[Federal Register Volume 62, Number 140 (Tuesday, July 22, 1997)]
[Proposed Rules]
[Pages 39207-39209]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-19151]
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DEPARTMENT OF TRANSPORTATION
National Highway Traffic Safety Administration
49 CFR Part 525
Denial of Petition for Rulemaking; Corporate Average Fuel Economy
(CAFE) Standards
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This document sets forth the reasons for the denial of a petition
for rulemaking submitted by the Coalition of Small Volume Automobile
Manufacturers, Inc. (COSVAM) regarding eligibility for exemptions from
corporate average fuel economy (CAFE) standards under 49 CFR Part 525.
COSVAM requested that the agency initiate rulemaking to amend Part
525.5 to add a definition that would define the number of ``Passenger
automobiles manufactured by a manufacturer'' to:
(1) Include every passenger vehicle manufactured by
(A) The manufacturer; and
(B) Any person that controls, is controlled by, or is under common
control with the manufacturer, unless such person neither manufactures
in nor imports into the Customs territory of the United States;
(2) Not include an automobile manufactured by any person described
in (1)(A) or (B) above, that is exported from the US not later than 30
days after end of the model year in which the automobile is
manufactured.
The petition is denied on the basis that it is unlikely that the
agency would adopt this definition. NHTSA concludes that the proposed
definition is contrary
[[Page 39208]]
to the language and intent of the governing statute.
Section 32902(d) of Title 49, United States Code (49 U.S.C.
32902(d)), provides that low volume manufacturers of passenger
automobiles may be eligible for an exemption from the general average
fuel economy standards for passenger automobiles. Subsection (d)(1) of
Section 32902(d) limits eligibility for low volume exemptions to those
manufacturers who ``manufacture'' (whether in the United States or not)
fewer than 10,000 passenger automobiles in the model year for which an
exemption is sought. This section also declares that applications for
these exemptions may only be submitted by manufacturers who produced
fewer than 10,000 passenger automobiles in the second model year
preceding the model year for which the exemption is sought.
A final rule, implementing the exemption provisions, became
effective July 28, 1977 (42 FR 38374). It added a new part 525 to NHTSA
regulations that established the timing, content, and format
requirements of petitions for exemption as well as the procedures that
the agency follows in acting on such petitions. Section 525.5 of Part
525 restates the statutory criteria for the availability and
application of exemptions by providing that an application may only be
made by a manufacturer who manufactures fewer than 10,000 cars in the
second model year preceding the model year for which an application is
made and that no exemption shall apply in any model year in which the
manufacturer produces more that 10,000 vehicles.
Section 32901(a)(4) defines ``automobiles manufactured by a
manufacturer'' to include ``every automobile manufactured by a person
that controls, is controlled by, or is under common control with the
manufacturer * * * .'' Under this definition, two or more companies
producing automobiles are considered to be a single manufacturer if one
company is controlled by, or controls, another manufacturer of motor
vehicles.
In 1978, NHTSA issued an interpretation of Part 525 known as the
``Chase interpretation.'' This interpretation, addressed to Howard E.
Chase, an attorney representing Officino Alfieri Maserati, S.p.A
(Maserati), concluded that cars produced by a ``parent'' manufacturer
that are neither produced or imported into the United States are not
counted for the purposes of determining eligibility for an exemption.
It thereby allowed Maserati, whose world-wide production of automobiles
was much less than 10,000 vehicles, to be eligible for exemption from
CAFE requirements even though Maserati was controlled by Nuova
Innocenti S.p.A. (Innocenti), whose annual production of passenger
automobiles exceeded 10,000 vehicles. Because Innocenti did not import
any vehicles into the United States, Maserati was granted an exemption
from the general CAFE requirements. This interpretation allowed an
importer or a number of importing manufacturers to apply for an
exemption if the worldwide production of those firms within a control
relationship that import into the United States did not exceed 10,000
passenger vehicles.
In a September 1990 notice concerning an application for exemption
submitted by Ferrari, which was then under the control of Fiat (55 FR
38822, Sept. 21, 1990), NHTSA re-examined the position it had taken in
the Chase interpretation. In that notice, the agency found that the
Chase interpretation was based on the definition of ``manufacture''
contained in the general definitions now found in Section 32901. This
definition states that ``manufacture'' means ``to produce or assemble
in the customs territory of the United States or to import.'' NHTSA
then concluded that the Chase interpretation wrongly applied this
limited definition of manufacture when the exemption provisions
themselves, now found in Section 32901(d), restrict the availability of
exemptions to manufacturers that ``manufactured (whether in the United
States or not) fewer than 10,000 passenger automobiles * * * '' The
notice also explained that importers who are controlled by larger
``parent'' manufacturers have, by virtue of the relationship with the
parent, access to technological and material resources that can provide
them with the ability to manufacture more fuel efficient vehicles. The
fact that the parent may choose not to import and market in the United
States does not have any bearing on the availability of these
resources. In a notice dated July 10, 1991 (56 FR 31459), the agency
indicated that it was adopting the revised interpretation set forth in
the September 1990 notice and abandoning the Chase interpretation.
