[Federal Register Volume 76, Number 125 (Wednesday, June 29, 2011)]
[Notices]
[Pages 38270-38279]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-16222]


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DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

[Docket No. NHTSA-2010-0154]


Terrafugia, Inc.; Grant of Application for Temporary Exemption 
From Certain Requirements of FMVSS No. 110, Tire Selection and Rims for 
Motor Vehicles, FMVSS No. 126, Electronic Stability Control Systems, 
FMVSS No. 205, Glazing Materials, and FMVSS No. 208, Occupant Crash 
Protection

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

ACTION: Notice of grant of petition for temporary exemption from 
certain provisions of Federal Motor Vehicle Safety Standard (FMVSS) No. 
110, Tire Selection and Rims and Motor Home/Recreation Vehicle Trailer 
Load Carrying Capacity Information for Motor Vehicles With a GVWR of 
4,536 kilograms (10,000 pounds) or Less, FMVSS No. 126, Electronic 
Stability Control Systems, FMVSS No. 205, Glazing Materials, and FMVSS 
No. 208, Occupant Crash Protection.

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SUMMARY: This notice grants the petition of Terrafugia for a temporary 
exemption from certain FMVSS requirements for tire selection and rims 
for motor vehicles (FMVSS No. 110), electronic stability control (ESC) 
systems (FMVSS No. 126), glazing materials (FMVSS No. 205), and 
advanced air bag requirements (FMVSS No. 208). The basis for the 
exemption is that compliance with these requirements would cause 
substantial economic hardship to a manufacturer that has tried in good 
faith to comply with the standard. This action follows our publication 
in the Federal Register of a document announcing receipt of

[[Page 38271]]

Terrafugia's petition and soliciting public comments.

DATES: The exemption from FMVSS No. 126 and from the advanced air bag 
requirements of FMVSS No. 208 is effective from June 1, 2012, through 
May 31, 2013. The exemption from certain provisions of FMVSS No. 110 
and FMVSS No. 205 is effective from June 1, 2012, through May 31, 2015.

FOR FURTHER INFORMATION CONTACT: William H. Shakely, Office of the 
Chief Counsel, NCC-112, National Highway Traffic Safety Administration, 
1200 New Jersey Avenue, SE., West Building 4th Floor, Room W41-318, 
Washington, DC 20590. Telephone: (202) 366-2992; Fax: (202) 366-3820.

SUPPLEMENTARY INFORMATION:

I. Statutory Basis for Requested Part 555 Exemption

    The National Traffic and Motor Vehicle Safety Act, as amended, 
codified as 49 U.S.C. chapter 301, provides the Secretary of 
Transportation authority to exempt, on a temporary basis and under 
specified circumstances, motor vehicles from a motor vehicle safety 
standard or bumper standard. This authority is set forth at 49 U.S.C. 
30113. The Secretary has delegated the authority for this section to 
NHTSA.\1\
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    \1\ 49 CFR 1.50.
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    NHTSA established part 555, Temporary Exemption from Motor Vehicle 
Safety and Bumper Standards, to implement the statutory provisions 
concerning temporary exemptions. Vehicle manufacturers may apply for 
temporary exemptions on several bases, one of which is that compliance 
would cause substantial economic hardship to a manufacturer that has 
tried in good faith to comply with the standard.
    A petitioner must provide specified information in submitting a 
petition for exemption.\2\ Foremost among these requirements are that 
the petitioner must set forth the basis of the application under 
Section 555.6, and the reasons why the exemption would be in the public 
interest and, as applicable, consistent with the objectives of 49 
U.S.C. chapter 301.
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    \2\ 49 CFR 555.5.
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    Only small manufacturers can obtain a hardship exemption. A 
manufacturer is eligible to apply for a hardship exemption if its total 
motor vehicle production in its most recent year of production did not 
exceed 10,000 vehicles, as determined by the NHTSA Administrator.\3\ In 
determining whether a manufacturer of a vehicle meets that criterion, 
NHTSA considers whether a second vehicle manufacturer also might be 
deemed the manufacturer of that vehicle.
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    \3\ 49 U.S.C. 30113(d).
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    Finally, while 49 U.S.C. 30113(b) states that exemptions from an 
FMVSS prescribed under Chapter 301 are to be granted on a ``temporary 
basis,'' the statute also expressly provides for renewal of an 
exemption on reapplication.\4\ Manufacturers are nevertheless cautioned 
that the agency's decision to grant an initial petition in no way 
predetermines that the agency will repeatedly grant renewal petitions. 
Exempted manufacturers seeking renewal must bear in mind that the 
agency is directed to consider financial hardship as but one factor, 
along with the manufacturer's ongoing good faith efforts to comply with 
the regulation and the public interest, among other factors provided in 
the statute.
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    \4\ 49 U.S.C. 30113(b)(1).
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II. Terrafugia's Petition

    In accordance with 49 U.S.C. 30113 and the procedures in 49 CFR 
part 555, Terrafugia has petitioned (dated July 20, 2010) the agency 
for a temporary exemption from certain FMVSS requirements for the 
Transition,[supreg] a Light Sport Aircraft (LSA) that has road-going 
capability. In addition to its original petition, Terrafugia has 
submitted additional information regarding its compliance efforts, 
which has been posted to the public docket.
    Terrafugia requested an exemption from certain provisions of the 
tire selection and rim requirements for motor vehicles (S4.1 and S4.4 
of FMVSS No. 110), the ESC system requirements (FMVSS No. 126), the 
glazing materials requirements (S5 of FMVSS No. 205), and the advanced 
air bag requirements (S14 of FMVSS No. 208). The basis for the 
application is that compliance would cause substantial economic 
hardship to a manufacturer that has tried in good faith to comply with 
the standard. Terrafugia has requested a three-year hardship exemption. 
A copy of the petition is available for review and has been placed in 
the docket of this notice.\5\ In a subsequent submission, Terrafugia 
clarified its plans with respect to S14 of FMVSS No. 208, stating that 
it will certify its vehicles to comply with the belted 50th percentile 
male barrier impact test (S14.5.1(a)). Terrafugia has also since stated 
that it plans to certify to the unbelted 50th percentile male barrier 
impact test in force prior to September 1, 2006 (S5.1.2(a)).
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    \5\ To view the petition, go to http://www.regulations.gov and 
enter the docket number set forth in the heading of this document. 
The company requested confidential treatment under 49 CFR part 512 
for certain business and financial information submitted as part of 
its petition for temporary exemption. Accordingly, the information 
placed in the docket does not contain such information that the 
agency has determined to be confidential.
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    According to the petition, Terrafugia is a small, privately held 
company that was incorporated in the state of Delaware in 2006 and 
maintains headquarters in Woburn, Massachusetts. Terrafugia states that 
the company employs ten full-time employees. The company identified 
itself as a Massachusetts Institute of Technology (MIT) spin-off 
company, but stated that it does not have access to MIT's financial 
resources. The company also stated that it is not affiliated with any 
other aircraft or automobile manufacturer.
    Terrafugia has designed and built the first prototype of the 
Transition,[supreg] which it described as a ``Roadable Aircraft.'' 
Terrafugia characterized the Transition[supreg] as an LSA, as defined 
by the Federal Aviation Administration (FAA), and stated that the 
vehicle's road-going capability will provide a significant increase in 
operational functionality and safety for the General Aviation \6\ pilot 
community by allowing pilots to safely continue their travel plans in 
the event of inclement weather.
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    \6\ Terrafugia explained that General Aviation is the segment of 
the air transportation industry characterized by flight outside of 
the commercial airline system and military operations.
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    To date, Terrafugia has not produced any vehicles for sale, but 
intends to begin delivery of the Transition[supreg] in late-2012 \7\ 
and anticipates producing 200 vehicles during the three-year requested 
exemption period. Terrafugia stated that it expects to remain a low-
volume manufacturer for the foreseeable future, continuing to market 
the Transition[supreg] as an aircraft with road-going capability, not 
as a ``flying car.'' Thus, the primary market for the 
Transition[supreg] will be U.S. pilots.
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    \7\ Terrafugia initially stated that it planned to begin 
production in late-2011 but subsequently indicated that its 
production plans had been delayed.
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    Terrafugia's basis for the petition is that requiring compliance 
with the stated provisions would cause substantial economic hardship to 
a manufacturer that has tried to comply with the standard in good faith 
(49 U.S.C. 30113(b)(3)(B)(i)).

