Defect and Noncompliance Responsibility and Reports Defect and Noncompliance Notification, 38805-38815 [05-13249]

Agencies

• National Highway Traffic Safety Administration
• DEPARTMENT OF TRANSPORTATION

[Federal Register Volume 70, Number 128 (Wednesday, July 6, 2005)]
[Rules and Regulations]
[Pages 38805-38815]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-13249]


-----------------------------------------------------------------------

DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

49 CFR Parts 573 and 577

[Docket No. NHTSA-2004-18341; Notice No. 2]
RIN 2127-AJ48


Defect and Noncompliance Responsibility and Reports Defect and 
Noncompliance Notification

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

ACTION: Final Rule; Response to Petitions for Reconsideration.

-----------------------------------------------------------------------

SUMMARY: This document responds to petitions for reconsideration of the 
June 23, 2004 dealer notification rule that amended several provisions 
of agency regulations on notifications by manufacturers of motor 
vehicles and motor vehicle equipment to dealers and distributors when 
they or NHTSA decide that vehicles or equipment contain a defect 
related to motor vehicle safety or do not comply with a Federal motor 
vehicle safety standard.

DATES: The amendments in this rule are effective on August 5, 2005.
    Petitions: Petitions for reconsideration must be received by August 
22, 2005 and should refer to this docket and the notice number of this 
document and be submitted to: Administrator, National Highway Traffic 
Safety Administration, 400 Seventh St., SW., Washington, DC 20590.

FOR FURTHER INFORMATION CONTACT: For non-legal issues, you may contact 
Mr. George Person, Office of Defects Investigation, Room 5319, National 
Highway Traffic Safety Administration, 400 Seventh Street, SW., 
Washington, DC 20590; Telephone: (202) 366-5210. For legal issues, you 
may contact Michael Goode, Office of Chief Counsel, Telephone: (202) 
366-5263.

SUPPLEMENTARY INFORMATION: 

I. Background

    On September 27, 1993, NHTSA published a Notice of Proposed 
Rulemaking (NPRM) proposing several amendments to its regulations (49 
CFR parts 573 and 577) concerning manufacturers' obligations to provide 
notification and remedy for motor vehicles and items of motor vehicle 
equipment found to contain a defect related to motor vehicle safety or 
a noncompliance with a Federal motor vehicle safety standard (58 FR 
50314). On April 5, 1995, we issued a final rule (60 FR 17254) 
addressing most aspects of that NPRM, and on January 4, 1996, we 
amended several provisions of that final rule in response to petitions 
for reconsideration of that rule (61 FR 274). However, the agency did 
not promulgate regulations on dealer notification in the 1995 or 1996 
rulemakings because we had not resolved the issues raised by the 
comments submitted in response to the NPRM.
    In the NPRM, we proposed to require manufacturers to notify their 
dealers and distributors \1\ of safety-related

[[Page 38806]]

defects and noncompliances in their motor vehicles and equipment within 
five days after notifying the agency of their determination of a safety 
defect or noncompliance pursuant to 49 CFR part 573, Defect and 
Noncompliance Reports. In a May 19, 1999 supplemental notice of 
proposed rulemaking (SNPRM), NHTSA proposed a different approach (64 FR 
27227). Rather than specify a particular time period, we proposed to 
require manufacturers to notify dealers within a reasonable time in 
accordance with a schedule that is to be submitted to the agency with 
the manufacturer's defect or noncompliance information report required 
by 49 CFR Sec.  573.6 (this section was codified as Sec.  573.5 prior 
to August 9, 2002). NHTSA published the final rule on June 23, 2004 (69 
FR 34954). It adopted the proposal in the SNPRM for dealer notification 
within a reasonable time after the manufacturer decides that a defect 
that relates to motor vehicle safety or a noncompliance exists. 49 CFR 
577.7(c)(1). In addition, the final rule established that, if the 
agency were to find that the public interest requires dealers to be 
notified at an earlier date than that proposed by the manufacturer, the 
manufacturer would have to notify its dealers in accordance with the 
agency's directive. Id. Finally, the final rule adopted the proposal in 
the SNPRM requiring that the dealer notification contain certain 
information and described the manner in which such notification is to 
be accomplished. 49 CFR 577.7(c) and 577.13.
---------------------------------------------------------------------------

    \1\ 49 U.S.C. 30118, 30119, and 30120 refer to notification to 
``dealers,'' without referring to ``distributors.'' However, under 
49 U.S.C. 30116, manufacturers of motor vehicles and motor vehicle 
equipment have certain responsibilities toward their distributors 
after it is determined that a product contains a safety-related 
defect or a noncompliance. Therefore, the notification requirements 
apply to both dealers and distributors. However, throughout the 
remainder of this preamble, we will refer to dealers and 
distributors as ``dealers,'' except where differentiation is 
required.
---------------------------------------------------------------------------

    In response to the final rule, the agency received four petitions 
for reconsideration. Two joint petitions were received: Public Citizen 
(PC) and the Center for Auto Safety (CAS) (collectively PC/CAS) and 
Motor and Equipment Manufacturers Association (MEMA) and the Automotive 
Aftermarket Suppliers Association (AASA) (collectively MEMA/AASA). The 
Juvenile Products Manufacturers Association, Inc. (JPMA) and General 
Motors Corporation (GM) filed separate petitions.
    PC/CAS objected to the provision allowing notification of dealers 
within a reasonable time and argued that the five-day period proposed 
in the NPRM should be instituted. GM asked the agency to clarify that 
manufacturers are required to verify that they sent the dealer 
notifications, rather than that the notifications were actually 
received by their dealers. MEMA/AASA, JPMA, and GM objected to the 
inclusion of a provision in the final rule on manufacturers' 
notification of offers to repurchase equipment in dealer inventory.
    The issues raised by the petitioners are addressed below.

