[Federal Register Volume 60, Number 179 (Friday, September 15, 1995)]
[Rules and Regulations]
[Pages 47878-47895]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-22902]
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DEPARTMENT OF TRANSPORTATION
49 CFR Part 583
[Docket No. 92-64; Notice 07]
RIN 2127-AG03
Motor Vehicle Content Labeling
AGENCY: National Highway Traffic Safety Administration (NHTSA),
Department of Transportation (DOT).
ACTION: Final rule; further response to petitions for reconsideration.
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SUMMARY: The American Automobile Labeling Act requires passenger cars
and other light vehicles to be labeled with information about their
domestic and foreign content. This document responds to several
petitions for reconsideration of the agency's July 1994 final rule
implementing that statute. NHTSA is making several changes to the final
rule in response to the petitions, which will reduce the burdens
associated with making content calculations and also result in more
accurate information. The agency has also decided not to make a number
of the changes requested by the petitions.
DATES: Effective date. The amendments made by this rule are effective
October 16, 1995.
Petitions for reconsideration. Petitions for reconsideration must
be received not later than October 16, 1995.
ADDRESSES: Petitions for reconsideration should be submitted to:
Administrator, National Highway Traffic Safety Administration, 400
Seventh Street SW, Washington, DC 20590.
FOR FURTHER INFORMATION CONTACT: Mr. Orron Kee, Office of Market
Incentives, National Highway Safety Administration, Room 5313, 400
Seventh Street SW, Washington, DC 20590 (202-366-0846).
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Background
A. Statutory Requirements
B. July 1994 Final Rule
1. Manufacturers of Passenger Motor Vehicles
2. Suppliers of Motor Vehicle Equipment
3. Dealers of Passenger Motor Vehicles
II. Petitions for Reconsideration
III. Initial Response to Petitions
IV. Overview of Further Response to Petitions
V. Further Response to Petitions
A. Definition of Final Assembly (Sec. 583.4)
B. Procedure for Determining U.S./Canadian Parts Content
(Sec. 583.6)
1. Calculation by suppliers of the portion of their equipment's
value that represents value added in the U.S./Canada
a. Issues concerning equipment or materials imported into the
U.S. or Canada
b. Issues concerning tracing provision
2. Non-responsive Suppliers
C. Procedure for Determining Major Foreign Sources of Passenger
Motor Vehicle Equipment (Sec. 583.7)
D. Alternative Procedures for Manufacturers
E. Legal Issues
1. Federal Preemption
2. Due Process
3. Authority to Exclude Vehicles with Low U.S./Canadian Content
F. Clarifying Amendments
G. Letter from Ford
VI. Rulemaking Analyses and Notices
I. Background
A. Statutory Requirements
Congress enacted the American Automobile Labeling Act (Labeling
Act) as part of the Department of Transportation and Related Agencies
Appropriation Act for Fiscal Year 1993, P.L. 102-388. The Labeling Act
amended Title II of the Motor Vehicle Information and Cost Savings Act
(Cost Savings Act) by adding a new section 210.
Subsequently, on July 5, 1994, the President signed a bill (P.L.
103-272) which revised and codified ``without substantive change'' the
Cost Savings Act and two other NHTSA statutes. The content labeling
provisions, which formerly existed as section 210 of the Cost Savings
Act, are now codified at 49 U.S.C. Sec. 32304, Passenger motor vehicle
country of origin labeling. NHTSA will use the new statutory citations
in this notice.
Section 32304 requires passenger motor vehicles 1 manufactured
on or after October 1, 1994 to be labeled with information about their
domestic and foreign content. The purpose of the section is to enable
consumers to take country of origin information into account in
deciding which vehicle to purchase.
1 The term ``passenger motor vehicle,'' defined in 49
U.S.C. 32101 as a motor vehicle with motive power designed to carry
not more than 12 individuals, is amended for purposes of section
32304 to include any ``multipurpose vehicle'' and ``light duty
truck'' that is rated at not more than 8,500 pounds gross vehicle
weight. Thus, the motor vehicle content labeling requirements apply
to passenger cars, light trucks, multipurpose passenger vehicles,
and certain small buses. Motorcycles are excluded.
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Section 32304(b) requires each new passenger motor vehicle to be
labeled with the following five items of information:
(1) The percentage U.S./Canadian equipment (parts) content;
(2) The names of any countries 2 other than the U.S. and
Canada which individually contribute 15 percent or more of the
equipment content, and the percentage content for each such country;
2 If there are more than two such countries, only the
names of the two countries providing the greatest amount of content
need be listed.
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(3) The final assembly place by city, state (where appropriate),
and country;
(4) The country of origin of the engine; and
(5) The country of origin of the transmission.
Section 32304(b) specifies that the first two items of information,
the equipment content percentages for the U.S./Canada and foreign
countries, are calculated on a ``carline'' basis rather than for each
individual vehicle. The term ``carline'' refers to a name of a group of
vehicles which has a degree of commonality in construction such as body
and chassis.
Manufacturers of passenger motor vehicles are required to establish
the required information annually for each model year, and are
responsible for the affixing of the required label to the vehicle.
Dealers are responsible for maintaining the labels.
In order to calculate the information required for the label, the
vehicle manufacturer must know certain information about the origin of
each item of passenger motor vehicle equipment used to assemble its
vehicles. For example, in order to calculate the information for the
first item of the label, i.e., the percentage of the value of the motor
vehicle
[[Page 47879]]
equipment installed on passenger motor vehicles within a carline which
originated in the U.S./Canada, the manufacturer must know the U.S./
Canadian content of each item of motor vehicle equipment.
The statute specifies that suppliers of passenger motor vehicle
equipment must provide information about the origin of the equipment
they supply. For purposes of determining U.S./Canadian origin for the
first item on the label, the statute provides different procedures
depending on whether equipment is received from an allied supplier (a
supplier wholly owned by the manufacturer) or an outside supplier.
For equipment received from outside suppliers, section
32304(a)(9)(A) provides that the equipment is considered U.S./Canadian
if it contains at least 70 percent value added in the U.S./Canada.
Thus, any equipment that is at least 70 percent U.S./Canadian is valued
at 100 percent U.S./Canadian, and any equipment under 70 percent is
valued at zero percent. This statutory provision is sometimes referred
to as the ``roll-up, roll-down'' provision. For equipment received from
allied suppliers, section 32304(a)(9)(B) provides that the actual
amount of U.S./Canadian content is used.
The statute requires the Department of Transportation to promulgate
regulations implementing the content labeling requirements. Section
32304(d) requires the promulgation of regulations which specify the
form and content of the required labels, and the manner and location in
which the labels must be affixed. Section 32304(e) requires
promulgation of such regulations as may be necessary to carry out the
labeling requirements, including regulations to establish a procedure
to verify the required labeling information. That section also directs
that such regulations provide the ultimate purchaser of a new passenger
motor vehicle with the best and most understandable information
possible about the foreign content and U.S/Canadian origin of the
equipment of such vehicles without imposing costly and unnecessary
burdens on the manufacturers. Finally, section 32304(e) also specifies
that the regulations include provisions requiring suppliers to certify
whether their equipment is of U.S., U.S./Canadian, or foreign origin.
B. July 1994 Final Rule
On July 21, 1994, NHTSA published in the Federal Register (59 FR
37294) a final rule establishing a new regulation, 49 CFR Part 583,
Automobile Parts Content Labeling, to implement the Labeling Act. The
regulation established requirements for (1) manufacturers of passenger
motor vehicles; (2) suppliers of motor vehicle equipment used in the
assembly of passenger motor vehicles; and (3) dealers of passenger
motor vehicles. A summary of the requirements is set forth below.
1. Manufacturers of Passenger Motor Vehicles
Vehicle manufacturers are required to affix to all new passenger
motor vehicles a label which provides the following information:
(1) U.S./Canadian Parts Content--the overall percentage, by value,
of the U.S./Canadian content of the motor vehicle equipment installed
on the carline of which the vehicle is a part;
(2) Major Sources of Foreign Parts Content--the names of the two
countries, if any, other than the U.S./Canada, which contributed the
greatest amount (at least 15 percent), by value, of motor vehicle
equipment for the carline, and the percentage, by value, of the
equipment originating in each such country;
(3) Final Assembly Point--the city, state (where appropriate), and
country in which the final assembly of the vehicle occurred;
(4) Country of Origin for the Engine Parts;
(5) Country of Origin for the Transmission Parts.
The label is also required to include a statement below this
information reading as follows:
Note: Parts content does not include final assembly,
distribution, or other non-parts costs.
Manufacturers are permitted, but not required, to provide at the
end of the note the following additional statement for carlines
assembled in the U.S. and/or Canada, and another country:
This carline is assembled in the U.S. and/or Canada, and in
[insert name of each other country]. The U.S./Canadian parts content
for the portion of the carline assembled in [insert name of country,
treating the U.S. and Canada together, i.e., U.S./Canada] is [ ]%.
The information for items (1) and (2) of the label is calculated,
prior to the beginning of the model year, for each carline. The
information for items (3), (4) and (5) is determined for each
individual vehicle. However, the country of origin for groups of
engines and transmissions is determined once a model year.
Vehicle manufacturers are to calculate the information for the
label, relying on information provided to them by suppliers. Under the
final rule, manufacturers and allied suppliers are required to request
their suppliers to provide the relevant content information specified
in Part 583, and the suppliers are required to provide the specified
information in response to such requests. The vehicle manufacturers are
required to maintain records of the information used to determine the
information provided on the labels.
2. Suppliers of Motor Vehicle Equipment
For any equipment that an outside supplier (a supplier not wholly
owned by the vehicle manufacturer) supplies to a vehicle manufacturer,
a supplier wholly owned by the vehicle manufacturer (an allied
supplier) or, in the case of a joint venture vehicle assembly
arrangement, a supplier that is wholly owned by one member of the joint
venture arrangement, the outside supplier is required to provide, at
the request of that manufacturer or allied supplier, the following
information:
(1) the price of the equipment to the manufacturer or allied
supplier;
(2) whether the equipment has, or does not have, at least 70
percent of its value added in the U.S. and Canada;
(3) for any equipment for which the U.S./Canadian content is less
than 70 percent, the country of origin of the equipment (treating the
U.S. and Canada together);
(4) for equipment that may be used in an engine or transmission,
the country of origin of the equipment (separating the U.S. and
Canada).
For any equipment that an allied supplier supplies to a vehicle
manufacturer, the supplier is required to provide, at the request of
the manufacturer, the following information:
(1) the price of the equipment to the manufacturer;
(2) the percentage U.S./Canadian content of the equipment;
(3) the country of origin of the equipment (treating the U.S. and
Canada together);
(4) for equipment that may be used in an engine or transmission,
the country of origin of the equipment (separating the U.S. and
Canada).
A supplier of engines and transmissions is, in addition to the
above requirements, required to provide, at the request of the vehicle
manufacturer, the country of origin for each engine or transmission it
supplies to the manufacturer, determined as follows: the country in
which the greatest percentage, by value (using the total cost of
equipment to the engine or transmission supplier, while excluding the
cost of final assembly labor), was added to the engine or transmission.
[[Page 47880]]
Both outside and allied suppliers that directly supply equipment to
vehicle manufacturers are required to provide the specified information
directly to the vehicle manufacturers, in the form of a certification.
Outside suppliers that directly supply to allied suppliers are required
to provide the specified information and certification directly to the
allied suppliers. Suppliers are also required to maintain records of
the information used to compile the information provided to the
manufacturers and outside suppliers.
The requirements apply only to suppliers which supply directly to
the vehicle manufacturer or to an allied supplier. No requirements are
imposed on suppliers earlier in the chain, e.g., a company which
supplies an item of equipment to an outside supplier which then
supplies it to a vehicle manufacturer.
3. Dealers of Passenger Motor Vehicles
Dealers are required to maintain the label on each vehicle until
the vehicle is sold to a consumer.
II. Petitions for Reconsideration
NHTSA received petitions for reconsideration from the American
Automobile Manufacturers Association (AAMA), General Motors (GM), the
Association of International Automobile Manufacturers (AIAM),
Volkswagen (VW), the American International Automobile Dealers
Association (AIADA), and the Kentucky Cabinet for Economic Development
(Kentucky Cabinet). A summary of these petitions follows.
AAMA argued that certain requirements specified in section 583.6,
Procedure for determining U.S./Canadian parts content, result in U.S./
Canadian content being understated and impose costly and unnecessary
burdens on manufacturers and suppliers. That organization identified
three major issues.
First, AAMA was concerned that section 583.6 provides that
materials used by a supplier located in the U.S./Canada are considered
foreign to whatever extent part or all of the cost of the material is
not determined to represent value added in the United States or Canada,
traced back to raw materials. AAMA stated that suppliers may avoid the
costly process of tracing simply by defaulting U.S./Canadian content to
zero, with the result that U.S./Canadian content will be understated.
That organization urged that the regulation allow first-tier suppliers
to use methods other than tracing to accurately calculate a material's
U.S./Canadian value added.