A. Terrafugia's General Statement of Economic Hardship

    Terrafugia stated that the denial of the requested exemption will 
result in substantial economic hardship. The company indicated that it 
has spent

[[Page 38272]]

approximately $3.5 million since 2006 on the development of the 
Transition[supreg] and has had no appreciable revenue during that time. 
Terrafugia acknowledged that it has received over 80 orders for 
vehicles but that, due to escrow agreements for each deposit, these 
funds are not accessible operating funds.
    The Transition's[supreg] dual purpose as an aircraft and ground 
vehicle has necessitated the application of both FAA regulations for 
LSA and the FMVSSs established by NHTSA for new motor vehicles and 
motor vehicle equipment. Terrafugia contended that ``it is not always 
possible to completely merge the two regulations without compromising 
safety, incurring prohibitive costs, and/or reducing core 
functionality.'' \8\ Specifically, Terrafugia stated that in order to 
maintain compliance with the FAA's maximum weight requirement for 
LSAs,\9\ weight must be removed from the vehicle to offset any extra 
weight that is added for motor vehicle safety equipment. Terrafugia 
calculated that for each additional pound removed, it costs $14,500 
\10\ in development costs and adds $4,200 \11\ to the cost of the 
aircraft.\12\
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    \8\ Terrafugia Petition, p. 3.
    \9\ Terrafugia obtained a partial grant of exemption from the 
FAA (FAA Docket No. FAA-2009-1087), allowing the Transition[supreg] 
to have a maximum takeoff weight (MTOW) of 1,430 pounds (650 kg) 
instead of the general MTOW requirement of 1,320 pounds (600 kg).
    \10\ Terrafugia explained that this is based on the experience 
of removing weight between the Proof of Concept vehicle to the 
prototype and the fact that as more and more weight must be removed, 
it becomes increasingly more difficult to do so.
    \11\ Terrafugia explained that this figure is based on 
identified cost vs. weight trade-offs, such as material replacement, 
and a minimal margin.
    \12\ Terrafugia noted that there is a physical limitation as to 
how much weight can be removed from the vehicle, at any cost, before 
it is no longer capable of safely performing its function. The 
dollar values provided by Terrafugia are applicable until that limit 
is reached, past which very little can be done at any price and the 
product is no longer viable.
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    Terrafugia stated that a grant of the requested exemption would 
allow the company to continue with LSA certification for the 
Transition[supreg] while pursuing lightweight compliance solutions and 
researching additional ways of reducing the weight of non-safety-
critical systems for the aircraft.
    Terrafugia noted that the Transition[supreg] is currently its only 
product line. Accordingly, a denial would force the company to delay 
all production until compliance is achieved. The company stated that a 
denial would delay customer delivery and initial revenue generation by 
at least two years and that this delay, coupled with the sharply 
decreased probability of the company reaching profitability, would make 
additional investment capital extremely difficult to secure. Terrafugia 
calculated that the revenue difference between a grant and a denial of 
the exemption would be $19.4 million and would double the price point 
of the Transition[supreg]. Accordingly, Terrafugia opined that a denial 
would likely force the company to abandon LSA certification and the 
development of the Transition[supreg].\13\
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    \13\ Terrafugia stated that not being able to certify the 
Transition[supreg] as an LSA would increase certification costs by 
up to $100 million and would force the company to dissolve.
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B. Terrafugia's Statement of the Costs of Compliance and Good Faith 
Efforts To Comply

    Terrafugia provided a detailed description of its efforts to comply 
and the compliance costs it faces. The company stated that although it 
might have been easier to design the Transition[supreg] as a three-
wheel vehicle and certify it as a motorcycle, due to the light weight 
of the vehicle and the exposed side area of the folded wings, a more 
stable four-wheel configuration was chosen.
    Below is a summary of the compliance efforts and costs for each of 
the requirements from which Terrafugia seeks exemption.
1. FMVSS No. 110, Tire Selection and Rims and Motor Home/Recreation 
Vehicle Trailer Load Carrying Capacity Information for Motor Vehicles 
With a GVWR of 4,536 Kilograms (10,000 Pounds) or Less, Paragraphs 
S4.1, S4.4\14\
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    \14\ 49 CFR 571.110.
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    Terrafugia seeks an exemption from the general tire requirements 
(S4.1) and rim requirements (S4.4) of FMVSS No. 110. Terrafugia stated 
that compliance with these requirements would cause substantial 
economic hardship due to the cost of reducing the weight of the vehicle 
in order to offset the weight of the tires and rims required by the 
standard, which have significantly higher speed and load ratings than 
that needed for the Transition[supreg]. As part of its efforts to 
comply with the standard, Terrafugia evaluated several passenger car 
tire and rim combinations. The company also investigated the 
development of a lighter custom rim and tire combination that would 
meet the requirements of FMVSS No. 110.
    Based on conversations with Continental Tire, Terrafugia estimated 
that development and certification costs for custom tires would be 
approximately $120,000 and that it would have to place a minimum order 
of 3,000 units at an expense $450,000, for a total cost of $570,000. 
Terrafugia also stated that it had experienced difficulty in finding a 
major tire manufacturer to work on the project. The company indicated 
that an exemption would provide time to gather data on tire usage to 
justify a larger custom tire purchase, would allow the company to build 
relationships with tire manufacturers to facilitate custom tire 
development, and would provide revenue to offset the cost of the custom 
tire program.
    If granted an exemption, Terrafugia intends to use tires and rims 
with proper load and speed ratings, which are certified for motorcycle 
use (See 49 CFR 571.119). The company stated that it had already 
performed takeoff and landing testing using the lighter motorcycle 
tires and rims, and the company asserted that they would provide an 
equivalent level of safety as compared to tires certified for 
traditional passenger vehicles, while allowing for weight savings of 25 
pounds (11.3 kg). The company stated that it intended to perform 
handling and brake testing using the motorcycle tires and rims.
    Terrafugia stated that, to date, it has spent $50,290 towards 
finding a compliant rim and tire combination that would meet the speed, 
loading, and weight requirements for the Transition[supreg].
2. FMVSS No. 126, Electronic Stability Control Systems\15\
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    \15\ 49 CFR 571.126.
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    Terrafugia seeks an exemption from the ESC system requirements of 
FMVSS No. 126. ESC systems employ automatic computer-controlled braking 
of individual wheels to assist the driver in maintaining control in 
critical driving situations.\16\ NHTSA's crash data study shows that 
ESC systems reduce fatal single-vehicle crashes of passenger cars by 36 
percent and fatal single-vehicle crashes of LTVs (light trucks and 
vans, including pickup trucks, SUVs, minivans, and full-size vans) by 
63 percent.\17\ The agency further estimates that ESC has the potential 
to prevent 70 percent of the fatal passenger car rollovers and 88 
percent of the fatal LTV rollovers that would otherwise occur in 
single-vehicle crashes.\18\
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    \16\ 73 FR 54526, 54527 (September 22, 2008).
    \17\ Dang, J., Statistical Analysis of the Effectiveness of 
Electronic Stability Control (ESC) Systems--Final Report, DOT HS 810 
794, U.S. Department of Transportation, Washington, DC (July 2007). 
Available at Docket No. NHTSA-2007-28629, item 2.
    \18\ Id.
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    Terrafugia stated that it faces two challenges with an off-the-
shelf ESC unit. First, an ESC system would add 6

