[Federal Register Volume 69, Number 120 (Wednesday, June 23, 2004)]
[Rules and Regulations]
[Pages 34954-34960]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-14072]


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DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

49 CFR Parts 573 and 577

[Docket No. NHTSA-2004-18341]
RIN 2127-AG27


Defect and Noncompliance Responsibility and Reports, Defect and 
Noncompliance Notification

AGENCY: National Highway Traffic Safety Administration, DOT.

ACTION: Final rule.

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SUMMARY: The National Highway Traffic Safety Administration (NHTSA) is 
amending several provisions of its regulations pertaining to its 
enforcement of those sections of 49 U.S.C. chapter 301 that require 
manufacturers of motor vehicles and items of motor vehicle equipment to 
notify their dealers and distributors when they or NHTSA decide that 
vehicles or equipment items contain a defect related to motor vehicle 
safety or do not comply with a Federal motor vehicle safety standard. 
The amendment requires manufacturers to furnish dealers and 
distributors with notification of a safety-related defect or 
noncompliance in accordance with a schedule that is to be submitted to 
the agency with the manufacturer's defect or noncompliance information 
report required by 49 CFR 573.6. The notification to dealers must be 
provided within a reasonable time after the manufacturer decides that 
the defect or noncompliance exists. If the agency finds that the public 
interest requires dealers and distributors to be notified at an earlier 
date than that proposed by the manufacturer, the manufacturer must 
provide the required notification in accordance with the agency's 
directive. The amendment also sets forth the required content of the 
dealer notification and the manner in which such notification is to be 
accomplished.

DATES: Effective date: The amendments made by this final rule are 
effective on October 21, 2004.
    Any petitions for reconsideration must be received by NHTSA no 
later than August 9, 2004.

ADDRESSES: ``Petitions for Reconsideration.'' Any petitions for 
reconsideration must refer to the docket notice numbers cited at the 
beginning of this notice and be submitted to Administrator, National 
Highway Traffic Safety Administration (NHTSA), 400 Seventh Street, SW., 
Washington, DC 20590. It is requested, but not

[[Page 34955]]

required, that two copies of the petition be provided.

FOR FURTHER INFORMATION CONTACT: Mr. George Person, Office of Defects 
Investigation, National Highway Traffic Safety Administration, 400 
Seventh Street, SW., Room 5319, Washington, DC 20590. Telephone: (202) 
366-5210.

SUPPLEMENTARY INFORMATION:

Background

    On September 27, 1993, NHTSA published a Notice of Proposed 
Rulemaking (NPRM) proposing several amendments to its regulations (49 
CFR parts 573 and 577) implementing the provisions of 49 U.S.C. chapter 
301 concerning manufacturers' obligations to provide notification and 
remedy without charge for motor vehicles and items of motor vehicle 
equipment found to contain a defect related to motor vehicle safety or 
a noncompliance with a Federal motor vehicle safety standard (58 FR 
50314). On April 5, 1995, we issued a final rule addressing most 
aspects of that NPRM (60 FR 17254), and on January 4, 1996, we amended 
several provisions of that final rule after receiving petitions for 
reconsideration (61 FR 274). However, we decided to delay issuance of 
the final rule on the subject of dealer notification because we had not 
resolved all the issues raised by the comments on that subject that 
were submitted in response to the NPRM. On May 19, 1999, we issued a 
supplemental notice of proposed rulemaking (SNPRM) in order to seek 
additional public comment on several significant proposed revisions to 
the proposal that we had originally set out in the NPRM (64 FR 27227).
    We had originally proposed to require manufacturers to notify their 
dealers and distributors \1\ of safety defects and noncompliances that 
had been determined to exist in their products within five days after 
notifying the agency of the determination pursuant to 49 CFR part 573. 
In the SNPRM, however, rather than specify a particular time period, we 
proposed to require manufacturers to notify dealers in accordance with 
a schedule that is to be submitted to the agency with the 
manufacturer's defect or noncompliance information report required by 
49 CFR 573.6 (this section was codified as Sec.  573.5 prior to August 
9, 2002). Under the SNPRM, if the agency were to find that the public 
interest requires dealers to be notified at an earlier date than that 
proposed by the manufacturer, the manufacturer would have to notify its 
dealers in accordance with the agency's directive. The SNPRM also 
proposed to require that the dealer notification contain certain 
information (including language about manufacturer and dealer 
obligations under 49 U.S.C. 30116 and 30120(i)) and described the 
manner in which such notification is to be accomplished. We received 
comments on the SNPRM from the Alliance of Automobile Manufacturers 
(AAM)/Association of International Automobile Manufacturers (AIAM); 
Atwood Mobile Products (Atwood); Ford Motor Company (Ford); the 
Juvenile Products Manufacturers Association (JPMA); Meritor Automotive 
(Meritor); the Motor and Equipment Manufacturers Association (MEMA); 
the Motorcycle Industry Council (MIC); the National Automobile Dealers 
Association (NADA); the Recreational Vehicle Industry Association 
(RVIA); the Specialty Equipment Market Association (SEMA); and the 
Truck Manufacturer's Association (TMA).
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    \1\ 49 U.S.C. 30118, 30119, and 30120 refer to notification to 
``dealers,'' without referring to ``distributors.'' However, under 
49 U.S.C. 30116, manufacturers of motor vehicles and motor vehicle 
equipment have certain responsibilities toward their distributors 
after it is determined that a product contains a safety-related 
defect or a noncompliance. Therefore, the notification requirements 
established by today's final rule will apply to both dealers and 
distributors. However, throughout the remainder of this preamble, we 
will refer to dealers and distributors as ``dealers,'' except where 
differentiation is required.
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    We have fully considered the comments submitted in response to the 
SNPRM. In general, the commenters supported the revised approach taken 
in the SNPRM. We will discuss all relevant comments; however, to the 
extent that these comments repeated discussions of positions that we 
addressed in the SNPRM, we will not repeat our prior responses.
    For the most part, the final rule adopted today follows the 
regulatory language proposed in the SNPRM and is based on the same 
rationale set forth in that Notice, which we incorporate here by 
reference. As described below, we have decided to make several 
revisions to the supplemental proposal on the basis of comments we 
received. We have also made a number of minor technical changes 
prompted by our own review, including changes to the ``Scope'' section 
of part 573. In addition, some of the section numbers have been changed 
to reflect other intervening amendments to parts 573 and 577.