II. Discussion

A. Timing of Dealer Notification

Statutory and Regulatory Framework
    Under 49 U.S.C. 30118(c), a manufacturer of motor vehicles or 
replacement equipment must notify NHTSA and owners, purchasers, and 
dealers of the vehicle or equipment as provided by 49 U.S.C. 30119(d) 
if the manufacturer learns that the vehicle or equipment contains a 
defect and decides in good faith that the defect is related to motor 
vehicle safety, or does not comply with an applicable federal motor 
vehicle safety standard. This notification must be accomplished within 
a reasonable time after the manufacturer first decides that a safety-
related defect or noncompliance exists under 49 U.S.C. 30118(c). 49 
U.S.C. 30119(c)(2). Similarly, if NHTSA decides, pursuant to 49 U.S.C. 
30118(b), that the vehicle or equipment contains a safety-related 
defect or does not comply with an applicable standard, the 
Administrator is required to order the manufacturer to notify owners, 
purchasers, and dealers of vehicle or equipment of the defect or 
noncompliance. In these instances, notification is to be given within a 
reasonable time prescribed by NHTSA. 49 U.S.C. 30119(c)(1).
    In addition to statutory requirements, NHTSA regulations delineate 
various aspects of manufacturers' notification obligations. For over 30 
years, 49 CFR part 573, Defect and Noncompliance Responsibility and 
Reports, has set forth requirements for manufacturers' notification of 
NHTSA of a safety-related defect or noncompliance. In addition, 49 CFR 
part 577, Defect and Noncompliance Notification, has set out 
requirements for manufacturers' notification of owners of motor 
vehicles and motor vehicle equipment of a safety defect or 
noncompliance.
Dealer Notification in the 1993 NPRM
    The September 1993 NPRM proposed that manufacturers conducting 
safety recalls provide their dealers with a document that contained the 
information set forth in the report submitted to the agency pursuant to 
49 CFR part 573, within five working days after submitting the report 
to NHTSA.
    A large number of parties commented on the dealer notification 
proposal in the NPRM, including manufacturer and dealer associations, 
individual manufacturers, and Advocates for Highway and Auto Safety. 
All manufacturing and dealer entities objected to the proposed five-day 
dealer notification requirement. Those objecting included Toyota Motor 
Corporate Services of North America, Inc. (Toyota), Volkswagen of 
America, Inc. (VWoA), Chrysler Corporation (Chrysler), American 
Automobile Manufacturers Association (AAMA), Association of 
International Automobile Manufacturers (AIAM), National Automobile 
Dealers Association (NADA), and five heavy truck manufacturers.
    The manufacturer and dealer commenters explained the procedure for 
dealer notification in operation for almost two decades since the 
enactment of the 1974 Amendments to the National Traffic and Motor 
Vehicle Safety Act (Safety Act). 88 Stat. 1470 et seq. In essence, 
under the operating procedure, manufacturers provided notice to dealers 
within a reasonable time after deciding that there was a safety-related 
defect or noncompliance. As the commenters pointed out, this procedure 
was working well and there was no need for the proposed five-day dealer 
notification period. The heavy truck manufacturers maintained that 
manufacturers act responsibly without the five-day rule, citing as an 
example a steering gear recall, in which the affected manufacturers 
notified dealers within one day of the defect determination and advised 
drivers to park their trucks.
    AAMA and NADA emphasized the statutory basis of dealer 
notification. They explained that section 153(b) of the Safety Act, as 
amended, (which has been recodified in 49 U.S.C. 30119(c) \2\) requires 
provision of notice of a safety-related defect to a dealer within a 
reasonable time after the determination of a defect. They argued that 
the reasonable time concept allows flexibility by taking into account 
the differing circumstances and complexities of any particular remedy 
program. Chrysler argued that circumstances requiring early 
notification can be taken care of in the present framework by the 
agency reviewing the issue with the manufacturer and resolving it based 
upon the reasonable time requirement.
---------------------------------------------------------------------------

    \2\ The National Traffic and Motor Vehicle Safety Act, as 
amended, was repealed in the course of the 1994 recodification of 
various laws pertaining to the Department of Transportation and was 
reenacted and recodified without substantive change. Pub. L. 103-
272, 108 Stat. 745, 941-973, 1379, 1385, 1388, 1397, 1399.

---------------------------------------------------------------------------

[[Page 38807]]

    VWoA, Chrysler and Toyota addressed the practical implications of 
Section 2504 of the Intermodal Surface Transportation Efficiency Act of 
1991 (ISTEA), Pub. L. 102-240, 105 Stat. 1914, 2083-2084. Under that 
provision, which is now codified at 49 U.S.C. 30120(i), in essence, 
when a manufacturer has given notice to a dealer about a new vehicle or 
equipment in a dealer's possession that contains a defect related to 
motor vehicle safety or does not comply with an applicable standard, 
the dealer may sell the vehicle or equipment only if it is remedied 
before delivery under the sale. Toyota pointed out that this statutory 
stop sale provision does not require a stop sale of vehicles on the 
date of filing the defect report with NHTSA, but only after the 
manufacturer's notification to the dealer. In VWoA's and Chrysler's 
view, there was no need for the regulation to specify a specific time 
within which a manufacturer must notify its dealers because of the 
self-interest of the manufacturer once the defect has been determined. 
According to AAMA, this self-interest is most manifest in cases where 
there have been imminent safety defects in newly produced vehicles in 
dealer inventories. In such situations, manufacturers recognize that 
early notification of dealers, with the consequent embargo of products, 
is likely to provide a significant safety benefit, and they routinely 
act accordingly.
    Conversely, in recall situations involving older vehicles, where 
few to no new vehicles would be in dealers' inventory, or where the 
defect does not pose an imminent safety risk, AAMA argued that there is 
no safety benefit from an early notification. AAMA called the proposed 
five-day dealer notification period ``unworkable, unnecessary, and in 
most cases, likely to be counterproductive.'' Likewise, Toyota 
commented that not all safety recalls are on the same level of 
importance. For example, where there is a minor labeling problem, it is 
both unreasonable and inconsistent for the manufacturer to stop sale of 
thousands of dollars of in-stock vehicles when in-use vehicles are 
being operated before the commencement of the recall. NADA emphasized 
that a stop sale where there is no safety risk puts an unfair burden on 
dealers because new vehicle inventory is a large portion of a dealer's 
overhead.
    Similarly, VWoA maintained that where the defect is time or mileage 
dependent and is not going to arise immediately, there is no practical 
reason to notify dealers until the dealer has received the necessary 
diagnostic and repair training or parts to correct the defect. AAMA and 
Chrysler pointed out that publicity in situations where the remedy is 
not yet ready creates owner frustration and confusion, and results in a 
lower overall recall completion rate (the percentage of vehicles 
remedied). Thus, early notification is counterproductive.
Dealer Notification in the 1997 Notice
    Pursuant to the Paperwork Reduction Act, the agency published a 
Federal Register notice requesting public comment on the potential 
paperwork burdens associated with the proposed rule. 62 FR 63598-63599 
(Dec. 1, 1997). The notice referred to the agency's proposal to 
establish a time limit within which manufacturers must notify dealers 
and to a paperwork burden on manufacturers in writing letters to NHTSA 
to request a delay in providing dealer notification beyond the five 
days specified in the rule. 62 FR 63598.
    Manufacturer trade associations and a motor vehicle dealer trade 
association submitted comments. AAMA again opposed the five-day notice 
proposal; AAMA's principal argument was that the statutory reasonable 
time standard controls timing issues. AAMA added that their position 
was underscored by the agency's retreat from a restrictive time 
requirement proposed in the same rulemaking effort to amend 49 CFR 
parts 573 and 577. In particular, in 1996, the agency changed a 
requirement that manufacturers provide a detailed schedule for any 
owner notification campaign in a recall that would not begin within 30 
days of the filing of a defect and noncompliance information report 
under 49 CFR 573.5 (recodified at Sec.  573.6 in 2002) (Part 573 
Report) or end within 75 days of that report. AAMA quoted language from 
the Federal Register notice revising the rule wherein the agency stated 
that ``manufacturers will have flexibility to tailor the recall 
notification schedule [to owners] to the circumstances of the 
particular recall * * * while NHTSA will retain the ability, on a case-
by-case basis, to ensure that the timing of recall notification is 
reasonable.'' 61 FR at 275. Ford opposed the five-day notification 
period, stating ``there is no evidence to support the need for a final 
rule on this [dealer notification] matter,'' and suggested that the 
agency terminate rulemaking action on dealer notification. Similarly, 
AIAM argued that there is no need for a five-day notice when the 
current procedure involving a reasonable time for notification has 
worked, and the agency has sufficient authority to require early 
notification when manufacturers do not act voluntarily. AIAM also 
asserted that there is no safety benefit in an early notice where there 
is no imminent safety risk; and the artificial sense of urgency results 
in a financial burden to dealers, market disruption, and confusion to 
consumers. NADA emphasized that the statute imposes a reasonable time 
standard rather than a five-day default period, and that the current 
system provides for the flexibility necessary in recall situations that 
are complex and variable.
The 1999 SNPRM
    After considering the information presented in the comments on the 
1993 proposed rule and the 1997 Paperwork Reduction Act notice, NHTSA 
published the SNPRM on May 19, 1999. 64 FR 27227. In the SNPRM, the 
agency proposed to require manufacturers to notify their dealers of 
safety defects and noncompliances in accordance with a schedule 
submitted to the agency with the manufacturer's Part 573 Report. The 
SNPRM stated that such a schedule will be reviewable by NHTSA to assure 
that the notification will be within a reasonable time.
    In the SNPRM, the agency explained:

