[Federal Register Volume 64, Number 144 (Wednesday, July 28, 1999)]
[Rules and Regulations]
[Pages 40777-40781]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-19318]
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DEPARTMENT OF TRANSPORTATION
National Highway Traffic Safety Administration
49 CFR Part 583
[Docket No. NHTSA-98-5064, Notice 2]
RIN 2127-AH33
Motor Vehicle Content Labeling
AGENCY: National Highway Traffic Safety Administration (NHTSA),
Department of Transportation (DOT).
ACTION: Final rule.
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SUMMARY: This final rule amends the regulation we issued to implement
the American Automobile Labeling Act. That Act requires passenger motor
vehicles to be labeled with information about their domestic and
foreign parts content. Congress amended that Act last year to make a
number of changes in the labeling requirement. This final rule makes
the regulation consistent with those changes.
DATES: Effective date: The amendments made in this rule are effective
June 1, 2000. Manufacturers may voluntarily comply with the amendments
before that time.
Petitions for reconsideration: Petitions for reconsideration must
be received not later than September 27, 1999.
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: For nonlegal issues: Henrietta
Spinner, Office of Planning and Consumer Programs, National Highway
Traffic Safety Administration, 400 Seventh Street, SW, Washington, DC
20590 (202-366-4802).
For legal issues: Edward Glancy, Office of the Chief Counsel,
National Highway Traffic Safety Administration, 400 Seventh Street, SW,
Washington, DC 20590 (202-366-2992).
SUPPLEMENTARY INFORMATION:
Background
On July 21, 1994, NHTSA published in the Federal Register (59 FR
37294) a new regulation, 49 CFR part 583, Automobile Parts Content
Labeling, to implement the American Automobile Labeling Act (AALA).
That Act, which is codified at 49 U.S.C. 32304, requires passenger
motor vehicles to be labeled with information about their domestic and
foreign parts content.
As part of the NHTSA Reauthorization Act of 1998,1
Congress amended the AALA to make a number of changes in the labeling
requirement. The changes are set forth in section 7106(d) of the NHTSA
Reauthorization Act.
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\1\ This Act was part of the Transportation Equity Act for the
21st Century (TEA-21). The full text of TEA-21 and the conference
report is available on the Web at http://www.fhwa.dot.gov/tea21/.
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On February 8, 1999, we published in the Federal Register (64 FR
6021) a notice of proposed rulemaking (NPRM) to amend Part 583 to
conform it to the amended AALA. We discussed each of the changes made
by the Congress and the conforming amendments proposed for part 583.
Three of the changes made by Congress were of particular
significance. One of these concerned the ``roll-up, roll-down''
provision. The original Act specified that, for purposes of determining
percentage U.S./Canadian parts content, any equipment from outside
suppliers that was at least 70 percent U.S./Canadian was rolled-up and
treated as though it were 100 percent U.S./Canadian. Any equipment
under 70 percent was rolled-down and treated by the Act as though it
were zero percent U.S./Canadian.
The 1998 amendments eliminated the ``roll-down'' aspect of this
provision. While equipment from an outside supplier that is at least 70
percent U.S./Canadian is still to be valued at 100 percent U.S./
Canadian, any equipment under 70 percent is now valued to the nearest
five percent. Thus, equipment whose calculated U.S./Canadian content is
63 percent is now to be valued at 65 percent, instead of zero percent.
The second of these changes concerned the origin of the engine and
transmission. The original Act specified that the label must state the
names of the countries of origin for the engine and for the
transmission. The Act provided that the determinations of country of
origin were to be based on the purchase price of materials received at
individual engine/transmission plants, but were to exclude engine/
transmission assembly costs. The 1998 amendments specified that
assembly and labor costs incurred for the assembly of engines and
transmissions are now to be included in making these country of origin
determinations.
The third of these changes made permanent a limited, temporary
[[Page 40778]]
provision in the part 583 content calculation procedures giving a
vehicle manufacturer added flexibility in making content determinations
in those instances in which outside suppliers have not responded to the
manufacturer's requests for content information.
In addition to proposing specific changes to conform Part 583 to
the amended AALA, we also proposed a change in the format of the
messages on the label to make them easier to understand. Part 583
currently requires a brief explanatory note concerning parts content to
be provided at the end of the label. We proposed to require that this
note be moved to the middle of the label, directly below the items of
information for which the note is relevant, i.e., below the specified
U.S./Canadian Parts Content and Major Sources of Foreign Parts Content.
