NHTSA

to require manufacturers to send a second notification of a defect or

noncompliance, ``in such manner as (NHTSA) may by regulation

prescribe,'' where the agency determines that the initial notification

campaign has not resulted in an adequate number of vehicles or items of

equipment being returned for remedy. With minor changes, the final rule

adopts the proposals in the NPRM.

New Sec. 577.10(b) sets forth criteria that NHTSA may consider in

making a determination under this provision. The criteria include, but

are not limited to, the percentage of covered vehicles or items of

equipment that have already been returned for remedy; the amount of

time that has elapsed since the prior notification was sent; the

likelihood that a follow-up notification will increase the number of

vehicles or items of equipment receiving the remedy; the seriousness of

the safety risk from the defect or noncompliance; and whether the prior

notification(s) undertaken by the manufacturer complied with the

requirements of the statute and regulations.

The agency does not intend that this list of factors be exhaustive.

Accordingly, paragraph (b)(6) makes it clear that NHTSA may consider

additional factors as it deems appropriate.

Section 577.10(c) provides that a manufacturer is required to

provide follow-up notification only with respect [[Page 17264]] to

vehicles or items of equipment that have not been returned for remedy

pursuant to the prior notification(s). Pursuant to paragraph (d), the

manufacturer is required to send the follow-up notification to all

categories of recipients (i.e., owners, first purchasers, lessors,

lessees, manufacturers, distributors, dealers, and retailers) that

received the prior notification(s), except where the agency determines

that a lesser scope is appropriate.

Paragraph (e) describes the required contents of the follow-up

notification. The notice will have to include a statement that

identifies it as a follow-up to an earlier notification, and must urge

the recipient to present the vehicle or item of equipment for remedy.

In addition, except where the agency determines otherwise, the notice

must include the other information required to be included in an

initial notification letter.

Paragraph (f) requires that the outside of the envelope or other

communication containing the follow-up notification meet the same

requirements as an envelope containing an initial notification, as set

forth in 49 CFR 577.5(a). Unlike the NPRM, the final rule does not

recite those requirements verbatim, but rather incorporates them by

reference to the appropriate section of these regulations.

Paragraph (g) allows the agency to authorize use of postcards or

other media rather than letters for follow-up notification where

appropriate.

AAMA and Blue Bird commented that the regulation is not needed

because manufacturers already send out follow-up notification, and that

follow-up notifications are likely to cause owner confusion. These

comments challenge the wisdom of the decision by Congress to authorize

NHTSA to require follow-up notification, rather than the substantive

merit of NHTSA's proposed regulation. Since Congress has decided that

it is appropriate to give NHTSA this authority, and has authorized

NHTSA to promulgate implementing regulations, these comments are not

persuasive.

AIAM and Toyota commented that the regulation should mandate,

rather than permit, NHTSA to consider the factors listed. The agency

believes that mandatory language would be unwise because it would

unduly restrict its discretion. Flexibility is essential to

administration of the agency's recall program, given the highly varied

nature of safety recalls. However, the agency will generally consider

the enumerated factors, since they are relevant to the need for a

follow-up notification.

The NPRM proposed that the scope, timing, form and content of the

follow-up notification would be ``designed by the Administrator, in

consultation with the manufacturer.'' AIAM commented that the

regulation should state that the follow-up notification letter will be

``developed,'' rather than ``designed'' by the agency, and that the

content of the letter should be a cooperative effort between NHTSA and

the manufacturer. Toyota also commented that the agency should only be

involved in ``approving'' the follow-up notification, not in

``designing'' it; and that if NHTSA has problems with a manufacturer's

follow-up notification, it should consult with the manufacturer to work

out the problem.

The agency interprets these comments to express reservations about

the extent of NHTSA's control over follow-up notification letters. The

agency believes that it must have such control, in order to carry out

its statutory responsibility to maximize the effectiveness of recall

campaigns. However, the agency has decided to change the word

``designed'' in Sec. 577.10(a) to ``established,'' to reflect the fact

that the scope, timing, form, and content of the follow-up notification

will result from consultation between NHTSA and the manufacturer,

rather than from independent NHTSA action.

Advocates and CAS commented that evaluation of safety risk should

not be a criterion equal to the others, since the existence of a recall

indicates that there is a safety risk. While recalls under the Act are

by their nature safety-related, some defects and noncompliances pose a

much greater risk to safety than others, by virtue of such factors as

the severity of the consequences and the likelihood that the problem

will occur. NHTSA believes that it is entirely appropriate for it to

consider the degree of the risk to safety as a factor in deciding

whether to require a manufacturer to undertake a follow-up

notification. However, the agency notes that it is not required to give

equal weight to all of the listed criteria.

Advocates and CAS also favored setting a minimum permissible

completion rate for all recalls, with follow-up notification for all

recalls falling below that percentage. Midland commented that NHTSA

should define what is considered to be an inadequate completion rate;

and Navistar said NHTSA should set ``guidelines'' for when a follow-up

notification would be required.

As previously stated, NHTSA believes that it is important for it to

retain substantial discretion and flexibility in order to carry out the

responsibility to maximize the effectiveness of recalls. Setting a

minimum completion requirement for all recalls would seriously restrict

this flexibility. Moreover, such a system would be neither fair nor

workable, given the number of factors that affect the completion rate,

such as the nature of the item (whether vehicle, tire or equipment),

its age, the seriousness of the defect, and the means used to notify

owners (e.g., individual notification letter or public notice).

CAS suggested that follow-up notification should be required for

all recalls involving a defect or noncompliance that poses a

significant safety risk. In addition to the difficulty of defining when

a defect or noncompliance presents a ``significant safety risk,'' the

agency does not believe it would be reasonable to impose a requirement

such as this, which fails to take into account whether a recall has

achieved a high completion rate.

CAS also commented that the follow-up notification should be sent

by certified mail, not post card. NHTSA continues to believe that it

should retain discretion to decide what medium or media would be the

most effective for follow-up notification in each individual case.

Mack Truck supported the follow-up notification regulation, noting

that it has a practice of automatically sending a second notice if

recall work has not been done on a vehicle by the end of the second

calendar quarter of a recall campaign.

