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                                                                                                                                       July 29, 2009

                                                                                                                                       Part IV

                                                                                                                                       Department of
                                                                                                                                       National Highway Traffic Safety

                                                                                                                                       49 CFR Parts 512 and 599
                                                                                                                                       Requirements and Procedures for
                                                                                                                                       Consumer Assistance To Recycle and Save
                                                                                                                                       Program; Final Rule
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                                                 37878             Federal Register / Vol. 74, No. 144 / Wednesday, July 29, 2009 / Rules and Regulations

                                                 DEPARTMENT OF TRANSPORTATION                             Privacy Notice for at                 I. Background
                                                                                                                       On June 24, 2009, the President
                                                 National Highway Traffic Safety                          footer/privacyanduse.jsp.                             signed into law the Consumer
                                                 Administration                                                                                                 Assistance to Recycle and Save Act of
                                                                                                          FOR FURTHER INFORMATION CONTACT: You
                                                                                                          may obtain additional information about               2009 (the CARS Act or the Act) (Pub. L.
                                                 49 CFR Parts 512 and 599                                                                                       111–32). The Act establishes, within the
                                                                                                          the CARS program by calling the CARS
                                                 [Docket No. NHTSA–2009–0120]                             Hotline at 1–866–CAR–7891. It is                      National Highway Traffic Safety
                                                                                                          dedicated to calls about the program.                 Administration (NHTSA or the agency),
                                                 RIN 2127–AK53
                                                                                                          For non-legal issues, you may call, Mr.               a temporary program under which an
                                                 Requirements and Procedures for                          Frank Borris, NHTSA Office of                         owner of a motor vehicle meeting
                                                 Consumer Assistance To Recycle and                       Enforcement, telephone (202) 366–8089.                statutorily specified criteria may trade
                                                 Save Program                                             For legal issues, you may call David                  in the vehicle and receive a monetary
                                                                                                          Bonelli, NHTSA Office of Chief                        credit from the dealer toward the
                                                 AGENCY: National Highway Traffic                                                                               purchase or lease of a new motor
                                                                                                          Counsel, telephone (202) 366–5834.
                                                 Safety Administration (NHTSA),                                                                                 vehicle meeting statutorily specified
                                                 Department of Transportation (DOT).                      SUPPLEMENTARY INFORMATION:                            criteria.
                                                 ACTION: Final rule.                                      Table of Contents                                        Generally, the trade-in vehicle must
                                                                                                          I. Background
                                                                                                                                                                have a combined fuel economy, as
                                                 SUMMARY:    This final rule sets forth                                                                         determined by the Environmental
                                                 requirements and procedures for the                      II. Questions and Comments From the Public
                                                                                                                About the CARS Program                          Protection Agency (EPA), below a
                                                 voluntary vehicle trade-in and                                                                                 specified value and the new vehicle
                                                                                                          III. Public Outreach and Consultation
                                                 purchase/lease program under the                         IV. The Regulation                                    must have an EPA combined fuel
                                                 Consumer Assistance to Recycle and                          a. Definitions (§ 599.102)                         economy above a higher specified value.
                                                 Save Act of 2009. This program helps                        b. Registration of Dealers (§ 599.200)             (Combined fuel economy is an EPA
                                                 consumers pay for a new, more fuel                          c. Identification of Disposal Facilities           calculation representing the weighted
                                                 efficient car or truck from a                                  (§ 599.201)                                     average of a vehicle’s city and highway
                                                 participating dealer when they trade in                     d. Determining Eligibility of Trade-in             fuel economy as determined according
                                                 a less fuel efficient car or truck. The rule                   Vehicles and New Vehicles (§ 599.300)           to the method described in EPA
                                                 establishes a process by which dealers                      1. Vehicle Definitions
                                                                                                                                                                regulations at 40 CFR 600.210–08(c)).
                                                 can register in order to participate in the                 2. Eligibility of Trade-in Vehicles
                                                                                                             3. Eligibility of New Vehicles                     The program covers qualifying
                                                 program and establishes the criteria this                                                                      transactions that occur between July 1,
                                                 agency will use to determine which                          e. Requirements for Qualifying
                                                                                                                Transactions (§§ 599.300 and 301)               2009 and November 1, 2009, so long as
                                                 disposal facilities are eligible to receive                                                                    funds appropriated by Congress are not
                                                                                                             1. Vehicle Categories and Credit Amounts
                                                 and either crush or shred the trade-in                      2. Special Requirements for Trade-in               exhausted. If all of the conditions of
                                                 vehicles. It also sets forth the criteria                      Vehicles                                        eligibility are met and the dealer
                                                 that trade-in vehicles and new vehicles                     3. Restrictions and Limitations on                 provides NHTSA with sufficient
                                                 must meet in order for purchases and                           Transactions                                    documentation relating to the
                                                 leases to qualify for assistance under                      f. Requirements for Dealer Reimbursement           transaction, NHTSA will make an
                                                 this program and establishes the                               (§ 599.302–304)                                 electronic payment to the dealer equal
                                                 requirements that must be met by                            g. Disposal of Trade-In Vehicles
                                                                                                                                                                to the amount of the credit extended by
                                                 consumers, dealers, disposal facilities                        (§ 599.400–403)
                                                                                                             h. Enforcement (§ 599.500–517)
                                                                                                                                                                the dealer to the consumer, not
                                                 and others. Finally, the rule sets forth                                                                       exceeding the statutorily authorized
                                                 enforcement procedures and provisions                       1. Prevention of Fraud
                                                                                                             2. Civil Penalties and Other Sanctions             amount. The dealer must agree to
                                                 for punishing fraud and other violations                                                                       transfer the trade-in vehicle to a
                                                                                                          V. Confidential Information and Privacy
                                                 of the program requirements.                                a. Determinations of the Confidentiality of        disposal facility that will crush or shred
                                                 DATES: This final rule is effective July                       CARS Data Based on FOIA Exemptions              it so that it will never be returned to the
                                                 29, 2009. Petitions: If you wish to                            4 and 6                                         road, although parts of the vehicle, other
                                                 petition for reconsideration of this rule,                  b. Approach—Class Determinations vs.               than the engine block and drive train
                                                 your petition must be received by                              Individual Assessments                          (unless the drive train is sold in separate
                                                 September 14, 2009.                                         c. Class Determinations Based on FOIA              parts), may be sold.
                                                 ADDRESSES: If you submit a petition for                        Exemption 4                                        The CARS Act requires the Secretary
                                                                                                             d. Data Submitted to NHTSA for the CARS            of Transportation, acting through
                                                 reconsideration of this rule, you should
                                                 refer in your petition to the docket                        1. Manufacturer Data
                                                                                                                                                                NHTSA, to issue final regulations
                                                 number of this document and submit                          2. Dealer Information and Transaction Data         within 30 days after enactment (i.e., by
                                                 your petition to: Administrator,                            3. Disposal Facility and Destruction Data          July 24, 2009), ‘‘notwithstanding’’ the
                                                 National Highway Traffic Safety                             e. CARS Data Class Determinations Based            notice and comment requirements of the
                                                 Administration, 1200 New Jersey                                on FOIA Exemption 4                             Administrative Procedure Act (5 U.S.C.
                                                 Avenue, SE., West Building,                                 1. Manufacturer Assigned Dealer                    553). The regulations must, among other
                                                 Washington, DC 20590.                                          Identification                                  things: (1) Provide for a means of
                                                    The petition will be placed in the                       2. Dealer Bank Name, ABA Routing                   registering dealers for participation in
                                                 public docket. Anyone is able to search                        Number, Bank Account Number                     the program; (2) establish procedures for
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                                                 the electronic form of all documents                        3. CARS Dealer ID and CARS                         reimbursement of dealers participating
                                                                                                                Authorization Codes
                                                 received into any of our dockets by the                                                                        in the program; (3) require that dealers
                                                                                                             f. Class Determination Based on FOIA
                                                 name of the individual submitting the                          Exemption 6                                     use the credit in addition to any other
                                                 document (or signing the document, if                    VI. Costs and Benefits                                rebate or discount advertised by the
                                                 submitted on behalf of an association,                   VII. Statutory Basis for This Action                  dealer or offered by the manufacturer
                                                 business, labor union, etc.). You may                    VIII. Effective Date                                  and prohibit the dealer from using the
                                                 review the complete User Notice and                      IX. Regulatory Analyses and Notices                   credit to offset any such other rebate or

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                                                                   Federal Register / Vol. 74, No. 144 / Wednesday, July 29, 2009 / Rules and Regulations                                         37879

                                                 discount; (4) require that dealers                       ensure that those requests are reviewed                  As detailed below, the program has
                                                 disclose to the person trading in an                     correctly and in a timely way. The Data               different requirements for different
                                                 eligible vehicle the best estimate of the                Analysis and Reporting Division will                  types of trade-in vehicles (e.g.,
                                                 scrappage value of such vehicle and                      review data generated in connection                   passenger cars, SUVs and vans, pickups,
                                                 permit dealers to retain $50 of the                      with the program to help ensure the                   and trucks) because these vehicles have
                                                 amount paid for the scrappage value as                   system’s efficiency and detect problems               varying levels of EPA combined fuel
                                                 payment for any administrative costs of                  with the process or indications of                    economy. In general, passenger cars
                                                 participation in the program; (5)                        potential compliance issues. That                     have the highest combined fuel
                                                 establish requirements and procedures                    division will also produce reports on all             economy. Therefore, even though a
                                                 for the disposal of eligible trade-in                    aspects of the system. The Compliance                 passenger car may be quite old and/or
                                                 vehicles; and (6) provide for the                        Division will work to detect and deter                in poor condition, it may not be an
                                                 enforcement of penalties for violations                  possible noncompliance related to the                 eligible trade-in vehicle under the
                                                 of the program requirements.                             program and coordinate closely with                   program because its combined fuel
                                                    Separate from the rulemaking                          NHTSA’s Office of Chief Counsel when                  economy at the time of its manufacture
                                                 requirement, the CARS Act directs the                    possible violations are found. That                   (as measured by the EPA) exceeds
                                                 agency to establish a Web site to convey                 division will also coordinate closely                 statutory limits. Some consumers have
                                                 information about the program,                           with the DOT’s Office of Inspector                    expressed surprise at this result.
                                                 including instructions on how to                         General on issues related to possible                 However, the agency must follow the
                                                 determine if a vehicle is an eligible                    fraud in connection with the program.                 requirements of the statute. Larger, older
                                                 trade-in vehicle, how to participate in                     The agency also has decided to use                 pickups and SUVs, on the other hand,
                                                 the program and how to determine if a                    the name Car Allowance Rebate System                  do not typically have very high fuel
                                                 dealer is participating in the program.                  (CARS) for its program implementing                   economy. The statutory requirements
                                                 The agency established this Web site at                  the Act. The use of the term ‘‘rebate’’ in            for trading in these vehicles are less
                                        Among other                         the name NHTSA has chosen for the                     strict than for trading in passenger cars.
                                                 things, the Web site contains an                         program is not intended to have any                   Consumers may find that more of the
                                                 interactive tool for determining eligible                effect on how CARS transactions are                   vehicles in these categories are eligible
                                                 vehicles, a list of participating dealers                treated under State or Federal tax laws.              as trade-in vehicles under the program.
                                                 and disposal facilities, responses to                    The CARS Act provides that the credit                    Questions have arisen as to which
                                                 frequently asked questions, and                          is not income to the purchaser, but does
                                                                                                                                                                persons are eligible to participate in the
                                                 information on how to determine the                                                                            program and whether a person can trade
                                                                                                          not address any other possible tax
                                                 EPA combined fuel economy of trade-in                                                                          in a vehicle owned by someone else,
                                                                                                          issues. NHTSA lacks expertise and
                                                 vehicles and of new vehicles. In                                                                               such as a family member. The agency
                                                                                                          authority in tax matters and makes no
                                                 addition, NHTSA set up a hotline ((866)                                                                        has concluded that individuals as well
                                                                                                          attempt here to provide any guidance on
                                                 227–7891) to answer questions about                                                                            as legal entities, such as corporations
                                                                                                          those matters.
                                                 the program and, on July 2, 2009,                                                                              and partnerships, may participate in the
                                                 published a document in the Federal                      II. Questions and Comments From the                   program. However, a person may not
                                                 Register (74 FR 31812) providing                         Public About the CARS Program                         trade in a vehicle owned by someone
                                                 additional useful information, in                                                                              else under the program. The Act’s one-
                                                                                                             During the period between enactment
                                                 advance of issuance of this final rule.                                                                        year insurance requirement is satisfied
                                                    The Act provides that the program                     of the CARS Act and publication of                    so long as the trade-in vehicle is
                                                 covers eligible transactions beginning                   today’s rule, the agency received                     insured, irrespective of the identity of
                                                 on July 1, 2009, prior to today’s final                  numerous questions and comments                       the person holding the insurance policy.
                                                 rule. NHTSA advised the public through                   about various provisions of the Act. The              The specifics of these requirements are
                                                 the July 2 Federal Register document,                    final rule seeks to address these                     explained later in this document.
                                                 the Web site, and the hotline that it was                comments and questions, and details                      The agency has received questions
                                                 prudent to wait until the details of the                 appear later in this document. However,               regarding the value and disposition of
                                                 program were specified in today’s final                  the agency provides here a brief                      the trade-in vehicle. The CARS Act
                                                 rule. Nevertheless, if transactions                      summary discussion of some of the                     specifies that while many parts of the
                                                 occurring on or after July 1, 2009, but                  issues raised. As noted earlier, NHTSA’s              trade-in vehicle are permitted to be
                                                 before today’s final rule, meet all of the               Web site for the CARS program contains                removed and sold, in the end the
                                                 requirements identified in this final                    responses to frequently asked questions               residual vehicle, including the engine
                                                 rule, registered dealers may follow the                  by members of the public.                             block, must be crushed or shredded.
                                                 application procedures of the rule and                      The CARS program assists consumers                 Therefore, the trade-in value of the
                                                 apply for reimbursement for those                        who trade in their older, less fuel                   vehicle is not likely to exceed its scrap
                                                 transactions. To expedite processing,                    efficient vehicles for new, more fuel                 value. Purchasers should not expect to
                                                 the rule relies, wherever possible, on                   efficient vehicles. The program is                    receive the same trade-in value as they
                                                 electronic submissions through secure                    designed to remove these older, less fuel             might if the vehicle were to remain on
                                                 agency Web sites.                                        efficient vehicles from the road, by                  the road. The Act also requires dealers
                                                    In order to implement this new                        requiring the trade-in vehicle to be                  to disclose to purchasers the scrap value
                                                 program, NHTSA has had to quickly                        crushed or shredded. Some consumers                   of the trade-in vehicle at the time of the
                                                 create a new organization. NHTSA has                     were unaware that their trade-in vehicle              trade-in and allows dealers to retain up
                                                 established the Office of the Car                        must be destroyed as a statutory                      to $50 of the scrap value of the vehicle
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                                                 Allowance Rebate System within the                       condition of participating in this                    for their administrative costs of
                                                 Office of Enforcement. The new office                    program. Because of that condition,                   participation in the program.
                                                 will consist of three divisions. The                     consumers purchasing or leasing a new                    Some consumers have expressed
                                                 Transaction Oversight Division will                      vehicle under this program should not                 concern that the combined fuel
                                                 work closely with the contractor                         expect to receive the full trade-in value             economy value of their vehicles, as
                                                 NHTSA has retained to review incoming                    of their old vehicle when negotiating                 determined on the http://
                                                 requests for payment from dealers to                     with a dealer.                               Web site of the EPA, is

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                                                 37880             Federal Register / Vol. 74, No. 144 / Wednesday, July 29, 2009 / Rules and Regulations

                                                 not an accurate measure of the actual                    equipment manufacturers (OEMs),                       engines of the vehicles that are traded
                                                 fuel economy they experience. EPA                        including the Alliance of Automobile                  in.
                                                 determines these values for each make,                   Manufacturers and the Association of                    Memoranda providing the dates and
                                                 model, and model year with regard to                     International Automobile                              summaries of meetings with these
                                                 each vehicle at the time of its                          Manufacturers, to obtain information on               organizations and various other groups
                                                 manufacture. These consumers contend                     franchised dealerships. The agency                    are included in the docket for this rule.
                                                 that if another means were used to                       involved the OEMs because they                        IV. The Regulation
                                                 calculate combined fuel economy, their                   possess comprehensive and readily
                                                 vehicle would be an eligible trade-in                    available lists of new vehicle dealers                   As directed by the CARS Act, today’s
                                                 vehicle under the program. The CARS                      licensed under State law. As detailed                 final rule sets forth requirements and
                                                 Act is prescriptive in this regard, and                  below, the agency is using lists of                   procedures for registering participating
                                                 requires NHTSA to use the EPA                            franchised dealers provided by the                    dealers and listing participating
                                                 calculation, and not any other                           OEMs to aid in the process of registering             disposal facilities, reimbursing dealers
                                                 calculation, to determine whether a                      dealers under the program.                            for qualifying transactions, disposing of
                                                 trade-in vehicle is eligible under the                      NHTSA met with automobile dealers                  trade-in vehicles, and enforcing
                                                 program.                                                 and dealer organizations, including the               penalties for program violations.
                                                    Some consumers have asked whether                     National Automobile Dealers                              The rule is being issued without first
                                                 they may participate in more than one                    Association and the American                          providing a notice and an opportunity
                                                 reimbursed transaction, either singly or                 International Automobile Dealers                      for public comment. As noted above, the
                                                 as joint-registered owners of a vehicle.                 Association, to better understand the                 Act provides that the rule shall be
                                                 The CARS Act specifies that each                         typical vehicle trade-in and purchase/                issued within 30 days after enactment,
                                                 person may receive only one credit and                   lease transaction. The agency consulted               ‘‘notwithstanding’’ the requirements of
                                                 that only one credit may be issued to the                with groups representing disposal                     5 U.S.C. 553, the Federal law requiring
                                                 joint-registered owners of a single trade-               facilities, salvage auctions, and                     notice and comment. Further, given that
                                                 in vehicle under the program.                            reporting entities, including the                     schedule and the necessity of quickly
                                                 Consequently, a person may participate                   American Salvage Pool Association, the                beginning to implement this 4-month
                                                 in a transaction that receives a credit                  Automotive Recyclers Association,                     program with a statutorily fixed end
                                                 under this program only once.                            CoPart, Mannheim, Insurance Auto                      date, the agency finds for good cause
                                                    The CARS Act is specific as to the                    Auctions, the Institute of Scrap                      that providing notice and comment is
                                                 characteristics of the vehicle that may                  Recycling Industries, Inc., and the                   impracticable and contrary to the public
                                                 be traded in and the characteristics of                  National Salvage Vehicle Reporting                    interest. Drafting and issuing a proposed
                                                 the new vehicle that may be purchased                    Program, to learn about the processes                 rule, providing a period for public
                                                 or leased, and these two requirements                    involved in recycling and scrapping old               comment, and addressing those
                                                 are interdependent (i.e., whether a new                  vehicles. The information learned by the              comments in the final rule would have
                                                 vehicle is eligible under the program                    agency from dealer and disposal facility              been highly impracticable in the time
                                                 depends, in part, on the characteristics                 organizations was critical to an                      available and would have substantially
                                                 of the trade-in vehicle). For example,                   informed rulemaking process.                          delayed issuance of this final rule
                                                 the trade-in requirements for a large                       The agency also consulted with                     beyond the legislatively mandated
                                                 work truck differ from those of                          officials from Texas, California and                  issuance date of July 24. We think the
                                                 passenger cars under the program.                        Germany. These officials provided                     public interest is best served by issuing
                                                 Similarly, some vehicles—notably                         valuable information to the agency,                   this rule on the mandated date so that
                                                 motorcycles—simply are not eligible                      based on their experience administering               its requirements are known and can be
                                                 under the CARS Act, either as trade-in                   and enforcing similar vehicle purchase                followed by all participants. This is
                                                 vehicles or for purchase or lease, even                  and trade-in programs. Each of these                  especially true because transactions
                                                 though consumers have noted that                         officials cautioned NHTSA that it would               since July 1 have been potentially
                                                 transactions involving those vehicles                    need to be vigilant to guard against                  eligible for credits under this program.
                                                 might reduce fuel use and improve the                    fraud.                                                   The CARS Act prescribes a
                                                 environment.                                                Finally, as required under the CARS                rulemaking period of just 30 days before
                                                                                                          Act, the agency coordinated with                      the program is to be fully implemented
                                                 III. Public Outreach and Consultation                    appropriate Federal agencies. With                    and capable of accommodating a
                                                    The extremely short time afforded by                  respect to the National Motor Vehicle                 potentially very large number of
                                                 the Act to develop and complete this                     Title Information System (NMVTIS), the                transactions. Mindful of this
                                                 rulemaking precluded publishing a                        agency met with the Department of                     requirement, the agency placed
                                                 proposed rule for notice and comment.                    Justice and its NMVTIS program                        significant emphasis on efficient
                                                 Therefore, the agency took a variety of                  administrator, the American Association               transaction processes and data
                                                 steps to obtain public input as it moved                 of Motor Vehicle Administrators, to                   exchange. To that end, most of the
                                                 forward to develop this rule. It                         develop procedures for updating the                   transactional requirements imposed by
                                                 established a Web site that invited                      NMVTIS to reflect the crushing or                     today’s rule are met through electronic
                                                 public inquiries. As it received                         shredding of trade-in vehicles under the              online submissions. Where this is so,
                                                 inquiries, it posted a steadily growing                  program. The agency consulted with the                the rule identifies the particular data or
                                                 list of questions and answers, which in                  EPA on the listing of categories of                   information required in the electronic
                                                 turn led to additional inquiries. It                     eligible vehicles and on the listing of               submission and, in one case, refers to an
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                                                 hosted a ‘‘webinar’’ that elicited                       disposal facilities and requirements and              appendix with a facsimile of the
                                                 hundreds of inquiries. In addition, it                   procedures for the proper disposal of                 electronic form for easy reference.
                                                 met with representatives of a wide                       refrigerants, antifreeze, mercury                        The Act requires the agency to
                                                 variety of environmental interest                        switches, and other substances prior to               develop certain lists to assist consumers
                                                 groups.                                                  crushing or shredding the trade-in                    and dealers (e.g., a comprehensive list of
                                                    The agency also directly consulted                    vehicle. The agency also consulted with               new fuel efficient vehicles meeting the
                                                 with organizations representing original                 EPA concerning a method to disable the                program requirements, a list of disposal

