[Federal Register Volume 73, Number 248 (Wednesday, December 24, 2008)]
[Notices]
[Pages 79207-79221]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-30603]


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DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

[Docket No. NHTSA 2008-0113 Notice 2]


Recommended Best Importer Practices To Enhance the Safety of 
Imported Motor Vehicles and Motor Vehicle Equipment

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

ACTION: Final Notice.

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SUMMARY: This notice provides guidance concerning best practices to be 
followed by importers of motor vehicles and motor vehicle equipment to 
reduce the likelihood of importing products that contain defects 
related to motor vehicle safety or do not comply with applicable 
Federal motor vehicle safety standards.

FOR FURTHER INFORMATION CONTACT: Clint Lindsay, Office of Vehicle 
Safety Compliance, National Highway Traffic Safety Administration, 1200 
New Jersey Avenue, SE., Washington, DC 20590, (202-366-5288).

SUPPLEMENTARY INFORMATION: 

Table of Contents

I. Background

    a. National Highway Traffic Safety Administration
    b. The Interagency Working Group Report--Strategic Framework
    c. Working Group--Action Plan
II. NHTSA's Implementation of the Working Group's Recommendation on 
Best Importer Practices
III. Comments and Recommendations Requested
IV. Comments Received
    a. Support for NHTSA Guidance
    b. Voluntary Product Marking
    c. Records Maintenance
    d. Methodologies for Product Management and Development
    e. Report Submitted
V. Executive Order 12866 on ``Significant Guidance''
VI. Recommended Best Practices for Importers of Motor Vehicles and 
Motor Vehicle Equipment
    a. Fully Understand the Importer's Obligations under Motor 
Vehicle Safety Statutes and Regulations
    b. Exercise Great Care in Selecting Foreign Fabricating 
Manufacturers
    c. Inspect Foreign Manufacturing Facilities
    d. Inspect Goods Either Before They Are Exported to or 
Distributed in the United States
    e. Identify the Product
    f. Establish a Consumer Service Program
    g. Contact NHTSA Concerning Manufacturer/Importer Reporting 
Requirements, Safety Compliance, Defect Issues, and Regulations
    h. Know How to Obtain General Assistance with Other Federal 
Regulations

I. Background

a. National Highway Traffic Safety Administration

    The National Highway Traffic Safety Administration (NHTSA) 
administers the National Traffic and Motor Vehicle Safety Act of 1966, 
as amended, 49 U.S.C. chapter 301 (the Vehicle Safety Act). Under that 
authority, NHTSA issues and enforces Federal motor vehicle safety 
standards (FMVSS) that apply to motor vehicles and to certain items of 
motor vehicle equipment. NHTSA also monitors motor vehicles and items 
of motor vehicle equipment that are imported into the United States for 
compliance with applicable FMVSS. In recent years, an ever-increasing 
number of motor vehicles and motor vehicle equipment items sold in the 
United States have been imported. For example, in 1996 imported tires 
comprised just 19 percent of the 282 million tires sold that year in 
the United States. By 2006, imported tires rose to 46 percent of all 
tire sales, with 140 million tires being imported. Nearly all 
motorcycle helmets are now imported, as is the case for a large 
percentage of vehicle lighting equipment and child safety seats sold in 
this country.
    Under the Vehicle Safety Act, fabricating manufacturers (i.e., the 
actual assemblers) and importers of motor vehicles and motor vehicle 
equipment are responsible for the safety of their products that they 
manufacture for sale in or import into the United States. NHTSA has a 
standard setting and oversight/enforcement role and may issue guidance 
that provides valuable information to affected industries. U.S. 
consumers provide valuable feedback to manufacturers and to NHTSA, 
which has a hotline, 1-888-DASH-2-DOT (1-888-327-4236), for consumers 
to report safety-related problems with motor vehicles and motor vehicle 
equipment.\1\
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    \1\ Consumers may also file an online complaint concerning a 
motor vehicle, child seat, tire, or motor vehicle equipment item. 
See http://www.safercar.gov.
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    NHTSA's enforcement program has two major elements, compliance 
testing and defects investigation. As the volume of motor vehicle and 
equipment imports has increased, NHTSA's scrutiny of those imports 
through both compliance testing and defect investigations has also 
grown. However, recent experience has demonstrated that companies 
importing products regulated by NHTSA, particularly motor vehicle 
equipment, play an especially important role in ensuring that those 
items comply with the FMVSS and are not likely to be defective. At the 
same time, both NHTSA's recent experience and that of other agencies 
with regulatory authority over the safety of imported goods indicate 
that the entire importing community could benefit by following best 
practices that help ensure the safety of imported products and reduce 
the likelihood of unsafe products entering the United States.

b. The Interagency Working Group Report--Strategic Framework

    On July 18, 2007, the President issued Executive Order 13439 to 
establish the Interagency Working Group on Import Safety (the ``Working 
Group''). The Department of Transportation (DOT), including NHTSA, 
participated in the Working Group. As part of its mission, the Working 
Group identified strategies that could be pursued within existing 
resources to promote the safety of imported products. To begin 
identifying best practices for import safety, the Working Group held 
consultations with the private sector, reviewed current import safety 
procedures and methods, surveyed the authorities and practices of 
Federal agencies, and worked with the importing community. The Working 
Group recognized that U.S. importers are responsible for ensuring the 
safety of regulated products they import into the United States and 
should follow best practices to assure safety through methods that 
include: (1) Selecting foreign manufacturers to produce their products; 
(2) inspecting foreign manufacturing facilities; (3) inspecting goods 
produced on their behalf either before export or before distribution in 
the United States; (4) identifying the product's country of origin; and 
(5) safeguarding the supply chain.
    In September 2007, the Working Group published a report entitled 
``Protecting American Consumers Every Step of the Way: A Strategic 
Framework for Continual Improvement in Import Safety'' (the ``Strategic 
Framework''), which inaugurated the process of identifying action steps 
needed to enhance the safety of imported products.\2\ The Strategic 
Framework promotes a cost-effective, risk-based

[[Page 79208]]

approach to achieve this objective, and contains the following key 
principles:
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    \2\ Interagency Working Group on Import Safety, ``Protecting 
American Consumers Every Step of the Way: A strategic framework for 
continual improvement in import safety'' (Washington, DC, September 
2007) http://www.importsafety.gov/report/report.pdf.
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    (i) Prevention--Prevent harm in the first place. The Strategic 
Framework recognizes that the Federal government must work with the 
private sector and with foreign governments to adopt an approach to 
import safety that builds safety into the manufacturing and 
distribution processes;
    (ii) Intervention--Intervene when risks are identified. The 
Strategic Framework encourages Federal, state, local, and foreign 
governments, along with foreign manufacturers and the importing 
community, to adopt more effective techniques for identifying potential 
noncompliant and/or defective products. When problems are identified, 
the Strategic Framework recognizes that government officials must act 
swiftly, and in a coordinated manner, to seize, destroy or otherwise 
prevent noncompliant and/or defective products from advancing beyond 
the point-of-entry; and
    (iii) Response--Respond rapidly after harm has occurred. In the 
event that an unsafe imported product makes its way into domestic 
commerce, the Strategic Framework recommends swift action to limit 
potential exposure and harm to the American public.

c. Working Group--Action Plan

    The Working Group promised to solicit extensive comments and 
recommendations from the public, and to provide an action plan by mid-
November. On November 6, 2007, the Working Group submitted its report 
entitled ``Action Plan for Import Safety: A roadmap for continual 
improvement'' (the ``Action Plan'').\3\ The Action Plan represents the 
culmination of thousands of hours of research and analysis, as well as 
public comment received from hundreds of stakeholders. In the Action 
Plan, the Working Group presented 14 broad recommendations and 50 
specific action steps based on the key principles described above--
Prevention, Intervention, and Response. For each of these key 
principles, the Action Plan identified the cross-cutting building 
blocks that departments and agencies should use to guide their import 
safety programs. Building Block Number 2, with the subject heading 
Increase Accountability, Enforcement, and Deterrence, acknowledges that 
while it is important to remember that industry has a financial 
interest to sell safe products to consumers, all stakeholders involved 
in the production, distribution, and sale of imports must be held 
accountable to ensure that imported products meet Federal safety 
standards in the United States. The Action Plan recommended that 
Federal agencies ``work with the importing community and other members 
of the public to develop Good Importer Practices and issue guidance 
with respect to particular product categories.'' \4\ Although some 
members of the importing community have established best practices on 
their own, the majority of importers do not have available best 
practices that are focused on ensuring product safety. The Working 
Group believes that by developing best importer practices, the entire 
importing community may benefit from taking appropriate steps to ensure 
the safety of imported products and to reduce the likelihood of unsafe 
products entering the United States.
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    \3\ Interagency Working Group on Import Safety, ``Action Plan 
for Import Safety: A roadmap for continual improvement'' 
(Washington, DC, November 2007) http://www.importsafety.gov/report/actionplan.pdf.
    \4\ The Action Plan, Recommendation 3.1, pp. 20-21.
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II. NHTSA's Implementation of the Working Group's Recommendation on 
Best Importer Practices

    The Action Plan encourages Federal agencies to work with the 
importing community to develop best importer practices that will 
provide strategies for evaluating foreign manufacturers and imported 
products. The Food and Drug Administration (FDA) is in the process of 
issuing a set of Good Importer Practice recommendations on behalf of 
select Federal agencies and departments that are members of the 
Interagency Working Group on Import Safety. Those departments and 
agencies include the Consumer Product Safety Commission, the 
Environmental Protection Agency, the U.S. Department of Agriculture, 
the U.S. Department of Commerce, the U.S. Department of Health and 
Human Services, the U.S. Department of Homeland Security, and DOT. As 
the DOT representative to this working group, NHTSA has participated in 
the development of the Good Importer Practice recommendations that are 
awaiting issuance by the FDA. Those recommendations are intended to be 
generic in nature, and not specific to the products that are regulated 
by any particular Federal agency. In contrast, the recommended best 
importer practices that are the subject of this notice are specifically 
intended for importers of a particular product category, i.e., motor 
vehicles and motor vehicle equipment, the products that are regulated 
by NHTSA.
    NHTSA published in the Federal Register on July 8, 2008 (73 FR 
39078) a notice requesting public comments on the agency's recommended 
best importer practices. In today's notice, NHTSA issues in final form, 
with some changes, the suggested best practices for importers of motor 
vehicles and motor vehicle equipment that were the subject of the July 
8 notice. As stated by the agency in the July 8 notice, NHTSA is not 
establishing a binding set of rules on best practices or even 
suggesting that a single set of best practices would apply in all 
situations. The agency fully realizes that best practices may vary 
widely depending on the item being imported and the scope of an 
importer's operations. We also recognize that such practices must 
remain fluid to account for changes in safety regulations and the 
global economic environment. Importers remain free to choose the 
practices that best fit their needs in ensuring compliant and defect-
free products. Moreover, these recommended practices do not establish 
any defenses to any violations of the statutes and regulations that 
NHTSA administers.
    Consistent with the approach identified in the July 8 notice, we 
are issuing this final notice for informative purposes. We will also 
post these best importer practices on the agency's Web site for easy 
reference.

III. Comments and Recommendations Requested

    The agency specifically asked in the July 8 notice for members of 
the public, the importing community, and both foreign and domestic 
fabricating manufacturers of motor vehicles and motor vehicle equipment 
to provide comments and recommendations addressing the agency's initial 
thoughts on the suggested guidance regarding best importer practices. 
The comments that the agency received are described below, along with 
the action the agency has taken in response to each one.