Navistar commented that the recall completion rate should be based

on the number of vehicles in service, not the number produced. The

agency assumes that this comment refers to one of the factors the NPRM

listed for consideration by NHTSA in deciding whether to require

follow-up notification: the percentage of vehicles or items of

equipment that have been presented for remedy (proposed

Sec. 577.10(b)(1)). The agency believes it is reasonable to continue

its practice of computing recall completion rates based on the number

of recalled units produced, rather than the number in service as

suggested by Navistar. The number of items produced is a definite

number that is provided to NHTSA by the manufacturer when it reports

its decision that there is a safety-related defect or noncompliance,

whereas the number of items in service can never be more than a rough

estimate. Having such a definite number makes it possible for NHTSA to

compute recall completion rates with greater accuracy than would be

possible using an estimate of how many items are in service.

[[Page 17265]]

Moreover, the number of items in service will change during the

course of any recall, which would greatly complicate the task of

arriving at precise completion rates. Moreover, the final rule

specifically provides that recall completion rate is only one of

several criteria upon which the agency will base a decision to require

a follow-up notification. In deciding whether a recall completion rate

is inadequate, the agency will consider the age of the recalled items

and other factors which might significantly reduce the number of items

in service at the time of the recall. It recognizes that a lower

completion rate is to be expected where there has been significant

attrition in the population of items in use by the time of the recall,

or where the nature of the recalled item (e.g., something that is

disposable or very inexpensive) makes it less likely that owners will

respond to a recall.

Navistar also commented that NHTSA should only require a follow-up

notification where it can be shown that it will significantly improve

the completion rate. Such a standard is unworkable and is also

inconsistent with the language Congress used in authorizing NHTSA to

require follow-up notification. It would be difficult, if not

impossible, to demonstrate in advance that a follow-up notification

would result in a significant improvement of the recall completion

rate. Moreover, the Navistar standard is inconsistent with 49 U.S.C.

30119(e), which authorizes the agency to order a second notification

when ``notification * * * has not resulted in an adequate number of

vehicles or items of motor vehicle equipment being returned for

remedy.''

Navistar also expressed concern that unnecessary follow-up notices

could result in customer confusion and wasted effort, especially when

recalled vehicles are old and a significant number have been scrapped.

The agency believes that the criteria to be considered by the agency

will provide adequate protection against the ``wasted effort'' that

Navistar fears.

Polk commented that state vehicle registration records do not

identify lessors/lessees, so that obtaining this information for

renotification purpose would be extremely difficult. The agency has

addressed these concerns in the sections of the final rule concerned

with leased vehicle notification by requiring all notification letters

to include a statement directing lessors to notify their lessees. See

49 CFR 577.5(i).

Toyota suggested adding another factor to be considered: the

likelihood that the owner will experience the safety-related defect or

noncompliance. NHTSA does not believe that this is an appropriate

criterion. In the large majority of recalls, there is no way of

predicting the likelihood that an owner will experience the defect or

noncompliance. It would be inconsistent with the purpose of the Act,

which is to prevent accidents, injuries and fatalities before they

happen, to fail to notify an owner based on a prediction that the

problem is not likely to occur in a particular vehicle. The final rule

does take account of the fact that there may be instances in which the

population that is appropriate for follow-up notification will be

smaller than that covered by the original recall campaign. Section

577.10(d) allows NHTSA to narrow the scope of the population that will

receive follow-up notification in appropriate instances.

Toyota also commented that a low completion rate should not be the

only reason the agency uses to justify requiring renotification. In

Sec. 577.10(b), the final rule lists five specific factors, including

but not limited to the completion rate, that the agency may consider.

It also authorizes NHTSA to consider other factors that are consistent

with the purpose of the Act.

NHTSA's Toll-Free Hotline

The agency is adopting a final rule amending Sec. 577.5(g)(1)(vii)

to state that the telephone number for its toll-free Auto Safety

Hotline for calls originating in the Washington, D.C. area is (202)

366-0123. The agency received no comments on this proposed change.

Technical Amendments

NHTSA is adopting several technical amendments to 49 CFR Parts 552,

554, 573 and 577 that are needed to make these parts consistent with

the new codification of the enabling statute as Chapter 301 of Title 49

of the United States Code (Pub. L. 103-272 (July 5, 1994)) and with the

language of the amendments adopted today. These amendments did not

appear in the NPRM, but do not require notice and comment because they

are technical amendments only. They do not change the meaning of these

regulations.

With respect to part 552, the technical amendments are as follows.

Because the final rule amends the title of Sec. 552.8 to replace

``Determination whether to commence a proceeding'' with ``Notification

of agency action on the petition,'' the contents to part 552 is amended

to reflect this change. In addition, Sec. 30162(a) of Title 49 of the

United States Code now refers to a petition for a proceeding to decide,

rather than to determine, whether to issue an order requiring a

manufacturer to provide notification and remedy for a safety-related

defect or noncompliance. Accordingly, Sec. 552.1, Scope, is amended to

change the word ``determination'' to ``decision.'' Section 552.2,

Purpose, is amended to change ``determinations'' to ``decisions.''

Section 552.3, General, is amended to change ``determine'' to

``decide.'' The first sentence of Sec. 552.7, Public Meeting, is

amended to change ``determination'' to ``decision.'' Finally,

Sec. 552.9(b), Grant of Petition, is amended to change ``determine'' to

``decide.''

The agency is also adopting the following technical amendments to

part 554. The contents section is amended to change the word

``determinations'' to ``decisions'' for the headings of Secs. 554.10

and 554.11. Section 554.2, Purpose, is amended to change ``National

Traffic and Motor Vehicle Safety Act (the Act)'' to ``49 U.S.C. Chapter

301.'' Section 554.3, Application, is amended to change the statutory

citations to reflect the new codification in Title 49. The headings of

Secs. 554.10 and 554.11 are amended to change the word

``determinations'' to ``decisions,'' in order to be consistent with the

new statutory language at 49 U.S.C. 30118. The text of these

subsections is also amended to replace the words ``determine[s]'' or

``determination'' with ``decide[s]'' or ``decision'', respectively,

wherever they appear.

The technical amendments to part 573 are as follows. Paragraphs

(b)-(f) of Sec. 573.3 are amended to change the words ``determined to

exist'' to ``decided to exist.'' The definition of ``Act'' in the first

paragraph of Sec. 573.4, Definitions, is amended to replace ``the

National Traffic and Motor Vehicle Safety Act of 1966, as amended (15

U.S.C. 1381, et seq.)'' with ``49 U.S.C. Chapter 301.'' The agency is

also amending the second sentence of Sec. 573.5(c)(1) to replace

``Sec. 110(e) of the National Traffic and Motor Vehicle Safety Act (15

U.S.C. 1399(e)'' with ``49 U.S.C. Sec. 30164(a).'' The latter two

amendments are necessary because the July 1994 codification repealed

the National Traffic and Motor Vehicle Safety Act of 1966, as amended,

and replaced it with a codification in Title 49 of the United States

Code.