    This decision to permit greater flexibility than originally 
proposed is based on NHTSA's recognition that the process of dealer 
notification has worked well for over 20 years, notwithstanding the 
absence of formal regulatory requirements. In conformity with the 
statutory duty to notify dealers within a ``reasonable time'' (49 
U.S.C. 30119(c)(2)), manufacturers have generally notified their 
dealers of defects and noncompliances in a manner that has allowed 
repairs to be performed promptly, with minimal disruption of the 
dealers' operations.
    Where manufacturers have concluded that a defect or 
noncompliance presented an immediate safety risk, they have notified 
their dealers as soon as the defect or noncompliance determination 
was made, and have directed the dealers to stop sales (and leases) 
until the problem is corrected. On occasion, however, NHTSA and a 
manufacturer have disagreed about when notification should occur or 
whether immediate notification and immediate cessation of sales is 
appropriate. For this reason, the agency needs to know the 
manufacturer's proposed schedule for dealer notification so it can 
assess the safety implications of that schedule. Therefore, NHTSA is 
proposing a new section 573.5(c)(8)(iii), which would require the 
manufacturer to include the estimated date of its dealer 
notification in its Part 573 defect or noncompliance report, in the 
same manner as section 573.5(c)(8)(ii) currently requires the 
submission of the manufacturer's proposed schedule for its owner 
notification and remedy campaign. In addition, to eliminate the 
possibility that any

[[Page 38808]]

disagreements between NHTSA and the manufacturers concerning the 
notification date of dealers, NHTSA is proposing a new section 
577.7(c)(1), [which] requires manufacturers to comply with a NHTSA 
order to notify their dealers on a specific date, if the agency has 
found that notification at that time is in the public interest. In 
making such determinations, the agency will consider such factors as 
the severity of the safety risk; the likelihood of occurrence of the 
defect or noncompliance; availability of an interim remedial action 
by the owner; whether an initial dealer inspection would identify 
suspect vehicles or equipment items; the time frame in which the 
defect will manifest itself; whether there will be a delay in the 
availability of the remedy from the manufacturer; and, in those 
recalls where a delay is expected, the anticipated length of such 
delay. [64 FR at 27228]

    In response to the SNPRM, twelve entities, including trade 
associations of the motor vehicle and motor vehicle equipment 
industries, and automobile dealers submitted comments. Comments by the 
Alliance and AIAM, TMA and NADA supported the proposal in the SNPRM for 
notification of dealers within a reasonable time. There were no 
objections to the proposed reasonable time standard. Petitioners Public 
Citizen and the Center for Auto Safety did not comment.
The June 2004 Final Rule
    The June 2004 rule requires manufacturers to furnish dealers with 
notification of a safety-related defect or noncompliance in accordance 
with a schedule that manufacturers are to submit to the agency with 
their defect or noncompliance information report required by 49 CFR 
573.6(c)(8)(ii). 49 CFR 577.7(c). The notification to dealers must be 
provided within ``a reasonable time'' after the manufacturer decides 
that a defect related to motor vehicle safety or noncompliance exists. 
If the agency finds that the public interest requires dealers to be 
notified at an earlier date than that proposed by the manufacturer, the 
manufacturer must provide the required notification in accordance with 
the agency's directive. Id. The rule included a number of factors that 
the agency may consider. Id. The rule also set forth the required 
content of the dealer notification and the manner in which such 
notification is to be accomplished. Id; Sec.  577.13. In the preamble 
to the rule, NHTSA responded to comments on the SNPRM. Beyond that, it 
incorporated by reference the rationale in the SNPRM. 69 FR at 34955.
Petition for Reconsideration of the Reasonable Time Standard
    One petition for reconsideration of the June 2004 rule, submitted 
by PC/CAS, objected to the provision requiring dealer notification 
within a reasonable time after the manufacturer decides that a defect 
that relates to motor vehicle safety or a noncompliance exists. The 
petition requested the agency to reverse the rule and adopt a 
requirement that manufacturers notify their dealers within five days of 
the manufacturer's notice to NHTSA as proposed in 1993. Following 
receipt of the notice, the dealer would be prohibited from delivering 
the vehicle under a sale until parts were available and repairs were 
made. 49 U.S.C. 30120(i). In PC/CAS's view, the simplest and safest 
step for consumers is if they are never sold a defective vehicle in the 
first place. Petition at 6. The petitioners assert that under a 
reasonable time standard, defective vehicles will be sold and remain 
unfixed for an indeterminate amount of time, thus exposing their owners 
to an otherwise avoidable safety risk.
    PC/CAS contend that, as a matter of law, the Safety Act places 
significant restrictions on manufacturers and dealers in selling new 
vehicles with safety defects or a noncompliance, and implies real 
urgency in remedial action. Id. at 3. In their view, the rule is 
contrary to the ``intent'' of the Safety Act. Id. at 2, 8. Their 
argument does not address the central provision in the Safety Act, as 
amended and recodified, on the time for notification, 49 U.S.C. 
30119(c). That provision states: ``[n]otification required under 
section 30118 of this title shall be given within a reasonable time--
(1) prescribed by the Secretary, after the manufacturer receives notice 
of a final decision under section 30118(b); or (2) after the 
manufacturer first decides that a safety-related defect or 
noncompliance exists under section 30118(c) of this title.'' The 
petition pertains to the second clause, which applies to recalls 
initiated by manufacturers.\3\ The language of this provision sets a 
standard of a reasonable time. The statute does not dictate a single 
period of time as the reasonable time period that would apply to 
manufacturers' notifications of dealers in all circumstances. Instead, 
as we interpret the Safety Act, as amended and recodified, a reasonable 
time means a time that is reasonable in the circumstances.\4\
---------------------------------------------------------------------------

