[Federal Register Volume 64, Number 25 (Monday, February 8, 1999)] [Proposed Rules] [Pages 6021-6025] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 99-2970] ----------------------------------------------------------------------- DEPARTMENT OF TRANSPORTATION National Highway Traffic Safety Administration 49 CFR Part 583 [Docket No. NHTSA-98-5064] RIN 2127-AH33 Motor Vehicle Content Labeling AGENCY: National Highway Traffic Safety Administration (NHTSA), Department of Transportation. ACTION: Notice of proposed rulemaking. ----------------------------------------------------------------------- SUMMARY: This document proposes to amend the regulation NHTSA 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 recently amended that Act to make a number of changes in the labeling requirement. This proposal would make the regulation consistent with those changes. DATES: Comments must be received by April 9, 1999. ADDRESSES: Comments should refer to the docket number, and be submitted to: Docket Management, Room PL-401, 400 Seventh Street, SW, Washington, DC 20590 (Docket hours are from 10 a.m. to 5 p.m.) 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. We encourage interested persons to read the July 1994 notice, as well as the various subsequent notices published by the agency in response to petitions for reconsideration, for a detailed explanation of this program. 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. --------------------------------------------------------------------------- \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/. --------------------------------------------------------------------------- In this notice, the agency is proposing to amend Part 583 to conform it to the amended AALA. We will discuss each of the changes made by the Congress, and any conforming amendments being proposed for part 583, in the order set forth in section 7106(d). Changes to the AALA; Proposed Conforming Amendments Determination of Origin of Engine and Transmission (Subparagraph (1)(A) of Section 7106(d)) The original AALA specified, among other things, that vehicles were to be [[Page 6022]] labeled with the names of the countries of origin of the engine and transmission. The Act provided that these origin determinations were to be based on the purchase price of materials received at individual engine/transmission plants and were not to include engine/transmission assembly costs. To reflect the fact these origin determinations did not include engine/transmission assembly costs and to ensure that accurate information was provided to the public, we specified that the label refer to ``Engine Parts'' and ``Transmission Parts'' instead of ``Engines'' and ``Transmissions': Country of Origin: Engine Parts: (name of country) Transmission Parts: (name of country) Section 7106(d)(1)(A) amended the AALA to specify that assembly and labor costs incurred for the final assembly of engines and transmissions are now to be included in making these country of origin determinations. This means that the terms ``Engine Parts'' and ``Transmission Parts'' will no longer be appropriate for the vehicle content label. In order to conform part 583 to subparagraph (1)(A), we are proposing to amend the calculation procedures set forth in Sec. 583.8. We are also proposing to amend Sec. 583.5, so that the wording of the vehicle content label would no longer use the terms ``Engine Parts'' and ``Transmission Parts.'' It would instead use the terms ``Engine'' and ``Transmission.'' Definition of Final Assembly Place (Subparagraph (1)(B) of Section 7106(d) Subparagraph (1)(B) amends the definition of ``final assembly place.'' The Conference Report notes that this amendment ``codifies certain regulations which permit labor costs of parts manufactured at the same location as final vehicle assembly to be included in the vehicle's overall content calculation * * *'' Congressional Record H3929 (May 22, 1998). We note that subparagraph (1)(B) simply codifies an existing provision of part 583, i.e., the definition of final assembly set forth in Sec. 583.4(b)(4). Therefore, we do not need to make conforming amendments. Determination of U.S./Canadian Percentage of the Value of Items of Equipment by Outside Suppliers (Subparagraph (1)(C) of Section 7106(d) The AALA specifies, among other things, that the vehicle content labels must indicate the percentage U.S./Canadian parts content, determined on a carline basis. To enable vehicle manufacturers to calculate this information, the statute requires suppliers of equipment to provide information about the origin of the equipment they supply. The original AALA specified that, for equipment received from outside suppliers, 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 was at least 70 percent U.S./Canadian was valued at 100 percent U.S./Canadian. Any equipment under 70 percent was valued at zero percent. This provision was sometimes referred to as the ``roll- up, roll-down'' provision. It is reflected in Sec. 583.6(c) of the current regulation. Subparagraph (1)(C) amended the AALA to eliminate the ``roll-down'' portion 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, and must be reported, to the nearest five percent. As the Conference Report stated: Under this subparagraph, suppliers would report [U.S./Canadian] content to the nearest five percent. For instance, 38 percent would be reported to the manufacturer as 40 percent, rather than zero as under current law. Congressional Record H3929 (May 22, 1998). In order to conform part 583 to subparagraph (1)(C), we are proposing to amend the procedures for calculating U.S./Canadian parts content set forth in Sec. 583.6 and the requirements for outside suppliers set forth in Sec. 583.10. We note that the proposed amendments would increase the costs of compliance with part 583 for some outside suppliers. The original AALA did not require outside suppliers to provide specific estimates of the U.S./Canada value added of their equipment. Instead, it only required them to indicate whether the U.S./Canada value added was at least 70 percent.