[Federal Register Volume 69, Number 159 (Friday, October 8, 2004)]
[Rules and Regulations]
[Pages 60316-60319]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-22749]


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DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

49 CFR Part 571

[Docket No. NHTSA-04-19284]


Federal Motor Vehicle Safety Standards; Occupant Crash Protection

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

ACTION: Denial of petition for reconsideration.

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SUMMARY: The agency denies Porsche's petition for reconsideration of 
the agency's May 5, 2003 final rule expanding the limited line 
manufacturer

[[Page 60317]]

exemption from the advanced air bag phase-in requirements published on 
May 12, 2000, and amended January 6, 2003. In the petition for 
reconsideration, Porsche requested that NHTSA reconsider its position 
that advanced credits are not available to manufacturers taking 
advantage of the exemption. The agency is denying the petition because 
it does not believe manufacturers who can advance vehicle production 
sufficiently to use credits need the relief provided by the limited 
line manufacturer exception, and that further relief for limited line 
manufacturers is not merited.

FOR FURTHER INFORMATION CONTACT: For non-legal issues, you may call Mr. 
Louis Molino, Office of Crashworthiness Standards, NVS-112, telephone 
(202) 366-2264, facsimile (202) 493-2739.
    For legal issues, you may call Mr. Christopher M. Calamita of the 
NHTSA Office of the Chief Counsel, NCC-112, telephone (202) 366-2992, 
facsimile (202) 366-3820.
    You may send mail to both of these officials at National Highway 
Traffic Safety Administration, 400 Seventh Street, SW., Washington, DC 
20590.

