[Federal Register Volume 69, Number 15 (Friday, January 23, 2004)]
[Proposed Rules]
[Pages 3292-3300]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-1469]


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DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

49 CFR Part 579

[Docket No. NHTSA 2001-8677; Notice 8]
RIN 2127-AI92


Reporting of Information and Documents About Potential Defects

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

ACTION: Response to petitions for reconsideration.

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SUMMARY: This document denies the petitions filed by several 
associations of motor vehicle manufacturers for reconsideration of the 
final rule published on July 10, 2002, that implemented the early 
warning reporting (EWR) provisions of the Transportation Recall 
Enhancement, Accountability, and Documentation (TREAD) Act and responds 
to petitions for rulemaking. Under the final rule, in general, all 
manufacturers of motor vehicles whose yearly production of vehicles for 
sale in the United States is 500 or more in a particular vehicle 
category are required to report comprehensive information to NHTSA, 
including the numbers of property damage claims, consumer complaints, 
warranty claims, and field reports. Manufacturers of fewer than 500 
vehicles per year are required to report only limited types of 
information (e.g., information about incidents involving deaths 
referred to in claims and notices received by the company). We have 
decided to retain the existing thresholds for the present time, 
although we will consider this issue in approximately two years, after 
we have had experience under the early warning reporting regulation.

FOR FURTHER INFORMATION CONTACT: For non-legal issues, contact Jonathan 
White, Office of Defects Investigation, NHTSA (phone: 202-366-5226). 
For legal issues, contact Andrew DiMarsico, Office of Chief Counsel, 
NHTSA (phone: 202-366-5263).

SUPPLEMENTARY INFORMATION:

I. Background

    On July 10, 2002, NHTSA published a final rule implementing the 
early warning reporting provisions of the TREAD Act, established by 49 
U.S.C. 30166(m) (67 FR 45822). The agency published its responses to 
some issues raised by petitions for reconsideration on April 15, 2003 
(68 FR 18136) and others on June 11, 2003 (68 FR 35132 and 35145) and 
announced that it would respond to other issues at a later date. The 
reader is referred to those documents, and the prior notice of proposed 
rulemaking (NPRM) (66 FR 66190) for further information.
    The final rule established different reporting requirements for 
manufacturers, depending upon the type of product produced and, for 
vehicle manufacturers, the number of vehicles produced annually. 
Manufacturers of tires and child restraint systems (CRS) and vehicle 
manufacturers that produce 500 or more vehicles per year of one of four 
categories of vehicles (light vehicles, medium-heavy vehicles and 
buses, motorcycles, and trailers) must provide comprehensive quarterly 
reports to NHTSA. In general, such comprehensive reports must include 
information on deaths and injuries

[[Page 3293]]

based on claims and notices about incidents involving the 
manufacturer's products, and the numbers of property damage claims, 
consumer complaints, warranty claims, and field reports received by the 
manufacturer. For field reports other than those from dealers, a copy 
of the field report must also be submitted. All other manufacturers of 
equipment, and manufacturers that produce fewer than 500 vehicles per 
year of each category, need only report a very limited amount of 
information; i.e., information regarding claims and notices of death 
received by the manufacturer involving its products.
    Petitions for reconsideration of this aspect of the rule were filed 
on or before August 26, 2002, by the National Association of Trailer 
Manufacturers (NATM), the National Truck Equipment Association (NTEA), 
and the Recreational Vehicle Industry Association (RVIA), among others. 
NATM filed untimely supplemental comments on October 15, 2002, and a 
petition for rulemaking was filed by the National Trailer Dealers 
Association (NTDA) on November 1, 2002 relating to the threshold for 
comprehensive reporting.
    NTEA, NTDA, and RVIA petitioned for an increase in the threshold 
number of ``fewer than 500'' with regard to vehicles that their members 
produce or sell. NTEA suggested that instead of basing the threshold on 
the number of vehicles produced by a manufacturer in a given category, 
such as trailers, that NHTSA consider a manufacturer's annual total 
production and raise the threshold significantly. To support this 
suggestion, NTEA cited the agency's temporary exemption regulation, 49 
CFR part 555. This regulation (implementing 49 U.S.C. 30113) 
establishes a threshold of an annual production of less than 10,000 
motor vehicles for applying for hardship exemptions from the Federal 
motor vehicle safety standards. Under the provisions authorizing 
exemptions on bases other than hardship, exemptions covering up to 
2,500 vehicles a year may be granted.
    Alternatively, NTEA recommended that the threshold be 5,000 motor 
vehicles per year, as did RVIA, on the ground that this number is 
consistent with similar NHTSA and other Federal regulations. RVIA noted 
that S14.1 of Federal Motor Vehicle Safety Standard (FMVSS or Standard) 
No. 208 exempts from its provisions ``vehicles that are manufactured by 
a manufacturer that produces fewer than 5,000 vehicles worldwide 
annually'' (as does S14.3(d)), and that ``a similar 5,000 vehicle per 
year limit appears in the new FMVSS 138 [relating to tire pressure 
monitoring systems], issued June 5, 2002, at Section 7.6.'' It 
considered ``this figure `` consistent with Environmental Protection 
Agency definitions, which [establish] a subcategory [of small volume 
manufacturer] of 5,000 vehicles per year for maximum benefits (see 40 
CFR 86.1845-04(b)(3) and Table S04-06).'' RVIA concluded that: 
``Establishing a 5,000 vehicle per year definition `` in these final 
rules will maintain consistency and harmonization with current FMVSS 
and across agency boundaries.''
    NATM took a different approach, in which it requested that trailers 
with a gross vehicle weight rating (GVWR) of 26,000 lbs. or less be 
excluded from comprehensive early warning reporting. In its view, 
merely increasing the threshold from 500 ``to some higher number will * 
* * do little if anything to alleviate the unfair burden upon the 
26,000 lbs.-and-under GVWR trailer manufacturers, 96 percent of which 
are also `small businesses.'''