The agency is adopting the following technical amendments to part

577. The Contents to part 577 is amended by changing ``Sec. 577.5

Notification pursuant to a manufacturer's determination'' to ``Sec.

577.5 Notification pursuant to a manufacturer's decision''; and by

changing ``Sec. 577.6 Notification pursuant to Administrator's

[[Page 17266]] determination'' to ``Sec. 577.6 Notification pursuant to

Administrator's decision.'' Section 577.4, Definitions, is amended by

changing the definition of the term ``Act'' from ``the National Traffic

and Motor Vehicle Safety Act of 1966, as amended, 15 U.S.C. 1391 et

seq.'' to ``49 U.S.C. Chapter 301.''

The title of section 577.5 is changed from ``Notification pursuant

to a manufacturer's determination'' to ``Notification pursuant to a

manufacturer's decision.'' The first sentence of Sec. 577.5(a) is

amended by changing ``section 157 of the Act'' to ``49 U.S.C.

30118(e).'' Paragraphs (1) and (2) of Sec. 577.5(c) are amended to

replace the word ``determined'' with ``decided'' in the text to be used

by manufacturers in recall notification letters. Section 577.5(d) is

amended by changing ``determines'' to ``decides.''

The title of Sec. 577.6 is changed from ``Notification pursuant to

Administrator's determination'' to ``Notification pursuant to

Administrator's decision.'' Section 577.6(a) is amended by changing

``section 152 of the Act'' to ``49 U.S.C. section 30118(b).'' Section

577.6(b) is amended by changing ``determines'' to ``decides'' in

subsection (3); by changing ``determination'' to ``decision'' in

subsection (5); by changing ``determination'' to ``decision'' in

subsections (9)(i) (A) and (C); and by changing ``determination'' to

``decision'' in subsections (10)(iv) and (11). Section 577.6(c)(1) is

amended by changing ``determination'' to ``decision.'' Section 577.7,

Time and manner of notification, is amended by revising subsection

(a)(2)(ii)(B) by replacing ``determined'' by ``decided,'' by replacing

``necessary'' with ``required'' and by replacing ``determine'' with

``require.''

Rulemaking Analyses and Notices

1. Executive Order 12291 (Federal Regulation) and DOT Regulatory

Policies and Procedures

NHTSA has analyzed this final rule and determined that it is

neither ``major'' within the meaning of Executive Order 12291 nor

``significant'' within the meaning of the Department of Transportation

regulatory policies and procedures.

The provisions of this final rule that would result in additional

costs would be the one that extends from five to a maximum of eight

years the period for which motor vehicle manufacturers must retain

records concerning malfunctions that may be related to motor vehicle

safety; and the one that authorizes NHTSA to require manufacturers of

motor vehicles and motor vehicle equipment to mail a follow-up

notification of a safety-related defect or noncompliance if it

determines that the number of vehicles or items of equipment that have

received the remedy is inadequate.

Other provisions that will result in additional costs are the one

that would require vehicle lessors to mail notification of safety-

related defects or noncompliances with Federal motor vehicle safety

standards to each lessee of a vehicle covered by the notification and

remedy campaign and the requirement that lessors maintain lists of

lessees to whom they send such notification.

The costs associated with requiring manufacturers to retain records

for a longer period should be minimal if not negligible, and would be

offset by the benefit that would result from the manufacturers' ability

to determine the existence of safety-related defects and noncompliances

with safety standards in a wider range of vehicles, as well as the

enhancement of NHTSA's enforcement efforts, particularly with respect

to latent defects and noncompliances. The cost of sending out a follow-

up notification will be less than that incurred for an initial

notification, as it will be required only in those cases in which the

agency makes a determination that the response to the first

notification is inadequate; and will only involve a fraction of the

vehicles or items of equipment subject to the initial recall, i.e.,

those that have not yet been remedied. The cost of the follow-up

notification will be outweighed by the benefit of increasing the number

of noncompliant and defective vehicles and items of motor vehicle

equipment that are remedied. In addition, the provisions relating to

follow-up notification are required by the amendments added by ISTEA.

The cost of vehicle lessor notification of lessees is offset by the

safety benefit that would result from the increased number of

individuals who would return for remedy a vehicle or item of equipment

that has a safety-related defect or does not comply with a Federal

motor vehicle safety standard. In addition, this provision is required

by the amendments added by ISTEA.

The cost of the requirement that vehicle lessors maintain lists of

lessees of leased vehicles involved in notification and remedy

campaigns is outweighed by the fact that these records will enable

NHTSA to enforce the statutory requirement that lessees be notified of

the existence of safety-related defects or standards noncompliances in

their vehicles and of the availability of a remedy without charge for

the defect or noncompliance. In addition, the information to be

retained is minimal, consisting only of the identities of the vehicle,

the lessee and the recall, and the date the lessor sent the

notification to the lessee.

2. Regulatory Flexibility Act

The agency has also considered the effects of this rulemaking

action under the Regulatory Flexibility Act (5 U.S.C. 601 et seq.). I

certify that this proposed rule will not, if promulgated, have a

significant economic impact on a substantial number of small entities.

The regulations implementing the statutory amendment authorizing

NHTSA to require a follow-up notification in instances where it

determines that an initial notification has not resulted in the remedy

of an adequate number of defective or non-complying vehicles or items

of motor vehicle equipment will affect motor vehicle equipment

manufacturers who are small businesses. However, the agency anticipates

that the effect on those entities will not be significant because the

proposed regulations implementing this provision allow flexibility in

the amount of information that would be required for the second

notification, and also permit reducing postage costs through the use of

post-cards instead of first-class letters in appropriate circumstances.

The new provisions requiring lessors to notify lessees of safety-

related defects or noncompliances in leased motor vehicles, which are

being adopted pursuant to a statutory amendment requiring such

notification, will also affect vehicle lessors who are small

businesses. However, NHTSA anticipates that the effect of these

amendments on these entities will be minimized by the exception to the

requirement for notification by the lessor in cases where a lessor and

a manufacturer have agreed that the manufacturer will notify lessees

directly. In addition, the amendments provisions should result in a

safety benefit as more leased vehicles will be returned for remedy of

safety-related defects and noncompliances with Federal motor vehicle

safety standards.