Changes to the Supplemental Proposed Rule

Authority

    The authority citations for part 573 and part 577 have been changed 
by adding a reference to 49 U.S.C. 30116 and by deleting the references 
to 49 U.S.C. 30112 and 30167.

Schedule for Dealer Notification in Part 573 Reports

    Pursuant to 49 CFR part 573, manufacturers that have determined 
that a defect or noncompliance exists in their products must submit to 
NHTSA a report that contains certain specified information (part 573 
report). Pursuant to Sec.  573.6(c)(8)(ii), the part 573 report must 
include the estimated date on which the manufacturer will begin sending 
notifications to owners that a defect or noncompliance exists and that 
a remedy without charge will be available. Consistent with our revised 
approach to dealer notification, we are amending Sec.  573.6(c)(8)(ii) 
to require manufacturers also to identify the date(s) on which they 
plan to notify their dealers and distributors of the defect or 
noncompliance. This will allow us to consider whether a manufacturer's 
proposed schedule for dealer notification is reasonable.
    We are incorporating this requirement into paragraph (c)(8)(ii), 
rather than adding a new paragraph (c)(8)(iii) as we had proposed in 
the SNPRM, to avoid the need to add additional paragraphs addressing 
the duties of a manufacturer that files or plans to file a petition for 
an exemption from recall requirements on the basis that the defect or 
noncompliance is inconsequential to motor vehicle safety. Existing 
paragraphs (c)(8)(iii) and (iv) will apply to both owner and dealer 
notification.
    As with other information required to be reported under part 573, 
if the manufacturer has not determined a schedule for dealer 
notification at the time that it submits its initial part 573 report, 
it must provide the information as soon as it is available. See Sec.  
573.6(b).

Lists of Notified Dealers and Distributors

    In their comments on the SNPRM, AAM/AIAM, MIC, and JPMA recommended 
that we specify that manufacturers must maintain a list of the names 
and addresses of dealers and distributors to which a defect or 
noncompliance notification is sent for five years from the date the 
manufacturer submits a defect and noncompliance information report to 
the agency. In fact, Sec.  573.8(c), which is applicable to equipment 
manufacturers, already contains such a five-year retention requirement. 
To apply the same responsibility to vehicle manufacturers, we are 
revising Sec.  573.8(a), which currently requires vehicle manufacturers 
to maintain lists owner names and addresses. Of course,

[[Page 34956]]

vehicle manufacturers already maintain lists of their dealers, so this 
will not impose any additional burden upon them.