II. Discussion

1. The Development of the Current Threshold

    In our advance notice of proposed rulemaking to implement the early 
warning reporting provisions, we requested comments, in general, and 
specific answers to certain questions. We specifically asked: ``Which 
of the manufacturers * * * should be covered by the Final Rule and 
why?'' 66 FR 6532 at 6537 ( January 22, 2001). The Truck Trailer 
Manufacturers Association (TTMA) responded that 500 motor vehicles was 
an appropriate threshold since ``some trailer manufacturers are so 
small that their reporting would not advance the Agency's goals in any 
meaningful way.'' Docket  2001-8677-30, available at http://dms.dot.gov. We then proposed the threshold figure of 500 vehicles per 
category in the early warning reporting regulation notice of proposed 
rulemaking (NPRM), and we received comments on this issue from NTEA, 
RVIA, Gillig Corporation, and the Waste Equipment Technology 
Corporation (WASTEC). These commenters, as did NTEA in its petition for 
reconsideration, recommended that the limit be based on Part 555 
(10,000 vehicles, or alternatively, 2,500). The rationale that NTEA 
offered for these suggestions was that ``many companies producing 
multi-stage trucks and RVs in quantities greater than 500 are 
nevertheless `small businesses' by the criteria of the Small Business 
Administration (SBA) (13 CFR 121.201 (2000)).'' In adopting the Final 
Rule, we did not find this argument persuasive, observing that our 
investigations into alleged defects in products by relatively small 
businesses had led to safety recalls (67 FR 45822 at 45832). We discuss 
this below in more detail.

2. Safety-Related Defect Concerns

    The TREAD Act requires NHTSA to undertake a rulemaking to enhance 
the Secretary's ability to carry out the provisions of Chapter 301 of 
Title 49 of the U.S. Code (49 U.S.C. 30101 et seq.), which includes the 
identification of vehicles and equipment with safety-related defects. 
The TREAD Act also authorizes NHTSA to require manufacturers to provide 
information to the extent that such information may assist in the 
identification of defects related to motor vehicle safety. 49 U.S.C. 
30166(m).
    Since the purpose of requiring comprehensive early warning 
reporting is to assure that NHTSA's Office of Defects Investigation 
(ODI) has relevant data to promptly identify possible safety defects, 
we have considered whether safety recalls have been conducted by, or 
are applicable to, low-production vehicle manufacturers. Although we do 
not have precise production data, we were able to identify a number of 
safety recalls in each vehicle category in 49 CFR 579.21-24 that were 
conducted by companies whose annual production of vehicles in the 
category at issue was more than 500, but not significantly over 500. We 
chose manufacturers with an annual production between 500 and 1500. 
Many of these recalls involved serious safety problems. The following 
are illustrative examples of recalls by such manufacturers during the 
past five years, with one example provided for each category or 
subcategory of vehicle:
    1. Recall No. 98V-331 (transit buses with steering arms that can 
fail without warning, causing a loss of steering);
    2. Recall No. 99V-167 (passenger cars in which the fuel lines to 
the fuel injection system can leak, possibly resulting in a fire);
    3. Recall No. 01V-088 (motorhomes (medium heavy vehicles) in which 
a floor support leg could collapse, causing the liquid propane gas line 
to leak);
    4. Recall No. 00V-273 (motorhomes (both light vehicles and medium 
heavy vehicles) in which safety belt buckles could unlatch in a 
collision);
    5. Recall No. 99V-254 (motorcycles on which the rear wheel could 
lock without warning);
    6. Recall No. 00V-102 (full size trailers equipped with pregreased 
axle hubs that could experience hub and wheel separations); and

[[Page 3294]]

    7. Recall No. 00V-241 (small trailers in which the pinbox can fail, 
resulting in release of the trailer from the towing vehicle).
    If we were to raise the threshold for comprehensive reporting to a 
higher level, such as 1,500 vehicles per year, we would not receive 
timely early warning information about these types of safety problems 
from a significant number of manufacturers. Raising the threshold to 
5,000 vehicles per year, as requested by some petitioners, would allow 
even more potential problems to escape our consideration.
    In addition, the regulations cited by NTEA and RVIA (i.e., 
Standards Nos. 138 and 208) are distinguishable from the early warning 
reporting requirements. Those regulations provide a delayed compliance 
date for manufacturers whose world-wide production of vehicles is less 
than 5,000 per year. The early warning reporting regulation threshold 
is fewer than 500 vehicles for sale in the United States for each of 
four specific categories, regardless of the manufacturer's world-wide 
production. Adopting a world-wide limitation of 5,000 vehicles would 
result in a foreign manufacturer that produces more than 5,000 vehicles 
annually, but that sells fewer than 500 of a given category in the 
United States, having to report fully even though only reports of 
incidents of death are required under the current rule.