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                                                                   Federal Register / Vol. 74, No. 144 / Wednesday, July 29, 2009 / Rules and Regulations                                                  37881

                                                 entities to which dealers may transfer                   implementing the dealer registration                  password with which to conduct
                                                 eligible trade-in vehicles). Here, the rule              requirement through a several step                    transactions, and add the dealer to the
                                                 makes use of references to the CARS                      process. First, on June 30, 2009, the                 list of registered dealers on its Web site
                                                 Web site for convenient reference to                     agency requested and later received a                 at Consumers may
                                                 these helpful lists.                                     list of franchised dealers from their                 consult this list to identify registered
                                                    Much of the CARS Act is specific and                  respective OEMs, including each                       dealers in their locality. Section
                                                 directive. However, where a statutory                    dealer’s legal business name, doing-                  599.200(d)(2) provides that, where an
                                                 term or provision is not clear or gives                  business-as name, mailing address,                    application for registration is rejected,
                                                 the agency discretion, the rule generally                point of contact, and OEM franchise                   the agency will notify the dealer by e-
                                                 strikes the balance in favor of an                       identifier.1 OEM franchised dealers, as a             mail, and provide the reasons for
                                                 interpretation that promotes smooth and                  group, satisfy the requirement for State              rejection. The agency anticipates that,
                                                 expeditious completion of transactions                   licensing. The agency has learned that,               unless rejected, confirmation of
                                                 or one that decreases opportunities for                  without an active OEM franchise                       registration and addition to the list
                                                 fraud.                                                   agreement, a dealer is unable to offer                should occur within 2 to 4 business
                                                 a. Definitions (§ 599.102)                               manufacturer purchasing incentives and                days after a dealer submits the required
                                                                                                          may not be able, in some cases, to                    information.
                                                    The CARS Act defines a dealer as a                    extend the full manufacturer warranty
                                                 person licensed by a ‘‘State’’ and                                                                                Section 599.200(e)(1) provides that
                                                                                                          to the new vehicles it sells. For this                the agency may automatically revoke a
                                                 identifies an eligible trade-in vehicle in               reason, the agency includes the
                                                 terms of its insurance and registration                                                                        registration as a matter of course for
                                                                                                          requirement for a currently active OEM                termination or discontinuance of a
                                                 status under ‘‘State’’ law. Read together,               franchise agreement as part of the dealer
                                                 these statutory provisions restrict the                                                                        franchise but the dealer’s registration
                                                                                                          registration process. (The OEMs have
                                                 transactions that are eligible for a credit                                                                    may be reinstated upon a dealer’s
                                                                                                          agreed to update this list weekly, to add
                                                 under the CARS program. More                                                                                   showing of proper and adequate license
                                                                                                          newly franchised dealerships and
                                                 specifically, a dealer must be a United                                                                        to sell new vehicles to ultimate
                                                                                                          remove dealerships that are no longer
                                                 States dealer and a trade-in vehicle must                                                                      purchasers. Section 599.200(e)(2) states
                                                                                                          under franchise agreement.) The agency
                                                 be insured and registered in the United                                                                        that the agency may suspend or revoke
                                                                                                          then contacted all listed dealers by mail,
                                                 States. However, nothing in the Act                                                                            a dealer’s registration under the
                                                                                                          providing instructions on how to
                                                 excludes U.S. territories from the reach                                                                       procedures in Section 599.504. Section
                                                                                                          register under the program. Dealers
                                                 of the program. Consequently, in section                                                                       599.200(f) requires a registered dealer to
                                                                                                          received separate letters and were
                                                 599.102, the agency has defined ‘‘State’’                                                                      immediately notify the agency of any
                                                                                                          instructed to register separately for each
                                                 to include the 50 United States, the                     make of vehicle they sell. Section                    change in the registration information it
                                                 District of Columbia, Puerto Rico, the                   599.200(b) identifies the required dealer             submitted or any change in the status of
                                                 Virgin Islands, Guam, American Samoa,                    qualifications for registration, which                its State license or franchise. Finally,
                                                 and the Commonwealth of the Northern                     flow from the statutory requirement for               section 599.200(g) accommodates
                                                 Mariana Islands.                                         State licensing and from the need to                  transactions that occurred after July 1,
                                                    The CARS Act uses the term ‘‘person’’                 perform transactions electronically.                  2009, but prior to the publication of
                                                 to describe those eligible to purchase or                OEM franchised dealers should easily                  today’s final rule, by permitting
                                                 lease a new vehicle under the Program.                   satisfy these requirements.                           registration after a qualifying sale or
                                                 See Sections 1302(c–d). In the absence                      As set forth in section 599.200(c),                lease transaction has occurred.3
                                                 of a definition of this term in the CARS                 dealers that have been contacted by mail                 The agency believes that this process
                                                 Act, the agency relies on the universal                  by the agency and that wish to                        is the most efficient and appropriate
                                                 definition that appears in 1 U.S.C. 1,                   participate must register to do so                    method to register dealers consistent
                                                 which includes corporations,                             electronically, using the authorization               with the requirements of the CARS Act.
                                                 companies, associations, firms,                          code and following the instructions                   The Act requires that a dealer be
                                                 partnerships, societies, and joint stock                 provided in the mailing, and fill out an              licensed under State law, and the list
                                                 companies, as well as individuals. The                   electronic screen providing, among                    provided by OEMs ensures that this is
                                                 agency adopts this definition for the                    other things, name and contact                        so. Using this list also allows the agency
                                                 term ‘‘person’’ in Section 599.102, and                  information and bank account and                      to verify dealer registration information
                                                 also defines a ‘‘purchaser’’ in that                     routing data for receiving payment                    in a timely manner. Since the OEMs
                                                 section as a person purchasing or                        under the program.2 The agency will                   have agreed to provide weekly updated
                                                 leasing a new vehicle under the CARS                     review this information to ensure                     lists, this process also will allow for
                                                 program. Of course, each person is                       completeness, and verify that the dealer              registration of newly franchised dealers
                                                 subject to the statutory restriction that                has a still active franchise agreement                as they come into existence and the
                                                 precludes participation by any person in                 (based on the continuously updated list               discontinuance of registrations for
                                                 this program more than once.                             provided by OEMs). Section 599.200(d)                 dealers that are no longer franchised.
                                                                                                          sets forth the procedures for approving               Newly franchised dealers will be
                                                 b. Registration of Dealers (§ 599.200)
                                                                                                          and disapproving registration                         contacted by mail with an authorization
                                                    The Act requires the agency to                        applications. Section 599.200(d)(1)                   code, as the agency becomes aware of
                                                 provide for a means of registering                       provides that, where an application for               them from the weekly updated lists. A
                                                 dealers for participation in the program.                registration is approved, the agency will             dealer whose franchise has been
                                                 (Section 1302(d)(1)). A dealer is defined                notify the dealer of approval by e-mail,
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                                                                                                                                                                discontinued will be removed from the
                                                 under the Act as a person licensed by                    providing a user identification and                   agency’s list, and will no longer be
                                                 a State who engages in the sale of new                                                                         eligible to receive credits for
                                                 automobiles to ultimate purchasers                         1 The agency chose to involve the OEMs in this
                                                                                                                                                                transactions under the program.
                                                 (Section 1302(i)(6)), a definition we                    process to eliminate the opportunity for
                                                                                                          unscrupulous individuals or entities to identify
                                                 have restated in Section 599.102. After                  themselves as franchised dealers.                       3 As discussed later in this document, other
                                                 consultation with dealer and OEM                           2 The registration process was made available to    requirements apply to these earlier transactions as
                                                 organizations, the agency is                             dealers beginning on July 24, 2009.                   well.

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                                                 37882             Federal Register / Vol. 74, No. 144 / Wednesday, July 29, 2009 / Rules and Regulations

                                                 c. Identification of Disposal Facilities        Currently,                      shredding, in accordance with
                                                 (§ 599.201)                                              approximately 7,700 disposal facilities               applicable Federal and State
                                                    Under the Act, the agency is required                 are participants, and EPA estimates that              requirements. The rule does not impose
                                                 to provide a list of entities to which                   approximately 1,500 of these facilities               additional requirements; for example, it
                                                 dealers may transfer eligible trade-in                   actively turn in the switches. The                    does not require removal of all lead
                                                 vehicles for disposal. (Section                          agency has determined that disposal                   products such as lead solder
                                                 1302(d)(5)). The Act also requires the                   facilities that are participants on the               connections that are ordinarily not
                                                 Secretary to coordinate with the                         ELVS list present the best assurance of               removed during the shredding process.
                                                 Attorney General to ensure that the                      compliance with State and Federal                        NHTSA is aware, from consultations
                                                 National Motor Vehicle Title                             environmental laws.                                   with EPA, that the State of Maine and
                                                                                                             With this in mind, NHTSA has                       the U.S. territories are not participants
                                                 Information System (NMVTIS) is timely
                                                                                                          identified disposal facilities that are               in the NVMSRP and that the ELVS list
                                                 updated to reflect the crushing or
                                                                                                          ELVS participants for listing as                      contains no disposal facilities in these
                                                 shredding of trade-in vehicles and                       approved disposal facilities under this
                                                 appropriate reclassification of their                                                                          areas. Maine has its own program for
                                                                                                          program, and these disposal facilities                recycling mercury switches, which is
                                                 titles. (Section 1302(c)(2)(C)).                         are listed on the agency’s Web site at
                                                    The agency met with groups                                                                                  comparable to the NVMSRP. Under
                                                                                                 However,                Maine law, a vehicle may not be
                                                 representing auto recyclers and other
                                                                                                          some entities on this list may dispose of             crushed without first removing and
                                                 disposal facilities and salvage auctions,                mercury switches as part of their
                                                 as well as officials from AAMVA and                                                                            properly disposing of mercury switches,
                                                                                                          business (for example, auto repair                    and disposal facilities are covered by
                                                 the Department of Justice responsible                    businesses) but do not actually engage
                                                 for administering the NMVTIS, to get an                                                                        that law. NHTSA obtained a list of
                                                                                                          in dismantling or recycling of vehicles.              disposal facilities in Maine from the
                                                 understanding of the vehicle salvage                     Therefore, the fact that a facility is on
                                                 and disposal process. From those                                                                               State Bureau of Motor Vehicles, and
                                                                                                          the list does not automatically ensure                these facilities are included along with
                                                 meetings, the agency learned that there                  that it is equipped to dispose of vehicles
                                                 is a wide range of entities involved in                                                                        the ELVS facilities from other states, on
                                                                                                          properly. To be eligible for participation            the agency’s Web site at http://
                                                 various aspects of the vehicle salvage                   in the CARS Program, a facility on the
                                                 and disposal business. The agency also                                                                As a condition
                                                                                                          ELVS list must be able to crush or shred              of participating, these Maine facilities
                                                 consulted with the EPA about the CARS                    motor vehicles, either with its own
                                                 program and the requirement to produce                                                                         must make the same certifications as
                                                                                                          equipment or by use of a mobile                       required of the ELVS facilities.
                                                 a list of disposal facilities for                        crusher. NHTSA was not able to obtain
                                                 disposition of the trade-in vehicles.                                                                             In the case of the U. S. Territories, the
                                                                                                          accurate lists of all entities that have              agency is informed that participation in
                                                 Mindful of environmental issues,                         this capacity within the time allowed,
                                                 NHTSA sought to identify a universe of                                                                         ELVS is currently impracticable for cost
                                                                                                          but is informed that many of the entities             reasons related to sending mercury
                                                 disposal facilities that was attentive to                on the ELVS list are capable of at least
                                                 these concerns, while achieving the                                                                            switches to the Continental United
                                                                                                          obtaining the services of a mobile                    States. Therefore, the rule does not
                                                 objectives of the CARS program.                          crusher. Dealers will have to inquire of
                                                    In the course of these consultations                                                                        include disposal facilities on the list for
                                                                                                          specific entities concerning their                    the Territories, but allows dealers to
                                                 and based on advice from EPA, the                        capacity to crush or shred the vehicle.
                                                 agency identified the National Vehicle                                                                         select disposal facilities within the
                                                                                                          Any facility that does participate will               territories that are able to make the same
                                                 Mercury Switch Recovery Program                          have to certify that it has that capacity
                                                 (NVMSRP) as a comprehensive source                                                                             certifications required of the ELVS and
                                                                                                          to crush or shred and will dispose of the             Maine facilities.
                                                 of disposal facilities generally                         vehicle through crushing or shredding.
                                                 committed to meeting State and Federal                                                                            The agency plans to update this
                                                                                                             These facilities must additionally                 disposal facility list periodically, to add
                                                 environmental laws. The NVMSRP was                       agree to turn in mercury switches in
                                                 established in 2006 under a                                                                                    entities that become ELVS participants
                                                                                                          accordance with the NVMSRP from any
                                                 memorandum of understanding (MOU)                                                                              and to remove entities that are no longer
                                                                                                          CARS trade-in vehicles they accept (to
                                                 among the EPA, environmental groups,                                                                           ELVS participants or for other reasons
                                                                                                          the extent the vehicles have such
                                                 manufacturers and disposal facilities, to                                                                      discussed elsewhere in this document.
                                                                                                          switches), by certifying that they will do
                                                 recover and recycle mercury switches                                                                           The rule requires dealers to consult this
                                                                                                          so. In addition, because the CARS Act
                                                 from end-of-life vehicles before they are                                                                      list on the CARS Web site at the time
                                                                                                          directs the agency to ensure that
                                                 scrapped, crushed or shredded. This                                                                            of the transfer of the trade-in vehicle, as
                                                                                                          pollutants are removed from vehicles
                                                 purpose is in alignment with the CARS                                                                          an entity that does not appear on the list
                                                                                                          and properly disposed of, that vehicles
                                                 Act’s requirement for proper vehicle                                                                           on that date is not eligible to receive the
                                                                                                          are crushed or shredded, and that
                                                 disposition, including the removal of                    NMVITS is updated to reflect the                      vehicle for crushing or shredding.4
                                                 mercury switches. The MOU authorizes                                                                              One issue that has arisen is the
                                                                                                          disposition of the vehicle, as a condition
                                                 the End of Life Vehicle Solutions                        of participation in the program, the                  participation of entities that shred
                                                 (ELVS), a corporation established by                     listed participants must also agree to                vehicles in the CARS process. Shredders
                                                 vehicle manufacturers to carry out                       remove pollutants from the CARS trade-                turn crushed vehicles into materials
                                                 responsibilities of the NVMSRP,                          in vehicles in compliance with State                  useful in various industrial processes.
                                                 including establishing a process for                     and Federal law, crush or shred the                   Shredders are relatively few in number,
                                                 participants to enroll in the program                    vehicle, update NMVTIS to reflect the                 with less than 300 shredding machines
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                                                 and maintaining a database of                            disposition of the vehicle, and certify to            distributed nationwide. Disposal
                                                 participants who recover and submit                      having done so. The certification                     facilities with shredders may be ELVS
                                                 mercury switches.                                        requires the disposal facility to certify             participants and, if they are, they can
                                                    Participants may enroll in the                        that it will dispose of refrigerants,                   4 Participants in the CARS program are cautioned
                                                 program by registering with ELVS.                        antifreeze, lead products, mercury                    to consult the list on NHTSA’s CARS Web site,
                                                 Information about ELVS can be found                      switches, and other toxic or hazardous      , for eligible disposal
                                                 on its Web site at http://                               vehicle components prior to crushing or               facilities, not the list on the ELVS Web site.

