Civil Penalties, 13904-13919 [2018-06550]

Agencies

• National Highway Traffic Safety Administration
• DEPARTMENT OF TRANSPORTATION

[Federal Register Volume 83, Number 63 (Monday, April 2, 2018)]
[Proposed Rules]
[Pages 13904-13919]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-06550]


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DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

49 CFR Part 578

[Docket No. NHTSA-2018-0017]
RIN 2127-AL94


Civil Penalties

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

ACTION: Notice of proposed rulemaking.

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SUMMARY: This document proposes a civil penalty rate applicable to 
automobile manufacturers that fail to meet applicable corporate average 
fuel economy (CAFE) standards and are unable to offset such a deficit 
with compliance credits. The agency is proposing this civil penalty 
rate based on a tentative determination regarding the applicability of 
the Federal Civil Penalties Inflation Adjustment Act Improvements Act 
of 2015, and in accordance with the Energy Policy and Conservation Act 
of 1975 (EPCA) and the Energy Independence and Security Act of 2007 
(EISA).

DATES: Comments: Comments must be received by May 2, 2018.

ADDRESSES: You may submit comments to the docket number identified in 
the heading of this document by any of the following methods:
     Federal eRulemaking Portal: Go to https://www.regulations.gov. Follow the online instructions for submitting 
comments.
     Mail: Docket Management Facility, M-30, U.S. Department of 
Transportation, West Building, Ground Floor, Room W12-140, 1200 New 
Jersey Avenue SE, Washington, DC 20590.
     Hand Delivery or Courier: U.S. Department of 
Transportation, West Building, Ground Floor, Room W12-140, 1200 New 
Jersey Avenue SE, Washington, DC, between 9 a.m. and 5 p.m. Eastern 
time, Monday through Friday, except Federal holidays.
     Fax: 202-493-2251

FOR FURTHER INFORMATION CONTACT: Kerry Kolodziej, Office of Chief 
Counsel, NHTSA, telephone (202) 366-2992, facsimile (202) 366-3820, 
1200 New Jersey Ave, SE, Washington, DC 20590.

SUPPLEMENTARY INFORMATION: 

Table of Contents

A. Executive Summary
B. Statutory and Regulatory Background
C. Civil Penalties Inflationary Adjustment Act Improvements Act of 
2015
D. NHTSA's Actions to Date Regarding CAFE Civil Penalties
    1. Interim Final Rule
    2. Final Rule
    3. Reconsideration and Request for Comments
E. Proposed Revisions to the CAFE Civil Penalty Rate
    1. NHTSA is Proposing to Retain the $5.50 CAFE Civil Penalty 
Rate Because the 2015 Act is Inapplicable
    2. The Agency Proposes a Finding That Increasing the CAFE Civil 
Penalty Rate Will Result in Negative Economic Impact
    3. Increasing the CAFE Civil Penalty Rate to $14 Would Have a 
``Negative Economic Impact,'' Even If The EPCA Factors Were Not 
Mandatory
    4. The CAFE Civil Penalty Rate is Capped At $10
F. Rulemaking Analyses and Notices
    1. Executive Order 12866, Executive Order 13563, and DOT 
Regulatory Policies and Procedures
    2. Regulatory Flexibility Act
    3. Executive Order 13132 (Federalism)
    4. Unfunded Mandates Reform Act of 1995
    5. National Environmental Policy Act
    6. Executive Order 12778 (Civil Justice Reform)
    7. Paperwork Reduction Act
    8. Privacy Act
    9. Executive Order 13771

A. Executive Summary

    NHTSA has almost forty years of experience in implementing the 
corporate average fuel economy (CAFE) program and its civil penalty 
component. This includes oversight and administration of the program's 
operation, how the automobile manufacturers respond to CAFE standards 
and increases, and the role of civil penalties in achieving the CAFE 
program's objectives. NHTSA has carefully considered these objectives 
in reconsidering the Federal Civil Penalties Inflation Adjustment Act 
Improvements Act of 2015 (Inflation Adjustment Act or 2015 Act) and its 
application to the CAFE civil penalty statute NHTSA administers.
    As a result of this review, NHTSA is proposing to retain the 
current civil penalty rate in 49 U.S.C. 32912(b) of $5.50 per tenth of 
a mile per gallon for automobile manufacturers that do not meet 
applicable CAFE standards and are unable to offset such a deficit with 
compliance credits. NHTSA's proposal is based on its tentative 
determination that the CAFE civil penalty rate is not a ``civil 
monetary penalty,'' as defined by the 2015 Act, that must be adjusted 
for inflation. NHTSA's previous Federal Register notices on its 
inflation adjustments under the 2015 Act did not consider whether the 
CAFE civil penalty rate fit the definition of a ``civil monetary 
penalty'' subject to adjustment under the 2015 Act, instead

[[Page 13905]]