    \3\ The first clause applies to recalls ordered by NHTSA's 
Administrator. Very few vehicle recalls have been ordered under 49 
U.S.C. Sec.  30118(b). Any such order would include a notification 
schedule.
    \4\ In the preamble to the 1996 rule, in the context of the 
manufacturer's provision to the NHTSA of estimated dates when they 
will first provide notice to owners of recalled vehicles, we noted 
that the agency may examine ``whether the manufacturer's time frame 
for the recall is reasonable under the circumstances.'' 61 FR at 
275.
---------------------------------------------------------------------------

    Petitioners point to several subsections of the Act to support 
their view. For example, they cite 49 U.S.C. 30118(c), which requires 
manufacturers to notify owners, purchasers and dealers as provided by 
section 30119(d) if the manufacturer learns the vehicle contains a 
defect and decides in good faith that the defect is related to motor 
vehicle safety. Petitioners also refer to 49 U.S.C. 30116(a), which 
provides, in part, that if after a manufacturer sells a vehicle to a 
dealer and, before the dealer sells the vehicle, it is decided that the 
vehicle contains a safety-related defect or does not comply with an 
applicable motor vehicle safety standard, the manufacturer shall 
repurchase the vehicle or immediately give the dealer the part needed 
to make the vehicle comply with the standards or correct the defect. 
These subsections do not dictate a specific time for manufacturers' 
notifications to dealers.
    Petitioners also refer to subsections that were added to the Safety 
Act, as amended. As discussed above, 49 U.S.C. 30120(i), provides that 
if the manufacturer has provided notice under section 30118 to a dealer 
about a new motor vehicle or replacement equipment in the dealer's 
possession at the time of notification that contains a safety-related 
defect or noncompliance, the dealer may sell the vehicle or equipment 
only if the defect is remedied before delivery under the sale. The 
second, 49 U.S.C. 30120(j), prohibits a person from selling any new or 
used motor vehicle equipment for installation on a motor vehicle that 
is the subject of a decision under 49 U.S.C. 30118(b) or a notice 
required under 49 U.S.C. 30118(c) in a condition that it may be 
reasonably be used for its original purpose unless the defect or 
noncompliance is remedied as required under section 30120 before 
delivery under the sale. These provisions preclude a dealer from 
delivering a vehicle or equipment under a sale after receiving notice 
of a safety-related defect or noncompliance from a manufacturer. But, 
they do not specify a particular time when the manufacturer must 
provide notice of the defect to a dealer.
    PC/CAS also object to the provisions in the rule under which NHTSA 
could direct a manufacturer to provide notice to dealers. In the SNPRM, 
after stating that the manufacturer's proposed schedule may be reviewed 
by the Administrator, NHTSA proposed that the Administrator


[[Page 38809]]


may order a manufacturer to send the notification to dealers on a 
specific date where the Administrator finds, after consideration of 
available information, that such notification is in the public 
interest. The factors that the Administrator may consider include, 
but are not limited to, the severity of the safety risk; the 
likelihood of occurrence of the defect or noncompliance; whether a 
dealer inspection would identify vehicles or equipment items that 
contain the defect or noncompliance; whether there will be a delay 
in the availability of the remedy from the manufacturer; and, in 
those recalls where a delay is expected, the anticipated length of 
such delay.

Proposed Sec.  577.7(c)(1), 64 FR at 27231.

    NHTSA received a number of comments on the proposal. Following the 
agency's consideration of the matter, NHTSA promulgated the final rule, 
which provides in part:

    The Administrator may direct a manufacturer to send the 
notification to dealers on a specific date if the Administrator 
finds, after consideration of available information and the views of 
the manufacturer, that such notification is in the public interest. 
The factors that the Administrator may consider include, but are not 
limited to, the severity of the safety risk; the likelihood of 
occurrence of the defect or noncompliance; the time frame in which 
the defect or noncompliance may manifest itself; availability of an 
interim remedial action by the owner; whether a dealer inspection 
would identify vehicles or items of equipment that contain the 
defect or noncompliance; and the time frame in which the 
manufacturer plans to provide the notification and the remedy to its 
dealers. [Sec.  577.7(c)(1)]