We proposed to apply the new requirements to all model year 2000
carlines that were first offered for sale to ultimate purchasers on or
after June 1, 1999. Since the changes were relatively straightforward
and the statutory amendments left us little discretion, we believed the
vehicle manufacturers could implement the changes needed to comply with
the new requirements quickly.
Public Comments
We received public comments from several vehicle manufacturers and
their associations, and from the National Automobile Dealers
Association (NADA). Also, pursuant to the Agreement on Technical
Barriers to Trade, the World Trade Organization (WTO) Secretariat was
notified of the proposed rule. The European Commission sent comments to
the WTO Enquiry Point for the United States, which forwarded the
comments to our Docket. A summary of the more significant comments
follows.
Several of the commenters reraised previous criticisms of the basic
program established by the AALA. However, these comments were not
within the scope of the NPRM. Moreover, the criticisms were directed to
the AALA itself.
Commenters representing nearly all motor vehicle manufacturers
stated that the proposed effective date of June 1, 1999 provided
insufficient lead time. The Alliance of Automobile Manufacturers
(Alliance) stated that its members would face extreme difficulties in
implementing the proposed changes in such a short period. It stated
that the elimination of the ``roll-down'' provision will require new,
detailed certifications from outside suppliers which cannot reasonably
be prepared and obtained in such a short time frame. The Alliance also
stated that its member companies may need to adapt their computer
systems supporting the AALA parts content calculation. The Alliance
recommended an effective date of June 1, 2000.
The Association of International Automobile Manufacturers, Inc.
(AIAM) similarly stated that the proposed effective date was neither
reasonable nor practicable. That organization stated that auto
manufacturers and their suppliers require considerable lead time to
prepare an AALA label. AIAM stated that these preparations can often
require up to seven months lead time to complete. AIAM provided a chart
showing a typical AALA compliance schedule, including specific details
of activities manufacturers must undertake.
Commenters also made several recommendations to reduce costs. The
Japan Automobile Manufacturers Association (JAMA) stated that while
elimination of the ``roll-down'' provision will result in a more
accurate picture of actual parts content, it will do so at increased
cost to the outside supplier, and hence to the vehicle manufacturer and
ultimately the consumer. JAMA stated that one means of addressing this
cost burden would be to permit suppliers of parts with low U.S./
Canadian content to report that such content is ``minimal'' or
``negligible'' without the burdensome certification requirements
otherwise required.
JAMA noted that the agency had previously stated that it did not
have authority to permit manufacturers to label vehicles with low U.S./
Canadian content as ``minimal,'' given the statutory requirement for
manufacturers to provide a specific percentage. That organization
stated that it believes the agency placed too much emphasis on its
estimate on Congressional intent with respect to the issue.
JAMA stated that, at the very least, the agency should permit
outside suppliers to employ the ``minimal'' concept, allowing vehicle
manufacturers the option to state that all parts imported from a given
overseas supplier are all ``non-U.S./Canadian,'' without keeping
records by the individual part. That organization stated that this
would serve to reduce the burden and simplify the calculation without
compromising the integrity of the statute.
AIAM and Volkswagen made a recommendation with respect to a change
to the AALA which specifies that the costs of miscellaneous parts
(e.g., nuts, bolts, windshield wiper fluid, etc.) are now allocated to
the country where final assembly of the vehicle takes place. These
parts previously were not considered in making parts content
calculations. AIAM and Volkswagen stated that it is difficult to
identify the value of the miscellaneous parts on a particular carline
and asked that an averaging concept be permitted, e.g., permit
manufacturers to calculate a total value for all of the miscellaneous
parts used to produce vehicles at a particular assembly plant and then
divide that total by the number of vehicles produced.
One commenter, DaimlerChrysler, objected to the proposal to move
the explanatory note to the middle of the label. That company stated
that any change to the content label involves a good deal of
coordination and programming effort and substantial lead time, and that
the change would add additional cost and burden with little or no
tangible benefit.
Agency Decision
After carefully considering the comments, we have decided to make
the proposed rule final, but with a later effective date.
We have decided to establish an effective date of June 1, 2000, as
recommended by the Alliance, while permitting optional early
compliance. The proposed effective date of June 1, 1999 was based on an
assumption that vehicle manufacturers and suppliers had already begun
to collect the information needed to make the revised calculations
required by the NHTSA Reauthorization Act of 1998. However, since the
comments indicated that this was not true in many cases, the agency has
concluded that a significantly longer leadtime is needed.
