Red River Manufacturing, Inc.; Grant of Petition for Temporary Exemption From Federal Motor Vehicle Safety Standard No. 224

DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

[Docket No. NHTSA-98-3355; Notice 2]

Red River Manufacturing, Inc.; Grant of Petition for Temporary

Exemption From Federal Motor Vehicle Safety Standard No. 224

This notice grants the petition by Red River Manufacturing, Inc.,

of West Fargo, North Dakota (``Red River''), for a temporary exemption

from Motor Vehicle Safety Standard No. 224, Rear Impact Protection. The

basis of the petition was that compliance would cause substantial

economic hardship to a manufacturer that has tried in good faith to

comply with the standard.

Notice of receipt of the petition was published on February 2,

1998, and an opportunity afforded for comment (63 FR 5416).

Red River manufactures and sells several types of horizontal

discharge trailers. One type is used in the road construction industry

to deliver asphalt and other road building materials to the

construction site. The other type is used to haul feed, seed, and

agricultural products such as sugar beets and potatoes, from the fields

to hoppers for storage or processing. Both the construction and

agricultural trailers are known by the name ``Live Bottom.''

Standard No. 224 requires, effective January 26, 1998, that all

trailers with a gross vehicle weight rating (GVWR) of 4536 Kg or more,

including Live Bottom trailers, be fitted with a rear impact guard that

conforms to Standard No. 223, Rear impact guards. Red River, which

manufactured 265 Live Bottom trailers in 1996, has asked for an

exemption of three years in order to develop a rear impact guard that

conforms to Standard No. 223 and can be installed in compliance with

Standard No. 224, while retaining the functionality and price-

competitiveness of their trailers. In the absence of an exemption, it

believes that approximately 50 percent of its work force would have to

be laid off. Red River's gross revenues would decrease by an amount of

between $4,000,000 to $5,000,000 (these revenues averaged $13,049,311

over its 1994, 1995, and 1996 fiscal years).

Present studies show that a retractable rear impact guard would

likely catch excess asphalt and agricultural products as they were

discharged into hoppers. Further, the increased cost of the Live

Bottom, were it required to comply immediately, would likely cause

contractors to choose the cheaper alternative of dump trailers.

Finally, the increased weight of a retractable rear impact guard would

significantly decrease the payload of the Live Bottom.

In mid 1996, Red River's design staff began exploring options for

compliance with Standard No. 224. Through a business partner in

Denmark, the company reviewed the European rear impact protection

systems. Because these designs must be manually operated by ground

personnel, they would not be acceptable to the applicant's American

customers. Later in 1996, Red River decided to investigate powered

retractable rear impact guards. The initial design could not meet the

energy absorption requirements of Standard No. 223. The company is now

investigating another design for retractable rear impact guards, which

``is being refined and analyzed.''

Red River believes that an exemption would be in the public

interest and consistent with traffic safety objectives because the Live

Bottom ``can be used safely where it would be hazardous or impractical

to use end dump trailers, such as on uneven terrain or in places with

low overhead clearances.'' These trailers are ``valuable to the

agricultural sector'' because of the advantages they offer in the

handling of relatively fragile cargo. An exemption ``would have no

adverse effect on the safety of the general public'' because the Live

Bottom spends very little of its operating life on the highway and the

likelihood of its being involved in a rear-end collision is minimal. In

addition, the design of the Live Bottom is such that the rear tires act

as a buffer and reduce the likelihood of impact with the trailer.

In response to the Federal Register notice, one comment was

received. Robert J. Crail of Knoxville, Tennessee, supported the

petition.

Red River requested that the financial and production information

that it provided with its petition be kept confidential because of the

value it would afford competitors. NHTSA understands from Red River's

attorney that the company's principal competitor in the manufacture of

horizontal discharge trailers is Dan Hill & Associates, Inc. (``Dan

Hill''). Dan Hill asked for and received a one-year exemption from

Standard No. 224 on January 26, 1998 (63 FR 3784).

The fact that another manufacturer of a horizontal discharge

trailer believes that it can comply with Standard No. 224 at the end of

a one-year exemption supports the opinion of NHTSA engineers that

conformance is feasible within a limited time frame. NHTSA has

therefore concluded that Red River can achieve compliance of its

horizontal discharge trailers within the same one-year period that

another manufacturer of such trailers believes is reasonable. It is

important that the public be afforded the protection that underride

guards offer with no undue delay.