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                                                                   Federal Register / Vol. 74, No. 144 / Wednesday, July 29, 2009 / Rules and Regulations                                                     37883

                                                 participate fully in the CARS program.                   Auctions, and the Automotive Salvage                   automobile’’ and its definition are taken
                                                 To the extent these facilities are not                   Pool Association), we concluded that                   from the agency’s fuel economy statute.
                                                 ELVS participants, they may still play a                 simply listing their members, absent                   The definition excludes vehicles that
                                                 role in the ultimate disposition of the                  more information, would not be                         NHTSA has determined are (1) not
                                                 vehicle. The final rule places no                        appropriate. However, we understand                    manufactured primarily for transporting
                                                 restrictions on a trade-in vehicle once it               from representatives of those                          persons and (2) vehicles that are capable
                                                 is crushed. Once crushed, the agency                     organizations and companies that they                  of off-highway operation. Vehicles not
                                                 assumes the vehicle will be transferred                  and their members are willing to restrict              manufactured primarily for transporting
                                                 to a shredder so that its materials can be               the sale of CARS trade-in vehicles to                  persons include pickup trucks and
                                                 recycled. The rule does not require any                  just those entities on the CARS program                certain vehicles that permit expanded
                                                 tracking of this ultimate shredding of a                 disposal facility list and make the                    use of the vehicle for cargo-carrying
                                                 crushed vehicle, so the entity receiving                 necessary certifications about the                     purposes, including vehicles which are
                                                 the crushed vehicle for shredding does                   disposal of those vehicles. Any other                  designed to transport more than 10
                                                 not have to submit a CARS certification                  salvage auctions willing to abide by                   persons; provide temporary living
                                                 form.                                                    these restrictions and submit the                      quarters, transport property on an open
                                                    Because of the requirement, discussed                 necessary forms and certifications under               bed, provide greater cargo-carrying than
                                                 later in this document, that dealers must                penalty of law may participate in the                  passenger-carrying volume, or permit
                                                 disable the trade-in vehicle’s engine                    CARS program. All participants must                    expanded use of the automobile for
                                                 prior to transferring the vehicle to a                   understand the specific requirements of                cargo-carrying purposes or other
                                                 disposal facility, the agency believes                   this rule and the substantial penalties                nonpassenger-carrying purposes. (See
                                                 that the statutory interest in ensuring                  they may incur if they violate it or                   49 CFR 523.5(a)).
                                                 that the vehicle is not returned to use on               submit false information in connection                    Vehicles that are capable of off-
                                                 the road in this or any other country is                 with the program. Also, all who                        highway operation include three groups
                                                 largely met before it leaves the dealer’s                participate must understand that their                 of vehicles. (See 49 CFR 523.5(b)). The
                                                 possession. Prior engine disablement                     records, premises, and CARS vehicles in                first includes vehicles that have 4-wheel
                                                 reduces the likelihood that a trade-in                   their possession are subject to                        drive and have at least four out of five
                                                 vehicle will be returned to use as an on-                inspection by NHTSA and the DOT                        specified physical characteristics
                                                 road automobile. With the extra                          Office of Inspector General.                           relating to ground clearance.6 The
                                                 assurance provided by engine                                Section 599.201 implements the                      second includes vehicles that are rated
                                                 disablement, the smooth operation of                     requirements for identification of                     at more than 6,000 pounds gross vehicle
                                                 the program is better served if                          salvage auctions and disposal facilities.              weight and have at least four out of five
                                                 limitations on participation in the                      Section 599.201(a) identifies the                      specified physical characteristics
                                                 disposal stream are kept to a minimum,                   participating entities, including salvage              relating to ground clearance, but do not
                                                 ensuring a reasonable geographic                         auctions, disposal facilities listed on the            have 4-wheel drive. The third includes
                                                 distribution of entities that may receive                agency’s Web site, and disposal                        2-wheel drive SUVs (regardless of
                                                 trade-in vehicles from dealers under the                 facilities in the U.S. territories. Section            GVWR) which came in a 4-wheel drive
                                                 program.                                                 599.201(b) describes the conditions                    version that met four of five specified
                                                    With these points in mind, the agency                 these entities must follow in order to                 physical characteristics related to
                                                 consulted with representatives of the                    participate in the program.                            ground clearance. Beginning with the
                                                 salvage auction industry. The agency                                                                            2011 model year, NHTSA will reclassify
                                                 believes it is practicable to provide for                d. Determining Eligibility of Trade-in
                                                                                                                                                                 this third group of vehicles as passenger
                                                 the participation of salvage auctions in                 Vehicles and New Vehicles (§ 599.300)
                                                                                                                                                                 cars. See Average Fuel Economy
                                                 the transfer of trade-in vehicles to                       The CARS Act prescribes detailed                     Standards—Passenger Cars and Light
                                                 disposal facilities under the CARS                       requirements concerning eligible trade-                Trucks—Model Year 2011, Section XI
                                                 program, in order to broaden the                         in vehicles and eligible new vehicles for              (Vehicle Classification); 74 FR 14419,
                                                 avenues of disposal available to dealers.                qualifying transactions under the                      March 30, 2009. Although neither
                                                 Therefore, salvage auctions may receive                  Program. This final rule implements                    specified nor prohibited in the CARS
                                                 a CARS trade-in vehicle, provided that,                  these requirements in close adherence                  Act, the agency has concluded that it is
                                                 as a condition of participation, these                   to the statutory language.                             most appropriate to define passenger
                                                 entities agree to limit their auction sales              1. Vehicle Definitions
                                                 of CARS trade-in vehicles to the                                                                                the method used by the Environmental Protection
                                                 disposal facilities described above that                    The CARS Act divides eligible trade-                Agency and described in the report entitled
                                                 appear on the agency’s list. We believe                  in vehicles and new vehicles into four                 ‘‘Light-Duty Automotive Technology and Fuel
                                                                                                          groups: passenger automobiles, category                Economy Trends: 1975 through 2008’’; ‘‘category 3
                                                 that including listed disposal facilities,                                                                      truck’’ means a work truck, as defined in section
                                                 and requiring salvage auctions to sell at                1 trucks, category 2 trucks, and category              32901(a)(19) of title 49, United States Code. Under
                                                 auction the scrap trade-in vehicles only                 3 trucks.5 The term ‘‘passenger                        regulations implementing the CAFE program (see
                                                 to approved disposal facilities strikes                                                                         49 CFR Part 523), ‘‘passenger automobiles’’
                                                                                                             5 Section 1302(i) of the CARS Act defines those     currently include all passenger cars and ‘‘non-
                                                 the appropriate balance between                                                                                 passenger automobiles’’ include all SUVs, vans and
                                                                                                          categories largely with reference to statutory
                                                 program and environmental                                categories of vehicles subject to the Corporate        pickup trucks up to 8,500 pounds GVWR.
                                                 accountability, on the one hand, and                     Average Fuel Economy (CAFE) Standards as                  6 The five ground clearance characteristics are: (1)

                                                 geographic distribution and dealer                       follows: ‘‘passenger automobile’’ means a passenger    An approach angle of not less than 28 degrees; (2)
                                                 access, on the other.                                    automobile, as defined in section 32901(a)(18) of      a breakover angle of not less than 14 degrees; (3)
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                                                                                                          title 49, United States Code, that has a combined      a departure angle of not less than 20 degrees; (4)
                                                    NHTSA was unable to develop a                         fuel economy value of at least 22 miles per gallon;    a running clearance of not less than 20 centimeters;
                                                 comprehensive list of salvage auctions                   ‘‘category 1 truck’’ means a non-passenger             and (5) front and rear axle clearances of not less
                                                 within the time allowed. Although we                     automobile, as defined in section 32901(a)(17) of      than 18 centimeters each. These characteristics are
                                                 heard from representatives of some of                    title 49, United States Code, that has a combined      calculated when the automobile is at curb weight,
                                                                                                          fuel economy value of at least 18 miles per gallon,    on a level surface, with the front wheels parallel to
                                                 the largest auctions and their                           except that such term does not include a category      the automobile’s longitudinal centerline, and the
                                                 associations (including CoPart,                          2 truck; ‘‘category 2 truck’’ means a large van or a   tires inflated to the manufacturer’s recommended
                                                 Mannheim, the Insurance Auto                             large pickup, as categorized by the Secretary using    pressure. See 49 CFR Part 523.5(b)(2).

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                                                 37884             Federal Register / Vol. 74, No. 144 / Wednesday, July 29, 2009 / Rules and Regulations

                                                 cars using the NHTSA regulations and                     wheelbases offered by the original                    to the operation of the vehicle when it
                                                 policy which are applicable to 2010 and                  equipment manufacturer (OEM), the                     submits its request for reimbursement.
                                                 earlier model year vehicles. Therefore,                  size classification for the secondary                 Separately, the person trading in the
                                                 the third group of vehicles will continue                manufacturer will be determined by                    vehicle must certify that it is in drivable
                                                 to be classified as trucks for CARS                      (and consistent with) the size                        condition. This latter certification also
                                                 purposes (and will be excluded from the                  classification determined for the OEM.                must be submitted by the dealer with its
                                                 definition of a passenger automobile).                   For example, if General Motors                        application requesting reimbursement.
                                                    A ‘‘category 1 truck’’ is a non-                      produces 2008 model year Chevrolet                    This approach is adopted in section
                                                 passenger automobile. This category                      Colorado pickup trucks with wheelbases                599.300(b)(1) of the final rule, and the
                                                 includes sport utility vehicles (SUVs),                  of 111, 119 and 126 inches, Colorado                  required dealer and purchaser
                                                 medium-duty passenger vehicles,7 small                   pickup trucks would be classified as                  certifications are contained in the
                                                 and medium pickup trucks, minivans,                      category 1 trucks for CARS purposes                   Summary of Sale/Lease and
                                                 and small and medium passenger and                       (because the shortest wheelbase                       Certifications (Appendix A,
                                                 cargo vans. It does not include vehicles                 Colorado pickup truck was less than or                certifications section). Note that the
                                                 that are defined as category 2 trucks.8                  equal to 115 inches). If a secondary                  Summary of Sale/Lease and
                                                    A ‘‘category 2 truck’’ is a large van or              manufacturer introduces into commerce                 Certifications form has two
                                                 a large pickup truck, based upon the                     2008 model year Colorado ZZZ vehicles                 components—a section for the dealer to
                                                 length of the wheelbase (more than 115                   (high performance Colorado pickups                    input information summarizing the
                                                 inches for pickup trucks and more than                   with 126 inch wheelbase only),                        terms of the sale or lease transaction and
                                                 124 inches for vans). If the vehicle                     Colorado ZZZ models would also be                     a section containing certifications that
                                                 nameplate contains a variety of                          classified as a category 1 pickup trucks.             must be made by both the dealer and the
                                                 wheelbases, the size classification is                     The rule defines these four groups of               purchaser. The section summarizing the
                                                 determined by considering only the                       vehicles in section 599.102 and makes                 transaction is discussed later in this
                                                 shortest wheelbase produced. In                          use of these categories throughout                    notice.
                                                 addition, some pickup trucks and cargo                   sections 599.300(f) and 599.300(g).                   (ii) Insurance
                                                 vans which exceed these thresholds are                   2. Eligibility of Trade-in Vehicles
                                                 treated as category 3 trucks instead of                                                                           In addressing the requirement that the
                                                 category 2 trucks.                                          The CARS Act establishes four criteria             trade-in vehicle be ‘‘continuously
                                                    A ‘‘category 3 truck’’ is a work truck                for an eligible trade-in vehicle. The                 insured consistent with the applicable
                                                 and is rated between 8,500 and 10,000                    trade-in vehicle must:                                State law’’ for a period of not less than
                                                 pounds gross vehicle weight. This                           (1) Be in drivable condition;                      one year prior to the transaction, the
                                                 category includes very large pickup                         (2) Have been continuously insured,                agency notes the complication that not
                                                 trucks (those with cargo beds 72 inches                  in accordance with State law, and                     all States require vehicle owners to
                                                 or more in length) and very large cargo                  registered in the same owner’s name for               purchase automobile insurance
                                                 vans.                                                    the one-year period immediately prior                 coverage. Several States provide vehicle
                                                    As previously stated, for category 1                  to the trade-in;                                      owners with the option, for example, to
                                                 and 2 trucks with a variety of                              (3) Have been manufactured not                     post a surety bond, leave a cash deposit
                                                 wheelbases, the size classification is                   earlier than 25 years before the date of              or self-insure in lieu of purchasing
                                                 determined by considering only the                       trade-in 9 and, in the case of a category             automobile insurance. Two States have
                                                 shortest wheelbase produced. If a                        3 vehicle, also be from a model year not              little or no insurance requirements.
                                                                                                          later than model year 2001; and                          The agency recognizes that insurance
                                                 secondary manufacturer modifies and
                                                                                                             (4) Have a combined fuel economy                   requirements differ throughout the
                                                 introduces into commerce a vehicle
                                                                                                          value of 18 miles per gallon or less,10 if            country. However, the agency believes
                                                 with only a limited portion of the
                                                                                                          it is a passenger automobile, a category              that the Act requires the continuous
                                                    7 Medium-duty passenger vehicles are defined in
                                                                                                          1 truck, or a category 2 truck.11                     one-year insurance condition to be met
                                                 49 CFR 523.2.                                            The agency must have a means of                       as a threshold matter, with respect to
                                                    8 As noted in footnote 2, the statutory definition    evaluating these criteria as it determines            any trade-in vehicle under the program.
                                                 of the term ‘‘category 2 truck’’ is based on the         whether a transaction qualifies under                 In a State where the conditions and
                                                 categorization method used by the Environmental                                                                requirements of insurance are specified
                                                 Protection Agency and described in the report
                                                                                                          this program.
                                                 entitled ‘‘Light-Duty Automotive Technology and
                                                                                                                                                                in law (e.g., liability minimums,
                                                                                                          (i) ‘‘Drivable Condition’’                            deductible requirements), the insurance
                                                 Fuel Economy Trends: 1975 through 2008.’’ (A copy
                                                 of this report has been placed in the docket for this       The agency intends that ‘‘drivable                 coverage would then need to be in
                                                 rule.) Based on that method of categorization, large     condition’’ be demonstrated by several                accordance with those conditions and
                                                 vans and pickup trucks, which would otherwise fall
                                                 within category 1, instead fall within category 2.
                                                                                                          means. First, it must be confirmed by                 requirements. To qualify under this
                                                 The method is based primarily on published               the trade-in vehicle being operated,                  requirement, a purchaser must provide
                                                 wheelbase data according to the following criteria:      under its own power, by the dealer on                 proof of insurance covering the trade-in
                                                 A small pickup is less than 105″, a midsize pickup       public roads on the date the vehicle is               vehicle for a period of at least one year
                                                 is 105″ to 115″, a large pickup is more than 115″;
                                                 A small van is less than 109″, a midsize van is 109″
                                                                                                          traded in. The dealer must then certify               prior to the date of the trade-in.
                                                 to 124″, a large van is more than 124″; A small SUV                                                               The agency is aware that, in some
                                                 is less than 100″, a midsize SUV is 100″ to 110″,           9 This means that all pre-model year 1984          cases, consumers may have insurance
                                                 a large SUV is more than 110″. This classification       vehicles, and most model year 1984 vehicles, are      cards that state clearly the period of
                                                 scheme is similar to that used in many trade and         not eligible as trade-in vehicles.
                                                                                                                                                                insurance coverage, while in other
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                                                 consumer publications.                                      10 As discussed in later in this preamble, under

                                                    For those vehicle nameplates with a variety of        ‘‘Requirements for qualifying transactions,’’ the     cases, an insurance card is unavailable
                                                 wheelbases, the size classification was determined       combined fuel economy of the trade-in vehicle must    or does not convey the period-of-
                                                 by considering only the smallest wheelbase               satisfy the statutory requirements related to the     coverage information. To provide for an
                                                 produced. The classification of a vehicle for this       difference between its fuel economy and that of the   alternative, the agency consulted with
                                                 report is based on the author’s engineering              new vehicle, as well as meeting this 18 miles per
                                                 judgment and is not a replacement for definitions        gallon absolute threshold.                            several insurance associations,
                                                 used in implementing automotive standards                   11 There is no minimum for category 3 trucks       including the Insurance Information
                                                 legislation. [Emphasis added.]                           because they do not have fuel economy ratings.        Institute, American Insurance

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                                                                   Federal Register / Vol. 74, No. 144 / Wednesday, July 29, 2009 / Rules and Regulations                                                    37885

                                                 Association, National Association of                     the date of the trade-in. The agency                  month and year of manufacture may be
                                                 Mutual Insurance Companies, and                          recognizes that this proof of registration            retrieved from the safety standard
                                                 Property Casualty Insurers Association                   presents complications for purchasers.                certification label that appears on the
                                                 of America. These entities agreed to                     In several States, registration cards or              frame or edge of the driver’s door in
                                                 assist the agency through their member                   documents do not indicate a period of                 most vehicles. The rule allows the 25-
                                                 insurance companies. They indicated                      coverage of more than one year. In some               year period to be satisfied provided it
                                                 that purchasers could contact their                      of these States, purchasers have a                    falls any time within the month that the
                                                 insurers to obtain proof of insurance in                 difficult time obtaining prior                        vehicle is traded in. Section 599.300(f)
                                                 a form that provides the details needed                  registration information from the State.              implements the additional requirement,
                                                 to identify the insured vehicle and the                  Seeking a less burdensome alternative,                in the case of a category 3 vehicle, that
                                                 one year period of coverage required                     the agency evaluated the capabilities of              the trade-in vehicle be manufactured
                                                 under the program.                                       commercial vehicle information                        not later than model year 2001. The
                                                    To implement this process, the agency                 services, such as Polk and Experian, to               dealer must certify that the trade-in
                                                 is requiring the owner of the trade-in                   determine the type of vehicle                         vehicle meets this manufacturing date
                                                 vehicle to provide proof, at the time the                information that is readily available to              requirement. (Appendix A,
                                                 vehicle is traded in, that the trade-in                  consumers. The agency discovered that                 certifications section).
                                                 vehicle has been insured continuously                    purchasers may obtain a history of
                                                 for one year prior to the trade-in. This                 vehicle registration information from                 (v) Combined Fuel Economy
                                                 proof may take one of three forms. The                   these services.                                          The specified combined fuel economy
                                                 proof may consist of one or more                           To implement this process, the agency               rating of 18 mpg or less for the trade-in
                                                 insurance cards containing the make,                     has determined that proof of registration             vehicle (excepting category 3 vehicles)
                                                 model, model year, and vehicle                           may be demonstrated by any of the                     is implemented throughout sections
                                                 identification number (VIN) of the                       following: a current State registration               599.300(f) and 599.300(g).12 Under the
                                                 insured vehicle, but only if, taken                      document or series of registration                    Act, combined fuel economy for an
                                                 together, the cards display on their face                documents in the name of the purchaser                eligible trade-in vehicle is defined as the
                                                 a continuous one-year period of                          evidencing registration for a period of               number posted under the words
                                                 insurance coverage. The proof may also                   not less than one year immediately prior              ‘‘Estimated New EPA MPG’’ and above
                                                 consist of insurance policy documents                    to the trade-in; a current State                      the word ‘‘Combined’’ for vehicles of
                                                 (e.g., declarations pages) showing the                   registration document showing                         model year 1984 through 2007, or
                                                 same information. Finally, the proof                     registration in the name of the purchaser             posted under the words ‘‘New EPA
                                                 may consist of a signed letter, on                       and a document of title that confers title            MPG’’ and above the word ‘‘Combined’’
                                                 insurance company letterhead,                            on the purchaser not less than one year               for vehicles of model year 2008 or later
                                                 identifying the same vehicle                             immediately prior to the trade-in; or a               on the Web site of the
                                                 identification information (i.e., make,                  current State registration document                   Environmental Protection Agency for
                                                 model, model year, and VIN) of the                       showing registration in the name of the               the make, model, and year of such
                                                 insured vehicle and the period of                        purchaser and a document from a                       vehicle. (Section 1302(i)(5)(B)). The
                                                 continuous coverage, which must be for                   commercially available vehicle history                agency adopts this definition in section
                                                 at least one year prior to the date of the               provider evidencing registration for a                599.102, but includes language limiting
                                                 trade-in. In addition, for each of the                   period of not less than one year                      its application to combined fuel
                                                 three options, the consumer must certify                 immediately prior to the trade-in.                    economy based on gasoline. This
                                                 that the trade-in vehicle has been                       Changes in ownership during this                      treatment of trade-in vehicles is
                                                 continuously insured for the requisite                   period to delete a co-owner due to death              consistent with the CARS Act
                                                 period. This proof of insurance, along                   or divorce do not interrupt the                       requirements for defining the combined
                                                 with the consumer certification, must be                 continuity of the registration, so long as            fuel economy of new vehicles.13
                                                 submitted by the dealer in its                           the purchaser has been shown as an                       EPA changed the way it calculated
                                                 application to the agency requesting                     owner on the registration for the entire              fuel economy ratings starting in Model
                                                 reimbursement. Section 599.300(b)(2)                     period. In addition, for each of the three            Year 2008, and has estimated the
                                                 and Appendix A, certifications section,                  options, the consumer must certify that               revised ratings for Model Years 1985–
                                                 implement these requirements.                            the trade-in vehicle was continuously                 2007. Therefore, as described above,
                                                                                                          registered for the requisite period. This             eligibility is determined by the revised
                                                 (iii) Registration
                                                                                                          proof of registration, along with the                 ratings rather than the original EPA
                                                    The requirement that the trade-in                     consumer certification, must be                       sticker on the vehicle. Since the revised
                                                 vehicle be registered to the same owner                  submitted by the dealer in its                        ratings reflect a lower fuel economy,
                                                 for a continuous period of one year prior                application to the agency requesting                  vehicles that would not be eligible
                                                 to the transaction requires clarification.               reimbursement. Section 599.300(b)(3)                  under their original EPA rating may
                                                 The agency interprets this provision as                  and Appendix A, certifications section,               qualify for trade-in.
                                                 requiring the trade-in vehicle to be                     implements these requirements.
                                                 registered to and owned by the person                                                                          3. Eligibility of New Vehicles
                                                 purchasing or leasing the new vehicle                    (iv) Manufacture Date
                                                                                                                                                                   The Act specifies that a new vehicle
                                                 under the program. In a transaction                         The requirement that the trade-in                  must be a passenger automobile, a
                                                 involving more than one person, the                      vehicle be manufactured not earlier than              category 1 truck, a category 2 truck, or
                                                 trade-in vehicle must have been                          25 years before the date of trade-in is
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                                                 registered to and owned by at least one                  straightforward, and is implemented in                  12 The trade-in vehicle is also subject to statutory

