American Automobile Labeling Act; implementation: Motor vehicle content labeling; domestic and foreign parts content information,

[Federal Register: July 28, 1999 (Volume 64, Number 144)]

[Rules and Regulations]

[Page 40777-40781]

From the Federal Register Online via GPO Access [wais.access.gpo.gov]

[DOCID:fr28jy99-15]

DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

49 CFR Part 583

[Docket No. NHTSA-98-5064, Notice 2]

RIN 2127-AH33

Motor Vehicle Content Labeling

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

ACTION: Final rule.

SUMMARY: This final rule amends the regulation we issued to implement the American Automobile Labeling Act. That Act requires passenger motor vehicles to be labeled with information about their domestic and foreign parts content. Congress amended that Act last year to make a number of changes in the labeling requirement. This final rule makes the regulation consistent with those changes.

DATES: Effective date: The amendments made in this rule are effective June 1, 2000. Manufacturers may voluntarily comply with the amendments before that time.

Petitions for reconsideration: Petitions for reconsideration must be received not later than September 27, 1999.

ADDRESSES: Petitions for reconsideration should be submitted to: Administrator, National Highway Traffic Safety Administration, 400 Seventh Street, SW, Washington, DC 20590.

FOR FURTHER INFORMATION CONTACT: For nonlegal issues: Henrietta Spinner, Office of Planning and Consumer Programs, National Highway Traffic Safety Administration, 400 Seventh Street, SW, Washington, DC 20590 (202-366-4802).

For legal issues: Edward Glancy, Office of the Chief Counsel, National Highway Traffic Safety Administration, 400 Seventh Street, SW, Washington, DC 20590 (202-366-2992).

SUPPLEMENTARY INFORMATION:

Background

On July 21, 1994, NHTSA published in the Federal Register (59 FR 37294) a new regulation, 49 CFR part 583, Automobile Parts Content Labeling, to implement the American Automobile Labeling Act (AALA). That Act, which is codified at 49 U.S.C. 32304, requires passenger motor vehicles to be labeled with information about their domestic and foreign parts content.

As part of the NHTSA Reauthorization Act of 1998,‹SUP›1‹/SUP› Congress amended the AALA to make a number of changes in the labeling requirement. The changes are set forth in section 7106(d) of the NHTSA Reauthorization Act.

\1\ This Act was part of the Transportation Equity Act for the 21st Century (TEA-21). The full text of TEA-21 and the conference report is available on the Web at http://www.fhwa.dot.gov/tea21/.

On February 8, 1999, we published in the Federal Register (64 FR 6021) a notice of proposed rulemaking (NPRM) to amend Part 583 to conform it to the amended AALA. We discussed each of the changes made by the Congress and the conforming amendments proposed for part 583.

Three of the changes made by Congress were of particular significance. One of these concerned the ``roll-up, roll-down'' provision. The original Act specified that, for purposes of determining percentage U.S./Canadian parts content, any equipment from outside suppliers that was at least 70 percent U.S./Canadian was rolled-up and treated as though it were 100 percent U.S./Canadian. Any equipment under 70 percent was rolled-down and treated by the Act as though it were zero percent U.S./Canadian.

The 1998 amendments eliminated the ``roll-down'' aspect of this provision. While equipment from an outside supplier that is at least 70 percent U.S./Canadian is still to be valued at 100 percent U.S./ Canadian, any equipment under 70 percent is now valued to the nearest five percent. Thus, equipment whose calculated U.S./Canadian content is 63 percent is now to be valued at 65 percent, instead of zero percent.

The second of these changes concerned the origin of the engine and transmission. The original Act specified that the label must state the names of the countries of origin for the engine and for the transmission. The Act provided that the determinations of country of origin were to be based on the purchase price of materials received at individual engine/transmission plants, but were to exclude engine/ transmission assembly costs. The 1998 amendments specified that assembly and labor costs incurred for the assembly of engines and transmissions are now to be included in making these country of origin determinations.