[[Page 38273]]

pounds of weight to the Transition[supreg]. Removing this amount of 
weight from elsewhere in the vehicle would involve development costs of 
$87,000 and would raise the price of the vehicle by $25,200. These 
costs would be in addition to the purchase and integration costs for 
the system, which were not available at the time the petition was 
filed. Second, Terrafugia contended that an ESC system would pose a 
flight safety risk because, by design, an ESC system may automatically 
cut the engine power when activated in a vehicle, which would create a 
single point failure that could shut down the Transition's[supreg] 
engine in flight. Terrafugia indicated its belief that this additional 
safety risk outweighs the safety benefit of the ESC system on the 
ground.
    Terrafugia stated that it had approached Bosch Engineering Group 
about developing an ESC system for the Transition,[supreg] but those 
discussions were terminated by Bosch due to liability concerns about 
installing the system on an airplane. Terrafugia indicated that it was 
in the process of evaluating other vendors. The company stated that it 
had also investigated the feasibility of developing an ESC system in-
house but had determined that such a program beyond its current 
capabilities. Terrafugia indicated that an exemption would allow it to 
further investigate the issues associated with an ESC system, which 
might result in a petition for rulemaking to reflect the aviation 
safety concerns of such a system.
3. FMVSS No. 205, Glazing Materials, Paragraph S5\19\
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    \19\ 49 CFR 571.205.
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    Terrafugia seeks an exemption from the glazing material 
requirements (S5 of FMVSS No. 205), which affect the 
Transition's[supreg] windshield and side windows. Terrafugia stated 
that installing compliant glazing materials, such as traditional 
laminated safety glass, would result in 29 pounds (13.2 kg) of 
additional weight. Terrafugia equipped its Proof of Concept vehicle 
with custom-made FMVSS-compliant safety glass, but this vehicle was not 
light enough to comply with the LSA weight restrictions, and Terrafugia 
was unable to remove sufficient weight from the aircraft to accommodate 
compliant glazing materials. Terrafugia calculated that the removal of 
29 pounds from the Transition[supreg] would cost $420,500 in 
development costs, would increase the price of each vehicle by a 
minimum of $121,800, and would delay production of the vehicles.
    The company also determined that, in the event of a bird strike, 
FMVSS-compliant safety glass would either shatter or craze to a degree 
that would substantially inhibit the pilot's view. Accordingly, 
Terrafugia investigated the possibility of using an FMVSS-compliant 
polycarbonate windshield. According to the petition, the polycarbonate 
material passed intrusion tests without cracking, but Terrafugia was 
still pursuing options for a scratch-resistant coating that could meet 
the abrasion tests. The company stated that one vendor informed them 
that its coating would likely pass the abrasion tests but that such 
tests had not yet been performed. Terrafugia indicated that it is 
engaged in discussions with several vendors and is planning future 
compliance testing of coated polycarbonate materials. In the meantime, 
Terrafugia stated that the Transition[supreg] would be equipped with 
polycarbonate glazing, and each vehicle would be required to undergo 
regular, frequent inspections, at which time windshields with degraded 
visibility would be identified and replaced.
4. FMVSS No. 208, Occupant Crash Protection, Paragraph S14 (Advanced 
Air Bags)\20\
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    \20\ 49 CFR 571.208.
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    Terrafugia seeks an exemption from the advanced air bag 
requirements of FMVSS No. 208 (S14) because the company currently does 
not have the financial resources to design and install an advanced air 
bag system, which it calculated would cost approximately $2.4 million 
and result in production delays of at least 18 months.
    In the meantime, the company intends to install basic air bags in 
the Transition[supreg], as well as a carbon fiber omega beam ``safety 
cage'' surrounding the passenger compartment, energy-absorbing crush 
structures, seat belts, and other necessary passenger safety equipment 
not traditionally installed in an LSA. In its supplementary 
submissions, Terrafugia indicated that it was working with Multimatic 
and Tass to develop its occupant protection system and that it will 
certify compliance with the belted 50th percentile male barrier impact 
test (S14.5.1(a)). Terrafugia has also stated that it plans to certify 
to the unbelted 50th percentile male barrier impact test in force prior 
to September 1, 2006 (S5.1.2(a)).
    To date, Terrafugia has spent approximately $161,000 in its efforts 
to comply with FMVSS No. 208. Terrafugia anticipated using the sales 
revenue generated during the exemption period to pursue the development 
of an advanced air bag system, ideally one that would be able to 
differentiate between the needs of an automotive crash and an aviation 
crash.
5. Future Compliance Efforts
    Terrafugia included a schedule of its future compliance efforts 
during the proposed exemption period and stated that it was working 
toward full compliance by the end of that period. However, Terrafugia 
noted that the success of its plan was dependent on the availability of 
sufficient investment capital and the willingness of third parties to 
work with it. The company reiterated that it was also considering 
petitioning NHTSA and FAA for rulemakings to address the unique dual-
purpose nature of the Transition[supreg].