                                                 of the persons purchasing or leasing the                 section 599.300(b)(4). Ordinarily, the                requirements related to the difference between its
                                                 vehicle under the program.                               model year of the vehicle, which                      combined fuel economy and that of the new
                                                    To qualify under this requirement, the                appears on the title, will serve to satisfy           vehicle.
                                                                                                                                                                  13 As described later in this document, the
                                                 purchaser will need to provide proof of                  this requirement. Where that                          combined fuel economy of new vehicles is derived
                                                 registration covering the trade-in vehicle               information is inconclusive (e.g., certain            from the Monroney label, which lists only fuel
                                                 for a period of at least one year prior to               model year 1984 and 1985 vehicles), the               economy based on gasoline.

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                                                 37886             Federal Register / Vol. 74, No. 144 / Wednesday, July 29, 2009 / Rules and Regulations

                                                 a category 3 truck. The characteristics of               time prior to five years does not meet                greater than that of the trade-in category
                                                 these vehicles were described earlier                    the statutory requirement.                            3 truck.
                                                 under Section c.1, ‘‘Vehicle                                                                                      The full universe of qualifying
                                                                                                          e. Requirements for Qualifying
                                                 Definitions,’’ and they are defined in                                                                         transactions, together with the
                                                                                                          Transactions (§§ 599.300 and 301)
                                                 section 599.102. To further assist                                                                             corresponding amount of the credit, is
                                                 consumers in determining the eligibility                 1. Vehicle Categories and Credit                      set forth in sections 599.300(f) and
                                                 of new vehicles, the CARS Web site, at                   Amounts                                               599.300(g).
                                       , contains an                            The preceding section described                       The CARS Act limits the amount of
                                                 interactive tool. Consumers may                          eligibility requirements for the trade-in             funds that can be used to provide
                                                 identify their trade-in vehicle, select a                vehicle and for the purchased or leased               credits for purchases or leases of work
                                                 new vehicle, and determine whether the                   new vehicle. Under the CARS Act, a                    trucks (category 3 trucks) to 7.5 percent
                                                 transaction qualifies for a credit (and the                                                                    of the funds appropriated for the
                                                                                                          transaction does not qualify for a credit
                                                 amount of the credit) under the                                                                                program. Once that limit is reached,
                                                                                                          unless the trade-in vehicle and the new
                                                 program.                                                                                                       NHTSA will stop making payments for
                                                    In addition to the definitional                       vehicle, considered together, satisfy all
                                                                                                          requirements. In addition, the amount of              these transactions. The total amount
                                                 categories, the new vehicle purchased or                                                                       available for the program is $1 billion,
                                                 leased under the program must achieve                    the credit (either $3,500 or $4,500) is
                                                                                                          dependent on the category and fuel                    with $50 million available to the agency
                                                 a minimum combined fuel economy                                                                                to administer the program. NHTSA
                                                 level. For new passenger automobiles                     economy of the two vehicles making up
                                                                                                          the transaction.                                      intends to provide ongoing information
                                                 the combined fuel economy must be at                                                                           about the balance of funds remaining
                                                 least 22 miles per gallon, for category 1                   For example, in a transaction
                                                                                                          involving a trade-in vehicle that is a                available for these and all other
                                                 trucks it must be at least 18 miles per                                                                        categories of transactions under the
                                                 gallon, and for category 2 trucks it must                passenger automobile, a category 1
                                                                                                          truck, or a category 2 truck and a new                program.14
                                                 be at least 15 miles per gallon. Category
                                                 3 trucks have no minimum fuel                            vehicle that is a passenger automobile,               2. Special Requirements for Trade-in
                                                 economy requirement. Under the Act,                      each meeting the eligibility criteria                 Vehicles
                                                 combined fuel economy for new                            discussed in the last section, if the new
                                                                                                          vehicle has a combined fuel economy                      The CARS Act requires dealers to
                                                 vehicles is defined as the number,                                                                             disclose to purchasers trading in an
                                                 expressed in miles per gallon, centered                  that is 4 to 9 miles per gallon higher
                                                                                                          than the trade-in vehicle, the credit is              eligible vehicle the best estimate of the
                                                 below the words ‘‘Combined Fuel                                                                                scrap value of the vehicle, and permits
                                                 Economy’’ on the label required to be                    $3,500. If the new vehicle has a
                                                                                                          combined fuel economy that is at least                the dealer to retain $50 of any amount
                                                 affixed or caused to be affixed on a new                                                                       paid to the dealer for scrappage of the
                                                 automobile pursuant to subpart D of                      10 miles per gallon higher than the
                                                                                                          trade-in vehicle, the credit is $4,500.               vehicle as payment for the
                                                 part 600 of title 40 Code of Federal                                                                           administrative costs of participation in
                                                 Regulations (‘‘Monroney Label’’).                           If the transaction involves a trade-in
                                                                                                          vehicle that is a passenger automobile,               the program. The agency has restated
                                                 (Section 1302(i)(5)(A)). The agency                                                                            this requirement in section
                                                 adopts this definition, without change,                  a category 1 truck, or a category 2 truck
                                                                                                          and a new vehicle that is a category 1                599.300(d)(1) and in the dealer
                                                 in section 599.102.                                                                                            certifications in Appendix A,
                                                    The new vehicle must also have a                      truck each meeting the eligibility
                                                                                                          criteria, a gain of 2 to 4 miles per gallon           certifications section.
                                                 manufacturer’s suggested retail price
                                                                                                          results in a credit of $3,500; a gain of at              The CARS Act requires a dealer that
                                                 (MSRP) of $45,000 or less to be eligible
                                                                                                          least 5 miles per gallon results in a                 receives an eligible trade-in vehicle
                                                 for purchase or lease under the program.
                                                 The agency interprets this requirement                   credit of $4,500.                                     under the program to certify to the
                                                 to be the base MSRP—the price on the                        In the case of a new category 2 or                 Secretary of Transportation, as
                                                 Monroney label affixed to the vehicle                    category 3 truck, the trade-in vehicle                prescribed by rule, that the dealer will
                                                 before any dealer accessories, optional                  categories are different. For a new                   transfer the vehicle (including the
                                                 equipment, taxes or destination charges                  category 2 truck, the trade-in vehicle                engine block), ‘‘in such manner as the
                                                 are added to the price. This                             must be a category 2 or a category 3                  Secretary prescribes,’’ to a entity that
                                                 interpretation is consistent with the                    truck. If the transaction involves two                will ensure that the vehicle will be
                                                 Automobile Information Disclosure Act,                   category 2 trucks each meeting the                    crushed or shredded, and will not be
                                                 which identifies the retail price                        eligibility criteria, a gain of 1 mile per            sold, leased, or exchanged. While
                                                 separately from the retail delivered                     gallon results in a credit of $3,500; a               Congress authorized the agency to
                                                 price with optional equipment. See 15                    gain of at least 2 miles per gallon results           promulgate a rule, it did not define
                                                 U.S.C. 1232(f)(1). To implement this                     in a credit of $4,500. A category 3 truck             ‘‘manner’’ or otherwise speak directly to
                                                 approach, we have added a definition of                  that is traded in for a new category 2                its meaning. NHTSA interprets
                                                 the term MSRP in section 599.102 and                     truck is entitled to a $3,500 credit,                 ‘‘manner’’ 15 to include the methods
                                                 stated the limitation in section                         without fuel economy restriction.
                                                                                                                                                                   14 NHTSA intends to maintain an up-to-date
                                                 599.300(c)(2).                                           (Category 3 trucks are not rated for fuel
                                                                                                                                                                running balance of available funds on the Web site
                                                    The CARS Act allows the new vehicle                   economy by EPA.) A category 3 truck                   at
                                                 to be either purchased or leased. In the                 that is traded in for another category 3                 15 We note that a definition of manner is ‘‘the

                                                 case of a lease, the Act requires the lease              truck is entitled to a $3,500 credit if the           mode or method in which something is done or
                                                 to be for a period of not less than 5                    new vehicle is ‘‘smaller or similar in                happens.’’ Webster’s Third New International
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                                                                                                                                                                Dictionary 1376 (2002). Among the definitions of
                                                 years. The agency implements this                        size.’’ In view of the fact that Congress             mode are ‘‘a condition or state of being,’’ ‘‘a
                                                 requirement in section 599.300(c)(1).                    has not spoken directly to the precise                particular form or variety of something’’ and ‘‘a
                                                 Additionally, the agency has added a                     meaning of this term, consistent with                 manner of doing something or of performing a
                                                 definition of ‘‘lease’’ in section 599.102,              available information, NHTSA has                      particular function or activity.’’ Ibid. at 1451. We
                                                                                                                                                                further note generally that, to the extent that there
                                                 specifying its minimum duration and                      incorporated this statutory requirement               are ambiguities or questions of interpretation in
                                                 making clear that a lease that                           as satisfied if the gross vehicle weight              statutes within an agency’s jurisdiction to
                                                 incorporates a balloon payment at any                    rating of the new category 3 truck is no              administer, Congress has delegated authority to the

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                                                 applied by the dealer and the condition                  also including the crank, rods, pistons,              and prepared a report (placed in the
                                                 of the vehicle transferred by the dealer.                bearings, cam(s) and cylinder heads. In               docket) summarizing the tests. VRTC
                                                 Specifically, the agency is prescribing in               the case of a rotary engine, the block                evaluated four options: (1) The use of
                                                 today’s rule that the dealer is to transfer              includes the rotor housing and rotor. In              sodium silicate solution in the manner
                                                 the trade-in vehicle with its engine                     light of the statute’s purpose of                     the agency has now adopted; (2)
                                                 permanently disabled, as detailed                        removing fuel inefficient vehicles from               destroying the oil filter sealing land and
                                                 below.                                                   the nation’s highways, which of course                threaded fastener boss; (3) drilling a
                                                    In enacting the CARS Act, the                         are powered by engines that consume                   hole in the engine block; and (4)
                                                 Congress was concerned about fraud.                      substantial amounts of fuel the agency                running the engine without oil. VRTC
                                                 See Section 1302(a)(4). The agency is                    believes it is reasonable to read the                 concluded that the sodium silicate
                                                 aware of the significant disparity in                    word ‘‘engine block’’ in a way that                   method was the best option. The other
                                                 value that exists between a vehicle that                 includes engine parts traditionally                   methods all had significant problems
                                                 is in ‘‘drivable condition,’’ as the trade-              considered part of the ‘‘long block.’’ We             related to their effectiveness, practical
                                                 in vehicle must be under this program,                   do not believe that parts from the engine             limitations based on vehicle variations,
                                                 and a vehicle that is scrapped and                       such as the pistons and cylinder head                 and/or safety risks for workers involved.
                                                 ultimately destroyed, which is the                       that could be removed and used to                        Sodium Silicate solution is a mixture
                                                 required disposition for that trade-in                   reconstruct the engine from the trade in-             of water and sodium silicate solids.
                                                 vehicle. A substantial opportunity exists                vehicle should remain available to                    When, after draining the oil, it is
                                                 for fraudulent diversion of the trade-in                 recreate the fuel consuming engine.                   introduced into the engine oil system,
                                                 vehicle, largely because its still-                      Finally, the engine disabling procedure               the oil pump is able to distribute the
                                                 functioning engine makes it attractive to                using sodium silicate can not be                      solution throughout the engine oiling
                                                 return the vehicle to the road rather                    performed if the engine parts such as                 system. The heat of the operating engine
                                                 than relegate it to the scrap yard.16                    the head(s) are removed.                              then dehydrates the solution leaving
                                                 Moreover, continued use of the trade-in                     The agency has determined that a                   solid sodium silicate distributed
                                                 vehicle completely defeats the                           quick, inexpensive, and                               throughout the engine’s oiled surfaces
                                                 environmental purpose of the CARS                        environmentally safe process exists to                and moving parts. These solids quickly
                                                 Act, which is to remove these vehicles                   disable the engine of the trade-in                    abrade the bearings causing the engine
                                                 from the road permanently.                               vehicle while in the dealer’s possession.             to seize while damaging the moving
                                                    The CARS Act contains an explicit                     Removing the engine oil from the                      parts of the engine and coating all of the
                                                 Congressional instruction to take                        crankcase, replacing it with a 40 percent             oil passages. Only a small amount of
                                                 measures to prevent fraud and the                        solution of sodium silicate (a substance              sodium silicate remains in solution after
                                                 statute’s clear environmental objective                  used in similar concentrations in many                completion of the process. Many of the
                                                 is to ensure that the fuel inefficient parts             common vehicle applications, including                engine parts will be unaffected by this
                                                 of the vehicle are never again used on                   patching mufflers and radiators), and                 process such as: intake and exhaust
                                                 the highway. Taking the above                            running the engine for a short period of              manifolds, bolt-on components, and fuel
                                                 considerations into account, including                   time at low speeds renders the engine                 system components.
                                                 the Secretary’s authority to prescribe the               inoperable. Generally, this will require                 The agency reviewed available
                                                 manner in which the trade-in vehicle,                    just two quarts of the sodium silicate                information about sodium silicate and
                                                 including its engine block, is transferred               solution. The retail price for two quarts             its properties, including a toxicology
                                                 to a disposal facility, the agency has                   of this solution (enough to disable the               report and material safety data sheets
                                                 determined that the prudent course of                    largest engine under the program) is                  that are available in the docket. Sodium
                                                 action, consistent with Congressional                    under $7, and the time involved should                silicate is a commonly used substance
                                                 concerns about crushing or shredding,                    not substantially exceed that of a typical            found in a wide range of products,
                                                 resale and fraud, is to require permanent                oil change. The agency has tested this                including even dishwasher detergent.
                                                 disablement of the trade-in vehicle’s                    method at its Vehicle Research and Test               The Food and Drug Administration lists
                                                 engine block as a part of the qualifying                 Center and found it safe, quick, and                  it as a GRAS (Generally Regarded as
                                                 transaction under this program.                          effective. As with many materials used                Safe) substance. It is used to treat
                                                    In this context, we note that the                     in the vehicle service area of a                      hazardous wastes, and is frequently
                                                 statutory term engine block is not                       dealership, certain common precautions                used in the automotive industry as a
                                                 defined and that Congress did not speak                  need to be taken when using sodium                    rust inhibitor in cooling systems, and to
                                                 directly to its meaning. In general, the                 silicate. The same is true with regard to             seal leaks in cooling systems, head
                                                 term engine block may refer to the block                 workers who may come in contact with                  gaskets, and exhaust systems. Neither
                                                 casting, or to a short block or long block.              the substance during the crushing or                  our review of available information nor
                                                 The short and long blocks contain the                    shredding of the engine block. We have                our discussions with other agencies
                                                 block casting and, among others, a crank                 discussed the matter with the EPA and                 (EPA and OSHA) gave the agency reason
                                                 shaft, connecting rods, bearings and                     the Occupational Safety and Health                    to be concerned about the use of sodium
                                                 pistons. Long blocks also include the                    Administration (OSHA) and are aware                   silicate as a significant health or
                                                 cylinder head(s) and the cam(s). In a                    of no detrimental effects related to the              environmental issue.
                                                 pushrod engine, the short block                          disposal of the engine block with this                   It is important to note that there are
                                                 contains the cam. We interpret ‘‘engine                  material in it.                                       many varieties of sodium silicates,
                                                 block’’ to mean the part of the engine                      The agency considered several                      which are differentiated by weight ratio
                                                 containing the cylinders and typically                   possible methods of rendering the                     (the ratio of the silicon dioxide and
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                                                 incorporating water cooling jackets and                  engine inoperable. The agency was                     sodium oxide that make up the
                                                                                                          looking for a method that was safe for                compound). The weight ratios range
                                                 agency to fill the statutory gap or make an              workers involved, completely effective,               from 1.0 to 3.5, with the higher ratio
                                                 interpretation in a reasonable fashion.                  environmentally sound, and relatively                 formulations being less irritating for
                                                    16 We understand that this very kind of continued

                                                 use of the vehicle as an automobile has occurred in
                                                                                                          inexpensive for a dealer to use.                      humans and less corrosive in an engine
                                                 at least Germany’s program despite certifications        NHTSA’s Vehicle Research and Test                     environment. The material that dealers
                                                 that the vehicle had been disposed of.                   Center (VRTC) tested various methods                  will be required to use under this rule

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                                                 37888             Federal Register / Vol. 74, No. 144 / Wednesday, July 29, 2009 / Rules and Regulations