The third of these changes made permanent a limited, temporary

[[Page 40778]]

provision in the part 583 content calculation procedures giving a vehicle manufacturer added flexibility in making content determinations in those instances in which outside suppliers have not responded to the manufacturer's requests for content information.

In addition to proposing specific changes to conform Part 583 to the amended AALA, we also proposed a change in the format of the messages on the label to make them easier to understand. Part 583 currently requires a brief explanatory note concerning parts content to be provided at the end of the label. We proposed to require that this note be moved to the middle of the label, directly below the items of information for which the note is relevant, i.e., below the specified U.S./Canadian Parts Content and Major Sources of Foreign Parts Content.

We proposed to apply the new requirements to all model year 2000 carlines that were first offered for sale to ultimate purchasers on or after June 1, 1999. Since the changes were relatively straightforward and the statutory amendments left us little discretion, we believed the vehicle manufacturers could implement the changes needed to comply with the new requirements quickly.

Public Comments

We received public comments from several vehicle manufacturers and their associations, and from the National Automobile Dealers Association (NADA). Also, pursuant to the Agreement on Technical Barriers to Trade, the World Trade Organization (WTO) Secretariat was notified of the proposed rule. The European Commission sent comments to the WTO Enquiry Point for the United States, which forwarded the comments to our Docket. A summary of the more significant comments follows.

Several of the commenters reraised previous criticisms of the basic program established by the AALA. However, these comments were not within the scope of the NPRM. Moreover, the criticisms were directed to the AALA itself.

Commenters representing nearly all motor vehicle manufacturers stated that the proposed effective date of June 1, 1999 provided insufficient lead time. The Alliance of Automobile Manufacturers (Alliance) stated that its members would face extreme difficulties in implementing the proposed changes in such a short period. It stated that the elimination of the ``roll-down'' provision will require new, detailed certifications from outside suppliers which cannot reasonably be prepared and obtained in such a short time frame. The Alliance also stated that its member companies may need to adapt their computer systems supporting the AALA parts content calculation. The Alliance recommended an effective date of June 1, 2000.

The Association of International Automobile Manufacturers, Inc. (AIAM) similarly stated that the proposed effective date was neither reasonable nor practicable. That organization stated that auto manufacturers and their suppliers require considerable lead time to prepare an AALA label. AIAM stated that these preparations can often require up to seven months lead time to complete. AIAM provided a chart showing a typical AALA compliance schedule, including specific details of activities manufacturers must undertake.

Commenters also made several recommendations to reduce costs. The Japan Automobile Manufacturers Association (JAMA) stated that while elimination of the ``roll-down'' provision will result in a more accurate picture of actual parts content, it will do so at increased cost to the outside supplier, and hence to the vehicle manufacturer and ultimately the consumer. JAMA stated that one means of addressing this cost burden would be to permit suppliers of parts with low U.S./ Canadian content to report that such content is ``minimal'' or ``negligible'' without the burdensome certification requirements otherwise required.

JAMA noted that the agency had previously stated that it did not have authority to permit manufacturers to label vehicles with low U.S./ Canadian content as ``minimal,'' given the statutory requirement for manufacturers to provide a specific percentage. That organization stated that it believes the agency placed too much emphasis on its estimate on Congressional intent with respect to the issue.

JAMA stated that, at the very least, the agency should permit outside suppliers to employ the ``minimal'' concept, allowing vehicle manufacturers the option to state that all parts imported from a given overseas supplier are all ``non-U.S./Canadian,'' without keeping records by the individual part. That organization stated that this would serve to reduce the burden and simplify the calculation without compromising the integrity of the statute.

AIAM and Volkswagen made a recommendation with respect to a change to the AALA which specifies that the costs of miscellaneous parts (e.g., nuts, bolts, windshield wiper fluid, etc.) are now allocated to the country where final assembly of the vehicle takes place. These parts previously were not considered in making parts content calculations. AIAM and Volkswagen stated that it is difficult to identify the value of the miscellaneous parts on a particular carline and asked that an averaging concept be permitted, e.g., permit manufacturers to calculate a total value for all of the miscellaneous parts used to produce vehicles at a particular assembly plant and then divide that total by the number of vehicles produced.

