[Federal Register Volume 74, Number 144 (Wednesday, July 29, 2009)]
[Rules and Regulations]
[Pages 37878-37920]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-17994]



[[Page 37877]]

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Part IV





Department of Transportation





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National Highway Traffic Safety Administration



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49 CFR Parts 512 and 599



Requirements and Procedures for Consumer Assistance To Recycle and Save 
Program; Final Rule

  Federal Register / Vol. 74, No. 144 / Wednesday, July 29, 2009 / 
Rules and Regulations  

[[Page 37878]]


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DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

49 CFR Parts 512 and 599

[Docket No. NHTSA-2009-0120]
RIN 2127-AK53


Requirements and Procedures for Consumer Assistance To Recycle 
and Save Program

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

ACTION: Final rule.

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SUMMARY: This final rule sets forth requirements and procedures for the 
voluntary vehicle trade-in and purchase/lease program under the 
Consumer Assistance to Recycle and Save Act of 2009. This program helps 
consumers pay for a new, more fuel efficient car or truck from a 
participating dealer when they trade in a less fuel efficient car or 
truck. The rule establishes a process by which dealers can register in 
order to participate in the program and establishes the criteria this 
agency will use to determine which disposal facilities are eligible to 
receive and either crush or shred the trade-in vehicles. It also sets 
forth the criteria that trade-in vehicles and new vehicles must meet in 
order for purchases and leases to qualify for assistance under this 
program and establishes the requirements that must be met by consumers, 
dealers, disposal facilities and others. Finally, the rule sets forth 
enforcement procedures and provisions for punishing fraud and other 
violations of the program requirements.

DATES: This final rule is effective July 29, 2009. Petitions: If you 
wish to petition for reconsideration of this rule, your petition must 
be received by September 14, 2009.

ADDRESSES: If you submit a petition for reconsideration of this rule, 
you should refer in your petition to the docket number of this document 
and submit your petition to: Administrator, National Highway Traffic 
Safety Administration, 1200 New Jersey Avenue, SE., West Building, 
Washington, DC 20590.
    The petition will be placed in the public docket. Anyone is able to 
search the electronic form of all documents received into any of our 
dockets by the name of the individual submitting the document (or 
signing the document, if submitted on behalf of an association, 
business, labor union, etc.). You may review the complete User Notice 
and Privacy Notice for Regulations.gov at http://www.regulations.gov/search/footer/privacyanduse.jsp.

FOR FURTHER INFORMATION CONTACT: You may obtain additional information 
about the CARS program by calling the CARS Hotline at 1-866-CAR-7891. 
It is dedicated to calls about the program. For non-legal issues, you 
may call, Mr. Frank Borris, NHTSA Office of Enforcement, telephone 
(202) 366-8089. For legal issues, you may call David Bonelli, NHTSA 
Office of Chief Counsel, telephone (202) 366-5834.

SUPPLEMENTARY INFORMATION: 

Table of Contents

I. Background
II. Questions and Comments From the Public About the CARS Program
III. Public Outreach and Consultation
IV. The Regulation
    a. Definitions (Sec.  599.102)
    b. Registration of Dealers (Sec.  599.200)
    c. Identification of Disposal Facilities (Sec.  599.201)
    d. Determining Eligibility of Trade-in Vehicles and New Vehicles 
(Sec.  599.300)
    1. Vehicle Definitions
    2. Eligibility of Trade-in Vehicles
    3. Eligibility of New Vehicles
    e. Requirements for Qualifying Transactions (Sec. Sec.  599.300 
and 301)
    1. Vehicle Categories and Credit Amounts
    2. Special Requirements for Trade-in Vehicles
    3. Restrictions and Limitations on Transactions
    f. Requirements for Dealer Reimbursement (Sec.  599.302-304)
    g. Disposal of Trade-In Vehicles (Sec.  599.400-403)
    h. Enforcement (Sec.  599.500-517)
    1. Prevention of Fraud
    2. Civil Penalties and Other Sanctions
V. Confidential Information and Privacy
    a. Determinations of the Confidentiality of CARS Data Based on 
FOIA Exemptions 4 and 6
    b. Approach--Class Determinations vs. Individual Assessments
    c. Class Determinations Based on FOIA Exemption 4
    d. Data Submitted to NHTSA for the CARS Program
    1. Manufacturer Data
    2. Dealer Information and Transaction Data
    3. Disposal Facility and Destruction Data
    e. CARS Data Class Determinations Based on FOIA Exemption 4
    1. Manufacturer Assigned Dealer Identification
    2. Dealer Bank Name, ABA Routing Number, Bank Account Number
    3. CARS Dealer ID and CARS Authorization Codes
    f. Class Determination Based on FOIA Exemption 6
VI. Costs and Benefits
VII. Statutory Basis for This Action
VIII. Effective Date
IX. Regulatory Analyses and Notices

I. Background

    On June 24, 2009, the President signed into law the Consumer 
Assistance to Recycle and Save Act of 2009 (the CARS Act or the Act) 
(Pub. L. 111-32). The Act establishes, within the National Highway 
Traffic Safety Administration (NHTSA or the agency), a temporary 
program under which an owner of a motor vehicle meeting statutorily 
specified criteria may trade in the vehicle and receive a monetary 
credit from the dealer toward the purchase or lease of a new motor 
vehicle meeting statutorily specified criteria.
    Generally, the trade-in vehicle must have a combined fuel economy, 
as determined by the Environmental Protection Agency (EPA), below a 
specified value and the new vehicle must have an EPA combined fuel 
economy above a higher specified value. (Combined fuel economy is an 
EPA calculation representing the weighted average of a vehicle's city 
and highway fuel economy as determined according to the method 
described in EPA regulations at 40 CFR 600.210-08(c)). The program 
covers qualifying transactions that occur between July 1, 2009 and 
November 1, 2009, so long as funds appropriated by Congress are not 
exhausted. If all of the conditions of eligibility are met and the 
dealer provides NHTSA with sufficient documentation relating to the 
transaction, NHTSA will make an electronic payment to the dealer equal 
to the amount of the credit extended by the dealer to the consumer, not 
exceeding the statutorily authorized amount. The dealer must agree to 
transfer the trade-in vehicle to a disposal facility that will crush or 
shred it so that it will never be returned to the road, although parts 
of the vehicle, other than the engine block and drive train (unless the 
drive train is sold in separate parts), may be sold.
    The CARS Act requires the Secretary of Transportation, acting 
through NHTSA, to issue final regulations within 30 days after 
enactment (i.e., by July 24, 2009), ``notwithstanding'' the notice and 
comment requirements of the Administrative Procedure Act (5 U.S.C. 
553). The regulations must, among other things: (1) Provide for a means 
of registering dealers for participation in the program; (2) establish 
procedures for reimbursement of dealers participating in the program; 
(3) require that dealers use the credit in addition to any other rebate 
or discount advertised by the dealer or offered by the manufacturer and 
prohibit the dealer from using the credit to offset any such other 
rebate or

[[Page 37879]]

discount; (4) require that dealers disclose to the person trading in an 
eligible vehicle the best estimate of the scrappage value of such 
vehicle and permit dealers to retain $50 of the amount paid for the 
scrappage value as payment for any administrative costs of 
participation in the program; (5) establish requirements and procedures 
for the disposal of eligible trade-in vehicles; and (6) provide for the 
enforcement of penalties for violations of the program requirements.
    Separate from the rulemaking requirement, the CARS Act directs the 
agency to establish a Web site to convey information about the program, 
including instructions on how to determine if a vehicle is an eligible 
trade-in vehicle, how to participate in the program and how to 
determine if a dealer is participating in the program. The agency 
established this Web site at http://www.cars.gov. Among other things, 
the Web site contains an interactive tool for determining eligible 
vehicles, a list of participating dealers and disposal facilities, 
responses to frequently asked questions, and information on how to 
determine the EPA combined fuel economy of trade-in vehicles and of new 
vehicles. In addition, NHTSA set up a hotline ((866) 227-7891) to 
answer questions about the program and, on July 2, 2009, published a 
document in the Federal Register (74 FR 31812) providing additional 
useful information, in advance of issuance of this final rule.
    The Act provides that the program covers eligible transactions 
beginning on July 1, 2009, prior to today's final rule. NHTSA advised 
the public through the July 2 Federal Register document, the Web site, 
and the hotline that it was prudent to wait until the details of the 
program were specified in today's final rule. Nevertheless, if 
transactions occurring on or after July 1, 2009, but before today's 
final rule, meet all of the requirements identified in this final rule, 
registered dealers may follow the application procedures of the rule 
and apply for reimbursement for those transactions. To expedite 
processing, the rule relies, wherever possible, on electronic 
submissions through secure agency Web sites.
    In order to implement this new program, NHTSA has had to quickly 
create a new organization. NHTSA has established the Office of the Car 
Allowance Rebate System within the Office of Enforcement. The new 
office will consist of three divisions. The Transaction Oversight 
Division will work closely with the contractor NHTSA has retained to 
review incoming requests for payment from dealers to ensure that those 
requests are reviewed correctly and in a timely way. The Data Analysis 
and Reporting Division will review data generated in connection with 
the program to help ensure the system's efficiency and detect problems 
with the process or indications of potential compliance issues. That 
division will also produce reports on all aspects of the system. The 
Compliance Division will work to detect and deter possible 
noncompliance related to the program and coordinate closely with 
NHTSA's Office of Chief Counsel when possible violations are found. 
That division will also coordinate closely with the DOT's Office of 
Inspector General on issues related to possible fraud in connection 
with the program.
    The agency also has decided to use the name Car Allowance Rebate 
System (CARS) for its program implementing the Act. The use of the term 
``rebate'' in the name NHTSA has chosen for the program is not intended 
to have any effect on how CARS transactions are treated under State or 
Federal tax laws. The CARS Act provides that the credit is not income 
to the purchaser, but does not address any other possible tax issues. 
NHTSA lacks expertise and authority in tax matters and makes no attempt 
here to provide any guidance on those matters.

II. Questions and Comments From the Public About the CARS Program

    During the period between enactment of the CARS Act and publication 
of today's rule, the agency received numerous questions and comments 
about various provisions of the Act. The final rule seeks to address 
these comments and questions, and details appear later in this 
document. However, the agency provides here a brief summary discussion 
of some of the issues raised. As noted earlier, NHTSA's Web site for 
the CARS program contains responses to frequently asked questions by 
members of the public.
    The CARS program assists consumers who trade in their older, less 
fuel efficient vehicles for new, more fuel efficient vehicles. The 
program is designed to remove these older, less fuel efficient vehicles 
from the road, by requiring the trade-in vehicle to be crushed or 
shredded. Some consumers were unaware that their trade-in vehicle must 
be destroyed as a statutory condition of participating in this program. 
Because of that condition, consumers purchasing or leasing a new 
vehicle under this program should not expect to receive the full trade-
in value of their old vehicle when negotiating with a dealer.
    As detailed below, the program has different requirements for 
different types of trade-in vehicles (e.g., passenger cars, SUVs and 
vans, pickups, and trucks) because these vehicles have varying levels 
of EPA combined fuel economy. In general, passenger cars have the 
highest combined fuel economy. Therefore, even though a passenger car 
may be quite old and/or in poor condition, it may not be an eligible 
trade-in vehicle under the program because its combined fuel economy at 
the time of its manufacture (as measured by the EPA) exceeds statutory 
limits. Some consumers have expressed surprise at this result. However, 
the agency must follow the requirements of the statute. Larger, older 
pickups and SUVs, on the other hand, do not typically have very high 
fuel economy. The statutory requirements for trading in these vehicles 
are less strict than for trading in passenger cars. Consumers may find 
that more of the vehicles in these categories are eligible as trade-in 
vehicles under the program.
    Questions have arisen as to which persons are eligible to 
participate in the program and whether a person can trade in a vehicle 
owned by someone else, such as a family member. The agency has 
concluded that individuals as well as legal entities, such as 
corporations and partnerships, may participate in the program. However, 
a person may not trade in a vehicle owned by someone else under the 
program. The Act's one-year insurance requirement is satisfied so long 
as the trade-in vehicle is insured, irrespective of the identity of the 
person holding the insurance policy. The specifics of these 
requirements are explained later in this document.
    The agency has received questions regarding the value and 
disposition of the trade-in vehicle. The CARS Act specifies that while 
many parts of the trade-in vehicle are permitted to be removed and 
sold, in the end the residual vehicle, including the engine block, must 
be crushed or shredded. Therefore, the trade-in value of the vehicle is 
not likely to exceed its scrap value. Purchasers should not expect to 
receive the same trade-in value as they might if the vehicle were to 
remain on the road. The Act also requires dealers to disclose to 
purchasers the scrap value of the trade-in vehicle at the time of the 
trade-in and allows dealers to retain up to $50 of the scrap value of 
the vehicle for their administrative costs of participation in the 
program.
    Some consumers have expressed concern that the combined fuel 
economy value of their vehicles, as determined on the http://
http://fueleconomy.gov">fueleconomy.gov Web site of the EPA, is

[[Page 37880]]

not an accurate measure of the actual fuel economy they experience. EPA 
determines these values for each make, model, and model year with 
regard to each vehicle at the time of its manufacture. These consumers 
contend that if another means were used to calculate combined fuel 
economy, their vehicle would be an eligible trade-in vehicle under the 
program. The CARS Act is prescriptive in this regard, and requires 
NHTSA to use the EPA calculation, and not any other calculation, to 
determine whether a trade-in vehicle is eligible under the program.
    Some consumers have asked whether they may participate in more than 
one reimbursed transaction, either singly or as joint-registered owners 
of a vehicle. The CARS Act specifies that each person may receive only 
one credit and that only one credit may be issued to the joint-
registered owners of a single trade-in vehicle under the program. 
Consequently, a person may participate in a transaction that receives a 
credit under this program only once.
    The CARS Act is specific as to the characteristics of the vehicle 
that may be traded in and the characteristics of the new vehicle that 
may be purchased or leased, and these two requirements are 
interdependent (i.e., whether a new vehicle is eligible under the 
program depends, in part, on the characteristics of the trade-in 
vehicle). For example, the trade-in requirements for a large work truck 
differ from those of passenger cars under the program. Similarly, some 
vehicles--notably motorcycles--simply are not eligible under the CARS 
Act, either as trade-in vehicles or for purchase or lease, even though 
consumers have noted that transactions involving those vehicles might 
reduce fuel use and improve the environment.

III. Public Outreach and Consultation

    The extremely short time afforded by the Act to develop and 
complete this rulemaking precluded publishing a proposed rule for 
notice and comment. Therefore, the agency took a variety of steps to 
obtain public input as it moved forward to develop this rule. It 
established a Web site that invited public inquiries. As it received 
inquiries, it posted a steadily growing list of questions and answers, 
which in turn led to additional inquiries. It hosted a ``webinar'' that 
elicited hundreds of inquiries. In addition, it met with 
representatives of a wide variety of environmental interest groups.
    The agency also directly consulted with organizations representing 
original equipment manufacturers (OEMs), including the Alliance of 
Automobile Manufacturers and the Association of International 
Automobile Manufacturers, to obtain information on franchised 
dealerships. The agency involved the OEMs because they possess 
comprehensive and readily available lists of new vehicle dealers 
licensed under State law. As detailed below, the agency is using lists 
of franchised dealers provided by the OEMs to aid in the process of 
registering dealers under the program.
    NHTSA met with automobile dealers and dealer organizations, 
including the National Automobile Dealers Association and the American 
International Automobile Dealers Association, to better understand the 
typical vehicle trade-in and purchase/lease transaction. The agency 
consulted with groups representing disposal facilities, salvage 
auctions, and reporting entities, including the American Salvage Pool 
Association, the Automotive Recyclers Association, CoPart, Mannheim, 
Insurance Auto Auctions, the Institute of Scrap Recycling Industries, 
Inc., and the National Salvage Vehicle Reporting Program, to learn 
about the processes involved in recycling and scrapping old vehicles. 
The information learned by the agency from dealer and disposal facility 
organizations was critical to an informed rulemaking process.
    The agency also consulted with officials from Texas, California and 
Germany. These officials provided valuable information to the agency, 
based on their experience administering and enforcing similar vehicle 
purchase and trade-in programs. Each of these officials cautioned NHTSA 
that it would need to be vigilant to guard against fraud.
    Finally, as required under the CARS Act, the agency coordinated 
with appropriate Federal agencies. With respect to the National Motor 
Vehicle Title Information System (NMVTIS), the agency met with the 
Department of Justice and its NMVTIS program administrator, the 
American Association of Motor Vehicle Administrators, to develop 
procedures for updating the NMVTIS to reflect the crushing or shredding 
of trade-in vehicles under the program. The agency consulted with the 
EPA on the listing of categories of eligible vehicles and on the 
listing of disposal facilities and requirements and procedures for the 
proper disposal of refrigerants, antifreeze, mercury switches, and 
other substances prior to crushing or shredding the trade-in vehicle. 
The agency also consulted with EPA concerning a method to disable the 
engines of the vehicles that are traded in.
    Memoranda providing the dates and summaries of meetings with these 
organizations and various other groups are included in the docket for 
this rule.

IV. The Regulation

    As directed by the CARS Act, today's final rule sets forth 
requirements and procedures for registering participating dealers and 
listing participating disposal facilities, reimbursing dealers for 
qualifying transactions, disposing of trade-in vehicles, and enforcing 
penalties for program violations.
    The rule is being issued without first providing a notice and an 
opportunity for public comment. As noted above, the Act provides that 
the rule shall be issued within 30 days after enactment, 
``notwithstanding'' the requirements of 5 U.S.C. 553, the Federal law 
requiring notice and comment. Further, given that schedule and the 
necessity of quickly beginning to implement this 4-month program with a 
statutorily fixed end date, the agency finds for good cause that 
providing notice and comment is impracticable and contrary to the 
public interest. Drafting and issuing a proposed rule, providing a 
period for public comment, and addressing those comments in the final 
rule would have been highly impracticable in the time available and 
would have substantially delayed issuance of this final rule beyond the 
legislatively mandated issuance date of July 24. We think the public 
interest is best served by issuing this rule on the mandated date so 
that its requirements are known and can be followed by all 
participants. This is especially true because transactions since July 1 
have been potentially eligible for credits under this program.
    The CARS Act prescribes a rulemaking period of just 30 days before 
the program is to be fully implemented and capable of accommodating a 
potentially very large number of transactions. Mindful of this 
requirement, the agency placed significant emphasis on efficient 
transaction processes and data exchange. To that end, most of the 
transactional requirements imposed by today's rule are met through 
electronic online submissions. Where this is so, the rule identifies 
the particular data or information required in the electronic 
submission and, in one case, refers to an appendix with a facsimile of 
the electronic form for easy reference.
    The Act requires the agency to develop certain lists to assist 
consumers and dealers (e.g., a comprehensive list of new fuel efficient 
vehicles meeting the program requirements, a list of disposal

[[Page 37881]]

entities to which dealers may transfer eligible trade-in vehicles). 
Here, the rule makes use of references to the CARS Web site for 
convenient reference to these helpful lists.
    Much of the CARS Act is specific and directive. However, where a 
statutory term or provision is not clear or gives the agency 
discretion, the rule generally strikes the balance in favor of an 
interpretation that promotes smooth and expeditious completion of 
transactions or one that decreases opportunities for fraud.

a. Definitions (Sec.  599.102)

    The CARS Act defines a dealer as a person licensed by a ``State'' 
and identifies an eligible trade-in vehicle in terms of its insurance 
and registration status under ``State'' law. Read together, these 
statutory provisions restrict the transactions that are eligible for a 
credit under the CARS program. More specifically, a dealer must be a 
United States dealer and a trade-in vehicle must be insured and 
registered in the United States. However, nothing in the Act excludes 
U.S. territories from the reach of the program. Consequently, in 
section 599.102, the agency has defined ``State'' to include the 50 
United States, the District of Columbia, Puerto Rico, the Virgin 
Islands, Guam, American Samoa, and the Commonwealth of the Northern 
Mariana Islands.
    The CARS Act uses the term ``person'' to describe those eligible to 
purchase or lease a new vehicle under the Program. See Sections 1302(c-
d). In the absence of a definition of this term in the CARS Act, the 
agency relies on the universal definition that appears in 1 U.S.C. 1, 
which includes corporations, companies, associations, firms, 
partnerships, societies, and joint stock companies, as well as 
individuals. The agency adopts this definition for the term ``person'' 
in Section 599.102, and also defines a ``purchaser'' in that section as 
a person purchasing or leasing a new vehicle under the CARS program. Of 
course, each person is subject to the statutory restriction that 
precludes participation by any person in this program more than once.

b. Registration of Dealers (Sec.  599.200)

    The Act requires the agency to provide for a means of registering 
dealers for participation in the program. (Section 1302(d)(1)). A 
dealer is defined under the Act as a person licensed by a State who 
engages in the sale of new automobiles to ultimate purchasers (Section 
1302(i)(6)), a definition we have restated in Section 599.102. After 
consultation with dealer and OEM organizations, the agency is 
implementing the dealer registration requirement through a several step 
process. First, on June 30, 2009, the agency requested and later 
received a list of franchised dealers from their respective OEMs, 
including each dealer's legal business name, doing-business-as name, 
mailing address, point of contact, and OEM franchise identifier.\1\ OEM 
franchised dealers, as a group, satisfy the requirement for State 
licensing. The agency has learned that, without an active OEM franchise 
agreement, a dealer is unable to offer manufacturer purchasing 
incentives and may not be able, in some cases, to extend the full 
manufacturer warranty to the new vehicles it sells. For this reason, 
the agency includes the requirement for a currently active OEM 
franchise agreement as part of the dealer registration process. (The 
OEMs have agreed to update this list weekly, to add newly franchised 
dealerships and remove dealerships that are no longer under franchise 
agreement.) The agency then contacted all listed dealers by mail, 
providing instructions on how to register under the program. Dealers 
received separate letters and were instructed to register separately 
for each make of vehicle they sell. Section 599.200(b) identifies the 
required dealer qualifications for registration, which flow from the 
statutory requirement for State licensing and from the need to perform 
transactions electronically. OEM franchised dealers should easily 
satisfy these requirements.
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    \1\ The agency chose to involve the OEMs in this process to 
eliminate the opportunity for unscrupulous individuals or entities 
to identify themselves as franchised dealers.
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    As set forth in section 599.200(c), dealers that have been 
contacted by mail by the agency and that wish to participate must 
register to do so electronically, using the authorization code and 
following the instructions provided in the mailing, and fill out an 
electronic screen providing, among other things, name and contact 
information and bank account and routing data for receiving payment 
under the program.\2\ The agency will review this information to ensure 
completeness, and verify that the dealer has a still active franchise 
agreement (based on the continuously updated list provided by OEMs). 
Section 599.200(d) sets forth the procedures for approving and 
disapproving registration applications. Section 599.200(d)(1) provides 
that, where an application for registration is approved, the agency 
will notify the dealer of approval by e-mail, providing a user 
identification and password with which to conduct transactions, and add 
the dealer to the list of registered dealers on its Web site at http://www.cars.gov. Consumers may consult this list to identify registered 
dealers in their locality. Section 599.200(d)(2) provides that, where 
an application for registration is rejected, the agency will notify the 
dealer by e-mail, and provide the reasons for rejection. The agency 
anticipates that, unless rejected, confirmation of registration and 
addition to the list should occur within 2 to 4 business days after a 
dealer submits the required information.
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    \2\ The registration process was made available to dealers 
beginning on July 24, 2009.
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    Section 599.200(e)(1) provides that the agency may automatically 
revoke a registration as a matter of course for termination or 
discontinuance of a franchise but the dealer's registration may be 
reinstated upon a dealer's showing of proper and adequate license to 
sell new vehicles to ultimate purchasers. Section 599.200(e)(2) states 
that the agency may suspend or revoke a dealer's registration under the 
procedures in Section 599.504. Section 599.200(f) requires a registered 
dealer to immediately notify the agency of any change in the 
registration information it submitted or any change in the status of 
its State license or franchise. Finally, section 599.200(g) 
accommodates transactions that occurred after July 1, 2009, but prior 
to the publication of today's final rule, by permitting registration 
after a qualifying sale or lease transaction has occurred.\3\
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    \3\ As discussed later in this document, other requirements 
apply to these earlier transactions as well.
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    The agency believes that this process is the most efficient and 
appropriate method to register dealers consistent with the requirements 
of the CARS Act. The Act requires that a dealer be licensed under State 
law, and the list provided by OEMs ensures that this is so. Using this 
list also allows the agency to verify dealer registration information 
in a timely manner. Since the OEMs have agreed to provide weekly 
updated lists, this process also will allow for registration of newly 
franchised dealers as they come into existence and the discontinuance 
of registrations for dealers that are no longer franchised. Newly 
franchised dealers will be contacted by mail with an authorization 
code, as the agency becomes aware of them from the weekly updated 
lists. A dealer whose franchise has been discontinued will be removed 
from the agency's list, and will no longer be eligible to receive 
credits for transactions under the program.