C. Terrafugia's Statement of Public Interest

    Terrafugia asserted that the requested exemption is in the public 
interest because the Transition[supreg] will increase the safety of 
flight for General Aviation in the United States, contribute to the 
advancement of technology for light aircraft and light-weight, fuel 
efficient automobiles, and improve the environment and economy.
    According to Terrafugia's petition, one of the most significant 
causes of General Aviation accidents and fatalities is weather, and a 
leading cause of weather-related accidents is when pilots using visual 
references, rather than flight instruments, for primary orientation and 
navigation (Visual Flight Rules or VFR) fly into weather conditions 
with insufficient visibility to provide a safe visual reference 
(instrument meteorological conditions or IMC). In such situations, 
pilots can get disoriented and enter an unrecoverable situation that 
results in an often fatal accident. According to Terrafugia, the 
Transition[supreg] offers a new alternative to pilots by allowing them 
to divert to the nearest airport and continue the trip on the ground. 
Although the trip may take longer, Terrafugia stated that the 
Transition[supreg] is expected to eliminate the possibility of an 
indeterminately long delay caused by either retracing the flight route 
to clearer weather or diverting and waiting for the weather to pass. 
Accordingly, Terrafugia expects that the Transition[supreg] will help 
reduce these types of crashes, while also making General Aviation more 
appealing and accessible to a greater number of people. Additionally, 
because the Transition[supreg] is equipped with basic FMVSS occupant 
crash protection features, Terrafugia argued that it is advancing 
passenger safety technology in light aircraft.

[[Page 38274]]

    The Transition[supreg] uses an FAA-certified, four cylinder, 100 
horsepower, unleaded gasoline-fueled aircraft engine to power the 
vehicle both in the air and on the ground. Terrafugia contended that 
the use of unleaded gasoline will provide ``significant ecological and 
energy benefits,'' as compared to the leaded gasoline used in other 
General Aviation aircraft. Terrafugia also opined that one day a future 
version of the Transition[supreg] might play a role in reducing highway 
congestion and CO2 emissions by enabling more people to 
shift from highway-based travel to a combination of flight and road use 
for mid-range trips. Terrafugia stated that the Transition[supreg] will 
cruise in the air at approximately 105 miles per hour and maintain 
highway speeds on the ground, while attaining between 25 and 40 miles 
per gallon in flight and on the road.
    Terrafugia anticipated that the Transition[supreg] will only be 
operated on public roadways in conjunction with a flight. The company 
stated that it expects that the typical recreational owner will operate 
the vehicle as an aircraft for at least 65 percent of its engine-on-
time and will drive the vehicle on the road less than 2,000 miles 
annually. Terrafugia contended that the combination of low sales volume 
and limited use on roadways limits the Transition's[supreg] overall 
impact on motor vehicle safety.
    Terrafugia estimated that by 2015, the production of the 
Transition[supreg] will provide 500 manufacturing, engineering, and 
support jobs to the U.S. economy.

III. Notice of Receipt and Summary of Comments

    On November 16, 2010 we published a notice of receipt of 
Terrafugia's petition for temporary exemption in the Federal Register 
(75 FR 70071), and provided an opportunity for public comment. We 
received ten comments in response to the notice, as well as a response 
from Terrafugia.
    Five commenters submitted six comments supporting the grant of the 
exemption requested by Terrafugia. These commenters included Women in 
Aviation International (WAI), a nonprofit organization dedicated to the 
encouragement and advancement of women in aviation career fields and 
interests, the Experimental Aircraft Association (EAA), a group of 
aviation enthusiasts, pilots, and aircraft owners, the Aircraft Owners 
and Pilots Association (AOPA), a not-for-profit membership organization 
consisting of more than 400,000 pilots, Sherry Grobstein, a private 
pilot with over 35 years of experience who has placed a deposit on a 
Transition[supreg], and Kenneth J. Ramsey. Four comments raised 
questions regarding Terrafugia's petition. One of these comments was 
submitted by John Dritten, a pilot, and the other three were anonymous 
comments.
    All of the supporting comments described the dangers associated 
with VFR flights entering IMC and emphasized the Transition's[supreg] 
ability to reduce these types of crashes by encouraging pilots to land 
when they encounter bad weather. WAI, EAA, and Mr. Ramsey also 
discussed the safety features equipped on the Transition[supreg]. WAI 
stated that the Transition[supreg] offers a significantly higher level 
of crash safety than that found in light aircraft, EAA indicated that 
the Transition's[supreg] safety features had the potential to reduce 
crash-landing fatalities, and Mr. Ramsey opined that the 
Transition's[supreg] safety features would provide an adequate safety 
margin under most circumstances.
    Mr. Dritten, however, questioned Terrafugia's petition, noting that 
it appeared that most of the exemptions sought would be unnecessary if 
the Transition[supreg] was equipped with only three wheels and 
certified as a motorcycle. Mr. Dritten further stated that removing one 
wheel would eliminate approximately 100 pounds of weight from the 
vehicle.
    Mr. Dritten also questioned Terrafugia's efforts to comply and 
whether the exemption sought was in the public interest. Mr. Dritten 
noted that development of the Transition[supreg] began in 2006 and 
questioned why Terrafugia had not requested an exemption earlier.
    One of the anonymous commenters responded to the question we raised 
in the notice of receipt concerning whether the safety benefits of 
reducing weather-related accidents for flights of the 
Transition[supreg] outweigh the safety risks associated with road use 
of the Transition[supreg] in inclement weather. The commenter noted 
that an LSA piloted by a sport pilot can only be flown in daytime VFR 
conditions, which requires three miles of visibility. The commenter 
indicated that, accordingly, a pilot should not even see inclement 
weather if the pilot is flying legally. The commenter stated that in 
the face of inclement weather, VFR pilots in normal aircraft would not 
fly, fly around the weather, or land the aircraft and wait until the 
bad weather passes, and that any of these options would be safer than 
flying or driving the Transition[supreg] in inclement weather. The 
commenter indicated that without electronic stability control, non-DOT 
car tires and rims, no laminated safety glass, and no advanced air 
bags, driving the Transition[supreg] would be less safe than flying the 
Transition[supreg] legally (in good weather). The commenter stated that 
comparing driving the Transition[supreg] in inclement weather to flying 
the Transition[supreg] in inclement weather (i.e., illegally) was not 
as valuable as determining whether and to what extent granting the 
exemption would increase the risk of accident and injury to the 
occupants of the Transition[supreg] as compared to a motor vehicle that 
meets all FMVSSs.
    The commenters offered the following comments on each of the 
specific exemptions sought by Terrafugia:
    FMVSS No. 110, S4.1 and S4.4--Ms. Grobstein stated that the tires 
on the Transition[supreg] must allow cross wind landings as well as 
safe operation on the road and should be appropriate for the light 
weight of the vehicle. Accordingly, she opined that heavier tires would 
provide no benefit and take up weight that could be used for a 
passenger or baggage. EAA commented that it was the group's 
understanding that the type of tires used on the Transition[supreg] are 
permitted on vehicles of comparable wheel load. EAA also noted that 
Terrafugia's Proof of Concept vehicle successfully tested using these 
tires and opined that compliance appeared to involve a regulatory 
technicality rather than a safety matter. Mr. Ramsey opined that the 
tires proposed by Terrafugia would be suitable and provide an 
appropriate safety margin during takeoff and landing as well as while 
driving.
    FMVSS No. 126--Ms. Grobstein and Mr. Ramsey stated that the 
Transition[supreg] has a low center of gravity and would be unlikely to 
roll over, and that, accordingly, an ESC system is unnecessary. EAA 
noted it was not unusual for suppliers to refuse to work with aircraft 
companies due to low production volumes and product liability concerns. 
EAA opined that given the physical characteristics of the 
Transition[supreg], including its relatively long wheel base, wide 
track, low center of gravity, and low mass, it appeared that the 
Transition[supreg] was significantly different than vehicles displaying 
rollover tendencies, which drove the adoption of the ESC requirement. 
Accordingly, given the economic hardship Terrafugia would encounter in 
terms of complying with the FAA weight requirement and developing its 
own ESC system, EAA stated that an exemption would be in the public 
interest.
    An anonymous commenter indicated that NHTSA's own statistics showed

