[Federal Register Volume 71, Number 1 (Tuesday, January 3, 2006)]
[Notices]
[Pages 166-168]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-8152]


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DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

[Docket No. NHTSA-2005-20288, Notice 2]


Cross Lander USA; Grant of Application for a Temporary Exemption 
From Federal Motor Vehicle Safety Standard No. 208

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

ACTION: Grant of Application for a Temporary Exemption from S4.2 and 
S14 of Federal Motor Vehicle Safety Standard No. 208.

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SUMMARY: This notice grants the Cross Lander USA (``Cross Lander'') 
application for a temporary exemption from the requirements of S4.2 and 
S14 of Federal Motor Vehicle Safety Standard (FMVSS) No. 208, Occupant 
crash protection. The exemption applies to the Cross Lander 244X 
vehicle line. In accordance with 49 CFR part 555, the basis for the 
grant is that compliance would cause substantial economic hardship to a 
manufacturer that has tried in good faith to comply with the standard.

DATES: The exemption from S4.2 and S14 of FMVSS No. 208, Occupant crash 
protection, is effective from December 1, 2005 until May 1, 2008.

FOR FURTHER INFORMATION CONTACT: George Feygin in the Office of Chief 
Counsel, NCC-112, (Phone: 202-366-2992; Fax 202-366-3820; E-Mail: 
[email protected]).

I. Background

    Cross Lander, a Nevada corporation, owns a Romanian vehicle 
manufacturer ARO, S.A., which manufactures multipurpose passenger 
vehicles built for extreme off road conditions.\1\ According to the 
petitioner, this vehicle was formerly used by Romanian military. Cross 
Lander intends to import and distribute this vehicle, named the Cross 
Lander 244X (``244X''), in the United States. A detailed description of 
the 244X is set forth in their petition (Docket No. NHTSA-2005-20288-
1). For additional information on the 244X, please go to http://www.crosslander4x4.com/.
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    \1\ To view the petition and other supporting documents, please 
go to: http://dms.dot.gov/search/searchFormSimple.cfm (Docket No. 
NHTSA-2005-20288).
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    In preparing the 244X for sale in the United States, Cross Lander 
anticipated that the Gross Vehicle Weight Rating (GVWR) of the 244X 
would exceed 5,500 pounds, which would exclude the vehicles from the 
air bag requirements specified in S4.2 and S14 of FMVSS No. 208. 
However, because of an unexpected change in the choice of engine used 
in the 244X, the GVWR of the 244X is less than 5,500 pounds, and it is 
thus subject to the requirements in S4.2 and S14. Because a heavier 
vehicle would not have been subject to the applicable air bag 
requirements, the petitioner was not prepared to equip the 244X with a 
suitable air bag system. According to the petitioner, the cost of 
making the 244X compliant with FMVSS No. 208 on short notice is beyond 
the company's current capabilities. Thus, Cross Lander requests a 
three-year exemption in order to develop a compliant automatic 
restraint system.
    As described below, the petitioner seeks a temporary exemption 
because despite its good faith efforts, it cannot bring the 244X into 
compliance with the applicable air bag requirements without

[[Page 167]]

incurring substantial economic hardship.

II. Why Compliance Would Cause Substantial Economic Hardship and How 
Cross Lander Has Tried in Good Faith To Comply With FMVSS No. 208 and 
the Bumper Standard

    Because the ``advanced'' air bag requirements specified in S14 of 
FMVSS No. 208 become effective September 1, 2006, Cross Lander intends 
to concentrate all its efforts on developing an ``advanced'' air bag 
system. Cross Lander chose Siemens as its air bag supplier. According 
to the petitioner, equipping the 244X with advanced air bags will 
require significant time and resources necessary to redesign the 
vehicle interior and for laboratory testing and sensor calibration. The 
estimated cost of developing an advanced air bag system is $2 to $3 
million.\2\ Further, the project would take approximately 24 months and 
cannot begin until Cross Lander is assured of an immediate source of 
revenue. That is, because Cross Lander has no current vehicles for sale 
in the United States, the petitioner states that it is impossible to 
finance this project without a source of revenue. The petitioner 
contends that a three-year exemption from the current, as well as the 
``advanced'' air bag requirements would allow it to successfully 
develop a suitable air bag system.
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    \2\ See Siemens Report, Attachment 2 (Docket No. NHTSA-2005-
20288-3).
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    The petition and supplements filed by the petitioner indicate that 
Cross Lander has invested over $3 million into the company. According 
to the petitioners, the total investment will reach $34,000,000 by the 
time the 244X will be offered for sale in the U.S. The petitioner 
states that an immediate exemption is crucial to the survival of Cross 
Lander because it must begin selling 244X immediately in order to 
generate a cash flow that can support the company's continued 
existence.
    The petitioner's financial statements indicate a net loss of 
$673,079 for the fiscal year ending 12/31/2002, and a net loss of 
$523,676 for the fiscal year ending 12/31/2003. The petitioner stated 
that its 2004 net loss is $5,069,185.00. The petitioner provided the 
following summary of the financial consequences of failure to obtain a 
temporary exemption from the requirements of FMVSS No. 208:

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                2005                                  2006                                  2007
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                                           Assuming Grant of Petition
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Net loss of $108,000                  Net profit of $14,000,000             Net profit of $30,000,000
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                                           Assuming Denial of Petition
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Net loss of $8,500,000                Net loss of $8,000,000                Net loss of $8,500,000
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III. Comments Regarding the Cross Lander Petition.