One commenter, DaimlerChrysler, objected to the proposal to move the explanatory note to the middle of the label. That company stated that any change to the content label involves a good deal of coordination and programming effort and substantial lead time, and that the change would add additional cost and burden with little or no tangible benefit.

Agency Decision

After carefully considering the comments, we have decided to make the proposed rule final, but with a later effective date.

We have decided to establish an effective date of June 1, 2000, as recommended by the Alliance, while permitting optional early compliance. The proposed effective date of June 1, 1999 was based on an assumption that vehicle manufacturers and suppliers had already begun to collect the information needed to make the revised calculations required by the NHTSA Reauthorization Act of 1998. However, since the comments indicated that this was not true in many cases, the agency has concluded that a significantly longer leadtime is needed.

By permitting optional early compliance, vehicle manufacturers which are able to comply with the new requirements earlier, including for some or all of their model year 2000 vehicles, can do so. We recognize that consumers comparing the labels on different model year 2000 vehicles may sometimes be faced with differing labels. However, the changes are sufficiently minor that we do not believe this will cause any significant confusion.

We note that the AALA and part 583 contemplate that U.S./Canadian parts content and major sources of foreign parts content are determined on a once-a-model-year basis for a particular carline. The June 1, 2000 effective date means that new model year carlines introduced to the public on or after that date must bear the revised labels. New model year carlines introduced before

[[Page 40779]]

that date may continue to bear the old labels for the balance of the model year, even for vehicles manufactured after June 1, 2000.

While we have considered JAMA's request to permit suppliers of parts with low U.S./Canadian content to report such content as ``minimal'' or ``negligible'' rather than as a percentage (to the nearest five percent), we do not believe that such an exception from the express statutory requirements has been justified. Most significantly, JAMA has not shown that such an exception would not result in a loss of non-trivial benefits. The agency would not have authority to create such an exception, absent such a showing. Moreover, JAMA has not provided support for its contention that the requirement to provide a percentage is burdensome.

As to the AIAM/Volkswagen request that an averaging concept be permitted for calculating the value of miscellaneous parts, we note that the proposed rule did not include a procedure for calculating the value of these parts. It is our opinion that manufacturers need not identify the individual cost of each nut and bolt, but may simply make a good faith estimate of the overall value of miscellaneous parts. We do not believe it is necessary to state this in the regulatory text itself. One way of making such a good faith estimate might be to calculate a total value for all of the miscellaneous parts used to produce vehicles at a particular assembly plant and then divide that total by the number of vehicles produced. However, if substantially different vehicles were produced at the same plant, the vehicle manufacturer might need to make an adjustment so that the estimated value was reasonable for each individual carline.

While we have considered DaimlerChrysler's arguments against moving the explanatory note, we have decided to adopt this proposed change. As discussed in the NPRM, we believe that moving the note to the middle of the label, directly below the items of information for which the note is relevant, will make the label easier to read. While DaimlerChrysler stated that there is a cost to making any format change, it did not quantify the cost. Given that the label will have to be changed in other ways anyway, we believe that any cost impacts for moving the note will be negligible.

As noted earlier, several of the commenters criticized the basic requirements of the AALA. NADA stated that the rule is of little value to most consumers. AIAM stated that while Congress addressed some of its concerns in last year's amendments, it believes the law continues to provide misleading and inaccurate information. JAMA argued that the statute is costly to implement, burdensome to vehicle manufacturers and outside suppliers, and of little interest or use to vehicle purchasers in their buying decisions.

The EC submitted a comment stating:

The EC thinks that the label is superfluous, it is getting harder and harder to determine the real origin of details. Many companies manufacture in several countries and they can also be owned by several large owners. The new procedure makes it even more cumbersome when additional details such as screws and clips must be taken into account when determining the origin. The vehicle manufacturers must also get a certificate from each large supplier.