Second, AAMA was concerned that the U.S./Canadian content of
components must be defaulted to zero if suppliers fail to respond to a
manufacturer's or allied supplier's request for content information.
That organization argued that the content information ultimately
provided to consumers will be more accurate if manufacturers are
permitted to establish the U.S./Canadian content of a component by
other means when a supplier fails to respond.
Third, AAMA was concerned that section 583.6 specifies that
whenever material or motor vehicle equipment is imported into the U.S.
or Canada from a third country, the value added in the U.S./Canada for
that material or equipment is considered zero, even if part of the
material originated in the U.S. or Canada. AAMA argued that this
provision is inconsistent with the Labeling Act's definition of
``foreign.'' It also noted that if a manufacturer installed identical
parts both in a vehicle assembled in the U.S or Canada and in one
assembled in a third country, the two parts would have different U.S./
Canadian content. AAMA urged that if a manufacturer is able to identify
the U.S./Canadian content, it should be permitted to include the actual
U.S./Canadian content of the imported component in the calculations.
AAMA recommended specific changes to Part 583 in light of the three
major issues it identified. That organization also recommended a number
of other changes to provide clarification.
GM joined in the AAMA petition and also submitted a separate
petition urging the agency to permit manufacturers to use alternative
procedures to determine U.S./Canadian parts content. That company
expressed concern that Part 583 requires it to collect content data on
millions of unique part numbers when tracing beyond the first tier of
suppliers is required. According to GM, this represents the most
burdensome and costly procedure possible, even more burdensome than any
other trade- related content data requirements administered by any
other U.S. government entity.
With respect to AAMA's and GM's petitions, NHTSA notes that the FY
1995 Conference Report on DOT Appropriations included the following
language:
The conferees are aware that several petitions for
reconsideration have been submitted to NHTSA since the publication
of the final rule. Among the issues raised in the petitions are
whether it is consistent with the Act that the final rule requires
that a first-tier supplier of equipment produced or assembled in the
U.S. or Canada must consider material used in that equipment to have
zero U.S./Canadian content unless the material's U.S./Canadian value
has been verified by full tracing to its origin, and that a
manufacturer or supplier that does not receive information from its
suppliers concerning the U.S./Canadian content of equipment must
consider the U.S./Canadian value of the equipment to be zero.
These provisions of the final rule will not ensure that the most
accurate, understandable, and cost-effective information is provided
to consumers, and thus contradict the expressed intent of Congress
in passing the AALA. Therefore, the conferees direct NHTSA to amend
the final rule to permit first-tier suppliers to use other methods,
such as country-of-origin marking, substantial transformation, or
other customs data in their records, to determine the U.S./Canadian
content of equipment, and manufacturers and allied suppliers to use
other methods to determine U.S./Canadian content of equipment when
suppliers fail to provide adequate information.
Furthermore, to ensure that the final rule does not impose
costly and unnecessary burdens on manufacturers, the conferees also
direct NHTSA to amend the rule to allow manufacturers to propose
alternative procedures for determining domestic content if such
procedures produce reliable results.
NHTSA notes that the inclusion of this language in an
Appropriations Report does not have the effect of changing the existing
statute or the agency's duty to follow that statute. The agency will
respectfully treat this language as expressing the sentiment of
Congress as to how the issues raised by the petitions for
reconsideration should be resolved.
AIAM raised four issues in its petition for reconsideration. First,
that organization stated that NHTSA did not respond to its comment on
the NPRM urging that the regulation provide that any state action which
challenges the information provided on the label is Federally
preempted. Second, AIAM argued that the regulation contains an overly
broad interpretation of the term ``final assembly.'' That organization
stated that the definition includes within its scope (and thereby
excludes from U.S./Canada parts content) assembly operations that are
not performed on the motor vehicle but instead on parts and components
of that motor vehicle. Third, AIAM argued that the provision in the
regulation concerning tracing back to raw materials is inconsistent
with the language of the Labeling Act and also outside the scope of
notice of the NPRM. Finally, AIAM argued that a provision in the
regulation which specifies that major foreign source percentages are
``rounded down'' to bring the combined total of U.S./Canadian and major
foreign source content to no higher than 100 percent is
[[Page 47881]]
outside NHTSA's authority under the Labeling Act.
VW, a member of AIAM, submitted a separate petition requesting that
NHTSA reconsider its determination that it is statutorily prohibited
from permitting manufacturers selling motor vehicles with minimal U.S./
Canadian parts content to state that fact rather than providing
specific content numbers. That manufacturer cited the case of Alabama
Power Company v. Costle, 636 F.2d 323 (1979), in support of its
request.
AIADA requested that the agency ``reconsider and vacate its final
rule on Motor Vehicle Content Labeling.'' That organization stated that
the rule is unconstitutionally vague and unequal and discriminatory in
its application and therefore constitutes a denial of due process in
violation of the Fifth Amendment to the Constitution and the
Administrative Procedure Act. It also cited its comments to the agency
on the NPRM and on an earlier request for comments but did not provide
any other arguments or analysis in support of its petition.
The Kentucky Cabinet argued that the tracing provisions included in
the final rule impose unnecessary administrative burdens on the
Kentucky automotive industry. It expressed concern that companies will
be required to undergo expensive and time-consuming efforts to trace a
part back to raw materials. It also stated that in some cases a second
tier supplier may not want to divulge proprietary information. The
Kentucky Cabinet also expressed concern that the calculations for
domestic content do not include the value of labor performed by
Kentuckians. It stated that consumers will be forced to make purchasing
decisions based on information that does not reflect the actual amount
of domestic content. The Kentucky Cabinet specifically expressed
concern about the exclusion of final assembly in the calculation of
domestic content. It stated that an automotive manufacturer which does
substantial ``in-house'' final assembly will not be able to include the
full value of domestic parts and therefore be at a competitive
disadvantage.
III. Initial Response to Petitions
In a notice published March 16, 1995 (60 FR 14228), the agency
partially responded to the petitions for reconsideration by extending a
temporary alternative approach for data collection and calculations.
This approach permits manufacturers and suppliers to use procedures
that are expected to yield similar results. This alternative was
originally available, under the July 1994 final rule, for model year
1995 and model year 1996 carlines which were first offered for sale to
ultimate purchasers before June 1, 1995. The notice extended the
alternative to all model year 1996 carlines and model year 1997
carlines which are first offered for sale to ultimate purchasers before
June 1, 1996.
IV. Overview of Further Response to Petitions
In response to the petitions for reconsideration, NHTSA is making
several changes in Part 583. These changes include:
(1) Providing that whenever material or motor vehicle equipment is
imported into the U.S. or Canada from a third country, the value added
in the U.S. or Canada is presumed zero, but that if documentation is
available to the supplier which identifies value added in the U.S. or
Canada for that equipment, such value added in the U.S. or Canada is
counted;
(2) Amending the clarifying procedures concerning the determination
of U.S./Canadian content to (a) make it clear that, for materials used
by suppliers in producing passenger motor vehicle equipment (other than
for materials imported from third countries), suppliers are to make a
good faith estimate of the value added in the United States or Canada
(to the extent necessary to make required determinations concerning the
value added in the U.S./Canada of their passenger motor vehicle
equipment), (b) provide suppliers greater flexibility in the
information they can use in making these estimates, and (c) reduce the
number of stages for which suppliers must consider where value was
added (although not to the degree recommended by AAMA);
(3) Providing that manufacturers can petition to use alternative
calculation procedures based on representative or statistical sampling
to determine U.S./Canadian parts content and major sources of foreign
parts content; and
(4) Several minor clarifying changes.
NHTSA is granting the petitions to the extent that they are
accommodated by these changes; the agency is otherwise denying the
petitions.
V. Response to Petitions
In this section, NHTSA presents its analysis of the issues raised
by the petitioners and its response. The major issues are organized
according to the sections of the final rule to which they relate.
A. Definition of Final Assembly (Section 583.4)
Section 32304(a)(15) provides that ``costs incurred or profits made
at the final assembly place and beyond (including advertising,
assembly, labor, interest payments, and profits)'' are excluded from
the calculation of parts content. In earlier notices, NHTSA recognized
that manufacturers may conduct some pre-assembly operations, e.g.,
production of parts, at the same location as final assembly. The agency
included a definition of ``final assembly'' in the final rule to
distinguish between production of parts, for which labor and other
costs are included in parts content calculations, and final assembly,
for which labor and other costs are not included.
Two of the petitions for reconsideration addressed the exclusion of
final assembly costs from the calculation of U.S./Canadian parts
content and/or the final rule's definition of final assembly. As
indicated above, the Kentucky Cabinet expressed concern that the
calculations for domestic content do not include the value of labor
performed by Kentuckians. It stated that consumers will be forced to
make purchasing decisions based on information that does not reflect
the actual amount of domestic content. The Kentucky Cabinet expressed
specific concern about the exclusion of final assembly costs in the
calculation of domestic content. It stated that an automotive
manufacturer which does substantial ``in-house'' final assembly will
not be able to include the full value of domestic parts and therefore
be at a competitive disadvantage.
AIAM argued that the final rule contains an overly broad
interpretation of the term ``final assembly'' that will mislead the
motor vehicle purchaser to believe that the value of many auto parts
made in-house by a U.S. motor vehicle manufacturer are not part of the
U.S./Canadian parts content of the vehicle. It argued that the rule
creates an unfair and anomalous situation, since a manufacturer that
assembles a large number of components to produce a complex piece of
equipment (other than an engine or transmission) must exclude the
assembled value of that item from the reported U.S./Canadian parts
content of the motor vehicle, while a less integrated manufacturer that
obtained the same piece of equipment from an outside supplier in the
United States or Canada would include its entire value in the U.S./
Canada parts content of the vehicle if the ``70 percent'' test was met.
AIAM also argued that the definition of ``final
[[Page 47882]]
assembly'' is so broad that it includes within its scope (and thereby
excludes from U.S./Canada parts content) assembly operations that are
not performed on the motor vehicle but instead are performed on parts
and components of that motor vehicle. AIAM alleged that there is no
statutory basis, or even a rational one, to exclude substantial U.S.
value added to in-house produced components other than engines and
transmissions.
With respect to the Kentucky Cabinet's concerns about excluding
final assembly costs, including the exclusion of the value of labor
performed by Kentuckians, in the calculation of U.S./Canadian parts
content, NHTSA notes that Congress decided to require manufacturers to
provide prospective passenger motor purchasers with calculations of
parts content rather than overall vehicle content. As indicated above,
the statute specifically provides that final assembly costs, including
labor costs, are excluded from these calculations. NHTSA does not have
the authority to depart from the statute. The agency observes, however,
that the value of final assembly labor is reflected on the label since
the final assembly point is specified by city, state and country. Thus,
prospective purchasers will know whether the vehicle they are
considering purchasing was assembled in Kentucky.
With respect to AIAM's concerns about the final rule's definition
of ``final assembly,'' NHTSA notes that numerous commenters on the NPRM
addressed this subject, and the agency discussed it at length in the
preamble to the final rule. In its petition, AIAM did not address the
agency's extensive analysis of this issue. The agency will repeat a
portion of that discussion in this notice (the statutory references in
the quoted language have been superseded, but the substance has not
changed):
The starting place for resolving the question of what operations
should be considered to be part of ``final assembly'' and therefore
excluded from parts content calculations is the language of the
Labeling Act. The Act includes several relevant sections. First,
section 210(b)(1)(A) provides that the label must indicate ``the
percentage (by value) of passenger motor vehicle equipment installed
in such vehicle within a carline which originated in the United
States and Canada . . . .'' Second, section 210(f)(10) provides that
``(c)osts incurred or profits made at the final vehicle assembly
point and beyond (i.e., advertising, assembly, labor, interest
payments, profits, etc.) shall not be included in [the calculation
of value added in the United States and Canada].'' Third, section
210(f)(14) defines ``final assembly point'' as ``the plant, factory,
or other place at which a new passenger motor vehicle is produced or
assembled by a manufacturer and from which such vehicle is delivered
to a dealer or importer in such a condition that all component parts
necessary to the mechanical operation of such automobile are
included with such vehicle . . . .'' (Emphasis added.).
While final assembly point can be considered as either a
physical place or a phase in the assembly process, it is significant
that section 210 defines it as a place, i.e., the plant, factory, or
other place at which a new vehicle is produced or assembled. Thus,
looking at the plain language of section 210, assembly and labor
costs ``at'' the plant, factory or other place at which a new
vehicle is assembled are excluded from parts content calculations.
It is also significant that the language in section 210(f)(14)
about the vehicle being in such a condition that ``all component
parts necessary to the mechanical operation of such automobile are
included with such vehicle'' refers to the vehicle when it leaves
the final assembly point for delivery to a dealer or importer. In
citing this language for the proposition that ``final assembly'' is
defined in terms of completeness, AIAM and Toyota confuse the
completion of final assembly with the final assembly process.