[[Page 37882]]

c. Identification of Disposal Facilities (Sec.  599.201)

    Under the Act, the agency is required to provide a list of entities 
to which dealers may transfer eligible trade-in vehicles for disposal. 
(Section 1302(d)(5)). The Act also requires the Secretary to coordinate 
with the Attorney General to ensure that the National Motor Vehicle 
Title Information System (NMVTIS) is timely updated to reflect the 
crushing or shredding of trade-in vehicles and appropriate 
reclassification of their titles. (Section 1302(c)(2)(C)).
    The agency met with groups representing auto recyclers and other 
disposal facilities and salvage auctions, as well as officials from 
AAMVA and the Department of Justice responsible for administering the 
NMVTIS, to get an understanding of the vehicle salvage and disposal 
process. From those meetings, the agency learned that there is a wide 
range of entities involved in various aspects of the vehicle salvage 
and disposal business. The agency also consulted with the EPA about the 
CARS program and the requirement to produce a list of disposal 
facilities for disposition of the trade-in vehicles. Mindful of 
environmental issues, NHTSA sought to identify a universe of disposal 
facilities that was attentive to these concerns, while achieving the 
objectives of the CARS program.
    In the course of these consultations and based on advice from EPA, 
the agency identified the National Vehicle Mercury Switch Recovery 
Program (NVMSRP) as a comprehensive source of disposal facilities 
generally committed to meeting State and Federal environmental laws. 
The NVMSRP was established in 2006 under a memorandum of understanding 
(MOU) among the EPA, environmental groups, manufacturers and disposal 
facilities, to recover and recycle mercury switches from end-of-life 
vehicles before they are scrapped, crushed or shredded. This purpose is 
in alignment with the CARS Act's requirement for proper vehicle 
disposition, including the removal of mercury switches. The MOU 
authorizes the End of Life Vehicle Solutions (ELVS), a corporation 
established by vehicle manufacturers to carry out responsibilities of 
the NVMSRP, including establishing a process for participants to enroll 
in the program and maintaining a database of participants who recover 
and submit mercury switches.
    Participants may enroll in the program by registering with ELVS. 
Information about ELVS can be found on its Web site at http://www.elvsolutions.org. Currently, approximately 7,700 disposal 
facilities are participants, and EPA estimates that approximately 1,500 
of these facilities actively turn in the switches. The agency has 
determined that disposal facilities that are participants on the ELVS 
list present the best assurance of compliance with State and Federal 
environmental laws.
    With this in mind, NHTSA has identified disposal facilities that 
are ELVS participants for listing as approved disposal facilities under 
this program, and these disposal facilities are listed on the agency's 
Web site at http://www.cars.gov/disposal. However, some entities on 
this list may dispose of mercury switches as part of their business 
(for example, auto repair businesses) but do not actually engage in 
dismantling or recycling of vehicles. Therefore, the fact that a 
facility is on the list does not automatically ensure that it is 
equipped to dispose of vehicles properly. To be eligible for 
participation in the CARS Program, a facility on the ELVS list must be 
able to crush or shred motor vehicles, either with its own equipment or 
by use of a mobile crusher. NHTSA was not able to obtain accurate lists 
of all entities that have this capacity within the time allowed, but is 
informed that many of the entities on the ELVS list are capable of at 
least obtaining the services of a mobile crusher. Dealers will have to 
inquire of specific entities concerning their capacity to crush or 
shred the vehicle. Any facility that does participate will have to 
certify that it has that capacity to crush or shred and will dispose of 
the vehicle through crushing or shredding.
    These facilities must additionally agree to turn in mercury 
switches in accordance with the NVMSRP from any CARS trade-in vehicles 
they accept (to the extent the vehicles have such switches), by 
certifying that they will do so. In addition, because the CARS Act 
directs the agency to ensure that pollutants are removed from vehicles 
and properly disposed of, that vehicles are crushed or shredded, and 
that NMVITS is updated to reflect the disposition of the vehicle, as a 
condition of participation in the program, the listed participants must 
also agree to remove pollutants from the CARS trade-in vehicles in 
compliance with State and Federal law, crush or shred the vehicle, 
update NMVTIS to reflect the disposition of the vehicle, and certify to 
having done so. The certification requires the disposal facility to 
certify that it will dispose of refrigerants, antifreeze, lead 
products, mercury switches, and other toxic or hazardous vehicle 
components prior to crushing or shredding, in accordance with 
applicable Federal and State requirements. The rule does not impose 
additional requirements; for example, it does not require removal of 
all lead products such as lead solder connections that are ordinarily 
not removed during the shredding process.
    NHTSA is aware, from consultations with EPA, that the State of 
Maine and the U.S. territories are not participants in the NVMSRP and 
that the ELVS list contains no disposal facilities in these areas. 
Maine has its own program for recycling mercury switches, which is 
comparable to the NVMSRP. Under Maine law, a vehicle may not be crushed 
without first removing and properly disposing of mercury switches, and 
disposal facilities are covered by that law. NHTSA obtained a list of 
disposal facilities in Maine from the State Bureau of Motor Vehicles, 
and these facilities are included along with the ELVS facilities from 
other states, on the agency's Web site at http://www.cars.gov/disposal. 
As a condition of participating, these Maine facilities must make the 
same certifications as required of the ELVS facilities.
    In the case of the U. S. Territories, the agency is informed that 
participation in ELVS is currently impracticable for cost reasons 
related to sending mercury switches to the Continental United States. 
Therefore, the rule does not include disposal facilities on the list 
for the Territories, but allows dealers to select disposal facilities 
within the territories that are able to make the same certifications 
required of the ELVS and Maine facilities.
    The agency plans to update this disposal facility list 
periodically, to add entities that become ELVS participants and to 
remove entities that are no longer ELVS participants or for other 
reasons discussed elsewhere in this document. The rule requires dealers 
to consult this list on the CARS Web site at the time of the transfer 
of the trade-in vehicle, as an entity that does not appear on the list 
on that date is not eligible to receive the vehicle for crushing or 
shredding.\4\
---------------------------------------------------------------------------

    \4\ Participants in the CARS program are cautioned to consult 
the list on NHTSA's CARS Web site, http://www.cars.gov/disposal, for 
eligible disposal facilities, not the list on the ELVS Web site.
---------------------------------------------------------------------------

    One issue that has arisen is the participation of entities that 
shred vehicles in the CARS process. Shredders turn crushed vehicles 
into materials useful in various industrial processes. Shredders are 
relatively few in number, with less than 300 shredding machines 
distributed nationwide. Disposal facilities with shredders may be ELVS 
participants and, if they are, they can

[[Page 37883]]

participate fully in the CARS program. To the extent these facilities 
are not ELVS participants, they may still play a role in the ultimate 
disposition of the vehicle. The final rule places no restrictions on a 
trade-in vehicle once it is crushed. Once crushed, the agency assumes 
the vehicle will be transferred to a shredder so that its materials can 
be recycled. The rule does not require any tracking of this ultimate 
shredding of a crushed vehicle, so the entity receiving the crushed 
vehicle for shredding does not have to submit a CARS certification 
form.
    Because of the requirement, discussed later in this document, that 
dealers must disable the trade-in vehicle's engine prior to 
transferring the vehicle to a disposal facility, the agency believes 
that the statutory interest in ensuring that the vehicle is not 
returned to use on the road in this or any other country is largely met 
before it leaves the dealer's possession. Prior engine disablement 
reduces the likelihood that a trade-in vehicle will be returned to use 
as an on-road automobile. With the extra assurance provided by engine 
disablement, the smooth operation of the program is better served if 
limitations on participation in the disposal stream are kept to a 
minimum, ensuring a reasonable geographic distribution of entities that 
may receive trade-in vehicles from dealers under the program.
    With these points in mind, the agency consulted with 
representatives of the salvage auction industry. The agency believes it 
is practicable to provide for the participation of salvage auctions in 
the transfer of trade-in vehicles to disposal facilities under the CARS 
program, in order to broaden the avenues of disposal available to 
dealers. Therefore, salvage auctions may receive a CARS trade-in 
vehicle, provided that, as a condition of participation, these entities 
agree to limit their auction sales of CARS trade-in vehicles to the 
disposal facilities described above that appear on the agency's list. 
We believe that including listed disposal facilities, and requiring 
salvage auctions to sell at auction the scrap trade-in vehicles only to 
approved disposal facilities strikes the appropriate balance between 
program and environmental accountability, on the one hand, and 
geographic distribution and dealer access, on the other.
    NHTSA was unable to develop a comprehensive list of salvage 
auctions within the time allowed. Although we heard from 
representatives of some of the largest auctions and their associations 
(including CoPart, Mannheim, the Insurance Auto Auctions, and the 
Automotive Salvage Pool Association), we concluded that simply listing 
their members, absent more information, would not be appropriate. 
However, we understand from representatives of those organizations and 
companies that they and their members are willing to restrict the sale 
of CARS trade-in vehicles to just those entities on the CARS program 
disposal facility list and make the necessary certifications about the 
disposal of those vehicles. Any other salvage auctions willing to abide 
by these restrictions and submit the necessary forms and certifications 
under penalty of law may participate in the CARS program. All 
participants must understand the specific requirements of this rule and 
the substantial penalties they may incur if they violate it or submit 
false information in connection with the program. Also, all who 
participate must understand that their records, premises, and CARS 
vehicles in their possession are subject to inspection by NHTSA and the 
DOT Office of Inspector General.
    Section 599.201 implements the requirements for identification of 
salvage auctions and disposal facilities. Section 599.201(a) identifies 
the participating entities, including salvage auctions, disposal 
facilities listed on the agency's Web site, and disposal facilities in 
the U.S. territories. Section 599.201(b) describes the conditions these 
entities must follow in order to participate in the program.

d. Determining Eligibility of Trade-in Vehicles and New Vehicles (Sec.  
599.300)

    The CARS Act prescribes detailed requirements concerning eligible 
trade-in vehicles and eligible new vehicles for qualifying transactions 
under the Program. This final rule implements these requirements in 
close adherence to the statutory language.
1. Vehicle Definitions
    The CARS Act divides eligible trade-in vehicles and new vehicles 
into four groups: passenger automobiles, category 1 trucks, category 2 
trucks, and category 3 trucks.\5\ The term ``passenger automobile'' and 
its definition are taken from the agency's fuel economy statute. The 
definition excludes vehicles that NHTSA has determined are (1) not 
manufactured primarily for transporting persons and (2) vehicles that 
are capable of off-highway operation. Vehicles not manufactured 
primarily for transporting persons include pickup trucks and certain 
vehicles that permit expanded use of the vehicle for cargo-carrying 
purposes, including vehicles which are designed to transport more than 
10 persons; provide temporary living quarters, transport property on an 
open bed, provide greater cargo-carrying than passenger-carrying 
volume, or permit expanded use of the automobile for cargo-carrying 
purposes or other nonpassenger-carrying purposes. (See 49 CFR 
523.5(a)).
---------------------------------------------------------------------------

    \5\ Section 1302(i) of the CARS Act defines those categories 
largely with reference to statutory categories of vehicles subject 
to the Corporate Average Fuel Economy (CAFE) Standards as follows: 
``passenger automobile'' means a passenger automobile, as defined in 
section 32901(a)(18) of title 49, United States Code, that has a 
combined fuel economy value of at least 22 miles per gallon; 
``category 1 truck'' means a non-passenger automobile, as defined in 
section 32901(a)(17) of title 49, United States Code, that has a 
combined fuel economy value of at least 18 miles per gallon, except 
that such term does not include a category 2 truck; ``category 2 
truck'' means a large van or a large pickup, as categorized by the 
Secretary using the method used by the Environmental Protection 
Agency and described in the report entitled ``Light-Duty Automotive 
Technology and Fuel Economy Trends: 1975 through 2008''; ``category 
3 truck'' means a work truck, as defined in section 32901(a)(19) of 
title 49, United States Code. Under regulations implementing the 
CAFE program (see 49 CFR Part 523), ``passenger automobiles'' 
currently include all passenger cars and ``non-passenger 
automobiles'' include all SUVs, vans and pickup trucks up to 8,500 
pounds GVWR.
---------------------------------------------------------------------------

    Vehicles that are capable of off-highway operation include three 
groups of vehicles. (See 49 CFR 523.5(b)). The first includes vehicles 
that have 4-wheel drive and have at least four out of five specified 
physical characteristics relating to ground clearance.\6\ The second 
includes vehicles that are rated at more than 6,000 pounds gross 
vehicle weight and have at least four out of five specified physical 
characteristics relating to ground clearance, but do not have 4-wheel 
drive. The third includes 2-wheel drive SUVs (regardless of GVWR) which 
came in a 4-wheel drive version that met four of five specified 
physical characteristics related to ground clearance. Beginning with 
the 2011 model year, NHTSA will reclassify this third group of vehicles 
as passenger cars. See Average Fuel Economy Standards--Passenger Cars 
and Light Trucks--Model Year 2011, Section XI (Vehicle Classification); 
74 FR 14419, March 30, 2009. Although neither specified nor prohibited 
in the CARS Act, the agency has concluded that it is most appropriate 
to define passenger

[[Page 37884]]

cars using the NHTSA regulations and policy which are applicable to 
2010 and earlier model year vehicles. Therefore, the third group of 
vehicles will continue to be classified as trucks for CARS purposes 
(and will be excluded from the definition of a passenger automobile).
---------------------------------------------------------------------------

    \6\ The five ground clearance characteristics are: (1) An 
approach angle of not less than 28 degrees; (2) a breakover angle of 
not less than 14 degrees; (3) a departure angle of not less than 20 
degrees; (4) a running clearance of not less than 20 centimeters; 
and (5) front and rear axle clearances of not less than 18 
centimeters each. These characteristics are calculated when the 
automobile is at curb weight, on a level surface, with the front 
wheels parallel to the automobile's longitudinal centerline, and the 
tires inflated to the manufacturer's recommended pressure. See 49 
CFR Part 523.5(b)(2).
---------------------------------------------------------------------------

    A ``category 1 truck'' is a non-passenger automobile. This category 
includes sport utility vehicles (SUVs), medium-duty passenger 
vehicles,\7\ small and medium pickup trucks, minivans, and small and 
medium passenger and cargo vans. It does not include vehicles that are 
defined as category 2 trucks.\8\
---------------------------------------------------------------------------

    \7\ Medium-duty passenger vehicles are defined in 49 CFR 523.2.
    \8\ As noted in footnote 2, the statutory definition of the term 
``category 2 truck'' is based on the categorization method used by 
the Environmental Protection Agency and described in the report 
entitled ``Light-Duty Automotive Technology and Fuel Economy Trends: 
1975 through 2008.'' (A copy of this report has been placed in the 
docket for this rule.) Based on that method of categorization, large 
vans and pickup trucks, which would otherwise fall within category 
1, instead fall within category 2. The method is based primarily on 
published wheelbase data according to the following criteria: A 
small pickup is less than 105'', a midsize pickup is 105'' to 115'', 
a large pickup is more than 115''; A small van is less than 109'', a 
midsize van is 109'' to 124'', a large van is more than 124''; A 
small SUV is less than 100'', a midsize SUV is 100'' to 110'', a 
large SUV is more than 110''. This classification scheme is similar 
to that used in many trade and consumer publications.
    For those vehicle nameplates with a variety of wheelbases, the 
size classification was determined by considering only the smallest 
wheelbase produced. The classification of a vehicle for this report 
is based on the author's engineering judgment and is not a 
replacement for definitions used in implementing automotive 
standards legislation. [Emphasis added.]
---------------------------------------------------------------------------

    A ``category 2 truck'' is a large van or a large pickup truck, 
based upon the length of the wheelbase (more than 115 inches for pickup 
trucks and more than 124 inches for vans). If the vehicle nameplate 
contains a variety of wheelbases, the size classification is determined 
by considering only the shortest wheelbase produced. In addition, some 
pickup trucks and cargo vans which exceed these thresholds are treated 
as category 3 trucks instead of category 2 trucks.
    A ``category 3 truck'' is a work truck and is rated between 8,500 
and 10,000 pounds gross vehicle weight. This category includes very 
large pickup trucks (those with cargo beds 72 inches or more in length) 
and very large cargo vans.
    As previously stated, for category 1 and 2 trucks with a variety of 
wheelbases, the size classification is determined by considering only 
the shortest wheelbase produced. If a secondary manufacturer modifies 
and introduces into commerce a vehicle with only a limited portion of 
the wheelbases offered by the original equipment manufacturer (OEM), 
the size classification for the secondary manufacturer will be 
determined by (and consistent with) the size classification determined 
for the OEM. For example, if General Motors produces 2008 model year 
Chevrolet Colorado pickup trucks with wheelbases of 111, 119 and 126 
inches, Colorado pickup trucks would be classified as category 1 trucks 
for CARS purposes (because the shortest wheelbase Colorado pickup truck 
was less than or equal to 115 inches). If a secondary manufacturer 
introduces into commerce 2008 model year Colorado ZZZ vehicles (high 
performance Colorado pickups with 126 inch wheelbase only), Colorado 
ZZZ models would also be classified as a category 1 pickup trucks.
    The rule defines these four groups of vehicles in section 599.102 
and makes use of these categories throughout sections 599.300(f) and 
599.300(g).
2. Eligibility of Trade-in Vehicles
    The CARS Act establishes four criteria for an eligible trade-in 
vehicle. The trade-in vehicle must:
    (1) Be in drivable condition;
    (2) Have been continuously insured, in accordance with State law, 
and registered in the same owner's name for the one-year period 
immediately prior to the trade-in;
    (3) Have been manufactured not earlier than 25 years before the 
date of trade-in \9\ and, in the case of a category 3 vehicle, also be 
from a model year not later than model year 2001; and
---------------------------------------------------------------------------

    \9\ This means that all pre-model year 1984 vehicles, and most 
model year 1984 vehicles, are not eligible as trade-in vehicles.
---------------------------------------------------------------------------

    (4) Have a combined fuel economy value of 18 miles per gallon or 
less,\10\ if it is a passenger automobile, a category 1 truck, or a 
category 2 truck.\11\
---------------------------------------------------------------------------

    \10\ As discussed in later in this preamble, under 
``Requirements for qualifying transactions,'' the combined fuel 
economy of the trade-in vehicle must satisfy the statutory 
requirements related to the difference between its fuel economy and 
that of the new vehicle, as well as meeting this 18 miles per gallon 
absolute threshold.
    \11\ There is no minimum for category 3 trucks because they do 
not have fuel economy ratings.

