[Federal Register Volume 59, Number 86 (Thursday, May 5, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-10759]


[[Page Unknown]]

[Federal Register: May 5, 1994]


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DEPARTMENT OF TRANSPORTATION
49 CFR Part 580

[Docket No. 92-20; Notice 3]

 

Petition for Rulemaking; American Car Rental Association

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

ACTION: Denial of petition for rulemaking.

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SUMMARY: This notice denies a petition filed by the American Car Rental 
Association, requesting that the National Highway Traffic Safety 
Administration amend its regulation concerning odometer disclosure 
requirements to accommodate the needs of car rental companies 
purchasing fleets of new vehicles. The petition is denied, because the 
agency concludes that its authority to grant relief extends only to 
vehicles for which the odometer reading is not relied upon as an 
indicator of mileage or condition.

FOR FURTHER INFORMATION CONTACT: John Donaldson, Attorney Adviser, 
Office of the Chief Counsel, NHTSA, 400 Seventh Street, S.W., 
Washington, D.C. 20590; (202) 366-1834.

SUPPLEMENTARY INFORMATION:

Background

    Title IV of the Motor Vehicle Information and Cost Savings Act (15 
U.S.C. 1981-1991) (``the Act'') sets forth certain requirements 
concerning odometers in motor vehicles. Among other things, the Act 
prohibits disconnecting, resetting, or altering motor vehicle odometers 
and requires the execution of an odometer disclosure statement incident 
to the transfer of ownership of a motor vehicle. The Act also subjects 
violators to civil and criminal penalties, and provides for Federal 
injunction, State enforcement, and a private right of civil action. The 
provisions requiring odometer disclosure statements on titles were 
added by the Truth in Mileage Act of 1986 (Pub. L. 99-579), and reflect 
Congress' intent to address the growing national problem of odometer 
tampering in motor vehicles.
    Section 408 of the Act (15 U.S.C. 1988) directs the Secretary of 
Transportation to promulgate rules governing the making of odometer 
disclosure statements. In accordance with that mandate, NHTSA published 
a regulation (49 CFR part 580) which requires, in connection with the 
transfer of ownership of a motor vehicle, that each transferor must 
disclose the mileage to the transferee in writing on the title (or in 
some cases on the document being used to reassign the title). The 
regulation details the minimum contents of the disclosure, requires the 
disclosure to be signed by both the transferor and the transferee, and 
provides that no person shall sign an odometer disclosure statement as 
both the transferor and transferee in the same transaction, except in 
limited situations (described below).
    The regulation allows a number of exemptions of relevance to the 
instant petition. Section 580.6(b) provides that ``[a] transferor of a 
new vehicle prior to its first transfer for purposes other than resale 
need not disclose the vehicle's odometer mileage.'' In practice, this 
provision exempts a motor vehicle manufacturer from the odometer 
disclosure requirement with respect to a vehicle transferred to a 
dealer for purposes of resale as a new vehicle. Section 580.5(h), which 
prohibits a person from signing an odometer disclosure statement as 
both transferor and transferee, allows an exemption in situations where 
the exercise of a power of attorney is authorized under Secs. 580.13 or 
580.14. The power of attorney allows a transferee to make an odometer 
disclosure on behalf of his transferor only in cases where the 
transferor's title is held by a lienholder or where the transferor to 
whom the title was issued by the State has lost his title and the 
transferee obtains a duplicate title on behalf of the transferor.