Section 210(f)(14) defines ``final assembly point'' as the plant,
factory, or other place at which a vehicle is ``produced or
assembled'' by a manufacturer. All of the operations that make up
the production or assembly process are part of final assembly. There
is no basis to interpret section 210(f)(10)'s requirement that
assembly and labor costs incurred ``at the plant, factory or other
place'' at which a new vehicle is assembled only applies to the
costs associated with the last step in completing the vehicle.
Since section 210 expressly provides that assembly and labor
costs at the plant, factory or other place at which a new vehicle is
assembled are excluded from parts content calculations, NHTSA
believes that all assembly and labor costs that are ordinarily
associated with final assembly must be excluded. However, the agency
believes that the costs associated with parts production that may
occur at a final assembly plant should not be excluded from parts
content calculations. . . .
. . . A failure to consider parts produced at the final assembly
plant as ``passenger motor vehicle equipment'' would result in
significant differences among manufacturers. Further, if a plant
were very highly integrated, it could result in a situation where
the parts content percentages do not reflect the greater number of a
vehicle's parts.
At the same time, however, NHTSA must give full effect to the
Congressional intent to exclude the costs of final assembly from
parts content calculations. The agency believes that the best way to
accomplish this is the method suggested by AAMA: define ``final
assembly'' to include all operations involved in the assembly of the
vehicle performed at the final assembly point (the final assembly
plant), including but not limited to assembly of body panels,
painting, final chassis assembly, and trim installation, except
engine and transmission fabrication and assembly and the fabrication
of motor vehicle equipment components produced at the same final
assembly point using stamping, machining or molding processes.
Under this approach, all costs incurred at the final assembly
plant are excluded except for those that are incurred in producing
either engines/transmissions or in producing parts using forming
processes such as stamping, machining or molding. In addition to
ensuring that final assembly costs are excluded as required by
section 210, the agency also believes that a definition along these
lines is much clearer than the proposed definition. For example,
this type of definition will not raise issues concerning whether a
part is assembled on the main assembly line or off of it.
NHTSA cannot accept the recommendation of foreign vehicle
manufacturers to define final assembly as starting at the time when
the engine and body are fastened together. Under such a definition,
manufacturers could add the engine to the body as the last step in
assembling the vehicle, thereby reducing final assembly costs to a
nullity. Such an approach would be inconsistent with the statutory
requirement to exclude assembly and labor costs at the final
assembly plant from parts content calculations.
The arguments raised in AIAM's petition for reconsideration do not
lead the agency to change the definition of ``final assembly.'' That
organization argued that the definition includes within its scope
assembly operations that are not performed on the motor vehicle but
instead are performed on parts and components of that motor vehicle.
However, this is an incorrect distinction. AIAM views final assembly as
performing operations on a vehicle when, in fact, the final assembly
process consists of assembling parts to produce a vehicle.
NHTSA recognizes that there are many levels of ``parts.'' For
example, any individual item that is used in the assembly of a chassis
is a ``part,'' yet the chassis as a whole can also be called a
``part.'' It appears that AIAM would like almost all assembly that
takes place at the final assembly plant to be outside the definition of
final assembly and instead be considered parts production, so that the
costs of such assembly are included within the parts content
calculations.
However, NHTSA must give effect to section 32304(a)(15)'s
requirement that costs incurred at the final assembly place, including
assembly and labor, are excluded from the calculation of parts content.
As discussed in the above-quoted section of the final rule preamble,
the agency believes that all assembly and labor costs that are
ordinarily associated with final assembly must be excluded.
NHTSA believes that the definition of final assembly included in
the final rule strikes an appropriate balance in distinguishing between
parts production
[[Page 47883]]
at a final assembly plant and final assembly. First, all costs
associated with producing engines and transmissions are excluded from
the definition of final assembly, and hence counted as parts content.
These are very expensive parts, and it is common both for manufacturers
to assemble them at vehicle final assembly plants and to assemble them
at separate plants. Therefore, including these costs in parts content,
notwithstanding the fact that these items may have been produced at a
final assembly plant, helps maintain comparability of the information
provided on the labels of different vehicles.
Second, all costs incurred in producing parts using forming
processes such as stamping, machining or molding are excluded from the
definition of final assembly. The production of parts using forming
processes is not assembly, and these operations are thus readily
distinguishable from final assembly.
All other costs incurred at the final assembly plant are included
within the definition of final assembly, and are thus not included in
parts content. These costs basically reflect all assembly costs at the
final assembly plant other than those associated with producing engines
and transmissions. NHTSA believes that the bulk of these costs, e.g.,
assembling body panels, building up the chassis, etc., come within the
generally understood meaning of final assembly and must therefore be
excluded from parts content calculations under the statute.
NHTSA notes that AIAM did not provide specific details or examples
about differences between more integrated and less integrated
manufacturers. Since manufacturing processes differ among
manufacturers, it is inevitable that some differences will be reflected
on the label. However, the final's rule inclusion of all costs
associated with engine/transmission production and production of parts
using forming processes within parts content will reduce such
differences.
B. Procedure for Determining U.S./Canadian Parts Content (Section
583.6)
Section 583.6 of the final rule specifies a procedure for
determining U.S./Canadian parts content. A number of the major issues
raised by the petitioners for reconsideration relate to this section.
1. Calculation by Suppliers of the Portion of their Equipment's Value
that Represents Value Added in the U.S./Canada
One of the major issues addressed in the final rule was how
suppliers are to calculate the portion of their equipment's value that
represents value added in the U.S./Canada. It is necessary for
suppliers to make such calculations 3 since the Labeling Act
provides that determinations of U.S./Canadian parts content are based
on the value added in the U.S./Canada of the equipment used to assemble
vehicles within a carline.
3 As noted in the final rule preamble, however, only
allied suppliers typically need to calculate actual value added in
the U.S./Canada of their equipment. 59 FR 37309. As a result of the
roll-up, roll-down provision, outside suppliers only need to
determine whether the value added in the U.S./Canada is at least 70
percent or not. In order to make this determination, of course,
outside suppliers need to understand how value added in the U.S./
Canada is calculated. Moreover, if the value added in the U.S./
Canada of their equipment is close to 70 percent, outside suppliers
will need to calculate actual value added.
As part of avoiding unnecessary costs and keeping the regulatory
scheme as simple as possible, NHTSA decided to limit tracking and
reporting requirements to ``first-tier'' suppliers (including both
suppliers which deliver equipment to the vehicle manufacturer itself
and ones which deliver equipment to an allied supplier). The agency
noted in the NPRM, however, that suppliers which are subject to the
information requirements may need in some cases to arrange to obtain
information from their suppliers.
Commenters on the NPRM raised a number of issues about how
suppliers are to make the required determinations about U.S./Canadian
content. NHTSA therefore included in the final rule clarifying
procedures concerning the determination of value added in the U.S./
Canada.
NHTSA recognized that the basic way suppliers add value in the
U.S./Canada is by producing or assembling passenger motor vehicle
equipment within the territorial borders of the United States or
Canada. The final rule (Sec. 583.6(c)(4)(ii)) therefore specified that,
in determining the value added in the United States or Canada of
passenger motor vehicle equipment produced or assembled within the
territorial boundaries of the United States or Canada, the cost of all
foreign materials is subtracted from the total value (e.g., the price
paid at the final assembly plant) of the equipment. The procedures
specified that material is considered foreign to whatever extent part
or all of the cost of the material is not determined to represent value
added in the United States or Canada, traced back to raw materials. As
explained in the final rule preamble, under this approach, neither
suppliers nor anyone else is required to trace the value added in the
United States or Canada back to raw materials; however, any portion of
the cost of a material which is not traced to value added in the United
States or Canada is considered foreign.
The clarifying procedures (Sec. 583.6(c)(4)(ii) and (iv)) also
provided that for any material or equipment which is imported into the
United States or Canada from a third country, the value added in the
United States or Canada is zero, even if part of the material
originated in the United States or Canada. NHTSA stated that, for
purposes of simplicity and consistency, it believed it appropriate to
deem any materials which are imported in the United States or Canada
from a third country as foreign. The agency did not believe that any
attempt to separate out the possible portion of such materials that may
have originated in the United States or Canada would provide
significantly more useful information to the consumer.
The petitioners for reconsideration raised concerns about both the
tracing provision and the provision deeming any equipment or materials
which are imported into the United States or Canada from a third
country as foreign. The agency will discuss the latter concern first.
a. Issues concerning equipment or materials imported into the U.S.
or Canada. AAMA argued that the final rule's provisions stipulating
that whenever material or motor vehicle equipment is imported into the
U.S. or Canada from a third country, the value added in the U.S. or
Canada is zero, even if part of the material originated in the U.S. or
Canada, are inconsistent with the Labeling Act's definition of
``foreign.'' That organization noted that section 210(f)(16) defined
foreign or foreign content as ``passenger motor vehicle equipment not
determined to be U.S./Canadian origin.'' (This reference has been
superseded by 49 U.S.C. 32304(a)(6).) AAMA believed that the provisions
at issue are inconsistent with that section since a portion of the
value of the material or equipment could be determined to be of U.S./
Canadian origin. AAMA also noted that if a manufacturer installed
identical parts both in a vehicle assembled in the U.S or Canada and in
one assembled in a third country, the two parts would have different
U.S./Canadian content.
In additional information provided to the agency in support of its
petition, AAMA cited a specific example of the consequences of these
provisions. In the example, it was assumed that $800 of U.S. engine
parts were shipped abroad to the foreign engine assembly plant of an
allied supplier. If the engine were shipped back to the U.S., it would
be
[[Page 47884]]
considered to have $0 U.S./Canadian content. This would occur as a
result of the provision which specifies that any motor vehicle
equipment imported into the U.S. or Canada from a third country is
considered to have zero U.S./Canadian content. However, if the engine
were shipped to a foreign vehicle assembly plant, it would be
considered to have $800 U.S./Canadian content. This would occur because
the provision about motor vehicle equipment being imported into the
U.S. or Canada from a third country would not apply.
AAMA urged that if a manufacturer is able to identify the U.S./
Canadian content, it should be permitted to include the actual U.S./
Canadian content of the imported component in the calculations.
After considering AAMA's arguments, NHTSA has decided to make a
change along the lines recommended by the petitioner. The revised final
rule provides that whenever material or motor vehicle equipment is
imported into the U.S. or Canada from a third country, the value added
in the U.S. or Canada is presumed zero, but that if documentation is
available to the supplier which identifies value added in the United
States or Canada for that equipment, such value added in the United
States or Canada is counted.
The agency fully agrees with AAMA that $800 of U.S. engine parts
should not be converted to foreign content simply because the engine is
assembled in another country. NHTSA included the provision deeming any
materials which are imported into the United States or Canada from a
third country as foreign for reasons of simplicity and because it did
not believe that separating out the portion that may have originated in
the United States or Canada would significantly affect the information
provided on the label. Since AAMA has clearly demonstrated that the
provision can have a significant effect on the label, the agency
believes that the change recommended by that organization is
appropriate.
b. Issues concerning tracing provision. Three of the petitioners
for reconsideration, AAMA, AIAM, and the Kentucky Cabinet, raised
concerns about the tracing provision. The agency will first discuss two
issues raised by AIAM concerning whether NHTSA has the authority to
specify such a provision.
AIAM argued in its petition that the requirement to trace back to
raw materials is contrary to the language of the Labeling Act. AIAM
also argued that the tracing provision was not included in the NPRM and
was therefore imposed without notice and opportunity for comment.
In arguing that the requirement to trace back to raw materials is
contrary to the language of the Labeling Act, AIAM stated that the Act
expressly provides that for purposes of determining U.S./Canada value
added for an equipment item, only incorporated foreign passenger motor
vehicle equipment, not foreign raw material, is to be treated as
foreign content. AIAM's explanation for this position is as follows.
First, the term ``value added in the United States and Canada'' is
defined in the Labeling Act to mean a percentage derived as follows:
value added equals the total purchase price, minus total purchase price
of foreign content, divided by the total purchase price. Second,
``foreign content'' is defined to mean passenger motor vehicle
equipment not determined to be of U.S./Canadian origin. Third,
``passenger motor vehicle equipment'' is defined to mean any system,
subcomponent or assembly and does not include materials or raw
materials. Thus, according to AIAM, the term ``foreign content'' can
only refer to passenger motor vehicle equipment and not raw materials.
NHTSA notes that since AIAM's argument cites the specific language
of section 210, the agency will respond in the context of that language
(while recognizing that language has since been superseded in form but
not substance). While AIAM may appear at first glance to simply be
applying the statutory definitions, the agency believes that there are
several problems with AIAM's argument.
First, a more complete quotation of the definition of ``passenger
motor vehicle equipment'' cited by AIAM reads as follows: The term
``passenger motor vehicle equipment'' means any system, subassembly, or
component received at the final assembly point for installation on, or
attachment to, such vehicle at the time of its initial shipment by the
manufacturer to a dealer for sale to an ultimate purchaser. Since this
definition is limited to items received at the final assembly point,
neither it, nor a definition of ``foreign content'' incorporating it,
can be directly applied to items being received by a supplier for
purposes of producing equipment.