proceeding--without analysis--as if the 2015 Act applied to the CAFE 
civil penalty rate. After taking the opportunity to fully analyze the 
issue, NHTSA tentatively concludes that the CAFE civil penalty rate is 
not covered by the 2015 Act and seeks comment on four ways that the 
provisions of the 2015 Act could be best approached.
    First, civil penalties assessed for CAFE violations under Section 
32912(b) are not a ``penalty, fine, or other sanction that'' is either 
``a maximum amount'' or ``a specific monetary amount.'' Rather, the 
civil penalties under consideration here are part of a complicated 
market-based enforcement mechanism. Any potential civil penalties for 
failing to satisfy fuel economy requirements, unlike other civil 
penalties, are not determined until the conclusion of a complex 
formula, credit-earning arrangement, and credit transfer and trading 
program. In fact, the ultimate penalty assessed is based on the 
noncompliant manufacturer's decision, not NHTSA's, on whether and how 
to acquire and apply any credits that may be available to the 
manufacturer, and on the decisions of other manufacturers to earn and 
sell credits to a potentially liable manufacturer. In other words, what 
the noncompliant manufacturer pays is as much a function of market 
forces as it is the CAFE penalty rate.
    Moreover, NHTSA tentatively concludes that Congress did not intend 
for the 2015 Act to apply to this specialized civil penalty rate, which 
has longstanding, strict procedures previously enacted by Congress that 
limit NHTSA's ability to increase the rate. Congress specifically 
contemplated that increases to the CAFE civil penalty rate for 
manufacturer non-compliance with CAFE standards may be appropriate and 
necessary and included a mechanism in the statute for such increases. 
Critically, this mechanism requires the Secretary of Transportation to 
determine specifically that any such increase will not lead to certain 
specific negative economic effects. In addition, Congress explicitly 
limited any such increase to $10 per tenth of a mile per gallon.\1\ 
These restrictions have been in place since the statute was amended in 
1978. Though Congress later amended the CAFE civil penalty provision in 
2007, Congress did not amend either the mechanism for increases or the 
upper limit of an increased civil penalty under the statute. NHTSA 
seeks comment on this analysis.
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    \1\ NHTSA tentatively concludes the 2015 Act also does not apply 
to the $10 cap.
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    Second, in the alternative, NHTSA is proposing to keep the civil 
penalty rate the same in order to comply with EPCA, which must be read 
harmoniously with the 2015 Act. The 2015 Act confers discretion to the 
head of each agency to adjust the amount of a civil monetary penalty by 
less than the amount otherwise required for the initial adjustment, 
with the concurrence with the Director of the Office of Management and 
Budget, upon determining that doing so would have a ``negative economic 
impact'' In EPCA, Congress previously identified specific factors that 
NHTSA is required to consider before making a determination about the 
``impact on the economy'' as a prerequisite to increasing the 
applicable civil penalty rate. NHTSA believes that these statutory 
criteria are appropriate for determining whether an increase in the 
CAFE civil penalty rate would have a ``negative economic impact'' for 
purposes of the 2015 Act. Under EPCA, NHTSA faces a heavy burden to 
demonstrate that increasing the civil penalty rate ``will not have a 
substantial deleterious impact on the economy of the United States, a 
State, or a region of a State.'' Specifically, in order to establish 
that the increase would not have that ``substantial deleterious 
impact,'' NHTSA would need to affirmatively determine that it is likely 
that the increase would not cause a significant increase in 
unemployment in a State or a region of a State; adversely affect 
competition; or cause a significant increase in automobile imports. In 
light of those statutory factors--and the absence of evidence to the 
contrary--NHTSA tentatively concludes it is likely that increasing the 
CAFE civil penalty rate would have a negative economic impact and thus 
is proposing not to adjust the rate under the 2015 Act. NHTSA is 
soliciting comments on this proposal, including whether the inflation 
adjustment would have a ``negative economic impact,'' and if so, how 
much less than the amount otherwise required should the penalty level 
be adjusted.
    Third, even if EPCA's statutory factors for increasing civil 
penalties are not applied, NHTSA has tentatively determined that the 
$14 penalty will lead to a negative economic impact that merits leaving 
the CAFE civil penalty rate at $5.50. Based on available information, 
including information provided by commenters, the effect of applying 
the 2015 Act to the CAFE civil penalty could potentially drastically 
increase manufacturers' costs of compliance beyond those contemplated 
when NHTSA established the current CAFE standards in 2012. NHTSA is 
soliciting comments on this tentative conclusion, including the level 
at which the CAFE civil penalty rate should be set.
    Fourth, even if the CAFE civil penalty rate is a ``civil monetary 
penalty'' under the 2015 Act and regardless of whether increasing it 
would have a ``negative economic impact,'' the increase is capped by 
statute at $10 by EPCA. NHTSA seeks comment on this alternative, 
including whether the $10 cap is itself a ``civil monetary penalty'' 
that is required to be adjusted under the 2015 Act.
    NHTSA is also proposing an inflationary adjustment to the general 
penalty for other violations of EPCA, as amended.

B. Statutory and Regulatory Background

    NHTSA sets \2\ and enforces \3\ corporate average fuel economy 
(CAFE) standards for the United States light-duty vehicle fleet, and in 
doing so, assesses civil penalties against vehicle manufacturers that 
fall short of their compliance obligations and are unable to make up 
the shortfall with credits.\4\ The civil penalty amount for CAFE non-
compliance was originally set by statute in 1975, and since 1997, has 
included a rate of $5.50 per each tenth of a mile per gallon (0.1) that 
a manufacturer's fleet average CAFE level falls short of its compliance 
obligation. This shortfall amount is then multiplied by the number of 
vehicles in that manufacturer's fleet.\5\ The basic equation for 
calculating a manufacturer's civil penalty amount before accounting for 
credits, is as follows:
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    \2\ 49 U.S.C. 32902.
    \3\ 49 U.S.C. 32911, 32912.
    \4\ Credits may be either earned (for over-compliance by a given 
manufacturer's fleet, in a given model year), transferred (from one 
fleet to another), or purchased (in which case, another manufacturer 
earned the credits by over-complying and chose to sell that 
surplus). 49 U.S.C. 32903.
    \5\ A manufacturer may have up to three fleets of vehicles, for 
CAFE compliance purposes, in any given model year--a domestic 
passenger car fleet, an imported passenger car fleet, and a light 
truck fleet. Each fleet belonging to each manufacturer has its own 
compliance obligation, with the potential for either over-compliance 
or under-compliance. There is no overarching CAFE requirement for a 
manufacturer's total production.
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    (penalty rate, in $ per 0.1 mpg per vehicle) x (amount of 
shortfall, in tenths of an mpg) x (# of vehicles in manufacturer's non-
compliant fleet).
    Without even accounting for costs of generating or purchasing 
credits, automakers have paid more than $890 million in CAFE civil 
penalties, up to and including model year (MY) 2014

[[Page 13906]]

vehicles.\6\ Starting with the model year 2011, provisions in the CAFE 
program provided for credit transfers among a manufacturer's various 
fleets. Starting with that model year, the law also provided for 
trading between vehicle manufacturers, which has allowed vehicle 
manufacturers the opportunity to acquire credits from competitors 
rather than paying civil penalties for non-compliance. Manufacturers 
are required to notify NHTSA of the volumes of credits traded or sold, 
but the agency does not receive any information regarding total cost 
paid or cost per credit. NHTSA believes it is likely that credit 
purchases involve significant expenditures and that an increase in the 
penalty rate would correlate with an increase in such expenditures. The 
agency currently anticipates many manufacturers will face the 
possibility of paying larger CAFE penalties or incurring increased 
costs to acquire credits over the next several years than at 
present.\7\
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    \6\ Fine reporting for MY15 and newer vehicles was not reported 
at the time of this proposal. The highest CAFE penalty paid to date 
for a shortfall in a single fleet was $30,257,920, paid by 
DaimlerChrysler for its imported passenger car fleet in MY 2006. 
Since MY 2012, only Jaguar Land Rover and Volvo have paid civil 
penalties. See https://one.nhtsa.gov/cafe_pic/CAFE_PIC_Fines_LIVE.html.
    \7\ NHTSA's Projected Fuel Economy Performance Report7 indicates 
that many manufacturers are falling behind the standards for model 
year 2016 and increasingly so for model year 2017.
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    NHTSA has long had authority under the Energy Policy and 
Conservation Act (EPCA) of 1975, Public Law 94-163, 508, 89 Stat. 912 
(1975), to raise the amount of the penalty for CAFE shortfalls if it 
can make certain findings,\8\ as well as the authority to compromise 
and remit such penalties under certain circumstances.\9\ If NHTSA were 
to raise the penalty rate for CAFE shortfalls, the higher amount would 
apply to any manufacturer that owed them; the authority to compromise 
and remit penalties, however, is extremely limited and on a case-by-
case basis. To date, NHTSA has never utilized its ability to compromise 
or remit a CAFE civil penalty.
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    \8\ 49 U.S.C. 32912.
    \9\ 49 U.S.C. 32913.
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    Recognizing the economic harm that CAFE civil penalties could have 
on the automobile industry and the economy as a whole, Congress capped 
any increase in the original statutory penalty rate at $10 per tenth of 
a mile per gallon. Further--and significantly--it provided that NHTSA 
may only raise CAFE penalties under EPCA if it concludes through 
rulemaking that the increase in the penalty rate both (1) will result 
in, or substantially further, substantial energy conservation for 
automobiles in model years in which the increased penalty may be 
imposed, and (2) will not have a substantial deleterious impact on the 
economy of the United States, a State, or a region of the State. A 
finding of ``no substantial deleterious impact'' may only be made if 
NHTSA determines that it is likely that the increase in the penalty (A) 
will not cause a significant increase in unemployment in a State or a 
region of a State, (B) adversely affect competition, or (C) cause a 
significant increase in automobile imports. Nowhere does EPCA define 
``substantial'' or ``significant'' in the context of this provision.
    If NHTSA seeks to compromise or remit penalties for a given 
manufacturer, a rulemaking is not necessary, but the amount of a 
penalty may be compromised or remitted only to the extent (1) necessary 
to prevent a manufacturer's insolvency or bankruptcy, (2) the 
manufacturer shows that the violation was caused by an act of God, a 
strike, or a fire, or (3) the Federal Trade Commission certifies that a 
reduction in the penalty is necessary to prevent a substantial 
lessening of competition. NHTSA has never previously attempted to 
undertake this process.