The Petition

    The American Car Rental Association (ACRA) filed a petition dated 
November 29, 1993, seeking an amendment to NHTSA's regulation, under 
which its member car rental companies would be relieved of certain 
odometer disclosure requirements when purchasing new vehicles. ACRA 
describes a process, referred to as ``drop-shipment,'' by which many 
nationwide car rental companies purchase fleets. According to ACRA, the 
companies receive vehicle deliveries directly from the manufacturers 
but, due to franchising agreements between manufacturers and dealers, 
the purchase must be handled through a dealer. In some cases, the 
manufacturer ships both the vehicles and the title documents directly 
to the car rental company, while in other cases, it ships the vehicles 
to the car rental company and the ownership documents to the dealer. In 
either of these cases, ACRA asserts, car rental companies experience 
significant logistical problems in complying with the odometer 
disclosure regulations, because they must secure odometer disclosure 
statements from dealers that never take possession of the vehicles or, 
in some cases, the title documents.
    ACRA explains that the required odometer disclosure is currently 
accomplished through the grant of a power-of-attorney from the dealer 
to a third party (not related to the limited power of attorney between 
transferor and transferee authorized under Secs. 580.13 and 580.14). 
The third party certifies the vehicle's odometer reading on behalf of 
the dealer, conveys the manufacturer's certificate of origin (MCO), and 
performs other services incidental to titling and registering the 
vehicle. ACRA acknowledges that this system works, but claims that it 
imposes a significant cost on the car rental industry, because the 
dealers pass on the costs associated with third party services to the 
car rental companies. ACRA estimates the cost to the average nationwide 
car rental company to be in the tens of thousands of dollars per year, 
and asserts that the process delays the introduction of vehicles into a 
car rental fleet without a legitimate law enforcement purpose, given 
the extremely low mileage on these new vehicles.
    In early 1993, following informal discussions with NHTSA, ACRA 
submitted a written request for a legal interpretation of a proposal to 
list both the dealer and the car rental company as joint transferees on 
a vehicle's MCO. ACRA sought assurances that, under this arrangement, 
it would be permissible for only one of these entities to sign the 
odometer disclosure statement as transferee in the initial transfer and 
as transferor in a subsequent transaction. It was ACRA's hope that this 
procedure would alleviate the burdens associated with the use of third 
party agents. NHTSA confirmed that only one of several listed 
transferors or transferees need execute an odometer disclosure 
statement in the course of a vehicle transfer. However, NHTSA also 
noted that, in this case, the listing of joint transferees on the MCO 
would defeat the vehicle manufacturer's exemption from the odometer 
disclosure requirements (under Section 580.6(b)), as one of the listed 
transferees would be using the vehicle for purposes other than resale. 
It is ACRA's position that vehicle manufacturers would be unwilling to 
undertake the burden of executing odometer disclosure statements, and 
it now seeks other avenues of relief.
    ACRA proposes three alternative regulatory approaches to alleviate 
the burden imposed on the car rental industry. First, it proposes to 
exempt the transferor of a new vehicle that is dropped-shipped to a car 
rental company from the requirement to make an odometer disclosure. It 
would accomplish this by adding a definition of ``new vehicle'' to 
Sec. 580.3 (``any vehicle driven no more than the limited use necessary 
in moving or road testing a vehicle prior to delivery by a manufacturer 
and/or a dealer'') and a new exemption to Sec. 580.6 (``a transferor of 
new vehicle to a business engaged in the leasing of automobiles for a 
period of thirty (30) days or less need not disclose the vehicle's 
odometer mileage''). Under this approach, with the dealer and the car 
rental firm listed as joint transferees on the MCO, the car rental firm 
would make any required odometer disclosure without involving the 
dealer.
    Alternatively, ACRA proposes to extend the circumstances under 
which a transferor could give its transferee power of attorney to make 
the odometer disclosure ordinarily required of the transferor. ACRA 
would also extend the power of attorney from the transferee to the 
transferor. To accomplish this objective, ACRA proposes to amend 
Sec. 580.13 as follows:

    (a) If the transferor's title is physically held by a 
lienholder, or if the transferor transfers the title of a new 
vehicle to a transferee engaged in the business of leasing new 
vehicles for a period of thirty (30) days or less, or if the 
transferor to whom the title was issued by the State has lost his 
title and the transferee obtains a duplicate title on behalf of the 
transferor, and if otherwise permitted by State law, the transferor 
may give a power of attorney to his transferee, or the transferee 
may give a power of attorney to his transferor, for the purpose of 
mileage disclosure only. The power * * *.

    As a final option, ACRA proposes to exempt the initial transfer on 
all fleet purchases of new vehicles from the odometer disclosure 
requirements. To implement this approach, ACRA suggests including the 
definition of ``new vehicle'' set forth in the first suggested 
approach, and adding a definition of ``fleet purchases'' (``the annual 
aggregate transfer of new vehicles in quantities over 500 vehicles from 
a manufacturer to a transferee for use in the transferee's rental, 
lease, or corporate fleet.'') Section 580.6 would then be amended to 
read as follows:

    ``Notwithstanding the requirements of Secs. 580.5 and 580.7:
    (a) A transferor or a lessee of any of the following motor 
vehicles need not disclose the vehicle's odometer mileage:
* * * * *
    (5) A new vehicle transferred by a manufacturer as part of a 
fleet purchase.