SUPPLEMENTARY INFORMATION: On May 12, 2000, we published in the Federal 
Register (65 FR 30680) a rule to require advanced air bags. (Docket No. 
NHTSA 00-7013; Notice 1.) The rule amended Standard No. 208, Occupant 
Crash Protection, to require that future air bags be designed so that, 
compared to air bags then installed in production vehicles, they create 
less risk of serious air bag-induced injuries and provide improved 
frontal crash protection for all occupants, by means that include 
advanced air bag technology. The rule is being phased in during two 
stages. During the first phase-in, from September 1, 2003, through 
August 31, 2006, increasing percentages of motor vehicles are required 
to meet requirements for minimizing air bag risks.
    As initially adopted, the rule would have required that the 
majority of vehicle manufacturers meet the following phase-in 
requirements: 9/1/03 through 8/31/04--35 percent; 9/1/04 through 8/31/
05--65 percent; 9/1/05 through 9/1/06--100 percent, with manufacturers 
allowed to use credits for early compliance. Effective September 1, 
2006, all vehicles thereafter manufactured must comply with the 
advanced air bag technologies; credits for early compliance are not 
permitted. On January 31, 2003, NHTSA published a final rule that 
adjusted the first year of the phase-in to 20 percent (68 FR 4961).
    On May 5, 2003 NHTSA published another final rule that expanded the 
limited line manufacturer exception to the first advanced air bag 
phase-in schedule (68 FR 23614). We decided to amend the definition of 
a limited line manufacturer for purposes of the first phase-in only, to 
a manufacturer that produces three or fewer carlines, as that term is 
defined in 49 CFR 583.4, for sale or distribution in the United States. 
We also decided to exclude a limited line manufacturer from the first 
two years of the first phase-in, with full compliance required in the 
third year. Without this relief, a limited line manufacturer, then 
defined as a manufacturer that produces two or fewer lines, would have 
been required to achieve 100% compliance by the second year of the 
phase-in, a point at which other manufacturers need only certify 65% of 
their fleet. NHTSA reiterated that no credits for early compliance were 
allowed. NHTSA stated its belief that such additional relief was not 
justified, since a limited line manufacturer that was able to take 
advantage of early credits could design its product plans to meet the 
relaxed phase-in requirements and should not be able to take advantage 
of one element of a compliance system it has opted not to pursue.
    Porsche submitted a petition for reconsideration of the May 5, 2003 
final rule, asking NHTSA to reconsider its position on early credits 
for limited line manufacturers opting out of the phase-in schedule. In 
its petition, Porsche stated that without advanced credits it would be 
prohibited from selling a small number of highly specialized ``niche'' 
vehicles in the United States from September 1, 2005, through August 
31, 2006. It went on to claim that it could not simply advance 
production of those vehicles intended for the U.S. market to some time 
prior to September 1, 2005, in order to certify those vehicles to the 
older air bag requirements and then sell the vehicles after that date 
because the manufacturing process is so specialized as to preclude 
stockpiling of a portion of the fleet for future sales.
    Porsche based its petition on four arguments, three of which were 
based on a mistaken belief that NHTSA had changed its position on 
advanced credits for limited line manufacturers in the May 5, 2003 
final rule. First, Porsche stated that eliminating credits would remove 
its niche vehicles from the marketplace, while allowing larger 
manufacturers to continue production of their niche vehicles, without 
modification, until September 1, 2006. Second, it averred that NHTSA 
based it's decision to eliminate credits on an assumption, first 
articulated in the May 5, 2003 final rule (i.e., that credits were not 
needed by limited line manufacturers because such manufacturers that 
were able to generate credits by producing compliant vehicles could 
likely meet the phase-in schedule), which is based on incorrect 
assumptions, i.e., that a manufacturer of three or fewer carlines would 
be able to fully meet a 20-65-100% phase-in schedule if it was able to 
certify one or more of its carlines as advanced air bag compliant prior 
to September 1, 2005. Third, Porsche claimed that NHTSA had failed to 
provide notice before eliminating advanced credits. Finally, Porsche 
argued that not allowing advanced credits was directly contrary to the 
mandate in the Transportation Equity Act (TEA-21, 112 Stat. 466, June 
9, 1998) that credits be allowed for those manufacturers exceeding the 
phase-in requirements of an advanced air bag final rule. For the 
reasons discussed below, NHTSA rejects each of Porsche's arguments.
    As an initial matter, NHTSA believes it is beneficial to explain 
its position on limited line manufacturers, phase-ins, and advanced 
credits related to phase-ins. S14.1(a) and S14.3(a) of FMVSS No. 208 
each specify a general phase-in schedule for vehicles certified to the 
standard's advanced air bag requirements: the first for vehicles 
manufactured prior to September 1, 2006, and the second for vehicles 
manufactured between September 1, 2007, and August 31, 2010. As noted 
in Porsche's petition for reconsideration, Sec.  7103 of TEA-21 
directed NHTSA to adopt a phase-in schedule that commenced no later 
than September 1, 2003, and that resulted in every vehicle subject to 
the advanced air bag requirements and manufactured on or after 
September 1, 2006 being certified to those requirements.
    At its discretion, NHTSA decided to bifurcate the advanced air bag 
requirements and to establish a phase-in schedule for each of the two 
sets of requirements. NHTSA excluded three types of vehicle 
manufacturers from each of the two phase-ins because it recognized that 
these types of manufacturers faced certain hardships not faced by the 
larger manufacturers. Under the May 12, 2000 final rule, manufacturers 
of vehicles built in two or more stages and small volume manufacturers 
are not required to certify any of their vehicles to the advanced air 
bag requirements before the final effective date of those requirements, 
i.e., September 1, 2006 (S14.1 (c) and (d)) and September 1, 2010 
(S14.3(c) and (d)). NHTSA recognized that these

[[Page 60318]]