IV. Comments Received

    NHTSA received comments from North American Lighting, Inc. (NAL) of 
Farmington Hills, Michigan; the Motor and Equipment Manufacturers 
Association (MEMA) of Research Triangle Park, North Carolina \5\; the 
Truck-Lite Company, Inc. (TLC) of

[[Page 79209]]

Falconer, New York; the Specialty Equipment Market Association (SEMA) 
of Washington, DC \6\; and the Ford Motor Company (Ford) of Dearborn, 
Michigan.
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    \5\ MEMA states that it represents almost 700 companies that 
manufacture motor vehicle parts for use in the light vehicle and 
heavy duty original equipment and aftermarket industries. MEMA 
represents its members through three market segment associations: 
Automotive Aftermarket Suppliers Association (AASA), Heavy Duty 
Manufacturers Association (HDMA), and Original Equipment Suppliers 
Association (OESA). MEMA states its comments are also submitted on 
behalf of the Transportation Safety Equipment Institute (TSEI) and 
the Motor Vehicle Lighting Council (MVLC)--both independent groups 
managed by MEMA.
    \6\ SEMA states it represents the $38.1 billion specialty 
equipment automotive industry. SEMA describes itself as a nonprofit 
trade association comprising nearly 7,500 companies, including 
manufacturers, distributors, installers and retailers.
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(a) Support for NHTSA Guidance

    The five commenters expressed support for NHTSA's efforts to draft 
guidance and recommended best importer practices to enhance the safety 
of imported motor vehicles and motor vehicle equipment. NAL stated, 
``[w]e support the efforts of [NHTSA] in designing a set of Best 
Importer Practices to ensure the quality of imported lighting products 
brought into the United States.'' \7\ MEMA wrote that the proposed 
guidance, ``[i]s a significant and positive step toward improving the 
safety of imported products'' and the ``[g]uidance is well-crafted and 
covers many elements that our industry agrees are integral to a 
comprehensive and understandable set of best practices for importers.'' 
MEMA added that it ``[s]upports the action by NHTSA to issue this 
proposed guidance'' and believes that ``[i]ssuing guidance on best 
practices sends the right message to the automotive and equipment 
industry--to practice due diligence, be responsible, and be 
compliant.'' \8\ The TLC stated, ``[w]e appreciate the agency's efforts 
to provide best practices guidance on imported products.'' \9\ SEMA 
stated that it ``[s]upports the coordinated initiative by [NHTSA] and 
other federal government agencies to recommend 'best practices' for 
importers.'' \10\ Ford stated the company, ``[a]pplauds the agency for 
its initiative to enhance the safety of imported motor vehicles and 
motor vehicle equipment by providing guidance to importers and supports 
the recommendations contained in the notice.'' \11\
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    \7\ North American Lighting, Inc. (NAL) ``Comments on Guidance 
and Recommended Best Importer Practices to Enhance the Safety of 
Imported Motor Vehicles and Motor Vehicle Equipment'' Docket No. 
NHTSA 2008-0113, (August 2008), p. 1.
    \8\ Motor and Equipment Manufacturers Association (MEMA) 
``Comments on Guidance and Recommended Best Importer Practices to 
Enhance the Safety of Imported Motor Vehicles and Motor Vehicle 
Equipment'' Docket No. NHTSA 2008-0113, (August 2008), pp. 1-2 and 
8.
    \9\ Truck-Lite Co., Inc. (TLC), ``Comments on Guidance and 
Recommended Best Importer Practices to Enhance the Safety of 
Imported Motor Vehicles and Motor Vehicle Equipment'' Docket No. 
NHTSA 2008-0113, (August 2008), p. 2.
    \10\ Specialty Equipment Market Association (SEMA), ``Comments 
on Guidance and Recommended Best Importer Practices to Enhance the 
Safety of Imported Motor Vehicles and Motor Vehicle Equipment'' 
Docket No. NHTSA 2008-0113, (August 2008), p. 1.
    \11\ Ford Motor Company (Ford), ``Comments on Guidance and 
Recommended Best Importer Practices to Enhance the Safety of 
Imported Motor Vehicles and Motor Vehicle Equipment'' Docket No. 
NHTSA 2008-0113, (August 2008), p. 1.
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(b) Voluntary Product Marking

    The five commenters addressed common themes, one of which is that 
safety is enhanced when those who manufacture and import motor vehicles 
and items of motor vehicle equipment are accountable. However, 
accountability cannot be assured when products have no markings that 
identify their fabricating manufacturers or importers. The commenters 
observed that when unmarked products are noncompliant, or have a 
safety-related defect, it becomes difficult for NHTSA to trace the 
products' origins or identify the party responsible for remedying those 
conditions.
    The commenters suggested that accountability would be enhanced if 
manufacturers voluntarily marked their products with certain 
information. For example, MEMA stated that it ``[b]elieves that 
voluntary product marking should be widely encouraged for all imported 
aftermarket equipment--particularly products critical to safety.'' MEMA 
stated that markings should include the name or trademark of the 
fabricating manufacturer or importer, the date or date range of 
manufacture, and any marks specified in industry recommended practices 
or standards.\12\
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    \12\ MEMA Comments, pp. 4-5.
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    SEMA furnished with its comments an article entitled ``Sourcing 
Your Products from China without Losing Your Shirt, Your Intellectual 
Property, or Your Customers.'' The article was written by Merritt R. 
Blakeslee and published as a two-part series in the December 2007 and 
February 2008 editions of the ``SEMA News'' magazine.\13\ To emphasize 
the need for voluntarily marking products, Mr. Blakeslee provides what 
he describes as a ``Nightmare Scenario'' in which a company that 
imports wheels from an overseas manufacturer is sued for product 
liability following a fatal crash that was caused by a defective wheel. 
The company suspects that the wheel involved in the crash was produced 
without its authorization, but cannot prove this because the company 
does not mark its products in a way that would permit it to identify 
counterfeits. The company ultimately must defend against a product 
liability suit and conduct an expensive product recall, prompting the 
author to assert: ``It is essential that you ensure that your products 
are carefully marked--by individual serial number or at least by lot 
number--so that when you find suspect products in the marketplace, you 
can immediately determine whether they are products whose manufacture 
you authorized.'' \14\
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    \13\ http://sema.org/main/semaorghome.aspx?id=58637.
    \14\ Merritt R. Blakeslee, ``Sourcing Your Products from China 
without Losing Your Shirt, Your Intellectual Property, or Your 
Customers--Parts I and II'' (Washington, DC, December 2007 and 
February 2008), p. 1, http://sema.org/main/semaorghome.aspx?id=58637.
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    TLC commented that accountability is ``[t]he start of any good 
product and the finish of any good product.'' The company stated that 
without ``[a] manufacturer identification system, any of the changes 
offered [by NHTSA's guidance] will not be effective in improving the 
overall safety of imported product.'' TLC notes that to allow for 
traceability and accountability of its own products, the company 
voluntarily labels its lighting products in accordance with the Society 
of Automotive Engineers (SAE) Recommended Practice J759 ``Lighting 
Identification Code,'' which the company states ``[p]rovides guidelines 
on identifying product function, manufacturer's identification, model 
number (or part number), class designation, application and even ampere 
load rating (where required).'' TLC contends that manufacturer 
identification is one of the most important features in assuring the 
ongoing quality of the product and that with such identification, 
``[f]ewer risks will be taken by importers on questionable products if 
they know that they can be caught.'' \15\
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    \15\ TLC Comments, p. 2.
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    MEMA also endorses the voluntary labeling of products in accordance 
with SAE J759. The organization notes that most lighting and 
conspicuity product manufacturers that belong to MEMA, the 
Transportation Safety Equipment Institute, and the Motor Vehicle 
Lighting Council already voluntarily mark such products with the 
manufacturer's name and a date.\16\
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    \16\ MEMA Comments, p. 4.
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    The agency agrees with the commenters that traceability is enhanced 
when fabricating manufacturers and/or importers voluntarily mark their 
products with their companies' names, date or lot codes, and industry 
recommended information such as that listed in SAE J759, which applies 
to lighting equipment. The described markings

[[Page 79210]]

would enhance the ability of a fabricating manufacturer or importer to 
ensure that product recalls are initiated when noncompliances or safety 
defects are identified. Such markings that are voluntarily applied 
would also benefit fabricating manufacturers and importers by allowing 
them to accurately identify their products and limit the scope of 
recalls to only those products that contain the noncompliance or 
safety-related defect. For these reasons, we have included a 
recommendation for voluntary markings in our final guidance document 
under a new heading entitled ``Identify the Product,'' which replaces 
``Product's Country of Origin.''

(c) Records Maintenance

    Several commenters observed that an essential element of 
accountability is the maintenance of records. Ford commented that NHTSA 
should include as part of its recommended guidance document a reference 
to 49 CFR part 576, an agency regulation that requires manufacturers to 
retain for a period of five years reports and other materials and 
documents that contain information concerning malfunctions that may be 
related to motor vehicle safety.\17\ MEMA stated that documentation of 
a product's design, its testing, and the process used to manufacture 
the product should be diligently maintained. The organization contends 
that this documentation allows a fabricating manufacturer to readily 
produce, if necessary, the appropriate records to demonstrate 
compliance with mandated FMVSS performance requirements, or with 
voluntary industry standards and recommended practices. MEMA observes 
that such records can become particularly important in the event of 
changes to a product--whether the change be in material components, the 
manufacturing process, or test procedures.\18\ NAL stated that 
importers should have to prove they can meet the necessary requirements 
for their products in a way that is similar to what U.S. manufacturers 
have to do when they build products for the European or Chinese 
markets.\19\ NAL stated that in order to manufacture for other markets, 
the company has had to perform witness testing and demonstrate process 
checks. NAL also stated that the company has allowed government 
officials to inspect its manufacturing plants and has shipped its 
products to outside test houses to verify compliance with applicable 
standards. NAL contends that all manufacturers of lighting equipment 
destined for the United States likewise should be required to have 
documented proof that the manufacturing plants have passed inspection 
and that their products comply with the FMVSS.\20\
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    \17\ Ford Comments, p. 1.
    \18\ MEMA Comments, p. 7.
    \19\ NAL describes the type approval process that is required by 
most European countries, but is not required for motor vehicles and 
motor vehicle equipment offered for sale or sold in the United 
States. NHTSA does not issue type approval certifications and does 
not certify any motor vehicles or motor vehicle equipment as 
complying with applicable FMVSS. Instead, we have a ``self-
certification'' process, which places responsibility on the 
fabricating manufacturer to certify the vehicle or equipment item as 
complying with the applicable FMVSS.
    \20\ NAL Comments, pp. 1-2.
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    The agency generally agrees with many of the points these 
commenters have raised. However, to the extent the comments recommend 
that NHTSA require certain records to be kept, those comments are 
beyond the scope of this notice, which is intended only to offer 
recommendations. If the agency sought to impose any new requirements, 
it would only do so by initiating rulemaking to establish appropriate 
regulations on the subject. In the July 8 notice, we stated why we 
believe it is important to create and/or maintain, at a minimum, 
records of a product's: (1) Certification data; (2) design changes or 
changes in the production process; (3) supporting technical 
documentation; (4) test reports; (5) serial number, model, and date of 
manufacture; (6) location while in the distribution system; (7) retail 
purchasers; (8) accompanying instructions; and 9) manufacturing process 
including work orders, operation sheets, inspection logs, repair logs, 
and test procedure checklists. The final recommended best practices 
include under the heading ``Record Keeping for Manufacturers,'' a 
discussion of certain records that manufacturers must maintain under 49 
CFR part 576, as well as parts 574 and 588. The final notice also 
encourages importers to inquire whether their manufacturing partners 
comply with these regulations.