    This approach would exempt the manufacturer from the odometer 
disclosure requirements, even though the car rental company and the 
dealer are listed on the MCO as joint transferees.
    ACRA asserts that under any of the three approaches, the 
opportunity for odometer fraud is minimal. It notes that, under the 
first two approaches, the universe of vehicles potentially qualifying 
for exemption is carefully limited to new vehicles (registering very 
low mileage), and only those new vehicles transferred to a business 
engaged in ``short-term leasing.'' Under the third approach, ACRA views 
the combination of factors (i.e., new vehicle, fleet purchase) to pose 
a similarly low risk of fraud, while eliminating the need for 
manufacturer disclosures in cases involving joint dealer and car rental 
company transferees.

Discussion

    The central purpose of the Truth in Mileage Act was to make the 
title document the sole vehicle for odometer disclosure. Congress 
sought to institute a uniform system of disclosure that would be 
readily available to assist the consumer in making motor vehicle 
purchasing decisions. Prior to that time, the use of separate documents 
for odometer disclosure was not uncommon, and was found to be 
vulnerable to abuse.
    Subsequent statutory amendments in 1988 and 1990 have deviated from 
the absolute requirement to use the title document, by authorizing the 
use of powers of attorney in strictly limited circumstances when titles 
are physically held by lienholders. Additionally, Congress has 
authorized the approval of alternate odometer disclosure procedures, 
provided they are determined to be consistent with the Act, but only 
when these procedures are submitted by a State. However, there is no 
indication that Congress intended to extend the opportunity to seek 
alternate procedures to any other entities. Indeed, such a course of 
action would seem anomalous, considering that it is the States that are 
charged with institutionalizing the odometer disclosure procedures. The 
limited circumstances articulated for deviation from the primary intent 
of the Act reflect Congress' reluctance to stray from the overriding 
goal of achieving comprehensive odometer disclosure procedures to 
protect the public.
    It is significant that several States have voiced concern regarding 
the granting of additional exemptions to the disclosure requirements, 
arguing that new exemptions would introduce serious burdens to an 
already complex titling review process. Even under the current 
procedures, NHTSA is aware that some States have administratively 
rejected certain exemptions provided for in NHTSA's regulation. The 
differing practices among States with respect to the existing 
exemptions have resulted in a disruption of interstate vehicle 
transfers, as title transfer documents from some States have been 
rejected by other States. Favorable action on this petition would 
likely compound the problem, in apparent contradiction to the intent of 
Congress that the interests of the States be accommodated, where 
consistent with the Act.
    Apart from issues of Congressional intent evident in the 
legislation, the agency's authority to deviate from the Act has, over 
the years, been thrown into question by court decisions rejecting one 
of NHTSA's regulatory exemptions under Section 580.6. Several courts 
have ruled that NHTSA does not have the authority to exempt vehicles 
with a Gross Vehicle Weight Rating in excess of 16,000 pounds from the 
odometer disclosure requirement. See W. W. Wallwork, Inc. v. 
Duchscherer, 501 N.W.2d 751 (N.D. 1993); Davis v. Dils Motor Co., 566 
F. Supp. 1360 (S.D.W.Va. 1983); Lair v. Lewis Service Center, 428 F. 
Supp. 778 (D. Neb. 1977). It is significant that these courts reached 
such a conclusion despite NHTSA's administrative determination that, in 
transfers of the subject vehicles (heavy trucks), maintenance records 
are of key importance but the odometer reading is not generally relied 
upon in determining value or condition. NHTSA continues to believe that 
it has the requisite authority to consider exemptions in cases where 
odometer readings are not relied upon in the course of vehicle 
transfers. However, the vehicles that are the subject of this petition 
do not enjoy such a distinction, and so it is especially doubtful that 
the courts would support the requested broadening of exemptions.
    In view of these limitations, the agency's discretion to allow 
exemptions to the odometer disclosure requirements is highly 
circumscribed. This is especially true in the instant case, where the 
proposed changes have been requested by an entity other than a State 
(whose right to seek approval of alternate requirements is the only one 
