Civil Penalties

DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

49 CFR Part 578

[Docket No. NHTSA 99-5448; Notice 2]

RIN 2127-AH48

Civil Penalties

AGENCY: National Highway Traffic Safety Administration (NHTSA), DOT.

ACTION: Final rule.

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SUMMARY: This document adjusts certain civil penalties authorized for

violations of statutes that we enforce. The Federal Civil Monetary

Penalty Inflation Adjustment Act of 1990, as amended by the Debt

Collection Improvement Act of 1996, requires us to take this action

periodically. The largest adjustments occur in penalties for related

series of violations of 49 U.S.C. Chapter 301--Motor Vehicle Safety,

and 49 U.S.C. Chapter 325--Bumper Standards. The maximum penalties for

violations of Chapters 301 and 325 are increased from $880,000 to

$925,000 according to the formulae set forth in the statute.

Adjustments in two other penalties are made as well.

DATES: Effective Date: August 13, 1999.

Applicability Date: These adjusted penalties apply to violations

occurring on or after August 13, 1999.

FOR FURTHER INFORMATION CONTACT: Taylor Vinson, Office of Chief

Counsel, NHTSA, telephone (202) 366-5263, facsimile (202) 366-3820,

electronic mail ``TV[email protected]'', 400 Seventh Street, SW,

Washington, DC 20590.

SUPPLEMENTARY INFORMATION:

Background

In order to preserve the remedial impact of civil penalties and to

foster compliance with the law, the Federal Civil Monetary Penalty

Inflation Adjustment Act of 1990 ((``Adjustment Act''), 28 U.S.C. Sec.

2461 note, Pub. L. 101-410), as amended by the Debt Collection

Improvement Act of 1996 (``Collection Act,'' Pub. L. 104-134), requires

us and other Federal agencies to regularly adjust certain civil

penalties for inflation. Under these laws, each agency must make an

initial inflationary adjustment for all applicable civil penalties, and

must make further adjustments of these penalty amounts at least once

every four years. The Collection Act limited the initial increase to 10

percent of the penalty being adjusted.

Our initial adjustment of civil penalties under these legislative

authorities was published on February 4, 1997 (62 FR 5167). We

established 49 CFR Part 578, Civil Penalties, which applies to

violations that occur on and after March 6, 1997. These adjustments

resulted in the maximum permissible increases of 10 percent. For

example, the maximum penalty of $1,000 for each violation of 49 U.S.C.

Sec. 30112(a), up to $800,000 for a related series of violations, was

adjusted to $1,100 and $880,000.

In accordance with the mandate to make further adjustments of civil

penalty amounts at least once every four years, on April 6, 1999, we

proposed to adjust some of our penalties now in order to enhance their

deterrent effect (64 FR 16690). We received no comments on this

proposal.

Method of Calculation

Under the Adjustment Act as amended by the Collection Act, we

determine the inflation adjustment for each applicable civil penalty by

[[Page 37877]]

increasing the maximum civil penalty amount per violation by the cost-

of-living adjustment, and then applying a rounding factor. Sec. 5(b) of

the Adjustment Act defines the ``cost-of-living'' adjustment as: ``the

percentage (if any) for each civil monetary penalty by which--

(1) the Consumer Price Index for the month of June of the calendar

year preceding the adjustment exceeds

(2) the Consumer Price Index for the month of June of the calendar

year in which the amount of such civil monetary penalty was last set or

adjusted pursuant to law.''

Since the current adjustment is effective before July 1, 1999, the

``Consumer Price Index [CPI] for the month of June of the calendar year

preceding the adjustment'' is the CPI for June 1998. This figure is

488.2. NHTSA's penalties were initially adjusted based on the CPI

figure for June 1996. Because the intent of the legislation is for

agencies to adjust their civil penalties to account for increases in

inflation in order to preserve their remedial impact, we believe that

this is realized by adjusting civil penalties according to the CPI base

upon ``which the amount of such civil monetary penalty was last set or

adjusted pursuant to law.'' This base was the CPI for June 1996. This

was 469.5. The factor that we are using in calculating the increase,

then, is 488.2 divided by 469.5, or 1.0398296. Any calculated increase

under this adjustment is then subject to a specific rounding formula

set forth in Sec. 5(a) of the Adjustment Act. Under the formula:

Any increase shall be rounded to the nearest

(1) multiple of $10 in the case of penalties less than or equal to

$100;

(2) multiple of $100 in the case of penalties greater than $100 but

less than or equal to $1,000;

(3) multiple of $1,000 in the case of penalties greater than $1,000

but less than or equal to $10,000;

(4) multiple of $5,000 in the case of penalties greater than

$10,000 but less than or equal to $100,000;

(5) multiple of $10,000 in the case of penalties greater than

$100,000 but less than or equal to $200,000; and

(6) multiple of $25,000 in the case of penalties greater than

$200,000.