                                                 is at the higher end of the range—3.2—                   disable the engine prior to transferring              program may exceed the $50 the dealer
                                                 which means that it is far less of a                     the vehicle to the disposal facility. With            is allowed to retain from the trade-in’s
                                                 potential health or environmental issue                  regard to transactions that occurred                  scrappage value to cover its
                                                 than other lower range formulations of                   prior to the effective date of this rule,             administrative costs. Nevertheless, we
                                                 the product.                                             the dealer may have already transferred               think the importance of having this task
                                                    Like many household and workplace                     the vehicle to a disposal facility,                   performed by the dealer is sufficient
                                                 products, sodium silicate solution can                   whether or not using a salvage auction                reason to require dealers to perform it.
                                                 be harmful if swallowed or inhaled and                   to transfer the vehicle. In that case, the            The CARS Act does not preclude
                                                 can cause irritation to the eyes or                      rule permits the dealer to locate the                 NHTSA from imposing costs necessary
                                                 respiratory tract if used improperly.                    vehicle at the disposal facility and                  to the proper implementation of the
                                                 Employers whose employees may come                       either disable the engine at that location            program.
                                                 in contact with the material need to                     or, if the vehicle, including the engine                 The Automotive Recyclers
                                                 provide them with adequate warning of                    block and drive train (unless the                     Association (ARA), which represents
                                                 these risks and appropriate protection.                  transmission, drive shaft, and rear end               more than 4,500 scrap and junk yards,
                                                 Because sodium silicate has been used                    are sold separately), has already been                wrote to NHTSA on July 20. ARA argues
                                                 in automotive repair for decades, it has                 crushed or shredded, to obtain proof, in              that the use of sodium silicate will
                                                 long been present both in repair shops                   the form of the affidavit, from the                   damage more than the engine block and
                                                 and in vehicles at various stages of                     disposal facility that the crushing or                jeopardize the resale of parts such as
                                                 recycling. It is reasonable to assume,                   shredding has occurred. Section                       pistons, cams, and cylinder heads. ARA
                                                 therefore, that dealerships, scrap yards,                599.300(e) implements this exception.                 apparently believes that ‘‘block’’ has
                                                 and shredder facilities are well                         The agency is making this allowance                   only one meaning, i.e., the so-called
                                                 equipped to take appropriate measures                    only to accommodate dealers who,                      ‘‘short block,’’ which generally refers
                                                 to protect their workers.                                rather than waiting for the final rule to             only to the cast iron or aluminum
                                                    Nor did we find reason to have                        be issued as the agency had advised,                  casting. As discussed above, NHTSA
                                                 significant concerns about the                           proceeded to conduct transactions that                has defined ‘‘engine block’’ in a way
                                                 environmental effects of sodium silicate                 were otherwise completely in                          that includes the engine parts that ARA
                                                 in this application. The EPA does not                    accordance with this final rule. Dealers              contends are not part of the block.
                                                 regulate it as a hazardous substance.                    should note that all other requirements               NHTSA’s definition is a reasonable
                                                 Given the high weight ratio of the                       of this rule, except for the disposal                 reading of the term ‘‘block,’’ and is
                                                 formulation that will be used to disable                 facility certifications, apply to these               consistent with a Congressional purpose
                                                 the engines, the risk of its causing                     transactions.                                         to prevent these fuel inefficient engines
                                                 corrosion is very low. In a report                          Although there was not time to                     from ever being operated again.
                                                 prepared for the agency, a toxicology                    provide notice and an opportunity to                  Moreover, even if ARA’s more
                                                 expert reviewed the process required by                  comment prior to issuance of this final               restrictive reading of ‘‘block’’ were to
                                                 this rule concluded: ‘‘Provided adequate                 rule, NHTSA did engage in extensive                   prevail, the statute merely permits the
                                                 safety equipment is used by personnel                    outreach prior to its issuance with                   disposal facility to sell parts that are not
                                                 in dealerships and shredder operations,                  representatives of those entities most                part of the block; it does not preclude
                                                 and dust control measures are employed                   knowledgeable about the subject matter.               NHTSA from requiring measures that
                                                 at shredder operations to minimize                       In those discussions, the method                      might affect some of those parts. ARA
                                                 airborne particulates, the use of sodium                 NHTSA has now chosen for disabling                    also contends that use of sodium silicate
                                                 silicate solutions to disable automobile                 the engine block was identified as an                 would contaminate the recycling of
                                                 engines is not expected to adversely                     option NHTSA might adopt. Several of                  motor oil. ARA seems not to understand
                                                 affect occupationally exposed workers,                   the organizations that participated in                that, under the procedure set out in this
                                                 nor are sodium silicate particulates                     the discussions wrote to NHTSA                        rule, the dealer would drain the oil and
                                                 expected to harm the environment.’’ 17                   concerning that methodology. (These                   recycle it as it would normally do.
                                                    The agency has decided to implement                   letters are in the docket.)                              The Institute of Scrap Recycling
                                                 this process in the rule, requiring a                       In its letter of July 21, 2009, NADA               Industries (ISRI) represents, among
                                                 dealer that receives an eligible trade-in                contends that Congress did not assign                 others, companies that shred vehicles
                                                 vehicle under the CARS program to                        the task of making the engine inoperable              that have previously been crushed,
                                                 disable that vehicle’s engine prior to                   to the dealers, and that if required to               either at their facility or at another
                                                 transferring the vehicle to a disposal                   accomplish this task the dealers should               disposal facility that lacks a shredder.
                                                 facility, and to provide a certification to              be compensated. As discussed above,                   ISRI wrote to NHTSA on July 20. ISRI
                                                 the agency that it has done so at the time               the agency interprets the CARS Act as                 contends, based on the judgment of its
                                                 the dealer submits its request for                       giving NHTSA substantial discretion in                own director of environmental
                                                 reimbursement. Section 599.300(d)(2)                     determining the manner in which the                   management, that the use of sodium
                                                 specifies the requirement for the dealer                 vehicle, including the engine block, is to            silicate could pose hazards to workers at
                                                 to disable the engine, Appendix B sets                   be transferred for ultimate disposal. We              shredders and could cause certain
                                                 forth, in a simple and precise manner,                   believe that having the engine                        metals to corrode, which could lead to
                                                 the procedures that the dealer must                      permanently disabled at the dealer                    excess metal ions in storm water runoff,
                                                 follow to disable the engine and the                     greatly reduces the risk of fraud and                 which in turn could make storm water
                                                 workplace precautions that should be                     helps ensure that the statute’s                       compliance more challenging. ISRI’s
                                                                                                          environmental objectives will be                      contentions appear to be based on an
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                                                 taken, and Appendix A, certifications
                                                 section, contains the required dealer                    achieved. We believe that the dealers                 incorrect assumption as to the quantity
                                                 certification.                                           can disable the engine using the                      of sodium silicate that would be in each
                                                    The rule contains one exception to the                prescribed method at very low cost,                   CARS trade-in vehicle; the procedure in
                                                 general requirement that the dealer                      which we estimate to be no greater than               most cases will require no more than
                                                                                                          $30. It is possible that the total of the             two quarts, while ISRI assumes three to
                                                  17 Expert Report of Margaret H. Whittaker, Ph.D.,       cost of performing this task and the                  four quarts. ISRI asserts that a
                                                 M.P.H., D.A.B.T., July 23, 2009.                         dealer’s other costs related to the                   substantial portion of the material will

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                                                 remain unreacted after the procedure,                    3. Restrictions and Limitations on                    and would have to recover the funds.
                                                 which is not the case.                                   Transactions                                          NHTSA does not believe it has a duty
                                                    As discussed previously, NHTSA has                       The CARS Act places some                           to fund any such tentative deal and will
                                                 no reason to believe that the use of                     restrictions and limitations on                       not do so. Such a transaction does not
                                                 sodium silicate will expose any                          qualifying transactions under the                     qualify for reimbursement under the
                                                 workers, including those at shredders,                   program. Section 1302(c)(1)(A) of the                 program until the dealer obtains the title
                                                 to unreasonable risks. Those who                         Act provides that a credit may be issued              (assuming that other eligibility criteria
                                                 manage the shredders will simply need                    only for a qualifying transaction that                are met). Consequently, the dealer may
                                                 to require their employees to take the                   occurs between July 1, 2009 and                       not submit an application for
                                                 precautions necessary to protect                         November 1, 2009. Additionally,                       reimbursement (discussed later in this
                                                 themselves from exposure to sodium                       section1302(c)(1)(B) provides that not                document) until title to the trade-in
                                                 silicate. Presumably those who work at                   more than 1 credit may be issued for a                vehicle, free of all liens and
                                                 shredders are appropriately trained and                  single person and not more than 1 credit              encumbrances, is transferred to it. If the
                                                 equipped to deal with hazards that may                   may be issued for the joint registered                title to the trade-in vehicle has been
                                                 be related to the materials with which                   owners of a single eligible trade-in                  lost, the owner will need to acquire
                                                 they are working. More importantly,                      vehicle, and § 1302(c)(1)(C) provides                 duplicate title from the State. Section
                                                 sodium silicate has been present in                      that only 1 credit issued under the                   599.301(d) implements this requirement
                                                 motor vehicles for decades because of                                                                          for transfer of the trade-in title.
                                                                                                          Program may be applied toward the
                                                 its common use in the repair of                                                                                   The agency recognizes that five
                                                                                                          purchase or qualifying lease of a single
                                                 mufflers, radiators—and engines. We                                                                            States—Georgia, Maine, New
                                                                                                          new vehicle. Reading these                            Hampshire, Rhode Island and
                                                 assume that shredders have taken note                    requirements together, the agency has
                                                 of the presence of the material before                                                                         Vermont—do not issue titles in
                                                                                                          determined that only one credit may be                transactions involving some older
                                                 now. The use of dust respirators would                   issued for each transaction under the
                                                 be advisable.                                                                                                  vehicles that may be eligible for trade-
                                                                                                          program and that once a person                        in under this program. In some of these
                                                    With regard to the potential                          participates in a transaction, whether as             States, liens may be documented on the
                                                 environmental risks, ISRI has not made                   an individual owner or a joint-registered             registrations. In these States and for
                                                 an effective case, and NHTSA has no                      owner of either an eligible trade-in                  these vehicles, a current registration in
                                                 reason to believe that any such risk                     vehicle, a new vehicle, or both, the                  the name of the person intending to
                                                 exists with regard to sodium silicate.                   person may not receive another credit or              purchase the new vehicle, with no
                                                 The heart of ISRI’s argument is that the                 be named in a transaction receiving a                 evidence of lien, and a bill of sale
                                                 unreacted portion of the sodium silicate                 credit under the program. These time                  conferring ownership of the trade-in
                                                 could cause corrosion of metals during                   and transaction limitations are specified             vehicle from the purchaser of the new
                                                 the shredding process. As noted above,                   in sections 599.301(a), (b), and (c).                 vehicle to the dealer, serves in lieu of
                                                 the formulation of sodium silicate used                     One additional restriction, although               the title. Section 599.301(e) of the rule
                                                 in the engine disablement procedure is                   not specifically stated in the CARS Act,              allows use of a current registration and
                                                 among those least likely to have a severe                flows naturally from its operation. The               bill of sale in lieu of a title in these
                                                 corrosive effect. In fact, sodium silicate               agency has concluded that in order to be              limited situations.
                                                 is used in vehicle cooling systems to                    entitled to reimbursement under the
                                                 inhibit corrosion and is used in metal                   program, a dealer must obtain clear title             f. Requirements for Dealer
                                                 pipes to help prevent corrosion that                     to the trade-in vehicle. Without clear                Reimbursement (§§ 599.302–304)
                                                 could increase lead levels in drinking                   title, the dealer is not in a position to                As a precondition for reimbursing a
                                                 water. In any event, the agency has no                   make the statutorily required legal                   dealer for a qualifying transaction under
                                                 reason to believe that the untoward                      certification as to disposal of the trade-            the Program, NHTSA must have a
                                                 environmental effects that ISRI suggests                 in vehicle that serves as a prerequisite              means of verifying that all the statutory
                                                 may occur are a realistic possibility.                   to reimbursement. Similarly, disposal                 conditions have been met. The rule
                                                    The rule also requires that, prior to                 facilities would generally be unable to               requires a dealer to submit an
                                                 submitting a copy of the title along with                crush or shred the trade-in vehicle, as               application for reimbursement to
                                                 its request for reimbursement, the dealer                required under the Act. The agency is                 NHTSA, containing the information and
                                                 clearly mark the title on both sides with                informed that in many new car                         certifications necessary for NHTSA to
                                                 the words, ‘‘Junk Automobile,                            purchases involving trade-in vehicles,                do so. The dealer must use its user
                                       ’’ Section 599.300(d)(3)                        the title to the trade-in vehicle is not              account and password (discussed
                                                 implements this requirement. The                         immediately available, either because it              earlier) to access a secure Web site and
                                                 marking must be placed so as not to                      is held by a lienholder or for some other             submit an application. The application
                                                 obscure the vehicle owner’s name, VIN,                   reason. Nevertheless, the dealer                      consists of an electronic transaction
                                                 or other writing. Having this special                    proceeds with the transaction, even                   form (portion reproduced in Appendix
                                                 label or brand on the title will inform all              though title is obtained and transferred              C) that requires inputting of information
                                                 who subsequently handle it that the                      to the dealer at a later time. In some                into relevant fields, attaching electronic
                                                 vehicle is a trade-in under this program                 small percentage of such transactions,                copies of supporting documents, and
                                                 and should not be registered or titled for               the dealer is unable to obtain clear title            making applicable certifications.
                                                 further use as an automobile. State                      to the trade-in vehicle. Were that to                    The electronic form requires the
                                                 registration officials should pay special                occur under this program, the dealer                  dealer to input and attach several pieces
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                                                 attention to this marking on a title                     would not be able to ensure that the                  of information about the vehicle
                                                 because it indicates that the vehicle has                trade-in vehicle would be disposed of in              purchaser, trade-in vehicle, and new
                                                 been traded in under the CARS program                    accordance with the Act. If NHTSA had                 vehicle. For a purchaser, a dealer must
                                                 with the understanding that it would                     already reimbursed the dealer for the                 collect individual or entity name,
                                                 never again be used as an automobile in                  credit amount, NHTSA would have                       address and State or corporate
                                                 this or any other country and is suitable                provided the credit under circumstances               identification number (e.g., driver’s
                                                 only to be used for scrap or parts.                      beyond its authority under the statute                license number, State identification

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                                                 37890             Federal Register / Vol. 74, No. 144 / Wednesday, July 29, 2009 / Rules and Regulations

                                                 number, corporate tax identification                     requirements of for a qualifying                       to certain conditions and certifications.
                                                 number). This information is used to                     transaction, the application will be                   As a condition of accepting transfer of
                                                 verify the identity of the purchaser and                 rejected and the submitter will be                     the trade-in vehicle, the salvage auction
                                                 to confirm no prior participation in the                 informed electronically of the reason for              must certify that it meets all applicable
                                                 program. For the trade-in vehicle and                    rejection. A dealer may correct and                    State and Federal laws and has a
                                                 new vehicle, the dealer must input                       resubmit a rejected application for                    currently active State license to conduct
                                                 characteristics of the vehicle (e.g., make,              reimbursement without penalty, but the                 business as a salvage auction in that
                                                 model, model year, combined fuel                         application will be treated as a new                   State. The salvage auction must also
                                                 economy, odometer reading, VIN, base                     application as of the date it is                       certify that it will not sell, lease,
                                                 MSRP, engine and transmission                            resubmitted. The requirements                          exchange, or otherwise dispose of the
                                                 description), and input and attach                       concerning application review and                      vehicle for use as an automobile in the
                                                 evidence of vehicle insurance,                           payment of dealers are implemented in                  United States or any other country. It
                                                 registration and title. This information                 sections 599.303 and 304.                              must certify that it will limit
                                                 is used to determine that each of these                                                                         participation in the auction of a trade-
                                                                                                          g. Disposal of Trade-In Vehicles
                                                 vehicles is eligible under the Program                                                                          in vehicle under the CARS program to
                                                                                                          (§§ 599.400–403)
                                                 and that the transaction meets the                                                                              a disposal facility that currently appears
                                                 requirements for fuel economy                               In addressing the trade-in vehicle                  on the agency’s CARS list of disposal
                                                 improvement.                                             disposal process (Section III.b.,                      facilities and will obtain from the
                                                    The dealer must also attach additional                Identification of Disposal Facilities), the            disposal facility the same certification
                                                 information to verify the transaction,                   agency decided to include disposal                     the disposal facility would have
                                                 including a copy of the purchase                         facilities participating in the ELVS                   provided upon direct transfer of a trade-
                                                 contract or lease agreement, the                         program (currently numbering                           in vehicle from the dealer, and provide
                                                 Manufacturer’s Certificate of Origin or                  approximately 7,700) 18 on the list of                 that certification to NHTSA. Finally, the
                                                 Manufacturer’s Statement of Origin, and                  facilities that may participate in the                 salvage auction must certify that it will
                                                 certifications from the salvage auction                  disposal process, subject to certain                   update NMVTIS, within 3 days after
                                                 or disposal facility. The dealer must also               conditions and certifications. As a                    receipt of the trade-in vehicle from the
                                                 complete and attach a Summary of Sale/                   condition of accepting transfer of the                 dealer, or prior to auction, whichever is
                                                 Lease and Certifications Form                            trade-in vehicle, the disposal facility                earlier. These requirements for salvage
                                                 (Appendix A, certifications section).                    must certify that it meets all applicable              auctions are implemented in sections
                                                 This form conveys that the dealer has                    State and Federal laws and has a                       599.400(c) and 402 and Appendix F.
                                                 extended a CARS credit, as well as any                   currently active State license to operate              Finally, a dealer receiving certifications
                                                 other rebate and manufacturer                            as a disposal facility in that State. The              from a disposal facility or a salvage
                                                 incentive, and has disclosed the                         disposal facility must also certify that it            auction under these procedures is
                                                 scrappage value of the trade-in vehicle                  will not sell, lease, exchange, or                     required to send them to the agency
                                                 to the purchaser. The form also sets                     otherwise dispose of the vehicle for use               within 7 days of receipt. Section
                                                 forth required dealer and purchaser                      as an automobile in the United States or               599.403 sets forth this requirement.
                                                 certifications. The dealer and purchaser                 any other country, that the vehicle will                  It is important to note that the
                                                 must sign this form, attesting that each                 be crushed or shredded onsite within                   requirement under the CARS Act and its
                                                 has followed the requirements of the                     six months after the date of its transfer              implementing regulations for disposal
                                                 CARS Act and its implementing                            from the dealer, and that the vehicle                  facilities and salvage auctions
                                                 regulations. In addition to the                          will not be transferred to another                     participating in the CARS program to
                                                 certifications on this form, the dealer                  disposal facility prior to being crushed               update NMVTIS are distinct from the
                                                 must also make required certifications                   or shredded. Finally, it must certify that             monthly reporting requirement imposed
                                                 listed on the electronic transaction form.               it will update NMVTIS, within 7 days                   on junk and salvage yards pursuant to
                                                 Finally, the agency requests that the                    after receiving the trade-in vehicle and               49 U.S.C. 30504. In accordance with
                                                 dealer attach a completed customer                       again within 7 days after crushing or                  regulations implemented by the
                                                 survey (Appendix D). This survey                         shredding the vehicle. During the six-                 Department of Justice at 28 CFR 25.56,
                                                 should be presented to the customer for                  month period prior to the required                     any individual or entity engaged in the
                                                 completion prior to the submission of                    crushing or shredding of the trade-in                  business of operating a junk yard or
                                                 an application for reimbursement. The                    vehicle, the disposal facility may sell                salvage yard within the United States
                                                 information in the survey is important                   any parts of the vehicle other than the                shall provide, or cause to be provided
                                                 for the agency to meet its Congressional                 engine block 19 or drive train (unless the             on its behalf, to the operator of NMVTIS
                                                 reporting requirement. The                               drive train is dismantled and sold in                  and in a format acceptable to the
                                                 requirements associated with dealer                      parts). These requirements for disposal                operator, an inventory of all junk
                                                 applications are implemented in section                  facilities are implemented in sections                 automobiles or salvage automobiles
                                                 599.302.                                                 599.400(b) and 401 and Appendix E.                     obtained in whole or in part by that
                                                    Upon receipt of the application, the                     The agency also has determined that,                entity in the prior month. Updates by
                                                 agency will review the application to                    in lieu of direct transfer to a disposal               junk and salvage yards to NMVTIS
                                                 determine whether it is complete and                     facility that appears on the agency’s list,            under the CARS Act and its
                                                 satisfies all the requirements of a                      the dealer may opt to transfer the trade-              implementing regulations, however,
                                                 qualifying transaction. An application                   in vehicle to a salvage auction, subject               may fulfill this separate NMVTIS
                                                 that meets the requirements of the CARS                                                                         monthly reporting requirement
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                                                 Program will be approved for payment                       18 The agency also decided to include certain        regarding such vehicles, provided the
                                                 and the agency will reimburse the                        disposal facilities in the State of Maine, as          updates contain all of the information
                                                 dealer, by electronic transfer to the                    explained earlier in this document. The list does      required by the Department of Justice
                                                                                                          not include disposal facilities for the territories.
                                                 account identified under the registration                However, disposal facilities in the territories must
                                                                                                                                                                 under 28 CFR Part 25.
                                                 process in section 599.200.                              make the certification discussed in this paragraph.       The procedures described above allow
                                                    If an application is incomplete or                      19 Section 599.102 contains a definition of the      a trade-in vehicle to be transferred no
                                                 otherwise fails to meet all the                          term ‘‘engine block.’’                                 more than two times subsequent to the