C. Civil Penalties Inflation Adjustment Act Improvements Act of 2015

    On November 2, 2015, the Federal Civil Penalties Inflation 
Adjustment Act Improvements Act (Inflation Adjustment Act or 2015 Act), 
Public Law 114-74, Section 701, was signed into law. The 2015 Act 
required federal agencies to make an initial ``catch-up'' adjustment to 
the ``civil monetary penalties,'' as defined, they administer through 
an interim final rule and then to make subsequent annual adjustments 
for inflation. The amount of increase for any ``catch-up'' adjustment 
to a civil monetary penalty pursuant to the 2015 Act was limited to 150 
percent of the then-current penalty. Agencies were required to issue an 
interim final rule, without providing the opportunity for public 
comment ordinarily required under the Administrative Procedure Act, for 
the initial ``catch-up'' adjustment by July 1, 2016.
    The method of calculating inflationary adjustments in the 2015 Act 
differs substantially from the methods used in past inflationary 
adjustment rulemakings conducted pursuant to the Federal Civil 
Penalties Inflation Adjustment Act of 1990 (the 1990 Inflation 
Adjustment Act), Public Law 101-410. Civil penalty adjustments under 
the 1990 Inflation Adjustment Act were conducted under rules that 
sometimes required significant rounding of figures.
    The 2015 Act altered these rounding rules. Now, penalties are 
simply rounded to the nearest $1. Furthermore, the 2015 Act ``resets'' 
the inflation calculations by excluding prior inflationary adjustments 
under the 1990 Inflation Adjustment Act. To do this, the 2015 Act 
requires agencies to identify, for each civil monetary penalty, the 
year and corresponding amount(s) for which the maximum penalty level or 
range of minimum and maximum penalties was established (i.e., 
originally enacted by Congress) or last adjusted other than pursuant to 
the 1990 Inflation Adjustment Act.
    The Director of the Office of Management and Budget (OMB) provided 
guidance to agencies in a February 24, 2016 memorandum.\10\ For those 
penalties an agency determined to be ``civil monetary penalties,'' the 
memorandum provided guidance on how to calculate the initial adjustment 
required by the 2015 Act. The initial catch up adjustment is based on 
the change between the Consumer Price Index for all Urban Consumers 
(CPI-U) for the month of October in the year the penalty amount was 
established or last adjusted by Congress and the October 2015 CPI-U. 
The February 24, 2016 memorandum contains a table with a multiplier for 
the change in CPI-U from the year the penalty was established or last 
adjusted to 2015. To arrive at the adjusted penalty, the agency must 
multiply the penalty amount when it was established or last adjusted by 
Congress, excluding adjustments under the 1990 Inflation Adjustment 
Act, by the multiplier for the increase in CPI-U from the year the 
penalty was established or adjusted as provided in the February 24, 
2016 memorandum. The 2015 Act limits the initial inflationary increase 
to 150 percent of the current penalty. To determine whether the 
increase in the adjusted penalty is less than 150 percent, the agency 
must multiply the current penalty by 250 percent. The adjusted penalty 
is the lesser of either the adjusted penalty based on the multiplier 
for CPI-U in Table A of the February 24,

[[Page 13907]]

2016 memorandum or an amount equal to 250% of the current penalty.
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    \10\ Memorandum from the Director of OMB to Heads of Executive 
Departments and Agencies, Implementation of the Federal Civil 
Penalties Inflation Adjustment Act Improvements Act of 2015 (Feb. 
24, 2016), available online at https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/memoranda/2016/m-16-06.pdf (last accessed 
December 14, 2017).
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    Additionally, the 2015 Act gives agencies discretion to adjust the 
amount of a civil monetary penalty by less than otherwise required if 
the agency determines that increasing the civil monetary penalty by the 
otherwise required amount will have either a negative economic impact 
or if the social costs of the increased civil monetary penalty will 
outweigh the benefits.\11\ In either instance, the agency must publish 
a notice, take and consider comments on this finding, and receive 
concurrence on this determination from the Director of OMB prior to 
finalizing a lower civil penalty amount.
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    \11\ Public Law 114-74, Sec. 701(c).
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D. NHTSA's Actions to Date Regarding CAFE Civil Penalties