Second, the Labeling Act's primary section concerning the
determination of the U.S./Canadian origin of equipment, section
210(f)(5), indicates that, in at least some instances, the foreign
content of passenger motor vehicle equipment is determined by
subtracting the value of the foreign material in that equipment. That
section read as follows:
The terms ``originated in the United States and Canada,'' and
``of U.S./Canadian origin,'' in referring to automobile equipment,
means--
(A) for outside suppliers, the purchase price of automotive
equipment which contains at least 70 percent value added in the
United States and Canada; and
(B) for allied suppliers, the manufacturer shall determine the
foreign content of any passenger motor vehicle equipment supplied by
the allied supplier by adding up the purchase price of all foreign
material purchased from outside suppliers that comprise the
individual passenger motor vehicle equipment and subtracting such
purchase price from the total purchase price of such equipment.
Determination of foreign or U.S./Canadian origin from outside
suppliers will be consistent with subparagraph (A).
This section's reference to determining the foreign content of
passenger motor vehicle equipment by subtracting the value of the
foreign material in that equipment applies to equipment supplied by
allied suppliers rather than equipment supplied by outside suppliers,
the focus of AIAM's comment. It is significant, however, that the
section uses the term ``foreign content'' differently from AIAM's
reading of section 210's definition of ``foreign content.''
Third, AIAM's argument begs the ultimate question of how suppliers
are to determine the U.S./Canada value added for their equipment. That
organization asserts that ``only incorporated foreign passenger motor
vehicle equipment, not foreign raw material, is to be treated as
foreign content.'' However, first-tier suppliers rarely use raw
materials in producing passenger motor vehicle equipment. AIAM's
argument leaves unanswered the question of how a supplier determines
whether, and the extent to which, the so-called ``passenger motor
vehicle equipment'' which it uses to produce passenger motor vehicle
equipment is foreign.
For the reasons discussed above, NHTSA does not accept AIAM's
argument that tracing back to raw materials is contrary to the Labeling
Act. The agency notes that Act's definition of ``value added in the
United States and Canada'' makes it clear that, in making that
calculation, the purchase price of ``foreign content'' is to be
subtracted. As indicated above, the Labeling Act defines ``foreign
content'' as meaning passenger motor vehicle equipment not determined
to be U.S./Canadian origin. In applying this provision in the context
of suppliers determining whether an item they receive to produce
passenger
[[Page 47885]]
motor vehicle equipment is foreign, the agency believes that the best
reading of the provision is that the cost of the item is considered
foreign to whatever extent part or all of the cost is not determined to
represent value added in the United States or Canada. Since value is
added to items at many stages, it is appropriate, in determining the
extent to which an item represents value added in the United States or
Canada, to take into account the location where value is added in the
various stages.
NHTSA also does not accept AIAM's argument that the tracing
provision was outside the scope of notice of the NPRM. The NPRM clearly
put at issue the subject of how suppliers are to make determinations of
U.S./Canadian content. While the NPRM did not mention tracing as such,
the inclusion of the provision in the final rule is a logical outgrowth
of the proposal.
NHTSA now turns to the other issues raised by the petitioners
concerning the tracing provision. These issues relate to the accuracy
of the information that will result from that provision and the
difficulties associated with tracing.
AAMA expressed concern that suppliers may avoid the costly process
of tracing simply by defaulting U.S./Canadian content to zero, with the
result that U.S./Canadian content will be understated. That
organization added that even if a supplier chooses to trace, it will be
difficult and costly for sub- suppliers to certify the actual U.S./
Canadian value added. AAMA stated that sub-suppliers may not maintain
the required financial inventory records, and that if actual data are
not available, the rule would require these suppliers to default their
material content to foreign.
AAMA also noted that the Labeling Act requires that a foreign
country providing at least 15 percent of a vehicle's content must be
identified. That organization stated that the final rule does not
address how ``default-to-foreign content'' would be allocated to a
foreign country or how that foreign country would be identified.
Based on the above arguments, AAMA expressed concern that, under
the final rule, Labeling Act data may be subject to significant
variability depending on the response and efforts of the manufacturer's
suppliers. It recommended that first-tier suppliers be allowed to base
the determination of value added in the U.S./Canada on the country-of-
origin markings on the materials it purchases, the first-tier
supplier's knowledge of the second-tier supplier's processes and the
rule of substantial transformation, or if the material is identified as
U.S. or Canadian using any other methodology that is used for customs
purposes (U.S. or foreign), so long as a consistent methodology is
employed for all items of equipment.
As indicated above, the FY 1995 Conference Report on DOT
Appropriations stated that the tracing provision, among others, will
not ensure that the most accurate, understandable, and cost-effective
information is provided to consumers, and directed NHTSA to amend the
final rule to permit first-tier suppliers to use other methods, such as
country-of-origin marking, substantial transformation, or other customs
data in their records, to determine the U.S./Canadian content of
equipment.
In addition to the arguments AIAM made with respect to agency
authority to specify a tracing provision, that organization also argued
that the tracing provision is inconsistent with the Congressionally
stated purpose to provide the best and most understandable information
possible without imposing costly and unnecessary burdens on the
manufacturers. The Kentucky Cabinet expressed concern that companies
will be required to undergo expensive and time-consuming efforts to
trace a part back to raw materials and that, in some cases, a second
tier supplier may not want to divulge proprietary information.
NHTSA has carefully considered the arguments of all of the
petitioners, as well as the Congressional report. The agency shares the
concern about the possibility that suppliers may choose to avoid the
costly process of tracing simply by defaulting the U.S./Canadian
content of materials to zero, with the result that U.S./Canadian
content will be understated. The agency also shares the concern that
actual tracing may be overly burdensome in some instances.
As discussed below, in light of these concerns, NHTSA has decided
to amend the clarifying procedures to (1) make it clear that, for
materials used by suppliers in producing passenger motor vehicle
equipment (other than for materials imported from third countries),
suppliers must make a good faith estimate of the value added in the
United States or Canada (to the extent necessary to make required
determinations concerning the value added in the U.S./Canada of their
passenger motor vehicle equipment), (2) provide suppliers greater
flexibility in the information they can use in making these estimates,
and (3) reduce the number of stages for which suppliers must consider
where value was added, although not to the degree recommended by AAMA.
As indicated above, AAMA urged that first-tier suppliers be allowed
to base the determination of value added in the U.S./Canada on the
country-of-origin markings on the materials it purchases, the first-
tier supplier's knowledge of the second-tier supplier's processes and
the rule of substantial transformation, or if the material is
identified as U.S. or Canadian using any other methodology that is used
for customs purposes (U.S. or foreign), so long as a consistent
methodology is employed for all items of equipment. NHTSA believes that
a methodology this broad for determining value added in the U.S./Canada
would be inconsistent with the Labeling Act's requirement that
determinations of U.S./Canadian origin be based on the value added in
the U.S./Canada.
NHTSA notes that country of origin determinations for customs
purposes do not connote value content. The substantial transformation
test is a traditional means of making country of origin determinations
for customs purposes. Under this test, an imported good becomes a
product of the country where it emerges from a process with a new name,
character and use different from that possessed by the good prior to
processing. However, application of the test does not indicate any
particular level of value content from that country of origin.
Therefore, even though the product's country-of-origin might be the
United States or Canada, it might have little U.S./Canadian content.
In enacting the Labeling Act, Congress decided, for purposes of
making determinations about the U.S./Canada origin of motor vehicle
equipment, to specify a value added test rather than substantial
transformation. More specifically, Congress decided to require items
supplied to vehicle manufacturers or their allied suppliers by outside
suppliers to have at least 70 percent value added in the U.S./Canada in
order to be considered U.S/Canadian.
NHTSA believes that permitting outside suppliers to use the
substantial transformation test for purposes of determining the origin
of the materials it uses to produce equipment could allow substantial
amounts of foreign content to be converted into the U.S./Canadian
content and counted toward the 70 percent threshold. This can be
illustrated by a hypothetical situation where a first-tier outside
supplier purchases casings from a second-tier supplier to use in
producing transmissions. The second-tier supplier, located in the U.S.,
produces the casings by casting them from imported aluminum. Under
AAMA's suggested approach, the entire value of the casings would be
considered to be U.S./
[[Page 47886]]
Canadian (since the second-tier supplier had performed a substantial
transformation) and counted toward the 70 percent threshold, even
though the casings were made of imported aluminum. NHTSA observes that
just as it agrees with AAMA that $800 of U.S. engine parts should not
be converted into foreign content as a result of a regulatory provision
intended to provide simplicity, it is equally concerned about the
possibility of such a regulatory provision permitting the conversion of
a large amount of foreign content into U.S./Canadian content.
A comment on the NPRM signed by Senator Carl Levin and several
House members also illustrates how methodologies that permit conversion
of substantial foreign content into U.S./Canadian content, for purposes
of making country-of-origin determinations for materials suppliers use
to produce equipment, could substantially affect the information on the
vehicle label.
The comment stated:
We are writing to urge you to draft American Automobile Labeling
Act implementing regulations that reflect the legislation's intent
to provide an accurate means of measuring the parts value content of
a vehicle.
The trend has been for Japanese transplants to purchase parts
assembled in the U.S. by Japanese affiliated parts makers, a high
percentage of which are merely assembled here using subcomponents
and materials imported from Japan. Nonetheless, they are erroneously
counted as U.S. parts for the purposes of calculating U.S. content
levels. The Labeling Act was an attempt by Congress to establish a
tool to more accurately measure the ``actual'' U.S. and Canadian
content of vehicles sold in the U.S. based on the origin of where
the parts are made, not where the parts are purchased or assembled.
It is our hope that the Labeling Act will achieve this objective by
imposing a stringent definition of what is an ``American or Canadian
made'' auto part.
Currently, Japanese transplant auto makers claim high levels of
U.S. content in their U.S. made vehicles. But they will not provide
the necessary data to measure accurately the U.S. content levels of
the auto parts used in these vehicles, and thus, it is impossible to
verify their claims. After tracing the actual source of parts, a
1992 Economic Strategy Institute study found that the U.S. auto
parts used in a 1991 Honda Accord contained \2/3\ Japanese content
and only \1/3\ ``actual'' U.S. content. Even with these low levels
of U.S. content, Honda took credit for these parts being totally
U.S.-made.
In order to adequately distinguish between parts assembled in
the U.S. using imported materials and parts made in the U.S. using
U.S. materials, the Labeling Act must include tracing requirements
similar to the tracing requirements in the NAFTA rule of origin,
with the exception that Mexican parts would not be included as U.S.
or Canadian. Tracing should be used to determine if suppliers can be
designated as North America (U.S. or Canadian)--if they achieve the
70% North American content value--as well as to determine the
country of origin for the engine and transmission. For example, if
tracing were required, an engine or transmission that contains 75%
Japanese content but is assembled in the U.S. would be correctly
found to be primarily of Japanese origin, not of U.S. origin.
NHTSA has also concluded that the concerns identified by the
petitioners for reconsideration and the Congressional report can be
adequately addressed by making other changes in the procedures for
determining value added in the U.S./Canada.
First, the agency is specifying in the regulation that, for
materials used by suppliers in producing passenger motor vehicle
equipment (other than for materials imported from third countries),
suppliers must make a good faith estimate of the value added in the
United States or Canada (to the extent necessary to make required
determinations concerning the value added in the U.S./Canada of their
passenger motor vehicle equipment). Thus, suppliers are not permitted
to simply default the U.S./Canadian value of the materials they use to
zero, since that would not represent a good faith estimate.
Second, NHTSA is providing greater flexibility to suppliers
concerning the information they may use to make their good-faith
estimates. Rather than specifying tracing as such, the regulation will
permit suppliers to base their estimate on all information that is
available to the supplier, e.g., information in its records,
information it can obtain from its suppliers, the supplier's knowledge
of manufacturing processes, etc.
Third, NHTSA has concluded that it can reduce the number of stages
for which suppliers must consider where value was added, although not
to the degree recommended by AAMA. As indicated above, the basic
problem with adopting AAMA's specific recommendation is that it would
permit large amounts of foreign content to be transformed into U.S./
Canadian content and counted toward the 70 percent threshold. The
agency believes that this possibility can be substantially reduced or
eliminated by adopting an approach that requires a supplier to
consider, for materials it uses which were produced or assembled in the
U.S. or Canada, where value was added at each stage back to and
including the two closest stages which represented a substantial
processing operation into a new and different product with a different
name, character and use, rather than all the way back to raw materials.
NHTSA is adopting the following provision concerning how outside
suppliers are to determine the U.S./Canadian content of materials used
by the supplier which are produced or assembled in the U.S./Canada:
(A)(1) For any material used by the supplier which was produced
or assembled in the U.S. or Canada, the supplier will subtract from
the total value of the material any value that was not added in the
U.S. and/or Canada. The determination of the value that was not
added in the U.S. and/or Canada shall be a good faith estimate based
on information that is available to the supplier, e.g., information
in its records, information it can obtain from its suppliers, the
supplier's knowledge of manufacturing processes, etc.