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                                                                   Federal Register / Vol. 74, No. 144 / Wednesday, July 29, 2009 / Rules and Regulations                                         37891

                                                 dealer taking title and prior to its                     vehicles, the dealer will need to verify              identified above. The OIG Hotline is
                                                 crushing or shredding, either directly to                the combined fuel economy. With                       open 24 hours a day, seven days a week.
                                                 an entity currently appearing on the list                regard to the trade-in vehicle, the dealer              Those who think the Internet has been
                                                 of eligible disposal facilities, where the               will need to verify that the registration             used to commit a crime related to this
                                                 vehicle must remain until it is crushed                  and insurance information is accurate                 program may also contact the Internet
                                                 or shredded, or to a salvage auction that                and that the vehicle is in drivable                   Crime Complaint Center (IC3), a
                                                 subsequently transfers the vehicle to                    condition.                                            partnership among the Federal Bureau
                                                 that entity. This approach for the                          Also, this rule provides measures to               of Investigation
                                                 vehicle disposal process is adopted in                   ensure that the trade-in vehicle is never             (FBI), the National White Collar Crime
                                                 Subpart D and the required                               used again as an automobile in this or                Center (NW3C),
                                                 certifications appear in Appendices E                    any other country. These measures                     and the Bureau of Justice Assistance
                                                 and F. Nothing in the rule proscribes                    include requiring the dealer to disable      (BJA).
                                                 further transfer of a crushed vehicle to                 the trade-in vehicle’s engine prior to                IC3’s mission is to serve as a vehicle to
                                                 another disposal facility, including a                   transferring the vehicle, requiring                   receive, develop, and refer criminal
                                                 shredder.                                                binding certifications from all entities              complaints regarding the rapidly
                                                                                                          involved in handling these vehicles,                  expanding arena of cyber crime. The IC3
                                                 h. Enforcement (§§ 599.500–517)                                                                                gives the victims of cyber crime a
                                                                                                          updating the NMVTIS system at all
                                                 1. Prevention of Fraud                                   crucial junctures to ensure the                       convenient and easy-to-use reporting
                                                                                                          availability of information about the                 mechanism that alerts authorities of
                                                    The funds Congress provided for the                                                                         suspected criminal or civil violations.
                                                 CARS program are intended only for                       vehicle’s status, and labeling the title of
                                                 qualifying transactions, and the                         those vehicles as ‘‘junk automobiles’’ to             2. Civil Penalties and Other Sanctions
                                                 requirement to destroy the trade-in                      defer further sale of them as vehicles
                                                                                                                                                                   While NHTSA expects that the vast
                                                 vehicle is an important part of the                      authorized for on-road use.
                                                                                                                                                                majority of activities under the CARS
                                                 program. To protect the taxpaying                           The process set out in this rule                   Act will comply with it and the
                                                 public, NHTSA will enforce the Act and                   includes obtaining certifications from                implementing regulations, NHTSA
                                                 this implementing regulation strictly                    purchasers, dealers, salvage auctions,                intends to penalize violators. Section
                                                 and will work with the DOT Inspector                     and disposal facilities involved with                 1302(d)(6) of the CARS Act requires
                                                 General, the Department of Justice, and                  CARS transactions. Those certifications               NHTSA’s regulations implementing the
                                                 other government agencies to punish                      will be made on paper or electronic                   program to provide for the enforcement
                                                 violations and fraud.                                    forms that make clear that there are                  of the penalties described in Section
                                                    In the rule being issued today,                       significant penalties for submitting false            1302(e). Section 1302(e)(1) provides that
                                                 NHTSA has taken a number of steps to                     information. NHTSA, working with                      it shall be unlawful for any person to
                                                 minimize the potential for fraud in the                  DOT’s Office of Inspector General and                 violate any provision under this section
                                                 first instance. Among other things,                      the Department of Justice, will                       (i.e., under the CARS Act) or any
                                                 NHTSA has created a system that will                     vigorously pursue actions against                     regulations issued pursuant to the CARS
                                                 provide payments only for qualifying                     anyone it believes has submitted false                Act.
                                                 transactions under the CARS program.                     information in connection with this                      Section 1302(e)(2) provides that any
                                                 NHTSA will make electronic funds                         program.                                              person who commits a violation
                                                 transfers only to a registered dealer that                  The agency will conduct inspections                described in Section 1302(e)(1) shall be
                                                 has submitted the required proof and                     of records, premises and vehicles to                  liable to the United States Government
                                                 made the required certifications under                   detect possible violations. Should                    for a civil penalty of not more than
                                                 penalty of law. The rule establishes a                   NHTSA identify a violation or fraud, we               $15,000 for each violation, and that the
                                                 registration system to identify licensed,                intend to enforce the CARS Act’s                      Secretary shall have the authority to
                                                 franchised new vehicle dealers and to                    requirements vigorously. The public is                assess and compromise such penalties
                                                 obtain the information necessary for                     encouraged to contact NHTSA if it                     and to require from any entity the
                                                 making secure electronic transfers. Only                 suspects any fraud is occurring in                    records and inspections necessary to
                                                 registered dealers will have access to the               connection with the CARS program.                     enforce this program. In determining the
                                                 payment system.                                          Please call 1–866–CAR–7891, which is                  amount of the civil penalty, the severity
                                                    At the time of the transaction at the                 NHTSA’s dedicated hotline for calls                   of the violation and the intent and
                                                 dealer, a purchaser who is trading in a                  about the program, Monday–Friday 8                    history of the person committing the
                                                 vehicle will need to provide evidence of                 a.m. to 10 p.m., TTY: 1–800–424–9153.                 violation shall be taken into account.
                                                 ownership and proof that the vehicle                        Anyone who thinks illegal activity                    As authorized by Section 1302(e)(2) of
                                                 has been continuously registered to that                 related to this program has occurred                  the CARS Act, which grants NHTSA the
                                                 owner and insured throughout the last                    may also call the Hotline of the Office               authority to require from any entity the
                                                 12 months. To prevent repeated use of                    of the Inspector General (OIG) at the                 records and inspections necessary to
                                                 the program by the same person, the                      U.S. Department of Transportation. The                enforce this program, NHTSA will use
                                                 consumer will need to provide evidence                   toll free number is 1–800–424–9071.                   information gathering mechanisms
                                                 of identity and permit that information                  The OIG Hotline is an important tool for              comparable to those it currently
                                                 to become part of the documentation of                   reporting allegations of fraud, waste,                employs under other statutes the agency
                                                 the transaction.                                         abuse, or mismanagement in the                        administers.
                                                    We believe that dealers will have                     Department’s programs or operations,                     In the rule being issued today,
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                                                 every reason to avoid entering into a                    including the CARS program. The                       NHTSA has established administrative
                                                 transaction for which the dealer cannot                  Hotline is set-up to receive allegations              procedures to assess civil penalties
                                                 be reimbursed under this program.                        in a variety of forms, including by e-                quickly and fairly once a likely violation
                                                 Dealers will be expected to verify that                  mail (, regular mail              is identified. These procedures are set
                                                 the trade-in vehicle and the vehicle                     (DOT Inspector General, P.O. Box 708,                 forth at subpart E. Under these
                                                 being purchased or leased are both                       Fredericksburg, VA 22404), fax (540–                  procedures, any person may report an
                                                 eligible under the program. For both                     373–2090), and the toll free number                   apparent violation to NHTSA. When a

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                                                 37892             Federal Register / Vol. 74, No. 144 / Wednesday, July 29, 2009 / Rules and Regulations

                                                 report of an apparent violation is                       Secretary determines that such                        trade secrets and commercial or
                                                 received, or when an apparent violation                  manufacturer has violated provisions,                 financial information obtained from a
                                                 has been detected by any person                          the Secretary shall assess the penalties              person and privileged or confidential.
                                                 working for NHTSA, the matter may be                     provided for under subsection (b). This               Under Exemption 4, the standard for
                                                 investigated or evaluated by NHTSA                       provision was recodified at 49 U.S.C.                 assessing the confidentiality of
                                                 enforcement personnel. If NHTSA                          32911(b) and 32912 so as to clearly                   information that parties are required to
                                                 enforcement personnel believe that a                     provide for ‘‘an opportunity for a                    submit to the government is whether
                                                 violation may have occurred, a report of                 hearing on the record’’ to decide                     disclosure of the information is likely to
                                                 the investigation will be prepared and                   whether a violation has been                          have either of the following effects: (1)
                                                 sent to the NHTSA Chief Counsel for                      committed. In view of the language in                 To impair the Government’s ability to
                                                 review. The Chief Counsel will review                    the Cost Savings Act, NHTSA adopted                   obtain necessary information in the
                                                 the report to determine if there is                      regulations establishing formal                       future; or (2) to cause substantial
                                                 sufficient information to establish a                    Administrative Procedure Act (APA)                    competitive harm to the competitive
                                                 likely violation. If the Chief Counsel                   adjudicative hearing procedures before                position of the person from whom the
                                                 determines that a violation has likely                   an administrative law judge (ALJ),                    information was obtained.20 National
                                                 occurred, the Chief Counsel may issue                    which may result in civil penalties. See              Parks & Conservation Ass’n v. Morton,
                                                 a Notice of Violation to the party, or                   49 CFR Part 511, Adjudicative                         498 F.2d 765, 770 (D.C. Cir. 1974).
                                                 make other enforcement                                   Procedures. In view of the absence of                 Because of the nature of the information
                                                 recommendations, such as suspensions                     any statutory requirement in the CARS                 at issue here, our discussion is limited
                                                 or revocations. The alleged violator will                Act for an on-the-record hearing or, in               to examination of the competitive harm
                                                 have an opportunity to present its views                 fact, for any hearing, as set forth in the            test even though other standards could
                                                 to NHTSA and reach a settlement of the                   regulatory text, the formal APA                       justify non-disclosure.21
                                                 civil penalty case. If the alleged violator              adjudication procedures set forth at 5                   Under the competitive harm test of
                                                 instead requests a hearing, the Chief                    U.S.C. 554, 556 and 557 do not apply to               National Parks, there must be actual
                                                 Counsel will forward a case file to a                    civil penalty proceedings under the                   competition and a likelihood of
                                                 Hearing Officer, with a recommended                      CARS Act and NHTSA need not employ                    substantial competitive injury from
                                                 action. The Hearing Officer’s functions                  an ALJ as the hearing officer. There is               disclosure of the information. CNA
                                                 are separate from those of NHTSA’s                       no right to discovery. In receiving                   Financial Corp. v. Donovan, 830 F.2d
                                                 enforcement personnel and Chief                          evidence, the Hearing Officer is not                  1132, 1152 (D.C. Cir. 1987). This
                                                 Counsel, and the Hearing Officer has no                  bound by strict rules of evidence. At the             standard requires only that disclosure of
                                                 other responsibility, direct or                          conclusion of the hearing, the Hearing                information would ‘‘likely’’ cause
                                                 supervisory, for the investigation of                    Officer assesses civil penalties, if                  competitive harm. McDonnell Douglas
                                                 cases referred for the assessment of civil               appropriate. If civil penalties are in                Corp. v. U.S. Dept. of the Air Force, 375
                                                 penalties.                                               excess of $100,000.00, the Hearing                    F.3d 1182, 1187 (D.C. Cir. 2004); see
                                                    A party receiving the Notice of                       Officer’s decision may be appealed to                 also Occidental Petroleum Corp. v. SEC,
                                                 Violation may pay the proposed penalty                   the NHTSA Administrator.                              873 F.2d 325, 341 (D.C. Cir. 1989).
                                                 or decline the Notice of Violation. If the                 NHTSA also has the authority under                  Under this test, the agency assesses the
                                                 Notice of Violation is timely declined,                  the CARS Act to compromise (i.e.,                     likelihood of substantial injury; it does
                                                 the regulations provide for a hearing                    settle) civil penalties, and parties                  not make that assessment and then
                                                 prior to a final assessment of a penalty                 receiving notices of violations will be               further balance it against other matters
                                                 by the Hearing Officer. Failure to either                given the opportunity early in the                    such as the public’s interest in the
                                                 pay the proposed penalty on the Notice                   process to settle with the Government,                information. Public Citizen Health
                                                 of Violation or request a hearing within                 should they choose to do so. Finally, we              Research Group v. FDA, 185 F.3d 898,
                                                 30 days of the date shown on the Notice                  note that these penalties are not                     904–05 (D.C. Cir. 1999).
                                                 of Violation will result in a finding of                 exclusive. For example, violators could                  Exemption 6 of the FOIA addresses
                                                 default, and NHTSA will assess the civil                 also face penalties under the False                   the withholding of ‘‘personnel and
                                                 penalty in the amount proposed on the                    Claims Act or criminal prosecution.
                                                 Notice of Violation without a hearing.                                                                            20 The term ‘‘trade secrets’’ has been narrowly

                                                    The hearings will be held at the                      V. Confidential Information and                       defined by the Court of Appeals for the District of
                                                 headquarters of the U.S. Department of                   Privacy                                               Columbia Circuit for the purpose of FOIA
                                                                                                                                                                Exemption 4 as encompassing a secret,
                                                 Transportation in Washington, DC,                           Administration of the CARS program                 commercially valuable plan, formula, process, or
                                                 either telephonically or in person,                      requires that information about                       device that is used for the making, preparing,
                                                 before a Hearing Officer. Unlike another                 qualifying transactions be submitted to               compounding, or processing of trade commodities
                                                                                                                                                                and that can be said to be the end product of either
                                                 statute administered by NHTSA, the                       NHTSA from different entities and                     innovation or substantial effort. Public Citizen
                                                 CARS Act does not require a hearing on                   individuals. Some of this data is                     Health Research Group v. FDA, 704 F.2d 1280, 1288
                                                 the record before assessing civil                        sensitive. As discussed below, NHTSA                  (D.C. Cir. 1983).
                                                 penalties. For example, Section                          is amending its existing regulations                     21 Impairment to the Government’s ability to

                                                 508(a)(1) of the Motor Vehicle                                                                                 obtain the information in the future serves as an
                                                                                                          governing confidential treatment, found               independent basis for withholding under
                                                 Information and Cost Savings Act                         at 49 CFR Part 512, to address these                  Exemption 4. See National Parks, 498 F.2d at 770.
                                                 (formerly 15 U.S.C. 2008 (1994), and                     issues.                                               Case law also strongly points to the availability of
                                                 now codified at 49 U.S.C. 32911),                                                                              a ‘‘third prong’’ protecting other governmental
                                                 provided that if fuel economy                            a. Determinations of the Confidentiality              interests, such as compliance and program
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                                                 calculations indicate that any                           of CARS Data Based on FOIA                            effectiveness. See Critical Mass v. NRC, 975 F.2d
                                                                                                          Exemptions 4 and 6                                    871, 879 (D.C. Cir. 1992) (noting that Exemption 4
                                                 manufacturer has violated specified                                                                            can protect interests beyond impairment and
                                                 provisions, the Secretary shall                             The confidentiality of most CARS                   competitive harm. See also 9 to 5 Org. for Women
                                                 commence a proceeding. Section                           data is based on Freedom of Information               Office Workers v. Bd. of Governors of the Fed. Res.
                                                                                                                                                                System, 721 F.2d 1, 11 (1st Cir. 1983) (adopting a
                                                 508(a)(2) of the Cost Savings Act then                   Act (FOIA) Exemptions 4 and 6, 5                      third prong under Exemption 4 based on the
                                                 went on to state that, if on the record                  U.S.C. 552(b)(4) and (b)(6). FOIA                     government’s interest in administrative efficiency
                                                 after opportunity for agency hearing, the                Exemption 4 allows withholding of                     and effectiveness).