Time and Manner of Notification

    The time and manner of notification to dealers is addressed in a 
new paragraph (c) of Sec.  577.7. As requested by AAM/AIAM, TMA, and 
Meritor, we revised proposed paragraph (c)(1) to require that the 
agency consider the views of the manufacturer when making a 
determination to require dealer notification on a specific date. The 
wording of this new requirement is comparable to that in subparagraph 
(a)(1) concerning notification of owners. Proposed subparagraph (c)(1) 
is also being modified to identify two additional factors that will be 
considered by the agency when deciding whether to require dealer 
notification on a specific date. These two factors are: (1) 
Availability of an interim remedial action by the owner and (2) the 
time frame in which the defect may manifest itself. AAM/AIAM 
recommended that these two factors, which were discussed in the 
preamble of the SNPRM, be included in the regulatory text.
    We are revising proposed Sec.  577.7(c)(2)(i) to identify examples 
of what will be considered to be verifiable electronic means of 
notification, such as receipts or logs from electronic mail or 
satellite distribution systems. AAM/AIAM and MIC recommended this 
change in order to clarify the meaning of verifiable electronic means. 
However, the examples referenced are not the only types of verifiable 
electronic means that would be permissible, since other technology that 
provides comparable information may become available.
    Proposed Sec.  577.7(c)(2)(ii) is being split into two 
subparagraphs, (c)(2)(ii) and (iii). The first sentence had proposed to 
require manufacturers of replacement equipment or tires to notify ``all 
retailers, dealers, and purchasers of such equipment for purposes of 
re-sale.'' SEMA and MEMA objected on the basis that this language 
indicated that manufacturers could be held responsible for assuring 
notification to each entity at every level of the distribution chain 
even though the manufacturer generally only has knowledge of the 
identity of its customers. These organizations also argued that such a 
requirement exceeded NHTSA's statutory authority. To address these 
concerns, new paragraph (c)(2)(ii) states that notification will only 
be required to dealers and distributors that are known to the 
manufacturer.
    The second sentence of proposed paragraph (c)(2)(ii) (new paragraph 
(c)(2)(iii)) applies in those cases in which a manufacturer sold the 
recalled product to a central office of a retail network, such as an 
auto supply chain or a department store chain, which then distributed 
the product to its retail outlets. The new language, which will now 
apply to both vehicles and equipment, clarifies that the manufacturer 
will not have to notify each retail outlet individually, since 
notification to the central office will be deemed to be notice to all 
dealers and distributors within that group. It will be the 
responsibility of the purchaser (through its central purchasing office 
or otherwise) to assure that its retail outlets comply with all 
applicable statutory and regulatory requirements, such as the duty not 
to sell vehicles or items of equipment that are covered by a defect or 
noncompliance determination unless they have been remedied.
    Several commenters objected to proposed Sec.  577.7(c)(2)(iii), 
which addressed situations in which a manufacturer provides motor 
vehicles or motor vehicle equipment items to another entity, such as an 
independent distributor, which then provides them to independent 
dealers. The SNPRM proposed to allow the manufacturer to provide the 
required information to the distributors, ``if those distributors agree 
to transmit it to all applicable retail dealers within five additional 
working days.'' The proposed language expressly stated that the 
manufacturer would retain the legal responsibility for assuring that 
its dealers received the information in a timely manner.
    AAM/AIAM, Atwood, JPMA, MEMA, and SEMA requested that the agency 
better define the extent to which the manufacturer is legally 
responsible for the actions of its dealers and distributors in this 
context. Several commenters were concerned that manufacturers might be 
held legally responsible for the actions of distributors at the third 
or fourth distribution stage that are independent entities over which 
the manufacturer has no effective control.
    In recognition of these concerns, we are taking a somewhat 
different approach in this final rule. Under new Sec.  577.7(c)(2)(iv), 
in cases in which a manufacturer sells or arranges for the delivery of 
vehicles or equipment to or through independent distributors that 
subsequently sell or arrange for the delivery of the vehicles or 
equipment items to independent retail outlets, the manufacturer will be 
required to provide the distributors with the required notification. 
However, in addition to the information included in standard 
notifications to dealers, the notification to such distributors must 
also instruct the distributors to provide copies of the notification to 
all entities further along the distribution chain within five working 
days of its receipt. (As a practical matter, this requirement would 
only affect equipment recalls, since vehicle manufacturers generally 
communicate directly with their dealers rather than through a 
distribution network.) We expect that the distributors will be able to 
verify that they transmitted the notifications to the appropriate 
entities with which they do business. However, manufacturers would not 
have the legal responsibility to assure that each lower tier, 
independent dealer is notified.
    We recognize that under this approach it is possible that some 
lower tier, independent dealers may not receive notification of defects 
or noncompliances, particularly if there is more than one level of 
independent distributors. If we become aware of widespread inadequate 
notification to dealers by distributors, we may revisit this aspect of 
the regulation.