3. NATM's Suggested Weight-Based Threshold for Trailers

    As noted above, NATM's petition for reconsideration was not based 
upon a numerical production or sales-based threshold. Rather, NATM 
asked the agency ``to separate out and treat differently for early-
warning reporting purposes'' all trailer manufacturers whose trailers 
have a gross vehicle weight rating (GVWR) of 26,000 pounds or less, 
regardless of the manufacturer's annual sales or production. NATM 
asserted that this category encompasses two types of trailers, trailers 
that it regarded as small (those with a GVWR less than 10,000 lbs.) and 
trailers that it classified as medium (those with a GVWR from 10,000 
lbs. to and including 26,000 lbs.). NATM claimed that small and medium 
trailers ``are rarely involved in a death or serious personal injury,'' 
because of their ``much reduced exposure to over-the-road travel and 
its attendant hazards.'' It estimated that ``the smaller trailer rarely 
logs more than 10,000 miles per year on the public highways.'' It also 
claimed that the costs of compliance with the comprehensive early 
warning reporting requirements would be excessive.
    In support of its suggestion, on June 27, 2003, NATM submitted the 
result of a survey that it had conducted of its 154 ``large-volume 
trailer manufacturers,'' i.e., those that produce more than 500 
trailers annually.\1\ NATM had first asked ``each member to provide the 
total numbers of fatalities and serious injuries occurring during the 
past ten (10) years in which its trailers have been involved.'' It next 
asked, ``of these ``trailer'' accidents or incidents, how many prompted 
allegations of a manufacturing or design defect or a trailer 
malfunction causing the fatality or injury.'' Third, the survey asked 
``how many NHTSA recalls (responding to FMVSS violations or safety-
related defects) each member initiated.'' Finally, ``to add perspective 
to the data, the survey concludes by asking each responding 
manufacturer how many vehicles it manufactured each year during the 
past five (5) years.''
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    \1\ According to its website, www.natm.com, NATM has 339 
members.
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    NATM provided only a general summary of survey results, as opposed 
to copies of actual responses. NATM stated that it received 91 
responses to its survey from the 154 inquiries sent. Thus, the survey 
results do present a complete representative picture of NATM's 
membership, much less the entire population of manufacturers of 
trailers with a GVWR less than or equal to 26,000 lbs.
    The NATM survey indicated that, during the past five years, there 
were 14 safety recalls of trailers manufactured by these 91 respondents 
(2.8 per year). Yet, an ODI review of recalls during the period from 
calendar year 1995 through 2002 (described below) reveals that there 
were 80 safety recall campaigns conducted by such trailer manufacturers 
(10 recalls per year, or almost four times the rate reported by the 
NATM survey respondents). Moreover, NATM's survey was limited in scope 
to only questions on death and serious injuries, employed a definition 
of defect that is narrower than that in 49 U.S.C. Sec.  30102, and 
failed to include other information required by subpart C of 49 CFR 
part 579, such as numbers of property damage claims, warranty claims, 
consumer complaints and field reports received by the manufacturer.
    In response to NATM's petition for reconsideration, ODI conducted a 
review of safety-related recalls involving trailers initiated between 
calendar years 1995 and 2002 (excluding certain noncompliance recalls 
such as those involving labeling, since they are not relevant to the 
early warning reporting regulation). ODI divided the data into the 
categories of under 26,000 pounds GVWR and of 26,000 pounds GVWR and 
over. The results of this review have been placed in the Docket for 
this rulemaking proceeding.
    Table 1 summarizes the results of ODI's review. It lists the 
trailer safety recalls by calendar years 1995 to 2002 by the numbers of 
recalls and numbers (population) of recalled trailers. More 
particularly, it first provides the number of recalls by trailer weight 
rating in two categories--under 26,000 pounds GVWR, and 26,000 pounds 
GVWR and over--and states the total. It then states the percentage of 
trailer recalls where the trailers weighed under 26,000 pounds GVWR or 
less for any given year. Next, it provides similar information in terms 
of the number of trailers recalled. Lastly, the table provides the 
number of ODI-influenced recalls (those where the recall was initiated 
after ODI began an investigation), divided into the categories of 
trailers under 26,000 pounds GVWR and 26,000 pounds GVWR and over.

                                                       Table 1.--Trailer Safety Recalls: 1995-2002
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                                                    Recalls by                           Recall  population                  ODI-  influenced
                                                       trailer weight                             by  weight  rating      Total            recalls
                       Year                         rating  (in pounds)    Total     %  recalls ----------------------    recall   ---------------------
                                                  ----------------------  recalls     gvwr<26k                          population
                                                      <26K       26K+                               <26K       26K+                    <26K       26K+
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1995.............................................          8          7         15           53     47,494      9,291       56,785          3          0
1996.............................................          7          2          9           78      7,165      7,164       14,329          2          0
1997.............................................          6          3          9           67      3,236      2,542        5,778          2          0

[[Page 3295]]

 
1998.............................................          7          4         11           64     23,145      1,676       24,821          3          0
1999.............................................         12          4         16           75     86,918        215       87,133          4          2
2000.............................................         17          6         23           74     23,993     19,098       43,091          1          3
2001.............................................         12          7         19           63     24,437      2,454       26,891          2          1
2002.............................................         11          6         17           65     12,287      6,981       19,268          1          3
                                                  ------------------------------------------------------------------------------------------------------
    Total........................................         80         39        119           67    228,675     49,421      278,096         18          9
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    As shown in the Table, during the past eight years, trailers with a 
GVWR of less than 26,000 pounds have accounted for, overall, 67 percent 
of the trailer safety recalls. Moreover, the trailers under 26,000 
pounds accounted for approximately 82 percent of the total trailers 
recalled. Of the ODI influenced recalls, two-thirds of the recalls 
involved trailers of less than 26,000 pounds GVWR.
    ODI also reviewed the potential risks to safety posed by the 
identified defects in the recalls reflected in Table 1. Many of these 
recalls were conducted to address significant safety risks. Examples of 
safety defects that have been found to exist in trailers with a GVWR 
equal to or below 26,000 pounds include brake failure, wheel 
separation, hitch/tongue separation, and fire hazard due to electrical 
short circuits or fuel leakage.
    In addition, it is important to recognize that many trailers with a 
GVWR equal to or below 26,000 pounds are used extensively on the public 
roads. This category of trailer covers a wide range of designs, from 
recreational and part-time living quarters to freight and equipment 
hauling. Consequently, some applications may result in year-round 
highway use versus seasonal or recreational use, as suggested by NATM. 
In any event, it would not be practical to base the threshold for 
comprehensive reporting on the anticipated amount of on-road use of a 
vehicle, since this could vary widely within a given categories or 
types of vehicles.
    Although NATM asserted in its petition that trailers with a GVWR 
equal to or below 26,000 pounds tend to be manufactured by entities 
that are small businesses, NATM did not advocate reducing the early 
warning reporting requirements that apply to its smaller members. 
Indeed, in a June 27, 2003 letter to the agency, NATM stated that, in 
its view, raising the threshold for comprehensive reporting to 2500 
trailers per year would be worse than maintaining the status quo.
    This position is apparently based on NATM's belief that ``most 
trailer manufacturers producing more than 2500 trailers per year may 
have only minimal concerns about their [alleged] economic disadvantage 
(stemming from their early warning compliance obligations) competing 
against trailer manufacturers producing fewer than 500 units per year, 
but with no early warning reporting burdens,'' but would fear ``far 
more serious competition from much stronger, more substantial, viable 
companies producing, for example, only 2400 trailers per year.''
    As described below, NATM has significantly exaggerated the costs of 
preparing for, and complying with, the early warning reporting 
requirements. A majority of the trailer manufacturers that have 
provided cost information to ODI stated that their anticipated 
compliance costs were well under $50,000. Other trailer manufacturers 
that did not provide a cost figure have stated that the annual 
compliance cost would be negligible. Moreover, the information provided 
by these trailer manufacturers confirm NHTSA's conclusion in the Final 
Regulatory Evaluation (FRE) that the major portion of the costs 
associated with early warning reporting involves setting up the 
manufacturer's reporting system, while the annual, recurring costs of 
compliance are low. Since the first quarterly reports were due on 
December 1, 2003, it is likely that most, if not all, manufacturers 
have already completed these initial preparations and have already 
incurred those set up costs. For these reasons, there is little 
likelihood that companies that are not required to provide 
comprehensive reports will have any significant competitive advantage 
over larger manufacturers.