1. Interim Final Rule
    On July 5, 2016, NHTSA published an interim final rule, adopting 
inflation adjustments for civil penalties under its administration, 
following the procedure and the formula in the 2015 Act. NHTSA did not 
analyze at that time whether the 2015 Act applied to all of its civil 
penalties. One of the adjustments NHTSA made at the time was raising 
the civil penalty rate for CAFE non-compliance from $5.50 to $14.\12\ 
NHTSA also indicated in that notice that the maximum penalty rate that 
the Secretary is permitted to establish for such violations would 
increase from $10 to $25, although this was not codified in the 
regulatory text.\13\ NHTSA also raised the maximum civil penalty for 
other violations of EPCA, as amended, to $40,000.\14\
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    \12\ 81 FR 43524 (July 5, 2016). This interim final rule also 
updated the maximum civil penalty amounts for violations of all 
statutes and regulations administered by NHTSA, and was not limited 
solely to penalties administered for CAFE violations.
    \13\ For the reasons described in Section E.1, NHTSA is 
proposing to leave the maximum penalty rate that the Secretary is 
permitted to establish for such violations at $10.
    \14\ 81 FR 43524 (July 5, 2016).
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    In response to the changes to the CAFE penalty provisions issued in 
the interim final rule, the Alliance of Automobile Manufacturers 
(Alliance) and the Association of Global Automakers (Global) jointly 
petitioned NHTSA for reconsideration (the Industry Petition).\15\ The 
Industry Petition raised concerns with the significant impact, which 
they estimated to be at least $1 billion annually, that the increased 
penalty rate would have on CAFE compliance costs. Specifically, the 
Industry Petition raised: The issue of retroactivity (applying the 
penalty increase associated with model years that have already been 
completed or for which a company's compliance plan had already been 
``set''); which ``base year'' (i.e., the year the penalty was 
established or last adjusted) NHTSA should use for calculating the 
adjusted penalty rate; and whether an increase in the penalty rate to 
$14 would cause a ``negative economic impact.''
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    \15\ Jaguar Land Rover North America, LLC also filed a petition 
for reconsideration in response to the July 5, 2016 interim final 
rule raising the same concerns as those raised in the Industry 
Petition. Both petitions, along with a supplement to the Industry 
Petition, can be found in Docket ID NHTSA-2016-0075 at 
www.regulations.gov.
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2. Final Rule
    In response to the Industry Petition, NHTSA issued a final rule on 
December 28, 2016.\16\ In that rule, NHTSA agreed that raising the 
penalty rate for model years already fully complete would be 
inappropriate, given how courts generally disfavor the retroactive 
application of statutes. NHTSA also agreed that raising the rate for 
model years for which product changes were infeasible due to lack of 
lead time, did not seem consistent with Congress' intent that the CAFE 
program be responsive to consumer demand. NHTSA therefore stated that 
it would not apply the inflation-adjusted penalty rate of $14 until 
model year 2019, as the agency believed that would be the first year in 
which product changes could be made in response to the higher penalty 
rate.
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    \16\ 81 FR 95489 (December 28, 2016).
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3. Reconsideration and Request for Comments
    Before NHTSA's December 2016 final rule became effective, in 
January 2017, NHTSA took action to delay the effective date of the 
December 2016 CAFE civil penalties rule.\17\ As part of that action, 
and in light of CAFE compliance data submitted by manufacturers to 
NHTSA showing that many automakers would begin to fall behind in 
meeting their applicable CAFE standards beginning in model years 2016 
and 2017,\18\ the agency requested public comment on the civil 
penalties--the first opportunity the public had to do so.\19\ The 
comment period closed on October 10, 2017. NHTSA received thirteen 
comments from various interested parties.
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    \17\ 82 FR 8694 (January 30, 2017); 82 FR 15302 (March 28, 
2017); 82 FR 29009 (June 27, 2017); 82 FR 32139 (July 12, 2017). The 
portions of the July 5, 2016 interim final rule not dealing with 
CAFE remain in effect and are expected to be finalized as part of 
NHTSA's 2018 inflationary adjustments.
    \18\ ``MYs 2016 and 2017 Projected Fuel Economy Performance 
Report,'' February 14, 2017, available at https://one.nhtsa.gov/cafe_pic/AdditionalInfo.htm
    \19\ 82 FR 32140 (July 12, 2017).
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    Commenters included industry stakeholders and citizens. The array 
of commenters also included representatives from environmental groups, 
academia, and state governments such as attorneys general and 
environmental quality divisions. Industry stakeholders included 
comments from trade organizations and vehicle manufacturers.\20\
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    \20\ Comments on this notice of proposed rulemaking can be found 
at: https://www.regulations.gov/docket?D=NHTSA-2017-0059.
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    Generally, commenters from environmental organizations, attorneys 
general of 10 states, and academia expressed support for upholding the 
December 2016 final rule. In addition, those supporting the $14 civil 
penalty generally asserted reconsidering the 2016 final rule was 
outside of NHTSA's authority. None of the comments received from 
commenters specifically addressed whether the CAFE civil penalty rate 
was a ``civil monetary penalty'' as defined by the 2015 Act.
    Vehicle manufacturers, either directly or via their respective 
representing organizations, also expressed support for the 
reconsideration of the 2016 final rule. These commenters provided an 
analysis of how increased CAFE civil penalties could potentially impact 
their efforts to develop and sell vehicles in the marketplace when 
faced with anticipated increases in CAFE stringencies. These commenters 
expressed support for using 2007 as the base year for calculating 
inflation adjusted increases in CAFE civil penalty amounts.
    Additionally, some commenters suggested civil penalty amounts of 47 
dollars per 0.1 mpg and $8.47 per 0.1 mpg, the latter a 54% increase 
over the $5.50 per 0.1 mpg value.
    The California Air Resources Board (CARB) commented that NHTSA's 
considerations when adjusting a civil penalty rate under EPCA do not 
matter for purposes of making an adjustment under the 2015 Act. CARB 
also stated that in past joint documents, NHTSA did not indicate that 
the $5.50 civil penalty rate would have a negative economic impact.
    The Alliance and Global suggested that NHTSA's considerations when 
adjusting a civil penalty rate under EPCA are informative for purposes 
of making a determination of negative economic impact under the 2015 
Act.
    The December 28, 2016 final rule is not yet effective, and during 
reconsideration, the applicable civil penalty rate was $5.50 per tenth 
of a

[[Page 13908]]

mile per gallon, which was the civil penalty rate prior to NHTSA's 
inflationary adjustment.\21\ NHTSA's delay of the final rule pending 
reconsideration did not affect the amount of any CAFE penalties that 
would have otherwise applied prior to Model Year 2019.
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    \21\ 82 FR 32140 (July 12, 2017). If the December 28, 2016 final 
rule had gone into effect, the penalty rate would have remained 
$5.50 until MY 2019.
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E. Proposed Revisions to the CAFE Civil Penalty Rate

