Civil Penalties

DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

49 CFR Part 578

[Docket No. NHTSA 99-5448]

RIN 2127-AH48

Civil Penalties

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

ACTION: Notice of proposed rulemaking.

-----------------------------------------------------------------------

SUMMARY: This document proposes to adjust 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 would 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 would be

increased from $880,000 to $925,000 according to the formulae set forth

in the statute. Adjustments in two other penalties would be made as

well. These adjusted penalties would apply to violations occurring on

or after the effective date of the final rule.

DATES: Date that comments are due: May 21, 1999. Proposed effective

date: 45 days after publication of final rule in the Federal Register.

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. 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.

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, we propose to adjust

some of our penalties now in order to enhance their deterrent effect.

Method of Calculation

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

determine the inflation adjustment for each applicable civil penalty by

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

of-living adjustment, and then applying a rounding factor. Section 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 we plan to make the current adjustment effective before July

1, 1999, the ``Consumer Price Index (CPI) for the month of June of the

calendar year preceding the adjustment'' would be the CPI for June

1998. This figure is 488.2. NHTSA's penalties were initially adjusted

based on the CPI figure for June 1996. Since 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 should use 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 have concluded that application of the formulae

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

proposing this action 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.

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 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 propose to amend 49 CFR 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 section 5(a)(6) of

the Adjustment Act permit raises to the nearest multiple of $25,000

where the penalty exceeds $200,000. Section

[[Page 16691]]

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 propose adjusting the penalty to this amount.

Violations of safety and bumper requirements. Both 49 CFR 578.6(a)

and 49 CFR 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. Section 5(a)(6)

permits a rounding to the nearest multiple of $25,000, which is

$925,000, and we are proposing adjusting the penalties to this amount.

Effective Date

These amendments would be effective 45 days after publication in

the Federal Register and would apply to violations of pertinent

statutes and regulations occurring on and after that date.

Request for Comments

Interested persons are invited to submit comments on the proposal

and other approaches to adjustment of penalties for inflation. It is

requested that two copies be submitted.

All comments must not exceed 15 pages in length. (49 CFR 553.21).

Necessary attachments may be appended to these submissions without

regard to the 15-page limit. This limitation is intended to encourage

commenters to detail their primary arguments in a concise fashion.

If a commenter wishes to submit certain information under a claim

of confidentiality, three copies of the complete submission, including

purportedly confidential business information, should be submitted to

the Chief Counsel, NHTSA, at the street address given above, and seven

copies from which the purportedly confidential information has been

deleted should be submitted to the Docket Section. A request for

confidentiality should be accompanied by a cover letter setting forth

the information specified in the agency's confidential business

information regulation. 49 CFR part 512.

All comments received before the close of business on the comment

closing date indicated above for the proposal will be considered, and

will be available for examination in the docket at the above address

both before and after that date. To the extent possible, comments filed

after the closing date will also be considered. Comments received too

late for consideration in regard to the final rule will be considered

as suggestions for further rulemaking action. Comments on the proposal

will be available for inspection in the docket. The NHTSA will continue

to file relevant information as it becomes available in the docket

after the closing date, and it is recommended that interested persons

continue to examine the docket for new material.

Those persons desiring to be notified upon receipt of their

comments in the rules docket should enclose a self-addressed, stamped

postcard in the envelope with their comments. Upon receiving the

comments, the docket supervisor will return the postcard by mail.

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 notice under the

Regulatory Flexibility Act. I certify that this proposed rule would

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. 605(b)). The proposed 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. 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 would

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

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

action is limited to the proposed 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 would 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 (Pub. L. 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 proposed 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 proposed rule does not have a retroactive or preemptive

effect. Judicial review of a rule based on this proposal 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.

[[Page 16692]]

Unfunded Mandates Reform Act of 1995

The Unfunded Mandates Reform Act of 1995 (Pub. L. 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 would 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, Tires, Penalties.

PART 578--CIVIL PENALTIES

1. The authority citation for 49 CFR Part 578 would continue to

read as follows:

Authority: Pub. L. 101-410, Pub. L. 104-134, 49 U.S.C. 30165,

30505, 32308, 32309, 32507, 32709, 32710, 32912, and 33115;

delegation of authority at 49 CFR 1.50.

2. Section 578.6 would be amended by revising the last sentence in

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

republishing the headings of paragraphs (a), (c), (d), and (f) 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. (1) * * *

(2) The maximum civil penalty under this paragraph 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: March 29, 1999.

Kenneth N. Weinstein,

Associate Administrator for Safety Assurance.

[FR Doc. 99-8140 Filed 4-5-99; 8:45 am]

BILLING CODE 4910-59-P