By permitting optional early compliance, vehicle manufacturers
which are able to comply with the new requirements earlier, including
for some or all of their model year 2000 vehicles, can do so. We
recognize that consumers comparing the labels on different model year
2000 vehicles may sometimes be faced with differing labels. However,
the changes are sufficiently minor that we do not believe this will
cause any significant confusion.
We note that the AALA and part 583 contemplate that U.S./Canadian
parts content and major sources of foreign parts content are determined
on a once-a-model-year basis for a particular carline. The June 1, 2000
effective date means that new model year carlines introduced to the
public on or after that date must bear the revised labels. New model
year carlines introduced before
[[Page 40779]]
that date may continue to bear the old labels for the balance of the
model year, even for vehicles manufactured after June 1, 2000.
While we have considered JAMA's request to permit suppliers of
parts with low U.S./Canadian content to report such content as
``minimal'' or ``negligible'' rather than as a percentage (to the
nearest five percent), we do not believe that such an exception from
the express statutory requirements has been justified. Most
significantly, JAMA has not shown that such an exception would not
result in a loss of non-trivial benefits. The agency would not have
authority to create such an exception, absent such a showing. Moreover,
JAMA has not provided support for its contention that the requirement
to provide a percentage is burdensome.
As to the AIAM/Volkswagen request that an averaging concept be
permitted for calculating the value of miscellaneous parts, we note
that the proposed rule did not include a procedure for calculating the
value of these parts. It is our opinion that manufacturers need not
identify the individual cost of each nut and bolt, but may simply make
a good faith estimate of the overall value of miscellaneous parts. We
do not believe it is necessary to state this in the regulatory text
itself. One way of making such a good faith estimate might be to
calculate a total value for all of the miscellaneous parts used to
produce vehicles at a particular assembly plant and then divide that
total by the number of vehicles produced. However, if substantially
different vehicles were produced at the same plant, the vehicle
manufacturer might need to make an adjustment so that the estimated
value was reasonable for each individual carline.
While we have considered DaimlerChrysler's arguments against moving
the explanatory note, we have decided to adopt this proposed change. As
discussed in the NPRM, we believe that moving the note to the middle of
the label, directly below the items of information for which the note
is relevant, will make the label easier to read. While DaimlerChrysler
stated that there is a cost to making any format change, it did not
quantify the cost. Given that the label will have to be changed in
other ways anyway, we believe that any cost impacts for moving the note
will be negligible.
As noted earlier, several of the commenters criticized the basic
requirements of the AALA. NADA stated that the rule is of little value
to most consumers. AIAM stated that while Congress addressed some of
its concerns in last year's amendments, it believes the law continues
to provide misleading and inaccurate information. JAMA argued that the
statute is costly to implement, burdensome to vehicle manufacturers and
outside suppliers, and of little interest or use to vehicle purchasers
in their buying decisions.
The EC submitted a comment stating:
The EC thinks that the label is superfluous, it is getting
harder and harder to determine the real origin of details. Many
companies manufacture in several countries and they can also be
owned by several large owners. The new procedure makes it even more
cumbersome when additional details such as screws and clips must be
taken into account when determining the origin. The vehicle
manufacturers must also get a certificate from each large supplier.
While we understand that a number of parties continue to have
objections to the current content labeling program, we note that the
objections are with the underlying statute. Since most of the details
of the content labeling program are set forth in the AALA, any
significant changes could only come from the Congress. We do note,
however, that the extended leadtime provided for today's rule and our
interpretation that good faith estimates may be made concerning the
value of miscellaneous parts will help minimize costs.
We also note that this agency is in the process of conducting an
evaluation of the AALA. This evaluation is being conducted pursuant to
Executive Order 12866, Regulatory Planning and Review, which requires
agencies to conduct periodic evaluations of the effectiveness of its
existing regulations and programs. This evaluation is listed in the
April 1999 Semiannual Regulatory Agenda. See 64 FR 21706, April 26,
1999. We plan to publish the evaluation of the AALA in the summer of
2000 in the Federal Register and will solicit comments from all
parties.
Rulemaking Analyses and Notices
A. Executive Order 12866 and DOT Regulatory Policies and Procedures
We have considered the impact of this rulemaking action under
Executive Order 12866 and the Department of Transportation's regulatory
policies and procedures. This rulemaking document was not reviewed by
the Office of Management and Budget under E.O. 12866, ``Regulatory
Planning and Review.'' The rulemaking action has been determined not to
be significant under the Department's regulatory policies and
procedures.
This final rule amends 49 CFR part 583 to conform the agency's
content labeling requirements and calculation procedures to recent
statutory changes. The changes are so minor that they will not have any
measurable effect on vehicle prices.