4. Burden on Small Vehicle Manufacturers \2\
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    \2\ Additional points related to the burden imposed by the early 
warning reporting regulation on small manufacturers are set forth in 
the discussion of the regulation under the Regulatory Flexibility 
Act, which appears later in this document.
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    The TREAD Act provided for the promulgation of the early warning 
reporting regulation without reference to the size of manufacturers of 
motor vehicles under SBA definitions. See 49 U.S.C. Sec.  30166(m). The 
Act directed the agency only not to impose requirements that are unduly 
burdensome to a manufacturer, taking into account cost and the agency's 
ability to use the information to assist in the identification of 
defects related to motor vehicle safety. See 49 U.S.C. 30166(m)(4)(D).
    In the Final Regulatory Analysis (FRE) that accompanied the Final 
Rule, we stated that: ``We estimate that there are 8 large 
manufacturers and hundreds of small businesses that manufacture 
trailers.'' For the eight ``large'' trailer manufacturers, NHTSA 
estimated that setting up a computer system to handle all this 
information would cost $200,000. For the others we assumed that they 
would have so few claims of fatalities, injuries and property damage, 
warranty claims, and field reports that they would not set up a 
computer system for reporting, but would review and process the claims 
manually as they came in. We estimated a $10,000 annual cost for these 
manufacturers.
    NATM claims in its petition for reconsideration that ``Industry 
estimates put the annual cost at $145,000 per company.'' This is 
unsubstantiated. The cost estimates in the FRE were based on estimates 
of the costs that were likely to be incurred by very large vehicle 
manufacturers. The amount of data likely to be received by trailer 
manufacturers, and particularly relatively small companies, will not 
require that level of expenditure.

[[Page 3296]]

    We continue to believe that the burden on relatively small 
manufacturers from early warning reporting will not be significant. 
Vehicle manufacturers that are subject to comprehensive reporting have 
to provide the numbers of property damage claims, consumer complaints, 
warranty claims, and field reports.\3\ As explained in the Regulatory 
Flexibility Act statement below, it is unlikely that relatively small 
manufacturers will receive many of these items in any calendar quarter, 
and therefore they will not have to develop complex, computerized data 
systems. For example, ODI's docketed review of the number of consumer 
complaints received by trailer manufacturers whose products were the 
subject of defect investigations during the past nine years revealed 
that, with a few exceptions, the manufacturers had received fewer than 
five consumer complaints about the product under investigation. (And it 
is likely that there would be even fewer complaints about products that 
are not the subject of a defect investigation.) Moreover, as specified 
in Section 579.29(a), these manufacturers will be able to submit the 
small amount of relevant data that they compile as an attachment to an 
e-mail message. And, as explained below, all vehicle manufacturers are 
already required to retain the data in question for five years under 
NHTSA's recordkeeping regulations, 49 CFR part 576.
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    \3\ Regardless of the threshold, all vehicle manufacturers have 
to report incidents involving deaths based on claims and notices 
received by the company. See 49 CFR 579.27. The petitioners agree 
that their member companies will not receive many of these claims or 
notices, and therefore they will not have to report a large number 
of such incidents.
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    A number of trailer manufacturers, most of whom produce trailers 
with a GVWR of less than 26,000 pounds, have contacted the agency to 
inquire about the early warning reporting regulation. ODI has had 
discussions with many of these manufacturers about their experiences in 
preparing to comply with that regulation. In these discussions, ODI 
obtained information about the expenditures that they have incurred and 
expect to incur, both to set up their reporting systems and to provide 
information in the future. (We believe that it is reasonable to assume 
that the information provided would also be applicable to manufacturers 
of vehicles other than trailers.)
    ODI discussed these issues with 31 trailer manufacturers, with 
annual production ranging from 674 to over 30,000 vehicles. ODI made no 
attempt to verify the responses or to obtain details about the precise 
expenditures made and/or anticipated. A summary of the responses has 
been placed in the Docket for this rulemaking proceeding, with the 
names of the specific manufacturers deleted to maintain 
confidentiality.
    ODI asked whether the manufacturers were confident about their 
ability to comply with the early warning reporting regulation. The 
overwhelming majority of manufacturers were confident and did not 
anticipate any problems in complying. Of the few that were not, the 
chief concerns involved computer upgrades, software, data retention, or 
personnel resources.
    ODI also asked the manufacturers whether they had experienced any 
problems in preparing for compliance with the early warning reporting 
regulation. About one third stated that they had not had any problems 
and that they have the necessary mechanisms set up for reporting. 
Another third stated that that they had experienced some difficulties 
in sorting or categorizing input data, converting their existing data 
system to report in accordance with the requirements of early warning 
reporting regulation, or capturing the historical data required by the 
rule. Only a very small percentage referred to a financial burden 
associated with the preparation for reporting.
    Slightly over one third of the manufacturers informed ODI that they 
had not needed to make any significant investment in connection with 
the regulation. About a third reported that they hired or reassigned 
personnel to handle early warning reporting. Approximately one fourth 
of the manufacturers stated that they had to purchase computer hardware 
or software, or that they had hired a consulting service to assist 
them.
    With respect to the estimated cost of preparing for compliance, 
about one fourth of the manufacturers described the cost as ``minimal'' 
and did not provide a dollar estimate; four others simply did not 
provide an estimate. Twenty-two manufacturers provided cost information 
in dollar figures. These estimates are set out in Table 2, Costs of 
Early Warning Reporting Start-Up. The estimates ranged from $0 to as 
high as $250,000. Of those estimating relatively high expenditures, 
most did not explain why the costs were so high or state whether those 
costs also addressed other issues. As we had anticipated, the larger 
companies generally had the highest average costs.