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                                                                   Federal Register / Vol. 74, No. 144 / Wednesday, July 29, 2009 / Rules and Regulations                                                37893

                                                 medical files and similar files the                      assessed the alternatives. One                        requests and the significant burdens
                                                 disclosure of which would constitute a                   alternative is to require entities to                 those requests would impose.
                                                 clearly unwarranted invasion of                          submit individual requests for                          A third alternative is to proceed by
                                                 personal privacy’’ to the subject of those               confidentiality for each transaction. A               binding rule. Binding determinations for
                                                 files. See 5 U.S.C. 52(b)(6). The first                  second alternative is presumptive                     CARS data are appropriate mechanisms
                                                 inquiry in examining withholding                         categorical determinations of                         to address the confidentiality of
                                                 information under Exemption 6 is a                       confidentiality. A third alternative is to            sensitive data. CARS reports are
                                                 determination of what data is at stake                   adopt binding class determinations.                   submitted by filling out standardized
                                                 and the nature and degree of any                         Concerns involved in considering these                electronic templates that are used
                                                 privacy interest in the information. The                 alternatives include providing clear                  repeatedly. Each manufacturer, dealer
                                                 second step is an assessment of the                      direction to CARS participants,                       and salvage yard files the same reports
                                                 public interest in disclosure. Under                     predictability, consistency and                       as other CARS participants in the same
                                                 Exemption 6, the concept of public                       efficiency.                                           category.
                                                 interest is limited to shedding light on                    Requiring individual requests for
                                                 the government’s performance of its                                                                              Binding determinations provide
                                                                                                          confidential treatment of CARS data                   direction to the regulated community.
                                                 statutory duties. U.S. Dep’t of Justice v.               would force thousands of entities,
                                                 Reporters Comm. for Freedom of the                                                                             They also assure consistency and avoid
                                                                                                          almost all of them small businesses, to               resource burdens, particularly for small
                                                 Press, 489 U.S. 749, 773 (1989);                         submit requests for confidentiality for
                                                 National Ass’n of Retired Federal                                                                              businesses. They conserve agency
                                                                                                          each transaction. These entities, having              resources that would otherwise be used
                                                 Employees v. Horner, 879 F.2d 873, 879                   virtually no experience in making such
                                                 (D.C. Cir. 1989); cf., DOD v. FLRA, 510                                                                        to respond to thousands of individual
                                                                                                          requests, would likely submit a wide                  confidentiality requests and allow more
                                                 U.S. 487, 497 (1994). Finally, there is a                variety of documents written in
                                                 weighing of the privacy interests at                                                                           rapid disclosure of information that is
                                                                                                          different ways. Some requests would                   not confidential. This is in the public
                                                 stake against the public interest in                     meet the applicable standards for
                                                 disclosure. Ripkis v. Dept. Hous. and                                                                          interest. In view of the foregoing,
                                                                                                          confidential treatment and some would                 NHTSA believes that binding
                                                 Urban Dev., 746 F.2d 1, 3 (D.C. Cir.                     not. Given our past experience with
                                                 1984).                                                                                                         determinations are appropriate.
                                                                                                          first-time requests, many would not
                                                    Data submitted under the CARS                         meet procedural requirements, would be                c. Class Determinations Based on FOIA
                                                 program includes personally identifying                  denied and would then be followed by                  Exemption 4
                                                 information for consumers. This
                                                                                                          reconsideration requests. The burden
                                                 information falls within the                                                                                      FOIA Exemption 4 covers commercial
                                                                                                          imposed on entities requesting
                                                 classification of ‘‘similar files’’ under                                                                      or financial information obtained from a
                                                                                                          confidential treatment and on the
                                                 Exemption 6. In Center for Auto Safety                                                                         person that is privileged or confidential.
                                                                                                          agency would be substantial. NHTSA
                                                 v. National Highway Traffic Safety                                                                             5 U.S.C. 552(b)(4). The terms
                                                                                                          already receives about 550 requests for
                                                 Administration, 809 F. Supp. 148                                                                               ‘‘commercial’’ or ‘‘financial’’
                                                                                                          confidential treatment every year.
                                                 (D.D.C. 1993), an advocacy group sought                                                                        information are given their ordinary
                                                                                                          Adding the expected number of CARS
                                                 the release of names and addresses of                                                                          meanings. Public Citizen Health
                                                                                                          submissions to the existing
                                                 consumers filing complaints directly to                                                                        Research Group v. FDA, 704 F.2d 1280,
                                                                                                          confidentiality request workload would
                                                 NHTSA. The Court found that the                                                                                1290 (D.C. Cir. 1983). Some CARS data
                                                 complainant’s names and addresses                        overwhelm the agency and lead to a
                                                                                                          huge backlog. Consistent with our                     meet this element of Exemption 4.22
                                                 invoked a privacy interest within the                                                                          Second, the information must be
                                                 scope of Exemption 6 and ruled in favor                  practice, information would be withheld
                                                                                                          until NHTSA decides if it is                          obtained from a ‘‘person.’’ The word
                                                 of non-disclosure because there was no                                                                         ‘‘person’’ encompasses business
                                                 ascertainable public interest of                         confidential. Disclosure of rightfully
                                                                                                          public information would be delayed                   establishments, including corporations.
                                                 sufficient significance or certainty to                                                                        See FlightSafety Servs. v. Dep’t of Labor,
                                                 outweigh a complainant’s privacy right                   and the public interest would be
                                                                                                          impacted, particularly if other agency                326 F.3d 607, 611 (5th Cir. 2003). CARS
                                                 justifying release of the information.                                                                         data from manufacturers, dealers and
                                                                                                          resources were diverted to address the
                                                 b. Approach—Class Determinations vs.                     backlog. In view of the foregoing,                    salvage auctions and disposal facilities
                                                 Individual Assessments                                   requiring and processing individual                   is obtained from persons within the
                                                                                                          requests for confidential treatment for               meaning of Exemption 4. Third, the
                                                    As employed in the agency’s                                                                                 information must be confidential. As
                                                 regulations governing confidentiality                    CARS data is not a viable alternative.
                                                                                                                                                                noted above, the National Parks Court
                                                 determinations (49 CFR Part 512), class                     A second alternative is presumptive
                                                                                                                                                                declared that commercial or financial
                                                 determinations declare that certain                      class determinations. Presumptive
                                                                                                                                                                data is ‘‘confidential’’ for the purposes
                                                 categories of data submitted to NHTSA                    determinations are a middle ground
                                                                                                                                                                of Exemption 4 if disclosure of the
                                                 will be kept confidential. Under this                    between ad hoc determinations and
                                                                                                                                                                information would be likely to cause
                                                 approach, submitters need not request                    binding class determinations. Unlike the
                                                                                                                                                                substantial competitive harm to the
                                                 confidential treatment; such treatment is                latter, that operate automatically,
                                                                                                                                                                competitive position of the person from
                                                 given automatically.                                     presumptive determinations require
                                                                                                                                                                whom the information was obtained.
                                                    NHTSA is promulgating class                           submitters to provide abbreviated
                                                                                                                                                                498 F.2d at 770. Actual competitive
                                                 determinations on the confidentiality of                 written requests and supporting
                                                                                                                                                                harm need not be demonstrated; actual
                                                 some categories of CARS data. In                         justifications. In our view, presumptive
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                                                                                                                                                                competition and a likelihood of
                                                 adopting this approach, we have                          confidentiality determinations are
                                                                                                                                                                substantial competitive injury is all that
                                                 considered a number of matters. First,                   inappropriate for CARS. While
                                                                                                                                                                need be shown. CNA Financial Corp. v.
                                                 NHTSA may adopt categorical rules to                     presumptive determinations would
                                                 manage the tasks Congress assigned to it                 provide direction to NHTSA’s clients                    22 See the discussion of the categories of CARS
                                                 under the CARS Act. Public Citizen v.                    and avoid inconsistent confidentiality                information below. Those discussions demonstrate
                                                 Mineta, 427 F. Supp. 2d 7, 13 (D. D.C.                   determinations, they would not                        that the submitters have a commercial interest in
                                                 2006). Second, we have identified and                    eliminate individual confidentiality                  the data.

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                                                 37894             Federal Register / Vol. 74, No. 144 / Wednesday, July 29, 2009 / Rules and Regulations

                                                 Donovan, 830 F.2d 1132, 1152 (D.C. Cir.                  searched and retrieved by name from a                 program and other costs associated with
                                                 1987).                                                   number of Web based providers for a                   improper use of a CARS code and ID.
                                                   We now turn to certain categories of                   nominal fee. Nonetheless, some data                   Accordingly, this final rule establishes a
                                                 information that manufacturers, dealers                  provided to NHTSA under the CARS                      class determination according
                                                 and disposal facilities must submit                      program is not publicly available and                 confidential treatment to this data.
                                                 under the CARS rule.                                     entitled to confidential treatment. This
                                                                                                                                                                f. Class Determination Based on FOIA
                                                 d. Data Submitted to NHTSA for the                       data is discussed below.
                                                                                                                                                                Exemption 6
                                                 CARS Program                                             1. Manufacturer Assigned Dealer                          The CARS rule requires dealers to
                                                 1. Manufacturer Data                                     Identification                                        provide NHTSA with the name, address,
                                                    Vehicle manufacturers will provide                       Vehicle manufacturers assign                       telephone number, state identification
                                                 NHTSA with both dealer and vehicle                       identification codes to their individual              number, trade-in vehicle VIN, trade-in
                                                 information needed for administration                    dealers. One manufacturer, Ford,                      insurance information and new vehicle
                                                 of the CARS program. The dealer                          indicates that these codes are                        VIN for consumers participating in the
                                                 information is used to identify dealers                  confidential and that release of this                 CARS program. NHTSA has long held
                                                 and determine if they are authorized                     information would be likely to cause                  the view that Exemption 6 of the FOIA
                                                 new car dealers for a particular make.                   competitive harm by increasing the                    authorizes confidential treatment of
                                                 Manufacturers will provide NHTSA                         possibility of fraud perpetrated by                   consumer personally identifying
                                                 with information about the vehicles                      impostors using dealer codes. Because                 information. See 5 U.S.C. 552(b)(6).
                                                 they manufacture.                                        fraudulent use of this information                    Accordingly, consumer names,
                                                                                                          would be likely to cause competitive                  addresses and telephone numbers are
                                                 2. Dealer Information and Transaction                    harm, this final rule establishes a class             routinely accorded confidential
                                                 Data                                                     determination extending confidential                  treatment. The agency’s policy has been
                                                    New car dealers participating in the                  treatment to these manufacturer                       to redact personal identifiers from
                                                 CARS program must submit information                     assigned dealer codes.                                owner complaints (whether filed
                                                 related to their business as well as data                                                                      directly with the agency or from
                                                                                                          2. Dealer Bank Name, ABA Routing
                                                 for individual sales. To take part in the                                                                      documents obtained from manufacturers
                                                                                                          Number, Bank Account Number
                                                 CARS program, dealers must register                                                                            in the course of a defect investigation)
                                                 with NHTSA. The required registration                       Participating dealers will be                      before placing them on the public
                                                 data includes identifying information                    identifying their bank, its American                  record.
                                                 and the identity and contact information                 Banking Association (ABA) routing                        The privacy interest in protecting
                                                 for a designated CARS contact person.                    number and a bank account number in                   personal identifiers and contact
                                                 Once registered, dealers have to submit                  forms submitted to NHTSA. This                        information is no less compelling when
                                                 information needed to establish a CARS                   information is kept confidential by these             a consumer purchases a new vehicle
                                                 account. This includes the registration                  dealers and its release would cause                   under the CARS program. Furthermore,
                                                 data discussed above and additional                      substantial harm to those dealers. Public             disclosure of personal identifiers and
                                                 data needed for financial transactions.                  disclosure of this information presents               the erosion of privacy that would result
                                                 For each individual sale, dealers also                   an open and obvious potential for fraud               might dissuade consumers from
                                                 submit dealer data, new vehicle                          or abuse that could result in serious                 participating in CARS. This would
                                                 purchaser data, trade-in vehicle data,                   financial loss. Indeed, even the                      frustrate achievement of the program’s
                                                 and new vehicle data.                                    inadvertent disclosure of a bank account              principal goal—to encourage
                                                                                                          number and a subsequent change to                     replacement of older less fuel efficient
                                                 3. Disposal Facility Information and                     another account can cause significant                 vehicles with new more fuel-efficient
                                                 Destruction Data                                         disruption in business operations. The                cars and trucks.
                                                    Disposal Facilities are required to                   agency believes that a class                             The consumer data at issue—name,
                                                 submit certifications to NHTSA                           determination is an appropriate means                 address, telephone number, state
                                                 regarding their business operations and                  for protecting this information.                      identification number and vehicle
                                                 to verify proper destruction of CARS                                                                           identification number (VIN)—is within
                                                                                                          3. CARS Dealer ID and CARS                            the scope of Exemption 6. VINs, when
                                                 trade-in vehicles.                                       Authorization Codes                                   coupled with other data, can be used to
                                                 e. CARS Data Class Determinations                           NHTSA will provide participating                   identify vehicle owners and obtain other
                                                 Based on FOIA Exemption 4                                dealers with unique identifiers for                   personal data. As this data has privacy
                                                    With a few exceptions, the data                       CARS purposes and issue CARS                          implications, the next inquiry is an
                                                 submitted by businesses participating in                 authorization codes for individual                    assessment of the public interest in
                                                 the CARS program is already a matter of                  CARS transactions. Dealers must use                   disclosure. Congress has directed the
                                                 public record. Dealer addresses,                         this unique identifier and authorization              disclosure of trade-in vehicle VINs to
                                                 telephone numbers, fax numbers and e-                    code when submitting requests for                     the commercial market to help verify
                                                 mail addresses are freely given. Other                   reimbursement. Public disclosure of a                 destruction of these vehicles. For the
                                                 information, such as a dealer or salvage                 dealer’s unique CARS ID and                           remaining personal data, the concept of
                                                 yard business license number, legal                      authorization code increases the                      public interest under Exemption 6 is
                                                 name and legal address, are available                    potential that this identifier will be used           limited to shedding light on the
                                                 through public records. Still more data                  improperly or to perpetuate fraud.                    government’s performance of its
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                                                 can be ascertained through publicly                      Unauthorized and improper use of the                  statutory duties. United States
                                                 available search engines. For example,                   unique CARS ID and code would be                      Department of Justice v. Reporters
                                                 Employer Identification Numbers (EINs)                   likely to cause the ‘‘owner’’ of the ID to            Comm. for Freedom of the Press, 489
                                                 for businesses are routinely released on                 suffer competitive harm. The legitimate               U.S. 749, 773 (1989); National Ass’n of
                                                 tax forms, public filings and, in some                   ‘‘owner’’ of the ID and authorization                 Retired Federal Employees v. Horner,
                                                 instances, on employee pay stubs. As a                   code may be subject to financial claims,              879 F.2d 873, 879 (D.C. Cir. 1989); cf.,
                                                 result, an employer’s EIN may be                         suspension or removal from the CARS                   DOD v. FLRA, 510 U.S. 487, 497 (1994).

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                                                                   Federal Register / Vol. 74, No. 144 / Wednesday, July 29, 2009 / Rules and Regulations                                          37895

                                                 With the limited redaction of part of the                divided by 19,700 dealers as of early                 which would, in turn, delay the
                                                 VIN under this rulemaking, the public                    2009) during the course of the program.               implementation of the program and
                                                 would be able to review identification of                   Another benefit of the program is the              effectively compress its applicability.
                                                 the make, model and model year of the                    increased incorporation of improved                      This rulemaking is also major under
                                                 new vehicle. This apprises the public of                 fuel efficiency into the on-road vehicle              Chapter 8 of 5 U.S.C. (Congressional
                                                 information central to the core purpose                  fleet. This will decrease greenhouse                  Review of Agency Rulemakings)
                                                 of the CARS program. Disclosing                          gases and criteria pollutants by                      because it has an annual effect on the
                                                 additional VIN information, with the                     decreasing fuel consumption, resulting                economy of $100,000,000 or more. For
                                                 sequential number unique to the                          in air pollution benefits. These benefits             the same reasons noted in the prior
                                                 vehicle, that would enable someone to                    are ultimately dependent upon which                   paragraph, we find good cause under
                                                 identify the owner of the new vehicle                    types of vehicles consumers purchase.                 section 808 of Title 5 that notice and
                                                 and other personal information would                        Certain costs may be incurred by                   public procedure are impracticable and
                                                 not, however, further serve the public                   dealers. However, the CARS Act                        contrary to the public interest, and that
                                                 interest. If disclosed, it would not                     provides that dealers may retain up to                the rule shall take effect upon
                                                 answer the question of ‘‘what the                        $50 from the scrap value of trade-in                  publication in the Federal Register.
                                                 government is up to.’’ Reporters Comm.,                  vehicles to offset any administrative                    Accordingly, the effective date of this
                                                 489 U.S. at 773 (1989).                                  costs of participating in the program.                final rule is July 29, 2009.
                                                    The final step in an Exemption 6                      Disposal facilities and salvage auctions
                                                 analysis is weighing the competing                       will also incur some costs in complying               IX. Regulatory Analyses and Notices
                                                 privacy and public interests against one                 with the Act. Related industries, such as             A. Executive Order 12866 and DOT
                                                 another. See Ripskis v. HUD, 746 F.2d                    auto repair shops, may lose some profit               Regulatory Policies and Procedures
                                                 1, 3 (D.C. Cir. 1984). In the case of the                due to foregone repairs by vehicle
                                                 CARS VIN information, there is a                         owners. Additionally, the Act may                        Executive Order 12866, ‘‘Regulatory
                                                 privacy interest in not being contacted                  shorten the vehicle life cycle depending              Planning and Review’’ (58 FR 51735,
                                                 about a new vehicle purchase, such as                    on the age and condition of the trade-                October 4, 1993), provides for making
                                                 by companies selling warranties. On the                  in vehicles.                                          determinations whether a regulatory
                                                 other hand, the public interest, in terms                   Cost and benefit information                       action is ’’significant’’ and therefore
                                                 of information that reveals ‘‘what the                   associated with this rulemaking is set                subject to Office of Management and
                                                 government is up to’’ is better served by                forth in the final regulatory impact                  Budget (OMB) review and to the
                                                 other publicly available information. On                 analysis prepared by NHTSA and                        requirements of the Executive Order.
                                                 balance, NHTSA has concluded that the                    included in the public docket.                        The Order defines a ‘‘significant
                                                 privacy interests in non-disclosure of                                                                         regulatory action’’ as one that is likely
                                                                                                          VII. Statutory Basis for This Action                  to result in a rule that may: (1) Have an
                                                 consumer personal identifying
                                                 information outweigh the limited public                     This final rule implements the                     annual effect on the economy of $100
                                                 interest served by disclosing this                       Consumer Assistance to Recycle and                    million or more or adversely affect in a
                                                 information when other data is available                 Save Act (Cars Act) (Pub. L. 111–32),                 material way the economy, a sector of
                                                 to better address public concerns.                       which directs the Secretary to issue                  the economy, productivity, competition,
                                                    NHTSA is amending 49 CFR Part 512                     final regulations within 30 days after                jobs, the environment, public health or
                                                 by revising Appendix E to provide new                    enactment.                                            safety, or State, local, or Tribal
                                                 class determinations applying to                                                                               governments or communities; (2) create
                                                                                                          VIII. Effective Date
                                                 information provided for the CARS                                                                              a serious inconsistency or otherwise
                                                 program. These class determinations do                     Section 1302(d) of the CARS Act                     interfere with an action taken or
                                                 not apply as a rule of general                           provides that notwithstanding the                     planned by another agency; (3)
                                                 application to the agency’s treatment of                 requirements of section 553 of title 5,               materially alter the budgetary impact of
                                                 similar information in other instances.                  United States Code, the Secretary shall               entitlements, grants, user fees, or loan
                                                 Revising Appendix E requires addition                    promulgate final regulations to                       programs or the rights and obligations of
                                                 of a new Appendix F to accommodate                       implement the Program not later than 30               recipients thereof; or (4) raise novel
                                                 information previously found in                          days after the date of the enactment of               legal or policy issues arising out of legal
                                                 Appendix E.                                              this Act. The agency finds that it has                mandates, the President’s priorities, or
                                                                                                          good cause to make this rule effective                the principles set forth in the Executive
                                                 VI. Costs and Benefits                                   fewer than 30 days after the publication              Order.
                                                   The CARS Act will have various                         in the Federal Register. The CARS                        This rulemaking is economically
                                                 economic, employment, safety and                         program is a short-term program that                  significant. Accordingly, OMB reviewed
                                                 environmental effects. The employment                    Congress expected NHTSA to                            it under Executive Order 12866. The
                                                 impacts of the Act will affect NHTSA,                    implement promptly. Under the CARS                    rule is also significant within the
                                                 and may affect manufacturer and dealer                   Act, a credit issued under the Program                meaning of the Department of
                                                 employment. At this time, NHTSA is                       may be used only in connection with                   Transportation’s Regulatory Policies and
                                                 planning to hire 30 employees and over                   the purchase or qualifying lease of new               Procedures. The agency has prepared a
                                                 200 contractor employees to handle this                  fuel efficient automobiles that occur                 Final Regulatory Impact Analysis (FRIA)
                                                 program over a period of 6 months.                       between July 1, 2009, and November 1,                 and placed it in the docket and on the
                                                 Manufacturers’ and dealers’                              2009. In view of the fact that the                    agency’s Web site.
                                                 employment levels are unlikely to be                     regulations being published today have
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                                                 impacted by the Act. The impact of the                   not been previously available, sales of               B. National Environmental Policy Act
                                                 Act will most likely not be large enough                 new vehicles under the program have                     NHTSA has considered this
                                                 to increase production by                                not begun in volume. It would,                        rulemaking action for the purposes of
                                                 manufacturers, and dealers on average                    therefore, be inconsistent with                       the National Environmental Policy Act
                                                 will only be selling an additional 12                    Congressional intent, impracticable, and              (NEPA). It is established law that NEPA
                                                 vehicles (250,000 estimated number of                    contrary to the public interest, to delay             compliance is required unless there is a
                                                 vehicles sold during the program                         the effective date of the regulations,                clear conflict of statutory authority.