(d) Methodologies for Product Management and Development

    In its comments, MEMA suggests that NHTSA add to its guidance 
document a reference to ISO/TS16949, which MEMA describes as a quality 
management system that provides for continual improvement, and that 
emphasizes defect prevention and the reduction of variation and waste 
in the supply chain. MEMA recommends that the approach be used to 
review records regarding the development of products, the quality 
planning methodology, and the method to improve the ongoing quality and 
performance of the products being manufactured.\21\ The agency is aware 
that ISO/TS16949 is an internationally recognized Quality Management 
System specification for the Automotive Industry that was jointly 
developed by the International Automotive Task Force (IATF). As such, 
we believe it is important to include a reference to ISO/TS16949 in our 
guidance under the heading, ``Inspect Foreign Manufacturing 
Facilities.''
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    \21\ MEMA Comments, p. 7.
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    MEMA commented that it supports a ``design to conform'' methodology 
for product development, which the organization describes as including 
a number of steps necessary to originate, plan, create, develop, 
verify, and manufacture products that, in good faith, consistently meet 
established requirements when properly installed and applied. 
Essentially, this methodology serves as a ``process map'' from design 
to production and from certification to application. Under product 
design, MEMA states it is wise to consider: (1) the technical 
description of the product's function; (2) the tolerances of parts; (3) 
material specifications; (4) test requirements and test reports; and 
(5) certification reports including clear documentation and summaries 
of test results. For manufacturing specifications, MEMA states that the 
following factors should be considered: (1) Process sheets showing 
complete details; (2) process control plans detailing statistical 
process controls (i.e., part selection criteria, test requirements, and 
plans to address nonconformances); and (3) recovery plans (i.e., the 
steps to be taken once nonconforming product is identified).\22\ 
Although the ``design to conform'' methodology, as described by MEMA, 
appears to have merit, the agency has not incorporated the methodology 
into this final guidance document because its level of specificity far 
exceeds the scope of the general recommendations contained in the 
document.
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    \22\ Ibid, p. 7.
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    In the July 8 notice, the agency observed that fabricating 
manufacturers use systematic analysis tools such as Failure Modes and 
Effects Analysis (FMEA) to identify potential safety hazards and to 
improve their products over time by reducing or eliminating failures. 
TLC commented that there are related product development and control 
systems that can be used to verify product compliance and consistency, 
including Design Failure Mode and Effect Analysis (DFMEA),

[[Page 79211]]

Design Verification Plan and Report (DVP&R), Process Failure Mode and 
Effect Analysis (PFMEA), Manufacturing Process Plan, and Control Plans. 
Because FMEA was cited in the July 8 notice, for illustrative purposes 
alone, as one example of the systematic analysis tools that are used to 
identify potential safety hazards, little purpose could be served by 
including the many other examples that TLC has identified.

(e) Report Submitted

    MEMA also appended to its comments a special report published by 
the Automotive Aftermarket Suppliers Association entitled ``Direct 
Importing: Do the Risks Outweigh the Reward?'' \23\ MEMA states that 
this report was published in October 2007 to educate association 
members on the costs and risks associated with direct importing as a 
result of a growing concern about the safety of imported products.\24\ 
While the agency recognizes that much of the information in the special 
report (such as that pertaining to profit erosion, industry image, and 
product liability) is of value to importers, we believe the report 
either corroborates information we are already presenting or offers new 
information on issues unrelated to the agency's jurisdiction.
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    \23\ Ibid, Attachment to MEMA Comments. Also see: http://www.mema.org/publications/index.php.
    \24\ The October 2007 Report examines the trend for off-shore 
opportunities and direct importing and takes a closer look at 
possible pitfalls and additional costs that may offset the savings 
on acquisition process. Topics include: quality control, product 
liability, intellectual property protection, recall responsibility, 
etc. The publication's conclusion states that the only real solution 
is to weigh all the associated costs and then decide whether direct 
importing is cost effective.
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V. Executive Order 12866 on ``Significant Guidance''

    On January 18, 2007, the President issued Executive Order (E.O.) 
13422, ``Further Amendment to Executive Order 12866 on Regulatory 
Planning and Review.'' On the same day, in connection with E.O. 13422, 
the Director of the Office of Management and Budget (OMB) issued OMB 
Bulletin No. 07-02 on ``Agency Good Guidance Practices.'' The primary 
focus of E.O. 13422 and OMB Bulletin No. 07-02 is to improve the way 
the Federal government does business with respect to guidance 
documents--by increasing their quality, transparency, accountability, 
and coordination.
    Both Executive Order 13422 and OMB Bulletin No. 07-02 define 
``guidance documents'' as ``an agency statement of general 
applicability and future effect, other than a regulatory action, that 
sets forth a policy on a statutory, regulatory, or technical issue or 
an interpretation of a statutory or regulatory issue.'' Guidance 
documents that are not ``significant'' are not covered by E.O.s 13422 
and 12866, and by Bulletin No. 07-02.
    A ``significant'' guidance document is one disseminated to 
regulated entities or the general public that may reasonably be 
anticipated to:
    (1) Lead to an annual effect of $100 million or more or adversely 
effect in a material way the economy, a sector of the economy, 
productivity, competition, jobs, the environment, public health or 
safety, or State, local, or tribal governments or communities;
    (2) create a serious inconsistency or otherwise interfere with an 
action taken or planned by another agency;
    (3) materially alter the budgetary impacts of entitlements, grants, 
user fees or loan programs or the rights or obligations of recipients 
thereof; or,
    (4) raise novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles set forth in 
one of the cited Executive Orders.
    The document the agency is publishing today contains no guidance 
that meets any of the four stated criteria to be deemed 
``significant.'' Therefore, this document is not subject to E.O. 13422, 
E.O. 12866, or to OMB Bulletin 07-02. Nevertheless, because we 
anticipated some level of public interest and were eager to obtain 
input from other sources, we solicited public comments in our July 8 
notice.
    In consideration of the foregoing, NHTSA offers the following 
recommended best practices for importers of motor vehicles and motor 
vehicle equipment:

VI. Recommended Best Practices for Importers of Motor Vehicles and 
Motor Vehicle Equipment

    The National Highway Traffic Safety Administration (NHTSA) is the 
U.S. government agency responsible for implementing and enforcing the 
National Traffic and Motor Vehicle Safety Act of 1966, as amended, 49 
U.S.C. chapter 301 (the Vehicle Safety Act), and certain other laws 
relating to motor vehicle safety. Fabricating manufacturers (i.e., the 
actual assemblers) and importers of motor vehicles and motor vehicle 
equipment have duties as manufacturers under the Vehicle Safety Act. 
Companies that import these products must ensure that the products 
comply with applicable Federal motor vehicle safety standards (FMVSS). 
If a product does not comply with an applicable FMVSS or contains a 
defect related to motor vehicle safety, including a defect that 
manifests itself after considerable operation in the field, the 
manufacturer, which, by statute, includes the importer, must furnish 
owners with notification of, and a remedy for, the noncompliance or 
defect. Obviously, it is best if the motor vehicle or equipment 
complies with applicable FMVSS and does not manifest defects. To reduce 
the likelihood of noncompliances and defects, we recommend that 
fabricating manufacturers and importers \25\ become familiar with the 
best practices suggested here and adapt them to their specific needs. 
NHTSA is also willing to work with fabricating manufacturers and 
importers to explain our standards, reporting requirements, regulatory 
program, and enforcement process.
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    \25\ Our recommended best importer practices are not intended to 
address importers specially registered with NHTSA to import motor 
vehicles not originally manufactured to comply with all applicable 
FMVSS and to perform the necessary modifications on those vehicles 
so that they conform to all applicable FMVSS. Instead, NHTSA has 
established regulations under 49 CFR Parts 591-594 covering the 
registration, duties, and responsibilities of these importers, who 
are referred to as ``Registered Importers.''
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    In the paragraphs below, we present the recommended best importer 
practices first in outline form, and then provide a more detailed 
discussion of those recommendations.

Outline

(a) Fully Understand the Importer's Obligations Under Motor Vehicle 
Safety Statutes and Regulations
    (i) Certification of Motor Vehicles and Equipment to the Federal 
Motor Vehicle Safety Standards
    (ii) NHTSA Compliance Program
    (iii) NHTSA Defect Investigations
    (iv) Duty to Notify NHTSA of a Noncompliance With an FMVSS or a 
Safety-Related Defect
    (v) Duty to Notify Owners and Dealers and Provide a Remedy for a 
Noncompliance or a Safety-Related Defect
    (vi) Importer's Recall Obligations
    (vii) Compliance Needed to Import Motor Vehicles and Equipment
    (viii) Procedural Requirements for Fabricating Manufacturers
    (ix) Recordkeeping for Manufacturers
    (x) Penalties
(b) Exercise Great Care in Selecting Foreign Fabricating 
Manufacturers
    (i) Establishing a Business Plan
    (ii) Minimizing Risks
    (iii) Product Design Considerations
    (iv) Product Design Records and Traceability
(c) Inspect Foreign Manufacturing Facilities
    (i) Evaluating the Manufacturer's Company, Factory, and Staff
    (ii) Assuring Quality Control
    (iii) Protecting Intellectual Property, Trademarks, Copyrights, 
Patents, and Trade Secrets

[[Page 79212]]

    (iv) Reaching Agreement on Whether Products are Substandard, 
Nonconforming, or Defective
    (v) Contract Considerations
    (vi) Monitoring Compliance with Contract Requirements
(d) Inspect Goods Either Before They Are Exported to or Distributed 
in the United States
    (i) Monitoring Production Outputs
    (ii) Sampling, Inspecting, and Testing Products
    (iii) Post Production Quality Control
(e) Identify the Product
    (i) Identify the Product's Country of Origin
    (ii) Identify the Product's Manufacturer
    (iii) Identify the Product's Date or Lot Codes
    (iv) Industry Recommended Practices or Standards for Product 
Markings
(f) Establish a Consumer Service Program
    (i) Consumer Education
    (ii) Product Service
    (iii) Recordkeeping
    (iv) Safety Recall Plan
    (v) Intervention
    (vi) Notification
    (vii) Business Process Monitoring
(g) Contact NHTSA Concerning Manufacturer/Importer Reporting 
Requirements, Safety Compliance, Defect Issues, and Regulations
(h) Know How To Obtain General Assistance With Other Federal 
Regulations

Recommended Best Practices

(a) Fully Understand the Importer's Obligations Under Motor Vehicle 
Safety Statutes and Regulations