                               Table 2.--Costs of Early Warning Reporting Start-Up
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                                                                                           Expense range
     Annual production range         Number of        Average         Median     -------------------------------
                                    respondents       expense         expense           Low            High
----------------------------------------------------------------------------------------------------------------
500-2,500.......................               9         $46,080        $125,000              $0        $250,000
2,501-5,000.....................               6          41,202         100,000               0         200,000
5,001-10,000....................               4         126,250         132,500          15,000         250,000
10,001-20,000...................               1          15,000
20,000...............               2         142,500  ..............         100,000         185,000
----------------------------------------------------------------------------------------------------------------

    With respect to the estimated cost of ongoing compliance, only 
twelve manufacturers provided a dollar figure. Ten others stated that 
they would have to incur the cost of adding one employee to handle 
early warning reporting, while six stated that costs of continued 
compliance would be ``negligible'' or they did not expect any 
additional costs.
    Table 3, below, reflects the annual estimated compliance costs 
reported by those manufacturers that provided a dollar figure. Notably, 
there are very large differences in the anticipated costs reported by 
these manufacturers, and the differences are not explainable by the 
size of the companies.

[[Page 3297]]



                TABLE 3.--Annual Compliance Cost for Manufacturers That Reported a Dollar Figure
----------------------------------------------------------------------------------------------------------------
                                                                                           Expense range
     Annual production range         Number of        Average         Median     -------------------------------
                                    respondents       expense         expense           Low            High
----------------------------------------------------------------------------------------------------------------
500-2,500.......................              10         $15,244         $15,000              $0         $30,000
2,501-5,000.....................               5          21,800          17,000           5,000          45,000
5,001-10,000....................               4         132,500         200,000               0         400,000
10,001-20,000...................               2          20,355  ..............          15,000          25,710
20,000...............               2          95,000  ..............          90,000         100,000
----------------------------------------------------------------------------------------------------------------

    To obtain additional information on the cost issue, ODI contacted a 
business that provides consultation services and computer software 
designed to assist vehicle and equipment manufacturers in preparing for 
and complying with the early warning reporting regulation. This company 
advised ODI that its fee for its consulting services (including on-site 
visits) is a minimum of $10,000, up to a maximum of $50,000 for six 
weeks of consultation. The software offered costs $16,000 or more, 
depending upon the amount and complexity of reporting to be performed 
by the vehicle manufacturer. According to this company, the annual cost 
for maintaining the software, including updates, is $3,000.
    For the reasons set forth above, as well as those set forth in the 
Regulatory Flexibility Act Statement below, at this time we are denying 
the petitions requesting us to raise the reporting threshold, and to 
exempt all manufacturers of trailers of 26,000 pounds GVWR or less from 
comprehensive reporting. However, as we stated in the Final Rule, 67 FR 
45822, 45867 and 45870 (July 10, 2002), and consistent with 49 U.S.C. 
30166(m)(5), we will conduct a review to determine whether it would be 
appropriate to make changes to the early warning reporting regulation, 
including possible changes to the reporting threshold. We expect to 
complete this review by the end of 2005. If we find that the 
information submitted by relatively small vehicle manufacturers does 
not help in the prompt identification of safety defects, we will 
commence a rulemaking proceeding to adjust the reporting requirements 
appropriately.