    In the preamble to the final rule, we noted that the final rule 
contained several changes to the proposal. 69 FR at 34956. We revised 
proposed paragraph (c) of Sec.  577.7 to provide for consideration of 
the views of the manufacturer in ordering notification to dealers at a 
date earlier than that proposed by the manufacturer. We also indicated 
that we added two additional factors, namely, availability of an 
interim remedial action by the owner and the time frame in which the 
defect may manifest itself, that will be considered by the agency when 
deciding whether to require dealer notification on a specific date. 
These two factors had been discussed in the preamble to the SNPRM along 
with the other factors that became part of the regulatory text in the 
final rule.
    PC/CAS criticize the three changes adopted in the final rule. 
Petition at 7. They assert that the ``views of the manufacturer'' is a 
catch-all for whatever the industry will say it means.'' PC/CAS's 
observation is not a fair characterization of the provision. As noted 
in the preamble to the final rule, NHTSA's defect and noncompliance 
notification rule contained a provision requiring that the 
manufacturers' notification of owners of recalled vehicles and 
equipment be furnished within a reasonable time after the manufacturer 
first decides that either a defect that relates to motor vehicle safety 
or a noncompliance exists (49 CFR 577.7(a)(1)). 69 FR at 34956. The 
rule further provided that NHTSA may direct a manufacturer to send the 
notification to owners on a specific date. Sec.  577.7(c)(1); 69 FR at 
34959. Under that provision on owner notification, the agency considers 
available information and the ``views of the manufacturer''. Id. The 
dealer notification provision parallels the related owner notification 
provision. Second, the provision on consideration of the views of the 
manufacturer is procedural. NHTSA need not adopt the views of the 
manufacturer. Third, it makes good sense for the agency to consider the 
views of the manufacturer before ordering it to provide notice to 
dealers on a specific date. Ordinarily, the agency's decision would be 
more informed if the agency considered the views of the regulated 
entity, as contrasted to ordering the entity to take an action on a 
specific date without first asking for its views. We would add that in 
other circumstances, formal or informal, NHTSA often considers the 
views of the manufacturer, which may possess pertinent information 
unknown to the agency. For instance, when determining whether to 
accelerate a manufacturer's remedy program the agency is required to 
consult with the manufacturer. See 49 CFR 573.14(c). Finally, PC/CAS's 
criticisms are not supported by any facts or analysis.
    With regard to the second factor--availability of an interim 
remedy--PC/CAS comment that the agency did not explain why consumers 
should be burdened with addressing a safety defect. The point of this 
factor was not one of burdening consumers. When the recall remedy is 
not yet available, a common industry practice in appropriate cases has 
been for manufacturers to notify consumers to take some action, either 
to obtain whatever current repair may be available from a dealer or 
other authorized repair shop, or to take a precautionary action in 
operation of the vehicle. Similarly, this factor addresses any type of 
action (in vehicle operation or to the vehicle) that can be taken by 
the owner or performed at the owner's request by a dealer. For example, 
if there were an electrical defect in a non-essential accessory, the 
accessory could be unplugged from a wiring harness.
    Third, PC/CAS argue that the factor on the time frame in which the 
defect will manifest itself is 180 degrees from the agency's initial 
position in 1993. Petition at 7. But the time in which the defect will 
manifest itself ordinarily is a valid consideration. If the defect will 
not manifest itself for a significant period of time, well beyond that 
in which the recall remedy will be available, a deferred notification 
to dealers is not problematic. PC/CAS's reference to language from the 
1993 NPRM (58 FR 50317) that discussed the proposed requirement for 
manufacturers to provide justification in their defect report for any 
requests for delays of the recall or remedy does not dictate a 
different approach. The agency has rejected the approach proposed in 
the 1993 NPRM. In the 1996 notice responding to petitions, the agency 
deleted the extensive scheduling information required in the Part 573 
Report under the 1995 rule. In addition, in the 1999 SNPRM, the agency 
explained its misgivings with the approach in the 1993 NPRM. The June 
2004 rule implicitly rejected that approach.
    More generally, PC/CAS assert that the agency's determination of 
what is a reasonable time for dealer notification will turn on factors 
pertaining to the availability of the remedy, rather than safety 
considerations. The agency disagrees. The regulation specifies a public 
interest test. Section 577.7(c)(1). One factor is the severity of the 
safety risk. Another is the likelihood of occurrence of the defect or 
noncompliance. A third is the time frame in which the defect or 
noncompliance may manifest itself. In any event, the factors set forth 
in section 577.7(c)(1), which employs the phrase ``include, but are not 
limited to'', are not all inclusive.
    The rule addressed the range of circumstances encountered in 
vehicle and equipment recalls by employing the statutory phrase of 
notification ``within a reasonable time'' after the manufacturer 
decides that the defect or noncompliance exists. As both AAMA and NADA 
observed in their comments on earlier notices, the reasonable time 
standard permits the flexibility needed in the complex and variegated 
motor vehicle recall circumstances. The rule's approach is sufficiently 
flexible to consider the factual predicate for the recall and the wide 
range of circumstances giving rise to a recall.
    In cases where the defect presents an immediate danger in new 
vehicles, we expect manufacturers, as they routinely

[[Page 38810]]

have done, to notify dealers within a short period of time after 
determining that a safety related defect exists. For example, recently 
Mitsubishi recalled its Model Year 2006 Eclipse vehicles. The vacuum 
brake booster may not have been crimped together and could come apart. 
If it does, the master cylinder will be disconnected and the vehicle 
will have complete brake failure. Mitsubishi promptly notified dealers. 
We believe that the regulation should be clarified to assure prompt 
notification in circumstances such as this. Thus, we are adding a 
provision to section 577.7(c)(1). The new provision states that in the 
case of defects or noncompliances that present an immediate and 
substantial threat to motor vehicle safety, the manufacturer shall 
transmit this notice to dealers and distributors within three business 
days of its transmittal of the Defect and Noncompliance Information 
Report under Sec.  573.6 to NHTSA, except that when the manufacturer 
transmits the notice by other than electronic means, the manufacturer 
shall transmit this notice to dealers and distributors within five 
business days of its transmittal of the Defect and Noncompliance 
Information Report to NHTSA. Once the manufacturer has prepared the 
report to NHTSA, if it transmits the dealer notice electronically, it 
will be able to prepare and electronically transmit the dealer notice 
within three business days. Manufacturers with large dealer networks 
employ electronic communications with dealers. If the manufacturer uses 
a means other than electronic communication to dealers, we are allowing 
five business days.
    We also believe that provisions on Defect and Noncompliance 
Information Reports should be modified slightly to improve our 
oversight. Currently, section 573.6(b) provides that each report shall 
be submitted not more than 5 working days after a defect in a vehicle 
or item of equipment has been determined to be safety related, or a 
noncompliance with a motor vehicle safety standard has been determined 
to exist. Required information that is not available within that period 
is to be submitted as it becomes available. Id. We are amending this 
section to provide that, at a minimum, information required by 
subparagraphs (1), (2) and (5) of paragraph (c) of this section shall 
be submitted in the initial report. The remainder of the information 
required by paragraph (c) that is not available within the five-day 
period shall be submitted as it becomes available. This would assure 
that we are provided timely information on the defect or noncompliance. 
Manufacturers have this information and commonly provide it in the 
initial report.
    Some products contain potential or latent safety defects that do 
not manifest themselves for a considerable period of time. For example, 
vehicle manufacturers produce vehicles that are identical or almost 
identical in runs that last a number of model years. When a 
manufacturer identifies a defective part in a make and model of a 
vehicle, the manufacturer is required to include in its Part 573 Report 
all of the range of model years of that make and model of vehicle that 
contain the problematic part, even if failures have not been 
experienced in current model year vehicles. When the Part 573 Report 
covers current production vehicles, it does not mean that new vehicles 
on dealers' lots per se present an immediate safety risk. In fact, in 
some new vehicles, there is no present safety concern.
    As noted in the SNPRM, in many recalls, the safety consequences of 
the defect are unlikely to arise until the vehicle has been in service 
for an extended period of time, such as where the problem is caused by 
corrosion or metal fatigue. 64 FR at 27228. The following examples 
further indicate some of the situations in which immediate notification 
of dealers would not be necessary, and support our view that the five-
day rule sought by PC/CAS is not warranted.
    A common type of progressive failure is accumulative wear of parts. 
In a new vehicle, the parts would not be worn. Over a period of many 
months or years, the parts could fail as a result of wear. An example 
where a component progressively wore and ultimately failed is ball 
joint failures in Toyota Tundra vehicles. In May 2005, Toyota initiated 
a recall covering vehicles with possible flaws in ball joints, which 
are parts in the suspension system of vehicles (Recall No. 05V225). The 
problem stemmed from scratches on the surface of some ball joints as 
newly manufactured. This could progress to wear and then to failures in 
which the ball joint could separate, which could result in a loss of 
control of the vehicle. The first ball joint separation occurred after 
8 months and most occurred after tens of thousands of miles. The ball 
joints in new vehicles did not present safety issues.
    In another instance, a part wore over time as a result of chafing. 
In September 1997 Ford recalled approximately 125,000 MY 1992-1993 Ford 
Thunderbird and Mercury Cougar vehicles to repair a fuel line leak (No. 
97V159). The fuel line chafed against the floor pan at times when the 
vehicle was in motion, which eventually could create a pin hole fuel 
leak. The amount of chafing was mileage dependent and also increased 
under rough road conditions. Vehicles did not experience failures until 
they had been driven over 40,000 miles, except for one after 27,000 
miles and another after 32,000 miles.
    Corrosion may also cause slow, progressive failures. For example, 
in January 2005 Ford recalled 261,000 MY 2000--2002 Focus vehicles (No. 
05V030). In that recall, dealers were instructed to conduct inspections 
and to replace rear door latches that do not latch properly. In a 
highly corrosive environment, some door latch assemblies corroded over 
an extended period of time, which prevented the proper engagement of 
the door latch ``catch'' to the latch striker on the vehicle body. Some 
owners experienced difficulty opening or closing the door, and 
eventually some doors did not latch properly. As revealed in the agency 
investigation, the failure condition did not manifest itself until the 
vehicles were in service for approximately two years or more, with the 
exception of two earlier failures, the earliest of which is unlikely to 
have been related to corrosion.
    Similarly, in July 2004, Ford recalled 899,060 MY 1999-2001 Ford 
Taurus and Mercury Sable vehicles (No. 04V332) registered in the high 
corrosion states to repair front suspension coil springs, which may 
fracture and puncture the adjacent tire. The potential for corrosion 
causing a spring fracture increases with the number of miles and years 
in service. Data compiled during the agency investigation indicate that 
the vast majority of the failures occurred after the vehicles had been 
in service for two years. The earliest failure occurred after 7 months 
and the second after 10 months in service.
    Some defects stem from materials degradation over time. For 
example, in August 1998, Chrysler Corporation notified the agency that 
it would be conducting a recall of 722,387 vehicles manufactured 
between 1992 and 1997 to replace several rubber o-ring seals in the 
fuel injection assembly that were prone to lose sealing capacity 
prematurely (No. 98V184). Prolonged exposure to high underhood 
temperatures and some aggressive automotive fuels caused the o-rings to 
experience compressive stress relaxation and lose their sealing force. 
The degradation of the defective o-rings took place over many months. 
Warranty data related to leakage in certain parts of the fuel rail 
assembly provided the first evidence of the problem over two years 
after the oldest vehicles were