[[Page 38275]]

that ESC systems have the ability to prevent crashes other than 
rollovers, which are independent of the vehicle's center of 
gravity.\21\ The commenter also indicated that he had purchased off-
the-shelf ESC systems and never had to disclose the intended use of the 
systems. The commenter opined that the ESC requirements should not be 
ignored because of engineering and development expense.
---------------------------------------------------------------------------

    \21\ The commenter did not cite a source for the statistics 
listed. As stated above, NHTSA's crash studies have shown that ESC 
systems reduce fatal single-vehicle crashes of passenger cars by 36 
percent, and fatal single-vehicle crashes of LTVs by 63 percent. The 
studies further estimated that ESC systems would prevent 70 percent 
of passenger car rollovers and 88 percent of LTV rollovers in single 
vehicle crashes.
---------------------------------------------------------------------------

    FMVSS No. 205, S5--Ms. Grobstein, EAA, and Mr. Ramsey all stated 
that due to the danger of bird-strikes while in flight, a polycarbonate 
windshield was safer for the Transition[supreg] than one that was 
compliant with FMVSS No. 205. Ms. Grobstein also noted that an FMVSS-
compliant windshield would be heavier, and Mr. Ramsey indicated that a 
polycarbonate windshield would provide adequate protection while the 
Transition[supreg] was being driven. Additionally, EAA stated that the 
Transition[supreg] would be subject to annual airworthiness condition 
inspections, and any windshield scratches that could obscure the 
operator's vision would be discovered and remedied during such 
inspections.
    An anonymous commenter stated that a polycarbonate windshield would 
quickly scratch and haze when exposed to road conditions, especially 
with the use of windshield wipers in rainy weather. The commenter also 
stated that, in the event of a crash, emergency personnel would have a 
difficult time removing a polycarbonate windshield.
    FMVSS No. 208, S14--WAI stated that pilots are more accustomed to 
following seat belt and other usage guidelines than the average driver, 
making the installation of advanced air bags less critical. Ms. 
Grobstein stated that the Transition[supreg] was not an appropriate 
vehicle to ride long distances with a child and that her companion 
would not be one that required a car seat. Accordingly, she opined that 
advanced air bags would provide no extra safety and would only add 
expense and weight to the vehicle. EAA stated that due to the 
difficulty of finding a supplier for an advanced air bag system that 
would be compatible with both road travel and flight, the development 
of such a system would represent a significant financial burden to 
Terrafugia. Mr. Ramsey stated that given the Transition's[supreg] 
design, it was unlikely that an unbelted out-of-position child would be 
in the vehicle, and, accordingly, an advanced air bag system was not 
warranted.
    On the other hand, Mr. Dritten questioned the safety of driving the 
Transition[supreg]. He indicated that children would undoubtedly ride 
in the vehicle, noting that he flew with his own children and would 
continue to do so if he owned the Transition[supreg]. One anonymous 
commenter agreed that children would likely be riding in the vehicle, 
noting that EAA is a proponent of giving children the opportunity to 
fly with its Young Eagles program and that many of the flights in this 
program involve LSA.
    Terrafugia submitted a response to the public comments described 
above. Regarding the decision to create a four-wheel, rather than 
three-wheel, vehicle, the company reiterated that it recognized that 
significant additional effort would be required to meet the applicable 
safety standards but indicated that it made the decision to develop a 
four-wheel vehicle based on its determination that a such a vehicle 
would be safer and more stable.
    Terrafugia also discussed the probability of children riding in the 
Transition[supreg]. The company acknowledged that children may 
occasionally be driven or flown in the Transition[supreg], but that it 
was not expected to be a common occurrence. The company noted that most 
of the customers who could afford the Transition[supreg] are beyond the 
age at which they would have young children and, as trained pilots, 
would understand the associated risks. Terrafugia further stated that 
the benefit garnered by occasionally giving children the opportunity to 
ride in the Transition[supreg] offsets the occasional, well-considered 
risk.

IV. Agency Analysis and Decision

    In this section, we provide our analysis and decision regarding 
Terrafugia's temporary exemption request from the requirements of 
various FMVSSs.
    As discussed below, we are granting Terrafugia's petition for the 
Transition[supreg] to be exempted from S4.1 and S4.4 of FMVSS No. 110, 
FMVSS No. 126, S5 of FMVSS No. 205, and S14 (apart from S14.5.1.(a)) of 
FMVSS No. 208 beginning on June 1, 2012. The Transition[supreg] is 
exempted from FMVSS No. 126 and S14 (apart from S14.5.1.(a)) of FMVSS 
No. 208 for a period of one year and is exempted from S4.1 and S4.4 of 
FMVSS No. 110 and S5 of FMVSS No. 205 for a period of three years. In 
addition to certifying compliance with the belted 50th percentile adult 
male dummy barrier impact requirements in S14.5.1(a) of FMVSS No. 208, 
Terrafugia must certify to the unbelted 50th percentile adult male 
dummy barrier impact test requirement that applied prior to September 
1, 2006 (S5.1.2(a) of FMVSS No. 208). For purposes of this exemption, 
the unbelted sled test in S13 of FMVSS No. 208 is an acceptable option 
for that requirement. The agency's rationale for this decision is as 
follows:

A. Eligibility

    As discussed above, a manufacturer is eligible to apply for an 
economic hardship exemption if its total motor vehicle production in 
its most recent year of production did not exceed 10,000 vehicles, as 
determined by the NHTSA Administrator (49 U.S.C. 30113). Terrafugia 
indicated that at the time of the application, it had not produced any 
vehicles for sale and stated that it predicted producing 200 vehicles 
during the exemption period if an exemption is granted. Furthermore, 
the company stated that it is not affiliated with any other aircraft or 
automobile manufacturer. Accordingly, we have determined that 
Terrafugia is eligible to apply for an economic hardship exemption.