    In this notice of proposed rulemaking (NPRM), NHTSA is announcing 
that it has tentatively determined, upon reconsideration, that the 2015 
Act should not be applied to the CAFE civil penalty formula provision 
found in 49 U.S.C. 32912 and is proposing to retain the current civil 
penalty rate of $5.50 per .1 of a mile per gallon.\22\ The agency is 
proposing this based on a legal determination that the CAFE civil 
penalty rate is not a ``civil monetary penalty'' as contemplated by the 
2015 Act and that therefore the 2015 Act should not be applied to the 
NHTSA CAFE civil penalty formula. Additionally, in the alternative, 
NHTSA is proposing to maintain the current civil penalty rate based on 
a tentative finding that--in light of the factors Congress requires 
NHTSA to analyze in determining whether an increase in the civil 
penalty rate will have ``a substantial deleterious impact on the 
economy''--increasing the CAFE civil penalty rate would result in 
negative economic impact. Pursuant to OMB's guidance, NHTSA has 
consulted with OMB before proposing this reduced catch-up adjustment 
determination and submitted this notice of proposed rulemaking (NPRM) 
to the Office of Information and Regulatory Affairs (OIRA) for review. 
. In addition, if NHTSA determines that a reduced catch-up adjustment 
is appropriate in its final rule, it will seek OMB's concurrence before 
promulgating the rule, as required by the 2015 Act and confirmed by 
OMB's guidance. Finally, in this NPRM NHTSA has provided a series of 
tentative interpretations of the 2015 Act. In light of OMB's role in 
providing agencies guidance about the 2015 Act, NHTSA has requested 
OMB's views about the 2015 Act.
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    \22\ NHTSA chose to reconsider its prior determination 
consistent with its statutory authority to administer the CAFE 
standards program and its inherent authority to do so efficiently 
and in the public interest. See, e.g., Tokyo Kikai Seisakusho, Ltd. 
v. United States, 529 F.3d 1352, 1360-61 (Fed. Cir. 2008) 
(``[A]dministrative agencies possess inherent authority to 
reconsider their decisions, subject to certain limitations, 
regardless of whether they possess explicit statutory authority to 
do so.''). OMB's February 2016 guidance confirms that each agency is 
``responsible for identifying the civil monetary penalties that fall 
under the statutes and regulations [it] enforce[s].'' And, as 
repeatedly confirmed by courts, an agency may reconsider how it 
previously interpreted a statute, particularly when its updated 
interpretation ``closely fits the design of the statute as a whole 
and its object and policy.'' Good Samaritan Hosp. v. Shalala, 508 
U.S. 402, 417-18 (1993) (cleaned up); see also Nat'l Classification 
Comm. v. United States, 22 F.3d 1174, 1177 (D.C. Cir. 1994) (``[A]n 
agency may depart from its past interpretation [of a statute] so 
long as it provides a reasoned basis for the change.'') (citing 
Motor Vehicles Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 
U.S. 29, 42 (1983)); Torrington Extend-A-Care Employee Ass'n v. 
N.L.R.B., 17 F.3d 580, 589 (2d Cir. 1994) (similar). In the 2015 Act 
specifically, Congress did not prohibit or otherwise restrict 
agencies from reconsidering whether an initial catch-up adjustment 
is required or, if so, the magnitude of such an adjustment. 
Moreover, NHTSA's regulations provide broadly that ``[t]he 
Administrator may initiate any further rulemaking proceedings that 
he finds necessary or desirable.'' 49 CFR 553.25.
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    NHTSA is also proposing to finalize the 2017 and 2018 inflationary 
adjustments for the maximum penalty for general CAFE violations in 49 
U.S.C. 32912(a).
1. NHTSA Is Proposing To Retain the $5.50 CAFE Civil Penalty Rate 
Because the 2015 Act Is Inapplicable
    Upon reconsideration, NHTSA has tentatively determined that the 
2015 Act is not applicable to the CAFE civil penalty formula. The 
penalty in 49 U.S.C. 32912(b) for a manufacturer that violates fuel 
economy standards is not a ``civil monetary penalty'' subject to 
inflationary adjustment under the 2015 Act. This reflects a change in 
NHTSA's position on this issue from when NHTSA previously adjusted the 
CAFE civil penalty rate from $5 to $5.50.\23\ Given that the current 
penalty figure has been in effect since it was set twenty years ago, 
NHTSA proposes to apply its new position on a prospective basis only 
from the effective date of the final rule of this rulemaking. As a 
result of this change, NHTSA is proposing to retain the $5.50 
multiplier in the CAFE civil penalty formula. NHTSA requests comment on 
this issue.
---------------------------------------------------------------------------

    \23\ NHTSA may consider a separate rulemaking to consider 
whether the CAFE civil penalty rate should be $5.
---------------------------------------------------------------------------

    The 2015 Act requires agencies to adjust ``civil monetary 
penalties'' for inflation.\24\ A ```civil monetary penalty' means any 
penalty, fine, or other sanction'' that meets three requirements.\25\ 
First, the ``penalty, fine, or other sanction'' must be ``for a 
specific monetary amount as provided by Federal law'' or have ``a 
maximum amount provided for by Federal law.'' \26\ Second, the 
``penalty, fine, or other sanction'' must be ``assessed or enforced by 
an agency pursuant to Federal law.'' \27\ Third, the ``penalty, fine, 
or other sanction'' must be ``assessed or enforced pursuant to an 
administrative proceeding or a civil action in the Federal courts.'' 
\28\
---------------------------------------------------------------------------

    \24\ EPCA's use of the terminology ``civil penalty'' in 49 
U.S.C. 32912(b) is not dispositive. The 2015 Act does not apply to 
all civil penalties, but rather ``civil monetary penalties,'' a 
defined term.
    \25\ 28 U.S.C. 2461 note, Federal Civil Penalties Inflation 
Adjustment Sec.  3(2).
    \26\ Id.
    \27\ Id.
    \28\ Id.
---------------------------------------------------------------------------

    The 2015 Act required the Office of Management and Budget (OMB) to 
``issue guidance to agencies on implementing the inflation 
adjustments'' under the Act.\29\ OMB issued guidance on February 24, 
2016 that stated: ``Agencies are responsible for identifying the civil 
monetary penalties that fall under the statutes and regulations they 
enforce'' and for determining the ``applicability of the inflation 
adjustment requirement to an individual penalty . . . .'' \30\ In none 
of NHTSA's July 2016 interim final rule, its December final rule, its 
July 2017 request for comments, nor its earlier adjustment from $5 to 
$5.50 did NHTSA specifically address whether the penalty for 
manufacturer violations of fuel economy standards in 49 U.S.C. 32912(b) 
is a ``civil monetary penalty'' subject to inflationary adjustment 
under the 2015 Act, or more generally, whether the 2015 Act should be 
made applicable to the penalty in Section 32912(b). Instead, it applied 
the 2015 Act without specific analysis of these issues.
---------------------------------------------------------------------------

    \29\ Id. Sec.  7(a).
    \30\ OMB Guidance at 2. OMB's guidance included the definition 
of ``civil monetary penalty'' applicable to the 2015 Act and 
explained: ``Agencies with questions on the applicability of the 
inflation adjustment requirement to an individual penalty, should 
first consult with the Office of General Counsel of the agency for 
the applicable statute, and then seek clarifying guidance from OMB 
if necessary.''
---------------------------------------------------------------------------

    Upon evaluation, NHTSA has tentatively concluded the penalty for 
manufacturer violations of fuel economy standards in 49 U.S.C. 32912(b) 
is not a ``civil monetary penalty'' subject to adjustment under the 
2015 Act. Upon similar evaluation, NHTSA also has tentatively concluded 
the $10 limit for such violations in 49 U.S.C. 32912(c)(1)(B) is not a 
``civil monetary penalty'' subject to adjustment under the 2015 Act 
either. To be a ``civil monetary penalty,'' a penalty must meet all 
three criteria in the statutory definition.\31\ The penalty for 
manufacturer violations of fuel economy

[[Page 13909]]

standards, which includes a rate of $5.50 per .1 mile in its formula, 
does not meet the first set of criteria in the definition. It is not a 
``penalty, fine, or other sanction'' that is either ``a specific 
monetary amount'' or ``a maximum amount.'' Instead, the statute 
outlines a process that NHTSA uses to determine a proposed penalty and 
that manufacturers use to assess their specific penalty. In particular, 
the $5.50 per .1 mile is merely a rate that goes into a complex, 
statutory formula used to calculate a variable penalty. Other factors, 
such as the manufacturer's credit earning arrangement and its 
participation in the credit trading program, are also integral parts of 
the multifaceted formula used to calculate a manufacturer's penalty for 
violations of the fuel economy standards in 49 U.S.C. 32912(b). 
Moreover, the decisions of other manufacturers to generate or not 
generate and sell or not sell credits will also influence the amount 
that a potentially liable manufacturer pays. NHTSA does not believe 
this complex formula and credit trading program generates the kind of 
simple civil penalty that lends itself to rote application of the 2015 
Act.
---------------------------------------------------------------------------

    \31\ The three criteria in the definition are joined by the 
conjunctive ``and.''
---------------------------------------------------------------------------