[[Page 38811]]

built. Chrysler replaced the o-rings with seals made from a new 
material that was more resistant to high temperatures and aggressive 
fuels.
    Plastics degradation led to a recall in November 1998 by Volkswagen 
of 6,217 MY 1992-1994 Corrado vehicles to address heat exchanger end 
cap ruptures (No. 98V295). The plastic cap degraded over time due to 
heat and some failed, resulting in a release of hot coolant. Warranty 
claims submitted by Volkswagen in the investigation show that the 
vehicles were at least three years old when the failures occurred, 
except for one that occurred after 9 months and another after two 
years. The majority of the failures occurred when the vehicles were 
four and five years old.
    The alternative sought by PC/CAS--a rule requiring notice within a 
specific period of time in all cases--is excessive. It would provide an 
overbroad margin of safety in circumstances where it is not necessary 
to stop the sale of vehicles on dealers' lots. It would ground numerous 
vehicles that are not yet unsafe until parts could be produced, 
supplied, and installed. This approach, which would place an 
unnecessary and unjustified burden on those dealers who have large 
inventories of vehicles within the scope of a Part 573 Report, was 
proposed in the NPRM as a five-day notification period, and properly 
rejected.
    PC/CAS do not challenge NHTSA's assessment that the process of 
dealer notification using the reasonable time standard has worked well 
for 20 years (64 FR at 27228; 69 FR at 34955 (incorporating SNPRM) and 
34957), other than on theoretical grounds. Instead, they quibble with 
NHTSA's statement in the SNPRM that requiring 5 days notice in all 
cases could have perverse effects. NHTSA stated that a mandatory 
timeframe could encourage some manufacturers to delay making defect 
determinations to give them time to develop remedies and stockpile 
parts. PC/CAS argues that a delayed defect determination violates the 
Safety Act and subjects the manufacturer to civil penalties. While that 
is true, it does not resolve the central issue of the timing of dealer 
notification. As reflected in the examples above, in numerous 
circumstances there is no factual safety justification for requiring a 
manufacturer to provide notice to dealers within five days of the 
submission of their Part 573 Reports to NHTSA. The approach to dealer 
notification in the June 2004 rule should not be undone simply because 
a rigid regulation, such as that proposed in the NPRM, could be written 
to require early dealer notification in all cases and, under such a 
regime, an untimely notification could violate the Act or a rule.
    PC/CAS also criticize the final rule for not requiring that the 
dealer notification schedule be a mandatory piece of information in the 
initial filing of the Part 573 defect report. Section 573.6(b) states 
that each Defect and Noncompliance Report shall be submitted by a 
manufacturer to NHTSA not more than 5 working days after a defect in a 
vehicle or item of equipment has been determined to be safety related 
or a noncompliance with a standard has been determined to exist. The 
information requirements for the report are set forth in Sec.  
573.6(c). Under the rule, including the amendment discussed above, 
certain information that is required by paragraph (c) that is not 
available within the five-day period is to be submitted as soon as it 
becomes available. Sec.  573.6(b). The agency believes that requiring 
that the manufacturer's initial submission be complete, with all of the 
information specified in paragraph (c), is not sound. Indeed, it would 
delay the notification to NHTSA of the existence of a safety-related 
defect until all of the information is available. Such a delay is 
inconsistent with 49 U.S.C. 30118 and 30119, 49 CFR 573.6(b) 
(requirement of reporting within 5 days of determination of 
noncompliance or safety-related defect) and the agency's strong 
interest in receiving reports of defects as soon as possible. It is not 
uncommon that some information, such as a description of the 
manufacturer's program for remedying the defect or noncompliance (Sec.  
573.6(c)(8)), is not available when the Part 573 Report is filed. 61 FR 
at 275. The formulation of the dealer notification schedule often is 
contingent on the availability of such information. At times, it is not 
known when the manufacturer submits the Part 573 defect report.
    In addition, the petitioners argue that since the rate of remedying 
vehicles after sale is less than the 100 percent repairs achievable 
prior to sale of new vehicles on dealers' lots, a higher number of 
consumers will be at risk. Petition at 2. Their argument is 
theoretical. As noted above, the statutory ``reasonable time'' standard 
for dealer notification has been in place for three decades. 
Historically, the vast majority of vehicles covered by a safety recall 
have been remedied. In circumstances involving severe problems, 
manufacturers and dealers have embargoed the sale of new vehicles, 
particularly after the enactment of ISTEA. Today's amendment to 49 CFR 
577.7(c)(1) provides further assurances that when the defect or 
noncompliance in a new motor vehicle presents and immediate and 
substantial risk to motor vehicle safety, the vehicle will not be sold 
until repaired. As to other vehicles, manufacturers and at times 
dealers provide notice of recalls to owners, the vast majority of which 
bring the vehicles to dealers for recall work. Also, owners commonly 
have vehicles serviced by dealers when the vehicles, such as those at 
issue, are under warranty. When vehicles are brought to dealers for 
warranty work, the dealers check the manufacturers' records on those 
vehicles and perform outstanding recall repairs.\5\ In the end, the 
petition simply does not demonstrate with compelling real world 
evidence that the historical approach is fundamentally flawed.
---------------------------------------------------------------------------