With respect to the additional recordkeeping requirements adopted

for vehicle lessors, the amount of information required is small and

should not place any significant cost burdens on the lessors. The

information is essential to the agency's ability to enforce the new

provisions requiring lessors to notify lessees of safety-related

defects and noncompliances with Federal motor vehicle safety standards

in their vehicles, and the economic [[Page 17267]] impact will be

outweighed by the benefit to safety from NHTSA's ability to enforce

this provision effectively.

To the extent the above amendments do have an impact on small

businesses, those impacts are minimal and would be offset by the safety

benefits that they would provide.

3. National Environmental Policy Act

In accordance with the National Environmental Policy Act of 1969,

the agency has analyzed the environmental impacts of this rulemaking

action and determined that implementation of this action will not have

a significant impact on the quality of the human environment. The new

record-keeping requirements will not introduce any new or harmful

matter into the environment.

4. Paperwork Reduction Act

Certain provisions in the final rule that would require

manufacturers to submit information to NHTSA, and to retain other

information, are considered to be information collection requirements,

as that term is defined by the Office of Management and Budget (OMB) in

5 CFR part 1320. The provision in the rule that would require vehicle

lessors to retain information is considered to be an information

collection requirement, as that term is defined by the Office of

Management and Budget (OMB) in 5 CFR part 1320. Accordingly, this

requirement has been submitted to OMB for its approval, pursuant to the

requirements of the Paperwork Reduction Act (44 U.S.C. 3501 et seq.).

Comments on the proposed information collection requirements were

solicited in the NPRM. No comments on these requirements were received

by NHTSA.

5. Executive Order 12612 (Federalism)

This action has been analyzed in accordance with the principles and

criteria contained in Executive Order 12612, and it has been determined

that the rulemaking does not have sufficient federalism implications to

warrant the preparation of a Federalism Assessment.

List of Subjects

49 CFR Part 552

Administrative practice and procedure; Motor vehicle safety;

Reporting and recordkeeping requirements.

49 CFR Part 554

Administrative practice and procedure; Motor vehicle safety.

49 CFR Part 573

Imports; Motor vehicle safety; Motor vehicles; Reporting and

recordkeeping requirements; tires.

49 CFR Part 576

Motor vehicle safety; Reporting and recordkeeping requirements.

49 CFR Part 577

Motor vehicle safety.

In consideration of the foregoing, parts 552, 554, 573, 576, and

577 of title 49 of the Code of Federal Regulations are amended as

follows:

PART 552--PETITIONS FOR RULEMAKING, DEFECT, AND NONCOMPLIANCE

ORDERS

1. The authority citation for Part 552 is revised to read as

follows:

Authority: 49 U.S.C. 30111, 30118, 30162; delegation of

authority at 49 CFR 1.50.

2.-3. Section 552.1 is revised to read as follows:

Sec. 552.1 Scope.

This part establishes procedures for the submission and disposition

of petitions filed by interested persons pursuant to 49 U.S.C. Chapters

301, 305, 321, 323, 325, 327, 329 and 331 to initiate rulemaking or to

make a decision that a motor vehicle or item of replacement equipment

does not comply with an applicable Federal motor vehicle safety

standard or contains a defect which relates to motor vehicle safety.

4. Section 552.2 is revised to read as follows:

Sec. 552.2 Purpose.

The purpose of this part is to enable the National Highway Traffic

Safety Administration to identify and respond on a timely basis to

petitions for rulemaking or defect or noncompliance decisions, and to

inform the public of the procedures following in response to such

petitions.

5. Section 552.3 is revised to read as follows:

Sec. 552.3 General.

Any interested person may file with the Administrator a petition

requesting him:

(a) to commence a proceeding respecting the issuance, amendment or

revocation of a motor vehicle safety standard, or

(b) to commence a proceeding to decide whether to issue an order

concerning the notification and remedy of a failure of a motor vehicle

or item of replacement equipment to comply with an applicable motor

vehicle safety standard or a defect in such vehicle or equipment that

relates to motor vehicle safety.

6. Section 552.6 is revised to read as follows:

Sec. 552.6 Technical review.

The appropriate Associate Administrator conducts a technical review

of the petition. The technical review may consist of an analysis of the

material submitted, together with information already in the possession

of the agency. It may also include the collection of additional

information, or a public meeting in accordance with Sec. 552.7.

7. Section 552.8 is revised to read as follows:

Sec. 552.8 Notification of agency action on the petition.

After considering the technical review conducted under Sec. 552.6,

and taking into account appropriate factors, which may include, among

others, allocation of agency resources, agency priorities and the

likelihood of success in litigation which might arise from the order,

the Administrator will grant or deny the petition. NHTSA will notify

the petitioner of the decision to grant or deny the petition within 120

days after its receipt of the petition.

PART 554--STANDARDS ENFORCEMENT AND DEFECT INVESTIGATIONS

8. The authority citation for part 554 is revised to read as

follows:

Authority: 49 U.S.C. 30102-103, 30111-112, 30117-121, 30162,

30165-67; delegation of authority at 49 CFR 1.50.

9.-10. Section 554.2 is revised to read as follows:

Sec. 554.2 Purpose.

The purpose of this part is to inform interested persons of the

procedures followed by the National Highway Traffic Safety

Administration in order more fairly and effectively to implement 49

U.S.C. Chapter 301.

11. Section 554.3 is revised to read as follows:

Sec. 554.3 Application.

This part applies to actions, investigations, and defect and

noncompliance decisions of the National Highway traffic Safety

Administration under 49 U.S.C. 30116, 30117, 30118, 30120 and 30165.

12. Section 554.10 is amended by revising paragraphs (a), (b), (c),

introductory test, (c)(2) and (c)(4), and by removing paragraph (e), to

read as follows: [[Page 17268]]

Sec. 554.10 Initial decisions and public meetings.

(a) An initial decision of failure to comply with safety standards

or of a safety-related defect is made by the Administrator or his

delegate based on the completed investigative file compiled by the

appropriate office.

(b) The decision is communicated to the manufacturer in a letter

which makes available all information on which the decision is based.

The letter advises the manufacturer of his right to present

information, views, and arguments to establish that there is no defect

or failure to comply or that the alleged defect does not affect motor

vehicle safety. The letter also specifies the time and place of a

public meeting for the presentation of arguments or sets a date by

which written comments must be submitted. Submission of all

information, whether at a public meeting or in written form, is

normally scheduled about 30 days after the initial decision. The

deadline for submission of information can be extended for good cause

shown.