While we understand that a number of parties continue to have objections to the current content labeling program, we note that the objections are with the underlying statute. Since most of the details of the content labeling program are set forth in the AALA, any significant changes could only come from the Congress. We do note, however, that the extended leadtime provided for today's rule and our interpretation that good faith estimates may be made concerning the value of miscellaneous parts will help minimize costs.

We also note that this agency is in the process of conducting an evaluation of the AALA. This evaluation is being conducted pursuant to Executive Order 12866, Regulatory Planning and Review, which requires agencies to conduct periodic evaluations of the effectiveness of its existing regulations and programs. This evaluation is listed in the April 1999 Semiannual Regulatory Agenda. See 64 FR 21706, April 26, 1999. We plan to publish the evaluation of the AALA in the summer of 2000 in the Federal Register and will solicit comments from all parties.

Rulemaking Analyses and Notices

1. Executive Order 12866 and DOT Regulatory Policies and Procedures

   We have considered the impact of this rulemaking action under Executive Order 12866 and the Department of Transportation's regulatory policies and procedures. This rulemaking document was not reviewed by the Office of Management and Budget under E.O. 12866, ``Regulatory Planning and Review.'' The rulemaking action has been determined not to be significant under the Department's regulatory policies and procedures.

   This final rule amends 49 CFR part 583 to conform the agency's content labeling requirements and calculation procedures to recent statutory changes. The changes are so minor that they will not have any measurable effect on vehicle prices.

   The change most likely to result in any cost impacts is the one requiring outside suppliers to make calculations of U.S./Canadian content, to the nearest five percent, for equipment with U.S./Canadian content below 70 percent. This will increase compliance costs for some outside suppliers. The agency notes that there are about 15,000 suppliers to vehicle manufacturers. However, many small suppliers procure all their materials and components from the same country, and will experience negligible costs. NHTSA believes that cost impacts for other suppliers will be small and will diminish over time. Somewhat higher costs are likely to be experienced the first year as suppliers become familiar with the new calculation procedures and incorporate them into their programming or other systems. While the agency has concluded that the cost impacts will be small, it does not have sufficient information to quantify such costs. No commenter quantified any of the cost impacts. Because the economic impacts of this proposal are so minimal, preparation of a full regulatory evaluation is not necessary.

2. Regulatory Flexibility Act

   We have considered the effects of this rulemaking action under the Regulatory Flexibility Act (5 U.S.C. 601 et seq.) I hereby certify that the final rule will not have a significant economic impact on a substantial number of small entities. Therefore, a regulatory flexibility analysis is not required for this action. Although certain small businesses, such as parts suppliers and some vehicle manufacturers, are affected by the regulation, the effect on them is minor. The requirements are strictly informational and, as discussed above, cost impacts small.

3. National Environmental Policy Act

   We have analyzed this final rule for the purposes of the National Environmental Policy Act and determined that it will not have any significant impact on the quality of the human environment.

4. Executive Order 12612 (Federalism)

   We have analyzed this final rule in accordance with the principles and criteria set forth in Executive Order 12612. We have determined that it does not have sufficient federalism implications to warrant the preparation of a Federalism Assessment.

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5. Paperwork Reduction Act

   Information collection requirements established in this final rule differ from those approved by the Office of Management and Budget under the provisions of the Paperwork Reduction Act (Pub. L. 96-511) and assigned OMB Control Number 2127-0573. The current approval will expire on June 30, 2001. Since NHTSA believes that the changes will result in a small increase in the paperwork burden of this reporting requirement, NHTSA will ask OMB for approval to amend OMB Control Number 2127-0573 to account for any additional information collection burdens imposed on the public.

6. Executive Order 12778 (Civil Justice Reform)

   This final rule does not have any retroactive effect. States are preempted from promulgating laws and regulations contrary to the provisions of this rule. The rule does not require submission of a petition for reconsideration or other administrative proceedings before parties may file suit in court.