(2) The supplier shall consider the amount of value added and
the location in which that value was added--
(i) At each earlier stage, counting from the time of receipt of
a material by the supplier, back to and including the two closest
stages each of which represented a substantial transformation into a
new and different product with a different name, character and use.
(ii) The value of materials used to produce a product in the
earliest of these two substantial transformation stages shall be
treated as value added in the country in which that stage occurred.
This approach can be illustrated by returning to the hypothetical
situation involving a first-tier supplier of transmissions which
purchases aluminum casings from a second-tier supplier located in the
United States.
Under the July 1994 final rule, the first-tier supplier could count the
full value of the aluminum in those casings as U.S./Canadian content
only if it traced the aluminum back to raw materials, i.e., back to
bauxite, and found the bauxite to be of U.S. or Canadian origin.
Under today's amendments, the first-tier supplier need only
consider where value was added back through two stages, i.e., the
casting of the casing and the production of the aluminum. The second-
tier supplier, with which the first-tier supplier directly deals, will
have information on both of these stages, i.e., it will know about its
own casting operations and it will know the source of the aluminum it
uses for the casting.
If the casing was cast in the U.S. using aluminum made in the U.S.
or Canada, the full value of the casing would be counted as U.S./
Canadian content for purposes of determining whether the 70 percent
threshold were met. If the casing was cast in the U.S. using imported
aluminum, the value of the imported aluminum would have to be
subtracted from the value of the casing
[[Page 47887]]
in determining the amount that could be counted as U.S./Canadian
content.
It would not be necessary, under those two circumstances, for the
supplier to attempt to determine the origin of the bauxite used to
produce the aluminum. For example, if the aluminum were produced in
U.S. or Canada, the value of the materials used to make it would be
treated as value added in the country where the aluminum was produced.
The agency believes that the value of a material this many stages back
is likely to be so small as not to affect labeling information.
Moreover, it would be much more difficult to obtain information for a
still earlier stage (before the aluminum production), since it would
likely require contacting parties with which the first-tier supplier
does not ordinarily have privity or any other connection.
NHTSA notes that this approach for the materials used by suppliers
is similar to the double substantial transformation test specified by
customs for determining foreign value content. As indicated above,
country of origin determinations for customs purposes do not connote
value content. However, there are a number of programs where certain
determinations of value must be made. The full value of imported
materials is counted toward the full value of the good for purposes of
programs such as the Generalized Systems of Preferences, the Caribbean
Basin Economic Recovery Act, etc., only when the imported materials
undergo what is known in customs law as a ``double substantial
transformation.'' Under this standard, foreign materials can be
considered ``materials produced in the beneficiary country'' when those
materials are substantially transformed in that country into a new or
different article of commerce which is then used in the production or
manufacture of yet another new or different article (the final
product). For a further discussion of this concept, see Treasury
Decision 88-17, 53 FR 12143, April 13, 1988.
Particularly given the changes discussed in this section, NHTSA
believes that the requirement for suppliers to make content
determinations will not be burdensome. The agency notes again that the
Labeling Act does not require outside suppliers to provide specific
estimates of the U.S./Canada value added of their equipment, but
instead only requires them to indicate whether the U.S./Canada value
added is at least 70 percent.
NHTSA notes that AAMA indicated that a typical item of motor
vehicle equipment represents 59 percent value added by the first-tier
supplier and 41 percent purchased material. In order to determine in
such an instance whether the 70 percent threshold is satisfied, a U.S./
Canada outside first--tier supplier of transmissions would only need to
determine whether enough of the 41 percent material cost (i.e., the
cost of the casings and other transmission parts) represented value
added in the U.S./Canada so as to raise the 59 percent figure for the
transmissions to at least 70 percent. The agency notes that, assuming
the same 59:41 ratio for value added to material cost for second-tier
suppliers, about 83 percent (59 percent + (59 percent)(41 percent)) of
the total value added of the transmissions would typically represent
value added by the transmission supplier itself or the second-tier
suppliers from which it purchases materials. Moreover, the second-tier
suppliers will know the source of the materials they use.
As discussed above, the first-tier supplier is not limited to
basing its estimates on actual tracing, but may instead consider all
available information. To the extent that the value added in the U.S./
Canada of motor vehicle equipment is well above or well below 70
percent, it will be easy for suppliers to make the required
determination. The most difficult determinations will be for equipment
whose value added in the U.S./Canada is close to 70 percent. To the
extent that the reasonably available information to the supplier
indicates that the U.S./Canada value added is near 70 percent, the
supplier will simply have to make its best good-faith judgment whether
it is ``at least'' 70 percent.
NHTSA believes that the revised clarifying procedures will, in
addition to providing appropriate additional flexibility to suppliers,
result in more accurate information being provided to consumers. Full
tracing back to raw materials may often be impossible, and, for
materials made in the U.S./Canada which are used by suppliers located
in the U.S./Canada to make their motor vehicle equipment, the agency
believes that good faith estimates by the suppliers of the U.S./Canada
value added will be more accurate than a procedure which specifies that
any untraced portions of the materials be considered foreign. The
agency believes that the concerns expressed by Senator Levin and others
in the Congressional comment on the NPRM will be adequately addressed
by requiring the suppliers' estimates to reflect consideration of where
value was added at each stage back to and including the two closest
stages which represented a substantial processing operation into a new
and different product with a different name, character and use.
2. Non-Responsive Suppliers
NHTSA included a provision in the final rule which specifies that
if a manufacturer or allied supplier does not receive information from
one or more of its suppliers concerning the U.S./Canadian content of
particular equipment, the U.S./Canadian content of that equipment is
considered zero. The agency stated that it does not believe that this
situation will occur very often, and that the provision will ensure
that U.S./Canadian content is not overstated as a result of the
manufacturer or allied supplier simply assuming that equipment is of
U.S./Canadian origin in the absence of information from the supplier.
AAMA argued that the agency's expectation that few suppliers will
fail to report is unreasonable, especially within the first few years
of implementation. That organization stated that, for a comparison, one
of its members' requests for data from suppliers for NAFTA certificates
of origin has yielded a response rate of 50 to 60 percent. (In later
information provided to the agency, AAMA indicated that the percentage
of suppliers reporting under NAFTA ranged from 60 to 65 percent for GM,
Ford and Chrysler.)
AAMA argued that the content information ultimately provided to
consumers will be more accurate if manufacturers are permitted to
establish the U.S./Canadian content of components by other means when a
supplier fails to respond. That organization recommended that if a
manufacturer or allied supplier does not receive a response to its
request for information, the manufacturer or allied supplier should be
permitted to use the information in its records to determine the U.S.
and Canadian content. The determination could be made by such means as
examining the customs marking country, applying the substantial
transformation test, or other methodologies used for customs purposes.
As indicated above, the FY 1995 Conference Report on DOT
Appropriations stated that this provision of the final rule, among
others, will not ensure that the most accurate, understandable, and
cost-effective information is provided to consumers, and directed NHTSA
to amend the final rule to permit manufacturers and allied suppliers to
use other methods to determine U.S./Canadian content of equipment when
suppliers fail to provide adequate information.
[[Page 47888]]
NHTSA has carefully considered AAMA's request and the Congressional
report. As discussed below, the agency has concluded that it would be
inappropriate under the statute to make the requested change. However,
the agency believes that its one-year extension of the temporary
alternative approach for data collection and calculations will provide
appropriate flexibility in this area.
As discussed above, the Labeling Act provides that passenger motor
vehicle equipment supplied by outside suppliers is considered U.S./
Canadian if at least 70 percent of its value is added in the U.S./
Canada. See 49 U.S.C. 32304(a)(9). The Labeling Act also provides that
outside suppliers are required to certify, among other things, whether
their equipment is of U.S./Canadian origin.
While it might appear at first glance to be reasonable to permit
manufacturers and allied suppliers to make origin determinations
concerning equipment provided by an outside supplier in the event that
the outside supplier fails to do so, the problem is that the
manufacturers and allied suppliers will not possess the information
needed to make the required determination. The agency assumes that this
is why AAMA suggests that manufacturers and allied suppliers be
permitted to determine whether equipment is U.S./Canadian based on
methods other than the value added approach specified in the statute.
However, the results that would be obtained from those other methods
would not necessarily be consistent with the value added approach.
NHTSA also notes that the most likely instance in which an outside
supplier would not want to provide the required information is when the
U.S./Canadian content was below 70 percent. In such an instance, it
would be particularly inappropriate to permit the manufacturer to use
alternative methods for determining whether the equipment was U.S./
Canadian.
Moreover, the agency believes that vehicle manufacturers can obtain
the required information from suppliers, assuming that the
manufacturers and suppliers have the time to make any necessary
arrangements. Apart from the fact that outside suppliers are required
by Federal law to provide the information to manufacturers and allied
suppliers, the outside suppliers are dependent on the auto
manufacturers for their business. While NHTSA understands that there
may be some confusion at the time a new program is first implemented,
it does not believe that suppliers will deliberately refuse to provide
the information in response to manufacturers' and allied suppliers'
requests. The agency notes that the manufacturers can put specific
provisions in their purchase agreements to ensure that they receive the
required information.
In its March 1995 initial response to petitions, NHTSA extended by
one year the temporary alternative approach for data collection and
calculations which permits manufacturers and suppliers to use
procedures that are expected to yield similar results. For a more
complete discussion of this alternative, see 59 FR 37324-25, July 21,
1994.
The extension of this temporary alternative gives an extra year for
manufacturers and suppliers to work out any arrangements that are
necessary to ensure that suppliers provide the necessary information to
manufacturers. The agency believes that this should provide appropriate
flexibility in light of AAMA's concerns.
C. Procedure for Determining Major Foreign Sources of Passenger Motor
Vehicle Equipment (Section 583.7)
As part of the procedure for determining major foreign sources of
passenger motor vehicle equipment, NHTSA included a provision to
prevent the possibility that the specified U.S./Canadian content and
major foreign sources of foreign content for a carline will together
exceed 100 percent. The agency was concerned that, due to differences
in calculation methods for U.S./Canadian and foreign content, it would
otherwise be possible for the sum of the U.S./Canadian and foreign
label values of a carline to be over 100 percent, which could cause
confusion for consumers. The agency decided to simply specify that if
the U.S./Canada and major foreign source percentages add up to more
than 100 percent, the foreign source percentages are proportionately
reduced to the extent necessary to bring the percentages down to 100
percent.
AIAM stated that there are a number of serious problems raised by
this provision, all involving the central question of the agency's
authority to take this step. That organization made the following
argument:
As NHTSA implicitly acknowledges, the statute does not provide
authority for such an arbitrary reduction, yet elsewhere in the
preamble the Agency has argued that it is strictly bound by the
language of the statute, (see e.g., the Agency's discussion on the
authority to exclude vehicles with low or high U.S./Canadian content
. . .). The Agency has not identified what specific authority the
statute affords NHTSA to reduce that number to 100 percent. The
excuse the Agency relies upon--that ``such a procedure would
necessarily be very complicated, given certain aspects of the
procedure for determining U.S./Canadian content'' . . . has, in an
analogous situation, been found wanting by NHTSA for giving relief
to companies with little U.S. content and who for the sake of
``simplicity'' would agree to claim essentially all foreign content
by merely indicating on the label that the U.S. content fell below a
specified level. The Agency has refused to grant such a common sense
exclusion because ``NHTSA has concluded that it does not have the
authority to provide exclusions.'' * * *
A second problem is the absence of any basis in the statute for
the Agency's assertion (or justification) that U.S./Canadian
percentage ``is the more important of the two items of information
for consumers.'' . . . Again, we are unable to find in the language
of the statute such a prioritization of the information.
Accordingly, AIAM asks the Agency to amend the Rule by deleting
Sec. 583.7 to require the use of the percentages as calculated in
accordance with the terms of the statute regardless of what the
total might be.
NHTSA disagrees with the petitioner's suggestion that the agency
lacks authority in this area. Section 32304(e) expressly provides that
the agency is to prescribe regulations to carry out [the Labeling Act].
Moreover, AIAM draws an incorrect analogy in comparing this issue
with that of whether the agency has authority to exclude vehicles with
high or low U.S./Canadian content from certain statutory provisions. In
the latter case, the relevant issue was whether the agency could
create, by rule, exclusions from express statutory requirements. The
provision concerning reducing foreign source percentages does not
represent an exclusion from a statutory requirement but instead is
simply part of the procedure for determining foreign source
percentages.
Rather than representing a departure from the statutory
requirements, the provision AIAM objects to was intended to ensure that
the statutory provisions concerning determination of U.S./Canadian
content are not effectively diluted. NHTSA explained in the final rule
preamble that while the method for determining the U.S./Canada
percentage is explicitly set forth in the statute, the methodology for
determining major foreign source percentages is not in the statute. The
agency also explained that since the statute provides a specific
methodology for determining the U.S./Canada percentage, ``the
Sec. 583.7 procedures have the limited purpose of providing a method
for calculating the extent to which the remaining percentage is
attributable to foreign countries which individually contribute at
least 15 percent of the parts content,
[[Page 47889]]
and the specific percentage attributable to each such foreign
country.''