B. Economic Hardship

    Terrafugia stated that it has spent approximately $3.5 million 
since 2006 on the development of the Transition[supreg] and has had no 
appreciable revenue during that time. Terrafugia acknowledged that it 
has received over 80 orders for vehicles but that due to escrow 
agreements for each deposit, these funds are not accessible operating 
funds. Terrafugia's confidential records support its assertion that it 
has experienced a continuing and cumulative net loss position. 
Additionally, one commenter agreed with Terrafugia that the cost of 
complying with the advanced air bag requirements and the ESC system 
requirements would represent a significant financial burden to 
Terrafugia.
    The touchstone that NHTSA uses in determining the existence of 
substantial economic hardship is an applicant's financial health, as 
indicated by its income statements. NHTSA has tended to consider a 
continuing and a cumulative net loss position as strong

[[Page 38276]]

evidence of hardship.\22\ The theory behind NHTSA's rationale is that, 
if a company with a continuing net loss is required to divert its 
limited resources to resolve a compliance problem on an immediate 
basis, it may be unable to use those resources to solve other problems 
that may affect its viability. The agency has considered this 
especially important in its treatment of corporate petitioners during 
their infancy.
---------------------------------------------------------------------------

    \22\ Grant of petition of Bugatti Automobili, S.p.A., 59 FR 
11649, 11650 (Mar. 11, 1994).
---------------------------------------------------------------------------

    Additionally, Terrafugia stated that the Transition[supreg] is 
currently its only product line. Accordingly, a denial would force the 
company to delay all production until compliance is achieved. 
Terrafugia stated that a denial would delay customer delivery and 
initial revenue generation by at least two years and that this delay, 
coupled with the sharply decreased probability of the company reaching 
profitability, would make additional investment capital extremely 
difficult to secure. Terrafugia calculated that the difference between 
a grant and a denial of its petition was $19.4 million in revenue and 
indicated that a denial would likely put the company out of business.
    Based on these factors, we conclude that Terrafugia has 
demonstrated the requisite economic hardship.

C. Good Faith Efforts To Comply

    Terrafugia described in detail its efforts to comply with the 
listed FMVSSs as well as its plans for compliance by the end of the 
proposed exemption period. In particular, Terrafugia provided a plan to 
achieve full compliance with FMVSS Nos. 110, 205, and 208 within the 
three-year period. Although Terrafugia budgeted for FMVSS No. 126 
compliance research and indicated that it was working towards 
compliance with all FMVSSs by the end of the requested exemption 
period, the company also stated that it was currently evaluating 
vendors to work with to develop an ESC system and indicated that 
further research might lead the company to petition for rulemaking on 
this issue. Accordingly, it appears that Terrafugia does not know at 
this time whether the Transition[supreg] will be able to comply with 
FMVSS No. 126 by the end of the requested exemption period.
    One of the public comments questioned Terrafugia's general efforts 
to comply. Specifically, the commenter noted that Terrafugia could have 
designed the Transition[supreg] with three wheels instead of four, thus 
saving weight, allowing for the installation of additional safety 
features, and avoiding the need to comply with the safety standards 
required for four-wheel vehicles. The commenter also questioned why 
Terrafugia did not request an exemption earlier in the development 
process.
    Regarding the decision to design a four-wheel, rather than three-
wheel, vehicle, Terrafugia stated in its petition and its response to 
the public comments that it was aware that using a three-wheel design 
would lessen its regulatory burden. However, due to the light weight of 
the vehicle and the exposed side area of the folded wings, the company 
chose a four-wheel design to increase stability and make the vehicle 
safer. Given Terrafugia's rationale for its decision to use a four-
wheel design, the agency does not believe that this decision reflects 
negatively on Terrafugia's efforts to comply with the FMVSSs.
    Likewise, the agency does not consider the timing of Terrafugia's 
petition for exemption to reflect negatively on the company's efforts 
to comply. Terrafugia's petition is dated July 20, 2010. In the 
petition, Terrafugia requested an exemption beginning with the first 
Transition[supreg] delivery on or near December 1, 2011, over 16 months 
later. The agency considers this to be a sufficient period to carefully 
consider the merits of Terrafugia's petition and make a reasoned 
decision.
    After reviewing Terrafugia's petition and the public comments, we 
believe that the company has made good faith efforts to comply with the 
standards from which it is seeking exemption. Terrafugia is a new 
company, and the Transition[supreg] is a unique, dual-purpose vehicle 
designed for both flying and driving. Many of the impediments to 
compliance that Terrafugia has encountered are a direct result of the 
dual nature of the Transition[supreg], including the need to meet the 
strict weight requirements of an LSA. Despite these impediments, 
Terrafugia has devoted significant resources towards compliance, has 
attempted to mitigate the risks associated with noncompliance, and has 
developed a plan for full compliance with three of the four listed 
FMVSSs by the end of the requested three-year period.
    In sum, we believe that, considering Terrafugia's overall 
situation, the efforts that the company has made to date, and the plans 
it has in place, Terrafugia has made good faith efforts to comply with 
the requirements from which it seeks a temporary exemption.

D. Public Interest Considerations

    NHTSA has traditionally found that the public interest is served by 
affording consumers a wider variety of motor vehicles and providing 
additional employment opportunities. We believe that both of these 
public interest considerations would be served by granting Terrafugia's 
petition. The Transition[supreg] is a unique vehicle that uses a 
variety of new technologies. An exemption would allow for the 
evaluation of the market for this type of vehicle as well as the 
further development of these new technologies. Additionally, Terrafugia 
estimated that by 2015, the production of the Transition[supreg] will 
provide 500 manufacturing, engineering, and support jobs to the U.S. 
economy.
    Furthermore, by reducing the disincentive associated with landing 
an aircraft prior to reaching the pilot's planned destination, the 
Transition[supreg] has the potential to reduce aircraft crashes 
involving a pilot using VFR flying into inclement weather. One 
commenter noted that VFR pilots are not supposed to fly into inclement 
weather and asserted that comparing flying and driving in inclement 
weather was not as useful as focusing on the increased risk to 
occupants of the Transition[supreg] when it is operated on the road. We 
note that Terrafugia cited a report describing the occurrence of these 
VFR-into-IMC crashes, and the company stated that one of the purposes 
of the Transition[supreg] is to attempt to reduce their occurrence. 
Additionally, five of the comments discussed the danger of such types 
of crashes and supported Terrafugia's assertion that the 
Transition[supreg] has the potential to reduce their occurrence. 
Accordingly, we believe that the Transition's[supreg] stated purpose 
supports Terrafugia's assertion that the requested exemption is 
consistent with the public interest.
    We have also considered motor vehicle safety issues related to the 
exemption requested by Terrafugia. We believe that, in general, the 
requested exemption will have a limited impact on motor vehicle safety 
because of the low number of vehicles expected to be produced and 
because each vehicle is likely to travel on public roads only 
infrequently. Terrafugia predicted producing 200 vehicles during the 
exemption period and estimated that, on average, each vehicle would 
spend less than 2,000 miles on the road annually.
    However, as explained in detail below, after considering the 
individual requirements from which exemption is sought, the public 
comments, and the agency's policy on granting exemptions, we have 
determined that the three-year exemption requested for the ESC system 
requirements and the advanced air bag requirements is not warranted. 
Instead,