    \5\ Of course, in general, far fewer than all the vehicles 
covered by a recall are defective. See United States v. General 
Motors Corp., 581 F.2d 420, 438-439 (D.C. Cir. 1975).
---------------------------------------------------------------------------

    PC/CAS also assert that a lack of public information about the 
defect does not allow the generation of any public pressure on 
manufacturers to develop a quick remedy. In particular, PC/CAS state 
that the public frequently will face a substantial delay in being 
informed of the defect because the agency does not routinely place Part 
573 Reports on its Web site until weeks or months after the 
manufacturer's submission. Petition at 7. This is based on an incorrect 
understanding of agency practices. The Part 573 Reports are routinely 
placed on our website as soon as practicable, which currently is within 
a week of receipt.

B. Verification of Notice to Dealers

    In the NPRM we had proposed that manufacturers maintain records to 
verify that they notified their dealers of the defect or noncompliance 
and that the dealers received the notification. Subsequently, as stated 
in the SNPRM: ``The agency has decided that it would be unduly 
burdensome, and perhaps impracticable, to require manufacturers to keep 
records reflecting that each dealer received the notification. The 
proposed new section 577.11(d) required that manufacturers be able to 
verify that it has sent the notification to its dealers and the date of 
such notification.''
    The final rule essentially adopted the proposal in the SNPRM. In 
particular, proposed section 577.11(d) was moved to section 
577.7(c)(2)(i) and illustrative language was added. The preamble to the 
final rule proceeded to say that:


[[Page 38812]]


    We are revising proposed Sec.  577.7(c)(2)(i) to identify 
examples of what will be considered to be verifiable electronic 
means of notification, such as receipts or logs from electronic mail 
or satellite distribution systems. AAM/AIAM and MIC recommended this 
change in order to clarify the meaning of verifiable electronic 
means. However, the examples referenced are not the only types of 
verifiable electronic means that would be permissible, since other 
technology that provides comparable information may become 
available.

69 FR at 34956.
    In its petition, GM points out that the preamble to the final rule 
appears to evert to the 1993 proposal to require proof of receipt by a 
dealer. In responding to a recommendation that manufacturers be allowed 
to send notifications by first class mail, we stated:

    While we have authorized the use of various means of 
notification, we have required that the manufacturer be able to 
verify that the notifications were sent to and received by each 
dealer. Since there is no way to verify receipt of first class mail, 
we have rejected this suggestion. [emphasis added]

69 FR at 34957. The phrase ``and received by'' was an inadvertent 
misstatement. We confirm that manufacturers are not required to verify 
that the notification was received by their dealers. There is no need 
for any clarification to the regulatory text of section 577.7(c)(2)(i). 
That section does not include language indicating that a manufacturer 
must prove receipt of the notification by its dealers. The meaning is 
confirmed by section 577.13(d), which states that ``[t]he manufacturer 
shall, upon the request of the Administrator, demonstrate that it sent 
the required notification to each of its known dealers and distributors 
and the date of such notification.''

C. Content of Dealer Notification--Requiring Manufacturers To Provide 
Notice Containing Offer To Repurchase Equipment

    Section 30116 of the Safety Act, as amended, sets forth certain 
actions that manufacturers must take following a decision that a motor 
vehicle or an item of motor vehicle equipment is defective or 
noncompliant under 49 U.S.C. 30118. Section 30116(a) provides for the 
manufacturer's repurchase of the motor vehicle or equipment or, for 
vehicles, for the manufacturer's provision of parts or equipment needed 
to make the vehicle comply with the standards or correct the defect. In 
49 U.S.C. 30116(c), Congress provided that the parties shall establish 
the value of the installation of the part and amount of reimbursement 
and, if they do not agree or the manufacturer does not comply with the 
statute, a Federal cause of action whereby the dealer may bring suit 
against the manufacturer.
    In the final rule, section 577.13(c) required that for 
notifications of defects or noncompliances in items of motor vehicle 
equipment, the notification to dealers shall contain the manufacturer's 
offer to repurchase the items that remain in dealer or distributor 
inventory at a specified price, or as otherwise agreed to between the 
manufacturer and the dealer.
    In its petition for reconsideration, JPMA asserts that equipment 
manufacturers have the statutory right to elect the remedy, that the 
final rule unreasonably interprets the Safety Act to preclude repair or 
replacement of equipment in dealer inventory, and that the final rule 
interferes with contractual relationships. JPMA observes that 
historically the agency has allowed such repair or replacement. GM 
asserts similar legal arguments and contends that there is no need for 
this type of regulation. It points out that items in dealer inventory 
are inspected and repaired as need be, as opposed to being repurchased. 
MEMA/AASA make legal arguments similar to those of JPMA and GM.
    JPMA is correct that historically NHTSA has not opposed 
manufacturers' repair or replacement of items of equipment in dealer 
inventory that are the subject of a defect and noncompliance report 
under 49 CFR part 573. Indeed, we recognized that practice in the last 
clause of section 577.13(c), which in addition to a repurchase by the 
manufacturer recognized the appropriateness of arrangements as 
otherwise agreed to between the manufacturer and the dealer.
    On reconsideration, we agree with GM and JPMA that section 
577.13(c) is unnecessary and are deleting it. Manufacturers and 
equipment dealers have worked cooperatively in the past to 
satisfactorily handle inventory affected by a recall campaign. At this 
time, we do not see a safety need for additional notice requirements.