COSVAM's January 8, 1997 petition sought to broaden the exemption
for small volume automobile manufacturers. The amendments proposed by
COSVAM would allow importing manufacturers within a control
relationship with another major manufacturer to be eligible to apply
for an exemption from the CAFE requirements even though the combined
worldwide annual production of all related manufacturers within the
control relationship exceeds 10,000 passenger automobiles, provided no
other manufacturer in the control relationship produces or imports more
than 10,000 passenger automobiles in the United States. The
petitioner's proposed amendment would modify 49 CFR Part 525.5 by
adding a new section, 525.5(b), reading as follows:
(b) For purpose of determining whether a manufacturer manufactured
* * * 10,000 or more passenger automobiles, ``automobiles manufactured
by a manufacturer'':
(1) Includes every automobile manufactured * * * by
(A) The manufacturer; and
(B) Any person that controls, is controlled by, or is under common
control with the manufacturer, unless such person neither manufactures
in nor imports into the Customs territory of the United States.
The petitioner also stated that the petition process for an exemption,
as outlined in Part 525.6 and 525.7, is cumbersome and an unnecessary
burden on small volume manufacturers.
Notwithstanding COSVAM's view, Chapter 329 sets clear limits on
eligibility for exemption from CAFE standards. These limits preclude
the agency from granting the relief COSVAM requests. Section
32901(a)(4) defines ``automobiles manufactured by a manufacturer'' to
include ``every automobile manufactured by a person that controls, is
controlled by, or is under common control with the manufacturer * *
*''. Section 32902(d)(1) limits eligibility for low volume exemptions
to those manufacturers who ``manufacture'' (whether in the United
States or not) fewer than 10,000 passenger automobiles in the model
year for which an exemption is sought regardless of where those
automobiles are produced.
Congress had a clear purpose when it indicated in Section 32902(d)
that ``manufacture'' meant worldwide production. Examination of both
the text and the legislative history of the exemption provisions
indicates that Congress sought to provide relief to low volume
manufacturers because of their limited flexibility and resources to
improve fuel economy. In so doing, Congress intended that such relief
be made available to manufacturers who, based on their worldwide annual
production, may not be able to adapt to the CAFE standards applicable
to large manufacturers. Congress did not intend that any inquiry into
the size and resources of a company seeking exemption be governed by an
examination of how many cars it brings
[[Page 39209]]
into the U.S., either directly or by a subsidiary it controls.
The effect of the rulemaking suggested by COSVAM would be to allow
a small volume manufacturer to be eligible for an exemption if the
worldwide production of all manufacturers within the control
relationship that import into the U.S. does not exceed 10,000 vehicles
per year, even though non-importing manufacturers may produce many more
than 10,000 vehicles per year. As noted above, NHTSA considers that
adoption of this language to be contrary to the commands of Chapter 329
and beyond the agency's authority. COSVAM argues however, that the
agency would be within its authority as a proposed change to the
existing scheme under an inherent power to fashion relief from the
operation of a statutory scheme where the impact of such relief is de
minimis, as recognized in the case of Alabama Power versus Costle, 636
F.2d 323 (D.C. Cir. 1979). The agency does not agree that it has such
an implied power. Congress has expressly addressed the issue of
exemptions under the CAFE statutes and issued precise criteria under
which such exemptions may be granted. This express directive negates
any implied right the agency might otherwise have had to fashion its
own scheme.
COSVAM further argues that this petition should be granted because
of this agency's commitment to regulatory reform. However, regulatory
reform does not grant the agency authority to do what the statute does
not permit. While COSVAM also suggested that the procedures for
applying for an exemption be simplified, it offered no suggestions on
how to make the petition process less cumbersome for a low volume
automobile manufacturer. The agency has already reviewed Parts 525.6
and 525.7 as part of its regulatory reform effort and concluded that
all of the information requested is necessary for the agency to fulfill
its responsibility in establishing the maximum feasible fuel economy
standard for manufacturers seeking an exemption. NHTSA also notes that
provisions have been incorporated into Part 525 to allow for an
exemption to be sought for as many as three model years. This was
intended to provide some relief for the small volume manufacturer by
reducing the frequency of petitions.
The agency has consistently concluded, since reconsideration of the
Chase interpretation, that for CAFE purposes ``vehicles manufactured by
a manufacturer'' includes all vehicles manufactured, worldwide, by any
entity that controls, is controlled by, or is under common control with
the manufacturer. In the agency's view this interpretation is
consistent with the express language and the purpose of Chapter 329.
For the reasons stated above, the petition is denied.
Issued on: July 16, 1997.
L. Robert Shelton,
Associate Administrator for Safety Performance Standards.
[FR Doc. 97-19151 Filed 7-21-97; 8:45 am]
BILLING CODE 4910-59-P