Content of Dealer Notification

    Proposed Sec.  577.11, as revised, will now be designated as Sec.  
577.13 because of intervening amendments to part 577. We are revising 
proposed subsections (a) and (d) to clarify that the section applies to 
notifications to distributors as well as to dealers. This will conform 
this section to other sections of this final rule.
    Proposed Sec.  577.11(b) would have required language reminding 
dealers that they are prohibited (by 49 U.S.C. 30120(i)) from selling 
or leasing new motor vehicles or new motor vehicle equipment items 
until the defect or noncompliance is remedied. TMA and MEMA recommended 
that this language be changed to permit the sale or lease of recalled 
vehicles and motor vehicle equipment items, but prohibit the delivery 
of the vehicle or equipment item to the owner or lessee until the 
recall work has been completed. The agency is adopting this 
recommendation in new Sec.  577.13(b), which is consistent with the 
language of section 30120(i).
    We are making one additional minor change to this subsection to 
reflect 49 U.S.C. 30120(j), which was enacted as part of the 
Transportation Recall Enhancement, Accountability, and Documentation 
(TREAD) Act in November 2000, after issuance of the SNPRM. Section 
30120(j), which largely parallels, and in part overlaps, section 
30120(i), prohibits the sale or lease of all motor vehicle equipment 
(including a

[[Page 34957]]

tire) that has been determined to contain a defect or noncompliance 
under section 30118 unless the defect or noncompliance has been 
remedied before delivery under the sale or lease. See 49 CFR 577.12. 
Thus, the language required by Sec.  577.13(b) will apply to all 
equipment (new and used), but only to new motor vehicles.
    Proposed Sec.  577.11(c) would have helped to implement 49 U.S.C. 
30116 by requiring manufacturers to offer to repurchase defective or 
noncompliant motor vehicle equipment items that remained in a dealer's 
or a distributor's inventory under the terms specified in section 
30116(a)(1). The proposal was not intended to prevent manufacturers 
from negotiating alternative repurchase terms with their dealers. In 
accordance with the recommendation of AAM/AIAM the agency is modifying 
this section by adding wording that would permit the negotiation of 
alternative, mutually agreeable repurchase terms, with the listed 
repurchase terms serving as a minimum requirement in the absence of 
negotiated alternative repurchase terms.
    MEMA and SEMA argued that proposed subsection (c) was overly 
restrictive in that it required repurchase of recalled equipment items 
in dealer inventory and did not allow the items to be repaired or 
replaced. However, this language accurately tracks the language of 49 
U.S.C. 30116(a)(1). Section 30116(a)(2) allows manufacturers of 
vehicles to provide parts needed to repair defective or noncompliant 
vehicles in dealer or distributor inventory, but this repair option is 
clearly limited to vehicles. (For the reasons discussed in more detail 
below, we have decided that there is no need to address section 
30116(a)(2) or section 30116(b) in this final rule.)
    We are aware that 49 U.S.C. 30120(a)(1)(B) authorizes equipment 
manufacturers to remedy defects or noncompliances ``by repairing the 
equipment or replacing the equipment with identical or reasonably 
equivalent equipment.'' However, the primary application of section 
30120 is to the remedy of items in the hands of retail purchasers. 
Given the specific language of section 30116(a)(1), we do not agree 
with the commenters' contention that the remedies authorized by section 
30120(a)(1)(B) apply to equipment that remains in dealer or distributor 
inventory.