The agency must have a means of evaluating these criteria as it 
determines whether a transaction qualifies under this program.
(i) ``Drivable Condition''
    The agency intends that ``drivable condition'' be demonstrated by 
several means. First, it must be confirmed by the trade-in vehicle 
being operated, under its own power, by the dealer on public roads on 
the date the vehicle is traded in. The dealer must then certify to the 
operation of the vehicle when it submits its request for reimbursement. 
Separately, the person trading in the vehicle must certify that it is 
in drivable condition. This latter certification also must be submitted 
by the dealer with its application requesting reimbursement. This 
approach is adopted in section 599.300(b)(1) of the final rule, and the 
required dealer and purchaser certifications are contained in the 
Summary of Sale/Lease and Certifications (Appendix A, certifications 
section). Note that the Summary of Sale/Lease and Certifications form 
has two components--a section for the dealer to input information 
summarizing the terms of the sale or lease transaction and a section 
containing certifications that must be made by both the dealer and the 
purchaser. The section summarizing the transaction is discussed later 
in this notice.
(ii) Insurance
    In addressing the requirement that the trade-in vehicle be 
``continuously insured consistent with the applicable State law'' for a 
period of not less than one year prior to the transaction, the agency 
notes the complication that not all States require vehicle owners to 
purchase automobile insurance coverage. Several States provide vehicle 
owners with the option, for example, to post a surety bond, leave a 
cash deposit or self-insure in lieu of purchasing automobile insurance. 
Two States have little or no insurance requirements.
    The agency recognizes that insurance requirements differ throughout 
the country. However, the agency believes that the Act requires the 
continuous one-year insurance condition to be met as a threshold 
matter, with respect to any trade-in vehicle under the program. In a 
State where the conditions and requirements of insurance are specified 
in law (e.g., liability minimums, deductible requirements), the 
insurance coverage would then need to be in accordance with those 
conditions and requirements. To qualify under this requirement, a 
purchaser must provide proof of insurance covering the trade-in vehicle 
for a period of at least one year prior to the date of the trade-in.
    The agency is aware that, in some cases, consumers may have 
insurance cards that state clearly the period of insurance coverage, 
while in other cases, an insurance card is unavailable or does not 
convey the period-of-coverage information. To provide for an 
alternative, the agency consulted with several insurance associations, 
including the Insurance Information Institute, American Insurance

[[Page 37885]]

Association, National Association of Mutual Insurance Companies, and 
Property Casualty Insurers Association of America. These entities 
agreed to assist the agency through their member insurance companies. 
They indicated that purchasers could contact their insurers to obtain 
proof of insurance in a form that provides the details needed to 
identify the insured vehicle and the one year period of coverage 
required under the program.
    To implement this process, the agency is requiring the owner of the 
trade-in vehicle to provide proof, at the time the vehicle is traded 
in, that the trade-in vehicle has been insured continuously for one 
year prior to the trade-in. This proof may take one of three forms. The 
proof may consist of one or more insurance cards containing the make, 
model, model year, and vehicle identification number (VIN) of the 
insured vehicle, but only if, taken together, the cards display on 
their face a continuous one-year period of insurance coverage. The 
proof may also consist of insurance policy documents (e.g., 
declarations pages) showing the same information. Finally, the proof 
may consist of a signed letter, on insurance company letterhead, 
identifying the same vehicle identification information (i.e., make, 
model, model year, and VIN) of the insured vehicle and the period of 
continuous coverage, which must be for at least one year prior to the 
date of the trade-in. In addition, for each of the three options, the 
consumer must certify that the trade-in vehicle has been continuously 
insured for the requisite period. This proof of insurance, along with 
the consumer certification, must be submitted by the dealer in its 
application to the agency requesting reimbursement. Section 
599.300(b)(2) and Appendix A, certifications section, implement these 
requirements.
(iii) Registration
    The requirement that the trade-in vehicle be registered to the same 
owner for a continuous period of one year prior to the transaction 
requires clarification. The agency interprets this provision as 
requiring the trade-in vehicle to be registered to and owned by the 
person purchasing or leasing the new vehicle under the program. In a 
transaction involving more than one person, the trade-in vehicle must 
have been registered to and owned by at least one of the persons 
purchasing or leasing the vehicle under the program.
    To qualify under this requirement, the purchaser will need to 
provide proof of registration covering the trade-in vehicle for a 
period of at least one year prior to the date of the trade-in. The 
agency recognizes that this proof of registration presents 
complications for purchasers. In several States, registration cards or 
documents do not indicate a period of coverage of more than one year. 
In some of these States, purchasers have a difficult time obtaining 
prior registration information from the State. Seeking a less 
burdensome alternative, the agency evaluated the capabilities of 
commercial vehicle information services, such as Polk and Experian, to 
determine the type of vehicle information that is readily available to 
consumers. The agency discovered that purchasers may obtain a history 
of vehicle registration information from these services.
    To implement this process, the agency has determined that proof of 
registration may be demonstrated by any of the following: a current 
State registration document or series of registration documents in the 
name of the purchaser evidencing registration for a period of not less 
than one year immediately prior to the trade-in; a current State 
registration document showing registration in the name of the purchaser 
and a document of title that confers title on the purchaser not less 
than one year immediately prior to the trade-in; or a current State 
registration document showing registration in the name of the purchaser 
and a document from a commercially available vehicle history provider 
evidencing registration for a period of not less than one year 
immediately prior to the trade-in. Changes in ownership during this 
period to delete a co-owner due to death or divorce do not interrupt 
the continuity of the registration, so long as the purchaser has been 
shown as an owner on the registration for the entire period. In 
addition, for each of the three options, the consumer must certify that 
the trade-in vehicle was continuously registered for the requisite 
period. This proof of registration, along with the consumer 
certification, must be submitted by the dealer in its application to 
the agency requesting reimbursement. Section 599.300(b)(3) and Appendix 
A, certifications section, implements these requirements.
(iv) Manufacture Date
    The requirement that the trade-in vehicle be manufactured not 
earlier than 25 years before the date of trade-in is straightforward, 
and is implemented in section 599.300(b)(4). Ordinarily, the model year 
of the vehicle, which appears on the title, will serve to satisfy this 
requirement. Where that information is inconclusive (e.g., certain 
model year 1984 and 1985 vehicles), the month and year of manufacture 
may be retrieved from the safety standard certification label that 
appears on the frame or edge of the driver's door in most vehicles. The 
rule allows the 25-year period to be satisfied provided it falls any 
time within the month that the vehicle is traded in. Section 599.300(f) 
implements the additional requirement, in the case of a category 3 
vehicle, that the trade-in vehicle be manufactured not later than model 
year 2001. The dealer must certify that the trade-in vehicle meets this 
manufacturing date requirement. (Appendix A, certifications section).
(v) Combined Fuel Economy
    The specified combined fuel economy rating of 18 mpg or less for 
the trade-in vehicle (excepting category 3 vehicles) is implemented 
throughout sections 599.300(f) and 599.300(g).\12\ Under the Act, 
combined fuel economy for an eligible trade-in vehicle is defined as 
the number posted under the words ``Estimated New EPA MPG'' and above 
the word ``Combined'' for vehicles of model year 1984 through 2007, or 
posted under the words ``New EPA MPG'' and above the word ``Combined'' 
for vehicles of model year 2008 or later on the http://fueleconomy.gov">fueleconomy.gov Web 
site of the Environmental Protection Agency for the make, model, and 
year of such vehicle. (Section 1302(i)(5)(B)). The agency adopts this 
definition in section 599.102, but includes language limiting its 
application to combined fuel economy based on gasoline. This treatment 
of trade-in vehicles is consistent with the CARS Act requirements for 
defining the combined fuel economy of new vehicles.\13\
---------------------------------------------------------------------------

    \12\ The trade-in vehicle is also subject to statutory 
requirements related to the difference between its combined fuel 
economy and that of the new vehicle.
    \13\ As described later in this document, the combined fuel 
economy of new vehicles is derived from the Monroney label, which 
lists only fuel economy based on gasoline.
---------------------------------------------------------------------------

    EPA changed the way it calculated fuel economy ratings starting in 
Model Year 2008, and has estimated the revised ratings for Model Years 
1985-2007. Therefore, as described above, eligibility is determined by 
the revised ratings rather than the original EPA sticker on the 
vehicle. Since the revised ratings reflect a lower fuel economy, 
vehicles that would not be eligible under their original EPA rating may 
qualify for trade-in.
3. Eligibility of New Vehicles
    The Act specifies that a new vehicle must be a passenger 
automobile, a category 1 truck, a category 2 truck, or

[[Page 37886]]

a category 3 truck. The characteristics of these vehicles were 
described earlier under Section c.1, ``Vehicle Definitions,'' and they 
are defined in section 599.102. To further assist consumers in 
determining the eligibility of new vehicles, the CARS Web site, at 
http://www.cars.gov, contains an interactive tool. Consumers may 
identify their trade-in vehicle, select a new vehicle, and determine 
whether the transaction qualifies for a credit (and the amount of the 
credit) under the program.
    In addition to the definitional categories, the new vehicle 
purchased or leased under the program must achieve a minimum combined 
fuel economy level. For new passenger automobiles the combined fuel 
economy must be at least 22 miles per gallon, for category 1 trucks it 
must be at least 18 miles per gallon, and for category 2 trucks it must 
be at least 15 miles per gallon. Category 3 trucks have no minimum fuel 
economy requirement. Under the Act, combined fuel economy for new 
vehicles is defined as the number, expressed in miles per gallon, 
centered below the words ``Combined Fuel Economy'' on the label 
required to be affixed or caused to be affixed on a new automobile 
pursuant to subpart D of part 600 of title 40 Code of Federal 
Regulations (``Monroney Label''). (Section 1302(i)(5)(A)). The agency 
adopts this definition, without change, in section 599.102.
    The new vehicle must also have a manufacturer's suggested retail 
price (MSRP) of $45,000 or less to be eligible for purchase or lease 
under the program. The agency interprets this requirement to be the 
base MSRP--the price on the Monroney label affixed to the vehicle 
before any dealer accessories, optional equipment, taxes or destination 
charges are added to the price. This interpretation is consistent with 
the Automobile Information Disclosure Act, which identifies the retail 
price separately from the retail delivered price with optional 
equipment. See 15 U.S.C. 1232(f)(1). To implement this approach, we 
have added a definition of the term MSRP in section 599.102 and stated 
the limitation in section 599.300(c)(2).
    The CARS Act allows the new vehicle to be either purchased or 
leased. In the case of a lease, the Act requires the lease to be for a 
period of not less than 5 years. The agency implements this requirement 
in section 599.300(c)(1). Additionally, the agency has added a 
definition of ``lease'' in section 599.102, specifying its minimum 
duration and making clear that a lease that incorporates a balloon 
payment at any time prior to five years does not meet the statutory 
requirement.

e. Requirements for Qualifying Transactions (Sec. Sec.  599.300 and 
301)

1. Vehicle Categories and Credit Amounts
    The preceding section described eligibility requirements for the 
trade-in vehicle and for the purchased or leased new vehicle. Under the 
CARS Act, a transaction does not qualify for a credit unless the trade-
in vehicle and the new vehicle, considered together, satisfy all 
requirements. In addition, the amount of the credit (either $3,500 or 
$4,500) is dependent on the category and fuel economy of the two 
vehicles making up the transaction.
    For example, in a transaction involving a trade-in vehicle that is 
a passenger automobile, a category 1 truck, or a category 2 truck and a 
new vehicle that is a passenger automobile, each meeting the 
eligibility criteria discussed in the last section, if the new vehicle 
has a combined fuel economy that is 4 to 9 miles per gallon higher than 
the trade-in vehicle, the credit is $3,500. If the new vehicle has a 
combined fuel economy that is at least 10 miles per gallon higher than 
the trade-in vehicle, the credit is $4,500.
    If the transaction involves a trade-in vehicle that is a passenger 
automobile, a category 1 truck, or a category 2 truck and a new vehicle 
that is a category 1 truck each meeting the eligibility criteria, a 
gain of 2 to 4 miles per gallon results in a credit of $3,500; a gain 
of at least 5 miles per gallon results in a credit of $4,500.
    In the case of a new category 2 or category 3 truck, the trade-in 
vehicle categories are different. For a new category 2 truck, the 
trade-in vehicle must be a category 2 or a category 3 truck. If the 
transaction involves two category 2 trucks each meeting the eligibility 
criteria, a gain of 1 mile per gallon results in a credit of $3,500; a 
gain of at least 2 miles per gallon results in a credit of $4,500. A 
category 3 truck that is traded in for a new category 2 truck is 
entitled to a $3,500 credit, without fuel economy restriction. 
(Category 3 trucks are not rated for fuel economy by EPA.) A category 3 
truck that is traded in for another category 3 truck is entitled to a 
$3,500 credit if the new vehicle is ``smaller or similar in size.'' In 
view of the fact that Congress has not spoken directly to the precise 
meaning of this term, consistent with available information, NHTSA has 
incorporated this statutory requirement as satisfied if the gross 
vehicle weight rating of the new category 3 truck is no greater than 
that of the trade-in category 3 truck.
    The full universe of qualifying transactions, together with the 
corresponding amount of the credit, is set forth in sections 599.300(f) 
and 599.300(g).
    The CARS Act limits the amount of funds that can be used to provide 
credits for purchases or leases of work trucks (category 3 trucks) to 
7.5 percent of the funds appropriated for the program. Once that limit 
is reached, NHTSA will stop making payments for these transactions. The 
total amount available for the program is $1 billion, with $50 million 
available to the agency to administer the program. NHTSA intends to 
provide ongoing information about the balance of funds remaining 
available for these and all other categories of transactions under the 
program.\14\
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    \14\ NHTSA intends to maintain an up-to-date running balance of 
available funds on the Web site at http://www.cars.gov.
---------------------------------------------------------------------------

2. Special Requirements for Trade-in Vehicles
    The CARS Act requires dealers to disclose to purchasers trading in 
an eligible vehicle the best estimate of the scrap value of the 
vehicle, and permits the dealer to retain $50 of any amount paid to the 
dealer for scrappage of the vehicle as payment for the administrative 
costs of participation in the program. The agency has restated this 
requirement in section 599.300(d)(1) and in the dealer certifications 
in Appendix A, certifications section.
    The CARS Act requires a dealer that receives an eligible trade-in 
vehicle under the program to certify to the Secretary of 
Transportation, as prescribed by rule, that the dealer will transfer 
the vehicle (including the engine block), ``in such manner as the 
Secretary prescribes,'' to a entity that will ensure that the vehicle 
will be crushed or shredded, and will not be sold, leased, or 
exchanged. While Congress authorized the agency to promulgate a rule, 
it did not define ``manner'' or otherwise speak directly to its 
meaning. NHTSA interprets ``manner'' \15\ to include the methods

[[Page 37887]]

applied by the dealer and the condition of the vehicle transferred by 
the dealer. Specifically, the agency is prescribing in today's rule 
that the dealer is to transfer the trade-in vehicle with its engine 
permanently disabled, as detailed below.
---------------------------------------------------------------------------

    \15\ We note that a definition of manner is ``the mode or method 
in which something is done or happens.'' Webster's Third New 
International Dictionary 1376 (2002). Among the definitions of mode 
are ``a condition or state of being,'' ``a particular form or 
variety of something'' and ``a manner of doing something or of 
performing a particular function or activity.'' Ibid. at 1451. We 
further note generally that, to the extent that there are 
ambiguities or questions of interpretation in statutes within an 
agency's jurisdiction to administer, Congress has delegated 
authority to the agency to fill the statutory gap or make an 
interpretation in a reasonable fashion.
---------------------------------------------------------------------------

    In enacting the CARS Act, the Congress was concerned about fraud. 
See Section 1302(a)(4). The agency is aware of the significant 
disparity in value that exists between a vehicle that is in ``drivable 
condition,'' as the trade-in vehicle must be under this program, and a 
vehicle that is scrapped and ultimately destroyed, which is the 
required disposition for that trade-in vehicle. A substantial 
opportunity exists for fraudulent diversion of the trade-in vehicle, 
largely because its still-functioning engine makes it attractive to 
return the vehicle to the road rather than relegate it to the scrap 
yard.\16\ Moreover, continued use of the trade-in vehicle completely 
defeats the environmental purpose of the CARS Act, which is to remove 
these vehicles from the road permanently.
---------------------------------------------------------------------------

    \16\ We understand that this very kind of continued use of the 
vehicle as an automobile has occurred in at least Germany's program 
despite certifications that the vehicle had been disposed of.
---------------------------------------------------------------------------

    The CARS Act contains an explicit Congressional instruction to take 
measures to prevent fraud and the statute's clear environmental 
objective is to ensure that the fuel inefficient parts of the vehicle 
are never again used on the highway. Taking the above considerations 
into account, including the Secretary's authority to prescribe the 
manner in which the trade-in vehicle, including its engine block, is 
transferred to a disposal facility, the agency has determined that the 
prudent course of action, consistent with Congressional concerns about 
crushing or shredding, resale and fraud, is to require permanent 
disablement of the trade-in vehicle's engine block as a part of the 
qualifying transaction under this program.
    In this context, we note that the statutory term engine block is 
not defined and that Congress did not speak directly to its meaning. In 
general, the term engine block may refer to the block casting, or to a 
short block or long block. The short and long blocks contain the block 
casting and, among others, a crank shaft, connecting rods, bearings and 
pistons. Long blocks also include the cylinder head(s) and the cam(s). 
In a pushrod engine, the short block contains the cam. We interpret 
``engine block'' to mean the part of the engine containing the 
cylinders and typically incorporating water cooling jackets and also 
including the crank, rods, pistons, bearings, cam(s) and cylinder 
heads. In the case of a rotary engine, the block includes the rotor 
housing and rotor. In light of the statute's purpose of removing fuel 
inefficient vehicles from the nation's highways, which of course are 
powered by engines that consume substantial amounts of fuel the agency 
believes it is reasonable to read the word ``engine block'' in a way 
that includes engine parts traditionally considered part of the ``long 
block.'' We do not believe that parts from the engine such as the 
pistons and cylinder head that could be removed and used to reconstruct 
the engine from the trade in-vehicle should remain available to 
recreate the fuel consuming engine. Finally, the engine disabling 
procedure using sodium silicate can not be performed if the engine 
parts such as the head(s) are removed.
    The agency has determined that a quick, inexpensive, and 
environmentally safe process exists to disable the engine of the trade-
in vehicle while in the dealer's possession. Removing the engine oil 
from the crankcase, replacing it with a 40 percent solution of sodium 
silicate (a substance used in similar concentrations in many common 
vehicle applications, including patching mufflers and radiators), and 
running the engine for a short period of time at low speeds renders the 
engine inoperable. Generally, this will require just two quarts of the 
sodium silicate solution. The retail price for two quarts of this 
solution (enough to disable the largest engine under the program) is 
under $7, and the time involved should not substantially exceed that of 
a typical oil change. The agency has tested this method at its Vehicle 
Research and Test Center and found it safe, quick, and effective. As 
with many materials used in the vehicle service area of a dealership, 
certain common precautions need to be taken when using sodium silicate. 
The same is true with regard to workers who may come in contact with 
the substance during the crushing or shredding of the engine block. We 
have discussed the matter with the EPA and the Occupational Safety and 
Health Administration (OSHA) and are aware of no detrimental effects 
related to the disposal of the engine block with this material in it.
    The agency considered several possible methods of rendering the 
engine inoperable. The agency was looking for a method that was safe 
for workers involved, completely effective, environmentally sound, and 
relatively inexpensive for a dealer to use. NHTSA's Vehicle Research 
and Test Center (VRTC) tested various methods and prepared a report 
(placed in the docket) summarizing the tests. VRTC evaluated four 
options: (1) The use of sodium silicate solution in the manner the 
agency has now adopted; (2) destroying the oil filter sealing land and 
threaded fastener boss; (3) drilling a hole in the engine block; and 
(4) running the engine without oil. VRTC concluded that the sodium 
silicate method was the best option. The other methods all had 
significant problems related to their effectiveness, practical 
limitations based on vehicle variations, and/or safety risks for 
workers involved.
    Sodium Silicate solution is a mixture of water and sodium silicate 
solids. When, after draining the oil, it is introduced into the engine 
oil system, the oil pump is able to distribute the solution throughout 
the engine oiling system. The heat of the operating engine then 
dehydrates the solution leaving solid sodium silicate distributed 
throughout the engine's oiled surfaces and moving parts. These solids 
quickly abrade the bearings causing the engine to seize while damaging 
the moving parts of the engine and coating all of the oil passages. 
Only a small amount of sodium silicate remains in solution after 
completion of the process. Many of the engine parts will be unaffected 
by this process such as: intake and exhaust manifolds, bolt-on 
components, and fuel system components.
    The agency reviewed available information about sodium silicate and 
its properties, including a toxicology report and material safety data 
sheets that are available in the docket. Sodium silicate is a commonly 
used substance found in a wide range of products, including even 
dishwasher detergent. The Food and Drug Administration lists it as a 
GRAS (Generally Regarded as Safe) substance. It is used to treat 
hazardous wastes, and is frequently used in the automotive industry as 
a rust inhibitor in cooling systems, and to seal leaks in cooling 
systems, head gaskets, and exhaust systems. Neither our review of 
available information nor our discussions with other agencies (EPA and 
OSHA) gave the agency reason to be concerned about the use of sodium 
silicate as a significant health or environmental issue.
    It is important to note that there are many varieties of sodium 
silicates, which are differentiated by weight ratio (the ratio of the 
silicon dioxide and sodium oxide that make up the compound). The weight 
ratios range from 1.0 to 3.5, with the higher ratio formulations being 
less irritating for humans and less corrosive in an engine environment. 
The material that dealers will be required to use under this rule

[[Page 37888]]

is at the higher end of the range--3.2--which means that it is far less 
of a potential health or environmental issue than other lower range 
formulations of the product.
    Like many household and workplace products, sodium silicate 
solution can be harmful if swallowed or inhaled and can cause 
irritation to the eyes or respiratory tract if used improperly. 
Employers whose employees may come in contact with the material need to 
provide them with adequate warning of these risks and appropriate 
protection. Because sodium silicate has been used in automotive repair 
for decades, it has long been present both in repair shops and in 
vehicles at various stages of recycling. It is reasonable to assume, 
therefore, that dealerships, scrap yards, and shredder facilities are 
well equipped to take appropriate measures to protect their workers.
    Nor did we find reason to have significant concerns about the 
environmental effects of sodium silicate in this application. The EPA 
does not regulate it as a hazardous substance. Given the high weight 
ratio of the formulation that will be used to disable the engines, the 
risk of its causing corrosion is very low. In a report prepared for the 
agency, a toxicology expert reviewed the process required by this rule 
concluded: ``Provided adequate safety equipment is used by personnel in 
dealerships and shredder operations, and dust control measures are 
employed at shredder operations to minimize airborne particulates, the 
use of sodium silicate solutions to disable automobile engines is not 
expected to adversely affect occupationally exposed workers, nor are 
sodium silicate particulates expected to harm the environment.'' \17\
---------------------------------------------------------------------------

    \17\ Expert Report of Margaret H. Whittaker, Ph.D., M.P.H., 
D.A.B.T., July 23, 2009.
---------------------------------------------------------------------------