   List of Subjects in 49 CFR Part 583

   Imports, Motor vehicles, Labeling, Reporting and recordkeeping requirements.

   In consideration of the foregoing, 49 CFR Part 583 is amended as follows:

   PART 583--AUTOMOBILE PARTS CONTENT LABELING

   1. The authority citation for part 583 continues to read as follows:

      Authority: 49 U.S.C. 32304, 40 CFR 1.50, 501.2(f).

   2. Section 583.4 is amended by revising paragraph (b)(7) to read as follows:

      Sec. 583.4 Definitions.

      * * * * *

      (b) * * *

      (7) Passenger motor vehicle equipment means any system, subassembly, or component received at the final assembly point for installation on, or attachment to, such vehicle at the time of its initial shipment by the manufacturer to a dealer for sale to an ultimate purchaser. Passenger motor vehicle equipment also includes any system, subassembly, or component received by an allied supplier from an outside supplier for incorporation into equipment supplied by the allied supplier to the manufacturer with which it is allied. * * * * *

   3. Section 583.5 is amended by revising paragraph (a)(4), (a)(5), (b), and (i) to read as follows:

      Sec. 583.5 Label requirements.

      (a) * * *

      (4) Country of origin for the engine. The country of origin of the passenger motor vehicle's engine (the procedure for making this country of origin determination is set forth in Sec. 583.8);

      (5) Country of origin for the transmission. The country of origin of the passenger motor vehicle's transmission (the procedure for making this country of origin determination is set forth in Sec. 583.8); * * * * *

      (b) Except as provided in paragraphs (e), (f) and (g) of this section, the label required under paragraph (a) of this section shall read as follows, with the specified information inserted in the places indicated (except that if there are no major sources of foreign parts content, omit the section ``Major Sources of Foreign Parts Content''):

      Parts Content Information

      For vehicles in this carline:

      U.S./Canadian Parts Content: (insert number) % Major Sources of Foreign Parts Content:

      (Name of country with highest percentage): (insert number) %

      (Name of country with second highest percentage): (insert number) %

      Note: Parts content does not include final assembly, distribution, or other non-parts costs.

      For this vehicle:

      Final Assembly Point: (city, state, country) Country of Origin: Engine: (name of country) Transmission: (name of country) * * * * *

      (i) Carlines assembled in more than one assembly plant. (1) If a carline is assembled in more than one assembly plant, the manufacturer may, at its option, add the following additional information at the end of the explanatory note specified in paragraph (a)(6) of this section, with the specified information inserted in the places indicated:

      Two or more assembly plants produce the vehicles in this carline. The vehicles assembled at the plant where this vehicle was assembled have a U.S./Canadian parts content of [__]%.

      (2) A manufacturer selecting this option shall divide the carline for purposes of this additional information into portions representing each assembly plant.

      (3) A manufacturer selecting this option for a particular carline shall provide the specified additional information on the labels of all vehicles within the carline.

   4. Section 583.6 is amended by revising paragraphs (a), (c)(1)(ii), (c)(3)(ii), and (c)(6) to read as follows:

      Sec. 583.6 Procedure for determining U.S./Canadian parts content.

      (a) Each manufacturer, except as specified in Sec. 583.5 (f) and (g), shall determine the percentage U.S./Canadian Parts Content for each carline on a model year basis. This determination shall be made before the beginning of each model year. Items of equipment produced at the final assembly point (but not as part of final assembly) are treated in the same manner as if they were supplied by an allied supplier. All value otherwise added at the final assembly point and beyond, including all final assembly costs, is excluded from the calculation of U.S./Canadian parts content. The country of origin of nuts, bolts, clips, screws, pins, braces, gasoline, oil, blackout, phosphate rinse, windshield washer fluid, fasteners, tire assembly fluid, rivets, adhesives, grommets, and wheel weights, used in final assembly of the vehicle, is considered to be the country where final assembly of the vehicle takes place. * * * * *