(c) Public notice of an initial decision is made in a Federal

Register notice that--

* * * * *

(2) Summarizes the information on which the decision is based.

* * * * *

(4) States the time and place of a public meeting or the deadline

for written submission in which the manufacturer and interested persons

may present information, views, and arguments respecting the decision.

* * * * *

13. Section 554.11 is revised to read as follows:

Sec. 554.11 Final decisions.

(a) The Administrator bases his final decision on the completed

investigative file and on information, views, and arguments submitted

at the public meeting.

(b) If the Administrator decides that a failure to comply or a

safety-related defect exists, he orders the manufacturer to furnish the

notification specified in 49 U.S.C. 30118 and 30119 and to remedy the

defect or failure to comply.

(c) If the Administrator closes an investigation following an

initial determination, without making a final determination that a

failure to comply or a safety-related defect exists, he or she will so

notify the manufacturer and publish a notice of that closing in the

Federal Register.

(d) A statement of the Administrator's final decision and the

reasons for it appears in each completed public file.

PART 573--DEFECT AND NONCOMPLIANCE REPORTS

14. The authority citation for part 573 is revised to read as

follows:

Authority: 49 U.S.C. 30102-103, 30112, 30117-121, 30166-167;

delegation of authority at 49 CFR 1.50.

Sec. 573.3 [Amended]

15. Section 573.3 is amending by revising paragraphs (b) through

(f) to read as follows:

* * * * *

(b) In the case of a defect or noncompliance decided to exist in a

motor vehicle or equipment item imported into the United States,

compliance with Secs. 573.5 and 573.6 by either the fabricating

manufacturer or the importer of the vehicle or equipment item shall be

considered compliance by both.

(c) In the case of a defect or noncompliance decided to exist in a

vehicle manufactured in two or more stages, compliance with Secs. 573.5

and 573.6 by either the manufacturer of the incomplete vehicle or any

subsequent manufacturer of the vehicle shall be considered compliance

by all manufacturers.

(d) In the case of a defect or noncompliance decided to exist in an

item of replacement equipment (except tires) compliance with

Secs. 573.5 and 573.6 by the brand name or trademark owner shall be

considered compliance by the manufacturer. Tire brand name owners are

considered manufacturers (49 U.S.C. 10102(b)(1)(E)) and have the same

reporting requirements as manufacturers.

(e) In the case of a defect or noncompliance decided to exist in an

item of original equipment used in the vehicles of only one vehicle

manufacturer, compliance with Secs. 573.5 and 573.6 by either the

vehicle or equipment manufacturer shall be considered compliance by

both.

(f) In the case of a defect or noncompliance decided to exist in

original equipment installed in the vehicles of more than one

manufacturer, compliance with Sec. 573.5 is required of the equipment

manufacturer as to the equipment item, and of each vehicle manufacturer

as to the vehicles in which the equipment has been installed.

Compliance with Sec. 573.6 is required of the manufacturer who is

conducting the recall campaign.

16. Section 573.4 is amended by revising the definition of ``Act''

and by adding the following definitions, in alphabetical order, to read

as follows:

Sec. 573.4 Definitions.

* * * * *

Act means 49 U.S.C. Chapter 301.

* * * * *

Leased motor vehicle means any motor vehicle that is leased to a

person for a term of at least four months by a lessor who has leased

five or more vehicles in the twelve months preceding the date of

notification by the vehicle manufacturer of the existence of a safety-

related defect or noncompliance with a Federal motor vehicle safety

standard in the motor vehicle.

Lessee means a person who is the lessee of a leased motor vehicle

as defined in this section.

Lessor means a person or entity that is the owner, as reflected on

the vehicle's title, of any five or more leased vehicles (as defined in

this section), as of the date of notification by the manufacturer of

the existence of a safety-related defect or noncompliance with a

Federal motor vehicle safety standard in one or more of the leased

motor vehicles.

Readable form means a form readable by the unassisted eye or

readable by machine. If readable by machine, the submitting party must

obtain written confirmation from the Office of Defects Investigation

immediately prior to submission that the machine is readily available

to NHTSA. For all similar information responses, once a manufacturer

has obtained approval for the original response in that form, it will

not have to obtain approval for future submissions in the same form. In

addition, all coded information must be accompanied by an explanation

of the codes used.

17. Section 573.5 is amended by revising the second sentence of

paragraph (c)(1) and the introductory text of paragraph (c)(2), by

adding paragraphs (c)(2)(iv) and (v), by redesignating paragraph (c)(8)

as paragraph (c)(8)(i), by adding new paragraphs (c)(8)(ii)--(vi), and

by adding new paragraphs (c)(10) and (c)(11), to read as follows:

Sec. 573.5 Defect and noncompliance information report.

* * * * *

(c) * * * In the case of a defect or noncompliance decided to exist

in an imported vehicle or item of equipment, the agency designated by

the fabricating manufacturer pursuant to 49 U.S.C. section 30164(a)

shall be also stated. * * *

(2) Identification of the vehicles or items of motor vehicle

equipment potentially containing the defect or noncompliance, including

a description of the manufacturer's basis for its

[[Page 17269]] determination of the recall population and a description

of how the vehicles or items of equipment to be recalled differ from

similar vehicles or items of equipment that the manufacturer has not

included in the recall.

* * * * *

(iv) In the case of motor vehicles or items of motor vehicle

equipment in which the component that contains the defect or

noncompliance was manufactured by a different manufacturer from the

reporting manufacturer, the reporting manufacturer shall identify the

component and the manufacturer of the component by name, business

address, and business telephone number. If the reporting manufacturer

does not know the identity of the manufacturer of the component, it

shall identify the entity from which it was obtained.

(v) In the case of items of motor vehicle equipment, the

manufacturer of the equipment shall identify by name, business address,

and business telephone number every manufacturer that purchases the

defective or noncomplying component for use or installation in new

motor vehicles or new items of motor vehicle equipment.

* * * * *

(8)(i) A description of the manufacturer's program for remedying

the defect or noncompliance. The manufacturer's program will be

available for inspection in the public docket, Room 5109, Nassif

Building, 400 Seventh Street, SW, Washington DC 20590.