\2\ Under the amended AALA, however, outside suppliers which provide equipment with U.S./Canada value added of less than 70 percent are required to provide specific estimates (i.e., to the nearest five percent) of the U.S./Canada value added of their equipment. --------------------------------------------------------------------------- \2\ NHTSA discussed in some detail the compliance burdens associated with the now superseded requirements for outside suppliers at 60 FR 47883-87 (September 15, 1995). --------------------------------------------------------------------------- Identification of Country of Assembly (Paragraph (2) of Section 7106(d)) Paragraph (2) amends section 32304(d) of the AALA to provide that a manufacturer's vehicle content label may include a line identifying the country in which the vehicle assembly was completed. We note, however, that section 32304(b)(1)(B) of the AALA already provides that the label must identify the final assembly place for the vehicle by city, State (where appropriate) and country. This requirement is reflected in Sec. 583.5(b) of the current regulation. Since, pursuant to another section of the AALA, Part 583 already requires the vehicle content label to state the country in which the vehicle assembly was completed, we believe that it is unnecessary to amend the regulation in light of paragraph (2). U.S./Canadian Parts Content of a Vehicle Based on the Assembly Plant (Paragraph (3) of Section 7106(d)) Paragraph (3) amended the AALA to provide that a manufacturer's vehicle content label may display separately the domestic content of a vehicle based on the assembly plant. We note that, in enacting the original AALA, Congress decided that U.S./Canadian parts content should be calculated for groups of vehicles rather than for each individual vehicle. It also decided to adopt the concept of ``carline'' and its definition from the Corporate Average Fuel Economy Program, as the basis for determining the relevant groups of vehicles. We also note that carline determinations are based on degree of commonality in construction, instead of commonality of assembly plant. Thus, it is possible that some vehicles in a carline may be manufactured at one assembly plant, while other vehicles in the same carline may be manufactured at another assembly plant, even one in another country. If a carline is manufactured at more than one assembly plant, the U.S./Canadian content for the portion of the carline manufactured at one assembly plant may differ substantially from that for the portions manufactured at other assembly plants. Paragraph (3) permits a manufacturer to voluntarily display separately on the vehicle content label the U.S./Canadian parts content for the portion of the carline assembled at the plant where the vehicle was assembled. As noted by the Conference Report, this information would be reported in addition to the carline average percentage. Congressional Record H3929-30 (May 22, 1998). We note that this provision appears to represent a variation of an option currently included in part 583 at Sec. 583.5(e). That option applies to carlines consisting of vehicles some of which are assembled in the U.S./Canada [[Page 6023]] and others of which are assembled in one or more other countries. It permits manufacturers to voluntarily identify U.S./Canadian parts content for the portion of the carline assembled in the country in which the vehicle is actually assembled. If this information is provided, it must be included in an explanatory note at the end of the label. In order to conform part 583 to paragraph (3), we are proposing to add to Sec. 583.5 an additional option permitting manufacturers to voluntarily identify U.S./Canadian parts content based on the assembly plant in which the vehicle was assembled. The details of the option are generally patterned after the option included at Sec. 583.5(e), which would be retained. We seek comment on whether Sec. 583.5(e) will still be needed with this additional provision. Outside Suppliers Failing To Report (Paragraph (4) of Section 7106(d) For the past several years, we have provided a limited, temporary provision in the part 583 content calculation procedures to give 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.3 This provision is set forth at Sec. 583.6(c)(6). Paragraph (4) amended the AALA to codify this regulatory provision and make it permanent. --------------------------------------------------------------------------- \3\ For an explanation of this provision, see 62 FR 33756 (June 23, 1997). --------------------------------------------------------------------------- In order to conform part 583 to paragraph (4), we are proposing to remove the time limitation included in Sec. 583.6(c)(6). We are also proposing conforming changes to make that section consistent with subparagraph (1)(C) of section 7106(d) which, as discussed above, changed the procedures for calculating the U.S./Canadian content of equipment supplied by outside suppliers. Accounting for the Value of Small Parts (Paragraph (5) of Section 7106(d) The original AALA excluded small parts such as nuts, bolts, clips, screws and pins from the definition of ``passenger motor vehicle equipment.'' This reduced the burdens associated with obtaining content information about these minor items. However, it also meant that they were not considered at all in determining parts content. Paragraph (5) amends the AALA to provide that the value of small parts is to be defaulted to the country of final assembly. In other words, these small parts are now considered to be passenger motor vehicle equipment and to represent value added in the country where final assembly takes place, regardless of actual country of origin of those small parts. In order to conform part 583 to paragraph (5), we are proposing to amend the definition of passenger motor vehicle equipment set forth at Sec. 583.4(b) and the calculation procedures set forth at Sec. 583.6 and Sec. 583.7. Other Changes to the Label We are proposing a change in the format of the label to make it easier to understand. Part 583 currently requires a brief explanatory note concerning parts content to be provided at the end of the label. We are proposing to move this