    Before importing motor vehicles or motor vehicle equipment into the 
United States, it is essential that the importer understand its 
obligations under Federal statutes and regulations governing vehicle 
safety. This section summarizes those obligations stemming from the 
Vehicle Safety Act, which NHTSA administers.\26\
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    \26\ It is wise for manufacturers and importers to become 
familiar with other laws not administered by NHTSA, such as the 
pertinent environmental laws administered by the Environmental 
Protection Agency, which could impact the decision to sell products 
in the United States.
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(i) Certification of Motor Vehicles and Equipment to the Federal Motor 
Vehicle Safety Standards
    The Safety Act authorizes NHTSA to issue the FMVSS, which set 
minimum performance requirements for motor vehicles and for certain 
items of motor vehicle equipment. See 49 CFR part 571. In general, 
motor vehicles are vehicles driven or drawn by mechanical power and 
manufactured primarily for use on public roads. Typically, motor 
vehicles have the following type classifications:
     Passenger cars;
     Multipurpose passenger vehicles;
     Trucks;
     Buses;
     Motorcycles;
     Trailers; and
     Low speed vehicles.
    The following motor vehicle equipment items are also subject to the 
FMVSS:
     Tires;
     Rims;
     Brake hoses;
     Brake fluid;
     Seat belt assemblies;
     Lamps, reflective devices, and associated equipment;
     Glazing (automotive glass and plastics);
     Motorcycle helmets;
     Child restraint systems (child safety seats);
     Platform lift systems for the mobility impaired;
     Rear impact guards for trailers;
     Triangular reflective warning devices, and;
     Compressed natural gas containers.
    The Vehicle Safety Act requires that motor vehicles and regulated 
items of motor vehicle equipment produced for sale in the United States 
be certified to comply with all applicable FMVSS. See 49 U.S.C. 30115. 
Motor vehicle equipment items that are not subject to the FMVSS do not 
require certification; however, such items may be found (by either 
NHTSA or the manufacturer) to have a safety-related defect, and if so, 
the manufacturer will have an obligation to furnish owners of the 
equipment with notification of, and a remedy for, the defect, usually 
at no charge to the consumer.
    Type approval \27\ is not required for motor vehicles and motor 
vehicle equipment sold in the United States. NHTSA does not issue type 
approval certifications and does not certify any motor vehicles or 
motor vehicle equipment as complying with applicable FMVSS. Instead, in 
accordance with 49 U.S.C. 30115, we have in place a ``self-
certification'' process, which imposes responsibility on the 
manufacturer to certify the vehicle or equipment item as complying with 
the applicable FMVSS. Self-certification reduces the cost and time 
associated with lengthy, government-mandated testing that is required 
under type approval. Self-certification also reduces regulatory costs 
and facilitates international trade because it allows manufacturers to 
quickly bring to market vehicles and equipment items that incorporate 
safety and technology advancements.
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    \27\ In many countries, before motor vehicles or motor vehicle 
equipment items may be sold to consumers, the fabricating 
manufacturer must prove that these items comply with safety 
regulations and receive pre-approval from a government agency. This 
approach is commonly referred to as ``type approval.'' For example, 
the Vehicle Certification Agency, an Executive Agency of the United 
Kingdom Department for Transport, administers type approval in the 
U.K. See: http://www.vca.gov.uk/index.asp. Under type approval, a 
manufacturer submits production samples and specifications to an 
approved laboratory and if the product complies with the standards, 
the government issues a type approval certificate of compliance. 
Because this can take many months, the manufacturer begins the 
process of obtaining type approval well in advance of bringing the 
product to market. After type approval is granted, the manufacturer 
ensures that each vehicle or equipment item is produced in 
conformance with the specifications that were submitted for 
approval. If countries enter into international agreements covering 
vehicle safety regulations, one country's type approval may be valid 
for another member country.
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    The Vehicle Safety Act requires the exercise of ``reasonable care'' 
in issuing a certification of compliance with safety standards. See 49 
U.S.C. 30115. To this end, NHTSA encourages manufacturers to conduct 
tests as specified in certain of the FMVSS. See 49 CFR part 571.
(ii) NHTSA Compliance Program
    NHTSA's primary mission is to save lives, prevent injuries, and 
reduce economic costs due to road traffic crashes. The agency's 
enforcement activities, which are directed at vehicles and equipment 
items, are structured so that they will have the greatest impact on 
safety. Consistent with this approach, each year the agency purchases 
more than 100 vehicles and conducts more than 500 crashworthiness and 
crash avoidance performance tests on those vehicles, and more than 
1,200 performance tests on regulated equipment items to assure 
compliance with all applicable standards. As part of its enforcement 
program, NHTSA's Office of Vehicle Safety Compliance (OVSC) also 
inspects regulated equipment items at industry trade shows and conducts 
``spot checks'' of vehicles and equipment items at retailers to assure 
compliance with all applicable FMVSS. In the event of a test failure, 
OVSC conducts an investigation to determine whether a noncompliance 
exists. NHTSA will ask the fabricating manufacturer and/or importer to 
provide the basis for the certification that the vehicle or equipment 
item complies with applicable FMVSS, and the agency may perform 
additional testing. If NHTSA concludes that a product does not comply 
with an applicable FMVSS the fabricating manufacturer and/or importer 
must furnish owners or dealers with notification of, and a remedy for, 
the noncompliance, usually without charge.
(iii) NHTSA Defect Investigations
    In addition to conducting tests and inspections to determine 
whether

[[Page 79213]]

selected motor vehicles and motor vehicle equipment comply with the 
FMVSS, NHTSA through its Office of Defects Investigation, investigates 
potential safety-related defects in motor vehicles and motor vehicle 
equipment items. NHTSA has authority to investigate possible safety-
related defects in a motor vehicle equipment item regardless of whether 
the item is subject to the FMVSS. When an item is subject to an FMVSS, 
compliance with the standard does not ensure that the item is free of a 
safety-related defect. NHTSA investigates numerous vehicles and items 
of equipment each year for possible defects.
    Before initiating an investigation of a suspected safety-related 
defect, NHTSA reviews information and data from several sources, 
including consumers and manufacturers to determine whether a defect 
trend may exist. Consumers submit complaints related to issues or 
problems in particular makes and models of vehicles and equipment. 
Manufacturers submit quarterly reports to NHTSA pursuant to the 
agency's Early Warning Reporting (EWR) regulations that implement the 
Transportation Recall Enhancement, Accountability, and Documentation 
(TREAD) Act of 2000. These regulations require manufacturers, including 
by definition, importers, to submit information that could assist the 
agency in determining whether a safety-related defect exists in a 
vehicle or equipment item used in the United States. See 49 CFR part 
579, subpart C. The regulations divide manufacturers of motor vehicles 
and motor vehicle equipment into two groups with different 
responsibilities for reporting information that could indicate the 
existence of potential safety-related defects.
    The first group comprises larger volume manufacturers of motor 
vehicles, and all manufacturers of child restraint systems and tires. 
In general, the larger volume vehicle manufacturers must report 
separately on four categories of vehicles (if they produced, imported, 
offered for sale, or sold 500 or more of a category annually in the 
United States): (1) Light vehicles, (2) medium-heavy vehicles and all 
buses, (3) trailers, and (4) motorcycles. These larger volume vehicle, 
child restraint, and tire manufacturers must generally report to NHTSA 
production-related information, incidents related to a death or injury, 
consumer complaints, warranty claims (warranty adjustments for tires), 
property damage claims, and field reports.
    The second group of manufacturers comprises all other manufacturers 
of motor vehicles and motor vehicle equipment, i.e., vehicle 
manufacturers that produce, import, or sell in the United States fewer 
than 500 light vehicles, medium-heavy vehicles (including buses), 
motorcycles, or trailers annually; manufacturers of original motor 
vehicle equipment; and manufacturers of replacement motor vehicle 
equipment other than child restraint systems and tires. These 
manufacturers must submit a report if they receive a claim or notice 
related to an incident involving a death, but are not required to 
report any other information under the EWR rule. Manufacturers and 
importers are encouraged to review the agency's Web site for more 
comprehensive EWR information. See http://www-odi.nhtsa.dot.gov.
    Under other NHTSA regulations at 49 CFR 579.5 and 579.6, all 
vehicle and equipment manufacturers in both groups must provide copies 
of all documents sent or made available to more than one dealer, 
distributor, owner, purchaser, lessor or lessee, in the United States 
concerning customer satisfaction campaigns, consumer advisories, 
recalls, or other activities involving the repair or replacement of 
vehicles or equipment. A manufacturer must also report safety recalls 
and other safety campaigns it conducts in a foreign country that cover 
a motor vehicle, an item of motor vehicle equipment, or a tire that is 
identical or substantially similar to such a product offered for sale 
or sold in the United States. See 49 CFR part 579, subpart B.
    After reviewing all the relevant information, the agency may open 
an investigation to determine the existence of a safety-related defect. 
At the conclusion of the agency's investigation, if the agency 
determines that a safety-related defect exists, but the manufacturer 
refuses to conduct a recall, the agency will hold a public hearing. 
After the public hearing, NHTSA may order the manufacturer to conduct a 
recall.\28\ If the manufacturer fails to obey such an order, NHTSA may 
bring an action in Federal court to compel the recall.
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    \28\ See 49 U.S.C. 30118(b) and 49 CFR part 554.
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    NHTSA, through its Recall Management Division, maintains the 
administrative records for all safety recalls, and monitors these 
recalls to ensure that the scope is appropriate, and that the recall 
completion rate and remedy are adequate. NHTSA's monitoring of recall 
performance may lead to the opening of a recall investigation if the 
facts appear to indicate a problem with the adequacy or execution of 
the recall. A recall investigation may result in expanding the scope of 
a previously announced recall or in the adjustment of an existing 
recall remedy.
(iv) Duty To Notify NHTSA of a Noncompliance With an FMVSS or a Safety-
Related Defect
    Notwithstanding its certification of a product, a manufacturer may 
subsequently determine that a noncompliance with an FMVSS or a safety-
related defect exists in a motor vehicle or a motor vehicle equipment 
item it has produced. Manufacturers have a duty to notify NHTSA if they 
learn the vehicle or equipment contains a defect and in good faith they 
decide that the defect is related to motor vehicle safety, or in good 
faith they decide that the vehicle or equipment does not comply with an 
applicable FMVSS. See 49 U.S.C. 30118(c). The manufacturer must notify 
NHTSA within five working days after determining the existence of a 
noncompliance or a safety-related defect. See 49 CFR 573.6. 
Alternately, as discussed above, NHTSA may determine the existence of a 
noncompliance or a safety-related defect in a particular motor vehicle 
or motor vehicle equipment item and order the responsible manufacturer 
to recall the product. See 49 U.S.C. 30118(b).
(v) Duty to Notify Owners and Dealers and Provide a Remedy for a 
Noncompliance or a Safety-Related Defect
    Regardless of whether the noncompliance with an FMVSS or a safety-
related defect is determined to exist by the manufacturer or by NHTSA, 
the manufacturer must provide owners and dealers of the affected 
products with notification of the noncompliance or defect and must 
remedy the noncompliance or defect, usually without charge. See 49 CFR 
part 577. There is a limited exception under which a manufacturer that 
has reported a noncompliance or safety-related defect to NHTSA may 
petition the agency for a determination that the noncompliance or 
defect is inconsequential as it relates to motor vehicle safety.\29\ 
See 49 CFR part 556. The notification and remedy process is commonly 
referred to as a ``safety recall campaign'' or more simply