    Unlike other civil penalties under NHTSA's jurisdiction, the 
penalty for manufacturer violations of fuel economy standards is not 
for ``a maximum amount.'' One example of a penalty that is for ``a 
maximum amount'' is the ``general penalty'' in EPCA for violations of 
49 U.S.C. 32911(a). That ``general penalty'' is ``a civil penalty of 
not more than $10,000 for each violation.'' \32\ This sets ``a maximum 
amount'' of $10,000 per violation. In other words, EPCA set ``a maximum 
amount'' of $10,000 per violation of requirements such as the 
requirement for manufacturers to submit pre-model year and mid-model 
year reports to NHTSA on whether they will comply with the average fuel 
economy standards.\33\ Accordingly, this civil penalty level was 
properly adjusted to $40,000 in NHTSA's interim final rule and is 
further adjusted here for 2017 and 2018.\34\ Violations of the Safety 
Act are also generally subject to ``a maximum amount'' of $21,000 per 
violation and $105 million for a related series of violations.\35\ The 
agency determines the appropriate amount of such penalties, up to the 
statutory maximum. On the other hand, the penalty for manufacturer 
violations of fuel economy standards in 49 U.S.C. 32912(b) does not 
provide ``a maximum amount'' of a penalty and instead contains only a 
complex process for determining a penalty. Setting aside any credits 
available to the manufacturer, the greater shortfall there is in a 
manufacturer's corporate average fuel economy, the greater the 
potential exists for the eventual application of a civil penalty for 
that shortfall.
---------------------------------------------------------------------------

    \32\ 49 U.S.C. 32912(a). Since the penalty in 49 U.S.C. 32912(a) 
is for a maximum amount, it is subject to inflationary adjustment 
under the 2015 Act. NHTSA's inflationary adjustment of that civil 
penalty in the July 2016 IFR to a maximum penalty of $40,000 was 
therefore appropriate. The penalty in 49 U.S.C. 32912(a) is subject 
to additional inflationary adjustment for 2017 and 2018. Applying 
the multiplier for 2017 of 1.01636, as specified in OMB's December 
16, 2016 guidance, results in an adjusted maximum penalty of 
$40,654. Applying the multiplier for 2018 of 1.02041, as specified 
in OMB's December 15, 2017, results in an adjusted maximum penalty 
of $41,484. NHTSA is proposing to finalize that inflationary 
adjustment.
    \33\ See id.; 49 U.S.C. 32907(a).
    \34\ 81 FR 43524, 43526 (July 5, 2016).
    \35\ 49 U.S.C. 30165(a)(1). These civil penalty amounts were 
established by Section 24110 of the Fixing America's Surface 
Transportation Act (FAST Act), Public Law 114-94, after the 2015 Act 
was enacted, and thus were not adjusted in the interim final rule.
---------------------------------------------------------------------------

    The penalty for manufacturer violations of fuel economy standards 
also does not meet the definition of a ``civil monetary penalty'' 
because the fuel economy standards statute does not provide a 
``specific monetary amount'' for manufacturer violations of fuel 
economy standards. In contrast to other provisions of the statute that 
provide for a specific amount on a per violation basis, often in the 
tens of thousands of dollars, section 32912(b) provides no specific 
amount. It only provides a $5.50 rate, which is one input in a market-
based enforcement mechanism involving the calculation established in 49 
U.S.C. 32912(b), the ultimate result of which--the penalty owed--is 
determined by how a manufacturer decides to use any available credits 
it has, or can acquire, to make up for the initial shortfall identified 
by NHTSA which in turn is based on the market price for credits which 
is dependent on the actions of other manufacturers.
    For a manufacturer that does not meet an applicable fuel economy 
standard, NHTSA sends what is known as a ``shortfall letter'' to the 
manufacturer. NHTSA can only do so after it knows the average fuel 
economy ``calculated under section 32904(a)(1)(A) or (B) of this title 
for automobiles to which the standard applies manufactured by the 
manufacturer during the model year.'' \36\ The fuel economy calculation 
is conducted by the Environmental Protection Agency (EPA). Following 
the end of a model year, manufacturers submit final model year reports 
to EPA. EPA reviews and verifies the information and values 
manufacturers provide before providing the reports to NHTSA, generally 
more than six months after the end of a model year.
---------------------------------------------------------------------------

    \36\ 49 U.S.C. 32912(b)(1).
---------------------------------------------------------------------------

    Once NHTSA receives the average fuel economy calculation from EPA, 
NHTSA must then determine whether the manufacturer's average fuel 
economy fails to meet the applicable average fuel economy standard.\37\ 
If so, the manufacturer has a shortfall. NHTSA then prepares a 
preliminary calculation of the manufacturer's potential civil penalty, 
which, as described above, varies depending on the relationship between 
the manufacturer's average fuel economy and the average fuel economy 
standards. NHTSA sends the manufacturer a shortfall letter with the 
preliminary calculation, which requires the manufacturer to respond by 
either submitting a plan on how it intends to make up the shortfall or 
by paying a penalty.
---------------------------------------------------------------------------

    \37\ 49 U.S.C. 32912(b)(1).
---------------------------------------------------------------------------

    NHTSA's preliminary calculation is determined by multiplying three 
numbers: (1) $5.50, (2) each tenth of a mile per gallon by which the 
average fuel economy falls short of the applicable average fuel economy 
standard, and (3) the number of automobiles manufactured by the 
manufacturer during the model year.\38\ That calculation does not yield 
a final civil penalty amount because the statute requires that 
calculation to include a reduction ``by the credits available to the 
manufacturer under section 32903 of this title for the model year.'' 
\39\
---------------------------------------------------------------------------

    \38\ 49 U.S.C. 32912(b)(2).
    \39\ 49 U.S.C. 32912(b)(3).
---------------------------------------------------------------------------

    However, applying the reduction for the number of available credits 
is not a matter of simple mathematics because manufacturers have 
control over both the amount of credits available to them and the use 
of their credits. If a manufacturer's performance for a given fleet 
does not meet the applicable standard, then the manufacturer must elect 
how to satisfy its shortfall.
    Whether and to what extent the penalty calculation is reduced ``by 
the credits available to the manufacturer under section 32903 of this 
title for the model year'' (i.e., how to deal with a non-compliance) is 
ultimately determined by the manufacturer. Only after this step in the 
process outlined in section 32912 occurs is the penalty calculation 
complete. Each manufacturer controls the allocation of its own credits, 
if credits are available.\40\ A manufacturer that earned credits in a 
compliance category before MY 2008

[[Page 13910]]

may apply those credits to that same compliance category for the three 
model years prior to, and three model years after, the year in which 
the credits were earned.\41\ A manufacturer that earned credits in a 
compliance category during and after MY 2008 may apply those credits to 
the same compliance category for three model years prior to, and five 
model years after, the year in which the credits were earned.\42\ 
Manufacturers instruct NHTSA on how they wish to allocate their 
credits, or account for shortfalls.\43\
---------------------------------------------------------------------------