(ii) If a manufacturer anticipates that its notification campaign

will commence more than 30 days after it has notified NHTSA that a

safety-related defect or noncompliance exists, or anticipates that the

notification campaign will not be completed within 75 days after it has

notified NHTSA of that decision, the manufacturer shall include with

its report to NHTSA a proposed schedule for the notification campaign,

from commencement through completion. If the remedy for the defect or

noncompliance is not available at the time of the owner notification,

the report shall state when the remedy will be provided to owners. The

manufacturer shall also identify and describe in detail the factors on

which the proposed schedule is based. The manufacturer's proposed

schedule shall be subject to disapproval by the Administrator, if the

Administrator determines that it will lead to unreasonable delays in

the notification of and remedy for the defect or noncompliance.

(iii) The manufacturer shall describe any factors that it

anticipates could interfere with its ability to adhere to the proposed

schedule and state with specificity the likely effect of each such

factor.

(iv) A manufacturer that is unable to conduct its notification

campaign in accordance with the schedule submitted pursuant to

paragraph (c)(8)(ii) of this section, or that is otherwise unable to

complete owner notification within 75 days after notifying NHTSA of its

defect or noncompliance decision, shall promptly advise NHTSA of its

inability to do so and provide an explanation for such inability, along

with a revised schedule, or a new schedule in those instances in which

the manufacturer had not previously submitted a schedule. Such

submission shall contain the basis for the new or revised schedule,

which shall also be subject to disapproval by the Administrator.

(v) If a manufacturer intends to file a petition for an exemption

from the recall requirements of the Act on the basis that a defect or

noncompliance is inconsequential as it relates to motor vehicle safety,

it shall notify NHTSA of that intention in its original report to NHTSA

of the defect or noncompliance. If such a petition is filed and

subsequently denied, the time period under which an owner notification

schedule must be filed under paragraph (c)(8) of this section shall run

from the date of the denial of the petition.

(vi) If a manufacturer advises NHTSA that it intends to file such a

petition, and does not do so within the 30-day period established by 49

CFR 556.4(c), the time periods for ascertaining whether an owner

notification schedule must be filed under this section shall run from

the end of that 30-day period. Any such schedule must be filed no later

than the fifth business day after that date.

* * * * *

(10) Except as authorized by the Administrator, the manufacturer

shall submit a copy of its proposed owner notification letter to the

Office of Defects Investigation (``ODI'') no fewer than five Federal

government business days before it intends to begin mailing it to

owners. Submission shall be made by any means which permits the

manufacturer to verify promptly that the copy of the proposed letter

was in fact received by ODI and the date it was received by ODI.

(11) The manufacturer's campaign number, if it is not identical to

the identification number assigned by NHTSA.

18. Section 573.6 is amended by revising the first sentence of

paragraph (a), adding a new paragraph (b)(6) and adding a new paragraph

(d) to read as follows:

Sec. 573.6 Quarterly reports.

(a) Each manufacturer who is conducting a defect or noncompliance

notification campaign to manufacturers, distributors, dealers, or

owners shall submit to NHTSA a report in accordance with paragraphs

(b), (c), and (d) of this section. * * *

(b) * * *

(6) In reports by equipment manufacturers, the number of items of

equipment repaired and/or returned by dealers, other retailers, and

distributors to the manufacturer prior to their first sale to the

public.

* * * * *

(d) The reports required by this section shall be submitted in

accordance with the following schedule, except that if the due date

specified below falls on a Saturday, Sunday or Federal holiday, the

report shall be submitted on the next day that is a business day for

the Federal government:

(1) For the first calendar quarter (January 1 through March 31), on

or before April 30;

(2) For the second calendar quarter (April 1 through June 30), on

or before July 30;

(3) For the third calendar quarter (July 1 through September 30),

on or before October 30; and

(4) For the fourth calendar quarter (October 1 through December

31), on or before January 30.

19. Section 573.7 is amended by revising the heading of the section

and by adding new paragraphs (d) and (e) to read as follows:

Sec. 573.7 Lists of purchasers, owners, lessors and lessees.

* * * * *

(d) If a manufacturer has in its possession at the time it sends

notification of a safety-related defect or noncompliance information

that a vehicle concerning which notification has been sent is a leased

motor vehicle, the list(s) maintained by a manufacturer pursuant to

paragraph (a) of this section shall identify the vehicle as a leased

motor vehicle, and shall identify the person or entity to whom

notification was sent as the lessor or lessee of the vehicle (as

appropriate), if that information is known to the manufacturer. The

manufacturer may also maintain a separate list which includes only

leased vehicles, provided that it is clearly identified as such, and

that it meets the other requirements for a list prepared pursuant to

paragraph (a) of this section. [[Page 17270]]

(e) Each lessor of leased motor vehicles shall maintain, in a form

suitable for inspection, such as computer information storage devices

or card files, a list of the names and addresses of all lessees to

which the lessor has provided notification of a defect or noncompliance

pursuant to 49 CFR 577.5(i). The list shall also include the make,

model, and vehicle identification number of each such leased vehicle,

and either the date on which the lessor mailed notification of the

defect or noncompliance to the lessee, or a statement that the

manufacturer agreed on a specified date to mail the notification

directly to the lessee. A manufacturer that provides notification

directly to lessees shall maintain a list containing the same

information as that required by this paragraph to be maintained by

lessors sending notifications to lessees. The information required by

this paragraph must be retained by the manufacturer or lessor

(whichever sent the notification to the lessee) for one calendar year

from the date the vehicle lease expires.

20. Section 573.8 is revised to read as follows:

Sec. 573.8 Notices, bulletins, and other communications.

Each manufacturer shall furnish to the NHTSA a copy of all notices,

bulletins, and other communications (including those transmitted by

computer, telefax or other electronic means, and including warranty and

policy extension communiques and product improvement bulletins), other

than those required to be submitted pursuant to Sec. 573.5(c)(9), sent

to more than one manufacturer, distributor, dealer, lessor, lessee, or

purchaser, regarding any defect in its vehicles or items of equipment

(including any failure or malfunction beyond normal deterioration in

use, or any failure of performance, or any flaw or unintended deviation

from design specifications), whether or not such defect is safety-

related. Copies shall be in readable form and shall be submitted

monthly, not more than five (5) working days after the end of each

month.

PART 576--RECORD RETENTION

21. The authority citation for part 576 is revised to read as

follows:

Authority: 49 U.S.C. 30112, 30115, 30117-121, 30166-167;

delegation of authority at 49 CFR 1.50.

22. Section 576.5 is revised to read as follows:

Sec. 576.5 Basic requirements.