Penalties That We are Increasing

Upon review, we concluded that application of the formulae permit

some of our penalties to be increased at this time. We are doing so

before the passage of four years in order to enhance the deterrent

effect of these penalties because of their importance to our

enforcement programs. Even with these increases, these penalties appear

less than adequate as a full deterrent to violations of the statutes

that we enforce. For example, the maximum penalty for a related series

of violations under the National Traffic and Motor Vehicle Safety Act

of 1966 as amended in 1974 was $800,000. It would have increased more

than threefold, to $2.45 million, in June 1996 if adjusted for

inflation. However, the adjustment was capped at $880,000. Further,

under this aggregate penalty ceiling, on a per vehicle basis the

maximum penalty amounts to less than one dollar per vehicle where a

substantial fleet was in violation of the Safety Act (codified in 1994

as 49 U.S.C. Chapter 301--Motor Vehicle Safety).

Odometer Tampering and Disclosure

As shown above, Sec. 5(a)(3) of the amended Adjustment Act permits

an increase rounded ``to the nearest multiple of $1,000'' for penalties

between $1,000 and $10,000. Under 49 CFR Sec. 578.6(f)(2), a penalty of

$1,650 may be imposed (the original penalty was $1,500). A figure of

$1,716 results when the inflation factor is applied. The nearest

multiple of $1,000 is $2,000. Therefore, we are amending 49 CFR Sec.

578.6(f)(2) so that a person who violates a requirement on odometer

tampering and disclosure, with intent to defraud, will now be liable

for three times the actual damages or $2,000, whichever is greater.

Consumer Information

The rounding provisions of Sec. 5(a)(6) of the Adjustment Act

permit raises to the nearest multiple of $25,000 where the penalty

exceeds $200,000. Sec. 578.6(d) establishes a maximum penalty of

$440,000 (originally $400,000) for a related series of violations of

consumer information regarding crashworthiness and damage

susceptibility. The inflation factor applied to $440,000 gives

$457,525. As the nearest $25,000 multiple is $450,000, we are adjusting

the penalty to this amount.

Violations of Safety and Bumper Requirements

Both 49 CFR Sec. 578.6(a) and 49 CFR Sec. 578.6(c)(2) establish a

maximum penalty of $880,000 (originally $800,000) for related series of

violations of Chapter 301--Motor Vehicle Safety, and Chapter 325--

Bumper Standards. Multiplying this figure by the inflation factor gives

$915,050. Sec. 5(a)(6) permits a rounding to the nearest multiple of

$25,000, which is $925,000, and we are adjusting the penalties to this

amount.

Effective Date

The amendments are effective August 13, 1999 and the adjusted

penalties apply to violations of pertinent statutes and regulations

occurring on and after that date.

Rulemaking Analyses and Notices

Executive Order 12866 and DOT Regulatory Policies and Procedures

We have considered the impact of this rulemaking action under E.O.

12866 and the Department of Transportation's regulatory policies and

procedures. This rulemaking document was not reviewed under E.O. 12866,

``Regulatory Planning and Review.'' This action is limited to the

adoption of adjustments of civil penalties under statutes that the

agency enforces, and has been determined to be not ``significant''

under the Department of Transportation's regulatory policies and

procedures.

Regulatory Flexibility Act

We have also considered the impacts of this rule under the

Regulatory Flexibility Act. I certify that this rule will have no

significant economic impact on a substantial number of small entities.

The following is my statement providing the factual basis for the

certification (5 U.S.C. Sec. 605(b)). The amendments primarily affect

manufacturers of motor vehicles. Manufacturers of motor vehicles are

generally not small businesses within the meaning of the Regulatory

Flexibility Act.