III. Rulemaking Analyses

    Regulatory Policies and Procedures. We previously considered the 
impact of this rulemaking under E.O. 12866 and the Department of 
Transportation's regulatory policies and procedures in the Final Rule. 
67 FR 45870 (July 10, 2002). We incorporate our previous statements by 
reference.
    Regulatory Flexibility Act. The Regulatory Flexibility Act (RFA), 5 
U.S.C. 601 et seq., requires agencies to evaluate the potential effects 
of their proposed and final rules on small businesses, small 
organizations and small governmental jurisdictions. Section 605 of the 
RFA allows an agency to certify a rule, in lieu of preparing an 
analysis, if the rulemaking is not expected to have a significant 
impact on a substantial number of small entities.
    In the TREAD Act, Congress directed NHTSA to adopt regulations that 
impose early warning reporting obligations on manufacturers of motor 
vehicles and motor vehicle equipment. 49 U.S.C. 30166(m). Congress 
included a provision directing the agency not to impose requirements 
that are ``unduly burdensome * * * taking into account the 
manufacturer's cost of complying with such requirements and [NHTSA's] 
ability to use the information sought in a meaningful manner to assist 
in the identification of defects related to motor vehicle safety.'' 49 
U.S.C. 30166(m)(4)(D). In proposing and adopting the EWR regulation, 
NHTSA considered this provision, as well as other Federal laws and 
policies (including the RFA) that generally seek to minimize or reduce 
the impact of regulations on small businesses.
    NHTSA addressed the RFA at the time it issued the EWR NPRM, and the 
agency issued a certification statement of no significant impact at 
that time. 66 FR 66190 at 66216-66217 (December 21, 2001). No one 
submitted any responsive comments. The agency published another RFA 
certification statement with the Final Rule. 67 FR 45822 at 45870-45871 
(July 10, 2002). After considering the information and arguments 
related to small business impacts that were submitted with the 
petitions for reconsideration, we are supplementing that statement in 
this document.\4\
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    \4\ Additional issues related to the impact of the EWR 
regulation on small businesses are discussed in Section II.4 of this 
notice, which is incorporated by reference in this RFA statement.
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    As explained earlier in this notice, the EWR regulation establishes 
different reporting requirements for manufacturers, depending upon the 
type of product produced and, for vehicle manufacturers, the number of 
vehicles produced annually. Manufacturers of tires and child restraint 
systems (CRS) and vehicle manufacturers that produce 500 or more 
vehicles per year of one of four categories of vehicles (light 
vehicles, medium-heavy vehicles and buses, motorcycles, and trailers) 
must provide comprehensive quarterly reports to NHTSA. In general, such 
comprehensive reports must include information on deaths and injuries 
based on claims and notices about incidents involving the 
manufacturer's products, and the numbers of property damage claims, 
consumer complaints, warranty claims, and field reports received by the 
manufacturer. For field reports other than those from dealers, a copy 
of the field report must also be submitted. All other manufacturers of 
equipment, and manufacturers that produce fewer than 500 vehicles per 
year of each category, need only report a very limited amount of 
information; i.e., information regarding claims and notices of death 
received by the manufacturer involving its products.
    Business entities are defined as small by standard industry 
classification for the purposes of receiving Small Business 
Administration (SBA) assistance. One criterion for determining size, as 
stated in 13 CFR 121.201, is the number of employees in the firm. For 
establishments primarily engaged in manufacturing or assembling 
automobiles, light and heavy duty trucks, buses, motor homes, new 
tires, or motor vehicle body manufacturing, the firm must have less 
than 1,000 employees to be classified as a small business. For 
establishments manufacturing truck trailers, motorcycles, child 
restraint systems, lighting, motor vehicle seating and interior trim 
packages, or re-tread tires, the firm must have less than 500 employees 
to be classified as a small business. That 500-employee limit also

[[Page 3298]]

applies to vehicle alterers and second-stage vehicle manufacturers. For 
establishments manufacturing many other equipment items, the firm must 
have less than 750 employees to be classified as a small business.
    The EWR regulation will have some cost impact on both large and 
small manufacturers throughout the motor vehicle and motor vehicle 
equipment industry. With respect to equipment manufacturers, we believe 
that there are many thousands of manufacturers of original equipment 
and of replacement equipment (other than tires and CRS), most of which 
are small businesses. However, as noted above, we decided not to 
require such equipment manufacturers to submit comprehensive EWR 
information.
    We believe that there are few, if any, manufacturers of CRSs that 
are small businesses. While there are some tire manufacturers that are 
small businesses, it is likely that they will not have to report 
comprehensive EWR information about their products, since the agency 
included a provision under which such reporting is not required for 
``each group of tires with the same SKU [stock keeping unit], plant 
where manufactured, and year for which the volume produced or imported 
is less than 15,000, or are deep tread, winter-type snow tires, space-
saver or temporary use spare tires, tires with nominal rim diameters of 
12 inches or less, or are not passenger car tires, light truck tires, 
or motorcycle tires.'' See the introductory paragraph to 49 CFR 579.26, 
as amended at 68 FR 35132 (June 11, 2003).
    Most vehicles are manufactured by large businesses; however, many 
vehicle manufacturers are small businesses under the SBA guidelines. 
While those guidelines refer to the number of employees and the EWR 
regulation differentiates in terms of vehicle production, it is 
reasonable to assume that the number of employees of a company is 