    \40\ See 49 CFR 536.5(c), (d)(2), (6).
    \41\ Id. 536.6(a).
    \42\ Id. 536.6(b).
    \43\ See 49 CFR 536.5(d)(2), (6).
---------------------------------------------------------------------------

    Only once NHTSA hears back from the manufacturer on how it wishes 
to satisfy its shortfall does NHTSA know the specific civil penalty 
that the manufacturer owes for falling short of the applicable average 
fuel economy standard. In other words, the manufacturer's decision 
regarding use of credits is one of the several inputs in the complex 
formula set forth in the fuel economy standards statute, which 
ultimately produces the civil penalty for a manufacturer's violation of 
fuel economy standards. In sum, the statute describes a process to 
determine a penalty amount, but does not itself provide for a penalty, 
fine or sanction that is ``for a specific amount.'' Instead,, due to 
additional flexibilities of credit transfers and trades, a manufacturer 
determines the amount of the civil penalty that is actually owed.\44\ 
Considering this framework, the formula established under 49 U.S.C. 
32912(b) and the variable amounts that result from application of the 
formula, are not a ``specific monetary amount'' of a penalty for 
manufacturer violations of fuel economy standards subject to adjustment 
pursuant to the 2015 Act.
---------------------------------------------------------------------------

    \44\ Public Law 110-140, Title I, 104(a), 121 Stat. 1501 (2007).
---------------------------------------------------------------------------

    NHTSA must conduct a preliminary calculation for each of the 
manufacturer's fleets. CAFE standards are fleet-wide standards that 
apply to the vehicles a manufacturer produced for sale in each of three 
compliance categories: passenger cars manufactured domestically, 
imported passenger cars, and light trucks.\45\ Within specified limits, 
EISA permitted manufacturers to transfer credits across fleets. For 
example, credits earned for a manufacturer's domestic passenger fleet 
may be transferred to its domestic light-truck fleet. Likewise, EISA 
permitted manufacturers to sell (i.e., trade) their credits to other 
manufacturers. The ability to trade credits with another manufacturer, 
authorized for the first time by EISA in 2007, introduced a new level 
of complexity that further differentiated civil penalties for 
violations of fuel economy requirements from other types of civil 
penalties. This added wrinkle further supports NHTSA's current 
understanding that the statutory CAFE civil penalty process is not 
included within the scope of the 2015 Act.
---------------------------------------------------------------------------

    \45\ Id. 32902-04.
---------------------------------------------------------------------------

    Since manufacturers control the use of their available credits, 
NHTSA has no way of determining on its own the amount of a penalty that 
a manufacturer must pay, or even if a manufacturer must pay any penalty 
at all.\46\ The options are plentiful.\47\ A manufacturer can choose to 
use no credits and pay a penalty. A manufacturer can choose to use 
credits from the same compliance category and pay no penalty. A 
manufacturer can choose to use some credits from the same compliance 
category and pay a smaller penalty. A manufacturer can choose to 
transfer credits from another compliance category and pay no penalty. A 
manufacturer can choose to transfer some credits from another 
compliance category and pay a smaller penalty. A manufacturer can 
choose to purchase credits from another manufacturer and pay no 
penalty. A manufacturer can choose to purchase some credits from 
another manufacturer and pay a smaller penalty. A manufacturer can 
combine credits from the same compliance category and/or transfer 
credits from another compliance category and/or purchase credits from 
another manufacturer and pay no penalty or a smaller penalty.
---------------------------------------------------------------------------

    \46\ NHTSA is able to request supplemental reports and audit a 
manufacturer's compliance plan, see, e.g., 49 CFR 537.8, but 
ultimately, it is the manufacturer's decision on how to use the 
credits available to it.
    \47\ See 49 U.S.C. 32903.
---------------------------------------------------------------------------

    Those are just the options for credits already earned. A 
manufacturer can also elect not to pay a penalty or pay a smaller 
penalty by using a ``carryback'' plan, in which the manufacturer 
applies credits it expects to earn in future model years.\48\
---------------------------------------------------------------------------

    \48\ See 49 CFR 536.5(d).
---------------------------------------------------------------------------

    There are additional considerations that strongly supports NHTSA's 
conclusion that the 2015 Act should not be applied to the CAFE civil 
penalty. Congress already adopted a specific scheme for increasing the 
civil penalty in 49 U.S.C. 32912(b) that requires a far more intensive 
and restrictive process than the summary approach in the 2015 Act. 
First, EPCA placed an absolute limit on such an increase to ``not more 
than $10 for each .1 of a mile a gallon.'' \49\ Moreover, Congress set 
a high bar for adopting an increase. Specifically:
---------------------------------------------------------------------------

    \49\ 49 U.S.C. 32912(c).

    The Secretary of Transportation shall prescribe by regulation a 
higher amount for each .1 of a mile a gallon to be used in 
calculating a civil penalty under subsection (b) of this section, if 
the Secretary decides that the increase in the penalty--(i) will 
result in, or substantially further, substantial energy conservation 
for automobiles in model years in which the increased penalty may be 
imposed; and (ii) will not have a substantial deleterious impact on 
the economy of the United States, a State, or a region of a 
State.\50\
---------------------------------------------------------------------------

    \50\ 49 U.S.C. 32912(c)(1)(A).

Further, the Secretary must decide that an increase will not have a 
substantial deleterious impact ``only when the Secretary decides that 
it is likely that the increase in the penalty will not--(i) cause a 
significant increase in unemployment in a State or a region of a State; 
(ii) adversely affect competition; or (iii) cause a significant 
increase in automobile imports.'' \51\ These factors, which appear to 
demonstrate Congress' concern that the CAFE civil penalties program 
could damage the economy, are far more specific and tailored to the 
CAFE program than any provisions in the 2015 Act. Although it is not 
specifically identified in the statute, the legislative history 
indicates that the ``impact'' of concern relates to ``the automobile 
industry.'' \52\ In its report on EPCA's original fuel economy 
provisions in 1975, the House Commerce Committee recognized:
---------------------------------------------------------------------------

    \51\ Id. 32912(c)(1)(C).
    \52\ ``Energy Initiatives of the 95th Congress,'' S. Rep. No. 
96-10, at 175-76 (1979) (``Representative Dingell (D-Mich.), 
concerned that increasing the penalties could lead to layoffs in the 
automobile industry, insisted that raising the penalties be 
contingent upon findings by the Secretary of Transportation that 
increasing the penalties would achieve energy savings and would not 
be harmful to the economy.'').

The automobile industry has a central role in our national economy 
and that any regulatory program must be carefully drafted so as to 
require of the industry what is attainable without either imposing 
impossible burdens on it or unduly limiting consumer choice as to 
capacity and performance of motor vehicles.\53\
---------------------------------------------------------------------------

    \53\ H.R. Rep. No. 94-340, at 87 (1975). See also 121 Cong. Rec. 
18675 (June 12, 1975) (statement of Rep. Sharp) (``[W]e recognize 
that we have serious unemployment in the American auto industry and 
we want to preserve this important segment of the economy.'').