    The agency has decided to implement this process in the rule, 
requiring a dealer that receives an eligible trade-in vehicle under the 
CARS program to disable that vehicle's engine prior to transferring the 
vehicle to a disposal facility, and to provide a certification to the 
agency that it has done so at the time the dealer submits its request 
for reimbursement. Section 599.300(d)(2) specifies the requirement for 
the dealer to disable the engine, Appendix B sets forth, in a simple 
and precise manner, the procedures that the dealer must follow to 
disable the engine and the workplace precautions that should be taken, 
and Appendix A, certifications section, contains the required dealer 
certification.
    The rule contains one exception to the general requirement that the 
dealer disable the engine prior to transferring the vehicle to the 
disposal facility. With regard to transactions that occurred prior to 
the effective date of this rule, the dealer may have already 
transferred the vehicle to a disposal facility, whether or not using a 
salvage auction to transfer the vehicle. In that case, the rule permits 
the dealer to locate the vehicle at the disposal facility and either 
disable the engine at that location or, if the vehicle, including the 
engine block and drive train (unless the transmission, drive shaft, and 
rear end are sold separately), has already been crushed or shredded, to 
obtain proof, in the form of the affidavit, from the disposal facility 
that the crushing or shredding has occurred. Section 599.300(e) 
implements this exception. The agency is making this allowance only to 
accommodate dealers who, rather than waiting for the final rule to be 
issued as the agency had advised, proceeded to conduct transactions 
that were otherwise completely in accordance with this final rule. 
Dealers should note that all other requirements of this rule, except 
for the disposal facility certifications, apply to these transactions.
    Although there was not time to provide notice and an opportunity to 
comment prior to issuance of this final rule, NHTSA did engage in 
extensive outreach prior to its issuance with representatives of those 
entities most knowledgeable about the subject matter. In those 
discussions, the method NHTSA has now chosen for disabling the engine 
block was identified as an option NHTSA might adopt. Several of the 
organizations that participated in the discussions wrote to NHTSA 
concerning that methodology. (These letters are in the docket.)
    In its letter of July 21, 2009, NADA contends that Congress did not 
assign the task of making the engine inoperable to the dealers, and 
that if required to accomplish this task the dealers should be 
compensated. As discussed above, the agency interprets the CARS Act as 
giving NHTSA substantial discretion in determining the manner in which 
the vehicle, including the engine block, is to be transferred for 
ultimate disposal. We believe that having the engine permanently 
disabled at the dealer greatly reduces the risk of fraud and helps 
ensure that the statute's environmental objectives will be achieved. We 
believe that the dealers can disable the engine using the prescribed 
method at very low cost, which we estimate to be no greater than $30. 
It is possible that the total of the cost of performing this task and 
the dealer's other costs related to the program may exceed the $50 the 
dealer is allowed to retain from the trade-in's scrappage value to 
cover its administrative costs. Nevertheless, we think the importance 
of having this task performed by the dealer is sufficient reason to 
require dealers to perform it. The CARS Act does not preclude NHTSA 
from imposing costs necessary to the proper implementation of the 
program.
    The Automotive Recyclers Association (ARA), which represents more 
than 4,500 scrap and junk yards, wrote to NHTSA on July 20. ARA argues 
that the use of sodium silicate will damage more than the engine block 
and jeopardize the resale of parts such as pistons, cams, and cylinder 
heads. ARA apparently believes that ``block'' has only one meaning, 
i.e., the so-called ``short block,'' which generally refers only to the 
cast iron or aluminum casting. As discussed above, NHTSA has defined 
``engine block'' in a way that includes the engine parts that ARA 
contends are not part of the block. NHTSA's definition is a reasonable 
reading of the term ``block,'' and is consistent with a Congressional 
purpose to prevent these fuel inefficient engines from ever being 
operated again. Moreover, even if ARA's more restrictive reading of 
``block'' were to prevail, the statute merely permits the disposal 
facility to sell parts that are not part of the block; it does not 
preclude NHTSA from requiring measures that might affect some of those 
parts. ARA also contends that use of sodium silicate would contaminate 
the recycling of motor oil. ARA seems not to understand that, under the 
procedure set out in this rule, the dealer would drain the oil and 
recycle it as it would normally do.
    The Institute of Scrap Recycling Industries (ISRI) represents, 
among others, companies that shred vehicles that have previously been 
crushed, either at their facility or at another disposal facility that 
lacks a shredder. ISRI wrote to NHTSA on July 20. ISRI contends, based 
on the judgment of its own director of environmental management, that 
the use of sodium silicate could pose hazards to workers at shredders 
and could cause certain metals to corrode, which could lead to excess 
metal ions in storm water runoff, which in turn could make storm water 
compliance more challenging. ISRI's contentions appear to be based on 
an incorrect assumption as to the quantity of sodium silicate that 
would be in each CARS trade-in vehicle; the procedure in most cases 
will require no more than two quarts, while ISRI assumes three to four 
quarts. ISRI asserts that a substantial portion of the material will

[[Page 37889]]

remain unreacted after the procedure, which is not the case.
    As discussed previously, NHTSA has no reason to believe that the 
use of sodium silicate will expose any workers, including those at 
shredders, to unreasonable risks. Those who manage the shredders will 
simply need to require their employees to take the precautions 
necessary to protect themselves from exposure to sodium silicate. 
Presumably those who work at shredders are appropriately trained and 
equipped to deal with hazards that may be related to the materials with 
which they are working. More importantly, sodium silicate has been 
present in motor vehicles for decades because of its common use in the 
repair of mufflers, radiators--and engines. We assume that shredders 
have taken note of the presence of the material before now. The use of 
dust respirators would be advisable.
    With regard to the potential environmental risks, ISRI has not made 
an effective case, and NHTSA has no reason to believe that any such 
risk exists with regard to sodium silicate. The heart of ISRI's 
argument is that the unreacted portion of the sodium silicate could 
cause corrosion of metals during the shredding process. As noted above, 
the formulation of sodium silicate used in the engine disablement 
procedure is among those least likely to have a severe corrosive 
effect. In fact, sodium silicate is used in vehicle cooling systems to 
inhibit corrosion and is used in metal pipes to help prevent corrosion 
that could increase lead levels in drinking water. In any event, the 
agency has no reason to believe that the untoward environmental effects 
that ISRI suggests may occur are a realistic possibility.
    The rule also requires that, prior to submitting a copy of the 
title along with its request for reimbursement, the dealer clearly mark 
the title on both sides with the words, ``Junk Automobile, CARS.gov.'' 
Section 599.300(d)(3) implements this requirement. The marking must be 
placed so as not to obscure the vehicle owner's name, VIN, or other 
writing. Having this special label or brand on the title will inform 
all who subsequently handle it that the vehicle is a trade-in under 
this program and should not be registered or titled for further use as 
an automobile. State registration officials should pay special 
attention to this marking on a title because it indicates that the 
vehicle has been traded in under the CARS program with the 
understanding that it would never again be used as an automobile in 
this or any other country and is suitable only to be used for scrap or 
parts.
3. Restrictions and Limitations on Transactions
    The CARS Act places some restrictions and limitations on qualifying 
transactions under the program. Section 1302(c)(1)(A) of the Act 
provides that a credit may be issued only for a qualifying transaction 
that occurs between July 1, 2009 and November 1, 2009. Additionally, 
section1302(c)(1)(B) provides that not more than 1 credit may be issued 
for a single person and not more than 1 credit may be issued for the 
joint registered owners of a single eligible trade-in vehicle, and 
Sec.  1302(c)(1)(C) provides that only 1 credit issued under the 
Program may be applied toward the purchase or qualifying lease of a 
single new vehicle. Reading these requirements together, the agency has 
determined that only one credit may be issued for each transaction 
under the program and that once a person participates in a transaction, 
whether as an individual owner or a joint-registered owner of either an 
eligible trade-in vehicle, a new vehicle, or both, the person may not 
receive another credit or be named in a transaction receiving a credit 
under the program. These time and transaction limitations are specified 
in sections 599.301(a), (b), and (c).
    One additional restriction, although not specifically stated in the 
CARS Act, flows naturally from its operation. The agency has concluded 
that in order to be entitled to reimbursement under the program, a 
dealer must obtain clear title to the trade-in vehicle. Without clear 
title, the dealer is not in a position to make the statutorily required 
legal certification as to disposal of the trade-in vehicle that serves 
as a prerequisite to reimbursement. Similarly, disposal facilities 
would generally be unable to crush or shred the trade-in vehicle, as 
required under the Act. The agency is informed that in many new car 
purchases involving trade-in vehicles, the title to the trade-in 
vehicle is not immediately available, either because it is held by a 
lienholder or for some other reason. Nevertheless, the dealer proceeds 
with the transaction, even though title is obtained and transferred to 
the dealer at a later time. In some small percentage of such 
transactions, the dealer is unable to obtain clear title to the trade-
in vehicle. Were that to occur under this program, the dealer would not 
be able to ensure that the trade-in vehicle would be disposed of in 
accordance with the Act. If NHTSA had already reimbursed the dealer for 
the credit amount, NHTSA would have provided the credit under 
circumstances beyond its authority under the statute and would have to 
recover the funds. NHTSA does not believe it has a duty to fund any 
such tentative deal and will not do so. Such a transaction does not 
qualify for reimbursement under the program until the dealer obtains 
the title (assuming that other eligibility criteria are met). 
Consequently, the dealer may not submit an application for 
reimbursement (discussed later in this document) until title to the 
trade-in vehicle, free of all liens and encumbrances, is transferred to 
it. If the title to the trade-in vehicle has been lost, the owner will 
need to acquire duplicate title from the State. Section 599.301(d) 
implements this requirement for transfer of the trade-in title.
    The agency recognizes that five States--Georgia, Maine, New 
Hampshire, Rhode Island and Vermont--do not issue titles in 
transactions involving some older vehicles that may be eligible for 
trade-in under this program. In some of these States, liens may be 
documented on the registrations. In these States and for these 
vehicles, a current registration in the name of the person intending to 
purchase the new vehicle, with no evidence of lien, and a bill of sale 
conferring ownership of the trade-in vehicle from the purchaser of the 
new vehicle to the dealer, serves in lieu of the title. Section 
599.301(e) of the rule allows use of a current registration and bill of 
sale in lieu of a title in these limited situations.

f. Requirements for Dealer Reimbursement (Sec. Sec.  599.302-304)

    As a precondition for reimbursing a dealer for a qualifying 
transaction under the Program, NHTSA must have a means of verifying 
that all the statutory conditions have been met. The rule requires a 
dealer to submit an application for reimbursement to NHTSA, containing 
the information and certifications necessary for NHTSA to do so. The 
dealer must use its user account and password (discussed earlier) to 
access a secure Web site and submit an application. The application 
consists of an electronic transaction form (portion reproduced in 
Appendix C) that requires inputting of information into relevant 
fields, attaching electronic copies of supporting documents, and making 
applicable certifications.
    The electronic form requires the dealer to input and attach several 
pieces of information about the vehicle purchaser, trade-in vehicle, 
and new vehicle. For a purchaser, a dealer must collect individual or 
entity name, address and State or corporate identification number 
(e.g., driver's license number, State identification

[[Page 37890]]

number, corporate tax identification number). This information is used 
to verify the identity of the purchaser and to confirm no prior 
participation in the program. For the trade-in vehicle and new vehicle, 
the dealer must input characteristics of the vehicle (e.g., make, 
model, model year, combined fuel economy, odometer reading, VIN, base 
MSRP, engine and transmission description), and input and attach 
evidence of vehicle insurance, registration and title. This information 
is used to determine that each of these vehicles is eligible under the 
Program and that the transaction meets the requirements for fuel 
economy improvement.
    The dealer must also attach additional information to verify the 
transaction, including a copy of the purchase contract or lease 
agreement, the Manufacturer's Certificate of Origin or Manufacturer's 
Statement of Origin, and certifications from the salvage auction or 
disposal facility. The dealer must also complete and attach a Summary 
of Sale/Lease and Certifications Form (Appendix A, certifications 
section). This form conveys that the dealer has extended a CARS credit, 
as well as any other rebate and manufacturer incentive, and has 
disclosed the scrappage value of the trade-in vehicle to the purchaser. 
The form also sets forth required dealer and purchaser certifications. 
The dealer and purchaser must sign this form, attesting that each has 
followed the requirements of the CARS Act and its implementing 
regulations. In addition to the certifications on this form, the dealer 
must also make required certifications listed on the electronic 
transaction form. Finally, the agency requests that the dealer attach a 
completed customer survey (Appendix D). This survey should be presented 
to the customer for completion prior to the submission of an 
application for reimbursement. The information in the survey is 
important for the agency to meet its Congressional reporting 
requirement. The requirements associated with dealer applications are 
implemented in section 599.302.
    Upon receipt of the application, the agency will review the 
application to determine whether it is complete and satisfies all the 
requirements of a qualifying transaction. An application that meets the 
requirements of the CARS Program will be approved for payment and the 
agency will reimburse the dealer, by electronic transfer to the account 
identified under the registration process in section 599.200.
    If an application is incomplete or otherwise fails to meet all the 
requirements of for a qualifying transaction, the application will be 
rejected and the submitter will be informed electronically of the 
reason for rejection. A dealer may correct and resubmit a rejected 
application for reimbursement without penalty, but the application will 
be treated as a new application as of the date it is resubmitted. The 
requirements concerning application review and payment of dealers are 
implemented in sections 599.303 and 304.

g. Disposal of Trade-In Vehicles (Sec. Sec.  599.400-403)

    In addressing the trade-in vehicle disposal process (Section 
III.b., Identification of Disposal Facilities), the agency decided to 
include disposal facilities participating in the ELVS program 
(currently numbering approximately 7,700) \18\ on the list of 
facilities that may participate in the disposal process, subject to 
certain conditions and certifications. As a condition of accepting 
transfer of the trade-in vehicle, the disposal facility must certify 
that it meets all applicable State and Federal laws and has a currently 
active State license to operate as a disposal facility in that State. 
The disposal facility must also certify that it will not sell, lease, 
exchange, or otherwise dispose of the vehicle for use as an automobile 
in the United States or any other country, that the vehicle will be 
crushed or shredded onsite within six months after the date of its 
transfer from the dealer, and that the vehicle will not be transferred 
to another disposal facility prior to being crushed or shredded. 
Finally, it must certify that it will update NMVTIS, within 7 days 
after receiving the trade-in vehicle and again within 7 days after 
crushing or shredding the vehicle. During the six-month period prior to 
the required crushing or shredding of the trade-in vehicle, the 
disposal facility may sell any parts of the vehicle other than the 
engine block \19\ or drive train (unless the drive train is dismantled 
and sold in parts). These requirements for disposal facilities are 
implemented in sections 599.400(b) and 401 and Appendix E.
---------------------------------------------------------------------------

    \18\ The agency also decided to include certain disposal 
facilities in the State of Maine, as explained earlier in this 
document. The list does not include disposal facilities for the 
territories. However, disposal facilities in the territories must 
make the certification discussed in this paragraph.
    \19\ Section 599.102 contains a definition of the term ``engine 
block.''
---------------------------------------------------------------------------

    The agency also has determined that, in lieu of direct transfer to 
a disposal facility that appears on the agency's list, the dealer may 
opt to transfer the trade-in vehicle to a salvage auction, subject to 
certain conditions and certifications. As a condition of accepting 
transfer of the trade-in vehicle, the salvage auction must certify that 
it meets all applicable State and Federal laws and has a currently 
active State license to conduct business as a salvage auction in that 
State. The salvage auction must also certify that it will not sell, 
lease, exchange, or otherwise dispose of the vehicle for use as an 
automobile in the United States or any other country. It must certify 
that it will limit participation in the auction of a trade-in vehicle 
under the CARS program to a disposal facility that currently appears on 
the agency's CARS list of disposal facilities and will obtain from the 
disposal facility the same certification the disposal facility would 
have provided upon direct transfer of a trade-in vehicle from the 
dealer, and provide that certification to NHTSA. Finally, the salvage 
auction must certify that it will update NMVTIS, within 3 days after 
receipt of the trade-in vehicle from the dealer, or prior to auction, 
whichever is earlier. These requirements for salvage auctions are 
implemented in sections 599.400(c) and 402 and Appendix F. Finally, a 
dealer receiving certifications from a disposal facility or a salvage 
auction under these procedures is required to send them to the agency 
within 7 days of receipt. Section 599.403 sets forth this requirement.
    It is important to note that the requirement under the CARS Act and 
its implementing regulations for disposal facilities and salvage 
auctions participating in the CARS program to update NMVTIS are 
distinct from the monthly reporting requirement imposed on junk and 
salvage yards pursuant to 49 U.S.C. 30504. In accordance with 
regulations implemented by the Department of Justice at 28 CFR 25.56, 
any individual or entity engaged in the business of operating a junk 
yard or salvage yard within the United States shall provide, or cause 
to be provided on its behalf, to the operator of NMVTIS and in a format 
acceptable to the operator, an inventory of all junk automobiles or 
salvage automobiles obtained in whole or in part by that entity in the 
prior month. Updates by junk and salvage yards to NMVTIS under the CARS 
Act and its implementing regulations, however, may fulfill this 
separate NMVTIS monthly reporting requirement regarding such vehicles, 
provided the updates contain all of the information required by the 
Department of Justice under 28 CFR Part 25.
    The procedures described above allow a trade-in vehicle to be 
transferred no more than two times subsequent to the

[[Page 37891]]

dealer taking title and prior to its crushing or shredding, either 
directly to an entity currently appearing on the list of eligible 
disposal facilities, where the vehicle must remain until it is crushed 
or shredded, or to a salvage auction that subsequently transfers the 
vehicle to that entity. This approach for the vehicle disposal process 
is adopted in Subpart D and the required certifications appear in 
Appendices E and F. Nothing in the rule proscribes further transfer of 
a crushed vehicle to another disposal facility, including a shredder.

h. Enforcement (Sec. Sec.  599.500-517)

1. Prevention of Fraud
    The funds Congress provided for the CARS program are intended only 
for qualifying transactions, and the requirement to destroy the trade-
in vehicle is an important part of the program. To protect the 
taxpaying public, NHTSA will enforce the Act and this implementing 
regulation strictly and will work with the DOT Inspector General, the 
Department of Justice, and other government agencies to punish 
violations and fraud.
    In the rule being issued today, NHTSA has taken a number of steps 
to minimize the potential for fraud in the first instance. Among other 
things, NHTSA has created a system that will provide payments only for 
qualifying transactions under the CARS program. NHTSA will make 
electronic funds transfers only to a registered dealer that has 
submitted the required proof and made the required certifications under 
penalty of law. The rule establishes a registration system to identify 
licensed, franchised new vehicle dealers and to obtain the information 
necessary for making secure electronic transfers. Only registered 
dealers will have access to the payment system.
    At the time of the transaction at the dealer, a purchaser who is 
trading in a vehicle will need to provide evidence of ownership and 
proof that the vehicle has been continuously registered to that owner 
and insured throughout the last 12 months. To prevent repeated use of 
the program by the same person, the consumer will need to provide 
evidence of identity and permit that information to become part of the 
documentation of the transaction.
    We believe that dealers will have every reason to avoid entering 
into a transaction for which the dealer cannot be reimbursed under this 
program. Dealers will be expected to verify that the trade-in vehicle 
and the vehicle being purchased or leased are both eligible under the 
program. For both vehicles, the dealer will need to verify the combined 
fuel economy. With regard to the trade-in vehicle, the dealer will need 
to verify that the registration and insurance information is accurate 
and that the vehicle is in drivable condition.
    Also, this rule provides measures to ensure that the trade-in 
vehicle is never used again as an automobile in this or any other 
country. These measures include requiring the dealer to disable the 
trade-in vehicle's engine prior to transferring the vehicle, requiring 
binding certifications from all entities involved in handling these 
vehicles, updating the NMVTIS system at all crucial junctures to ensure 
the availability of information about the vehicle's status, and 
labeling the title of those vehicles as ``junk automobiles'' to defer 
further sale of them as vehicles authorized for on-road use.
    The process set out in this rule includes obtaining certifications 
from purchasers, dealers, salvage auctions, and disposal facilities 
involved with CARS transactions. Those certifications will be made on 
paper or electronic forms that make clear that there are significant 
penalties for submitting false information. NHTSA, working with DOT's 
Office of Inspector General and the Department of Justice, will 
vigorously pursue actions against anyone it believes has submitted 
false information in connection with this program.
    The agency will conduct inspections of records, premises and 
vehicles to detect possible violations. Should NHTSA identify a 
violation or fraud, we intend to enforce the CARS Act's requirements 
vigorously. The public is encouraged to contact NHTSA if it suspects 
any fraud is occurring in connection with the CARS program. Please call 
1-866-CAR-7891, which is NHTSA's dedicated hotline for calls about the 
program, Monday-Friday 8 a.m. to 10 p.m., TTY: 1-800-424-9153.
    Anyone who thinks illegal activity related to this program has 
occurred may also call the Hotline of the Office of the Inspector 
General (OIG) at the U.S. Department of Transportation. The toll free 
number is 1-800-424-9071. The OIG Hotline is an important tool for 
reporting allegations of fraud, waste, abuse, or mismanagement in the 
Department's programs or operations, including the CARS program. The 
Hotline is set-up to receive allegations in a variety of forms, 
including by e-mail ([email protected]), regular mail (DOT Inspector 
General, P.O. Box 708, Fredericksburg, VA 22404), fax (540-373-2090), 
and the toll free number identified above. The OIG Hotline is open 24 
hours a day, seven days a week.
    Those who think the Internet has been used to commit a crime 
related to this program may also contact the Internet Crime Complaint 
Center (IC3), a partnership among the Federal Bureau of Investigation 
http://www.fbi.gov (FBI), the National White Collar Crime Center http://www.nw3c.org/ (NW3C), and the Bureau of Justice Assistance http://www.ojp.usdoj.gov/BJA/ (BJA). IC3's mission is to serve as a vehicle to 
receive, develop, and refer criminal complaints regarding the rapidly 
expanding arena of cyber crime. The IC3 gives the victims of cyber 
crime a convenient and easy-to-use reporting mechanism that alerts 
authorities of suspected criminal or civil violations.
2. Civil Penalties and Other Sanctions
    While NHTSA expects that the vast majority of activities under the 
CARS Act will comply with it and the implementing regulations, NHTSA 
intends to penalize violators. Section 1302(d)(6) of the CARS Act 
requires NHTSA's regulations implementing the program to provide for 
the enforcement of the penalties described in Section 1302(e). Section 
1302(e)(1) provides that it shall be unlawful for any person to violate 
any provision under this section (i.e., under the CARS Act) or any 
regulations issued pursuant to the CARS Act.
    Section 1302(e)(2) provides that any person who commits a violation 
described in Section 1302(e)(1) shall be liable to the United States 
Government for a civil penalty of not more than $15,000 for each 
violation, and that the Secretary shall have the authority to assess 
and compromise such penalties and to require from any entity the 
records and inspections necessary to enforce this program. In 
determining the amount of the civil penalty, the severity of the 
violation and the intent and history of the person committing the 
violation shall be taken into account.
    As authorized by Section 1302(e)(2) of the CARS Act, which grants 
NHTSA the authority to require from any entity the records and 
inspections necessary to enforce this program, NHTSA will use 
information gathering mechanisms comparable to those it currently 
employs under other statutes the agency administers.
    In the rule being issued today, NHTSA has established 
administrative procedures to assess civil penalties quickly and fairly 
once a likely violation is identified. These procedures are set forth 
at subpart E. Under these procedures, any person may report an apparent 
violation to NHTSA. When a