related to the number of vehicles produced by that company.
    With respect to trailer manufacturers, their production ranges from 
under 500 to over 50,000 units per year. In the Preliminary Regulation 
Evaluation (PRE) \5\ for the EWR regulation, we estimated that there 
were eight large trailer manufacturers and hundreds of small trailer 
manufacturers of trailers. (We did not attempt to divide this group by 
the size of the trailers manufactured by the company.) We received no 
comments in response to that estimate, and we retained it in the Final 
Regulatory Evaluation (FRE).\6\
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    \5\ Docket NHTSA-2001-8677-64. Available at http://dmses.dot.gov/docimages/pdf75/145583_web.pdf.
    \6\ Docket NHTSA-2001-8677-470. Available at http://dmses.dot.gov/docimages/pdf82/178899_web.pdf.
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    Following receipt of the petitions for reconsideration, we have 
reexamined the trailer manufacturing industry. Among other things, we 
reviewed the North American Industry Classification System (NAICS) 
maintained by the SBA, which indicates that, in 2000, there were 
slightly over one thousand manufacturers of truck trailers and travel/
camper trailers that are considered small businesses (i.e., that have 
fewer than 500 employees). See http://www.sba.gov/advo/stats/us00_n6.pdf. However, the NAICS does not indicate which of these 
manufacturers produce 500 or more vehicles per year. NATM, which 
submitted one of the petitions for reconsideration of the EWR 
regulation, stated that 154 of its members manufacture over 500 
trailers per year, and 148 of those members employ less than 500 
employees.\7\
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    \7\ NATM's Web site states that the association has 339 members. 
Thus, somewhat over half of its members are not subject to the 
comprehensive EWR reporting requirements.
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    In order to estimate the percentage of vehicle manufacturers that 
will be required to submit comprehensive EWR reports (i.e., those that 
produce 500 or more vehicles per year), we examined World Manufacturer 
Identifier (WMI) data.\8\ The WMI is included in the Vehicle 
Identification Number (VIN), which is required on all vehicles. See 49 
CFR part 565. From its WMI, it is possible to determine whether a given 
manufacturer produces fewer than 500 vehicles per year.\9\ It is likely 
that virtually all of those manufacturers are small businesses as 
defined in the SBA regulations.
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    \8\ The agency's analysis of the WMI data is described in more 
detail in a memorandum submitted to the docket for this proceeding. 
A table listing all WMIs is publicly available through the NHTSA Web 
site. The table can be viewed on the Internet as follows:
    1. Enter the address ``ftp://ftp.nhtsa.dot.gov/Manufacture.''
    2. Open the MS Access database titled ``Manufacturer.mdb.''
    3. Open the table titled ``WMI.''
    \9\ Such manufacturers have a ``9'' in the third position of the 
WMI code and a specific numeric code in the 12th, 13th, and 14th 
position of the VIN.
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    There are approximately 23,500 WMI codes assigned to manufacturers 
for vehicles intended for sale in the United States. This number likely 
overstates the number of current manufacturers, since a WMI code is 
assigned for 30 years, and some of the manufacturers that have been 
assigned WMI codes may no longer be in business.\10\ However, the WMI 
data allow us to estimate the proportion of manufacturers that produce 
500 or more vehicles per year.
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    \10\ In addition, while the vast majority of manufacturers have 
only a single WMI, a few manufacturers have more than one (e.g., a 
large U.S. manufacturer with production facilities worldwide may 
utilize several WMI codes for the same make and model of vehicle 
that is produced in different countries). Also, foreign 
manufacturers may register for a WMI for use in the United States, 
but then decide not to sell any vehicles in this country.
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    Of those 23,500 codes, approximately 17,700 (75 percent) are 
assigned to manufacturers that produce fewer than 500 vehicles per 
year. By examining the VINs, we were able to ascertain the vehicle 
category for approximately 15,000 of those 17,700 small 
manufacturers.\11\ Of those, 84 percent (about 12,800) were trailer 
manufacturers, 8 percent were medium/heavy truck and bus manufacturers, 
5 percent were motorcycle manufacturers, and 3 percent were light 
vehicle manufacturers.
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    \11\ In the other cases, the information was either not 
provided, vague, or in a foreign language.
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    The remaining 5800 WMI codes were assigned to manufacturers of 500 
or more vehicles per year. Of the approximately 3400 manufacturers for 
which the vehicle category could be determined, approximately 64 
percent (almost 2,200) were trailer manufacturers, 9 percent were 
medium/heavy truck and bus manufacturers, 10 percent were motorcycle 
manufacturers, and 16 percent were light vehicle manufacturers.
    We do not have data that would enable us to identify how many 
manufacturers of 500 or more vehicles per year employ over 500 (or 
1000) employees. However, it is reasonable to assume that there are at 
least several hundred (and perhaps more) manufacturers of 500 or more 
vehicles per year that would be considered small businesses under the 
SBA criterion, while there are thousands of small businesses that 
manufacture fewer than 500 vehicles per year. The vast majority of the 
latter group are trailer manufacturers.
    We previously considered the economic impacts of early warning 
reporting on manufacturers that are small entities in the context of 49 
U.S.C. 30166(m)(4)(D) and the RFA. As noted earlier, in the NPRM, we 
asked interested persons to submit information on estimated costs of 
compliance. Although we received responses on behalf of large vehicle 
manufacturers, we did not receive any usable information with respect 
to the cost impacts on small businesses.