note 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 request comments on whether any other changes to the label, e.g., wording changes or format changes, are appropriate in light of the amendments to the AALA. Effective Date The NHTSA Reauthorization Act was signed by the President on June 9, 1998. While the provisions amending the AALA changed the existing labeling requirement and content calculation procedures, they did not specify when those changes are to become effective for vehicle manufacturers and suppliers. Given the leadtime needed to change labels and make calculations based on the new calculation procedures, it would not have been possible for the vehicle manufacturers to comply with the new requirements for their model year 1999 vehicles. However, we believe that manufacturers can comply with the new requirements with respect to all model year 2000 vehicles, with the possible exception of those introduced during the early part of 1999. Since the changes are relatively straightforward and leave us little discretion, the vehicle manufacturers can implement the changes needed to comply with the new requirements. They need not await the final rule to do so. Accordingly, we are proposing to apply the new requirements to all model year 2000 carlines that are first offered for sale to ultimate purchasers on or after June 1, 1999. This would affect the vast majority of model year 2000 carlines, since most will be introduced in the fall of 1999. For model year 2000 carlines that are first offered for sale before June 1, 1999, manufacturers would have the option of following the new requirements or the old ones. 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 document proposes to amend 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 would not have any measurable effect on vehicle prices. The change most likely to result in 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 inputs 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 believes that the cost impacts will be small, it does not have sufficient information to quantify such costs. Comments are requested concerning this issue. 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 proposed amendment would 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 [[Page 6024]] informational and, as discussed above, cost impacts small. C. National Environmental Policy Act We have analyzed this proposed amendment for the purposes of the National Environmental Policy Act and determined that it would not have any significant impact on the quality of the human environment. D. Executive Order 12612 (Federalism) We have analyzed this proposed amendment in accordance with the principles and criteria set forth in Executive Order 12612. We have determined that the proposed amendment does not have sufficient federalism implications to warrant the preparation of a Federalism Assessment. E. Paperwork Reduction Act Information collection requirements proposed in this notice 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 proposed in this notice will result in a small increase in the paperwork burden of this reporting requirement, if the changes proposed in this NPRM are made final, 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. Request for Comments We invite interested persons to submit comments on this proposal. Two copies should be submitted. All comments must not exceed 15 pages in length (49 CFR 553.21). Necessary attachments may be appended to these submissions without regard to the 15-page limit. This limitation is intended to encourage commenters to detail their primary arguments in a concise fashion. If a commenter wishes to submit certain information under a claim of confidentiality, three copies of the complete submission, including purportedly confidential business information, should be submitted to the Chief Counsel, NHTSA, at the street address given above, and two copies from which the purportedly confidential information has been deleted should be submitted to the Docket Section. A request for confidentiality should be accompanied by a cover letter setting forth the information specified in the agency's confidential business information regulation. 49 CFR part 512. We will consider all comments received before the close of business on the comment closing date indicated above. The comments will be available for examination in the docket at the above address both before and after that date. To the extent possible, we will consider comments filed after the closing date. We will consider comments received too late for consideration in regard to this action as suggestions for further rulemaking action. Comments will be available for inspection in the docket. We will continue to file relevant information as it becomes available in the docket after the closing date, and recommend that interested persons continue to examine the docket for new material. Those persons desiring to be notified upon receipt of their comments in the rules docket should enclose a self-addressed, stamped postcard in the envelope with their comments. Upon receiving the comments, the docket supervisor will return the postcard by mail. List of Subjects in 49 CFR Part 583 Imports, Labeling, Motor vehicles, Reporting and recordkeeping requirements. In consideration of the foregoing, we propose to amend 49 CFR part 583 as follows: PART 583--AUTOMOBILE PARTS CONTENT LABELING 1. The authority citation for part 583 would continue to read as follows: Authority: 49 U.S.C. 32304, 40 CFR 1.50, 501.2(f). 2. Section 583.4 would be 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 would be 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. [[Page 6025]] 4. Section 583.6 would be 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/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 would be 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 would be 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 would be 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: January 29, 1999. L. Robert Shelton, Associate Administrator for Safety Performance Standards. [FR Doc. 99-2970 Filed 2-5-99; 8:45 am] BILLING CODE 4910-59-P