[[Page 37892]]

report of an apparent violation is received, or when an apparent 
violation has been detected by any person working for NHTSA, the matter 
may be investigated or evaluated by NHTSA enforcement personnel. If 
NHTSA enforcement personnel believe that a violation may have occurred, 
a report of the investigation will be prepared and sent to the NHTSA 
Chief Counsel for review. The Chief Counsel will review the report to 
determine if there is sufficient information to establish a likely 
violation. If the Chief Counsel determines that a violation has likely 
occurred, the Chief Counsel may issue a Notice of Violation to the 
party, or make other enforcement recommendations, such as suspensions 
or revocations. The alleged violator will have an opportunity to 
present its views to NHTSA and reach a settlement of the civil penalty 
case. If the alleged violator instead requests a hearing, the Chief 
Counsel will forward a case file to a Hearing Officer, with a 
recommended action. The Hearing Officer's functions are separate from 
those of NHTSA's enforcement personnel and Chief Counsel, and the 
Hearing Officer has no other responsibility, direct or supervisory, for 
the investigation of cases referred for the assessment of civil 
penalties.
    A party receiving the Notice of Violation may pay the proposed 
penalty or decline the Notice of Violation. If the Notice of Violation 
is timely declined, the regulations provide for a hearing prior to a 
final assessment of a penalty by the Hearing Officer. Failure to either 
pay the proposed penalty on the Notice of Violation or request a 
hearing within 30 days of the date shown on the Notice of Violation 
will result in a finding of default, and NHTSA will assess the civil 
penalty in the amount proposed on the Notice of Violation without a 
hearing.
    The hearings will be held at the headquarters of the U.S. 
Department of Transportation in Washington, DC, either telephonically 
or in person, before a Hearing Officer. Unlike another statute 
administered by NHTSA, the CARS Act does not require a hearing on the 
record before assessing civil penalties. For example, Section 508(a)(1) 
of the Motor Vehicle Information and Cost Savings Act (formerly 15 
U.S.C. 2008 (1994), and now codified at 49 U.S.C. 32911), provided that 
if fuel economy calculations indicate that any manufacturer has 
violated specified provisions, the Secretary shall commence a 
proceeding. Section 508(a)(2) of the Cost Savings Act then went on to 
state that, if on the record after opportunity for agency hearing, the 
Secretary determines that such manufacturer has violated provisions, 
the Secretary shall assess the penalties provided for under subsection 
(b). This provision was recodified at 49 U.S.C. 32911(b) and 32912 so 
as to clearly provide for ``an opportunity for a hearing on the 
record'' to decide whether a violation has been committed. In view of 
the language in the Cost Savings Act, NHTSA adopted regulations 
establishing formal Administrative Procedure Act (APA) adjudicative 
hearing procedures before an administrative law judge (ALJ), which may 
result in civil penalties. See 49 CFR Part 511, Adjudicative 
Procedures. In view of the absence of any statutory requirement in the 
CARS Act for an on-the-record hearing or, in fact, for any hearing, as 
set forth in the regulatory text, the formal APA adjudication 
procedures set forth at 5 U.S.C. 554, 556 and 557 do not apply to civil 
penalty proceedings under the CARS Act and NHTSA need not employ an ALJ 
as the hearing officer. There is no right to discovery. In receiving 
evidence, the Hearing Officer is not bound by strict rules of evidence. 
At the conclusion of the hearing, the Hearing Officer assesses civil 
penalties, if appropriate. If civil penalties are in excess of 
$100,000.00, the Hearing Officer's decision may be appealed to the 
NHTSA Administrator.
    NHTSA also has the authority under the CARS Act to compromise 
(i.e., settle) civil penalties, and parties receiving notices of 
violations will be given the opportunity early in the process to settle 
with the Government, should they choose to do so. Finally, we note that 
these penalties are not exclusive. For example, violators could also 
face penalties under the False Claims Act or criminal prosecution.

V. Confidential Information and Privacy

    Administration of the CARS program requires that information about 
qualifying transactions be submitted to NHTSA from different entities 
and individuals. Some of this data is sensitive. As discussed below, 
NHTSA is amending its existing regulations governing confidential 
treatment, found at 49 CFR Part 512, to address these issues.

a. Determinations of the Confidentiality of CARS Data Based on FOIA 
Exemptions 4 and 6

    The confidentiality of most CARS data is based on Freedom of 
Information Act (FOIA) Exemptions 4 and 6, 5 U.S.C. 552(b)(4) and 
(b)(6). FOIA Exemption 4 allows withholding of trade secrets and 
commercial or financial information obtained from a person and 
privileged or confidential. Under Exemption 4, the standard for 
assessing the confidentiality of information that parties are required 
to submit to the government is whether disclosure of the information is 
likely to have either of the following effects: (1) To impair the 
Government's ability to obtain necessary information in the future; or 
(2) to cause substantial competitive harm to the competitive position 
of the person from whom the information was obtained.\20\ National 
Parks & Conservation Ass'n v. Morton, 498 F.2d 765, 770 (D.C. Cir. 
1974). Because of the nature of the information at issue here, our 
discussion is limited to examination of the competitive harm test even 
though other standards could justify non-disclosure.\21\
---------------------------------------------------------------------------

    \20\ The term ``trade secrets'' has been narrowly defined by the 
Court of Appeals for the District of Columbia Circuit for the 
purpose of FOIA Exemption 4 as encompassing a secret, commercially 
valuable plan, formula, process, or device that is used for the 
making, preparing, compounding, or processing of trade commodities 
and that can be said to be the end product of either innovation or 
substantial effort. Public Citizen Health Research Group v. FDA, 704 
F.2d 1280, 1288 (D.C. Cir. 1983).
    \21\ Impairment to the Government's ability to obtain the 
information in the future serves as an independent basis for 
withholding under Exemption 4. See National Parks, 498 F.2d at 770. 
Case law also strongly points to the availability of a ``third 
prong'' protecting other governmental interests, such as compliance 
and program effectiveness. See Critical Mass v. NRC, 975 F.2d 871, 
879 (D.C. Cir. 1992) (noting that Exemption 4 can protect interests 
beyond impairment and competitive harm. See also 9 to 5 Org. for 
Women Office Workers v. Bd. of Governors of the Fed. Res. System, 
721 F.2d 1, 11 (1st Cir. 1983) (adopting a third prong under 
Exemption 4 based on the government's interest in administrative 
efficiency and effectiveness).
---------------------------------------------------------------------------

    Under the competitive harm test of National Parks, there must be 
actual competition and a likelihood of substantial competitive injury 
from disclosure of the information. CNA Financial Corp. v. Donovan, 830 
F.2d 1132, 1152 (D.C. Cir. 1987). This standard requires only that 
disclosure of information would ``likely'' cause competitive harm. 
McDonnell Douglas Corp. v. U.S. Dept. of the Air Force, 375 F.3d 1182, 
1187 (D.C. Cir. 2004); see also Occidental Petroleum Corp. v. SEC, 873 
F.2d 325, 341 (D.C. Cir. 1989). Under this test, the agency assesses 
the likelihood of substantial injury; it does not make that assessment 
and then further balance it against other matters such as the public's 
interest in the information. Public Citizen Health Research Group v. 
FDA, 185 F.3d 898, 904-05 (D.C. Cir. 1999).
    Exemption 6 of the FOIA addresses the withholding of ``personnel 
and

[[Page 37893]]

medical files and similar files the disclosure of which would 
constitute a clearly unwarranted invasion of personal privacy'' to the 
subject of those files. See 5 U.S.C. 52(b)(6). The first inquiry in 
examining withholding information under Exemption 6 is a determination 
of what data is at stake and the nature and degree of any privacy 
interest in the information. The second step is an assessment of the 
public interest in disclosure. Under Exemption 6, the concept of public 
interest is limited to shedding light on the government's performance 
of its statutory duties. U.S. Dep't of Justice v. Reporters Comm. for 
Freedom of the Press, 489 U.S. 749, 773 (1989); National Ass'n of 
Retired Federal Employees v. Horner, 879 F.2d 873, 879 (D.C. Cir. 
1989); cf., DOD v. FLRA, 510 U.S. 487, 497 (1994). Finally, there is a 
weighing of the privacy interests at stake against the public interest 
in disclosure. Ripkis v. Dept. Hous. and Urban Dev., 746 F.2d 1, 3 
(D.C. Cir. 1984).
    Data submitted under the CARS program includes personally 
identifying information for consumers. This information falls within 
the classification of ``similar files'' under Exemption 6. In Center 
for Auto Safety v. National Highway Traffic Safety Administration, 809 
F. Supp. 148 (D.D.C. 1993), an advocacy group sought the release of 
names and addresses of consumers filing complaints directly to NHTSA. 
The Court found that the complainant's names and addresses invoked a 
privacy interest within the scope of Exemption 6 and ruled in favor of 
non-disclosure because there was no ascertainable public interest of 
sufficient significance or certainty to outweigh a complainant's 
privacy right justifying release of the information.

b. Approach--Class Determinations vs. Individual Assessments

    As employed in the agency's regulations governing confidentiality 
determinations (49 CFR Part 512), class determinations declare that 
certain categories of data submitted to NHTSA will be kept 
confidential. Under this approach, submitters need not request 
confidential treatment; such treatment is given automatically.
    NHTSA is promulgating class determinations on the confidentiality 
of some categories of CARS data. In adopting this approach, we have 
considered a number of matters. First, NHTSA may adopt categorical 
rules to manage the tasks Congress assigned to it under the CARS Act. 
Public Citizen v. Mineta, 427 F. Supp. 2d 7, 13 (D. D.C. 2006). Second, 
we have identified and assessed the alternatives. One alternative is to 
require entities to submit individual requests for confidentiality for 
each transaction. A second alternative is presumptive categorical 
determinations of confidentiality. A third alternative is to adopt 
binding class determinations. Concerns involved in considering these 
alternatives include providing clear direction to CARS participants, 
predictability, consistency and efficiency.
    Requiring individual requests for confidential treatment of CARS 
data would force thousands of entities, almost all of them small 
businesses, to submit requests for confidentiality for each 
transaction. These entities, having virtually no experience in making 
such requests, would likely submit a wide variety of documents written 
in different ways. Some requests would meet the applicable standards 
for confidential treatment and some would not. Given our past 
experience with first-time requests, many would not meet procedural 
requirements, would be denied and would then be followed by 
reconsideration requests. The burden imposed on entities requesting 
confidential treatment and on the agency would be substantial. NHTSA 
already receives about 550 requests for confidential treatment every 
year. Adding the expected number of CARS submissions to the existing 
confidentiality request workload would overwhelm the agency and lead to 
a huge backlog. Consistent with our practice, information would be 
withheld until NHTSA decides if it is confidential. Disclosure of 
rightfully public information would be delayed and the public interest 
would be impacted, particularly if other agency resources were diverted 
to address the backlog. In view of the foregoing, requiring and 
processing individual requests for confidential treatment for CARS data 
is not a viable alternative.
    A second alternative is presumptive class determinations. 
Presumptive determinations are a middle ground between ad hoc 
determinations and binding class determinations. Unlike the latter, 
that operate automatically, presumptive determinations require 
submitters to provide abbreviated written requests and supporting 
justifications. In our view, presumptive confidentiality determinations 
are inappropriate for CARS. While presumptive determinations would 
provide direction to NHTSA's clients and avoid inconsistent 
confidentiality determinations, they would not eliminate individual 
confidentiality requests and the significant burdens those requests 
would impose.
    A third alternative is to proceed by binding rule. Binding 
determinations for CARS data are appropriate mechanisms to address the 
confidentiality of sensitive data. CARS reports are submitted by 
filling out standardized electronic templates that are used repeatedly. 
Each manufacturer, dealer and salvage yard files the same reports as 
other CARS participants in the same category.
    Binding determinations provide direction to the regulated 
community. They also assure consistency and avoid resource burdens, 
particularly for small businesses. They conserve agency resources that 
would otherwise be used to respond to thousands of individual 
confidentiality requests and allow more rapid disclosure of information 
that is not confidential. This is in the public interest. In view of 
the foregoing, NHTSA believes that binding determinations are 
appropriate.

c. Class Determinations Based on FOIA Exemption 4

    FOIA Exemption 4 covers commercial or financial information 
obtained from a person that is privileged or confidential. 5 U.S.C. 
552(b)(4). The terms ``commercial'' or ``financial'' information are 
given their ordinary meanings. Public Citizen Health Research Group v. 
FDA, 704 F.2d 1280, 1290 (D.C. Cir. 1983). Some CARS data meet this 
element of Exemption 4.\22\ Second, the information must be obtained 
from a ``person.'' The word ``person'' encompasses business 
establishments, including corporations. See FlightSafety Servs. v. 
Dep't of Labor, 326 F.3d 607, 611 (5th Cir. 2003). CARS data from 
manufacturers, dealers and salvage auctions and disposal facilities is 
obtained from persons within the meaning of Exemption 4. Third, the 
information must be confidential. As noted above, the National Parks 
Court declared that commercial or financial data is ``confidential'' 
for the purposes of Exemption 4 if disclosure of the information would 
be likely to cause substantial competitive harm to the competitive 
position of the person from whom the information was obtained. 498 F.2d 
at 770. Actual competitive harm need not be demonstrated; actual 
competition and a likelihood of substantial competitive injury is all 
that need be shown. CNA Financial Corp. v.

[[Page 37894]]

Donovan, 830 F.2d 1132, 1152 (D.C. Cir. 1987).
---------------------------------------------------------------------------

    \22\ See the discussion of the categories of CARS information 
below. Those discussions demonstrate that the submitters have a 
commercial interest in the data.
---------------------------------------------------------------------------

    We now turn to certain categories of information that 
manufacturers, dealers and disposal facilities must submit under the 
CARS rule.

d. Data Submitted to NHTSA for the CARS Program

1. Manufacturer Data
    Vehicle manufacturers will provide NHTSA with both dealer and 
vehicle information needed for administration of the CARS program. The 
dealer information is used to identify dealers and determine if they 
are authorized new car dealers for a particular make. Manufacturers 
will provide NHTSA with information about the vehicles they 
manufacture.
2. Dealer Information and Transaction Data
    New car dealers participating in the CARS program must submit 
information related to their business as well as data for individual 
sales. To take part in the CARS program, dealers must register with 
NHTSA. The required registration data includes identifying information 
and the identity and contact information for a designated CARS contact 
person. Once registered, dealers have to submit information needed to 
establish a CARS account. This includes the registration data discussed 
above and additional data needed for financial transactions. For each 
individual sale, dealers also submit dealer data, new vehicle purchaser 
data, trade-in vehicle data, and new vehicle data.
3. Disposal Facility Information and Destruction Data
    Disposal Facilities are required to submit certifications to NHTSA 
regarding their business operations and to verify proper destruction of 
CARS trade-in vehicles.

e. CARS Data Class Determinations Based on FOIA Exemption 4

    With a few exceptions, the data submitted by businesses 
participating in the CARS program is already a matter of public record. 
Dealer addresses, telephone numbers, fax numbers and e-mail addresses 
are freely given. Other information, such as a dealer or salvage yard 
business license number, legal name and legal address, are available 
through public records. Still more data can be ascertained through 
publicly available search engines. For example, Employer Identification 
Numbers (EINs) for businesses are routinely released on tax forms, 
public filings and, in some instances, on employee pay stubs. As a 
result, an employer's EIN may be searched and retrieved by name from a 
number of Web based providers for a nominal fee. Nonetheless, some data 
provided to NHTSA under the CARS program is not publicly available and 
entitled to confidential treatment. This data is discussed below.
1. Manufacturer Assigned Dealer Identification
    Vehicle manufacturers assign identification codes to their 
individual dealers. One manufacturer, Ford, indicates that these codes 
are confidential and that release of this information would be likely 
to cause competitive harm by increasing the possibility of fraud 
perpetrated by impostors using dealer codes. Because fraudulent use of 
this information would be likely to cause competitive harm, this final 
rule establishes a class determination extending confidential treatment 
to these manufacturer assigned dealer codes.
2. Dealer Bank Name, ABA Routing Number, Bank Account Number
    Participating dealers will be identifying their bank, its American 
Banking Association (ABA) routing number and a bank account number in 
forms submitted to NHTSA. This information is kept confidential by 
these dealers and its release would cause substantial harm to those 
dealers. Public disclosure of this information presents an open and 
obvious potential for fraud or abuse that could result in serious 
financial loss. Indeed, even the inadvertent disclosure of a bank 
account number and a subsequent change to another account can cause 
significant disruption in business operations. The agency believes that 
a class determination is an appropriate means for protecting this 
information.
3. CARS Dealer ID and CARS Authorization Codes
    NHTSA will provide participating dealers with unique identifiers 
for CARS purposes and issue CARS authorization codes for individual 
CARS transactions. Dealers must use this unique identifier and 
authorization code when submitting requests for reimbursement. Public 
disclosure of a dealer's unique CARS ID and authorization code 
increases the potential that this identifier will be used improperly or 
to perpetuate fraud. Unauthorized and improper use of the unique CARS 
ID and code would be likely to cause the ``owner'' of the ID to suffer 
competitive harm. The legitimate ``owner'' of the ID and authorization 
code may be subject to financial claims, suspension or removal from the 
CARS program and other costs associated with improper use of a CARS 
code and ID. Accordingly, this final rule establishes a class 
determination according confidential treatment to this data.

f. Class Determination Based on FOIA Exemption 6

    The CARS rule requires dealers to provide NHTSA with the name, 
address, telephone number, state identification number, trade-in 
vehicle VIN, trade-in insurance information and new vehicle VIN for 
consumers participating in the CARS program. NHTSA has long held the 
view that Exemption 6 of the FOIA authorizes confidential treatment of 
consumer personally identifying information. See 5 U.S.C. 552(b)(6). 
Accordingly, consumer names, addresses and telephone numbers are 
routinely accorded confidential treatment. The agency's policy has been 
to redact personal identifiers from owner complaints (whether filed 
directly with the agency or from documents obtained from manufacturers 
in the course of a defect investigation) before placing them on the 
public record.
    The privacy interest in protecting personal identifiers and contact 
information is no less compelling when a consumer purchases a new 
vehicle under the CARS program. Furthermore, disclosure of personal 
identifiers and the erosion of privacy that would result might dissuade 
consumers from participating in CARS. This would frustrate achievement 
of the program's principal goal--to encourage replacement of older less 
fuel efficient vehicles with new more fuel-efficient cars and trucks.
    The consumer data at issue--name, address, telephone number, state 
identification number and vehicle identification number (VIN)--is 
within the scope of Exemption 6. VINs, when coupled with other data, 
can be used to identify vehicle owners and obtain other personal data. 
As this data has privacy implications, the next inquiry is an 
assessment of the public interest in disclosure. Congress has directed 
the disclosure of trade-in vehicle VINs to the commercial market to 
help verify destruction of these vehicles. For the remaining personal 
data, the concept of public interest under Exemption 6 is limited to 
shedding light on the government's performance of its statutory duties. 
United States Department of Justice v. Reporters Comm. for Freedom of 
the Press, 489 U.S. 749, 773 (1989); National Ass'n of Retired Federal 
Employees v. Horner, 879 F.2d 873, 879 (D.C. Cir. 1989); cf., DOD v. 
FLRA, 510 U.S. 487, 497 (1994).

[[Page 37895]]

With the limited redaction of part of the VIN under this rulemaking, 
the public would be able to review identification of the make, model 
and model year of the new vehicle. This apprises the public of 
information central to the core purpose of the CARS program. Disclosing 
additional VIN information, with the sequential number unique to the 
vehicle, that would enable someone to identify the owner of the new 
vehicle and other personal information would not, however, further 
serve the public interest. If disclosed, it would not answer the 
question of ``what the government is up to.'' Reporters Comm., 489 U.S. 
at 773 (1989).
    The final step in an Exemption 6 analysis is weighing the competing 
privacy and public interests against one another. See Ripskis v. HUD, 
746 F.2d 1, 3 (D.C. Cir. 1984). In the case of the CARS VIN 
information, there is a privacy interest in not being contacted about a 
new vehicle purchase, such as by companies selling warranties. On the 
other hand, the public interest, in terms of information that reveals 
``what the government is up to'' is better served by other publicly 
available information. On balance, NHTSA has concluded that the privacy 
interests in non-disclosure of consumer personal identifying 
information outweigh the limited public interest served by disclosing 
this information when other data is available to better address public 
concerns.
    NHTSA is amending 49 CFR Part 512 by revising Appendix E to provide 
new class determinations applying to information provided for the CARS 
program. These class determinations do not apply as a rule of general 
application to the agency's treatment of similar information in other 
instances. Revising Appendix E requires addition of a new Appendix F to 
accommodate information previously found in Appendix E.

VI. Costs and Benefits

    The CARS Act will have various economic, employment, safety and 
environmental effects. The employment impacts of the Act will affect 
NHTSA, and may affect manufacturer and dealer employment. At this time, 
NHTSA is planning to hire 30 employees and over 200 contractor 
employees to handle this program over a period of 6 months. 
Manufacturers' and dealers' employment levels are unlikely to be 
impacted by the Act. The impact of the Act will most likely not be 
large enough to increase production by manufacturers, and dealers on 
average will only be selling an additional 12 vehicles (250,000 
estimated number of vehicles sold during the program divided by 19,700 
dealers as of early 2009) during the course of the program.
    Another benefit of the program is the increased incorporation of 
improved fuel efficiency into the on-road vehicle fleet. This will 
decrease greenhouse gases and criteria pollutants by decreasing fuel 
consumption, resulting in air pollution benefits. These benefits are 
ultimately dependent upon which types of vehicles consumers purchase.
    Certain costs may be incurred by dealers. However, the CARS Act 
provides that dealers may retain up to $50 from the scrap value of 
trade-in vehicles to offset any administrative costs of participating 
in the program. Disposal facilities and salvage auctions will also 
incur some costs in complying with the Act. Related industries, such as 
auto repair shops, may lose some profit due to foregone repairs by 
vehicle owners. Additionally, the Act may shorten the vehicle life 
cycle depending on the age and condition of the trade-in vehicles.
    Cost and benefit information associated with this rulemaking is set 
forth in the final regulatory impact analysis prepared by NHTSA and 
included in the public docket.