manufacturers, because of their very small size, possess virtually no 
bargaining power with air bag suppliers, who the agency expected would 
be primarily engaged in satisfying the needs of larger manufacturers.
    In addition, a manufacturer falling within the definition of a 
``limited line manufacturer'' may decide to opt out of the general 
phase-in requirement as long as one hundred percent of the vehicles it 
makes for the U.S. market are certified as compliant with the 
applicable advanced air bag requirements by a specified date, i.e., 
September 1, 2005 (as amended by the May 5, 2003 final rule) and 
September 1, 2008 (S14.1(b) and S14.3(b), respectively). This provision 
was created because NHTSA believed it was unreasonable to expect 
limited line manufacturers to certify a greater percentage of their 
fleet to the advanced air bag requirements than was required of 
manufacturers of more carlines. NHTSA's analysis was based on the 
presumption that a limited line manufacturer would certify an entire 
vehicle line to the advanced air bag requirements, creating a 
compliance burden of half of their carlines in the first year of the 
phase-in. This would likely represent much more than 35% of their 
production. Larger manufacturers would have borne a first year 
compliance burden of 35% under the May 12, 2000 final rule.
    No alternative phase-in schedule was adopted for any manufacturers 
falling within one of these three groups. Rather, each manufacturer 
type was exempted from the phase-in requirements adopted by NHTSA and 
mandated generally by TEA-21. As specified by the regulatory text of 
S14.1(a) and S14.3(a), only those manufacturers that comply with the 
phase-in requirements are entitled to advanced credits.\1\
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    \1\ Section 7103(5) of TEA-21 states: ``To encourage early 
compliance, the Secretary is directed to include in the notice of 
proposed rulemaking required by paragraph (1) means by which 
manufacturers may earn credits fro future compliance. Credits, on a 
one-vehicle for one-vehicle basis, may be earned for vehicles 
certified as being in full compliance under section 30115 of title 
29, United States Code, with the rule required by paragraph (2) 
which are either--
    (A) So certified in advance of the phase-in period; or
    (B) In excess of the percentage requirements during the phase-in 
period.
    NHTSA does not believe this provision requires the agency to 
allow advance credits for manufacturers exempted from the mandated 
phase-in requirements.
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    Porsche's assertion that the agency has changed its position on 
advanced credits without notice and contrary to congressional intent is 
incorrect. The language in TEA-21 regarding advanced credits is 
directly linked to the phase-in also mandated by TEA-21. It does not 
specify that advanced credits must be provided for those manufacturers 
excluded from the phase-in requirements. Additionally, the explanation 
of the limited line manufacturer exception provided in the preamble of 
both the NPRM and the final rule never discussed the possibility of 
advanced credits and noted that under the exception, full compliance 
would be required for these manufacturers before it was required for 
those manufacturers meeting the more stringent phase-in requirements.
    Although the regulatory text has always provided that advanced 
credits are only available to manufacturers meeting the advanced air 
bag phase-in requirements, the issue of the relationship between the 
limited line manufacturer and advanced credits was fully addressed for 
the first time in the May 5, 2003 final rule. In the original NPRM 
proposing the new advanced air bag requirements, NHTSA stated that the 
exemption from the phase-in schedule was limited to manufacturers of 
two or fewer carlines because larger manufacturers could theoretically 
exempt themselves from the entire first year of the phase-in. The 
agency then went on to note ``[h]owever, the agency doubts that any 
full-line vehicle manufacturers would want to take advantage of the 
alternative, given the need to achieve full compliance by September 1, 
2003.'' (63 FR 49958, 49978; September 18, 1998). All portions of the 
industry were on notice, as early as 1998, that parties choosing to use 
the limited line manufacturer alternative would not be entitled to the 
panoply of discretion provided to larger manufacturers. Rather, in 
exchange for not having to produce any compliant vehicles during the 
first year of the phase-in, full compliance would be required effective 
the first day of the second year of the phase-in. In the May 12, 2000 
final rule, NHTSA reiterated that the limited carline exception 
relieved those manufacturers choosing to take advantage of it from the 
first year of the phase-in, but that full compliance would be required 
as of September 1, 2004, one year after the commencement of the phase-
in. Never did the agency discuss the possibility that advanced or 
carryover credits would be available for these manufacturers.
    We have decided against expanding the advanced credit provisions 
because we continue to believe that such relief is unnecessary and 
would unduly favor limited line manufacturers. We note that limited 
line manufacturers have already been given substantial relief under 
both the May 12, 2000 final rule and the May 5, 2003 amendment to that 
rule. While manufacturers of more than three carlines are allowed to 
use advanced credits to reach 100% compliance in the third year of the 
phase-in, they must also meet the 20% and 65% phase-in requirements 
during the first two years, a burden from which limited line 
manufacturers have been relieved.
    Advanced credits are not designed to allow manufacturers to 
manipulate the phase-in schedule and, ultimately, the number of 
compliant vehicles on the road prior to September 1, 2006. Rather, 
NHTSA acknowledges that there could be some problem vehicles for which 
early sensing or deployment technology is ill-suited. Rather than force 
a strict phase-in schedule where no recognition of these vehicles would 
be allowed anywhere in the phase-in, the final rule allows 
manufacturers to accommodate these vehicles as long as they meet the 
underlying phase-in requirements.
    If NHTSA were to grant Porsche's petition and allow advanced 
credits for manufacturers using the limited line exception, it would 
provide these manufacturers with extended relief neither justified by 
their circumstances nor contemplated by the provision for advanced 
credits. For example, a limited line manufacturer could have chosen to 
certify one of its carlines as advanced air bag compliant as early as 
the first year of the phase-in. For a limited line manufacturer 
excluded from the phase-in, this compliant line would generate advanced 
credits each of the three years prior to the 100 percent compliance 
date, without any of the credits having to be used prior to that date. 
Assuming that carline represented slightly more than one-third of its 
total sales in the United States, the manufacturer could then delay all 
other vehicle changes necessary to certify the rest of its fleet to the 
advanced air bag requirements until September 1, 2006. Those 
manufacturers subject to the phase-in, however, could not adopt such an 
approach because they would have to rely on advanced credits each year 
of the phase-in. It is likely that manufacturers subject to the phase-
in would have insufficient credits left over from the first year of the 
phase-in to meet the requirements established by NHTSA for the second 
year of the phase-in.
    Alternatively, a limited line manufacturer could choose to produce 
no advanced air bag-compliant vehicles during the first year of the 
phase-in, but could choose to certify two (or even one and a half) of 
its carlines during the second year of the phase-in, and meet all of 
its certification responsibilities. As with the first option, this 
approach