specifically recognized by the Act) and, moreover, would target a large 
vehicle population (the top ten companies had over one million vehicles 
in their fleets in 1992, according to ACRA's figures). Each of the 
proposed solutions advanced by ACRA raises serious problems. The first 
and third proposed solutions would introduce a new exemption, in the 
face of court decisions increasingly rejecting NHTSA's authority to 
grant such exemptions. Moreover, they would do so for vehicles with 
respect to which mileage is relied upon as an indicator of value or 
condition. The second proposed solution would expand the use of the 
power of attorney, in the face of Congressional intent that it be 
strictly limited. All of the proposed solutions would compromise the 
States' implementation procedures. Under the circumstances, and mindful 
of the fact that the petitioner is not a State, NHTSA concludes that it 
does not possess the authority to implement any of the proposed 
amendments.
    NHTSA is aware of ACRA's assertions that the current procedures are 
causing hardship to the car rental industry, and that its proposed 
solutions would not compromise the integrity of the system. Although 
the denial of this petition rests on the agency's lack of authority, 
the agency offers the following comments on ACRA's assertions.
    ACRA acknowledges that its existing procedures achieve compliance 
with odometer disclosure requirements, but cites costs to the average 
nationwide car rental company of tens of thousands of dollars per year 
and the time-consuming nature of the process. Given the large number of 
vehicles at issue, this compliance cost does not appear unreasonable, 
and certainly does not compel a conclusion of hardship. Nor is such a 
conclusion compelled by concerns about the time expended in achieving 
compliance.
    In the world of motor vehicle transfers, NHTSA is aware of other 
situations in which companies incur similar costs and time burdens 
associated with the employment of personnel that provide titling and 
registration services and act as agents for the purpose of odometer 
disclosure. For example, companies that lease vehicles for long terms 
also rely on ``drop shipments'' or ``courtesy deliveries'' when 
obtaining new vehicles. In these situations, the leasing companies 
typically pay set fees to dealers to prepare the new vehicles for 
operation and process the paperwork associated with the transfer of 
both the new and the old vehicles. In many instances, the services 
performed include executing mileage disclosures. These firms also 
experience similar, normal delays incident to obtaining the proper 
disclosures. NHTSA cannot conclude that the costs or burdens to the car 
rental industry are excessive or beyond those reasonably contemplated 
by the Congress in enacting the disclosure requirements.
    It is impossible to downplay the large number of vehicles proposed 
for exemption or alternate treatment under this petition. The total 
rental fleet put into service in 1992 numbered 1,532,000 passenger cars 
and light trucks,1 or almost 13 percent of the 12 million new 
passenger cars and light trucks sold in the country during that 
year.2 Moreover, NHTSA cannot distinguish the merits of ACRA's 
arguments from those that might be advanced by the leasing industry, as 
discussed above. If a similar exemption were granted to the leasing 
industry, which placed a total of 1,543,000 passenger cars and light 
trucks into service in 1992,3 it would encompass an additional 13 
percent of the new vehicles sold that year. While the risk to the 
integrity of the system may not appear great in the rental industry 
situation, the same cannot be said with respect to the leasing 
industry. Prior to the passage of the Act, odometer tampering in leased 
vehicles was rampant, and served as a major impetus for Congressional 
action.
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    \1\Automotive Fleet, 1993 Fact Book, Vol. 32 Supp. 1993, p. 20.
    \2\American Automobile Manufacturers Association, Motor Vehicle 
Facts and Figures '93, pp. 18, 20.
    \3\Automotive Fleet, p. 20.
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    In conclusion, NHTSA does not believe that it possesses the 
authority to grant the relief requested by the petitioner, based on the 
intent of Congress and recent court decisions. Moreover, granting the 
relief requested would be against the expressed interest of the States, 
the very entities charged with enforcing the odometer disclosure 
procedures.
    For the foregoing reasons, the petition is denied.


    Issued on April 29, 1994.
John Womack,
Acting Chief Counsel, National Highway Traffic Safety Administration.
[FR Doc. 94-10759 Filed 5-4-94; 8:45 am]
BILLING CODE 4910-59-P