In the absence of a specific statutory procedure, NHTSA decided to
provide wide flexibility concerning how manufacturers are to determine
country of origin for purposes of major foreign source percentages.
This was for the purpose of minimizing regulatory burdens on
manufacturers and suppliers. At the same time, the procedure must not
be so flexible that it interferes with other aspects of the statutory
scheme. Permitting manufacturers to identify the U.S./Canadian content
and major sources of foreign content for a carline as exceeding 100
percent would both confuse consumers and dilute the meaning of U.S./
Canadian content as determined under the more specific statutory
procedures. NHTSA therefore believes that, far from being arbitrary or
inconsistent with the statute, the provision at issue was a reasonable
limitation on how major foreign source percentages are determined.
On reconsideration, however, NHTSA has considered whether there may
be a better way of addressing this potential problem. The agency notes
that the only significant way \4\ that U.S./Canadian content and major
sources of foreign content can exceed 100 percent is if there is
double-counting, i.e., the same value is considered to be both U.S./
Canadian and foreign. Such double-counting would be inconsistent with
the statute, which specifies that foreign content means passenger motor
vehicle equipment that is not of United States/Canadian origin.
\4\ The U.S./Canadian content and major sources of foreign
content could also potentially exceed 100 percent as a result of the
vehicle manufacturer rounding the percentages to the nearest five
percent, as permitted by the statute. However, this result does not
appear likely.
---------------------------------------------------------------------------
The agency has considered the extent to which such double-counting
might occur under Part 583, absent the provision about reducing foreign
percentages.
Double-counting would not occur for equipment supplied by outside
suppliers. Such equipment is considered 100 percent U.S./Canadian if 70
percent or more of its value is added in the U.S. and/or Canada and 0
percent U.S/Canadian if less than 70 percent of its value is added in
the U.S. and/or Canada. Moreover, the outside supplier is only to
provide a country of origin, for purposes of major sources of foreign
content, for equipment which has less than 70 percent of its value
added in the U.S. and/or Canada. See section 583.10(a)(5).
NHTSA believes that Part 583 is not so clear with respect to
possible double-counting for equipment supplied by allied suppliers.
Under section 583.11, allied suppliers are to provide a specific
percentage U.S./Canadian content for their equipment, as well as a
country of origin for purposes of major sources of foreign content. A
manufacturer might believe that it should count the actual U.S./
Canadian content of such equipment for purposes of determining U.S./
Canadian parts content, and the total value of such equipment for
purposes of determining major sources of foreign content. This would,
of course, result in double-counting. The agency has decided to replace
the provision about reducing foreign percentages with one that makes it
clear that, in calculating major sources of foreign content,
manufacturers are not to count any value that has been counted as U.S./
Canadian content.
D. Alternative Procedures for Manufacturers
In the final rule preamble, NHTSA addressed comments by a number of
manufacturers urging it to permit simplified procedures for estimating
U.S./Canadian content. GM, for example, had recommended the use of a
high volume configuration model as the basis for establishing the U.S./
Canadian content value for a carline.
NHTSA stated that it does not disagree with the concept of
permitting simplified procedures for estimating U.S./Canadian content,
if such procedures would always ensure reliable results. The agency
concluded, however, that the procedures which were suggested by the
commenters, which were based on either a high volume configuration or
best selling model, would not appear to always ensure meaningful
results. By way of example, the agency cited a situation where the high
volume configuration or best selling model of a carline was produced in
the U.S./Canada and the rest of the carline was produced in a foreign
country. NHTSA noted that content calculations based on the portion of
the carline assembled in the U.S./Canada would likely not be
representative of the carline as a whole.
In petitioning for reconsideration, GM noted the agency's concern
that alternative procedures must always produce reliable results, and
requested that alternative, simplified procedures be permitted if the
Administrator determines that the procedures produce substantially
equivalent results. That manufacturer also stated that an optional
procedure can be designed to take care of the problem in the example
cited by the agency.
GM noted the Labeling Act's provision stating that regulations are
to provide the best and most understandable information possible
without imposing costly and unnecessary burdens on manufacturers. That
company argued that the agency has chosen as the only allowed method of
determining U.S./Canadian content the most burdensome and costly
procedure possible. GM explained an optional calculation procedure as
follows:
When attempting to average a very large number of values when
all of the values themselves are not known, certain well accepted
and reasonable approximation procedures can be employed to reduce
the amount of data gathering required to calculate with an
acceptable level of confidence. In other words, a great deal of the
burden can be reduced while maintaining reliable and equivalent test
results. Such procedures are accepted by the Commerce Department
under North American Free Trade Agreement and by the Environmental
Protection Agency in determining whether vehicles are in the
manufacturer's domestic or foreign fleet for Corporate Average Fuel
Economy (CAFE) purposes. Also such a procedure is used when
determining a manufacturer's CAFE. * * * As with any volume-weighted
calculation, only that data associated with high volumes will
significantly impact the final calculation. Any further data
collecting would add significant burden and provide diminishing
returns on the accuracy of the calculated average.
GM believes that NHTSA should accept optional calculation
methods as an accurate measure of the average percent of U.S./
Canadian content. This will dramatically reduce the content data
gathering burden while still maintaining a level of accuracy and
reliability required by the AALA in the average content value
calculation for the carline.
The FY 1995 Conference Report on DOT Appropriations stated that to
ensure that the final rule does not impose costly and unnecessary
burdens on manufacturers, the conferees also direct NHTSA to amend the
rule to allow manufacturers to propose alternative procedures for
determining domestic content if such procedure produces reliable
results.
After considering GM's petition and the Congressional report, NHTSA
has decided to add a provision along the lines suggested by GM. The
agency wishes to reduce manufacturer and supplier costs to the extent
possible, and the agency believes that the process recommended by GM is
consistent with the agency's concern that alternative procedures must
always ensure meaningful results.
[[Page 47890]]
NHTSA notes that GM suggested adding a single sentence to the
regulation indicating that manufacturers may use alternative procedures
to determine U.S./Canadian parts content provided the Administrator has
determined that the alternative procedure will produce substantially
equivalent results. The agency believes that it is also necessary for
the regulation to specify the type of alternative procedures that
manufacturers can petition for, and a more detailed procedure for
manufacturers to follow in submitting petitions.
NHTSA is specifying that manufacturers may petition for an
alternative calculation procedure that is based on representative
sampling and/or statistical sampling. The agency notes that GM's
request to use an optional calculation procedure was in the context of
a representative sampling approach, such as the one used by EPA for
calculating CAFE.
EPA's procedures provide that a manufacturer's CAFE is calculated
based on testing a limited number of vehicles. Because EPA's procedures
ensure that the tested vehicles are representative, with respect to
fuel economy, of the manufacturer's fleet, the procedures result in a
calculated average representative of the manufacturer's actual fleet
average. (A manufacturer's actual fleet average would be the average
fuel economy that would be measured using the prescribed test
procedures if every car produced were actually tested.)
NHTSA believes it is appropriate to similarly permit manufacturers
to use a calculation procedure for the motor vehicle content labeling
program that is based on vehicles that are representative, with respect
to content, for the carline. The agency recognized in the preamble to
the July 1994 final rule that a particular high volume configuration
carline model might not be representative, with respect to content, of
the overall carline. However, the agency believes that the petition
process recommended by GM will ensure that manufacturers select
vehicles that are representative.
The agency also believes it is appropriate to permit manufacturers
to petition for alternative calculation procedures that are based on
statistical sampling. NHTSA notes that EPA, in developing its
calculation procedures, considered statistical sampling approaches as
well as representative sampling. That agency decided not to adopt a
statistical sampling approach because it would have been much more
costly than representative sampling, due to a need to test more
vehicles. The motor vehicle content labeling program does not, of
course, involve costly testing. Moreover, a statistical sampling
approach would likely be less costly than the main approach specified
by Part 583 and might, in some cases, be easier for manufacturers to
implement than a representative approach. Therefore, NHTSA believes
that statistical sampling, as well as representative sampling, should
be included as an option for which manufacturers may petition. (For a
further discussion of EPA's consideration of representative and
statistical sampling approaches, see 41 FR 38677-79, September 10,
1976.)
The procedures specified in today's amendments require
manufacturers to provide analysis demonstrating that the alternative
procedure will produce substantially equivalent results. If the
Administrator determines that the petition contains adequate
justification, he or she will grant the petition.
The procedures also provide that the agency will publish a notice
of receipt of the petition and provide an opportunity for the public to
submit comments on the petition. The Administrator will consider the
public comments in deciding whether to grant the petition. While a
manufacturer may submit confidential business information in support of
a petition, the basic alternative procedure and supporting analysis
must be public information.
NHTSA notes that it is possible that alternative procedures may
raise issues which require complex analysis. The agency is therefore
including a provision in the regulation which specifies that petitions
must be submitted not later than 120 days before the manufacturer
wishes to use the procedure.
While GM's petition requested that manufacturers be permitted to
petition for alternative procedures for calculating carline U.S./
Canadian content, the agency is also making this option available for
calculating major sources of foreign parts content. The latter
calculations are also made on a carline basis, and the same
considerations relevant to this issue apply to calculations for both
items.
E. Legal Issues
1. Federal Preemption
AIAM stated that NHTSA did not respond to the concerns it raised in
its comment on the NPRM about the possibility of actions taken against
automotive manufacturers by state or local authorities as a result of
the differential treatment of suppliers or what AIAM termed ``the
misleading nature of the information required by the underlying statute
or compliance with the final rule.'' That organization argued that the
label could foster consumer confusion and requested that NHTSA provide
an express statement of Federal preemption of any state or local action
initiated as a result of providing the required information on the
label in accordance with the rule.
NHTSA wishes to emphasize that, while it will respond to the issue
of Federal preemption raised by AIAM, the agency is not accepting the
petitioner's argument that the underlying statute or regulation results
in misleading information or consumer confusion.
It is a basic principle of Constitutional law that Federal law,
including agency regulations, can preempt state law. Section 32304(f)
expressly provides that ``(w)hen a label content requirement prescribed
under this section is in effect, a State or a political subdivision of
a State may not adopt or enforce a law or regulation related to the
content of vehicles covered by a requirement under this section,''
although a state may prescribe requirements related to the content of
passenger motor vehicles obtained for its own use. Moreover, Federal
law impliedly preempts state law when, among other things, it is
impossible to comply with both. In this context, ``state law'' includes
the state's common law, as established through litigation.
Given these principles, and since manufacturers are required to
comply with section 32304 and with Part 583, no person may bring an
action under state or local law seeking to impose liability against a
manufacturer on the basis that it provided information required by
Federal law. This result follows from Constitutional law, and it is not
necessary to put a specific provision to that effect in the regulation.
2. Due Process
AIADA submitted a very brief petition requesting that the agency
``reconsider and vacate its final rule on Motor Vehicle Content
Labeling.'' As grounds for its request, it stated that ``(t)he rule is
unconstitutionally vague and unequal and discriminatory in its
application and therefore constitutes a denial of due process in
violation of the Fifth Amendment to the United States Constitution and
the Administrative Procedure Act.'' The petitioner also cited ``(a)l
the reasons set forth in AIADA's letters * * * dated January 11, 1992
and January 18, 1994.''
NHTSA cannot grant AIADA's request. The agency notes that it cannot
[[Page 47891]]
simply ``vacate'' the content labeling final rule, since the rule is
required by section 32304. NHTSA also notes that AIADA's stated concern
about ``due process'' is so vague that it is not possible to identify
what specific concerns about the final rule it might relate to. While
the petition cites that organization's earlier letters, NHTSA has
already responded to those issues in previous Federal Register notices,
including the final rule preamble. AIADA did not discuss why it is
unsatisfied with the agency's responses or even acknowledge the
responses. Therefore, there is no basis for the agency to give any
further consideration to AIADA's petition.
3. Authority to Exclude Vehicles With Low U.S./Canadian Content
VW requested the agency to reconsider its determination that it
lacks authority to permit manufacturers selling vehicles with low U.S./
Canadian content, e.g., less than 35 percent, from stating such content
as ``minimal'' or ``less than 35 percent,'' instead of indicating an
actual percentage, as specified in the statute. That company made the
following argument:
The NHTSA acknowledges that it has implied authority to create
exclusions from the statutory requirements of the [Labeling Act] in
cases of administrative need and where a literal application of the
statutory language would lead to absurd or futile results or
produces a gain of trivial value or of no value at all. The NHTSA
concluded, however, that all manufacturers have the capability of
implementing the statutory language literally and that disclosure on
the label of the actual U.S./Canadian parts content percentage per
carline offers a benefit to the consumer which is more than trivial.
We disagree.