III. Rulemaking Analyses and Notices

A. Executive Order 12866 and DOT Regulatory Policies and Procedures

    Executive Order 12866, ``Regulatory Planning and Review'' (58 FR 
51735, October 4, 1993), provides for making determinations whether a 
regulatory action is ``significant'' and therefore subject to Office of 
Management and Budget (OMB) review and to the requirements of the 
Executive Order. The Order defines a ``significant regulatory action'' 
as one that is likely to result in a rule that may:
    (1) Have an annual effect on the economy of $100 million or more or 
adversely affect in a material way the economy, a sector of the 
economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local, or Tribal governments or 
communities;
    (2) Create a serious inconsistency or otherwise interfere with an 
action taken or planned by another agency;
    (3) Materially alter the budgetary impact of entitlements, grants, 
user fees, or loan programs or the rights and obligations of recipients 
thereof; or
    (4) Raise novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles set forth in 
the Executive Order.
    NHTSA has considered the impact of this rulemaking under Executive 
Order 12866 and the Department of Transportation's regulatory policies 
and procedures, and for the following reasons has determined that it is 
not a ``significant regulatory action'' within the meaning of Sec. 3 of 
E.O. 12866 and is not ``significant'' within the meaning of the 
Department of Transportation's regulatory policies and procedures. This 
document was not reviewed by the Office of Management and Budget under 
E.O. 12866, ``Regulatory Planning and Review.''
    For the following reasons, NHTSA concludes that this final rule 
will not have any quantifiable cost effect on motor vehicle 
manufacturers or motor vehicle equipment manufacturers. In response to 
petitions for reconsideration, this final rule requires that the 
information required in paragraphs (1), (2) and (5) of 49 CFR 573.6(c) 
be submitted in the manufacturer's initial Defect and Noncompliance 
Information Report that is submitted within 5 working days after a 
defect in a vehicle or item of equipment has been determined to be 
safety related, or a noncompliance with a motor vehicle safety standard 
has been determined to exist. These items of information are not new, 
are ordinarily submitted in the initial report and insofar as they are 
not it would not be burdensome to submit them in the initial report, as 
opposed to later. Second, while the rule retains the standard for 
notification of dealers within a reasonable time after the manufacturer 
decides that the defect or noncompliance exists that appears in the 
statute and the June 2004 final rule, it also adds a provision for 
prompt notice to dealers in circumstances where there is an immediate 
and

[[Page 38813]]

substantial risk to motor vehicle safety. This states the proper 
application of the reasonable time standard in the circumstances. 
Manufacturers have informed us and we have observed that under the 
reasonable time standard, they provide such prompt notice to dealers 
where the safety risks warrants it. Thus, this amendment does not add a 
real burden. Third, as made clear in the discussion above, 
manufacturers are not required to verify that their notifications were 
received by their dealers. Finally, this final rule eliminates an 
unnecessary paragraph in notices to equipment dealers. The section 
577.13 notification to dealers and distributors need no longer include 
the manufacturer's offer to repurchase the items that remain in dealer 
or distributor inventory or as otherwise agreed to between the 
manufacturer and dealer.
    Because the economic effects of this final rule are so minimal, no 
further regulatory evaluation is necessary.

B. Regulatory Flexibility Act

    Pursuant to the Regulatory Flexibility Act (5 U.S.C. 601 et seq., 
as amended by the Small Business Regulatory Enforcement Fairness Act 
(SBFEFA) of 1996), whenever an agency is required to publish a notice 
of proposed rulemaking for any proposed or final rule, it must prepare 
and make available for public comment a regulatory flexibility analysis 
that describes the effect of the rule on small entities (i.e., small 
businesses, small organizations, and small governmental jurisdictions). 
The Small Business Administration's regulations at 13 CFR part 121 
define a small business, in part, as a business entity ``which operates 
primarily within the United States.'' (13 CFR 121.105(a)). No 
regulatory flexibility analysis is required if the head of an agency 
certifies that the rule will not have a significant economic impact on 
a substantial number of small entities. The SBREFA amended the 
Regulatory Flexibility Act to require Federal agencies to provide a 
statement of the factual basis for certifying that a rule will not have 
a significant economic impact on a substantial number of small 
entities.
    The Administrator has considered the effects of this rulemaking 
action under the Regulatory Flexibility Act (5 U.S.C. 601 et seq.) and 
certifies that this final rule will not have a significant economic 
impact on a substantial number of small entities. The statement of the 
factual basis for the certification is that this final rule, formulated 
in response to petitions for reconsideration, does not change the 
information required by paragraphs (1), (2) and (5) of 49 CFR 573.6(c), 
but does require that it be submitted in the manufacturer's initial 
Defect and Noncompliance Information Report. These items of information 
are ordinarily submitted in the initial report and insofar as they are 
not it would not be burdensome to submit them in the initial report, as 
opposed to later. Second, within the existing standard for notification 
of dealers within a reasonable time after the manufacturer decides that 
the defect or noncompliance exists that appears in the statute and the 
June 2004 final rule, this rule adds a provision for prompt notice to 
dealers in circumstances where there is an immediate and substantial 
risk to motor vehicle safety. Manufacturers have informed us and we 
have observed that under the reasonable time standard, they provide 
such prompt notice to dealers where the safety risks warrants it. Under 
the statute and June, 2004 rule it would not have been appropriate for 
manufacturers to defer notice where the defect in a vehicle presented 
an immediate and substantial risk to motor vehicle safety. Thus, this 
amendment to the rule thus does not add a significant burden. Third, 
this final rule eliminates an unnecessary paragraph in notices to 
equipment dealers. It does not alter the underlying substantive 
provision of the statute or historical practice whereby manufacturers 
offer to repurchase the items that remain in dealer or distributor 
inventory or reach an alternative agreement.
    For these reasons, and for the reasons described in our discussion 
on Executive Order 12866 and DOT Regulatory Policies and Procedures, 
NHTSA concludes that this final rule will not have a significant 
economic impact on a substantial number of small entities.

C. National Environmental Policy Act

    NHTSA has analyzed these amendments for the purposes of the 
National Environmental Policy Act and determined that they will not 
have any significant impact on the quality of the human environment.

D. Executive Order 13132 (Federalism)

    Executive Order 13132 requires NHTSA to develop an accountable 
process to ensure ``meaningful and timely input by State and local 
officials in the development of regulatory policies that have 
federalism implications.'' The Executive Order defines ``policies that 
have federalism implications'' to include regulations that have 
``substantial direct effects on the States, on the relationship between 
the national government and the States, or on the distribution of power 
and responsibilities among the various levels of government.'' Under 
Executive Order 13132, NHTSA may not issue a regulation with Federalism 
implications, that imposes substantial direct compliance costs, and 
that is not required by statute, unless the Federal government provides 
the funds necessary to pay the direct compliance costs incurred by 
State and local governments, or the agency consults with State and 
local officials early in the process of developing the regulation. 
NHTSA also may not issue a regulation with Federalism implications and 
that preempts State law unless the agency consults with State and local 
officials early in the process of developing the regulation.
    NHTSA has analyzed this rulemaking action in accordance with the 
principles and criteria set forth in Executive Order 13132. The agency 
has determined that this rule will not have sufficient federalism 
implications to warrant consultation with State and local officials or 
the preparation of a federalism summary impact statement. This rule 
will not have any substantial effects on the States, or on the current 
Federal-State relationship, or on the current distribution of power and 
responsibilities among the various local officials. The reason is that 
this final rule applies to motor vehicle manufacturers and to motor 
vehicle equipment manufacturers, not to the States or local 
governments. Thus, the requirements of Section 6 of the Executive Order 
do not apply.

E. Unfunded Mandates Reform Act

    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) 
requires federal agencies to prepare a written assessment of the costs, 
benefits and other effects of proposed or final rules that include a 
Federal mandate likely to result in the expenditure by State, local or 
tribal governments, in the aggregate, or by the private sector, of more 
than $100 million annually (adjusted for inflation with base year of 
1995). Before promulgating a rule for which a wr