Each manufacturer of motor vehicles shall retain as specified in

Sec. 576.7 every record described in Sec. 576.6 for eight years from

the last date of the model year in which the vehicle to which it

relates was produced.

23. Section 576.6 is revised to read as follows:

Sec. 576.6 Records.

Records to be retained by manufacturers under this part include all

documentary materials, films, tapes, and other information-storing

media that contain information concerning malfunctions that may be

related to motor vehicle safety. Such records include, but are not

limited to, communications from vehicle users and memoranda of user

complaints; reports and other documents, including material generated

or communicated by computer, telefax or other electronic means, that

are related to work performed under, or claims made under, warranties;

service reports or similar documents, including electronic

transmissions, from dealers or manufacturer's field personnel; and any

lists, compilations, analyses, or discussions of malfunctions that may

be related to motor vehicle safety contained in internal or external

correspondence of the manufacturer, including communications

transmitted electronically.

PART 577--DEFECT AND NONCOMPLIANCE NOTIFICATION

24. The authority citation for part 577 is revised to read as

follows:

Authority: 49 U.S.C. 30102-103, 30112, 30115, 30117-121, 30166-

167; delegations of authority at 49 CFR 1.50 and 49 CFR 501.8.

25.-26. Section 577.4 is amended by revising the definition of

``Act'', and by adding the following definitions, in alphabetical

order, to read as follows:

Sec. 577.4 Definitions.

* * * * *

Act means 49 U.S.C. Chapter 30101-30169.

* * * * *

Leased motor vehicle means any motor vehicle that is leased to a

person for a term of at least four months by a lessor who has leased

five or more vehicles in the twelve months preceding the date of

notification by the vehicle manufacturer of the existence of a safety-

related defect or noncompliance with a Federal motor vehicle safety

standard in the motor vehicle.

Lessee means a person who is the lessee of a leased motor vehicle

as defined in this section.

Lessor means a person or entity that is the owner, as reflected on

the vehicle's title, of any five or more leased vehicles (as defined in

this section), as of the date of notification by the manufacturer of

the existence of a safety-related defect or noncompliance with a

Federal motor vehicle safety standard in one or more of the leased

motor vehicles.

* * * * *

27. Section 577.5 is amended by revising the heading of the section

and the fourth sentence of paragraph (a), by adding a new fifth, sixth

and seventh sentence to paragraph (a), by revising paragraphs (c)(1)

and (2) and the parenthetical in paragraph (g)(1)(vii), and by adding

new paragraphs (h) and (i), to read as follows:

Sec. 577.5 Notification pursuant to a manufacturer's decision.

(a) * * * The information required by paragraphs (d) through (h) of

this section may be presented in any order. The manufacturer shall mark

the outside of each envelope in which it sends an owner notification

letter with a notation that includes the words ``SAFETY,'' RECALL,''

and ``NOTICE,'' all in capital letters and in type that is larger than

that used in the address section, and is also distinguishable from the

other type in a manner other than size. Except where the format of the

envelope has been previously approved by NHTSA, each manufacturer must

submit the envelope format it intends to use to NHTSA at least 5

Federal government business days before mailing to owners, in the same

manner as is required by Sec. 573.5(c)(9) for owner notification

letters.

* * * * *

(c) * * *

(1) ``(Manufacturer's name or division) has decided that a defect

which relates to motor vehicle safety exists in (identified motor

vehicles, in the case of notification sent by a motor vehicle

manufacturer; identified replacement equipment, in the case of

notification sent by a replacement equipment manufacturer);'' or

(2) ``(Manufacturer's name or division) has decided that

(identified motor vehicles, in the case of notification sent by a motor

vehicle manufacturer; identified replacement equipment, in the case of

notification sent by a replacement equipment manufacturer) fail to

conform to Federal Motor Vehicle Safety Standard No. (number and title

of standard).''

(g) * * *

(1) * * * [[Page 17271]]

(vii) * * * (Washington, DC area residents may call 202-366-0123) *

* *

* * * * *

(h) A statement that describes a lessor's obligation under Federal

law to provide a lessee of the vehicle to which the notification letter

refers with a copy of the letter; and to maintain a record which

identifies the lessee(s) to whom it sent a copy of the letter, the date

it sent the letter, and the Vehicle Identification Number(s) of the

vehicle(s) that it has leased to that lessee and to which the

notification applies. The statement must also include the definition of

``lessor'' set forth in Sec. 577.4 of this part. If the notification is

being sent directly from a manufacturer to an individual or entity that

the manufacturer knows to be a lessee, the manufacturer need not

include a definition of lessor, but must state the requirement of

Federal law regarding notification of lessees and that it is providing

notification in place of the lessor.

(i) Any lessor who receives a notification of a determination of a

safety-related defect or noncompliance pertaining to any leased motor

vehicle shall send a copy of such notice to the lessee as prescribed by

Sec. 577.7(a)(2)(iv). This requirement applies to both initial and

follow-up notifications, but does not apply where the manufacturer has

notified a lessor's lessees directly.

28. Section 577.6 is amended by revising the heading of the section

and paragraph (a), paragraphs (b)(2)(i) and (ii), (b)(3), and (b)(5),

paragraphs (b)(9)(i)(A) and (C), and paragraphs (b)(10)(iv), (b)(11),

and (c)(1), to read as follows:

Sec. 577.6 Notification pursuant to Administrator's decision.

(a) Agency-ordered notification. When a manufacturer is ordered

pursuant to 49 U.S.C. 30118(b) to provide notification of a defect or

noncompliance, he shall provide such notification in accordance with

Secs. 577.5 and 577.7, except that the statement required by paragraph

(c) of Sec. 577.5 shall indicate that the decision has been made by the

Administrator of the National Highway Traffic Safety Administration.

(b) * * *

(2) * * *

(i) ``The Administrator of the National Highway Traffic Safety

Administration has decided that a defect which relates to motor vehicle

safety exists in (identified motor vehicles, in the case of

notification sent by a manufacturer of motor vehicles; identified

replacement equipment, in the case of notification sent by a

manufacturer of replacement equipment);'' or

(ii) ``The Administrator of the National Highway Traffic Safety

Administration has decided that (identified motor vehicles in the case

of notification sent by a motor vehicle manufacturer; identified

replacement equipment, in the case of notification sent by a

manufacturer of replacement equipment) fail to conform to federal Motor

Vehicle Safety Standard No. (number and title of standard).''

(3) When the Administrator decides that the defect or noncompliance

may not exist in each such vehicle or item of replacement equipment,

the manufacturer may include an additional statement to that effect.