VII. Statutory Basis for This Action

    This final rule implements the Consumer Assistance to Recycle and 
Save Act (Cars Act) (Pub. L. 111-32), which directs the Secretary to 
issue final regulations within 30 days after enactment.

VIII. Effective Date

    Section 1302(d) of the CARS Act provides that notwithstanding the 
requirements of section 553 of title 5, United States Code, the 
Secretary shall promulgate final regulations to implement the Program 
not later than 30 days after the date of the enactment of this Act. The 
agency finds that it has good cause to make this rule effective fewer 
than 30 days after the publication in the Federal Register. The CARS 
program is a short-term program that Congress expected NHTSA to 
implement promptly. Under the CARS Act, a credit issued under the 
Program may be used only in connection with the purchase or qualifying 
lease of new fuel efficient automobiles that occur between July 1, 
2009, and November 1, 2009. In view of the fact that the regulations 
being published today have not been previously available, sales of new 
vehicles under the program have not begun in volume. It would, 
therefore, be inconsistent with Congressional intent, impracticable, 
and contrary to the public interest, to delay the effective date of the 
regulations, which would, in turn, delay the implementation of the 
program and effectively compress its applicability.
    This rulemaking is also major under Chapter 8 of 5 U.S.C. 
(Congressional Review of Agency Rulemakings) because it has an annual 
effect on the economy of $100,000,000 or more. For the same reasons 
noted in the prior paragraph, we find good cause under section 808 of 
Title 5 that notice and public procedure are impracticable and contrary 
to the public interest, and that the rule shall take effect upon 
publication in the Federal Register.
    Accordingly, the effective date of this final rule is July 29, 
2009.

IX. Regulatory Analyses and Notices

A. Executive Order 12866 and DOT Regulatory Policies and Procedures

    Executive Order 12866, ``Regulatory Planning and Review'' (58 FR 
51735, October 4, 1993), provides for making determinations whether a 
regulatory action is ''significant'' and therefore subject to Office of 
Management and Budget (OMB) review and to the requirements of the 
Executive Order. The Order defines a ``significant regulatory action'' 
as one that is likely to result in a rule that may: (1) Have an annual 
effect on the economy of $100 million or more or adversely affect 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 impact of 
entitlements, grants, user fees, or loan programs or the rights and 
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 the Executive Order.
    This rulemaking is economically significant. Accordingly, OMB 
reviewed it under Executive Order 12866. The rule is also significant 
within the meaning of the Department of Transportation's Regulatory 
Policies and Procedures. The agency has prepared a Final Regulatory 
Impact Analysis (FRIA) and placed it in the docket and on the agency's 
Web site.

B. National Environmental Policy Act

    NHTSA has considered this rulemaking action for the purposes of the 
National Environmental Policy Act (NEPA). It is established law that 
NEPA compliance is required unless there is a clear conflict of 
statutory authority.

[[Page 37896]]

Calvert Cliffs' Coordinating Committee, inc. v. Atomic Energy 
Commission, 449 F.2d 1109 (D.C. Cir 1971). NEPA analysis is not 
required where, as here, a statutorily-mandated time frame for the 
Government's action does not permit it. See, e.g., Flint Ridge 
Development Co. v. Scenic Rivers Ass'n of Oklahoma, 426 U.S. 776 (1976) 
and Kandra v. U.S., 145 F. Supp.2d 1192 (D. Or. 2001). The Consumer 
Assistance to Recycle and Save Act of 2009 requires the Secretary of 
Transportation, through NHTSA, to issue final regulations within 30 
days after enactment (i.e., by July 24, 2009) and since it is 
impossible to perform a NEPA analysis within this tight time frame, no 
NEPA analysis is required prior to issuing the final regulation.

C. Regulatory Flexibility Act

    Pursuant to the Regulatory Flexibility Act of 1980 (5 U.S.C. 601 et 
seq., as amended by the Small Business Regulatory Enforcement Fairness 
Act (SBREFA) of 1996), whenever an agency is required to provide for 
notice and comment for any proposed or final rule, it must prepare and 
make available for public comment a regulatory flexibility analysis 
that describes the effect of the rule on small entities (i.e., small 
businesses, small organizations, and small governmental jurisdictions). 
The agency has not prepared a final regulatory flexibility analysis for 
this final rule because the Regulatory Flexibility Act does not require 
such an analysis when a final rule was not required to be preceded by 
an NPRM.\23\ As noted elsewhere in this preamble, the agency determined 
that an NPRM was not required for this rulemaking. Nevertheless, the 
agency has examined impacts on small entities, including small 
businesses, and included them in its regulatory analysis for this final 
rule.
---------------------------------------------------------------------------

    \23\ The initial sentence of subsection (a), Section 604, Final 
regulatory flexibility analysis, of the Regulatory Flexibility Act 
provides that when an agency promulgates a final rule under section 
553 of this title, after being required by that section or any other 
law to publish a general notice of proposed rulemaking, or 
promulgates a final interpretative rule involving the internal 
revenue laws of the United States as described in section 603(a), 
the agency shall prepare a final regulatory flexibility analysis.
---------------------------------------------------------------------------

D. Executive Order 13132, Federalism

    Executive Order 13132, ``Federalism'' (64 FR 43255, August 10, 
1999), requires NHTSA to develop an accountable process to ensure 
``meaningful and timely input by State and local officials in the 
development of regulatory policies that have federalism implications.'' 
``Policies that have federalism implications'' are defined in the 
Executive Order to include regulations that have substantial direct 
effects on the States, on the relationship between the national 
government and the States, or on the distribution of power and 
responsibilities among the various levels of government. Under 
Executive Order 13132, the agency may not issue a regulation with 
federalism implications that imposes substantial direct compliance 
costs and that is not required by statute unless the Federal Government 
provides the funds necessary to pay the direct compliance costs 
incurred by State and local governments or the agency consults with 
State and local governments in the process of developing the proposed 
regulation. The agency also may not issue a regulation with federalism 
implications that preempts a State law without consulting with State 
and local officials.
    NHTSA has examined today's final rule pursuant to Executive Order 
13132 and concluded that consultation with States, local governments, 
or their representatives is not required. The agency has concluded that 
the rule does not have federalism implications, because the rule does 
not have a substantial direct effect on the States, on the relationship 
between the national government and the States, or on the distribution 
of power and the responsibilities among the various levels of 
government. This rule will have no effect on the ability of States to 
adopt and/or implement their own incentive plans.

E. Executive Order 12988

    Pursuant to Executive Order 12988, ``Civil Justice Reform'' the 
agency has considered whether this final rule would have any 
retroactive effect. Agencies may promulgate retroactive rules pursuant 
to the express authority of Congress to do so. See, e.g., Bowen v. 
Georgetown Univ. Hospital, 488 U.S. 204, 208 (1988); National Mining 
Association v. Dep't of Labor, 292 F.3d 849, 859 (D.C. Cir. 2002). On 
June 24, 2009, the President signed the CARS Act into law (Pub. L. 111-
32). The CARS Act required the Secretary of Transportation, acting 
through NHTSA, to issue final regulations to implement the program 
within 30 days after enactment (i.e., by July 24, 2009). However, the 
CARS Act provides that the program covers eligible transactions 
beginning on July 1, 2009, prior to today's final rule. Accordingly, as 
set forth in today's final rule, if transactions occurring on or after 
July 1, 2009 but prior to July 29, 2009 meet all of the requirements 
identified in this final rule, registered dealers may follow the 
application procedures of the rule and apply for reimbursement for 
those transactions.

F. Paperwork Reduction Act

    Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501, et 
seq.), a person is not required to respond to a collection of 
information by a Federal agency unless the collection displays a valid 
OMB control number. As part of this final rule, the agency must among 
other matters, request information from persons to register as 
participating dealers, provide a list of eligible vehicles and process 
credit transactions under the program.
    The agency has received approval from OMB to collect the following 
information:
    Title: CARS Program; Dealer Information, OMB Control No. 2127-0657, 
Expiration Date: December 31, 2009.
    This approval covers NHTSA Form 1070. NHTSA has been given OMB 
approval to collect 57,000 responses, for a total of 11,395 burden 
hours.
    Title: CARS Program; Disposal Facility and Salvage Auction 
Information, OMB Control No. 2127-0658, Expiration Date: January 31, 
2010.
    This approval covers NHTSA Form 1073, ``Disposal Facility 
Certification Form'' and NHTSA Form 1074, ``Salvage Auction 
Certification Form.'' NHTSA has been given OMB approval to collect 
3,750,000 responses, for a total of 31,248 burden hours.
    Title: CARS Program; Survey of Customer Response to CARS 
Initiative, OMB Control No. 2127-0659, Expiration Date: January 31, 
2010.
    This approval covers NHTSA Form 1075, ``Survey of Consumer Response 
to CARS Initiative.'' NHTSA has been given OMB approval to collect 
168,750 responses, for a total of 9,375 burden hours.
    Title: CARS Program; Dealer and Buyer Transaction Information, OMB 
Control No. 2127-0660, Expiration Date: January 31, 2010.
    This approval covers NHTSA Form 1071 ``Transaction Form'' (an 
electronic form) and NHTSA Form 1072 ``Certifications and Summary of 
Sale Language.'' NHTSA has been given OMB approval to collect 500,000 
responses, for a total of 108,334 burden hours.

G. The Unfunded Mandates Reform Act

    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) 
requires Federal agencies to prepare a written assessment of the costs, 
benefits, and other effects of proposed or final rules that include a 
Federal mandate

[[Page 37897]]

likely to result in the expenditure by State, local, or Tribal 
governments, in the aggregate, or by the private sector, of more than 
$100 million annually (adjusted for inflation with a base year of 
1995). This requirement, however, only applies to ``a final rule for 
which a general notice of proposed rulemaking was published''; as noted 
earlier in this final rule, an NPRM was not published.

H. Regulatory Identifier Number (RIN)

    The Department of Transportation assigns a regulation identifier 
number (RIN) to each regulatory action listed in the Unified Agenda of 
Federal Regulations. The Regulatory Information Service Center 
publishes the Unified Agenda in April and October of each year. You may 
use the RIN contained in the heading at the beginning of this document 
to find this action in the Unified Agenda.

I. Privacy Act

    Please note that anyone is able to search the electronic form of 
all comments received into any of our dockets by the name of the 
individual submitting the comment (or signing the comment, if submitted 
on behalf of an association, business, labor union, etc.). You may 
review the complete User Notice and Privacy Notice for Regulations.gov 
at http://www.regulations.gov/search/footer/privacyanduse.jsp.

List of Subjects

49 CFR Part 512

    Administrative procedure and practice, Confidential business 
information, Freedom of information, Motor vehicle safety, Reporting 
and record keeping requirements.

49 CFR Part 599

    Fuel economy, Motor vehicle safety.

0
In consideration of the foregoing, NHTSA hereby amends 49 CFR Chapter V 
as set forth below.

PART 512--CONFIDENTIAL BUSINESS INFORMATION

0
1. The authority citation for Part 512 continues to read as follows:

    Authority: 49 U.S.C. 322; 5 U.S.C. 552; 49 U.S.C. 30166, 49 
U.S.C. 30167; 49 U.S.C. 32307; 49 U.S.C. 32505; 49 U.S.C. 32708; 49 
U.S.C. 32910; 49 U.S.C. 33116; delegation of authority at 49 CFR 
1.50.


0
2. Revise Appendix E to Part 512 to read as follows:

Appendix E to Part 512--Consumer Assistance to Recycle and Save (CARS) 
Class Determinations

    (a) The Chief Counsel has determined that the following 
information required to be submitted to the agency under 49 CFR part 
599, if released, is likely to cause substantial harm to the 
competitive position of the entity submitting the information:
    (1) Vehicle Manufacturer Issued Dealer Identification Code;
    (2) Dealer Bank Name, ABA Routing Number and Bank Account 
Number; and
    (3) CARS Dealer Code and Authorization Code.
    (b) The Chief Counsel has determined that the disclosure of the 
new vehicle owner's name, home address, telephone number, state 
identification number and last six (6) characters, when disclosed 
along with the first eleven (11) characters, of the new vehicle 
identification numbers reported in transactions submitted to the 
agency under 49 CFR Part 599 will constitute a clearly unwarranted 
invasion of personal privacy within the meaning of 5 U.S.C. 
552(b)(6).


0
3. Add Appendix F to part 512 to read as follows:

Appendix F to Part 512--OMB Clearance

    The OMB clearance number for this part 512 is 2127-0025.

0
4. Add part 599 to read as follows:

PART 599--REQUIREMENTS AND PROCEDURES FOR CONSUMER ASSISTANCE TO 
RECYCLE AND SAVE ACT PROGRAM

Subpart A--General
Sec.
599.100 Purpose.
599.101 Scope.
599.102 Definitions.
Subpart B--Participating Dealers, Salvage Auctions and Disposal 
Facilities
599.200 Registration of participating dealers.
599.201 Identification of salvage auctions and disposal facilities.
Subpart C--Qualifying Transactions and Reimbursement
599.300 Requirements for qualifying transactions.
599.301 Limitations and restrictions on qualifying transactions.
599.302 Dealer application for reimbursement--submission, contents.
599.303 Agency disposition of dealer application for reimbursement.
599.304 Payment to dealer.
Subpart D--Disposal of Trade-in Vehicle
599.400 Transfer or consignment by dealer of trade-in vehicle.
599.401 Requirements and limitations for disposal Facilities that 
receive trade-in vehicles under the CARS program.
599.402 Requirements and limitations for salvage auctions that are 
consigned trade-in vehicles under the CARS program.
599.403 Requirements and limitations for dealers.
Subpart E--Enforcement
599.500 Definitions.
599.501 Generally.
599.502 Record retention.
599.503 Access to records.
599.504 Suspension, revocation, and reinstatement of registration 
and participation eligibility.
599.505 Reports and investigations.
599.506 Notice of violation.
599.507 Disclosure of evidence.
599.508 Statements of matters in dispute and submission of 
supporting information.
599.509 Hearing officer.
599.510 Initiation of action before the hearing officer.
599.511 Counsel.
599.512 Hearing location and costs.
599.513 Hearing procedures.
599.514 Assessment of civil penalties.
599.515 Appeals of civil penalties in excess of $100,000.00.
599.516 Collection of assessed or compromised civil penalties.
599.517 Other sanctions.
Appendix A to Part 599--Summary of Sale/Lease and Certifications
Appendix B to Part 599--Engine Disablement Procedures for the CARS 
Program
Appendix C to Part 599--Electronic Transaction Screen
Appendix D to Part 599--CARS Purchaser Survey
Appendix E to Part 599--Disposal Facility Certification Form
Appendix F to Part 599--Salvage Auction Certification Form

    Authority: 49 U.S.C. 32901, Notes; delegation of authority at 49 
CFR 1.50.

Subpart A--General


Sec.  599.100  Purpose.

    This part establishes requirements and procedures implementing the 
program authorized under the Consumer Assistance to Recycle and Save 
Act of 2009.


Sec.  599.101  Scope.

    The requirements of this part apply to new vehicle purchase or 
lease transactions, in combination with trade-in vehicle transactions 
that occur on or after July 1, 2009 up to and including November 1, 
2009, and to the disposal of trade-in vehicles under the CARS Act.


Sec.  599.102  Definitions.

    As used in this part--
    Agency or NHTSA means the National Highway Traffic Safety 
Administration.
    CARS Act means the Consumer Assistance to Recycle and Save Act of 
2009, Public Law 111-32, 123 Stat. 1859 (June 24, 2009).

[[Page 37898]]

    CARS Program means the program authorized under the Consumer 
Assistance to Recycle and Save Act of 2009, which NHTSA refers to as 
the Car Allowance Rebate System.
    Category 1 truck means a non-passenger automobile, as defined in 
section 49 U.S.C. 32901(a)(17) and 49 CFR 523.3, except that such term 
does not include a category 2 truck.
    Category 2 truck means a large van with a wheelbase of 124 inches 
or more, or a large pickup with a wheelbase of 115 inches or more.
    Category 3 truck means a work truck, as defined in 49 U.S.C. 
32901(a)(19).
    Clear title means title to a vehicle that is free from all liens 
and encumbrances.
    Combined Fuel Economy means--
    (1) With respect to an eligible new vehicle, the number, expressed 
in miles per gallon, centered below the words ``Combined Fuel Economy'' 
on the label required to be affixed or caused to be affixed on a new 
automobile pursuant to subpart D of 40 CFR part 600.
    (2) With respect to an eligible trade-in vehicle of model year 1985 
or later, the number posted under the words ``Estimated New EPA MPG'' 
or ``New EPA MPG'' and above the word ``Combined,'' except that for a 
bi-fuel, dual fuel, or flexible fueled vehicle, that number must also 
be below the word ``Gasoline,'' on the http://fueleconomy.gov">fueleconomy.gov Web site of the 
Environmental Protection Agency for the make, model, and year of such 
vehicle.
    Credit means an electronic payment to a dealer for a qualifying 
transaction under the program.
    Dealer means a person licensed by a State who engages in the sale 
of a new automobile to a person who in good faith purchases such 
automobile for purposes other than resale.
    Disposal facility means a facility listed on http://www.cars.gov/disposal as eligible to receive a trade-in vehicle for crushing or 
shredding under the CARS program, except in the case of a U.S. 
territory.
    End-of-Life Vehicle Solutions or ELVS means an entity established 
under the National Vehicle Mercury Switch Recovery Program for the 
collection, recycling and disposal of elemental mercury from automotive 
switches.
    Engine block means the part of the engine containing the cylinders 
and typically incorporating water cooling jackets and also including 
the crank shaft, connecting rods, pistons, bearings, cam(s), and 
cylinder head(s). In a rotary engine, the block includes the rotor 
housing and rotor.
    GVWR means gross vehicle weight rating.
    Lease means a lease of a new vehicle for a period of not less than 
5 years, excluding any lease with a balloon payment due prior to the 
elapsing of 5 years.
    Manufacturer's Suggested Retail Price or MSRP means the base 
Manufacturer's Suggested Retail Price, excluding any dealer 
accessories, optional equipment, taxes and destination charges.
    National Motor Vehicle Title Information System or NMVTIS means the 
online system established under the oversight of the Department of 
Justice that enables consumers and others to access vehicle history 
information, including salvage history, total loss information, and 
title branding and odometer information, and to which insurance 
companies and salvage yards must report vehicle status information. 
(http://www. nmvtis.gov.)
    New Vehicle means an automobile or work truck, the equitable or 
legal title of which has not been transferred to any person other than 
the purchaser.
    Non-titling Jurisdiction means a State that does not issue a title 
for certain typically older vehicles.
    Passenger automobile means a passenger automobile, as defined in 
section 49 U.S.C. 32901(a)(18) and 49 CFR 523.4.
    Person means an individual, corporation, company, association, 
firm, partnership, society, or joint stock company.
    Purchaser means a person purchasing or leasing a new vehicle under 
the CARS Program.
    Salvage auction means an entity that receives a CARS trade-in 
vehicle from a dealer and is authorized to sell it only to a disposal 
facility on the Disposal Facility List and that will make all the 
necessary certifications for salvage auctions under the CARS program.
    State means any one of the 50 United States, the District of 
Columbia, Puerto Rico, the Virgin Islands, Guam, American Samoa, or the 
Commonwealth of the Northern Mariana Islands.

Subpart B--Participating Dealers, Salvage Auctions and Disposal 
Facilities


Sec.  599.200  Registration of participating dealers.

    (a) In general. A dealer may apply for a credit under the CARS 
Program only if it meets the Required Dealer Qualifications for 
Registration under this subpart, is registered in accordance with this 
subpart, and is currently registered at the time it submits an 
application for reimbursement.
    (b) Required dealer qualifications for registration. A dealer 
seeking to register must have:
    (1) A currently operating new automobile dealership and business 
address within a State in the United States;
    (2) A currently active business license under the law of the State 
where the new automobile dealership is located to operate that 
dealership;
    (3) A currently active franchise agreement to sell new automobiles 
with an original equipment manufacturer of automobiles;
    (4) A bank account in a U.S. bank in a State and a bank account 
routing number for electronic transfer of funds;
    (5) The ability to submit application materials and perform 
transactions electronically using the Internet; and
    (6) Not been convicted of a crime involving motor vehicles or any 
fraud or financial crime under State or Federal law.
    (c) Registration procedures.
    (1) Using comprehensive lists of franchised dealers provided by 
original equipment manufacturers, as updated by these manufacturers, 
the agency will mail a letter to each listed dealer describing a secure 
electronic process and providing an authorization code by which the 
dealer, following the process in paragraph (c)(2) of this section, can 
effect registration.
    (2) A dealer contacted in accordance with paragraph (c)(1) of this 
section may register electronically as a participating dealer under the 
CARS Program by using the authorization code and following the 
instructions provided in the letter mailed under paragraph (c)(1) of 
this section, and submitting the following information electronically 
or validating the information, where it exists already on an electronic 
form:
    (i) Dealer's Federal Tax Identification Number (TIN) and OEM 
assigned dealer franchise number;
    (ii) Legal business name, doing business as name (if applicable), 
dealership physical and mailing address, telephone number, and fax 
number;
    (iii) Name and title of dealer representative authorized to submit 
transactions under this program, and phone number and e-mail address of 
representative; and
    (iv) Name of U.S. bank used by dealership, bank account number, and 
bank account routing number.
    (3) A dealer must register separately, following the process under 
paragraph (c)(2) of this section, for each make of vehicle it sells, 
using the authorization code associated with that vehicle make.
    (d) Disposition of registration application. The agency will review 
the registration application for compliance

[[Page 37899]]

with this part, including completeness, and notify the dealer as 
follows:
    (1) For an approved registration:
    (i) By e-mail notification to the authorized dealer representative, 
with a user identification and password that will allow the submission 
of transactions; and
    (ii) By listing the ``doing business as'' name, physical address, 
and general telephone number of the dealer on the agency Web site at 
http://www.cars.gov.
    (2) For a disapproved registration, by withholding the dealer 
identification information from the agency's Web site and providing e-
mail notification to the authorized dealer representative of the 
reasons for rejecting the application.
    (e) Revocation of Dealer Registration.
    (1) Termination or Discontinuance of Franchise.
    (i) A dealer whose franchise agreement with an original equipment 
manufacturer (OEM) has expired without renewal, has been terminated, or 
otherwise is no longer in effect shall be automatically removed as a 
matter of course, subject to paragraph (e)(1)(iii), from the agency's 
list of registered dealers and may no longer receive a credit for new 
transactions under the CARS Program submitted for repayment on or after 
the date that the franchise expired or no longer is in effect.
    (ii) Paragraph (e)(1)(i) of this section does not preclude a dealer 
registered under other franchise agreements from receiving a credit for 
transactions under those agreements that have not expired or been 
discontinued.
    (iii) A dealer whose name is removed from the agency's list of 
registered dealers under paragraph (e)(1)(i) shall be reinstated to the 
list of registered dealers upon a showing to NHTSA of proper and 
adequate license to sell new vehicles to ultimate purchasers.
    (2) Other suspension or revocations actions. The agency may also 
suspend or revoke the registration of a dealer as provided in Sec.  
599.504.
    (f) Notification of changes. A registered dealer shall immediately 
notify the agency of any change to the information submitted under this 
section and any change to the status of its State license or franchise.
    (g) Pre-registration transactions. An otherwise qualifying 
transaction that occurs during the time period prescribed under Sec.  
599.301(a) is not a non-complying transaction solely because a dealer 
is not registered at the time of the transaction, except that the 
dealer must be eligible to register and must register under Sec.  
599.200 in order to be entitled to reimbursement for a credit extended 
under the CARS program.