[[Page 79214]]

as a ``recall.'' NHTSA monitors the remedy program to ensure its 
successful completion. The agency is not authorized to expend its funds 
on recalls; the expense of notifying owners and providing a remedy must 
be borne by the fabricating manufacturer and/or importer of the 
products found to contain the noncompliance or defect. See 49 U.S.C. 
30118-30120.
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    \29\ The Vehicle Safety Act gives NHTSA the authority to exempt 
manufacturers from the requirement to provide notification and 
remedy for noncompliances or safety-related defects if the agency 
determines that the noncompliance or defect is inconsequential as it 
relates to motor vehicle safety. See 49 U.S.C. 30118, 30120. The 
procedures for implementing this statutory authority are set forth 
in 49 CFR part 556, Exemption for Inconsequential Defect or 
Noncompliance.
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(vi) Importer's Recall Obligations
    An importer's primary obligation is to assure that the motor 
vehicle or item of motor vehicle equipment subject to the FMVSS that it 
imports into the United States contains the required certification of 
compliance with those standards. If a fabricating manufacturer is not 
located in the United States and does not conduct business operations 
in this country, including through a subsidiary or other controlled 
entity, the U.S. judicial system likely will not be able to effectively 
compel the foreign manufacturer to conduct a recall. In that case, the 
burden of providing notification to owners and dealers and a free 
remedy will fall solely upon the importer, unless the fabricating 
manufacturer voluntarily supports the recall. This is because under the 
Vehicle Safety Act, importers of motor vehicles and motor vehicle 
equipment for resale are considered ``manufacturers'' for the purposes 
of notification and remedy. See 49 U.S.C. 30102(a)(5). Where the 
fabricating manufacturer or importer finds a noncompliance or safety 
defect in a motor vehicle or equipment item imported into the United 
States, compliance with notification and recall responsibilities by 
either the manufacturer or the importer of the vehicle or equipment 
item is considered to be compliance by both. See 49 CFR 573.3(b).
    Importers must therefore recognize that they have obligations under 
the Vehicle Safety Act, which continue after motor vehicles or items of 
motor vehicle equipment are sold to consumers within the United States. 
If an importer becomes aware that a vehicle or equipment item it has 
imported does not comply with an applicable FMVSS or contains a defect 
related to motor vehicle safety, it must provide NHTSA, as well as 
owners and dealers of the affected vehicles or equipment, with 
notification of the noncompliance or defect and must remedy the 
noncompliance or defect, usually without charge to the consumer. An 
importer also has notification and remedy responsibility if NHTSA 
determines the existence of the noncompliance or defect and orders it 
to undertake a notification and remedy campaign. Importers should be 
fully familiar with all of the recall-related provisions of 49 CFR 
parts 573 and 577.
(vii) Compliance Needed To Import Motor Vehicles and Equipment
    As part of its safety mandate, NHTSA monitors motor vehicles and 
items of motor vehicle equipment that are imported into the United 
States for compliance with applicable FMVSS and regulations. To be 
imported free of restriction, a motor vehicle less than 25 years old 
must be manufactured to comply with all applicable FMVSS and bear a 
label certifying such compliance that is permanently affixed by the 
vehicle's manufacturer. To be lawfully imported, a new or used item of 
motor vehicle equipment that is subject to an FMVSS must, as originally 
manufactured, conform to the standard and be so certified. In most 
instances, certification of compliance with the applicable FMVSS for 
regulated safety equipment is evidenced by the symbol ``DOT'' either 
inscribed on the equipment item in a prescribed location, or placed on 
the outside of the container in which the equipment item is shipped. 
See 49 U.S.C. 30112 and 30115.
(viii) Procedural Requirements for Fabricating Manufacturers
    Before offering a vehicle or motor vehicle equipment item for sale 
in the United States, the fabricating manufacturer must: (1) Comply 
with the requirements to designate a permanent resident of the United 
States as its agent for service of process if the fabricating 
manufacturer is not located in the United States (49 CFR part 551, 
subpart D Service of Process on Foreign Manufacturers and Importers) 
and (2) submit to NHTSA identifying information on itself and the 
products it manufactures to comply with the FMVSS, not later than 30 
days after the manufacturing process begins (49 CFR part 566 
Manufacturer Identification).\30\ The fabricating manufacturer of a 
motor vehicle must also submit to NHTSA information the agency will 
need to decipher the manufacturer's vehicle identification number (VIN) 
format not later than 60 days prior to offering the first vehicle for 
sale in the United States (49 CFR part 565 Vehicle Identification 
Number Requirements). The fabricating manufacturer of certain regulated 
equipment items such as brake hoses, glazing (automotive glass and 
plastics), and tires must label its products with identification 
numbers assigned to the manufacturer by NHTSA.\31\
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    \30\ NHTSA maintains a list of these manufacturers on its Web 
site. See http://www.nhtsa.dot/cars/rules/manufacture.
    \31\ See 49 CFR 571.106, paragraph S5.2.2(b), relating to brake 
hoses; 49 CFR 571.205, paragraph S6.2, relating to glazing; and 49 
CFR 574.5, relating to tires.
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(ix) Recordkeeping for Manufacturers
    A new tire manufacturer is required by NHTSA regulations to 
permanently mold into each tire intended for use on a motor vehicle a 
``tire identification number'' or ``TIN.'' See 49 CFR 574.5. Tire 
distributors and dealers that are owned or controlled by tire 
manufacturers are required to send to the tire manufacturers, records 
of any new tires they sell, including the TINs of the tires and the 
name and address of the tire purchasers. Independent tire distributors 
or dealers are required to furnish tire registration forms that 
identify the TIN and the tire distributor or dealer's name and address 
to the purchasers of new tires, who may then mail the forms to the tire 
manufacturer. Instead of furnishing the tire purchaser with a 
registration form, independent tire distributors or dealers may 
electronically transmit tire purchaser and tire registration 
information to the tire manufacturer by secure means, as identified or 
authorized by the manufacturer.\32\
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    \32\ NHTSA amended regulations at 49 CFR part 574 to accommodate 
and facilitate Internet and other electronic registration of tires, 
including voluntary registration of tires by independent dealers. 
The amendments are effective January 27, 2009; however, optional 
compliance with these amendments was permitted as of November 28, 
2008. See 73 FR 72358.
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    Tire manufacturers must maintain information from the registration 
forms for a period of not less than 5 years from the date on which the 
information is recorded. Motor vehicle manufacturers are required to 
maintain records of the TINs for the tires installed on their vehicles 
and the name and address of the first purchasers of their vehicles for 
5 years from the date that the vehicles are sold. These requirements 
are intended to ensure that purchasers receive proper notification in 
the event that a tire is recalled to remedy a noncompliance or safety-
related defect. See 49 CFR part 574.
    In like manner, the manufacturer of a child restraint system (i.e., 
a child safety seat), other than one installed on a vehicle as newly 
manufactured, must furnish a registration form to be completed by the 
owners of those seats and retain information from the form for a period 
of not less than 6 years to ensure that the owners receive proper 
notification during a recall campaign. See 49 CFR part 588.

[[Page 79215]]

    NHTSA regulations also require manufacturers of motor vehicles and 
motor vehicle equipment to retain claims, complaints, reports, and 
other records concerning alleged and proven defects and malfunctions 
that may be related to motor vehicle safety for a period of five 
calendar years from the date on which they were generated or acquired 
by the manufacturer.\33\ See 49 CFR part 576. Under section 576.8 of 
this regulation, ``malfunctions that may be related to motor vehicle 
safety'' are defined as including any failure or malfunction beyond 
normal deterioration in use, or any failure of performance, or any flaw 
or unintended deviation from design specifications, that could in any 
reasonably foreseeable manner be a causative factor in, or aggravate, a 
crash or an injury to a person. Section 576.6 describes the records 
that manufacturers must maintain, including all documentary materials, 
films, tapes, and other information-storing media that contain 
information concerning malfunctions that may be related to motor 
vehicle safety. The section describes such records as including, but 
not being limited to, reports and other documents, including material 
generated or communicated by computer, telefax or other electronic 
means, that are related to work performed under warranties; and any 
lists, compilations, analyses, or discussions of such malfunctions 
contained in internal or external correspondence of the manufacturer, 
including communications transmitted electronically. Importers may wish 
to consider purchasing products from fabricating manufacturers that 
comply with this regulation.
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    \33\ Under 49 CFR 576.5(c), manufacturers need not retain copies 
of documents transmitted to NHTSA pursuant to 49 CFR part 573 
(notification to NHTSA of safety-related defects and noncompliances 
with FMVSS); 49 CFR part 577 (notifications of defects or 
noncompliances with FMVSS made to owners, dealers, and 
distributors); and 49 CFR part 579 (EWR reporting to NHTSA).
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(x) Penalties
    Fabricating manufacturers and importers may be subject to 
substantial civil penalties for failure to meet the requirements of the 
statutes and regulations that NHTSA administers. See 49 U.S.C. 30165. 
Currently, those penalties can be as high as $6,000 for each violation 
with a maximum of $16,375,000 for a related series of violations. See 
49 CFR part 578. For example, the failure of a fabricating manufacturer 
or importer to furnish notification of a noncompliance or defect to 
owners or to NHTSA may subject the fabricating manufacturer or importer 
to substantial civil penalties.

(b) Exercise Great Care in Selecting Foreign Fabricating Manufacturers

(i) Establishing a Business Plan
    International trade presents unique risks. A company engaged in 
importing foreign manufactured goods or considering becoming an 
importer should have a complete and detailed business plan. The plan 
should reflect careful consideration of the following questions:
     Who will determine the specifications for the product?
     On what basis will the product specifications be 
developed?
     Who will design the product?
     Who will verify the product's design?
     What laboratory and field tests will be undertaken?
     Who will test product prototypes?
     What entity will fabricate various parts?
     What manufacturing quality control will be undertaken?
     How will manufacturing quality control be maintained?
     How often will products be tested to ensure continued 
compliance with the FMVSS?
     What documentation will be generated?
     What documentation will be maintained?
     Who will maintain the documentation?
     Who will check the documentation?
    Compliance with FMVSS at the time of manufacture is only a part of 
these considerations. Motor vehicles and equipment operate in harsh 
conditions over many miles and some abuse must be assumed; therefore, 
avoidance of safety-related defects that may develop during use of the 
product is critical.
(ii) Minimizing Risks
    Selecting a capable and responsible overseas business partner is 
one of the best ways to minimize risks. Before selecting a business 
partner in another country, it is wise to investigate the fabricating 
manufacturer's reputation using readily available public source 
information (such as the Internet) or, if possible, by interviewing 
other customers of the fabricating manufacturer. It is advisable for a 
prospective importer to check many references and not to limit its 
inquiries to references that the prospective manufacturer identifies. 
If the country in which a fabricating manufacturer is located has an 
established government agency to oversee product safety, that agency's 
public records may contain useful information on the company's history 
of recalls and regulatory compliance. Importers may also wish to 
consider requesting the potential fabricating manufacturer's catalogs 
and sample products for evaluation.
    It may be wise to look for a fabricating manufacturer that has 
prior experience with exporting to the United States. By selecting such 
a fabricating manufacturer, the importer has some assurance that the 
manufacturer understands the supply-chain and logistics issues 
associated with supplying a foreign purchaser and that it has some 
experience in meeting the demands of a U.S. customer.\34\
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    \34\Merritt R. Blakeslee, ``Sourcing Your Products from China 
without Losing Your Shirt, Your Intellectual Property, or Your 
Customers--Parts I and II'' (Washington, DC, December 2007 and 
February 2008), p. 5, http://sema.org/main/semaorghome.aspx?id=58637.
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    The U.S. Department of Commerce also offers an International 
Company Profile Report that may assist importers in evaluating 
potential foreign partners. This report summarizes the financial 
strength of a company and provides useful information gleaned from the 
local press, industry contacts, and other sources. More information 
about this service is available on the Department of Commerce Web site. 
See http://www.export.gov/salesandmarketing/ICP.asp. When considering 
doing business in China, it may be advisable to know that organizations 
such as the U.S.-China Business Council, the American Chambers of 
Commerce in China, and the Department of Commerce's Foreign Commercial 
Service assist U.S. companies and they may be a good starting point for 
selecting a reliable Chinese fabricating manufacturer.\35\
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    \35\Ibid, p. 5.
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    Importers may wish to consider selecting more than one foreign 
fabricating manufacturer to manufacture their products. By doing so, an 
importer's operations may remain viable when one of its fabricating 
manufacturer's products is found to contain a noncompliance or safety 
defect and a recall becomes necessary.\36\
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    \36\ Ibid, p. 7.
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    At a minimum, it is prudent for importers to use existing sources 
of information to ensure that they will purchase, import, distribute, 
and sell motor vehicles and motor vehicle equipment items subject to 
the FMVSS that are produced by foreign fabricating manufacturers who:
    1. Properly identify themselves and their products to NHTSA (49 CFR 
part 566);