Comments to the SNPRM That Will Not Be Incorporated Into the Final Rule

    As described below, we are not adopting several recommendations 
made by some commenters.
    TMA and Meritor recommended that subparagraph (c)(1) of Sec.  
577.7, Time and manner of notification, be changed to specify a 
procedure for presenting the manufacturer's views concerning dealer 
notification on a specific date to the agency. Meritor also recommended 
that an appeal mechanism be established to challenge an adverse ruling 
by NHTSA concerning dealer notification. We do not believe that such a 
revision is needed. Based on past experience, we anticipate that there 
will be extraordinarily few occasions on which we will have to direct a 
manufacturer to accelerate its proposed schedule for dealer 
notification. In almost all previous cases in which we have concluded 
that dealer notification was warranted at a date earlier than 
originally planned by the manufacturer, the manufacturer has promptly 
agreed to immediately provide such notification to its dealers. 
However, in those rare cases in which there is a disagreement, we need 
the ability to act quickly without being encumbered by formalized 
procedures that would lengthen the process. The views of the 
manufacturer, if presented to the agency in a timely manner, will be 
fully considered.
    MIC recommended that Sec.  577.7(c)(2)(i) be changed to allow 
manufacturers to send notifications to dealers via first class mail. 
The statute (49 U.S.C. 30119(d)(4)) specifies that dealers are to be 
notified ``by certified mail or quicker means if available.'' While we 
have authorized the use of various means of notification, we have 
required that the manufacturer be able to verify that the notifications 
were sent to and received by each dealer. Since there is no way to 
verify receipt of first class mail, we have rejected this suggestion.
    NADA recommended that proposed Sec.  577.11(b) be expanded to 
include language informing dealers of the statutory right to 
reimbursement specified in 49 U.S.C. 30116(b). That provision requires 
that motor vehicle manufacturers reimburse motor vehicle dealers and 
distributors that install parts or equipment to remedy a defect or a 
noncompliance in a motor vehicle in dealer or distributor inventory for 
the reasonable value of the installation plus other amounts associated 
with delays in correcting the problem. As discussed above, new Sec.  
577.13 requires manufacturers of motor vehicle equipment to include 
language in the notification to their dealers that refers to the 
reimbursement provisions of section 30116(a)(1), primarily to assure 
that those dealers that might not be aware of their rights under that 
section (such as those dealers for whom motor vehicle equipment 
represents only a small portion of their retail sales) will be assured 
that they will not suffer any financial hardship by complying with the 
duty not to sell noncompliant or defective items. Otherwise, they might 
have a financial incentive to ignore their statutory obligations. We 
explained in the SNPRM that similar concerns do not apply to vehicle 
dealers, who are much more likely to be aware of their rights under 
section 30116. Moreover, with respect to the particular issue raised by 
NADA, all vehicle dealers are well aware of their right to be 
reimbursed by manufacturers for recall repair work.
    Meritor offered four general criticisms of the SNPRM. Because each 
of these comments has previously been addressed in earlier rulemaking 
notices, our discussion of these comments will be brief. Meritor's 
first comment is that there is no need to regulate dealer notification, 
since the current system functions effectively. Meritor's second 
comment is that manufacturers are in a better position than NHTSA to 
determine the appropriate dealer notification date. We agree that in 
most cases the current dealer notification process has been effective 
and that the manufacturer is generally in the best position to 
determine an appropriate dealer notification date. However, there have 
been some instances in recent years in which safety considerations 
warranted immediate dealer notification and the recalling manufacturer 
would not cooperate with the agency. In such cases, we need the 
explicit authority to compel manufacturers to notify dealers on a 
specific date.
    Meritor's third comment is that manufacturers and their dealers 
could be subject to severe financial hardships if NHTSA misjudges the 
need for early dealer notification. As previously stated, we intend to 
utilize our authority to accelerate dealer notification only in rare 
cases, and only after consultation with the manufacturer, so such 
``misjudgments'' are unlikely. Meritor's fourth comment is that dealers 
may create their own home-made recall remedies to correct recalled 
vehicles in dealer inventory in order to be able to deliver these 
vehicles to a purchaser or lessee. We believe that this is highly 
unlikely. In general, dealers are not able to design remedies or to 
fabricate the necessary parts. And, if a dealer were to follow this 
course of action, it would face the possibility of manufacturer 
sanctions, as well as potential tort liability if the ``remedy'' did 
not function properly.

[[Page 34958]]