The change most likely to result in any cost impacts is the one
requiring outside suppliers to make calculations of U.S./Canadian
content, to the nearest five percent, for equipment with U.S./Canadian
content below 70 percent. This will increase compliance costs for some
outside suppliers. The agency notes that there are about 15,000
suppliers to vehicle manufacturers. However, many small suppliers
procure all their materials and components from the same country, and
will experience negligible costs. NHTSA believes that cost impacts for
other suppliers will be small and will diminish over time. Somewhat
higher costs are likely to be experienced the first year as suppliers
become familiar with the new calculation procedures and incorporate
them into their programming or other systems. While the agency has
concluded that the cost impacts will be small, it does not have
sufficient information to quantify such costs. No commenter quantified
any of the cost impacts. Because the economic impacts of this proposal
are so minimal, preparation of a full regulatory evaluation is not
necessary.
B. Regulatory Flexibility Act
We have considered the effects of this rulemaking action under the
Regulatory Flexibility Act (5 U.S.C. 601 et seq.) I hereby certify that
the final rule 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. The requirements are strictly informational and, as discussed
above, cost impacts small.
C. National Environmental Policy Act
We have analyzed this final rule for the purposes of the National
Environmental Policy Act and determined that it will not have any
significant impact on the quality of the human environment.
D. Executive Order 12612 (Federalism)
We have analyzed this final rule in accordance with the principles
and criteria set forth in Executive Order 12612. We have determined
that it does not have sufficient federalism implications to warrant the
preparation of a Federalism Assessment.
[[Page 40780]]
E. Paperwork Reduction Act
Information collection requirements established in this final rule
differ from those approved by the Office of Management and Budget under
the provisions of the Paperwork Reduction Act (Pub. L. 96-511) and
assigned OMB Control Number 2127-0573. The current approval will expire
on June 30, 2001. Since NHTSA believes that the changes will result in
a small increase in the paperwork burden of this reporting requirement,
NHTSA will ask OMB for approval to amend OMB Control Number 2127-0573
to account for any additional information collection burdens imposed on
the public.
F. Executive Order 12778 (Civil Justice Reform)
This final rule does not have any retroactive effect. States are
preempted from promulgating laws and regulations contrary to the
provisions of this 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
Imports, Motor vehicles, 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, 40 CFR 1.50, 501.2(f).
2. Section 583.4 is amended by revising paragraph (b)(7) to read as
follows:
Sec. 583.4 Definitions.
* * * * *
(b) * * *
(7) 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. Passenger motor vehicle equipment also includes any
system, subassembly, or component received by an allied supplier from
an outside supplier for incorporation into equipment supplied by the
allied supplier to the manufacturer with which it is allied.
* * * * *
3. Section 583.5 is amended by revising paragraph (a)(4), (a)(5),
(b), and (i) to read as follows:
Sec. 583.5 Label requirements.
(a) * * *
(4) Country of origin for the engine. The country of origin of the
passenger motor vehicle's engine (the procedure for making this country
of origin determination is set forth in Sec. 583.8);
(5) Country of origin for the transmission. The country of origin
of the passenger motor vehicle's transmission (the procedure for making
this country of origin determination is set forth in Sec. 583.8);
* * * * *
(b) Except as provided in paragraphs (e), (f) and (g) of this
section, the label required under paragraph (a) of this section shall
read as follows, with the specified information inserted in the places
indicated (except that if there are no major sources of foreign parts
content, omit the section ``Major Sources of Foreign Parts Content''):
Parts Content Information
For vehicles in this carline:
U.S./Canadian Parts Content: (insert number) %
Major Sources of Foreign Parts Content:
(Name of country with highest percentage): (insert number) %
(Name of country with second highest percentage): (insert
number) %
Note: Parts content does not include final assembly,
distribution, or other non-parts costs.
For this vehicle:
Final Assembly Point: (city, state, country)
Country of Origin:
Engine: (name of country)
Transmission: (name of country)
* * * * *
(i) Carlines assembled in more than one assembly plant. (1) If a
carline is assembled in more than one assembly plant, the manufacturer
may, at its option, add the following additional information at the end
of the explanatory note specified in paragraph (a)(6) of this section,
with the specified information inserted in the places indicated:
Two or more assembly plants produce the vehicles in this
carline. The vehicles assembled at the plant where this vehicle was
assembled have a U.S./Canadian parts content of [__]%.
(2) A manufacturer selecting this option shall divide the carline
for purposes of this additional information into portions representing
each assembly plant.