* * * * *

(5) A clear description of the Administrator's stated basis for his

decision, as provided in his order, including a brief summary of the

evidence and reasoning that the Administrator relied upon in making his

decision.

* * * * *

(9) * * *

(i) * * *

(A) A statement that the remedy will be provided without charge to

the owner if the Court upholds the Administrator's decision;

* * * * *

(C) A statement that, if the Court upholds the Administrator's

decision, he will reimburse the owner for any reasonable and necessary

expenses that the owner incurs (not in excess of any amount specified

by the Administrator) in repairing the defect or noncompliance

following a date, specified by the manufacturer, which shall not be

later than the date of the Administrator's order to issue this

notification.

* * * * *

(10) * * *

* * * * *

(iv) The manufacturer's recommendations of service facilities where

the owner could have the repairs performed, including (in the case of a

manufacturer required to reimburse if the Administrator's decision is

upheld in the court proceeding) at least one service facility for whose

charges the owner will be fully reimbursed if the Administrator's

decision is upheld.

(11) A statement that further notice will be mailed by the

manufacturer to the owner if the Administrator's decision is upheld in

the court proceeding.

* * * * *

(c) * * *

(1) The statement required by paragraph (c) of Sec. 577.5 shall

indicate that the decision has been made by the Administrator and that

his decision has been upheld in a proceeding in the Federal courts; and

* * * * *

29. Section 577.7 is amended by adding a new sentence at the end of

paragraph (a)(1), by adding a new last sentence to paragraph (a)(2)(i),

and by adding new paragraph (a)(2)(iv), and revising paragraph

(a)(2)(ii)(B), to read as follows:

Sec. 577.7 Time and manner of notification.

(a) * * *

(1) Be furnished within a reasonable time after the manufacturer

first decides that either a defect that relates to motor vehicle safety

or a noncompliance exists. The Administrator may order a manufacturer

to send the notification to owners on a specific date where the

Administrator finds, after consideration of available information and

the views of the manufacturer, that such notification is in the public

interest. The factors that the Administrator may consider include, but

are not limited to, the severity of the safety risk; the likelihood of

occurrence of the defect or noncompliance; whether there is something

that an owner can do to reduce either the likelihood of occurrence of

the defect or noncompliance or the severity of the consequences;

whether there will be a delay in the availability of the remedy from

the manufacturer; and the anticipated length of any such delay.

(2) * * *

(i) * * * The manufacturer shall also provide notification to each

lessee of a leased motor vehicle that is covered by an agreement

between the manufacturer and a lessor under which the manufacturer is

to notify lessees directly of safety-related defects and

noncompliances.

(ii) * * *

* * * * *

(B) (Except in the case of a tire) if decided by the Administrator

to be required for motor vehicle safety, by public notice in such

manner as the Administrator may require after consultation with the

manufacturer.

* * * * *

(iv) In the case of a notification to be sent by a lessor to a

lessee of a leased motor vehicle, by first-class mail to the most

recent lessee known to the lessor. Such notification shall be mailed

within ten days of the lessor's receipt of the notification from the

vehicle manufacturer.

* * * * * [[Page 17272]]

30. Section 577.8 is revised to read as follows:

Sec. 577.8 Disclaimers.

(a) A notification sent pursuant to Secs. 577.5, 577.6, 577.9 or

577.10 regarding a defect which relates to motor vehicle safety shall

not, except as specifically provided in this part, contain any

statement or implication that there is no defect, that the defect does

not relate to motor vehicle safety, or that the defect is not present

in the owner's or lessee's vehicle or item of replacement equipment.

This section also applies to any notification sent to a lessor or

directly to a lessee by a manufacturer.

(b) A notification sent pursuant to Secs. 577.5, 577.6, 577.9 or

577.10 regarding a noncompliance with an applicable motor vehicle

safety standard shall not, except as specifically provided in this

part, contain any statement or implication that there is not a

noncompliance, or that the noncompliance is not present in the owner's

or lessee's vehicle or item of replacement equipment. This section also

applies to any notification sent to a lessor or directly to a lessee by

a manufacturer.

31. A new Sec. 577.10 is added to read as follows:

Sec. 577.10 Follow-up notification.

(a) If, based on quarterly reports submitted pursuant to Sec. 573.6

of this part or other available information, the Administrator decides

that a notification of a safety-related defect of a noncompliance with

a Federal motor vehicle safety standard sent by a manufacturer has not

resulted in an adequate number of vehicles or items of equipment being

returned for remedy, the Administrator may direct the manufacturer to

send a follow-up notification in accordance with this section. The

scope, timing, form, and content of such follow-up notification will be

established by the Administrator, in consultation with the

manufacturer, to maximize the number of owners, purchasers, and lessees

who will present their vehicles or items of equipment for remedy.

(b) The Administrator may consider the following factors in

deciding whether or not to require a manufacturer to undertake a

follow-up notification campaign:

(1) The percentage of covered vehicles or items of equipment that

have been presented for the remedy;

(2) The amount of time that has elapsed since the prior

notification(s);

(3) The likelihood that a follow-up notification will increase the

number of vehicles or items of equipment receiving the remedy;

(4) The seriousness of the safety risk from the defect or

noncompliance;

(5) Whether the prior notification(s) undertaken by the

manufacturer complied with the requirements of the statute and

regulations; and

(6) Such other factors as are consistent with the purpose of the

statute.

(c) A manufacturer shall be required to provide a follow-up

notification under this section only with respect to vehicles or items

of equipment that have not been returned for remedy pursuant to the

prior notification(s).

(d) Except where the Administrator determines otherwise, the

follow-up notification shall be sent to the same categories of

recipients that received the prior notification(s).

(e) A follow-up notification must include:

(1) A statement that identifies it as a follow-up to an earlier

communication;

(2) A statement urging the recipient to present the vehicle or item

of equipment for remedy; and

(3) Except as determined by the Administrator, the information

required to be included in the initial notification.

(f) The manufacturer shall mark the outside of each envelope in

which it sends a follow-up notification in a manner which meets the

requirements of Sec. 577.5(a) of this part.

(g) Notwithstanding any other provision of this Part, the

Administrator may authorize the use of other media besides first-class

mail for a follow-up notification.

Issued on: March 24, 1995.

Ricardo Martinez,

Administrator.

[FR Doc. 95-8130 Filed 4-4-95; 8:45 am]

BILLING CODE 4910-59-P