Rulemaking Analyses and Notices

1. Executive Order 12866 (Federal Regulation) and DOT Regulatory 
Policies and Procedures

    NHTSA has considered the impact of this rulemaking under Executive 
Order 12866 and the Department of Transportation's regulatory policies 
and procedures, and determined that it is not a ``significant 
regulatory action'' within the meaning of Sec. 3 of E.O. 12866 and is 
not ``significant'' within the meaning of the Department of 
Transportation regulatory policies and procedures.
    Manufacturers are currently required by statute to notify their 
dealers and distributors of safety defects and noncompliances. 49 
U.S.C. 30116, 30118(b) and (c), and 30119(d)(4). Dealer notification 
must be within a ``reasonable time.'' 49 U.S.C. 30119(c)(2). This final 
rule restates that requirement, adding only that in the event that 
NHTSA disagrees with the manufacturer's assessment of what time period 
is reasonable, the agency's determination will control.
    The agency anticipates, based on past experience, that there will 
be few disagreements on this issue. In any event, an agency directive 
requiring a manufacturer to accelerate its dealer notification will not 
impose any additional costs directly on the manufacturer, since the 
notification would eventually have to be made anyway.
    NHTSA recognizes that an embargo on dealer deliveries of defective 
or noncompliant vehicles following the receipt of a notification from a 
manufacturer can impose costs, and that these costs could be relatively 
high if many vehicles are affected or if there is a significant delay 
in developing and implementing a remedy for the defect or 
noncompliance. (This would not apply in the context of recalled 
equipment, since that equipment must be repurchased pursuant to 49 
U.S.C. 30116(a)(1).) However, these costs would ultimately be borne by 
the manufacturers, either through contractual provisions or pursuant to 
49 U.S.C. 30116(b), which requires manufacturers to provide, among 
other things, ``reasonable reimbursement of at least one percent a 
month of the price paid prorated from the date of notice of 
noncompliance or defect to the date the motor vehicle [is remedied].''
    To the extent that agency actions pursuant to this rule impose 
additional costs, those costs would be outweighed by the safety benefit 
of ensuring that dealers do not deliver new motor vehicles or items of 
replacement equipment containing safety-related defects or 
noncompliances before the defect or noncompliance has been remedied, as 
required by 49 U.S.C. 30120(i) and (j). Moreover, any impacts are 
likely to be minimal, because manufacturers will have an incentive to 
develop and provide a remedy as soon as possible.

2. Regulatory Flexibility Act

    The agency has also considered the effects of this rulemaking 
action under the Regulatory Flexibility Act (5 U.S.C. 601 et seq.). I 
certify that this proposed rule will not have a significant economic 
impact on a substantial number of small entities.
    The new regulatory requirements would apply directly only to 
manufacturers of motor vehicles and items of motor vehicle equipment 
that conduct safety recalls, which for the most part are not small 
businesses. Moreover, manufacturers are already required by statute to 
notify their dealers of defects and noncompliances in their products. 
In rare cases, manufacturers may be required to send notification to 
dealers earlier than the manufacturer had proposed. Since manufacturers 
will generally have all of the required information at the time the 
notification is required, such a requirement will not impose a 
significant burden on manufacturers.
    As noted above, a notification could have an adverse effect on 
dealers, most of whom are small businesses, in that the dealers would 
be prohibited from delivering defective or noncompliant new vehicles or 
equipment items in their inventory until they have been remedied. 
However, for the reasons described above, the costs associated with 
such a delay would almost certainly be borne by the manufacturer. In 
any event, such costs are the result of requirements imposed by 49 
U.S.C. 30120(i) and (j), not this rule. Moreover, any impacts are 
likely to be minimal, because manufacturers will have an incentive to 
develop and provide a remedy as soon as possible. Finally, any such 
impacts would be offset by the safety benefits associated with 
preventing the delivery of defective or noncompliant vehicles or 
equipment items.

3. National Environmental Policy Act

    In accordance with the National Environmental Policy Act of 1969, 
the agency has analyzed the environmental impacts of this rulemaking 
action and determined that implementation of this action would not have 
a significant impact on the quality of the human environment. The new 
notification requirements will not introduce any new or harmful matter 
into the environment.

4. Paperwork Reduction Act

    This rule contains provisions which are considered to be 
information collection requirements as that term is defined by the 
Office of Management and Budget (OMB) in 5 CFR part 1320.
    Pursuant to the Paperwork Reduction Act of 1995 (PRA), and OMB's 
regulation at 5 CFR 1320.5(b)(2), NHTSA will seek approval from OMB for 
an amendment to a previously approved information collection 
requirement (OMB control number 2127-0004).
    Pursuant to the OMB regulations, the agency had issued a notice 
seeking public comment on the PRA burdens of the requirements that had 
been proposed in the original NPRM. See 62 FR 63598 (December 1, 1997). 
Since many of the provisions of the final rule are significantly 
different from those in the original NPRM, we have prepared and sent to 
the Federal Register another notice seeking comments on PRA burdens 
associated with the revised provisions.

5. Executive Order 13132 (Federalism)

    This action has been analyzed in accordance with the principles and 
criteria contained in Executive Order 13132, and we have determined 
that the rulemaking does not have sufficient federalism implications 
under that order.

6. Unfunded Mandates Reform

    This rule will not impose any unfunded mandates under the Unfunded 
Mandates Reform Act of 1995 or under Executive Order 12875. It does not 
result in costs of $100 million or more to either State, local or 
tribal governments, in the aggregate, or to the private sector; and is 
the least burdensome alternative that achieves the objective of the 
proposed rule.