    The National Highway Traffic Safety Administration (NHTSA) 
published a notice of receipt of the application on February 9, 2005, 
and afforded an opportunity for comment.\3\ The agency received two 
comments from Public Citizen.\4\ A short description of the comments 
follows.
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    \3\ See 70 FR 6924.
    \4\ See Docket Nos. NHTSA-2005-20288-7, NHTSA-2005-20288-9.
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    Public Citizen argues that the petitioner has not sufficiently 
demonstrated financial hardship, and that a grant of exemption would 
not be in the public interest. First, Public Citizen argues that the 
financial burdens associated with complying with the air bag 
requirements are not covered by the ``substantial economic hardship'' 
statutory provision. Second, Public Citizen argues that because a 
financial hardship exemption could affect a large number of vehicles, a 
grant of the petition would not be in the public interest. Third, 
Public Citizen argued that the petitioner downplayed the safety 
benefits associated with air bags. Fourth, Public Citizen expressed 
concerns that the 244X vehicles would be used primarily for common 
transportation by the vast majority of buyers, and not off-road, as 
indicated by the petitioner.

IV. The Agency's Findings

    Cross Lander is not significantly different from small volume 
manufacturers who have received temporary exemptions in the past on 
hardship grounds. Although Cross Lander has negotiated with an air bag 
manufacturer for the design and testing of an air bag system for its 
vehicle, they contend that completion of the air bag development is not 
economically viable without additional revenue generated through 
immediate sales of the 244X in the United States. In evaluating the 
petitioner's current situation, the agency finds that to require 
immediate compliance with FMVSS No. 208 would cause the petitioner 
substantial economic hardship, and could even result in the company 
going out of business. The agency concludes that the petitioner's 
application for a temporary exemption demonstrates the requisite 
financial hardship.
    The term of this exemption will be limited to less than three years 
and the agency anticipates that the 244X will be sold in limited 
quantities. In total, we anticipate that Cross Lander will not sell

[[Page 168]]

more than 9,000 vehicles.\5\ We anticipate that with the help of 
revenues derived from U.S. sales, Cross Lander will be able to 
introduce a fully compliant vehicle by the time this exemption expires. 
The agency notes that, according to the petitioner, the 244X complies 
with all other applicable Federal motor vehicle safety standards.
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    \5\ See NHTSA-2005-20288-11.
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    We note that under 49 CFR 555.9(b) and (c), the petitioner will be 
required to indicate on the vehicle certification label, and on a 
separate label affixed to the windshield or the side window, that the 
244X does not comply with FMVSS No. 208. In addition to the required 
labeling, the petitioner agreed to affix additional labeling to each 
vehicle. This supplemental labeling would read as follows:

 
 
 
                                 Notice
 THIS VEHICLE DOES NOT CONTAIN AN AIR BAG AND WAS EXEMPTED FROM FEDERAL
MOTOR VEHICLE SAFETY STANDARD 208 REGARDING OCCUPANT PROTECTION WITH AIR
       BAGS. IT WAS EXEMPTED PURSUANT TO NHTSA EXEMPTION NO * * *
 
                               WARNING !!
   TO AVOID SERIOUS INJURIES IN ALL TYPES OF CRASHES, ALWAYS WEAR YOUR
                              SAFETY BELTS
 

    The supplemental labeling will take the place of air bag warning 
labels required by FMVSS 208, and will be affixed to the sun visor.\6\
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    \6\ See Docket No. NHTSA-2005-20288-3, pages 9 and 11.
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    Contrary to Public Citizen's comments, we believe that the 
petitioner has demonstrated financial hardship. As a part of its 
application, the petitioner submitted detailed financial information. 
While most of this information has been granted confidential treatment 
and is not being published in this notice, the agency examined all the 
information submitted to the agency and concluded that the petitioner 
has experienced financial hardship as evidenced by net losses in all of 
the past 3 years. We further note that an exemption from the air bag 
requirements is consistent with the agency's previous financial 
hardship exemptions granted to Lotus, Saleen, and Spyker.\7\ Finally, 
we note that the information submitted by the petitioner indicates that 
sales of their vehicles are unlikely to exceed 9,000 vehicles for the 
duration of the exemption.
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    \7\ We also note that Spyker, like Cross Lander, was a start-up 
manufacturer without prior U.S. presence.
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    Public Citizen made a variety of arguments against granting this 
exemption. However, we believe that our decision is consistent with 
Congressional intent to allow the Secretary to temporarily exempt small 
volume manufacturers from a given standard when compliance with that 
standard would cause substantial economic hardship.
    In consideration of the foregoing, it is hereby found that 
compliance with the requirements of Paragraphs S4.2 and S14 of Federal 
Motor Vehicle Safety Standard (FMVSS) No. 208, Occupant crash 
protection would cause substantial economic hardship to a manufacturer 
that has tried in good faith to comply with the standard. It is further 
found that the granting of an exemption would be in the public 
interest.
    In accordance with 49 U.S.C. 30113(b)(3)(B)(i), Cross Lander is 
granted NHTSA Temporary Exemption No. EX 05-3, from Paragraphs S4.2 and 
S14 of Federal Motor Vehicle Safety Standard (FMVSS) No. 208, Occupant 
crash protection. The exemption shall remain in effect until May 1, 
2008.

    Authority: 49 U.S.C. 30113; delegation of authority at 49 CFR 
1.50 and 501.8.

    Issued on: December 23, 2005.
Gregory Walter,
Senior Associate Administrator for Policy and Operations.
[FR Doc. E5-8152 Filed 12-30-05; 8:45 am]
BILLING CODE 4910-59-P