Sec.  599.201  Identification of salvage auctions and disposal 
facilities.

    (a) Participating entities. Subject to the conditions and 
requirements of paragraph (b), participation in the transfer and 
disposal of a trade-in vehicle under the CARS program is limited to the 
following entities:
    (1) A salvage auction that will transfer trade-in vehicles received 
under this program only to a disposal facility identified in paragraph 
(b)(2) or (b)(3) of this section.
    (2) A disposal facility listed on the Web site at http://www.cars.gov/disposal; or
    (3) A facility that disposes of vehicles in Puerto Rico, the Virgin 
Islands, Guam, American Samoa, or the Commonwealth of the Northern 
Mariana Islands.
    (b) Conditions of Participation. A participating entity identified 
in paragraph (a) of this section must:
    (1) Comply with all the provisions and restrictions and make all 
the required certifications contained in subpart D of this part.
    (2) In the case of a disposal facility identified in paragraph 
(a)(2) of this section, be currently listed on the Web site at http://www.cars.gov/disposal, as of the date of its participation in the 
disposal of the trade-in vehicle.
    (c) Removal of authority to participate.
    (1) A disposal facility that qualifies as such by active membership 
in ELVS and that fails to maintain active ELVS membership may be 
automatically removed as a matter of course from the agency's list of 
disposal facilities maintained at http://www.cars.gov/disposal 
authorized to participate in the CARS program.
    (2) The agency may also suspend or remove a salvage auction's or 
disposal facility's authority to participate in the CARS program in 
accordance with the procedures of Sec.  599.504.

Subpart C--Qualifying Transactions and Reimbursement


599.300  Requirements for qualifying transactions.

    (a) In general. To qualify for a credit under the CARS Program, a 
dealer must sell or lease a new vehicle that meets eligibility 
requirements to a purchaser, obtain a trade-in vehicle that meets 
eligibility requirements from the purchaser, satisfy combined fuel 
economy requirements for both the new and trade-in vehicles, disable 
the engine of the trade-in vehicle, satisfy the limitations and 
restrictions of the program, arrange for disposal of the trade-in 
vehicle at a qualifying disposal facility or through a qualifying 
salvage auction, and register and submit a complete application for 
reimbursement to NHTSA, demonstrating that it meets all the 
requirements of this part.
    (b) Threshold eligibility requirements that apply to all trade-in 
vehicles. The trade-in vehicle must be:
    (1) In drivable condition, as demonstrated by actual operation of 
the motor vehicle on public roads by the dealer and by certification by 
the dealer and by the purchaser, as provided in Appendix A to this 
part, certifications section, that the vehicle was in drivable 
condition on the date of the qualifying transaction;
    (2) Continuously insured consistent with the applicable State law 
for a period of not less than 1 year immediately prior to the trade-in, 
as demonstrated by:
    (i) One or more current insurance cards specifying the make, model, 
model year, and vehicle identification number (VIN) of the insured 
vehicle and displaying a continuous one-year period of insurance 
coverage; or a copy of an insurance policy document (e.g., a 
declarations page or pages) showing a continuous one-year period of 
insurance coverage for the vehicle; or a signed letter, on insurance 
company letterhead, specifying the same vehicle identification 
information (i.e., make, model, model year, and VIN) of the insured 
vehicle and identifying the period of continuous coverage, which must 
be for at least one year prior to the date of the trade-in; and
    (ii) By certification by the purchaser, as provided in Appendix A 
to this part, certifications section, that the vehicle was so insured;
    (3) Continuously registered in a State to the purchaser for a 
period of not less than one year immediately prior to the trade-in, as 
demonstrated by:
    (i) A current State registration document or series of registration 
documents in the name of the purchaser evidencing registration for a 
period of not less than one year immediately prior to the trade-in; or 
a current State registration document showing registration in the name 
of the purchaser and a title that confers title on the purchaser not 
less than one year immediately prior to the trade-in; or a current 
State registration document showing registration in the name of the 
purchaser and a document from a commercially available vehicle history 
provider evidencing registration for a period of not less than one year 
immediately prior to the trade-in; and
    (ii) By certification by the purchaser, as provided in Appendix A 
to this part,

[[Page 37900]]

certifications section, that the vehicle was so registered;
    (4) Manufactured less than 25 years before the date of the trade-
in, as demonstrated by model year information on the title or, where 
that information is inconclusive, by direct observation by the dealer 
of the month and year of the vehicle's manufacture, which appears on 
the safety standard certification label of the vehicle, provided that 
on the 25th year, the 25-year requirement is satisfied if the 
manufacture date falls anytime within the month 25 years before the 
date of trade-in, and by certification by the dealer, as provided in 
Appendix A to this part, certifications section, that the manufacture 
date is less than 25 years before the date of trade-in.
    (c) Threshold eligibility requirements that apply to all new 
vehicles. The new vehicle must:
    (1) Be either purchased or leased for a lease period of not less 
than 5 years;
    (2) Have a manufacturer's suggested retail price of $45,000 or 
less.
    (d) Trade-in vehicle--disclosure of scrap value, engine 
disablement, and title marking. As part of a qualifying transaction 
under this part, and prior to submitting an application for 
reimbursement under Sec.  599.302, the dealer shall:
    (1) During the transaction, disclose to the person purchasing or 
leasing an eligible new vehicle and trading in an eligible trade-in 
vehicle, the best estimate of the scrap value of the trade-in vehicle, 
inform that person that the dealer is authorized to retain $50 of this 
amount as payment for its administrative costs of participation in the 
program, and certify, as provided in Appendix A to this part, 
certifications section, that it has made such disclosure;
    (2) Except as provided in paragraph (e) of this section, disable 
the engine of the eligible trade-in vehicle, following the procedures 
set forth in Appendix B to this part, and certify, as provided in 
Appendix A to this part, certifications section, that it has disabled 
the engine; and
    (3) Legibly mark the front and back of the trade-in vehicle's title 
in prominent letters that do not obscure the owner's name, VIN, or 
other writing as follows: ``Junk Automobile, CARS.gov.''
    (e) Dealer transfers prior to July 24, 2009.
    (1) Subject to the provisions of paragraph (e)(2) of this section, 
if the dealer transferred the vehicle prior to July 24, 2009, the 
dealer may either:
    (i) Locate the vehicle, disable its engine following the procedures 
set for the in Appendix B to this part, and provide the certification 
in Appendix A to this part, certifications section, that it has 
disabled the engine; or
    (ii) Obtain a sworn affidavit from a disposal facility that it has 
crushed or shredded the vehicle, including the engine block, and 
provide supporting documents sufficient to establish that fact.
    (2) The dealer and disposal facility must comply with all other 
requirements of this part, including the requirement that the trade-in 
vehicle be crushed or shredded, except that the affidavit and 
supporting documents provided for under paragraph (e)(1)(ii) of this 
section may substitute for the disposal facility certification form.
    (f) Qualifying transactions ($3,500 Credit). Subject to the 
requirements of paragraphs (b), (c), and (d), and, if applicable, 
paragraph (e) of this section and the additional requirements of 
Sec. Sec.  599.301, 599.302, and 599.303 of this subpart, each of the 
following transactions qualifies for a credit of $3,500 under this 
program:
    (1) The new vehicle is a passenger automobile with a combined fuel 
economy of at least 22 mpg, the eligible trade-in vehicle has a 
combined fuel economy of 18 mpg or less and is a passenger automobile, 
category 1 truck, or category 2 truck, and the combined fuel economy of 
the new vehicle is at least 4 mpg, but less than 10 mpg higher than the 
combined fuel economy of the eligible trade-in vehicle.
    (2) The new vehicle is a category 1 truck with a combined fuel 
economy of at least 18 mpg, the eligible trade-in vehicle has a 
combined fuel economy of 18 mpg or less and is a passenger automobile, 
category 1 truck, or category 2 truck, and the combined fuel economy of 
the new vehicle is at least 2 mpg, but less than 5 mpg higher than the 
combined fuel economy of the eligible trade-in vehicle.
    (3) The new vehicle is a category 2 truck with a combined fuel 
economy of at least 15 mpg, the eligible trade-in vehicle has a 
combined fuel economy of 18 mpg or less and is a category 2 truck, and 
the combined fuel economy of the new vehicle is 1 mpg higher than the 
combined fuel economy of the eligible trade-in vehicle.
    (4) The new vehicle is a category 2 truck with a combined fuel 
economy of at least 15 mpg and the eligible trade-in vehicle is a 
category 3 truck of model year 2001 or earlier.
    (5) The new vehicle is a category 3 truck, the eligible trade-in 
vehicle is a category 3 truck of model year 2001 or earlier, and the 
new fuel efficient vehicle has a GVWR less than or equal to the GVWR of 
the eligible trade-in vehicle.
    (g) Qualifying transactions ($4,500 Credit). Subject to the 
requirements of paragraphs (b), (c), and (d), and, if applicable, 
paragraph (e) of this section and the additional requirements of 
Sec. Sec.  599.301, 599.302, and 599.303 of this subpart, each of the 
following transactions qualifies for a credit of $4,500 under this 
program:
    (1) The new vehicle is a passenger automobile with a combined fuel 
economy of at least 22 mpg, the eligible trade-in vehicle has a 
combined fuel economy of 18 mpg or less and is a passenger automobile, 
category 1 truck, or category 2 truck, and the combined fuel economy of 
the new vehicle is at least 10 mpg higher than the combined fuel 
economy of the eligible trade-in vehicle.
    (2) The new vehicle is a category 1 truck with a combined fuel 
economy of at least 18 mpg, the eligible trade-in vehicle has a 
combined fuel economy of 18 mpg or less and is a passenger automobile, 
category 1 truck, or category 2 truck, and the combined fuel economy of 
the new vehicle is at least 5 mpg higher than the combined fuel economy 
of the eligible trade-in vehicle.
    (3) The new vehicle is a category 2 truck with a combined fuel 
economy of at least 15 mpg, the eligible trade-in vehicle has a 
combined fuel economy of 18 mpg or less and is a category 2 truck, and 
the combined fuel economy of the new vehicle is at least 2 mpg higher 
than the combined fuel economy of the eligible trade-in vehicle.
    (h) No other qualifying transactions. Transactions described under 
paragraphs (f) and (g) of this section are the only transactions that 
qualify for payment of a credit to a dealer under the CARS Program.


Sec.  599.301  Limitations and restrictions on qualifying transactions.

    (a) Date of transaction. A qualifying transaction may not occur on 
a date before July 1, 2009 or after November 1, 2009, and is subject to 
available agency funds for the CARS Program.
    (b) One credit per transaction. Only one credit may be applied 
towards the purchase or lease price of each new vehicle.
    (c) One credit per person. A person that participates in a 
transaction for which a credit is issued under the CARS Program, 
whether as a single owner or a joint-registered owner of either an 
eligible trade-in vehicle, a new vehicle, or both, may not participate 
or be named in another transaction for which a credit is issued under 
the CARS program, either as a registered owner of

[[Page 37901]]

the trade-in vehicle or as a purchaser of the new vehicle.
    (d) Transfer of title.
    (1) Except as provided in paragraph (d)(2) of this section, a 
dealer may not apply for or receive reimbursement for a credit extended 
to a purchaser under a CARS program transaction unless it has been 
conveyed clear title and physically possesses the title to the trade-in 
vehicle.
    (2) In the case of a trade-in vehicle registered in a State that is 
a non-titling jurisdiction and that, in accordance with State law, has 
no title, the requirement in paragraph (d)(1) of this section that 
clear title be conveyed is satisfied if the purchaser shows proof of 
registration in the purchaser's name and provides a bill of sale 
conferring ownership of the trade-in vehicle to the dealer.


Sec.  599.302  Dealer application for reimbursement--submission, 
contents.

    (a) In general. A dealer's application for reimbursement must 
demonstrate that the requirements and limitations governing qualifying 
transactions in Sec.  599.300 and Sec.  599.301 of this subpart have 
been met, and must comply with the submission and contents requirements 
of this section.
    (b) Electronic submission. The application for reimbursement must 
be submitted by using the login and password provided under Sec.  
599.200(d)(1) and following the procedures provided in the letter 
mailed under Sec.  599.200(c)(1) of this part.
    (c) Application contents. An application shall consist of an 
electronic transaction form (portion reproduced in Appendix C to this 
part) requiring input of information into relevant fields, electronic 
copies of supporting documents, and applicable certifications, as 
provided in Appendix A to this part, certifications section. As its 
application for each transaction, the dealer shall:
    (1) Input the following information into relevant fields on the 
transaction form:
    (i) Purchaser information.
    (A) Name. The first name, middle initial and last name of each 
purchaser, if an individual, or the full legal name of the company, 
association or other organization that is the purchaser.
    (B) Residence address (or, for an organization, business address). 
The full address of each purchaser.
    (C) Driver's license or State identification number. The State 
driver's license or State identification number of each purchaser or, 
for an organization, its tax identification number.
    (ii) Trade-in vehicle information.
    (A) Make. The make of the vehicle.
    (B) Model. The model of the vehicle.
    (C) Model year. The model year of the vehicle.
    (D) Vehicle identification number (VIN). The 17 digit VIN of the 
vehicle.
    (E) CARS Act vehicle category. The category of vehicle as defined 
under the CARS Act. (Enter, as applicable, passenger automobile, 
category 1 truck, category 2 truck or category 3 truck.)
    (F) State of title.
    (G) State of registration.
    (H) Start date of registration.
    (I) Start date of insurance.
    (J) End date of registration.
    (K) Odometer reading. The odometer reading of the vehicle at the 
time of the trade-in.
    (L) EPA combined fuel economy. The listed EPA combined fuel economy 
of the vehicle.
    (M) Vehicle description. The exact ``vehicle description'' for the 
vehicle found on http://www.fueleconomy.gov.
    (iii) New vehicle information.
    (A) Make. The make of the vehicle.
    (B) Model. The model of the vehicle.
    (C) Model year. The model year of the vehicle.
    (D) Vehicle identification number (VIN). The 17 digit VIN of the 
vehicle.
    (E) EPA combined fuel economy. The listed EPA combined fuel economy 
of the vehicle.
    (F) CARS Act vehicle category. The category of vehicle as defined 
under the CARS Act. (Enter, as applicable, passenger automobile, 
category 1 truck, category 2 truck or category 3 truck.)
    (G) Base manufacturer's suggested retail price (MSRP). The price of 
the new vehicle affixed to the Monroney label prior to the addition of 
any options, features, taxes or destination charges.
    (H) Vehicle description. The exact ``vehicle description'' for the 
vehicle found on http://www.fueleconomy.gov.
    (iv) Trade-in vehicle disposition information.
    (A) Identification of entity. The name, address and telephone 
number of the disposal facility or salvage auction to which the vehicle 
will be or has been transferred or consigned.
    (B) Disposal facility number. The unique identifier assigned to the 
disposal facility identified on the CARS Web site, and to which the 
vehicle is being transferred or consigned.
    (v) Transaction information.
    (A) Date of sale or lease. The date on which the vehicle 
transaction with the purchaser occurred.
    (B) Transaction request amount. The amount of the credit for which 
the dealer is applying.
    (2) Attach the following supporting documentation in electronic 
format (pdf, tif, jpeg) in the following order:
    (i) Proof of title. A copy of the front and back of the title of 
the trade-in vehicle, showing assignment to the dealer free and clear 
of any lien or encumbrance on the vehicle's title, with the ``Junk 
Automobile, CARS.gov'' marking on both sides.
    (ii) Proof of insurance. A copy of insurance policy cards or 
documents for the trade-in vehicle to confirm that the trade-in vehicle 
insurance was continuous for a period of not less than one year prior 
to trade in.
    (iii) Proof of registration. A copy of the registration card or 
documents for the trade-in vehicle identifying the owner, the vehicle, 
and dates of registration to confirm that the vehicle was registered to 
the purchaser for a period of not less than one year prior to trade in.
    (iv) Purchaser identification.
    (v) Summary of sale/lease and certifications form (Appendix A to 
this part, summary section).
    (vi) Manufacturer certificate of origin or manufacturer statement 
of origin of the new vehicle.
    (vii) CARS purchaser survey.
    (viii) Fueleconomy.gov side-by-side comparison of the trade-in 
vehicle and the new vehicle.
    (ix) Certification from salvage auction or disposal facility.
    (x) Copy of vehicle sales or lease contract.
    (3) Make the certifications provided in Appendix A to this part, 
certifications section.


599.303  Agency disposition of dealer application for reimbursement.

    (a) Application review. Upon receipt of an application for 
reimbursement, the agency shall review the application to determine 
whether it is complete and satisfies all the requirements of this 
subpart.
    (b) Complying application. An application that is determined to 
meet all the requirements of this subpart shall be approved for 
payment, in accordance with the provisions of Sec.  599.304.
    (c) Non-complying application. An application that is incomplete or 
that otherwise fails to meet all the requirements of this subpart shall 
be rejected, and the submitter shall be informed electronically of the 
reason for rejection. NHTSA shall have no obligation to correct a non-
conforming submission.
    (d) Electronic rejection. An application is automatically rejected, 
with system notification to the tendering dealer, if the transaction 
falls

[[Page 37902]]

outside of the permissible time period, exceeds the permissible MSRP, 
identifies a purchaser that has participated in a previous transaction, 
or identifies the vehicle identification number of a new or trade-in 
vehicle that was involved in a previous transaction.
    (e) Correction and resubmission. A dealer may correct and resubmit 
a rejected application for reimbursement, without penalty.


Sec.  599.304  Payment to dealer.

    Upon completion of review of an application for reimbursement from 
a registered dealer that satisfies all the requirements of this part, 
the agency shall reimburse the dealer, by electronic transfer to the 
account identified under the process in Sec.  599.200(c) of this part.

Subpart D--Disposal of Trade-in Vehicle


Sec.  599.400  Transfer or consignment by dealer of trade-in vehicle.

    (a) In general.
    (1) A trade-in vehicle accepted as part of an eligible transaction 
may be provided for disposal by a dealer either to a disposal facility 
or to a salvage auction, as described in and subject to the conditions 
of Sec.  599.201 of this part.
    (2) Dealers, disposal facilities, and salvage auctions involved in 
the disposal of the trade-in vehicle must each comply with the 
applicable provisions of this subpart.
    (b) Transfer by dealer or salvage auction to a disposal facility. 
If the trade-in vehicle is transferred by the dealer or salvage auction 
to a disposal facility, the disposal facility must, as a condition of 
the transfer:
    (1) Make the certifications contained in the Disposal Facility 
Certification Form in Appendix E to this part, signed by an official 
with authority to bind the disposal facility;
    (2) At the time of the transfer, deliver the signed Disposal 
Facility Certification Form to the dealer or salvage auction that 
transferred the trade-in vehicle; and
    (3) Comply with the requirements and limitations of Sec.  599.401.
    (c) Consignment by dealer to a salvage auction. If the trade-in 
vehicle is consigned by the dealer to a salvage auction, the salvage 
auction must, as a condition of the consignment:
    (1) Make the certifications contained in the Salvage Auction 
Certification Form in Appendix F to this part, signed by an official 
with authority to bind the salvage auction;
    (2) At the time of the consignment, deliver the signed Salvage 
Auction Certification Form to the dealer that authorized the salvage 
auction to sell the trade-in vehicle.
    (1) Make the certifications contained in the Salvage Auction 
Certification Form to the dealer that authorized the salvage auction to 
sell the trade-in vehicle; and
    (3) Comply with the requirements and limitations of Sec.  599.402.


Sec.  599.401  Requirements and limitations for disposal facilities 
that receive trade-in vehicles under the CARS program.

    (a) The disposal facility must:
    (1) Not more than 7 days after receiving the vehicle, report the 
vehicle to NMVTIS as a scrap vehicle.
    (2) Remove and dispose of all refrigerants, antifreeze, lead 
products, mercury switches, and such other toxic or hazardous vehicle 
components prior to crushing or shredding in accordance with applicable 
Federal and State requirements;
    (3) Crush or shred the trade-in vehicle onsite, including the 
engine block and the drive train (unless with respect to the drive 
train, the transmission, drive shaft, and rear end are sold 
separately), using its own machinery or a mobile crusher, within 180 
days after receipt of the vehicle from the dealer or salvage auction;
    (4) Not more than 7 days after the vehicle is crushed or shredded, 
report the vehicle to NMVTIS as crushed or shredded.
    (b) The disposal facility may not sell or transfer the engine block 
of the vehicle or, except as allowed under paragraph (c)(2) of this 
section, the drive train before they are crushed or shredded or 
otherwise allow the vehicle to leave the disposal facility before it is 
crushed or shredded.
    (c) The disposal facility may:
    (1) Sell any part of the vehicle other than the engine block or 
drive train;
    (2) Notwithstanding paragraph (c)(1) of this section, sell the 
drive train provided the transmission, drive shaft, and rear end are 
sold as separate parts;
    (3) Retain the proceeds from parts sold under this paragraph.