7. Civil Justice Reform Act

    The proposed rule will not have a retroactive or preemptive effect. 
Judicial review of the proposed rule may be obtainable under 5 U.S.C. 
702. That section does not require that a petition for reconsideration 
be filed prior to seeking judicial review.

List of Subjects

49 CFR Part 573

    Defect and Noncompliance Responsibility and Reports.

[[Page 34959]]

49 CFR Part 577

    Defect and Noncompliance Notification.

0
In consideration of the foregoing, parts 573 and 577 of title 49 of the 
Code of Federal Regulations are amended to read as follows:

PART 573--DEFECT AND NONCOMPLIANCE RESPONSIBILITY AND REPORTS

0
1. The authority citation for part 573 is revised to read as follows:

    Authority: 49 U.S.C. 30102, 30103, 30116-30121, 30166; 
delegation of authority at 49 CFR 1.50.


0
2. Section 573.1 is revised to read as follows:


Sec.  573.1  Scope.

    This part:
    (a) Sets forth the responsibilities under 49 U.S.C. 30116-30121 of 
manufacturers of motor vehicles and motor vehicle equipment with 
respect to safety-related defects and noncompliances with Federal motor 
vehicle safety standards in motor vehicles and items of motor vehicle 
equipment; and
    (b) Specifies requirements for--
    (1) Manufacturers to maintain lists of owners, purchasers, dealers, 
and distributors notified of defective and noncomplying motor vehicles 
and motor vehicle original and replacement equipment,
    (2) Reporting to the National Highway Traffic Safety Administration 
(NHTSA) defects in motor vehicles and motor vehicle equipment and 
noncompliances with motor vehicle safety standards prescribed under 
part 571 of this chapter, and
    (3) Providing quarterly reports on defect and noncompliance 
notification campaigns.

0
3. Section 573.6 is amended by revising paragraph (c)(8)(ii) to read as 
follows:


Sec.  573.6  Defect and noncompliance information report.

* * * * *
    (c) * * *
    (8) * * *
    (ii) The estimated date(s) on which it will begin sending 
notifications to owners, and to dealers and distributors, that there is 
a safety-related defect or noncompliance and that a remedy without 
charge will be available to owners, and the estimated date(s) on which 
it will complete such notifications (if different from the beginning 
date). If a manufacturer subsequently becomes aware that either the 
beginning or the completion dates reported to the agency for any of the 
notifications will be delayed by more than two weeks, it shall promptly 
advise the agency of the delay and the reasons therefore, and furnish a 
revised estimate.
* * * * *

0
4. Section 573.8 is amended by revising the title of the section and by 
revising paragraph (a) to read as follows:


Sec.  573.8  Lists of purchasers, owners, dealers, distributors, 
lessors, and lessees.

    (a) Each manufacturer of motor vehicles shall maintain, in a form 
suitable for inspection such as computer information storage devices or 
card files, a list of the names and addresses of registered owners, as 
determined through State motor vehicle registration records or other 
sources or the most recent purchasers where the registered owners are 
unknown, for all vehicles involved in a defect or noncompliance 
notification campaign initiated after the effective date of this part. 
The list shall include the vehicle identification number for each 
vehicle and the status of remedy with respect to each vehicle, updated 
as of the end of each quarterly reporting period specified in Sec.  
573.7. Each vehicle manufacturer shall also maintain such a list of the 
names and addresses of all dealers and distributors to which a defect 
or noncompliance notification was sent. Each list shall be retained for 
5 years, beginning with the date on which the defect or noncompliance 
information report required by Sec.  573.6 is initially submitted to 
NHTSA.
* * * * *

PART 577--DEFECT AND NONCOMPLIANCE NOTIFICATION

0
5. The authority citation for part 577 is revised to read as follows:

    Authority: 49 U.S.C. 30102, 30103, 30116-30121, 30166; 
delegations of authority at 49 CFR 1.50 and 49 CFR 501.8.


0
6. Section 577.1 is revised to read as follows:


Sec.  577.1  Scope.

    This part sets forth requirements for manufacturer notification to 
owners, dealers, and distributors of motor vehicles and items of 
replacement equipment about a defect that relates to motor vehicle 
safety or a noncompliance with a Federal motor vehicle safety standard.

0
7. Section 577.2 is amended by adding a new sentence at the end to read 
as follows:


Sec.  577.2  Purpose.

    * * * It is also to ensure that dealers and distributors of motor 
vehicles and items of replacement equipment are made aware of the 
existence of defects and noncompliances and of their rights and 
responsibilities with regard thereto.