[[Page 38277]]

we are granting a one-year exemption from these requirements.
    Terrafugia indicated that the tires and rims it plans on using have 
appropriate load and speed ratings for the Transition[supreg] and 
stated that it had already flight-tested this equipment. Most of the 
public comments supported exempting Terrafugia from the tire and rim 
requirements of FMVSS No. 110. One commenter expressed concern about 
the safety of driving the Transition[supreg] without the FMVSS-required 
safety equipment, including tires and rims, but did not specifically 
comment on any consequences of Terrafugia's proposed use of motorcycle 
tires and rims.
    After considering these factors, we believe that the requested 
three-year exemption from S4.1 and S4.4 of FMVSS No. 110 is consistent 
with the public interest.
    Regarding the ESC system requirements of FMVSS No. 126, several 
commenters asserted that the design of the Transition[supreg] was 
significantly different than vehicles displaying rollover tendencies, 
which drove the adoption of the ESC requirement, and, therefore, 
meeting the ESC system requirements would have a minor safety impact. 
However, one commenter asserted that, in light of NHTSA's own 
statistics indicating the ability of ESC systems to prevent crashes 
other than rollovers, the ESC requirements should not be ignored 
because of the associated engineering and development expense.
    The agency's research has shown that ESC systems have the ability 
to prevent 36 percent of fatal single-vehicle crashes of passenger cars 
and 63 percent of fatal single-vehicle crashes of LTVs. These 
statistics include crashes that do not involve vehicle rollovers. 
Accordingly, we believe that, in spite of the Transition's[supreg] 
design, an ESC system will improve the safety of the vehicle.
    Additionally, Terrafugia expressed concern that an ESC system would 
create a potential hazard while the Transition[supreg] is in flight. 
However, the agency notes that FMVSS No. 126 explicitly allows vehicles 
to be equipped with an ``ESC Off'' control that puts the ESC system 
into a mode in which it will no longer meet the performance 
requirements described in the standard. Terrafugia did not discuss this 
provision or explain why such a control would not be feasible for the 
Transition[supreg].
    Weighing these factors, the agency does not believe that a three-
year exemption from FMVSS No. 126 is warranted. Instead, we are 
granting Terrafugia a one-year exemption. Although this period is 
shorter than that requested by the company, the exemption will allow 
Terrafugia to begin production and continue to work towards compliance.
    Regarding the glazing requirements of FMVSS No. 205, Terrafugia 
stated that using automobile safety glass would cause a potential 
hazard in the event of an in-flight bird strike. Several commenters 
supported this assertion. However, one commenter expressed concern that 
the polycarbonate windshield and windows equipped in the 
Transition[supreg] would scratch and haze easily when exposed to road 
conditions and the use of windshield wipers. The commenter also stated 
that emergency personnel would have a difficult time removing the 
polycarbonate windshield. We acknowledge that a polycarbonate 
windshield may be subject to more scratching and hazing than an FMVSS-
compliant windshield. However, we believe that these concerns are 
mitigated by the Transition's[supreg] limited expected road use and by 
Terrafugia's assertions that each Transition[supreg] would be required 
to undergo regular, frequent inspections, at which time windshields 
with degraded visibility would be identified and replaced. 
Additionally, we do not believe that a polycarbonate windshield would 
meaningfully hamper rescue efforts by emergency personnel. Accordingly, 
we believe that the requested three-year exemption from S5 of FMVSS No. 
205 is consistent with the public interest.
    Finally, regarding the exemption from the advanced air bag 
requirements of FMVSS No. 208, there was disagreement among the 
commenters as to whether children would likely be riding in the 
Transition[supreg], with some commenters indicating they do not fly 
with children in their aircraft and others indicating that they do. One 
commenter noted that at least one organization encourages children to 
fly and has set up a program to provide such opportunities. Terrafugia 
acknowledged that children might ride in the Transition[supreg] but 
indicated that, in light of the average age of the customers purchasing 
the vehicle, it was not expected to be a common occurrence.
    In 2000, NHTSA upgraded the requirements for air bags in passenger 
cars and light trucks, requiring what are commonly known as ``advanced 
air bags.'' \23\ The upgrade was designed to meet the twin goals of 
improving protection for occupants of all sizes, belted and unbelted, 
in moderate-to-high-speed crashes, and of minimizing the risks posed by 
air bags to infants, children, and other occupants, especially in low-
speed crashes.
---------------------------------------------------------------------------

    \23\ See 65 FR 30680 (May 12, 2000).
---------------------------------------------------------------------------

    The issuance of the advanced air bag requirements was a culmination 
of a comprehensive plan that the agency announced in 1996 to address 
the adverse effects of air bags. This plan also included an extensive 
consumer education program to encourage the placement of children in 
rear seats.
    The new requirements were phased-in, beginning with the 2004 model 
year. Small volume manufacturers were not subject to the advanced air 
bag requirements until the end of the phase-in period, i.e., September 
1, 2006.
    In recent years, NHTSA has addressed a number of petitions for 
exemption from the advanced air bag requirements of FMVSS No. 208. The 
majority of these requests have come from small manufacturers, each of 
which has petitioned on the basis that compliance would cause it 
substantial economic hardship and that it has tried in good faith to 
comply with the standard. In recognition of the more limited resources 
and capabilities of small motor vehicle manufacturers, authority to 
grant exemptions based on substantial economic hardship and good faith 
efforts was added to the Vehicle Safety Act in 1972 to enable the 
agency to give those manufacturers additional time to comply with the 
Federal safety standards.
    NHTSA has granted a number of these petitions, usually in 
situations in which the manufacturer is supplying standard air bags in 
lieu of advanced air bags.\24\ In addressing these petitions, NHTSA has 
recognized that small manufacturers may face particular difficulties in 
acquiring or developing advanced air bag systems.
---------------------------------------------------------------------------

    \24\ See, e.g., grant of petition to Panoz, 72 FR 28759 (May 22, 
2007), or grant of petition to Koenigsegg, 72 FR 17608 (April 9, 
2007).
---------------------------------------------------------------------------

    Notwithstanding those previous grants of exemption, NHTSA is 
considering two key issues--
    (1) Whether it is in the public interest to continue to grant such 
petitions, particularly in the same manner as in the past, given the 
number of years these requirements have now been in effect and the 
benefits of advanced air bags, and (2) to the extent such petitions are 
granted, what plans and countermeasures to protect child and infant 
occupants, short of compliance with the advanced air bag requirements, 
should be expected.
    While the exemption authority was created to address the problems 
of small manufacturers and the agency wishes to be appropriately 
attentive to those problems, it was not anticipated by the