    Notably, Congress was aware that inflation would effectively reduce 
the real value of the civil penalty rate over time--the CBO Director 
and NHTSA Administrator recognized that the civil penalty structure 
under 1975 EPCA

[[Page 13911]]

``actually become less stringent over time . . . as inflation erodes 
[the penalties'] effect''--yet chose to require this strict procedure 
to increase the rate without allowing for inflationary adjustments to 
the multiplier in the formula. In contrast, Congress expressly purposes 
of the 2015 Act (and its predecessor) ``to establish a mechanism that 
shall . . . maintain the deterrent effect of civil monetary penalties . 
. . .'' The omission of any inflation adjustment procedure makes sense 
in light of Congress' requirement for NHTSA to continually increase 
fuel economy standards to maximum feasible levels.\54\ Rather than 
increase the penalty each year, Congress directed NHTSA to determine 
whether fuel economy standards should be increased, because the goal of 
the CAFE standards is to increase fuel economy not punish 
manufacturers, as with other penalties subject to the 2015 Act. 
Requiring mandatory penalty inflation adjustments and continuous fuel 
standard increases would multiply the amount assessed against 
manufacturers in a way that does not occur with other types of 
penalties.
---------------------------------------------------------------------------

    \54\ 49 U.S.C. 32902(a).
---------------------------------------------------------------------------

    Congress also recognized the need for lead time in increasing the 
civil penalty for violations of fuel economy standards by specifying 
that an increase ``is effective for the model year beginning at least 
18 months after the regulation stating the higher amount becomes 
final.'' \55\
---------------------------------------------------------------------------

    \55\ Id. 32912(c)(1)(D).
---------------------------------------------------------------------------

    Congress additionally recognized the need for extensive input from 
the public and other parts of the Government before any such increase. 
It required that:

The Secretary shall publish in the Federal Register a proposed 
regulation under this subsection and a statement of the basis for 
the regulation and provide each manufacturer of automobiles a copy 
of the proposed regulation and the statement. The Secretary shall 
provide a period of at least 45 days for written public comments on 
the proposed regulation. The Secretary shall submit a copy of the 
proposed regulation to the Federal Trade Commission and request the 
Commission to comment on the proposed regulation within that period. 
After that period, the Secretary shall give interested persons and 
the Commission an opportunity at a public hearing to present oral 
information, views, and arguments and to direct questions about 
disputed issues of material fact to--(A) other interested persons 
making oral presentations; (B) employees and contractors of the 
Government that made written comments or an oral presentation or 
participated in the development or consideration of the proposed 
regulation; and (C) experts and consultants that provided 
information to a person that the person includes, or refers to, in 
an oral presentation.\56\
---------------------------------------------------------------------------

    \56\ Id. 32912(c)(2).

    These extensive, statutorily-mandated procedures specifically 
applicable to increases in the penalty rate in 49 U.S.C. 32912(b) are 
in stark contrast to the procedures applicable to the 2015 Act. For the 
initial catch-up adjustment, the 2015 Act specified that agencies 
should use an interim final rule.\57\ For subsequent annual 
adjustments, the 2015 Act specified that agencies ``shall make the 
adjustment notwithstanding section 553 of title 5, United States 
Code,'' which contain the Administrative Procedure Act's requirements 
for rulemaking.\58\
---------------------------------------------------------------------------

    \57\ 28 U.S.C. 2461 note, Federal Civil Penalties Inflation 
Adjustment Sec.  4(b)(1)(A).
    \58\ Id. Sec.  4(b)(2).
---------------------------------------------------------------------------

    Finally, before Congress passed the 2015 Act, the CBO provided an 
assessment of the revenue that inflation adjustments pursuant to the 
2015 Act would provide the Federal government. CBO determined that all 
inflation adjustments pursuant to the 2015 Act (across every Federal 
agency) would provide in total $1.3 billion of revenue across ten 
years.\59\ Commenters indicate that adjusting the civil penalty rate to 
$14 could cost up to $1 billion annually in penalty payments.\60\ 
Across ten years, the penalty payments under this provision of the 
statute alone could dwarf CBO's contemporaneous estimate of the 2015 
Act's effect on revenues from all civil monetary penalties across all 
statutes. The drastic difference between CBO's estimate of revenue from 
all inflation adjustments across ten years and the potential revenue 
from this adjustment alone further suggests Congress had not considered 
the civil penalty rate subject to the 2015 Act's inflation adjustment. 
This is bolstered by the rounding rule adopted by Congress. The 2015 
Act states, ``[a]ny increase determined under this subsection shall be 
rounded to the nearest multiple of $1.'' \61\ This rounding rule 
suggests the Act was not intended to apply to the small dollar value 
CAFE civil penalty rate, since it would not serve a de minimis rounding 
function. As a practical matter, if the rounding rule applied to a 
small dollar penalty rate, it would prevent any annual inflationary 
increases (absent extraordinary inflation).
---------------------------------------------------------------------------

    \59\ See ``Estimate of the Budgetary Effects of H.R. 1314, the 
Bipartisan Budget Act of 2015, as reported by the House Committee on 
Rules on October 27, 2015,'' at 4, available at https://www.cbo.gov/sites/default/files/114th-congress-2015-2016/costestimate/hr1314.pdf. Title VII of the Bipartisan Budget Act of 2015 includes 
three sections and the revenue estimate was for title VII in its 
entirety. Section 701 is the 2015 Act. The other two sections are 
the rescission of money deposited or available in two funds which 
CBO recognized would decrease direct government spending. Therefore, 
the 2015 Act is likely the only portion of title VII to provide 
revenue, and the CBO's revenue estimate for title VII can be 
understood as a revenue estimate for the 2015 Act.
    \60\ See, e.g., Comment ID NHTSA-2017-0059-0019, available at 
https://www.regulations.gov/.
    \61\ 28 U.S.C. 2461 note, Federal Civil Penalties Inflation 
Adjustment Sec.  5(a).
---------------------------------------------------------------------------

    NHTSA believes that applying the 2015 Act to the penalty in 49 
U.S.C. 32912(b) would evade the statutory safeguards and limitations 
directly applicable to that penalty, in contrast to Congress's original 
awareness of penalty rate adjustments, and could result in the 
imposition of a potentially massive increase in civil penalties, in 
contrast to contemporaneous, pre-enactment evidence about the effect of 
the 2015 Act.
    NHTSA has previously sought comment on related issues, but NHTSA 
believes it is important to provide the public with an opportunity to 
provide additional comments in light of NHTSA's analysis. Accordingly, 
NHTSA requests comments on this analysis. For these reasons, NHTSA 
tentatively concludes that it is not appropriate to apply the 2015 Act 
and is proposing to retain the $5.50 rate in the CAFE civil penalty.
2. The Agency Tentatively Finds That Increasing the CAFE Civil Penalty 
Rate Will Result in Negative Economic Impact
    NHTSA is proposing to retain the CAFE civil penalty rate of $5.50 
per tenth of a mile per gallon, even if one were to assume that the 
penalties are subject to the 2015 Act, because NHTSA tentatively 
concludes that, in light of the statutory requirements in EPCA for 
raising the penalty rate, applying the increase would lead to a 
``negative economic impact'' under the 2015 Act.
    The 2015 Act states, ``[a]ny increase determined under this