      (c) * * *

      (1) * * *

      (ii) to otherwise have the actual percent of its value added in the United States and/or Canada, rounded to the nearest five percent. * * * * *

      (3) * * *

      (ii) to otherwise have the actual percent of its value added in the United States and/or Canada, rounded to the nearest five percent. * * * * *

      (6) If a manufacturer or allied supplier requests information in a timely manner from one or more of its outside suppliers concerning the U.S./Canadian content of particular equipment, but does not receive that information despite a good faith effort to obtain it, the manufacturer or allied supplier may make its own good faith value added determinations, subject to the following provisions:

      (i) The manufacturer or allied supplier shall make the same value added determinations as would be made by the outside supplier;

      (ii) The manufacturer or allied supplier shall consider the amount of value added and the location in which the value was added for all of the stages that the outside supplier would be required to consider;

      (iii) The manufacturer or allied supplier may determine that particular value is added in the United States and/

      [[Page 40781]]

      or Canada only if it has a good faith basis to make that determination;

      (iv) A manufacturer and its allied suppliers may, on a combined basis, make value added determinations for no more than 10 percent, by value, of a carline's total parts content from outside suppliers;

      (v) Value added determinations made by a manufacturer or allied supplier under this paragraph shall have the same effect as if they were made by the outside supplier;

      (vi) This provision does not affect the obligation of outside suppliers to provide the requested information. * * * * *

   5. Section 583.7 is amended by revising paragraph (a) to read as follows:

      Sec. 583.7 Procedure for determining major foreign sources of passenger motor vehicle equipment.

      (a) Each manufacturer, except as specified in Sec. 583.5(f) and (g), shall determine the countries, if any, which are major foreign sources of passenger motor vehicle equipment and the percentages attributable to each such country for each carline on a model year basis, before the beginning of each model year. The manufacturer need only determine this information for the two such countries with the highest percentages. Items of equipment produced at the final assembly point (but not as part of final assembly) are treated in the same manner as if they were supplied by an allied supplier. In making determinations under this section, the U.S. and Canada are treated together as if they were one (non-foreign) country. The country of origin of nuts, bolts, clips, screws, pins, braces, gasoline, oil, blackout, phosphate rinse, windshield washer fluid, fasteners, tire assembly fluid, rivets, adhesives, grommets, and wheel weights, used in final assembly of the vehicle, is considered to be the country where final assembly of the vehicle takes place. * * * * *

   6. Section 583.8 is amended by revising paragraphs (b) and (d) to read as follows:

      Sec. 583.8 Procedure for determining country of origin for engines and transmissions (for purposes of determining the information specified by Secs. 583.5(a)(4) and 583.5(a)(5) only).

      * * * * *

      (b) The value of an engine or transmission is determined by first adding the prices paid by the manufacturer of the engine/transmission for each component comprising the engine/transmission, as delivered to the assembly plant of the engine/transmission, and the fair market value of each individual part produced at the plant. The assembly and labor costs incurred for the final assembly of the engine/transmission are then added to determine the value of the engine or transmission. * * * * *

      (d) Determination of the total value of an engine/transmission which is attributable to individual countries. The value of an engine/ transmission that is attributable to each country is determined by adding the total value of all of the components installed in that engine/transmission which originated in that country. For the country where final assembly of the engine/transmission takes place, the assembly and labor costs incurred for such final assembly are also added. * * * * *

   7. Section 583.10 is amended by revising paragraph (a)(5) to read as follows:

      Sec. 583.10 Outside suppliers of passenger motor vehicle equipment.

      (a) * * *

      (5) For equipment which has less than 70 percent of its value added in the United States and Canada, (i) The country of origin of the equipment, determined under Sec. 583.7(c); and

      (ii) The percent of its value added in the United States and Canada, to the nearest 5 percent, determined under Sec. 583.6(c). * * * * *

      Issued on: July 21, 1999. Frank Seales, Jr., Acting Deputy Administrator.

      [FR Doc. 99-19318Filed7-27-99; 8:45 am]

      BILLING CODE 4910-59-P