[[Page 79216]]

    2. Comply with the requirements to designate a permanent resident 
of the United States as its agent for service of process if the 
fabricating manufacturer is not located in the United States (49 CFR 
part 551, subpart D);
    3. Furnish NHTSA with VIN-deciphering information (if they 
manufacture ``motor vehicles'') (49 CFR part 565); and
    4. Certify their products as complying with all applicable FMVSS 
and so label their products (49 U.S.C. 30115).
(iii) Product Design Considerations
    It would be advisable for the importer to focus on the 
specifications for, and design of, the product and the requirements of 
all applicable FMVSS covering the product that it wishes to import 
before beginning negotiations with a prospective overseas business 
partner. The importer should be well informed about U.S. import 
regulations and any FMVSS requirements that cover the products the 
importer intends to import. Before discussions take place with a 
prospective fabricating manufacturer, it may be worthwhile for the 
importer to have translated into the language used by that manufacturer 
the FMVSS that are applicable to the product and the agency regulations 
pertaining to manufacturers located outside the United States. It is 
reasonable to discuss with the prospective fabricating manufacturer at 
the outset the need for incorporating the requirements of the 
applicable FMVSS into the product's design because it is far less 
expensive to change the product's design in the planning stage than 
after the product is manufactured, when tooling must be changed or an 
expensive safety recall conducted. If the importer intends to have the 
manufacturer produce a replacement part for a motor vehicle, the part 
installed as original equipment may be used as a reference, keeping in 
mind the need to avoid infringing on any applicable patent.
    The importer and fabricating manufacturer may wish to consider 
conducting a review of the product's design (a ``design review'') that 
involves examining the product's configuration, the materials used in 
its fabrication, and its labeling and packaging.\37\ Importers without 
staff expertise and experience in design review may consider hiring a 
qualified consultant. It may be worthwhile for the design review to 
include a foreseeable use analysis,\38\ which involves integrating 
safety into the product's design. An effective foreseeable use analysis 
may reveal substantial safety hazards that involve risks of injury or 
impairment of health that are related to the product's characteristics 
or deficiencies.
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    \37\ U.S. Consumer Product Safety Commission (CPSC), ``Handbook 
For Manufacturing Safer Consumer Products'' (Washington, DC, July 
2006), p. 9 http://www.cpsc.gov/businfo/intl/handbookenglishaug05.pdf. Note: many of our suggestions are based on 
CPSC's Handbook, which provides a wealth of helpful ideas that are 
generally applicable to various types of manufacturing processes.
    \38\ Ibid, p. 10.
---------------------------------------------------------------------------

    Because products may contain safety defects even if they comply 
with all applicable FMVSS, or when no FMVSS applies, the importer may 
wish to measure the product's design against a known set of objectives 
for the product and compare the product's design to that of similar 
products produced by other manufacturers. When no FMVSS apply, it may 
also be sensible to measure the product's design against accepted 
product standards such as a set of voluntary industry standards, should 
one exist.\39\ To find applicable standards, importers and fabricating 
manufacturers may wish to check the Web sites of standard-setting 
bodies for products of the type at issue, such as the Underwriters 
Laboratories Inc. (UL), American National Standards Institute (ANSI), 
American Welding Society (AWS), ASTM International (originally the 
American Society for Testing and Materials or ASTM), and the Society of 
Automotive Engineers, International. See: http://www.sae.org. 
Manufacturers of certain automotive replacement parts such as lighting 
equipment may wish to visit the Web site of the Certified Automotive 
Parts Association (CAPA) for more information about that organization's 
certification program. See http://www.capacertified.org/home.asp. These 
examples are not intended to be all-inclusive. It may be desirable for 
an importer to contact other standard-setting and certification 
organizations associated with the type of products it wishes to have 
manufactured, should such organizations exist.
---------------------------------------------------------------------------

    \39\ Ibid, p. 26.
---------------------------------------------------------------------------

    Some fabricating manufacturers use other systematic analysis tools 
such as a Failure Modes and Effects Analysis (FMEA) \40\ to identify 
potential safety hazards and to improve their products over time by 
reducing or eliminating failures. Using FMEA, failures can be 
prioritized according to how serious their consequences are, how 
frequently they may occur, and how easily they can be detected.\41\
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    \40\ The FMEA process was originally developed by the U.S. 
military in the 1940s. See: American Society for Quality, http://www.asq.org/learn-about-quality/process-analysis-tools/overview/fmea.html.
    \41\ CPSC Handbook, p. 10.
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    It may be advisable to have parties with expertise in standards and 
regulations compliance, in-use durability, quality assurance, and 
customer service examine the results of the importer's product design 
review. Importers and fabricating manufacturers that do not have in-
house expertise may consider using an accredited test laboratory to 
evaluate the safety of a product.\42\
---------------------------------------------------------------------------

    \42\ Ibid, p. 10.
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(iv) Product Design Records and Traceability
    Importers should consider creating records that identify changes in 
the product's design or in the production process and to incorporate 
changes that affect the product's use into the documents that accompany 
the product when sold. When changes are made to the product's design or 
to the production process, importers should obtain additional test data 
to assure the product continues to comply with stated technical 
specifications and with all applicable FMVSS. For traceability \43\ or 
recall reasons, changed products can be identified by being marked or 
stamped with ``date'' or ``lot'' codes, or in another manner that 
distinguishes new products from old. It makes good sense to use current 
versions of the supporting technical documentation such as drawings; 
replacement parts data; instructions for the product's production, 
inspection, testing, and repair; as well as operating handbooks, and to 
remove from use obsolete documents and data.\44\
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    \43\ Ibid, p. 25.
    \44\ Ibid, p. 24.
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(c) Inspect Foreign Manufacturing Facilities

(i) Evaluating the Manufacturer's Company, Factory, and Staff
    Before entering into a written contract, we believe it is prudent 
for the importer to personally visit the fabricating manufacturer's 
facility and to determine whether the manufacturer is properly licensed 
by the appropriate government agencies. It may also be reasonable to 
hire a consultant if the importer has limited knowledge of, or 
experience with, the culture and trade practices of a foreign country. 
Several trips may be necessary to conduct an objective evaluation of 
the company, its factory, and its management. To reduce the potential 
for fraud, it is preferable to deal directly with the fabricating 
manufacturer and to avoid dealing with

[[Page 79217]]

representatives (such as trade groups) that claim to represent a 
manufacturer. When dealing with a business partner of the fabricating 
manufacturer, it is generally advisable to determine whether the 
partner is a subsidiary of a larger company \45\ and whether the 
importer has recourse against the parent company if the subsidiary 
defaults on its obligations.
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    \45\ For example, see U.S. Department of Commerce (DOC), 
``Essential China Advice'' (Washington, DC, 2001-2008) http://www.buyusa.gov/china/en/chinabiztips.html (February 22, 2008).
---------------------------------------------------------------------------

(ii) Assuring Quality Control
    While visiting a fabricating manufacturer's foreign facilities, the 
importer may consider asking the manufacturer's production managers to 
identify the quality control mechanisms that are in place (e.g., ISO 
9000 series quality assurance compliance) and it may be helpful to 
observe whether there is evidence of good quality workmanship. The 
importer should also be aware that other quality management systems are 
used such as ISO/TS16949, which was jointly developed by the 
International Automotive Task Force (IATF) \46\ and submitted to the 
ISO for approval and publication. \47\ ISO/TS16949 applies to the 
design and development, production, and, as relevant, the installation 
and servicing of automotive-related products.
---------------------------------------------------------------------------

    \46\ IATF members include the following vehicle manufacturers: 
BMW Group, Chrysler LLC, Daimler AG, Fiat Group Automobiles, Ford 
Motor Company, General Motors Corporation (including Opel Vauxhall), 
PSA Peugeot-Citroen, Renault, Volkswagen AG and the vehicle 
manufacturers' respective trade associations--AIAG (U.S.), ANFIA 
(Italy), FIEV (France), SMMT (U.K.) and VDA (Germany).
    \47\ See: http://www.iso.org/iso/catalogue_detail?csnumber=36155.
---------------------------------------------------------------------------

(iii) Protecting Intellectual Property, Trademarks, Copyrights, 
Patents, and Trade Secrets
    During the on-site visit, the importer should look for counterfeit 
commodities or evidence of trademark or copyright violations such as 
fraudulent seals made to look like those produced by certification 
organizations. We believe that it is in the best interest of an 
importer to consider protecting its intellectual property, trademarks, 
copyrights, patents, and trade secrets. While NHTSA does not have 
authority to enforce statutes that prohibit counterfeit products from 
being imported and the agency is aware that in some situations 
counterfeit products may, in fact, comply with applicable FMVSS, we 
believe it is prudent for importers to avoid business dealings with 
known or suspected counterfeiters because evidence of counterfeiting 
activities demonstrates the company's disdain for compliance with 
accepted norms, which may extend to safety standards. \48\ Importers 
should be aware that many Federal departments and agencies are working 
with industry to stop the proliferation of counterfeit products. \49\ 
For example, importers should be aware that the International Trade 
Administration of the U.S. Department of Commerce, has posted on its 
Web site an ``IPR Toolkit--Intellectual Property Rights in China'' that 
describes how to develop an intellectual property strategy plan, 
including what is involved in registering intellectual property in 
China. \50\ Also assisting in these efforts are many independent 
organizations such as the U.S. Chamber of Commerce, which represents 
more than three million businesses. \51\
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    \48\ Importers should be aware that the U.S. Department of 
Homeland Security recently announced The National Intellectual 
Property Rights Coordination Center (IPR Center) to keep unsafe 
products out of the United States. See ``DHS Announces New Center to 
Target Unsafe Products'' (Washington, DC, July 11, 2008) http://www.cbp.gov/xp/cgov/newsroom/highlights/target_center.xml.
    \49\ The Office of the U.S. Trade Representative and the 
Departments of Commerce, State, Justice, and Homeland Security lead 
a government-wide initiative, the Strategy Targeting Organized 
Piracy (STOP!), to fight billions of dollars in global trade in 
pirated and counterfeit goods that cheat American innovators and 
manufacturers, hurt the U.S. economy and endanger consumers 
worldwide. See: http://www.stopfakes.gov or call 1-866-999-HALT.
    \50\ Ibid, p. 12. See also: http://www.stopfakes.gov.
    \51\ The U.S. Chamber of Commerce sponsors the Coalition Against 
Counterfeiting and Piracy. See: http://www.thetruecosts.org/.
---------------------------------------------------------------------------

(iv) Reaching Agreement on Whether Products are Substandard, 
Nonconforming, or Defective
    It is advisable to reach agreement with a prospective fabricating 
manufacturer on what constitutes substandard or defective products, and 
on who will be responsible for conducting recalls of products that have 
a noncompliance with an FMVSS or safety-related defect. Of particular 
importance in this context are the importer's obligations under the 
Vehicle Safety Act to make determinations as to whether a product does 
not comply with an FMVSS or contains a safety-related defect. The 
importer should make clear to the foreign fabricating manufacturer that 
the importer makes the determination of a noncompliance or safety-
related defect under U.S. law regardless of the fabricating 
manufacturer's views. The importer must recognize that its legal duty 
to conduct a recall when the facts so warrant under the Vehicle Safety 
Act is not affected by the willingness of the foreign fabricating 
manufacturer to pay for all or some of the costs of the recall. 
Accordingly, the importer may wish to include provisions in the 
contract with the foreign fabricating manufacturer that covers 
contingencies, including recalls.
(v) Contract Considerations
    All aspects of the product's design and the production process may 
be considered for inclusion in the written contract, such as inspection 
and testing procedures and any documentation the importer requires, 
including work orders, operation sheets, inspection logs, repair logs, 
and test procedure checklists.\52\ The contract may also specify under 
what circumstances the product's design may be changed (if at all), 
what equipment must be used for particular manufacturing operations, 
product traceability measures to be employed, and the types of forms to 
be used for recording quantitative data such as test readings. It is 
useful for the contract to specify exact terms of payment, performance 
standards, and timelines for deliveries and payments. Other 
arrangements that are reached between the importer and fabricating 
manufacturer should also be made in writing, such as those covering the 
importer's rights to visit the production facility in order to provide 
guidance and conduct product inspections.
---------------------------------------------------------------------------