Sec.  599.402  Requirements and limitations for salvage auctions that 
are consigned trade-in vehicles under the CARS program.

    (a) The salvage auction must:
    (1) Within 3 days after the date the dealer consigns the vehicle or 
prior to auctioning the vehicle, whichever is earlier, report the 
status of the vehicle to NMVTIS;
    (2) Limit participation in the auction to disposal facilities that, 
when the auction is held:
    (i) Appear on the list identified in Sec.  599.201(a)(2) or are 
described in Sec.  599.201(a)(3); and
    (ii) Agree to make the certifications in the Salvage Auction 
Certification Form (Appendix F to this part).
    (3) As a condition of transferring title to the disposal facility, 
obtain from that facility the signed Disposal Facility Certification 
Form (Appendix E to this part), insert on the top of the form the 
appropriate CARS invoice number received from the dealer, if known, and 
provide the form to NHTSA at [email protected], and include that 
invoice number in the e-mail subject line.
    (b) [Reserved]


Sec.  599.403  Requirements and limitations for dealers.

    A dealer receiving a Disposal Facility Certification Form or 
Salvage Auction Certification Form under Sec.  599.400(b)(2) or (c)(2) 
shall insert on the top of the form the appropriate CARS invoice 
number, if known, and within 7 days of receipt, submit such 
certification form to NHTSA at [email protected].

Subpart E--Enforcement


Sec.  599.500  Definitions.

    As used in this subpart--
    Administrator means the Administrator of the National Highway 
Traffic Safety Administration, or his or her designee.
    Chief Counsel means the NHTSA Chief Counsel, or his or her 
designee.
    Hearing Officer means a NHTSA employee who has been delegated the 
authority to assess civil penalties.
    NHTSA Enforcement means the NHTSA Associate Administrator for 
Enforcement, or his or her designee.
    Notice of violation means a notification of violation and 
preliminary assessment of penalty issued by the Chief Counsel to a 
party.
    Party means the person alleged to have committed a violation of the 
CARS Act, regulations thereunder, or other applicable law, and includes 
an individual, a public or private corporation, and a partnership or 
other association.
    Violation means any non-conformance with the CARS Act or the 
regulations in this part except Sec.  599.200(e)(1)(i) and Sec.  
599.201(c)(1), the submission of incomplete or inaccurate information 
to NHTSA or an entity identified under this part, or the failure to 
maintain records, to permit access to records or to update information 
that has been submitted to NHTSA under this part, but does not include 
a clerical error. In the context of dealer registration and disposal 
facility or salvage auction participation eligibility, violation also 
includes any

[[Page 37903]]

conviction of a crime involving motor vehicles or any fraud or 
financial crime under State or Federal law.


Sec.  599.501  Generally.

    The provisions of 5 U.S.C. 554, 556 and 557 do not apply to any 
proceedings conducted pursuant to this subpart.


Sec.  599.502  Record retention.

    (a) Manufacturers, dealers, salvage auctions, and disposal 
facilities shall keep records of all transactions under the CARS Act 
and regulations thereunder for a period of five calendar years from the 
date on which they were generated or acquired by the manufacturer, 
salvage auction, dealer, or disposal facility, and shall promptly make 
those records available to NHTSA Enforcement or DOT's Office of the 
Inspector General upon request.
    (b) Records to be retained under this subpart include all 
documentary materials and other information-storing media that contain 
information concerning transactions under the CARS Program, including 
any material generated or communicated by computer, electronic mail, or 
other electronic means. Such records include, but are not limited to, 
lists, compilations, certifications, dealer application information, 
salvage auction or disposal facility information, owner eligibility 
information, vehicle eligibility information (including vehicle fuel 
economy), dealer applications for reimbursement under the program, 
vehicle identification number data, vehicle ownership information, 
vehicle title, registration and insurance information, sales 
agreements, bills of sale, lease agreements, manufacturer's certificate 
or statement of origin, other rebate and/or incentive programs used in 
conjunction with transactions under the program, bank account and 
routing number information, electronic funds transfer and payment 
information, reports made to the National Motor Vehicle Title 
Information System (NMVTIS), reports regarding vehicle scrappage values 
and payment, reports in connection with the transfer of vehicles to 
salvage auctions and disposal facilities; reports from disposal 
facilities in connection with the crushing or shredding of vehicles 
under the program, and any other documents that are related to 
transactions.
    (c) Duplicate copies need not be retained. Information may be 
reproduced or transferred from one storage medium to another (e.g., 
from electronic format to CD-ROM) as long as no information is lost in 
the reproduction or transfer, and when so reproduced or transferred the 
original form may be treated as a duplicate.


Sec.  599.503  Access to records.

    The Administrator shall have the right to enter onto the premises 
of manufacturers, dealers, salvage auctions and disposal facilities 
during normal business hours in order to: access, inspect and audit 
records and other sources of information maintained by any of these 
entities under this Program; to inspect vehicles traded in or sold 
under this program, including taking all actions necessary to determine 
whether trade-in vehicles have operative engines; and/or to interview 
persons who may have relevant knowledge.


Sec.  599.504  Suspension, revocation, and reinstatement of 
registration and participation eligibility.

    (a) Suspension or revocation of dealer registration, or salvage 
auction or disposal facility participation eligibility.
    (1) When the NHTSA Chief Counsel determines that a violation has 
likely occurred, the Administrator may notify the dealer, salvage 
auction or disposal facility in writing of the facts giving rise to the 
allegation of a violation and the proposed length of a suspension, if 
applicable, or revocation of registration, in the case of a dealer, or 
participation eligibility in the case of a salvage auction or disposal 
facility.
    (2) The notice shall afford the dealer, salvage auction or disposal 
facility an opportunity to present data, views, and arguments, in 
writing and/or in person, within 30 days of the date of the notice, as 
to whether the violation occurred, why its registration or 
participation eligibility ought not to be suspended or revoked, or 
whether the suspension should be shorter than proposed. The 
Administrator may, for good cause, reduce the time allowed for 
response.
    (3) If the Administrator decides, on the basis of the available 
information, that the dealer, salvage auction or disposal facility has 
committed a violation, the Administrator may suspend or revoke the 
dealer registration or the participation eligibility of the salvage 
auction or disposal facility.
    (4) The Administrator shall notify the dealer, salvage auction or 
disposal facility in writing of the decision, including the reasons for 
it. The decision shall reflect the gravity of the offense.
    (5) A suspension or revocation is effective as of the date of the 
Administrator's written notification, unless another date is specified 
therein.
    (6) The Administrator shall state the period of any suspension in 
the notice to the dealer, salvage auction or disposal facility.
    (7) There shall be no opportunity to seek reconsideration of the 
Administrator's decision issued under this paragraph (a).
    (b) Reinstatement of suspended registration or participation 
eligibility.
    (1) When a registration or participation eligibility has been 
suspended under this subpart, the registration or participation 
eligibility will be reinstated after the expiration of the period of 
suspension specified by the Administrator, or such earlier date as the 
Administrator may subsequently decide is appropriate.
    (2) Reinstatement is automatically effective as of the date 
previously set forth in the Administrator's written notification of 
suspension, unless another date is specified by the Administrator in 
writing.
    (c) Effect of suspension or revocation of registration or 
participation eligibility.
    (1) If a dealer's registration or a salvage auction or disposal 
facility's participation eligibility is suspended or revoked, as of the 
date of suspension or revocation, the dealer, salvage auction or 
disposal facility will not be considered registered or eligible to 
participate in the CARS Program, and must cease participating in the 
program.
    (2) A dealer whose registration has been suspended will not be 
entitled to any rights or reimbursement of funds for new transactions 
submitted as of the effective date of the suspension or revocation.
    (3) NHTSA may take such action as appropriate, including 
publication, to provide notice that a dealer's registration, or salvage 
auction's or disposal facility's participation eligibility has been 
suspended or revoked.


Sec.  599.505  Reports and investigations.

    (a) Any person may report an apparent violation of the CARS Act or 
regulations issued thereunder to NHTSA.
    (b) NHTSA may independently monitor for violations of the CARS Act 
or regulations issued thereunder.
    (c) When a report of an apparent violation has been received by 
NHTSA, or when an apparent violation has been detected by any person 
working for NHTSA, the matter may be investigated or evaluated by NHTSA 
Enforcement. If NHTSA Enforcement believes that a violation may have 
occurred, NHTSA Enforcement may prepare a report and send the report to 
the NHTSA Chief Counsel.

[[Page 37904]]

    (d) The NHTSA Chief Counsel will review the reports prepared by 
NHTSA Enforcement to determine if there is sufficient information to 
establish a likely violation.
    (1) The matter may be returned to NHTSA Enforcement for further 
investigation, if warranted.
    (2) The Chief Counsel may close a matter. A matter may be closed 
if, for example, the investigation has established that a violation did 
not occur, the alleged violator is unknown, there is insufficient 
information to support the existence of a violation and little 
likelihood of discovering additional relevant facts, or the magnitude 
of the matter is, under the circumstances, including availability of 
resources, insufficient to be pursued further.
    (3) If the Chief Counsel determines that a violation has likely 
occurred, the Chief Counsel may:
    (i) Issue a Notice of Violation to the party, and/or
    (ii) In the case of a dealer recommend that the Administrator 
suspend or revoke registration in the program or in the case of a 
salvage auction or disposal facility, recommend that the Administrator 
suspend or revoke participation eligibility in the program.
    (4) In the case of either paragraphs (d)(3)(i) or (ii) of this 
section, the NHTSA Chief Counsel will prepare a case file with 
recommended actions. A record of any prior violations by the same 
person or entity, shall be forwarded with the case file.


Sec.  599.506  Notice of Violation.

    (a) The agency has the authority to assess a civil penalty for any 
violation of the CARS Act or this part. The penalty may not be more 
than $15,000 for each violation.
    (b) The Chief Counsel may issue a Notice of Violation to a party. 
Notice of Violation will contain the following information:
    (1) The name and address of the party;
    (2) The alleged violation and the applicable law or regulations 
violated;
    (3) The amount of the maximum penalty that may be assessed for each 
violation;
    (4) The amount of proposed penalty;
    (5) A statement that payment of the proposed penalty within 30 days 
will settle the case without admission of liability;
    (6) The place to which, and the manner in which, payment is to be 
made;
    (7) A statement that the party may decline the Notice of Violation 
and that if the Notice of Violation is declined, the party has the 
right to a hearing prior to a final assessment of a penalty by a 
Hearing Officer.
    (8) A statement that failure to either pay the proposed penalty on 
the Notice of Violation or to decline the Notice of Violation and 
request a hearing within 30 days of the date shown on the Notice of 
Violation will result in a finding of violation by default and that 
NHTSA will proceed with the civil penalty in the amount proposed on the 
Notice of Violation without processing the violation under the hearing 
procedures set forth in this subpart.
    (c) The Notice of Violation may be delivered to the party by:
    (1) Hand-delivery to the party or an employee of the party;
    (2) Mailing to the party (certified mail is not required);
    (3) Use of an overnight or express courier service; or
    (4) Facsimile transmission or electronic mail (with or without 
attachments) to the party or an employee of the party.
    (d) If a party submits a written request for a hearing as provided 
in the Notice of Violation within 30 days of the date shown on the 
Notice of Violation, the case file will be sent to the Hearing Officer 
for processing under the hearing procedures set forth in this subpart.
    (e) If a party pays the proposed penalty on the Notice of Violation 
or an amount agreed on in compromise within 30 days of the date shown 
on the Notice of Violation, a finding of ``resolved with payment'' will 
be entered into the case file. Such payment shall not be an admission 
of liability.
    (f) If the party agrees to pay the proposed penalty, but has not 
made payment within 30 days of the date shown on the Notice of 
Violation, NHTSA will enter a finding of violation by default in the 
matter and NHTSA will proceed with the civil penalty in the amount 
proposed on the Notice of Violation without processing the violation 
under the hearing procedures set forth in this subpart.
    (g) If within 30 days of the date shown on the Notice of Violation 
a party fails to pay the proposed penalty on the Notice of Violation; 
and fails to request a hearing, then NHTSA will enter a finding of 
violation by default in the case file, and will assess the civil 
penalty in the amount set forth on the Notice of Violation without 
processing the violation under the hearing procedures set forth in this 
subpart.
    (h) NHTSA's order assessing the civil penalty following a party's 
default is final agency action.


Sec.  599.507  Disclosure of evidence.

    The alleged violator may, upon request, receive a free copy of all 
the written evidence in the case file, except material that would 
disclose or could lead to the disclosure of the identity of a 
confidential source. Following a timely request for a hearing, other 
evidence or material, if any, of whatever source or nature, may be 
examined at the Hearing Officer's offices or such other places and 
locations that the Hearing Officer may, in writing, direct, if there 
are adequate safeguards to prevent loss or tampering.


Sec.  599.508  Statements of matters in dispute and submission of 
supporting information.

    (a) Within 30 days of the date shown on the Notice of Violation, 
the party, or counsel for the party, shall submit to NHTSA at the 
person or office listed in the Notice of Violation two complete copies 
via hand delivery, use of an overnight or express courier service, 
facsimile or electronic mail of:
    (1) A detailed statement of factual and legal issues in dispute; 
and,
    (2) All statements and documents supporting the party's case.
    (b) One copy of the party's submission set forth above shall be 
labeled ``For Hearing Officer.''
    (c) Failure to specify any non-jurisdictional issue in the party's 
submission will preclude its consideration.


Sec.  599.509  Hearing Officer.

    (a) If a party timely requests a hearing after receiving a Notice 
of Violation, the Hearing Officer shall hear the case.
    (b) The Hearing Officer is solely responsible for the case referred 
to him or her. The Hearing Officer has no other responsibility, direct 
or supervisory, for the investigation of cases referred for the 
assessment of civil penalties.
    (c) The Hearing Officer decides each case on the basis of the 
information before him or her, and must have no prior connection with 
the case.


Sec.  599.510  Initiation of action before the Hearing Officer.

    (a) After the Hearing Officer receives a case file from the Chief 
Counsel, the Hearing Officer notifies the party in writing of:
    (1) The date, time and location of the hearing and whether the 
hearing will be conducted telephonically or at the DOT Headquarters 
building in Washington, D.C.;
    (2) The right to be represented at all stages of the proceeding by 
counsel as set forth in Sec.  599.511; and,
    (3) The right to a free copy of all written evidence in the case 
file as set forth in Sec.  599.507.

[[Page 37905]]

    (b) On the request of a party, or at the Hearing Officer's 
direction, multiple proceedings may be consolidated if at any time it 
appears that such consolidation is necessary or desirable.


Sec.  599.511  Counsel.

    A party has the right to be represented at all stages of the 
proceeding by counsel. A party electing to be represented by counsel 
must notify the Hearing Officer of this election in writing, after 
which point the Hearing Officer will direct all further communications 
to that counsel. A party represented by counsel bears all of its own 
attorneys' fees and costs.


Sec.  599.512  Hearing location and costs.

    (a) Unless the party requests a hearing at which the party appears 
before the Hearing Officer in Washington, DC, the hearing shall be held 
telephonically. The hearing is held at the headquarters of the U.S. 
Department of Transportation in Washington, DC.
    (b) The Hearing Officer may transfer a case to another Hearing 
Officer at a party's request or at the Hearing Officer's direction.
    (c) A party is responsible for all fees and costs (including 
attorneys' fees and costs, and costs that may be associated with travel 
or accommodations) associated with attending a hearing.


Sec.  599.513  Hearing procedures.

    (a) There is no right to discovery in any proceedings conducted 
pursuant to this subpart.
    (b) The material in the case file pertinent to the issues to be 
determined by the Hearing Officer is presented by the Chief Counsel or 
his or her designee.
    (c) The Chief Counsel may supplement the case file with information 
prior to the hearing. A copy of such information will be provided to 
the party no later than 3 days before the hearing.
    (d) At the close of the Chief Counsel's presentation of evidence, 
the party has the right to examine, respond to and rebut material in 
the case file and other information presented by the Chief Counsel.
    (e) In receiving evidence, the Hearing Officer is not bound by 
strict rules of evidence. In evaluating the evidence presented, the 
Hearing Officer must give due consideration to the reliability and 
relevance of each item of evidence.
    (f) A party may present the testimony of any witness either through 
a written statement or a personal appearance. If a party wishes to 
present testimony through a personal appearance, the party is 
responsible for obtaining that personal appearance, including any costs 
associated with such appearance. The Hearing Officer may, at his or her 
discretion, accept a stipulation in lieu of testimony.
    (g) At the close of the party's presentation of evidence, the 
Hearing Officer may allow the introduction of rebuttal evidence that 
may be presented by the Chief Counsel. The Hearing Officer may allow 
the party to respond to any such evidence submitted.
    (h) The Hearing Officer may take notice of matters which are 
subject to a high degree of indisputability and are commonly known in 
the community or are ascertainable from readily available sources of 
known accuracy. Prior to taking notice of a matter, the Hearing Officer 
shall give the party an opportunity to show why notice should not be 
taken. In any case in which notice is taken, the Hearing Officer places 
a written statement of the matters as to which notice was taken in the 
record, with the basis for such notice, including a statement that the 
party consented to notice being taken or a summary of the party's 
objections.
    (i) After the evidence in the case has been presented, the Chief 
Counsel and the party may present argument on the issues in the case. 
The party may also request an opportunity to submit a written statement 
for consideration by the Hearing Officer and for further review. If 
granted, the Hearing Officer shall allow a reasonable time for 
submission of the statement and shall specify the date by which it must 
be received. If the statement is not received within the time 
prescribed, or within the limits of any extension of time granted by 
the Hearing Officer, the Hearing Officer prepares the decision in the 
case.
    (j) A verbatim transcript of the hearing will not normally be 
prepared. A party may, solely at its own expense, cause a verbatim 
transcript to be made. If a verbatim transcript is made, the party 
shall submit two copies to the Hearing Officer not later than 15 days 
of the hearing. The Hearing Officer shall include such transcript in 
the record.


Sec.  599.514  Assessment of civil penalties.

    (a) Not later than 30 days following the close of the hearing, the 
Hearing Officer shall issue a written decision on the Notice of 
Violation, based on the hearing record. The decision shall set forth 
the basis for the Hearing Officer's assessment of a civil penalty, or 
decision not to assess a civil penalty. In determining the amount of 
the civil penalty, the severity of the violation and the intent and 
history of the party committing the violation shall be taken into 
account. The assessment of a civil penalty by the Hearing Officer shall 
be set forth in an accompanying final order.
    (b) If the Hearing Officer assesses civil penalties in excess of 
$100,000.00, the Hearing Officer's decision contains a statement 
advising the party of the right to an administrative appeal to the 
Administrator. The party is advised that failure to submit an appeal 
within the prescribed time will bar its consideration and that failure 
to appeal on the basis of a particular issue will constitute a waiver 
of that issue in its appeal before the Administrator.
    (c) The filing of a timely and complete appeal to the Administrator 
of a Hearing Officer's order assessing a civil penalty shall suspend 
the operation of the Hearing Officer's penalty.
    (d) There shall be no administrative appeals of civil penalties of 
$100,000.00 or less.


Sec.  599.515  Appeals of civil penalties in excess of $100,000.00.

    (a) A party may appeal the Hearing Officer's order assessing civil 
penalties over $100,000.00 to the Administrator within 21 days of the 
date of the issuance of the Hearing Officer's order.
    (b) The Administrator will affirm the decision of the Hearing 
Officer unless the Administrator finds that the Hearing Officer's 
decision was unsupported by the record as a whole.
    (c) If the Administrator finds that the decision of the Hearing 
Officer was unsupported, in whole or in part, then the Administrator 
may:
    (1) Assess or modify a civil penalty;
    (2) Rescind the Notice of Violation; or
    (3) Remand the case back to the Hearing Officer for new or 
additional proceedings.
    (d) In the absence of a remand, the decision of the Administrator 
in an appeal is a final agency action.


Sec.  599.516  Collection of assessed or compromised civil penalties.

    (a) Payment of a civil penalty, whether assessed or compromised, 
shall be made by check, postal money order, or electronic transfer of 
funds, as provided in instructions by the agency. A payment of civil 
penalties shall not be considered a request for a hearing.
    (b) The party must remit payment of any assessed civil penalty to 
NHTSA within 30 days after receipt of the Hearing Officer's order 
assessing civil penalties or, in the case of an appeal to the 
Administrator, within 30 days after receipt of the Administrator's 
decision on the appeal. Failure to make timely payment may result in 
the institution of appropriate action under the Federal Claims 
Collection Act, as amended, the

[[Page 37906]]

regulations issued thereunder, and other applicable law.
    (c) The party must remit payment of any compromised civil penalty 
to NHTSA on the date and under such terms and conditions as agreed to 
by the party and NHTSA. Failure to pay a compromised civil penalty to 
NHTSA on the date and under such terms and conditions as agreed to by 
the party and NHTSA may either result in the institution of appropriate 
action under the Federal Claims Collection Act, as amended, the 
regulations issued thereunder, and other applicable law, or NHTSA 
entering a finding of violation by default and assessing a civil 
penalty in the amount proposed in the Notice of Violation without 
processing the violation under the hearing procedures set forth in this 
part.


Sec.  599.517  Other sanctions.

    The procedures and penalties described in this subpart are not the 
only procedures and penalties that may apply to someone who violates 
the CARS Act or submits a false certification required by this rule. 
Anyone who submits false information on these forms or otherwise 
violates the CARS Act or this part may not only be subject to the 
procedures and penalties described in this subpart, but also civil and 
criminal penalties. Such civil and criminal penalties may include 
penalties three times any amount falsely claimed to be due from the 
United States pursuant to the False Claims Act (31 U.S.C. 3729), or 
imprisonment of up to 5 years and fines of up to $250,000 (18 U.S.C. 
1001). In addition, NHTSA may request that the Attorney General seek 
appropriate injunctive relief to address violations of the CARS Act or 
this part.
BILLING CODE 4910-59-P

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    Issued on: July 23, 2009.
Ronald L. Medford,
Acting Deputy Administrator.
[FR Doc. E9-17994 Filed 7-24-09; 4:15 pm]
BILLING CODE 4910-59-C