The Small Business Administration's regulations define a small

business in part as a business entity ``which operates primarily within

the United States.'' (13 CFR 121.105(a)) SBA's size standards are

organized according to Standard Industrial Classification Codes (SIC),

SIC Code 3711 ``Motor Vehicles and Passenger Car Bodies'' has a small

business size standard of 1,000 employees or fewer.

For manufacturers of passenger cars and light trucks, NHTSA

estimates there are at most five small manufacturers of passenger cars

in the U.S. Since each manufacturer serves a niche market, often

specializing in replicas of ``classic'' cars, production for each

manufacturer is fewer than 100 cars per year. Thus, there are at most

500 cars manufactured per year by U.S. small businesses.

In contrast, in 1999, there are approximately nine large

manufacturers producing passenger cars, and light trucks in the U.S.

Total U.S.

[[Page 37878]]

manufacturing production per year is approximately 15 to 15 and a half

million passenger cars and light trucks per year. We do not believe

small businesses manufacture even 0.1 percent of total U.S. passenger

car and light truck production per year.

Further, small organizations and governmental jurisdictions will

not be significantly affected as the price of motor vehicles ought not

to change as the result of this rule. As explained above, this action

is limited to the adoption of a statutory directive, and has been

determined to be not ``significant'' under the Department of

Transportation's regulatory policies and procedures.

Finally, this action will not affect our civil penalty policy under

the Small Business Regulatory Enforcement Fairness Act (62 FR 37115,

July 10, 1997). We shall continue to consider the appropriateness of

the penalty to the size of the business charged.

Paperwork Reduction Act

In accordance with the Paperwork Reduction Act of 1980 (Public Law

96-511), we state that there are no requirements for information

collection associated with this rulemaking action.

National Environmental Policy Act

We have also analyzed this rulemaking action under the National

Environmental Policy Act and determined that it has no significant

impact on the human environment.

Executive Order 12612 (Federalism)

We have analyzed this rule in accordance with the principles and

criteria contained in E.O. 12612, and have determined that it has no

significant federalism implications to warrant the preparation of a

Federalism Assessment.

Civil Justice Reform

This rule does not have a retroactive or preemptive effect.

Judicial review of a rule may be obtained pursuant to 5 U.S.C. 702.

That section does not require that a petition for reconsideration be

filed prior to seeking judicial review.

Unfunded Mandates Reform Act of 1995

The Unfunded Mandates Reform Act of 1995 (Public Law 104-4)

requires agencies to prepare a written assessment of the cost, benefits

and other effects of proposed or final rules that include a Federal

mandate likely to result in the expenditure by State, local, or tribal

governments, in the aggregate, or by the private sector, of more than

$100 million annually. Because this rule will not have a $100 million

effect, no Unfunded Mandates assessment will be prepared.

List of Subjects in 49 CFR Part 578

Imports, Motor vehicle safety, Motor vehicles, Rubber and rubber

products, Penalties, Tires.

In consideration of the foregoing, 49 CFR part 578 is amended as

follows:

PART 578--CIVIL PENALTIES

1. The authority citation for 49 CFR part 578 is revised to read as

follows:

Authority: 49 U.S.C. 30165, 30505, 32308, 32309, 32507, 32709,

32710, 32912, and 33115; Pub. L. 101-410, 104 Stat. 890; Pub. L.

104-134, 110 Stat. 1372; delegation of authority at 49 CFR 1.50.

2. Section 578.6 is amended by revising the last sentence in

paragraphs (a) and (d) and revising paragraphs (c)(2) and (f)(2) to

read as follows:

Sec. 578.6 Civil penalties for violations of specified provisions of

Title 49 of the United States Code.

(a) Motor vehicle safety. * * * The maximum civil penalty under

this paragraph for a related series of violations is $925,000.

* * * * *

(c) Bumper standards. * * *

(2) The maximum civil penalty under this paragraph (c) for a

related series of violations is $925,000.

(d) Consumer information regarding crashworthiness and damage

susceptibility. * * * The maximum penalty under this paragraph for a

related series of violations is $450,000.

* * * * *

(f) Odometer tampering and disclosure. * * *

(2) A person that violates 49 U.S.C. Chapter 327 or a regulation

prescribed or order issued thereunder, with intent to defraud, is

liable for three times the actual damages or $2,000, whichever is

greater.

* * * * *

Issued on: July 8, 1999.

Ricardo Martinez,

Administrator.

[FR Doc. 99-17807 Filed 7-13-99; 8:45 am]

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