    \52\ CPSC Handbook, p. 28.
---------------------------------------------------------------------------

    An agency's enforcement activities and the importer's legal duties 
may be complicated when the overseas fabricating manufacturer begins 
selling the importer's product to customers that have previously been 
buying directly from the importer. In the event of a product 
noncompliance, the agency must investigate the product importations by 
many, rather than just one importer. We therefore believe it is prudent 
for an importer to consider having contract language that prohibits the 
fabricating manufacturer from selling the importer's product (either 
with or without the importer's markings) to anyone except the importer. 
Without such assurances from the fabricating manufacturer, an importer 
may find that the manufacturer is performing the unauthorized 
manufacture (so-called ``midnight runs'') of the importer's products 
after business hours, which the manufacturer subsequently sells in the 
gray market. The importer may also consider not disclosing its customer 
lists to the manufacturer and not having the manufacturer drop-ship the 
importer's products to its customers because this provides an 
opportunity for the

[[Page 79218]]

manufacturer to deal directly with the importer's customers.\53\
---------------------------------------------------------------------------

    \53\ Blakeslee Sourcing Your Products, pp. 6-9.
---------------------------------------------------------------------------

    The importer should obtain sound legal guidance before entering 
into an agreement. Following execution of the contract, it is wise to 
adhere to the contract provisions or risk the costs of a legal dispute 
in a foreign country. The importer should obey all laws and regulations 
of the foreign country and be wary of any offer by the partner to 
ignore or avoid those laws. Also, the importer may wish to become 
familiar with U.S. Department of Commerce, Bureau of Industry and 
Security (BIS) regulations relating to the transfer of dual use 
technology to certain foreign countries. U.S. statutes prohibit 
transfer of some sensitive technologies without a license. See http://www.bis.doc.gov/2.
    While the contract between the importer and the fabricating 
manufacturer may clarify responsibilities between these entities, it 
does not modify the Vehicle Safety Act and has no bearing on NHTSA. The 
importer retains the obligations of a manufacturer for notification and 
recall under the Vehicle Safety Act and NHTSA regulations.
(vi) Monitoring Compliance With Contract Requirements
    It may be imprudent to assume that the overseas operations will run 
by themselves. Visits to the foreign fabricating manufacturer on a 
frequent basis may be needed to evaluate the state of affairs. During 
these visits, the importer should, if possible, talk to employees to 
learn of any substitutions of materials, modifications of the product's 
design, and manufacturing problems that were encountered. The importer 
should verify that the fabricating manufacturer is complying with 
contractual requirements by inspecting the facilities, production 
operations, inspection and test records, supplies, and audit results. 
The importer should also ensure the product's continued compliance with 
the standards by having performed ongoing FMVSS compliance tests. This 
inspection and testing will provide feedback into the nature of the 
operation and is part of the importer's oversight of the operation and 
its quality assurance/quality control. The importer should not delay 
taking corrective action with the fabricating manufacturer when 
circumstances necessitate such action.\54\
---------------------------------------------------------------------------

    \54\ CPSC Handbook, p. 10.
---------------------------------------------------------------------------

(d) Inspect Goods Either Before They Are Exported to or Distributed in 
the United States

(i) Monitoring Production Outputs
    Different products, designs, and fabrication processes will require 
various levels of precision and accuracy of manufacturing equipment and 
tooling.\55\ In all manufacturing processes, there is a need to monitor 
how well the products meet given specifications because products will 
deviate from specifications for reasons such as new tooling, aging 
machinery, and human error. Fabricating manufacturers of quality 
products use mathematical models for calibrating production equipment, 
controlling the output of the manufacturing process, and auditing 
production processes to attain improvements. Therefore, importers may 
wish to carefully consider instituting a quality control program at the 
outset.
---------------------------------------------------------------------------

    \55\ Ibid, p. 28.
---------------------------------------------------------------------------

(ii) Sampling, Inspecting, and Testing Products
    It would be wise for an importer to bear in mind that even though a 
product appears to be well manufactured, this does not necessarily mean 
that it also complies with applicable FMVSS and will not prove to be 
defective in actual use. While it is important to produce quality 
products, it is crucial that manufacturers test, on a continuing basis, 
their products to verify compliance with the FMVSS. To better shoulder 
the costs of any testing needed to assure compliance, smaller importers 
may wish to consider consortium purchasing, which would allow them to 
pool their resources.
    To ensure that product requirements are within tolerances, it is 
sensible to collect product samples at predetermined intervals and 
inspect them for compliance with any specifications that are identified 
in advance. The purpose of the inspection is to assure that the 
products safely perform their intended functions. Inspection procedures 
may include a visual examination, testing with appropriate instruments, 
measuring, or other forms of evaluation.\56\ Fabricating manufacturers 
collect production samples for inspection based on mathematical models, 
which are beyond the scope of this notice, but that are critical to 
ensuring the quality of the end products. More information relating to 
statistically valid sampling plans is available on Web sites such as 
that of the American Society for Quality. See http://www.asq.org/index.html. Test programs that are based on statistically valid 
sampling techniques will increase the probability that problems will be 
quickly identified and remedied before the products are shipped. 
Obviously, it is preferable from a cost perspective for nonconforming 
or substandard products to be discovered by the fabricating 
manufacturer before shipping costs are incurred.
---------------------------------------------------------------------------

    \56\ Ibid, p. 35.
---------------------------------------------------------------------------

    It is generally expected that quality control issues will be 
greater within the first batch of products made by the new fabricating 
manufacturer. After the initial production run, the importer and 
fabricating manufacturer may want to conduct an inspection to determine 
whether the initial products function as intended, whether their 
dimensions are within tolerances, and whether their appearance is 
satisfactory. The importer and fabricating manufacturer may consider 
conducting comprehensive tests of representative products to ensure 
compliance with design specifications.
    It is desirable to have an inspection plan to specify exactly what 
is to be inspected, how an inspection will be conducted and how often, 
and the types of gauges, tools, or instruments that will be used. If 
inspections are particularly critical to product safety, the inspection 
plan may require that they be performed by designated specialized or 
certified personnel.\57\
---------------------------------------------------------------------------

    \57\ Ibid, p. 36.
---------------------------------------------------------------------------

    It would be advisable to include inspection procedures in the 
contract and any changes should be mutually agreed upon so that a 
record of changes is maintained. We also suggest that the contract 
clearly state how the costs of quality control inspection and any need 
to redesign a product or process based on such inspections will be 
apportioned.
(iii) Post-Production Quality Control
    From the moment products leave the fabricating manufacturer until 
they are acquired by consumers, they are exposed to numerous 
contingencies that can affect their safety or usability. For these 
reasons, it is best not to terminate quality control measures at the 
port and the prudent importer might consider instituting quality 
control measures at storage locations and throughout the domestic 
distribution process. Distribution practices directly influence the 
safety of consumer products so it is wise to exercise control over 
packaging and shipping operations. This control includes the selection 
of adequate packaging materials, design of methods of packaging that 
preclude damage in

[[Page 79219]]

shipment, and selection of shipping methods consistent with the 
physical properties of the product. Packaging and shipping techniques 
may need to be revised as experience dictates. In those instances where 
distributors are involved in assembly or test operations before 
delivery to the consumer it is wise to provide them with current and 
adequate assembly and test instructions and the importer may wish to 
ensure that these instructions are followed.\58\
---------------------------------------------------------------------------

    \58\ Ibid, p. 40.
---------------------------------------------------------------------------

    When quality control problems are encountered, it may be useful to 
determine what has caused the problem and to collaborate with the 
fabricating manufacturer and participants in the distribution process 
to remediate the cause and prevent similar future problems. We believe 
it is wise to keep in mind that reputable fabricating manufacturers 
want to be apprised of problems and will work for compliance with the 
importer's requirements and applicable government standards.
    To prevent potentially dangerous products from being delivered to 
consumers, it may be desirable for importers and fabricating 
manufacturers to discuss the need for prompt corrective actions and to 
agree on those in advance. These actions may include determining what 
caused the problem, how to prevent future problems, and the removal of 
problem products from the production and distribution channels before 
they reach consumers.\59\ Locating products within the production and 
distribution system is crucial to preventing hazardous products from 
being delivered to consumers after safety defects become apparent.
---------------------------------------------------------------------------

    \59\ Ibid, p. 45.
---------------------------------------------------------------------------

    The importer may consider providing the overseas partner with 
training and technical assistance to assure product quality.\60\ This 
commitment to quality control may minimize defect costs and maintain 
profits by ensuring the end user's satisfaction, thereby enhancing the 
prospect for repeat business. On the other hand, neglecting oversight 
may result in compromised product quality and could possibly lead to 
legal consequences at home and abroad. It is worth noting that the 
foreign country's court system may not be relied on to offer a legal 
settlement consistent with U.S. practice.\61\
---------------------------------------------------------------------------

    \60\ U.S. DOC Essential Advice.
    \61\ Ibid.
---------------------------------------------------------------------------

(e) Identify the Product

(i) Identify the Product's Country of Origin
    It is generally required that an imported product be properly 
marked with its country of origin. The pertinent statute, which is 
administered by CBP, requires that, unless excepted, every article of 
foreign origin (or its container) imported into the United States must 
be marked with the article's country of origin. See Section 304, Tariff 
Act of 1930, as amended (19 U.S.C. 1304). The purpose of the marking 
requirement is to inform the ultimate purchaser in the United States of 
the country in which the imported article was produced.
    Articles that are not marked at the time of importation with the 
English name of their country of origin may be subject to additional 
duties unless they are properly marked after importation, or are 
exported or destroyed under CBP supervision. CBP allows importers, 
where administratively practicable, to mark goods that are not marked 
at the time of importation, prior to their release from CBP's control 
or custody. This rule does not apply to an importer that has repeatedly 
violated the country of origin marking requirements after receiving 
written notification from CBP that the goods are required to be marked 
prior to importation.
    It is also important to keep in mind that any person who removes, 
destroys, alters, covers, or obliterates, with the intent of 
concealing, the country of origin marking on an imported article could 
be subject to criminal prosecution.\62\
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    \62\ U.S. Customs and Border Protection (CBP), ``Marking of 
Country of Origin'' (Washington, DC, December 2004) Publication 
 0000-0539 http://www.cbp.gov/xp/cgov/toolbox/publications/trade/ (February 22, 2008).
---------------------------------------------------------------------------