While one may argue over whether or not disclosure of the actual
percentage in the case of a carline with marginal U.S./Canadian
parts content bestows more than trivial benefits on the public when
compared with a disclosure of that content as ``minimal,'' we note
that the Federal Court of Appeals in the case of Alabama Power
Company v. Costle, 636 F.2d 323 (1979) did not view the ``trivial''
standard to be relevant to a situation where the benefits are
exceeded by the costs associated with providing those benefits. The
court stated that in that event, the Agency should be guided by the
aims of the statute it is implementing and the Congressional intent
as expressed in the statute's legislative history.
In the case before us there appears to be no need to explore the
legislative history because the statute is plain on its face in
providing in section 210(d) that ``the regulations shall provide to
the ultimate purchaser of a new passenger motor vehicle the best and
most understandable information possible about the foreign and U.S./
Canadian origin of equipment of such vehicles without imposing
costly and unnecessary burdens on the manufacturers.'' (Emphasis
supplied by VW)
VW submits that the statute is clear in directing the NHTSA to
strike a balance between communicating to the public ``the best and
most understandable information possible'' and the ``cost'' and
``necessity'' of burdening the manufacturer. We believe that the
NHTSA erred in striking the correct balance between these competing
considerations as Congress directed it to do.
VW noted that it imports vehicles from both Germany and Mexico. It
stated that the German vehicles are estimated to have a small fraction
of U.S./Canadian parts content which could not reasonably be relevant
to a U.S. consumer's purchasing decision. That company stated that
while its Mexican vehicles are likely to have a greater U.S./Canadian
parts content, that content is not sufficient to permit the conclusion
that disclosure of the actual percentage would not be dictated by a
correct balancing of the factors described in section 210(d). VW argued
that its vehicles originating in Mexico are largely manufactured with
equipment originating in Europe and Mexico, are marketed and perceived
by the U.S. market as foreign made, and are purchased because they are
unlike any other offerings to the market by the transplants or the
domestic manufacturers.
VW also estimated that the assignment of a staff of five full time
employees at a total cost of approximately $500,000 annually will be
necessary at its various manufacturer locations to comply with the
regulations as adopted, and that $150,000 of that amount is
attributable to those portions of the regulation which require the
calculation and disclosure of actual percentage figures rather than
estimates designed to determine whether or not a particular carline has
U.S./Canadian parts content below a range of about 20 percent to 35
percent.
VW argued that the Labeling Act is very specific in directing NHTSA
to take costs into account in determining the form and content of the
information which the manufacturer must disclose. That company argued
that this directive is specific rather than general in nature and that
it leaves no room for debate irrespective of whether or not the benefit
to the public is trivial or non-trivial.
While NHTSA has carefully considered VW's arguments, it continues
to believe that it lacks authority to provide exclusions, along the
lines discussed above, for vehicles with low U.S./Canadian content. As
discussed below, the agency believes that VW is incorrectly
interpreting one sentence in section 210(d) (now replaced by 49 U.S.C.
32304(e)) as overriding more specific statutory provisions.
Since VW based its argument in part on the case of Alabama Power
Co., the agency will begin its analysis by quoting the relevant portion
of that case:
Exemptions for De Minimis Circumstances. Categorical exemptions
may also be permissible as an exercise of agency power, inherent in
most statutory schemes, to overlook circumstances that in context
may fairly be considered de minimis. . . .
Determination of when matters are truly de minimis naturally
will turn on the assessment of particular circumstances, and the
agency will bear the burden of making the required showing. But we
think most regulatory statutes . . . permit such agency showings in
appropriate cases.
While the difference is one of degree, the difference of degree
is an important one. Unless Congress has been extraordinarily rigid,
there is likely a basis for an implication of de minimis authority
to provide exemption when the burdens of regulation yield a gain of
trivial or no value. That implied authority is not available for a
situation where the regulatory function does provide benefits, in
the sense of furthering the regulatory objectives, but the agency
concludes that the acknowledged benefits are exceeded by the costs.
For such a situation any implied authority to make cost-benefit
decisions must be based not on a general doctrine but on a fair
reading of the specific statute, its aims and legislative history. .
. . 636 F.2d at 360-61.
In the final rule preamble, NHTSA explained that an exclusion
cannot be justified on the de minimis theory if non-trivial benefits
would otherwise be provided. The agency concluded that it does not have
authority to provide the relevant exclusion for vehicles with low U.S./
Canadian content because such an exclusion would permit the labels on a
substantial portion of the vehicles sold to provide the consumer with
significantly less information than Congress intended, thereby
eliminating much of the benefit that the Labeling Act was intended to
provide.
The agency added:
For example, a ``low-end'' exclusion would permit a large
percentage of foreign vehicles to be labeled with the words
``minimal'' or less than 35 percent (or some other specified
percentage) U.S./Canadian content, instead of being labeled with a
specific percentage. Consumers would not know whether vehicles
bearing such labels contained (on a carline basis) 0 percent, about
15 percent, or possibly even nearly 35 percent U.S./Canadian
content. A consumer wishing to make a purchase decision among
vehicles bearing such labels would not be able to compare their
U.S./Canadian content. . . .
NHTSA notes that section 210(b)(2) allows rounding of the
percentages, but limits the
[[Page 47892]]
rounding ``to the nearest five percent.'' This indicates that specific
percentages must be listed (since general percentages aren't
amenable to rounding) and that any rounding to a greater degree is
prohibited. In this regard, it is particularly important to note
that the degree of permissible rounding permitted by the enacted
version of Sec. 210 is significantly less than the degree that would
have been permitted in the introduced version. In the introduced
version, rounding would have been permitted to the nearest 10
percent. The enacted version permits rounding only to the nearest 5
percent. Thus, Congress focused particular attention on the issue of
rounding and decided to adopt strict limits. Moreover, implicit in
the enacted rounding provision is a judgment by Congress that
differences in content of as little as five percentage points are
significant enough to be considered by the consumer.
The agency continues to believe that the Labeling Act and its
legislative history make it clear that requirements which enable
consumers to distinguish vehicles with 0 percent, 5 percent, 10
percent, 15 percent, 20 percent, 25 percent, 30 percent, and 35 percent
U.S./Canadian content provide non-trivial benefits. While such
information may not make a difference to consumers who wish to purchase
a vehicle that is primarily of U.S./Canadian origin, the information
may be relevant for consumers in making a purchase decision between
vehicles with relatively low U.S./Canadian content, e.g., for a
consumer who may be deciding between a vehicle with 0 percent U.S./
Canadian content and one which has 20 percent U.S./Canadian content.
VW's primary argument on reconsideration is that ``NHTSA did not
properly balance the statutory considerations requiring the parts
content label to contain `the best and most understandable information'
to the consumer with the cost and administrative burdens imposed upon a
manufacturer such as VW, as Congress expressly directed it to do in the
form of a clear and precise mandate.'' However, VW is incorrectly
reading a general statutory provision as overriding most of the rest of
the statute.
Section 32304(e) reads in relevant part as follows:
(e) REGULATIONS.--. . . The Secretary of Transportation shall
prescribe regulations necessary to carry out this section, including
regulations establishing a procedure to verify the label information
required under subsection (b)(1) of this section. Those regulations
shall provide the ultimate purchaser of a new passenger motor
vehicle with the best and most understandable information possible
about the foreign content and United States/Canadian origin of the
equipment of the vehicles without imposing costly and unnecessary
burdens on the manufacturers. . . .
VW is reading the second sentence of section 32304(e) outside of
context. The first sentence makes it clear that the required
regulations are ``to carry out this section.'' The term ``this
section'' refers to section 32304, which includes numerous very
specific requirements concerning the content information which
manufacturers are required to provide. The second sentence is not an
invitation for NHTSA to second-guess Congress on all of the specific
requirements in section 32304 concerning content information, e.g.,
whether the information Congress decided to require manufacturers to
provide is ``best,'' whether that information is ``most
understandable,'' etc. The sentence instead indicates the factors NHTSA
must consider in exercising its limited discretion in developing the
required regulation. The agency observes that VW's reading of this
sentence would reduce virtually all of the specific requirements of
section 32304 to suggestions for NHTSA's consideration.
VW argued that the sentence at issue is specific rather than
general in nature. That argument was apparently made in response to the
agency's statement in the final rule preamble that, as a matter of
statutory construction, general provisions cannot be construed as
overriding specific ones. NHTSA isn't arguing that it need not follow
that sentence. What is significant is that the second sentence of 49
U.S.C. 32304(e) is general as compared to other relevant provisions of
the statute.
Of particular significance, section 32304(b) reads as follows:
(b) MANUFACTURER REQUIREMENT.--(1) Each manufacturer of a new
passenger motor vehicle * * * shall establish each year for each
model year and cause to be attached in a prominent place on each of
those vehicles, at least one label. The label shall contain the
following information:
(A) the percentage (by value) of passenger motor vehicle
equipment of United States/Canadian origin installed on vehicles in
the carline to which that vehicle belongs, identified by the words
``U.S./Canadian content.'' (Emphasis added.)
This subsection expressly and specifically requires manufacturers
to provide certain information, on the label, including the percentage
U.S./Canadian parts content. Following accepted principles of statutory
construction, the agency cannot interpret a more general provision as
overriding this specific provision.
F. Clarifying Amendments
NHTSA is making several amendments suggested by AAMA for purposes
of clarity. The amendments help clarify when the U.S. and Canada are
treated together and when they are treated separately in making country
of origin determinations. The amendments also help clarify requirements
concerning optional information for carlines assembled in the U.S./
Canada and in one or more other countries.
G. Letter From Ford
Ford submitted a letter requesting NHTSA's concurrence on a
procedure for determining the U.S./Canadian content and country of
origin for foreign-sourced allied and outside supplier components. That
company explained its request as follows:
[Part 583] assigns zero domestic content to all passenger motor
vehicle equipment which is imported into the territorial boundaries
of the United States or Canada from a third country, even if part of
its material originated in the United States or Canada. 49 CFR 583.7
allows the supplier to use methodologies that are used for customs
purposes to determine the country of origin. Ford expects that for
any imported component, both allied and outside, suppliers would
report that the domestic content is zero and the country of origin
is the country of manufacture, based on the rules of substantial
transformation.
Ford can obtain the same information (zero domestic content,
country of manufacture, purchase price) expected to be received from
our foreign suppliers from our present purchasing systems. Since the
process of soliciting the supplier is costly, Ford plans to assign
the domestic content and country of origin of the foreign sourced
components without soliciting the data from our foreign suppliers.
We are concerned that even if Ford did submit the request to foreign
suppliers, that suppliers would have to expend additional resources
creating a document which Ford already knows the answer. Even if the
foreign supplier does not respond, the domestic content and country
of origin will not be any different than if they did respond. Ford
believes that requiring these suppliers to respond will impose
costly and unnecessary burdens on our foreign suppliers.
NHTSA notes that it decided to address Ford's request in this
notice, since it was related to some of the issues raised by the
petitions for reconsideration.
After carefully considering Ford's request in light of the Labeling
Act and Part 583, NHTSA has decided that, for equipment supplied by
foreign suppliers and imported into the U.S. or Canada, manufacturers
may use any available information to make determinations of zero U.S./
Canadian content, country of manufacture, and purchase price, as an
alternative to relying on supplier certifications. The agency notes
that this represents a change in position from the final rule preamble.
The reasons for the agency's new position are set forth below.
[[Page 47893]]
In the final rule preamble, NHTSA noted that Toyota had commented
that ``blanket certifications'' should be authorized for use where a
supplier's parts contain no U.S./Canadian content and where the country
of origin of the equipment is indicated in ordinary business records.
In responding to this comment, the agency noted that the Labeling Act
provides that the agency's ``regulations shall include provisions
applicable to outside suppliers and allied suppliers to require those
suppliers to certify whether passenger motor vehicle equipment provided
by those suppliers is of United States origin, of United States/
Canadian origin, or of foreign content and to provide other information
* * * necessary to allow each manufacturer to comply reasonably with
this section and to rely on that certification and information.'' 49
U.S.C. 32304(e). NHTSA concluded that, given this statutory provision,
it cannot permit the use of ordinary business records instead of
specific certifications. See 59 FR 37319. (The agency did note that a
certification can cover multiple items of equipment and be incorporated
into business records that contain other information.)
On further consideration, NHTSA has concluded that the above-quoted
sentence of section 32304(e) should not be read to require
manufacturers to obtain information from suppliers that the
manufacturer can determine on its own. The agency believes that
statutory requirement is met literally by section 583's requirement for
suppliers to provide manufacturers and allied suppliers, upon their
request, a certificate providing the relevant information. The agency
also believes that there is no reason to require manufacturers to
request information for which they already know the answer.
With respect to whether manufacturers can make the relevant content
determinations, NHTSA believes that it is important to distinguish
between passenger motor vehicle equipment that is assembled or produced
in the U.S. or Canada, and equipment imported into the U.S. or Canada
that was produced in third countries. For reasons discussed in the
section on ``non-responsive suppliers,'' manufacturers and allied
suppliers will not possess the information needed to determine whether
equipment produced in the U.S. or Canada is of U.S./Canadian origin,
i.e., whether the equipment has at least 70 percent U.S./Canadian
content.