[[Page 3299]]

    It is clear that the limited reporting required of equipment 
manufacturers (other than manufacturers of tires and CRSs) and of those 
small vehicle manufacturers that produce fewer than 500 vehicles per 
year would impose at most a negligible economic burden, and in most 
cases absolutely no burden at all. These manufacturers need only report 
information about claims and notices they receive that involve deaths 
allegedly associated with their products. See 49 CFR 579.27. Most of 
these manufacturers will never receive such a claim or notice, and 
therefore they would not need to submit anything to the agency under 
the regulation. And, in those rare instances where such a manufacturer 
does receive such a claim or notice, it can provide the required 
information to NHTSA by filling out a simple form that can be found on 
the NHTSA Internet Web site. See 49 CFR 579.28(a)(2).
    As we explained above, this group contains approximately 75 percent 
of all vehicle manufacturers (based on an analysis of the WMI codes) 
and all of the many thousands of equipment manufacturers, many of which 
are small businesses under the SBA criterion. Thus, it is likely that 
well over 80 percent of all the manufacturers in the motor vehicle 
industry, and probably well over 90 percent of the small businesses in 
that industry, will have a negligible reporting burden.
    Vehicle manufacturers that must report comprehensive EWR 
information (see 49 CFR 579.21-24) will have a reporting burden that is 
larger than the burden on those manufacturers that only report 
information about incidents involving deaths under Section 579.27. 
However, as explained below, we continue to believe the regulation will 
not impose a significant burden on a substantial number of small 
entities.
    As we first pointed out in the preamble to the Final Rule (67 FR at 
45870), the costs of reporting are directly related to the volume of 
reportable communications submitted to a given manufacturer. After 
explaining that the regulation does not require manufacturers to 
undertake new collections of information, we concluded that the total 
number of reportable communications to relatively small manufacturers 
would probably be low enough that the company would not have to invest 
in a new computer system. Id.\12\
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    \12\ In the PRE and in the FRE, we provided estimates of the 
numbers of reportable communications and costs. However, because we 
did not have much information about relatively small companies, most 
of this analysis was based on information provided by the Alliance 
of Automobile Manufacturers (Alliance), which represents most of the 
largest light vehicle manufacturers. It is evident that the number 
of items to be reported by the members of the Alliance will far 
exceed the numbers to be reported by small manufacturers, as will 
the costs of such reporting.
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    Unlike the large manufacturers, small vehicle manufacturers are 
unlikely to prepare any field reports, as that term is defined in the 
EWR regulation, since they generally do not maintain an engineering 
staff or an extensive dealer network. And, as noted above, the vast 
majority are unlikely to receive any claims or notices of deaths or 
injuries and will receive few (if any) property damage claims.
    It is likely that small vehicle manufacturers will receive some 
warranty claims and, to a lesser extent, consumer complaints. In an 
effort to estimate the number of consumer complaints that are likely to 
be received by relatively small manufacturers, NHTSA's Office of 
Defects Investigation (ODI) reviewed data compiled during its 
investigations of alleged defects in trailers during the past nine 
years.\13\ A total of 18 defect investigations were opened on trailers 
of all sizes from 1995 through 2003, and ODI received information about 
the number of consumer complaints submitted to the manufacturer about 
the alleged defect in 14 of those investigations. The overall average 
number of such complaints in those 14 investigations was 26; however, 3 
of the investigations had significantly larger number of complaints 
than all the rest. The average number of consumer complaints in the 11 
other investigations was 2. Considering the number of affected models 
and model years involved, there was an average of approximately one 
consumer complaint per model and model year of production in these 
investigations. The overall average number of vehicles involved in 
those 14 investigations was 40,000. However, there were 4 outlying 
populations--two large (398,918 and 85,361) and two small (8 and 133)--
which skew the data. Absent these 4 unrepresentative investigations, 
the average vehicle production was 8,000.
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    \13\ We limited this inquiry to trailer investigations because, 
as shown above, most trailer manufacturers are small businesses, and 
it is difficult to identify which manufacturers of other categories 
of vehicles are small businesses. We limited the inquiry to consumer 
complaints because we did not have relevant warranty data for most 
of those investigations. More details about this analysis are 
included in a memorandum that we have placed in the docket for this 
rulemaking.
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    These data from ODI investigative files likely overstate the 
average number of such items received by trailer manufacturers in 
general, since ODI would not have opened an investigation unless there 
was reason to believe that there was a possible defect in the vehicle 
in question. Thus, it is likely that vehicles that are not the subject 
of a defect investigation would be the subject of fewer, if any, 
warranty claims and consumer complaints than vehicles that are the 
subject of an ODI investigation.\14\
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    \14\ We recognize that if there were an emerging problem in a 
vehicle model that led to an increase in the number of death and 
injury incidents and/or the amount of other reportable data, it 
could increase the costs of EWR reporting. However, any such 
deviation from the normal, expected number of problems is exactly 
the sort of information that NHTSA needs to promptly identify 
potential safety defects, which is consistent with the Congressional 
direction in 49 U.S.C. Sec.  30166(m)(4)(D) to weigh reporting 
burdens against the need to obtain relevant information about safety 
defects.
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    It is important to recognize that the burden of maintaining and 
retaining information about warranty claims and consumer complaints is 
not attributable to the EWR regulation. Pursuant to NHTSA's 
recordkeeping regulations, set out at 49 CFR part 576, all vehicle 
manufacturers (small as well as large) have long been required to 
maintain all records ``that contain information concerning malfunctions 
that may be related to motor vehicle safety,'' including ``work 
performed under warranties,'' for a period of five calendar years. See 
49 CFR 576.5(a) and 576.6.\15\ The only additional burden added by the 
EWR regulation is to sort this information into specified systems and 
components,\16\ prepare the data in a specified format, and submit it 
to NHTSA electronically four times per year. Those additional steps do 
not impose a significant burden on these manufacturers.
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    \15\ Companies also maintain warranty data for their own 
business purposes. First, the cost of repairing products under 
warranty can be deducted from income, assuming proper records are 
kept. Moreover, companies generally want to identify problems that 
lead to warranty repairs as soon as possible, so they can correct 
those problems prospectively in new production and thereby minimize 
future warranty costs. Unless they keep warranty data, they cannot 
identify any problem trends. Similarly, consumer complaints can also 
indicate product problems that companies will want to address.
    \16\ There are 14 such groupings for trailers (see 49 CFR 
579.24(b)(2)) and several additional categories for other types of 
vehicles that contain engines (see paragraph (b)(2) of 49 CFR 579.21 
through 579.23).
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    As discussed above in this notice, during the summer of 2003, ODI 
received information from a number of trailer manufacturers about the 
anticipated burdens of compliance with the EWR regulation. Almost all 
of the companies indicated that they had not had, and did not foresee, 
any significant difficulties in complying. Although the anticipated 
costs varied widely, depending in part upon the size of the

[[Page 3300]]

manufacturer, estimated average start-up costs ranged from $15,000 to 
$142,500, and estimated average annual compliance costs ranged from 
$15,244 to $132,000.
    In a separate effort to obtain cost information, ODI contacted a 
business that provides consultation services and computer software that 
is designed to assist vehicle and equipment manufacturers in preparing 
for and complying with the EWR regulation. As discussed above, this 
company advised ODI that its fee for these services would vary, 
depending on the amount and complexity of reporting to be performed by 
the manufacturer.
    For the reasons stated above, including the matters discussed in 
Section II.4 of this notice, and based on the best information 
available to the agency at this time, I certify that maintaining the 
existing 500-vehicle threshold for comprehensive early warning 
reporting will not have a significant economic impact on a substantial 
number of small entities.
    Executive Order 13132 (Federalism). We previously considered 
Executive Order 13132 in the Final Rule. 67 FR 45871 (July 10, 2002). 
We incorporate our previous statements by reference.
    Civil Justice Reform. This notice makes no changes to the current 
early warning reporting regulation, nor will it have a retroactive or 
preemptive effect, and judicial review of it may be obtained pursuant 
to 5 U.S.C. 702. That section does not require that a petition for 
reconsideration be filed prior to seeking judicial review.
    Paperwork Reduction Act. We received Paperwork Reduction Act 
clearance from OMB on December 20, 2002, which will expire on December 
31, 2005. The clearance number is 2127-0616. This notice does not make 
any substantive amendments to the Final Rule, so the overall paperwork 
burden is not changed.
    Data Quality Act. We previously considered the Data Quality Act in 
the Final Rule. 67 FR 45871-45872 (July 10, 2002). We incorporate our 
previous statements by reference.
    Unfunded Mandates Reform Act. We previously considered the Unfunded 
Mandates Reform Act in the Final Rule. 67 FR 49263-49264 (July 30, 
2002). We incorporate our previous statements by reference.

    Issued on: January 16, 2004.
Jeffrey W. Runge,
Administrator.
[FR Doc. 04-1469 Filed 1-22-04; 8:45 am]
BILLING CODE 4910-59-P