(3) A manufacturer selecting this option for a particular carline
shall provide the specified additional information on the labels of all
vehicles within the carline.
4. Section 583.6 is amended by revising paragraphs (a), (c)(1)(ii),
(c)(3)(ii), and (c)(6) 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. This determination shall be made
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, is excluded from the
calculation of U.S./Canadian parts content. The country of origin of
nuts, bolts, clips, screws, pins, braces, gasoline, oil, blackout,
phosphate rinse, windshield washer fluid, fasteners, tire assembly
fluid, rivets, adhesives, grommets, and wheel weights, used in final
assembly of the vehicle, is considered to be the country where final
assembly of the vehicle takes place.
* * * * *
(c) * * *
(1) * * *
(ii) to otherwise have the actual percent of its value added in the
United States and/or Canada, rounded to the nearest five percent.
* * * * *
(3) * * *
(ii) to otherwise have the actual percent of its value added in the
United States and/or Canada, rounded to the nearest five percent.
* * * * *
(6) If a manufacturer or allied supplier requests information in a
timely manner from one or more of its outside suppliers concerning the
U.S./Canadian content of particular equipment, but does not receive
that information despite a good faith effort to obtain it, the
manufacturer or allied supplier may make its own good faith value added
determinations, subject to the following provisions:
(i) The manufacturer or allied supplier shall make the same value
added determinations as would be made by the outside supplier;
(ii) The manufacturer or allied supplier shall consider the amount
of value added and the location in which the value was added for all of
the stages that the outside supplier would be required to consider;
(iii) The manufacturer or allied supplier may determine that
particular value is added in the United States and/
[[Page 40781]]
or Canada only if it has a good faith basis to make that determination;
(iv) A manufacturer and its allied suppliers may, on a combined
basis, make value added determinations for no more than 10 percent, by
value, of a carline's total parts content from outside suppliers;
(v) Value added determinations made by a manufacturer or allied
supplier under this paragraph shall have the same effect as if they
were made by the outside supplier;
(vi) This provision does not affect the obligation of outside
suppliers to provide the requested information.
* * * * *
5. Section 583.7 is amended by revising paragraph (a) to read as
follows:
Sec. 583.7 Procedure for determining major foreign sources of
passenger motor vehicle equipment.
(a) Each manufacturer, except as specified in Sec. 583.5(f) and
(g), shall determine the countries, if any, which are major foreign
sources of passenger motor vehicle equipment and the percentages
attributable to each such country for each carline on a model year
basis, before the beginning of each model year. The manufacturer need
only determine this information for the two such countries with the
highest percentages. 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. In making
determinations under this section, the U.S. and Canada are treated
together as if they were one (non-foreign) country. The country of
origin of nuts, bolts, clips, screws, pins, braces, gasoline, oil,
blackout, phosphate rinse, windshield washer fluid, fasteners, tire
assembly fluid, rivets, adhesives, grommets, and wheel weights, used in
final assembly of the vehicle, is considered to be the country where
final assembly of the vehicle takes place.
* * * * *
6. Section 583.8 is amended by revising paragraphs (b) and (d) 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).
* * * * *
(b) The value of an engine or transmission is determined by first
adding the prices paid by the manufacturer of the engine/transmission
for each component comprising the engine/transmission, as delivered to
the assembly plant of the engine/transmission, and the fair market
value of each individual part produced at the plant. The assembly and
labor costs incurred for the final assembly of the engine/transmission
are then added to determine the value of the engine or transmission.
* * * * *
(d) Determination of the total value of an engine/transmission
which is attributable to individual countries. The value of an engine/
transmission that is attributable to each country is determined by
adding the total value of all of the components installed in that
engine/transmission which originated in that country. For the country
where final assembly of the engine/transmission takes place, the
assembly and labor costs incurred for such final assembly are also
added.
* * * * *
7. Section 583.10 is amended by revising paragraph (a)(5) to read
as follows:
Sec. 583.10 Outside suppliers of passenger motor vehicle equipment.
(a) * * *
(5) For equipment which has less than 70 percent of its value added
in the United States and Canada,
(i) The country of origin of the equipment, determined under
Sec. 583.7(c); and
(ii) The percent of its value added in the United States and
Canada, to the nearest 5 percent, determined under Sec. 583.6(c).
* * * * *
Issued on: July 21, 1999.
Frank Seales, Jr.,
Acting Deputy Administrator.
[FR Doc. 99-19318 Filed 7-27-99; 8:45 am]
BILLING CODE 4910-59-P