[[Page 38278]]

agency that use of this authority would result in small manufacturers 
being given much more than relatively short term exemptions from 
recently implemented safety standards, especially those addressing 
particularly significant safety problems.
    Given the passage of time since the advanced air bag requirements 
were established and implemented, and in light of the benefits of 
advanced air bags, NHTSA is considering whether it is in the public 
interest to continue to grant exemptions from these requirements, 
particularly under the same terms as in the past. The costs of 
compliance with the advanced air bag requirements of FMVSS No. 208 are 
costs that all entrants to the U.S. automobile marketplace should 
expect to bear. Furthermore, NHTSA understands that, in contrast to the 
initial years after the advanced air bag requirements went into effect, 
low volume manufacturers now have access to advanced air bag 
technology. Accordingly, NHTSA tentatively concludes that the expense 
of advanced air bag technology may not now be sufficient, in and of 
itself, to justify the grant of a petition for a hardship exemption 
from the advanced air bag requirements.
    As part of the review of the agency's policy regarding exemptions 
from the advanced air bag requirements, we have published several 
notices of receipt that include requests for public comment on these 
issues.
    The agency acknowledges that Terrafugia faces impediments beyond 
the expense of advanced air bag technology and believes that it is 
consistent with the public interest to grant the requested exemption. 
However, in light of NHTSA's reexamination of the agency's policy 
regarding exemptions from the advanced air bag requirements, we do not 
believe that the three-year exemption requested is warranted. Instead, 
we are granting Terrafugia a one-year exemption from the advanced air 
bag requirements. Although this period is shorter than that requested 
by Terrafugia, this exemption will allow Terrafugia to begin production 
and continue its efforts toward full compliance.
    As a condition of this exemption, the Transition[supreg] must have 
the permanently affixed ``sun visor air bag warning label'' and the 
removable ``warning label on the dashboard'' that NHTSA developed/
requires for vehicles without advanced air bags.
    The agency acknowledges that Terrafugia's petition indicated that a 
three-year exemption was required to comply with the FMVSSs and that 
the company may not be able to achieve full compliance with the 
requirements of FMVSS No. 126 and the advanced air bag requirements of 
FMVSS No. 208 within the one-year exemption period granted by this 
notice. However, as stated above, this exemption will allow Terrafugia 
to begin production and continue its efforts toward full compliance 
with these standards. Additionally, we note that Part 555 allows a 
manufacturer to apply for renewal of a temporary exemption, and we 
emphasize that our decision to grant a more limited exemption than that 
requested does not foreclose Terrafugia from applying for such an 
extension at the end of the exemption period.

E. Labels

    We note that, as explained below, prospective purchasers will be 
notified that the vehicle is exempted from the specified requirements 
of FMVSS Nos. 110, 126, 205, and 208. Under Sec.  555.9(b), a 
manufacturer of an exempted vehicle must affix securely to the 
windshield or side window of each exempted vehicle a label containing a 
statement that the vehicle conforms to all applicable FMVSSs in effect 
on the date of manufacture ``except for Standard Nos. [listing the 
standards by number and title for which an exemption has been granted] 
exempted pursuant to NHTSA Exemption No. ------------.'' This label 
notifies prospective purchasers about the exemption and its subject. 
Under Sec.  555.9(c), this information must also be included on the 
vehicle's certification label.
    The text of Sec.  555.9 does not expressly indicate how the 
required statement on the two labels should read in situations in which 
an exemption covers part but not all of an FMVSS. We believe that a 
statement that the vehicle has been exempted from an FMVSS generally, 
without an indication that the exemption is limited to the specified 
provisions, could be misleading. A consumer might incorrectly believe 
that the vehicle has been exempted from all of the standard's 
requirements. Moreover, we believe that the addition of a reference to 
such provisions by number would be of little use to consumers, since 
they would not know the subject of those specific provisions. For these 
reasons, we believe that, in reference to this exemption, the two 
labels should read in, relevant part, ``except for the General Tire 
Requirements and Rim Requirements of Standard No. 110, Tire Selection 
and Rims and Motor Home/Recreation Vehicle Trailer Load Carrying 
Capacity Information for Motor Vehicles with a GVWR of 4,536 kilograms 
(10,000 pounds) or less, Standard No. 126, Electronic Stability Control 
Systems, the Glazing Requirements of Standard No. 205, Glazing 
Materials, and the Advanced Air Bag Requirements of Standard No. 208, 
Occupant Crash Protection, exempted pursuant to * * *.'' We note that 
the phrases used to describe the specific exempted provisions are 
abbreviated forms of the titles of the sections of the standards from 
which Terrafugia is exempted. We believe it is reasonable to interpret 
Sec.  555.9 as requiring this language.
    Additionally, the Transition[supreg] must have the permanently 
affixed ``sun visor air bag warning label'' and the removable ``warning 
label on the dashboard'' that NHTSA developed/requires for vehicles 
without advanced air bags. The requirements for these labels are 
described in paragraph S4.5.1 of FMVSS No. 208.

F. Decision

    In consideration of the foregoing, we conclude that compliance with 
certain requirements of FMVSS No. 110, Tire Selection and Rims and 
Motor Home/Recreation Vehicle Trailer Load Carrying Capacity 
Information for Motor Vehicles With a GVWR of 4,536 kilograms (10,000 
pounds) or Less, FMVSS No. 126, Electronic Stability Control Systems, 
FMVSS No. 205, Glazing Materials, and the advanced air bag requirements 
of FMVSS No. 208, Occupant Crash Protection, would cause substantial 
economic hardship to a manufacturer that has tried in good faith to 
comply with the standard. We further conclude that the granting of an 
exemption from these requirements would be in the public interest and 
consistent with the objectives of traffic safety.
    In accordance with 49 U.S.C. 30113(b)(3)(B)(i), Terrafugia is 
granted NHTSA Temporary Exemption No. EX 11-02, from S4.1 and S4.4 of 
FMVSS No. 110, FMVSS No. 126, S5 of FMVSS No. 205, and S14 (apart from 
S14.5.1(a)) of FMVSS No. 208 beginning on June 1, 2012. In addition to 
certifying compliance with the belted 50th percentile adult male dummy 
barrier impact requirements in S14.5.1(a) of FMVSS No. 208, Terrafugia 
must certify to the unbelted 50th percentile adult male dummy barrier 
impact test requirement that applied prior to September 1, 2006 
(S5.1.2(a) of FMVSS No. 208). For purposes of this exemption, the 
unbelted sled test in S13 of FMVSS No. 208 is an acceptable option for 
that requirement.

[[Page 38279]]

    This exemption is for the Transition[supreg]. The exemption from 
FMVSS No. 126 and S14 (apart from S14.5.1(a)) of FMVSS No. 208 shall 
remain in effect for one year from the effective date, and the 
exemption from S4.1 and S4.4 of FMVSS No. 110 and S5 of FMVSS No. 205 
shall remain in effect for three years from the effective date, as 
indicated in the DATES section of this document. (49 U.S.C. 30113; 
delegations of authority at 49 CFR 1.50. and 501.8)

    Issued on: June 16, 2011.
David L. Strickland,
Administrator.
[FR Doc. 2011-16222 Filed 6-28-11; 8:45 am]
BILLING CODE 4910-59-P