NHTSA is also mindful that a disparity in the duration of a

temporary exemption could afford a competitive advantage to competing

low volume manufacturers, causing hardship to one of them, and has

therefore decided to consider that factor as well in its deliberations

on Red River's petition. As noted above, Red River represented that, in

the absence of an exemption, it might have to reduce its workforce by

50 percent, and that its gross revenues would decrease by $4,000,000 to

$5,000,000. Gross revenues had averaged slightly over $13,000,000 in

its 1994, 1995, and 1996 fiscal years. The comparable figures for Dan

Hill are a reduction of 60 percent in workforce, and a decrease in

gross revenues of $6,000,000. Gross revenues had averaged approximately

$13,885,000 in the same fiscal years. Both manufacturers argued that

immediate compliance would require such a rise in the price of their

trailers that contractors would likely choose the cheaper alternative

of dump trailers. Both manufacturers also explored the possibility of

implementing systems designed in Europe. The principal difference

between Red River and Dan Hill discernable to NHTSA is the number of

horizontal discharge trailers that each manufactured in the year

preceding the filing of their petitions, 265 by Red River and 86 by Dan

Hill. These trailers represented 85 percent of Dan Hill's total

production, and a somewhat lesser percent of Red River's (although

NHTSA granted Red River confidential treatment to the total number of

trailers it produces as well as a breakdown of the 265 trailers into

construction and agricultural components, the data show that Red River

manufactures substantially more horizontal discharge construction

trailers than its direct competitor, Dan Hill). Granting Red River an

exemption that would last two years longer than the exemption granted

to Dan Hill might have the effect of providing Red River with an undue

advantage, given the substantial similarity of their trailers, the

modifications necessary to achieve compliance, and the financial

condition of both companies. Thus, the facts, the equities, and motor

vehicle safety all weigh towards granting Red River an exemption that

does not last longer than the one granted to Dan Hill.

[[Page 15910]]

NHTSA notes that Red River's exemption request also covers a

horizontal discharge agricultural trailer, a type that is not

manufactured by Dan Hill. However, it does not appear that this type of

trailer warrants a separate consideration or a longer exemption, given

that Red River's petition states that ``the modifications required for

agricultural Live Bottoms will be similar to those * * * [for]

construction Live Bottoms.''

NHTSA has concluded that Red River has not made a convincing

argument for an exemption of longer than one year. The petitioner

describes its primary competition in terms of vehicle type as the

``steel end dump trailer'' which retails for about $7,000 less than the

Live Bottom trailer. Red River has presented an estimated price

increase range if compliance is to be achieved within one to two years,

but has requested confidential treatment for it. While NHTSA cannot

quote dollar figures for the estimated range of price increases, it can

characterize the low end estimate as exceeding 10 percent of the retail

price differential between steel end dump trailers and Live Bottoms.

Such an increase would result ``in a projected loss of sales of

approximately 10 percent.'' Given the 1996 base of 265 Live Bottoms,

the estimated price increase were compliance to be required ``within

one to two years'' could result, then, in a loss of 27 sales per year.

NHTSA has concluded that this potential loss of sales does not

constitute ``substantial economic hardship'' which would justify an

exemption period that is longer than one year. The statute affords any

manufacturer granted an exemption the right to apply for a renewal. If

either Red River or Dan Hill discover that it requires further time for

compliance, it may apply for an extension near the end of the exemption

period.

NHTSA is in accord with Red River's public interest and safety

arguments, that Live Bottoms possess advantages in certain uses over

end dump trailers, and that much of its useful life is spent off the

highway.

In consideration of the foregoing, it is hereby found that to

require Red River Manufacturing, Inc., to comply immediately with 49

CFR 571.224, Standard No. 224 would cause substantial economic hardship

to a manufacturer that has tried in good faith to comply with the

standard, and that a one-year exemption would be in the public interest

and consistent with the objectives of motor vehicle safety.

Accordingly, Red River Manufacturing, Inc. is hereby granted NHTSA

Temporary Exemption No. 98-3 from Federal Motor Vehicle Safety Standard

No. 224, Rear Impact Protection, expiring April 1, 1999, applicable to

Live Bottom horizontal discharge construction and agricultural

trailers.

Authority: 49 U.S.C. 30113; delegation of authority at 49 CFR

1.50.

Issued: March 27, 1998.

Ricardo Martinez,

Administrator.

[FR Doc. 98-8514 Filed 3-31-98; 8:45 am]

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