(ii) Identify the Product's Manufacturer
    As noted above, items of motor vehicle equipment that are subject 
to the FMVSS must, as originally manufactured, conform to the 
applicable standard and be so certified. In most instances, 
certification of compliance with the applicable FMVSS for regulated 
safety equipment is evidenced by the symbol ``DOT'' either inscribed on 
the equipment item in a prescribed location, or placed on the outside 
of the container in which the equipment item is shipped. See 49 U.S.C. 
30112 and 30115. The manufacturer of certain regulated equipment items 
such as brake hoses, glazing (automotive glass and plastics), and tires 
must label its products with identification numbers assigned to the 
manufacturer by NHTSA.
    However, motor vehicle equipment items that are not covered by an 
equipment standard are not required by NHTSA regulations to be marked. 
NHTSA's enforcement efforts are complicated when unmarked products are 
noncompliant or have safety-related defects because it becomes more 
difficult to trace the products' origins and to request or order the 
fabricating manufacturer or importer to conduct a safety recall 
campaign. It is generally assumed that safety is enhanced when those 
who manufacture and import motor vehicles and items of motor vehicle 
equipment are accountable and that accountability may be compromised 
when products have no markings that identify their fabricating 
manufacturers or importers.
    The agency is aware that many fabricating manufacturers voluntarily 
mark their products with information that identifies the manufacturer. 
When a fabricating manufacturer does not mark its products, it becomes 
difficult to discern whether those products were produced by the 
manufacturer in accordance with a legitimate business relationship or 
were counterfeited by an unscrupulous manufacturer. An all-too-real 
possibility is that the fabricating manufacturer or importer may have 
to initiate a recall for the counterfeit products and incur costs that 
it otherwise would not have had to pay if the legitimate products were 
easily identifiable with their markings.
    The agency therefore believes it is in the best interests of 
importers and fabricating manufacturers to ensure that the legitimate 
manufacturer (and where feasible, the importer) is clearly identified 
on the product or its packaging. Readily apparent markings on the item 
itself are preferable, because after the item is in service, its 
packaging will usually not be available for reference purposes. It is 
important to keep in mind that such identification may limit a 
fabricating manufacturer or importer's recall liability to only those 
products that were actually manufactured or imported by those entities.
(iii) Identify the Product's Date or Lot Codes
    The agency also believes it is reasonable for importers and 
fabricating manufacturers to consider marking products with 
``production date codes'' or ``lot codes.'' As noted above, by doing so 
items that do not comply with standards or that contain safety defects 
can be traced back to the point at which the manufacturing process was 
changed or to other changes that were made, such as purchases of raw 
materials from different suppliers. By doing so, a recall may be 
limited to an identified ``lot'' of products or to products 
manufactured in a specific date range, thereby reducing the overall 
cost of the recall.

[[Page 79220]]

(iv) Industry Recommended Practices or Standards for Product Markings
    The agency is aware that many fabricating manufacturers also 
voluntarily mark their products in accordance with industry guidance to 
show that the products conform to established standards or recommended 
practices. Industry guidance is typically derived from broadly accepted 
specifications for a product. As an example, SAE Recommended Practice 
J759 entitled ``Lighting Identification Code,'' provides guidelines to 
manufacturers of lighting products that specify permanent markings that 
identify the product's manufacturer, the function for which it was 
designed, the model or part number, the class designation, and the 
product's application.\63\ When such guidance is available, the agency 
believes that importers and fabricating manufacturers should give it 
serious consideration.
---------------------------------------------------------------------------

    \63\ See: www.sae.org/standardsdev/.
---------------------------------------------------------------------------

(f) Establish a Consumer Service Program

    It is wise for importers to establish and maintain an effective 
consumer service program because good service leads to satisfied 
customers and repeat business. An effective consumer service program 
may also assist the importer in quickly identifying quality control and 
safety-related problems and allow the importer to remedy those problems 
before they become widespread. Importers should consider establishing a 
consumer service program that includes the following elements:
(i) Consumer Education
    An effective consumer service program will inform consumers through 
product manuals or instructions on how products are to be assembled, 
installed, and operated to prevent safety hazards. For example, NHTSA 
recommends that consumers read the instruction manual provided with a 
newly purchased child safety seat as well as the seat belt and child 
seat installation section of their vehicle owner's manual before 
attempting to install and use a child safety seat.
(ii) Product Service
    An effective consumer service program will make it easy for 
consumers to obtain replacement parts and will inform consumers how and 
where to take the product for servicing, particularly for deficiencies 
or malfunctions that are potential causes of safety hazards. Importers 
may consider providing a U.S. telephone number with the product for 
consumers to call if they have questions regarding the product.
(iii) Recordkeeping
    An effective consumer service program will include a records system 
that identifies a product by serial number, model, and date of 
manufacture and that identifies its location in the distribution system 
and after sale to a consumer. Importers should be aware that 
recordkeeping becomes very important for notifying consumers, dealers, 
and distributors of products when a safety recall is announced.
(iv) Safety Recall Plan
    An effective consumer service program will include a plan for the 
rapid recall of imported products from consumers, distributors, and 
dealers. The plan should include procedures to inform consumers how the 
importer will respond to noncompliances with the FMVSS or safety 
defects that are determined to exist in a product.\64\ The recall plan 
should also establish procedures for notifying NHTSA about 
noncompliances with the FMVSS or safety-related defects as required by 
agency regulations. The recall plan should be periodically evaluated 
and amended as necessary.
---------------------------------------------------------------------------

    \64\ CPSC Handbook, p. 42.
---------------------------------------------------------------------------

(v) Intervention
    If a noncompliance or safety-related defect becomes apparent, an 
effective consumer service program will assist an importer in locating 
products within the production and distribution system and help to 
prevent problem products from being delivered to consumers.
(vi) Notification
    In the event of a recall, the most important factor is the ability 
to inform as many owners, dealers, retailers, and distributors of the 
product as possible. Notifying owners ordinarily will be the importer's 
responsibility. While it may be impractical to maintain records 
identifying all retail purchasers of a particular consumer product, the 
importer may wish to make a reasonable effort in that direction by 
requesting distributors, dealers or retailers to maintain such records 
or by including with products self-addressed mailing cards for 
consumers to use, if they so choose, to register their ownership of the 
product.\65\ Where it is a requirement to maintain records identifying 
retail purchasers of a product, such as is the case for tires, child 
restraint systems, and motor vehicles, the importer must ensure that 
distributors, dealers, and retailers understand their obligations under 
existing regulations. For example, see 49 CFR part 574 Tire 
Identification and Recordkeeping and 49 CFR part 588 Child Restraint 
Systems Recordkeeping Requirements.
---------------------------------------------------------------------------

    \65\ Ibid, p. 45.
---------------------------------------------------------------------------

(vii) Business Process Monitoring
    Other than complaints received directly from the importer's 
consumer service program, information that could assist in identifying 
noncompliances with the FMVSS or safety-related defects includes 
insurance claims, lawsuits, product return data from business partners, 
the results of ongoing quality assurance testing, and information about 
products that share common parts or platforms. The importer should also 
pay close attention to the EWR data it submits to NHTSA because that 
information may be very useful in identifying safety-related problems 
early in the product's history.

(g) Contact NHTSA Concerning Manufacturer/Importer Reporting 
Requirements, Safety Compliance, Defect Issues, and Regulations

    Enhanced product safety for imported motor vehicles and equipment 
will result from a collaborative effort between the importer community, 
fabricating manufacturers, and NHTSA. To this end, we offer the 
following agency contact numbers and Internet resources to help answer 
questions about these recommended best importer practices.

                   Office of Vehicle Safety Compliance
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                                     NHTSA Office/
              Topic                     Internet         Telephone No.
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General questions about           Import and              (202) 366-5291
 importing vehicles and            Certification
 equipment items.                  Division.
General Importation Information:   http://www.nhtsa.dot.gov/cars/rules/import/ import/

[[Page 79221]]

 
Questions about how a             Import and              (202) 366-5291
 manufacturer informs NHTSA        Certification
 about its company and the         Division.
 products it manufactures.
Questions about how to provide    Import and              (202) 366-5291
 NHTSA with the manufacturer's     Certification
 vehicle identification number     Division.
 deciphering information.
Questions about NHTSA ID numbers  Equipment Division.     (202) 366-5322
 that are assigned to equipment
 manufacturers of brake hoses,
 glazing (glass), and tires.
Information to Assist New          http://www.nhtsa.dot.gov/cars/rules/
 Manufacturers:                                   maninfo/
Questions about FMVSS as they     Equipment Division.     (202) 366-5322
 relate to equipment items
 (i.e., tires, rims, brake
 hoses, brake fluid, seat belt
 assemblies, lighting equipment,
 glazing (automotive glass and
 plastics), motorcycle helmets,
 child restraint systems (child
 safety seats), platform lift
 systems for the mobility
 impaired, rear impact guards
 for trailers, triangular
 reflective warning devices, and
 compressed natural gas
 containers).
Federal motor vehicle safety       http://www.nhtsa.dot.gov/cars/rules/
 standards (FMVSS):
NHTSA's Manufacturer Databases:    http://www.nhtsa.dot.gov/cars/rules/
                                                manufacture
Government Vehicle Safety                http://www.safercar.gov/
 Information:
------------------------------------------------------------------------


                     Office of Defects Investigation
------------------------------------------------------------------------
                                     NHTSA Office/       Telephone No./
              Topic                     Internet              Link
------------------------------------------------------------------------
Questions about Early Warning     Early Warning           (202) 366-4238
 Reporting (EWR).                  Division.
Early Warning Reporting:             http://www-odi.nhtsa.dot.gov/ewr/ewr.cfm
Questions about Defects and       Office of Defects       (202) 366-5210
 Recalls.                          Investigation.
Defects Investigations:                http://www-odi.nhtsa.dot.gov/
------------------------------------------------------------------------


                         Office of Chief Counsel
------------------------------------------------------------------------
                                     NHTSA Office/
              Topic                    Internet          Telephone No.
------------------------------------------------------------------------
Questions about how the statutes  Office of Chief     Requests for
 and regulations administered by   Counsel.            interpretations
 NHTSA are interpreted.                                should be made in
                                                       writing.
NHTSA Chief Counsel interpretive         http://isearch.nhtsa.gov/
 letters:
NHTSA Statutory Authorities:       http://www.nhtsa.dot.gov/nhtsa/Cfc_title49/index.html
NHTSA Regulations:                 http://www.nhtsa.dot.gov/cars/rules/
Questions about how to designate  Office of Chief     (202) 366-1834
 a U.S. resident as an agent for   Counsel.
 service of process.
Suggested Designation of Agent     http://www.nhtsa.dot.gov/cars/rules/
 for Service of Process 49 CFR        manufacture/agent/customer.html
 Part 551, Subpart D:
------------------------------------------------------------------------

(h) Know How To Obtain General Assistance With Other Federal 
Regulations

    The Office of Management and Budget, in conjunction with the U.S. 
Small Business Administration, publishes a one-stop Internet resource 
to make it easier for fabricating manufacturers and importers to 
understand Federal regulations, including those administered by NHTSA. 
This Web site provides a point of contact at each agency to answer 
specific questions.\66\ See: http://www.business.gov/contacts/federal/. 
U.S. Customs and Border Protection (CBP), an agency of the U.S. 
Department of Homeland Security, has also published ``Importing into 
the United States: A Guide for Commercial Importers,'' which provides 
wide-ranging information about the importing process and import 
requirements. See: http://www.cbp.gov/xp/cgov/toolbox/publications/trade/.
---------------------------------------------------------------------------

    \66\ The Small Business Paperwork Relief Act of 2002 (SBPRA) 
requires each Federal agency to establish a point of contact to act 
as a liaison between the agency and small businesses. In addition, 
SBPRA requires the Office of Management and Budget (OMB), in 
conjunction with the Small Business Administration, to publish on 
the Internet a list of compliance assistance resources available at 
Federal agencies for small businesses.

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    Authority: E.O. 13439, 72 FR 40051.

David Kelly,
Acting Administrator.
[FR Doc. E8-30603 Filed 12-23-08; 8:45 am]
BILLING CODE 4910-59-P