0
8. Section 577.7 is amended by adding new paragraphs (c) and (d) to 
read as follows:


Sec.  577.7  Time and manner of notification.

* * * * *
    (c) The notification required by Sec. 577.13 shall--
    (1) Be furnished within a reasonable time after the manufacturer 
decides that a defect that relates to motor vehicle safety or a 
noncompliance exists. The notification shall be provided in accordance 
with the schedule submitted to the agency pursuant to 49 CFR 
573.6(c)(8)(ii), unless that schedule is modified by the Administrator. 
The Administrator may direct a manufacturer to send the notification to 
dealers on a specific date if the Administrator finds, after 
consideration of available information and the views of the 
manufacturer, that such notification is in the public interest. The 
factors that the Administrator may consider include, but are not 
limited to, the severity of the safety risk; the likelihood of 
occurrence of the defect or noncompliance; the time frame in which the 
defect or noncompliance may manifest itself; availability of an interim 
remedial action by the owner; whether a dealer inspection would 
identify vehicles or items of equipment that contain the defect or 
noncompliance; and the time frame in which the manufacturer plans to 
provide the notification and the remedy to its dealers.
    (2) Be accomplished--
    (i) In the case of a notification required to be sent by a motor 
vehicle manufacturer, by certified mail, verifiable electronic means 
such as receipts or logs from electronic mail or satellite distribution 
system, or other more expeditious and verifiable means to all dealers 
and distributors of the vehicles that contain the defect or 
noncompliance.
    (ii) In the case of a notification required to be sent by a 
manufacturer of replacement equipment or tires, by certified mail, 
verifiable electronic means such as receipts or logs from electronic 
mail or satellite distribution system, or other more expeditious and 
verifiable means to all dealers and distributors of the product that 
are known to the manufacturer.
    (iii) In those cases where a manufacturer of motor vehicles or 
items

[[Page 34960]]

of motor vehicle equipment provided the recalled product(s) to a group 
of dealers or distributors through a central office, notification to 
that central office will be deemed to be notice to all dealers and 
distributors within that group.
    (iv) In those cases in which a manufacturer of motor vehicles or 
items of motor vehicle equipment has provided the recalled product to 
independent dealers through independent distributors, the manufacturer 
may satisfy its notification responsibilities by providing the 
information required under this section to its distributors. In such 
cases, the manufacturer must also instruct those distributors to 
transmit a copy of the manufacturer's notification to known 
distributors and retail outlets along the distribution chain within 
five working days from its receipt.
    (d) Notwithstanding paragraph (c)(1) of this section, where the 
recall is being conducted pursuant to an order issued by the 
Administrator under 49 U.S.C. 30118(b), notification required by 
Sec. 577.13 shall be given on or before the date prescribed in the 
Administrator's order.

0
9. A new Sec.  577.13 is added to read as follows:


Sec.  577.13  Notification to dealers and distributors.

    (a) The notification to dealers and distributors of a safety-
related defect or a noncompliance with a Federal motor vehicle safety 
standard shall contain a clear statement that identifies the 
notification as being a safety recall notice, an identification of the 
motor vehicles or items of motor vehicle equipment covered by the 
recall, a description of the defect or noncompliance, and a brief 
evaluation of the risk to motor vehicle safety related to the defect or 
noncompliance. The notification shall also include a complete 
description of the recall remedy, and the estimated date on which the 
remedy will be available. Information required by this paragraph that 
is not available at the time of the original notification shall be 
provided as it becomes available.
    (b) The notification shall also include an advisory stating that it 
is a violation of Federal law for a dealer to deliver a new motor 
vehicle or any new or used item of motor vehicle equipment (including a 
tire) covered by the notification under a sale or lease until the 
defect or noncompliance is remedied.
    (c) For notifications of defects or noncompliances in items of 
motor vehicle equipment (including tires), the notification shall 
contain the manufacturer's offer to repurchase the items that remain in 
dealer or distributor inventory at the price paid by the dealer or 
distributor, plus transportation charges and reasonable reimbursement 
of at least one per cent a month, prorated from the date of 
notification to the date of repurchase, or as otherwise agreed to 
between the manufacturer and the dealer or distributor.
    (d) The manufacturer shall, upon request of the Administrator, 
demonstrate that it sent the required notification to each of its known 
dealers and distributors and the date of such notification.

    Issued on: June 16, 2004.
Jeffrey W. Runge,
Administrator.
[FR Doc. 04-14072 Filed 6-22-04; 8:45 am]
BILLING CODE 4910-59-P