[[Page 60319]]

would not be available to other manufacturers who must be able to 
certify a full 20% of their fleet in the first year of the phase-in and 
a full 65% in the second year. NHTSA finds these two alternatives 
unacceptable in that they provide a level of relief so at odds with the 
relief given to other manufacturers as to be patently unfair.
    Finally, a limited line manufacturer could choose to certify none 
of its fleet to the advanced air bag requirements until a couple of 
months before September 1, 2005, an approach that would result in very 
small numbers of advanced air bag-compliant vehicles being introduced 
earlier than currently required under the limited line manufacturer 
exception. This alternative would not result in significant numbers of 
compliant vehicles being introduced onto U.S. roads ahead of schedule, 
the only rationale for granting the relief requested by Porsche. Any 
one of these three scenarios (and doubtless others as well) would be 
permissible were NHTSA to grant Porsche's petition.
    As a practical matter, we believe granting Porsche's petition is 
unlikely to generate a sizeable number of vehicles that are certified 
to the advanced air bag requirements on U.S. roads in advance of FMVSS 
No. 208's requirements.\2\ Given the criteria for determining whether a 
particular vehicle falls within a given carline, it is unlikely that 
many manufacturers of any size would be able to qualify for the 
exemption. Second, the manufacturer would need to manufacture more than 
5,000 vehicles per year for the U.S. market. If its production numbers 
were lower than that, it could simply wait to certify any vehicles to 
the advanced air bag requirements until September 1, 2006. In its 
petition for reconsideration, Porsche indicated that it does not plan 
on introducing large numbers of advanced air bag-compliant vehicles 
into the U.S. prior to September 1, 2005. Rather, it appears that it 
would merely introduce production of such vehicles only to the extent 
necessary to receive an advanced credit for approximately 500, custom-
made vehicles. As such, the total number of vehicles likely to be 
introduced in advance of September 1, 2005, is quite small, and appears 
to be no more than a few months of production.
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    \2\ The arguable need for such credits is very limited; it 
appears that only Porsche is likely to be affected by our decision 
not to expand the availability of advanced credits, and then only if 
it can show that it manufactures no more than three carlines for the 
U.S. market.
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    As to Porsche's assertion that NHTSA's position on advanced credits 
will unfairly remove Porsche's niche vehicles from the U.S. market for 
one year while allowing larger manufacturers to use advanced credits 
for their niche vehicles, NHTSA notes that the limited line 
manufacturer exception already affords Porsche significantly more 
relief than is given to larger manufacturers. Additionally, the 
decision to use the limited line manufacturer exception, rather than 
the more stringent phase-in schedule with advanced credits, was a 
business decision left solely within Porsche's discretion. NHTSA finds 
that affording Porsche further relief is not merited.
    Accordingly, the petition for reconsideration is denied.

    Authority: 49 U.S.C. 30162; delegation of authority at 49 CFR 
1.50 and 501.8.

    Issued: October 4, 2004.
Stephen R. Kratzke,
Associate Administrator for Rulemaking.
[FR Doc. 04-22749 Filed 10-7-04; 8:45 am]
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