However, manufacturers may possess the information necessary to
make content determinations for equipment imported into the U.S. or
Canada that was produced in third countries. Under section 583.6(c),
the U.S./Canadian content of such equipment is presumed to be zero.
Moreover, section 583.7 provides considerable flexibility in making
country-of-origin determinations for such equipment. Therefore, for
equipment supplied by foreign suppliers which is imported into the U.S.
or Canada, the agency believes it is reasonable to permit manufacturers
to use any available information to make determinations of zero U.S./
Canadian content, country of manufacture, and purchase price, as an
alternative to relying on supplier certifications. Manufacturers can,
of course, request the information of foreign suppliers instead of
making their own determinations.
NHTSA does not believe that there is a need to change the
regulation to reflect this new position. The agency notes that section
583.5(h) requires manufacturers and allied suppliers to request their
suppliers to provide directly to them the information and
certifications ``which are necessary for the manufacturer/allied
supplier to carry out its responsibilities under [Part 583].'' Thus,
manufacturers and allied suppliers are not required to request
information which is unnecessary for them to carry out their
responsibilities.
VI. Rulemaking Analyses and Notices
A. Executive Order 12866 and DOT Regulatory Policies and Procedures
NHTSA has considered the impacts of this rulemaking action under
Executive Order 12866 and the Department of Transportation's regulatory
policies and procedures. This rulemaking document was reviewed under
Executive Order 12866. The July 1994 final rule was determined to be
``significant'' under the Department's regulatory policies and
procedures, given the degree of public interest and the relationship to
other Federal programs and agencies, particularly those related to
international trade. This final rule is sufficiently related to that
final rule to also be considered significant.
NHTSA discussed the costs associated with the July 1994 rule in a
Final Regulatory Evaluation which was placed in the docket for this
rulemaking. Today's amendments should slightly reduce manufacturer and
supplier costs by simplifying the process for making content
determinations.
B. Regulatory Flexibility Act
Pursuant to the Regulatory Flexibility Act, the agency has
considered the impact this rulemaking will have on small entities. I
certify that this action will not have a significant economic impact on
a substantial number of small entities. Therefore, a regulatory
flexibility analysis is not required for this action. Although certain
small businesses, such as parts suppliers and some vehicle
manufacturers, are affected by the regulation, the effect on them is
minor since the requirements are informational.
C. National Environmental Policy Act
The agency has analyzed the environmental impacts of the regulation
in accordance with the National Environmental Policy Act, 42 U.S.C.
4321 et seq., and has concluded that it will not have a significant
effect on the quality of the human environment.
D. 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 rule does not have sufficient Federalism implications to
warrant the preparation of a Federalism Assessment.
E. Paperwork Reduction Act
The reporting and recordkeeping requirements associated with this
final rule are being submitted to the Office of Management and Budget
for approval in accordance with 44 U.S.C. chapter 35.
F. Executive Order 12778 (Civil Justice Reform)
This rule does not have any retroactive effect. States are
preempted from promulgating laws and regulations contrary to the
provisions of the rule. The rule does not require submission of a
petition for reconsideration or other administrative proceedings before
parties may file suit in court.
List of Subjects in 49 CFR Part 583
Motor vehicles, Imports, Labeling, Reporting and recordkeeping
requirements.
In consideration of the foregoing, 49 CFR part 583 is amended as
follows:
PART 583--AUTOMOBILE PARTS CONTENT LABELING
1. The authority citation for part 583 continues to read as
follows:
Authority: 49 U.S.C. 32304, 49 CFR 1.50, 501.2(f).
2. Section 583.5 is amended by revising paragraph (e)(3) to read as
follows:
Sec. 583.5 Label requirements.
* * * * *
(e) * * *
(3) A manufacturer selecting this option for a particular carline
shall
[[Page 47894]]
provide the specified additional information on the labels of all
vehicles within the carline, providing the U.S./Canadian content that
corresponds to the U.S./Canadian content of the manufacturing location
shown as the final assembly point (with all U.S. and Canadian locations
considered as a single assembly point) on the label.
* * * * *
3. Section 583.6 is revised to read as follows:
Sec. 583.6 Procedure for determining U.S./Canadian parts content.
(a) Each manufacturer, except as specified in Sec. 583.5(f) and
(g), shall determine the percentage U.S./Canadian Parts Content for
each carline on a model year basis, before the beginning of each model
year. Items of equipment produced at the final assembly point (but not
as part of final assembly) are treated in the same manner as if they
were supplied by an allied supplier. All value otherwise added at the
final assembly point and beyond, including all final assembly costs,
are excluded from the calculation of U.S./Canadian parts content.
(b) Determining the value of items of equipment.
(1) For items of equipment received at the final assembly point,
the value is the price paid by the manufacturer for the equipment as
delivered to the final assembly point.
(2) For items of equipment produced at the final assembly point
(but not as part of final assembly), the value is the fair market price
that a manufacturer of similar size and location would pay a supplier
for such equipment.
(3) For items of equipment received at the factory or plant of an
allied supplier, the value is the price paid by the allied supplier for
the equipment as delivered to its factory or plant.
(c) Determining the U.S./Canadian percentage of the value of items
of equipment.
(1) Equipment supplied by an outside supplier to a manufacturer or
allied supplier is considered:
(i) 100 percent U.S./Canadian, if 70 percent or more of its value
is added in the United States and/or Canada; and
(ii) 0 percent U.S./Canadian, if less than 70 percent of its value
is added in the United States and/or Canada.
(2) The extent to which an item of equipment supplied by an allied
supplier is considered U.S./Canadian is determined by dividing the
value added in the United States and/or Canada by the total value of
the equipment. The resulting number is multiplied by 100 to determine
the percentage U.S./Canadian content of the equipment.
(3) In determining the value added in the United States and/or
Canada of equipment supplied by an allied supplier, any equipment that
is delivered to the allied supplier by an outside supplier and is
incorporated into the allied supplier's equipment, is considered:
(i) 100 percent U.S./Canadian, if at least 70 percent of its value
is added in the United States and/or Canada; and
(ii) 0 percent U.S./Canadian, if less than 70 percent of its value
is added in the United States and/or Canada.
(4)(i) Value added in the United States and/or Canada by an allied
supplier or outside supplier includes--
(A) The value added in the U.S. and/or Canada for materials used by
the supplier, determined according to (4)(ii) for outside suppliers and
(4)(iii) for allied suppliers, plus,
(B) For passenger motor vehicle equipment assembled or produced in
the U.S. or Canada, the value of the difference between the price paid
by the manufacturer or allied supplier for the equipment, as delivered
to its factory or plant, and the total value of the materials in the
equipment.
(ii) Outside suppliers of passenger motor vehicle equipment will
determine the value added in the U.S. and/or Canada for materials in
the equipment as specified in paragraphs (A) and (B).
(A)(1) For any material used by the supplier which was produced or
assembled in the U.S. or Canada, the supplier will subtract from the
total value of the material any value that was not added in the U.S.
and/or Canada. The determination of the value that was not added in the
U.S. and/or Canada shall be a good faith estimate based on information
that is available to the supplier, e.g., information in its records,
information it can obtain from its suppliers, the supplier's knowledge
of manufacturing processes, etc.
(2) The supplier shall consider the amount of value added and the
location in which that value was added--
(i) At each earlier stage, counting from the time of receipt of a
material by the supplier, back to and including the two closest stages
each of which represented a substantial transformation into a new and
different product with a different name, character and use.
(ii) The value of materials used to produce a product in the
earliest of these two substantial transformation stages shall be
treated as value added in the country in which that stage occurred.
(B) For any material used by the supplier which was imported into
the United States or Canada from a third country, the value added in
the United States and/or Canada is presumed to be zero. However, if
documentation is available to the supplier which identifies value added
in the United States and/or Canada for that material (determined
according to the principles set forth in (A), such value added in the
United States and/or Canada is counted.
(iii) Allied suppliers of passenger motor vehicle equipment shall
determine the value that is added in the U.S. and/or Canada for
materials in the equipment in accordance with (c)(3).
(iv) For the minor items listed in the Sec. 583.4 definition of
``passenger motor vehicle equipment'' as being excluded from that term,
outside and allied suppliers may, to the extent that they incorporate
such items into their equipment, treat the cost of the minor items as
value added in the country of assembly.
(v) For passenger motor vehicle equipment which is imported into
the territorial boundaries of the United States or Canada from a third
country, the value added in the United States and/or Canada is presumed
to be zero. However, if documentation is available to the supplier
which identifies value added in the United States and/or Canada for
that equipment (determined according to the principles set forth in the
rest of (c)(4)), such value added in the United States and/or Canada is
counted.
(vi) The payment of duty does not result in value added in the
United States and/or Canada.
(5) If a manufacturer or allied supplier does not receive
information from one or more of its suppliers concerning the U.S./
Canadian content of particular equipment, the U.S./Canadian content of
that equipment is considered zero. This provision does not affect the
obligation of manufacturers and allied suppliers to request this
information from their suppliers or the obligation of the suppliers to
provide the information.
(d) Determination of the U.S./Canadian percentage of the total
value of a carline's passenger motor vehicle equipment. The percentage
of the value of a carline's passenger motor vehicle equipment that is
U.S./Canadian is determined by--
(1) Adding the total value of all of the equipment (regardless of
country of origin) expected to be installed in that carline during the
next model year;
(2) Dividing the value of the U.S./Canadian content of such
equipment by the amount calculated in paragraph (d)(1) of this section,
and
(3) Multiplying the resulting number by 100.
[[Page 47895]]
(e) Alternative calculation procedures.
(1) A manufacturer may submit a petition to use calculation
procedures based on representative or statistical sampling, as an
alternative to the calculation procedures specified in this section to
determine U.S./Canadian parts content and major sources of foreign
parts content.
(2) Each petition must--
(i) Be submitted at least 120 days before the manufacturer would
use the alternative procedure;
(ii) Be written in the English language;
(iii) Be submitted in three copies to: Administrator, National
Highway Traffic Safety Administration, 400 Seventh Street SW.,
Washington, DC 20590;
(iv) State the full name and address of the manufacturer;
(v) Set forth in full the data, views and arguments of the
manufacturer that would support granting the petition, including--
(A) the alternative procedure, and
(B) analysis demonstrating that the alternative procedure will
produce substantially equivalent results to the procedure set forth in
this section;
(vi) Specify and segregate any part of the information and data
submitted in the petition that is requested to be withheld from public
disclosure in accordance with part 512 of this chapter (the basic
alternative procedure and basic supporting analysis must be provided as
public information, but confidential business information may also be
used in support of the petition).
(3) The NHTSA publishes in the Federal Register, affording
opportunity for comment, a notice of each petition containing the
information required by this part. A copy of the petition is placed in
the public docket. However, if NHTSA finds that a petition does not
contain the information required by this part, it so informs the
petitioner, pointing out the areas of insufficiency and stating that
the petition will not receive further consideration until the required
information is submitted.
(4) If the Administrator determines that the petition does not
contain adequate justification, he or she denies it and notifies the
petitioner in writing, explaining the reasons for the denial. A copy of
the letter is placed in the public docket.
(5) If the Administrator determines that the petition contains
adequate justification, he or she grants it, and notifies the
petitioner in writing. A copy of the letter is placed in the public
docket.
(6) The Administrator may attach such conditions as he or she deems
appropriate to a grant of a petition, which the manufacturer must
follow in order to use the alternative procedure.
4. Section 583.7 is amended by revising paragraphs (c)(1) and (f)
to read as follows:
Sec. 583.7 Procedure for determining major foreign sources of
passenger motor vehicle equipment.
* * * * *
(c) * * *
(1) Except as provided in (c)(2), the country of origin of each
item is the country which contributes the greatest amount of value
added to that item (treating the U.S. and Canada together).
* * * * *
(f) In determining the percentage of the total value of a carline's
passenger motor vehicle equipment which is attributable to individual
countries other than the U.S. and Canada, no value which is counted as
U.S./Canadian parts content is also counted as being value which
originated in a country other than the U.S. or Canada.
5. Section 583.8 is amended by revising paragraphs (c)(1) and (e)
to read as follows:
Sec. 583.8 Procedure for determining country of origin for engines and
transmissions for purposes of determining the information specified by
Secs. 583.5(a)(4) and 583.5(a)(5) only.
* * * * *
(c) * * *
(1) Except as provided in (c)(2), the country of origin of each
item of equipment is the country which contributes the greatest amount
of value added to that item (the U.S. and Canada are treated
separately).
* * * * *
(e) The country of origin of each engine and the country of origin
of each transmission is the country which contributes the greatest
amount of value added to that item of equipment (the U.S. and Canada
are treated separately).
Issued on: September 11, 1995.
Ricardo Martinez,
Administrator.
[FR Doc. 95-22902 Filed 9-14-95; 8:45 am]
BILLING CODE 4910-59-P