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                                                 37896              Federal Register / Vol. 74, No. 144 / Wednesday, July 29, 2009 / Rules and Regulations

                                                 Calvert Cliffs’ Coordinating Committee,                   the Executive Order to include                        application procedures of the rule and
                                                 inc. v. Atomic Energy Commission, 449                     regulations that have substantial direct              apply for reimbursement for those
                                                 F.2d 1109 (D.C. Cir 1971). NEPA                           effects on the States, on the relationship            transactions.
                                                 analysis is not required where, as here,                  between the national government and
                                                                                                                                                                 F. Paperwork Reduction Act
                                                 a statutorily-mandated time frame for                     the States, or on the distribution of
                                                 the Government’s action does not                          power and responsibilities among the                     Under the Paperwork Reduction Act
                                                 permit it. See, e.g., Flint Ridge                         various levels of government. Under                   of 1995 (PRA) (44 U.S.C. 3501, et seq.),
                                                 Development Co. v. Scenic Rivers Ass’n                    Executive Order 13132, the agency may                 a person is not required to respond to
                                                 of Oklahoma, 426 U.S. 776 (1976) and                      not issue a regulation with federalism                a collection of information by a Federal
                                                 Kandra v. U.S., 145 F. Supp.2d 1192 (D.                   implications that imposes substantial                 agency unless the collection displays a
                                                 Or. 2001). The Consumer Assistance to                     direct compliance costs and that is not               valid OMB control number. As part of
                                                 Recycle and Save Act of 2009 requires                     required by statute unless the Federal                this final rule, the agency must among
                                                 the Secretary of Transportation, through                  Government provides the funds                         other matters, request information from
                                                 NHTSA, to issue final regulations                         necessary to pay the direct compliance                persons to register as participating
                                                 within 30 days after enactment (i.e., by                  costs incurred by State and local                     dealers, provide a list of eligible
                                                 July 24, 2009) and since it is impossible                 governments or the agency consults                    vehicles and process credit transactions
                                                 to perform a NEPA analysis within this                    with State and local governments in the               under the program.
                                                 tight time frame, no NEPA analysis is                     process of developing the proposed                       The agency has received approval
                                                 required prior to issuing the final                       regulation. The agency also may not                   from OMB to collect the following
                                                 regulation.                                               issue a regulation with federalism                    information:
                                                                                                           implications that preempts a State law                   Title: CARS Program; Dealer
                                                 C. Regulatory Flexibility Act                                                                                   Information, OMB Control No. 2127–
                                                                                                           without consulting with State and local
                                                    Pursuant to the Regulatory Flexibility                 officials.                                            0657, Expiration Date: December 31,
                                                 Act of 1980 (5 U.S.C. 601 et seq., as                        NHTSA has examined today’s final                   2009.
                                                 amended by the Small Business                             rule pursuant to Executive Order 13132                   This approval covers NHTSA Form
                                                 Regulatory Enforcement Fairness Act                       and concluded that consultation with                  1070. NHTSA has been given OMB
                                                 (SBREFA) of 1996), whenever an agency                     States, local governments, or their                   approval to collect 57,000 responses, for
                                                 is required to provide for notice and                     representatives is not required. The                  a total of 11,395 burden hours.
                                                 comment for any proposed or final rule,                   agency has concluded that the rule does                  Title: CARS Program; Disposal
                                                 it must prepare and make available for                    not have federalism implications,                     Facility and Salvage Auction
                                                 public comment a regulatory flexibility                   because the rule does not have a                      Information, OMB Control No. 2127–
                                                 analysis that describes the effect of the                 substantial direct effect on the States, on           0658, Expiration Date: January 31, 2010.
                                                 rule on small entities (i.e., small                       the relationship between the national                    This approval covers NHTSA Form
                                                 businesses, small organizations, and                      government and the States, or on the                  1073, ‘‘Disposal Facility Certification
                                                 small governmental jurisdictions). The                    distribution of power and the                         Form’’ and NHTSA Form 1074,
                                                 agency has not prepared a final                           responsibilities among the various                    ‘‘Salvage Auction Certification Form.’’
                                                 regulatory flexibility analysis for this                  levels of government. This rule will                  NHTSA has been given OMB approval
                                                 final rule because the Regulatory                         have no effect on the ability of States to            to collect 3,750,000 responses, for a total
                                                 Flexibility Act does not require such an                  adopt and/or implement their own                      of 31,248 burden hours.
                                                 analysis when a final rule was not                        incentive plans.                                         Title: CARS Program; Survey of
                                                 required to be preceded by an NPRM.23                                                                           Customer Response to CARS Initiative,
                                                 As noted elsewhere in this preamble,                      E. Executive Order 12988
                                                                                                                                                                 OMB Control No. 2127–0659,
                                                 the agency determined that an NPRM                           Pursuant to Executive Order 12988,                 Expiration Date: January 31, 2010.
                                                 was not required for this rulemaking.                     ‘‘Civil Justice Reform’’ the agency has                  This approval covers NHTSA Form
                                                 Nevertheless, the agency has examined                     considered whether this final rule                    1075, ‘‘Survey of Consumer Response to
                                                 impacts on small entities, including                      would have any retroactive effect.                    CARS Initiative.’’ NHTSA has been
                                                 small businesses, and included them in                    Agencies may promulgate retroactive                   given OMB approval to collect 168,750
                                                 its regulatory analysis for this final rule.              rules pursuant to the express authority               responses, for a total of 9,375 burden
                                                                                                           of Congress to do so. See, e.g., Bowen v.             hours.
                                                 D. Executive Order 13132, Federalism                      Georgetown Univ. Hospital, 488 U.S.                      Title: CARS Program; Dealer and
                                                   Executive Order 13132, ‘‘Federalism’’                   204, 208 (1988); National Mining                      Buyer Transaction Information, OMB
                                                 (64 FR 43255, August 10, 1999), requires                  Association v. Dep’t of Labor, 292 F.3d               Control No. 2127–0660, Expiration
                                                 NHTSA to develop an accountable                           849, 859 (D.C. Cir. 2002). On June 24,                Date: January 31, 2010.
                                                 process to ensure ‘‘meaningful and                        2009, the President signed the CARS                      This approval covers NHTSA Form
                                                 timely input by State and local officials                 Act into law (Pub. L. 111–32). The                    1071 ‘‘Transaction Form’’ (an electronic
                                                 in the development of regulatory                          CARS Act required the Secretary of                    form) and NHTSA Form 1072
                                                 policies that have federalism                             Transportation, acting through NHTSA,                 ‘‘Certifications and Summary of Sale
                                                 implications.’’ ‘‘Policies that have                      to issue final regulations to implement               Language.’’ NHTSA has been given
                                                 federalism implications’’ are defined in                  the program within 30 days after                      OMB approval to collect 500,000
                                                                                                           enactment (i.e., by July 24, 2009).                   responses, for a total of 108,334 burden
                                                    23 The initial sentence of subsection (a), Section     However, the CARS Act provides that                   hours.
                                                 604, Final regulatory flexibility analysis, of the        the program covers eligible transactions
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                                                 Regulatory Flexibility Act provides that when an
                                                                                                           beginning on July 1, 2009, prior to                   G. The Unfunded Mandates Reform Act
                                                 agency promulgates a final rule under section 553
                                                 of this title, after being required by that section or    today’s final rule. Accordingly, as set                 Section 202 of the Unfunded
                                                 any other law to publish a general notice of              forth in today’s final rule, if transactions          Mandates Reform Act of 1995 (UMRA)
                                                 proposed rulemaking, or promulgates a final               occurring on or after July 1, 2009 but                requires Federal agencies to prepare a
                                                 interpretative rule involving the internal revenue
                                                 laws of the United States as described in section
                                                                                                           prior to July 29, 2009 meet all of the                written assessment of the costs, benefits,
                                                 603(a), the agency shall prepare a final regulatory       requirements identified in this final                 and other effects of proposed or final
                                                 flexibility analysis.                                     rule, registered dealers may follow the               rules that include a Federal mandate

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                                                                   Federal Register / Vol. 74, No. 144 / Wednesday, July 29, 2009 / Rules and Regulations                                             37897

                                                 likely to result in the expenditure by                   Appendix E to Part 512—Consumer                            trade-in vehicles under the CARS
                                                 State, local, or Tribal governments, in                  Assistance to Recycle and Save (CARS)                      program.
                                                 the aggregate, or by the private sector, of              Class Determinations                                   599.403 Requirements and limitations for
                                                 more than $100 million annually                             (a) The Chief Counsel has determined that
                                                 (adjusted for inflation with a base year                 the following information required to be               Subpart E—Enforcement
                                                 of 1995). This requirement, however,                     submitted to the agency under 49 CFR part              599.500 Definitions.
                                                 only applies to ‘‘a final rule for which                 599, if released, is likely to cause substantial       599.501 Generally.
                                                 a general notice of proposed rulemaking                  harm to the competitive position of the entity         599.502 Record retention.
                                                 was published’’; as noted earlier in this                submitting the information:                            599.503 Access to records.
                                                                                                             (1) Vehicle Manufacturer Issued Dealer              599.504 Suspension, revocation, and
                                                 final rule, an NPRM was not published.                   Identification Code;                                       reinstatement of registration and
                                                 H. Regulatory Identifier Number (RIN)                       (2) Dealer Bank Name, ABA Routing                       participation eligibility.
                                                                                                          Number and Bank Account Number; and                    599.505 Reports and investigations.
                                                   The Department of Transportation                          (3) CARS Dealer Code and Authorization              599.506 Notice of violation.
                                                 assigns a regulation identifier number                   Code.                                                  599.507 Disclosure of evidence.
                                                                                                             (b) The Chief Counsel has determined that           599.508 Statements of matters in dispute
                                                 (RIN) to each regulatory action listed in
                                                                                                          the disclosure of the new vehicle owner’s                  and submission of supporting
                                                 the Unified Agenda of Federal                            name, home address, telephone number, state                information.
                                                 Regulations. The Regulatory Information                  identification number and last six (6)                 599.509 Hearing officer.
                                                 Service Center publishes the Unified                     characters, when disclosed along with the              599.510 Initiation of action before the
                                                 Agenda in April and October of each                      first eleven (11) characters, of the new                   hearing officer.
                                                 year. You may use the RIN contained in                   vehicle identification numbers reported in             599.511 Counsel.
                                                 the heading at the beginning of this                     transactions submitted to the agency under             599.512 Hearing location and costs.
                                                 document to find this action in the                      49 CFR Part 599 will constitute a clearly              599.513 Hearing procedures.
                                                                                                          unwarranted invasion of personal privacy               599.514 Assessment of civil penalties.
                                                 Unified Agenda.                                          within the meaning of 5 U.S.C. 552(b)(6).              599.515 Appeals of civil penalties in excess
                                                 I. Privacy Act                                                                                                      of $100,000.00.
                                                                                                          ■ 3. Add Appendix F to part 512 to read                599.516 Collection of assessed or
                                                   Please note that anyone is able to                     as follows:                                                compromised civil penalties.
                                                 search the electronic form of all                                                                               599.517 Other sanctions.
                                                                                                          Appendix F to Part 512—OMB                             Appendix A to Part 599—Summary of Sale/
                                                 comments received into any of our                        Clearance                                                  Lease and Certifications
                                                 dockets by the name of the individual                                                                           Appendix B to Part 599—Engine Disablement
                                                 submitting the comment (or signing the                     The OMB clearance number for this part
                                                                                                          512 is 2127–0025.                                          Procedures for the CARS Program
                                                 comment, if submitted on behalf of an                                                                           Appendix C to Part 599—Electronic
                                                 association, business, labor union, etc.).               ■    4. Add part 599 to read as follows:                   Transaction Screen
                                                 You may review the complete User                                                                                Appendix D to Part 599—CARS Purchaser
                                                 Notice and Privacy Notice for                            PART 599—REQUIREMENTS AND                                  Survey
                                                                                                          PROCEDURES FOR CONSUMER                                Appendix E to Part 599—Disposal Facility
                                        at http://
                                                                                                          ASSISTANCE TO RECYCLE AND SAVE                             Certification Form
                                                                                                                     Appendix F to Part 599—Salvage Auction
                                                                                                          ACT PROGRAM
                                                 privacyanduse.jsp.                                                                                                  Certification Form
                                                                                                          Subpart A—General
                                                 List of Subjects                                                                                                  Authority: 49 U.S.C. 32901, Notes;
                                                                                                          Sec.                                                   delegation of authority at 49 CFR 1.50.
                                                 49 CFR Part 512                                          599.100 Purpose.
                                                                                                          599.101 Scope.                                         Subpart A—General
                                                   Administrative procedure and                           599.102 Definitions.
                                                 practice, Confidential business                                                                                 § 599.100    Purpose.
                                                                                                          Subpart B—Participating Dealers, Salvage
                                                 information, Freedom of information,                     Auctions and Disposal Facilities                         This part establishes requirements
                                                 Motor vehicle safety, Reporting and                                                                             and procedures implementing the
                                                                                                          599.200 Registration of participating
                                                 record keeping requirements.                                 dealers.                                           program authorized under the
                                                 49 CFR Part 599                                          599.201 Identification of salvage auctions             Consumer Assistance to Recycle and
                                                                                                              and disposal facilities.                           Save Act of 2009.
                                                     Fuel economy, Motor vehicle safety.                  Subpart C—Qualifying Transactions and                  § 599.101    Scope.
                                                 ■ In consideration of the foregoing,                     Reimbursement
                                                                                                                                                                    The requirements of this part apply to
                                                 NHTSA hereby amends 49 CFR Chapter                       599.300 Requirements for qualifying                    new vehicle purchase or lease
                                                 V as set forth below.                                        transactions.                                      transactions, in combination with trade-
                                                                                                          599.301 Limitations and restrictions on
                                                                                                              qualifying transactions.
                                                                                                                                                                 in vehicle transactions that occur on or
                                                 PART 512—CONFIDENTIAL BUSINESS                                                                                  after July 1, 2009 up to and including
                                                                                                          599.302 Dealer application for
                                                 INFORMATION                                                                                                     November 1, 2009, and to the disposal
                                                                                                              reimbursement—submission, contents.
                                                                                                          599.303 Agency disposition of dealer                   of trade-in vehicles under the CARS
                                                 ■ 1. The authority citation for Part 512                     application for reimbursement.                     Act.
                                                 continues to read as follows:                            599.304 Payment to dealer.
                                                                                                                                                                 § 599.102    Definitions.
                                                   Authority: 49 U.S.C. 322; 5 U.S.C. 552; 49
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                                                                                                          Subpart D—Disposal of Trade-in Vehicle
                                                 U.S.C. 30166, 49 U.S.C. 30167; 49 U.S.C.                                                                           As used in this part—
                                                                                                          599.400 Transfer or consignment by dealer                 Agency or NHTSA means the National
                                                 32307; 49 U.S.C. 32505; 49 U.S.C. 32708; 49
                                                                                                              of trade-in vehicle.
                                                 U.S.C. 32910; 49 U.S.C. 33116; delegation of             599.401 Requirements and limitations for
                                                                                                                                                                 Highway Traffic Safety Administration.
                                                 authority at 49 CFR 1.50.                                    disposal Facilities that receive trade-in             CARS Act means the Consumer
                                                                                                              vehicles under the CARS program.                   Assistance to Recycle and Save Act of
                                                 ■ 2. Revise Appendix E to Part 512 to                    599.402 Requirements and limitations for               2009, Public Law 111–32, 123 Stat. 1859
                                                 read as follows:                                             salvage auctions that are consigned                (June 24, 2009).

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                                                 37898             Federal Register / Vol. 74, No. 144 / Wednesday, July 29, 2009 / Rules and Regulations

                                                    CARS Program means the program                          Lease means a lease of a new vehicle                   (1) A currently operating new
                                                 authorized under the Consumer                            for a period of not less than 5 years,                automobile dealership and business
                                                 Assistance to Recycle and Save Act of                    excluding any lease with a balloon                    address within a State in the United
                                                 2009, which NHTSA refers to as the Car                   payment due prior to the elapsing of 5                States;
                                                 Allowance Rebate System.                                 years.                                                   (2) A currently active business license
                                                    Category 1 truck means a non-                           Manufacturer’s Suggested Retail Price               under the law of the State where the
                                                 passenger automobile, as defined in                      or MSRP means the base Manufacturer’s                 new automobile dealership is located to
                                                 section 49 U.S.C. 32901(a)(17) and 49                    Suggested Retail Price, excluding any                 operate that dealership;
                                                 CFR 523.3, except that such term does                    dealer accessories, optional equipment,                  (3) A currently active franchise
                                                 not include a category 2 truck.                          taxes and destination charges.                        agreement to sell new automobiles with
                                                    Category 2 truck means a large van                      National Motor Vehicle Title                        an original equipment manufacturer of
                                                 with a wheelbase of 124 inches or more,                  Information System or NMVTIS means                    automobiles;
                                                 or a large pickup with a wheelbase of                    the online system established under the                  (4) A bank account in a U.S. bank in
                                                 115 inches or more.                                      oversight of the Department of Justice                a State and a bank account routing
                                                    Category 3 truck means a work truck,                  that enables consumers and others to                  number for electronic transfer of funds;
                                                 as defined in 49 U.S.C. 32901(a)(19).                    access vehicle history information,                      (5) The ability to submit application
                                                    Clear title means title to a vehicle that             including salvage history, total loss                 materials and perform transactions
                                                 is free from all liens and encumbrances.                 information, and title branding and                   electronically using the Internet; and
                                                    Combined Fuel Economy means—                          odometer information, and to which                       (6) Not been convicted of a crime
                                                                                                          insurance companies and salvage yards                 involving motor vehicles or any fraud or
                                                    (1) With respect to an eligible new
                                                                                                          must report vehicle status information.               financial crime under State or Federal
                                                 vehicle, the number, expressed in miles
                                                 per gallon, centered below the words                                                                           law.
                                                                                                            New Vehicle means an automobile or
                                                 ‘‘Combined Fuel Economy’’ on the label                   work truck, the equitable or legal title of              (c) Registration procedures.
                                                 required to be affixed or caused to be                   which has not been transferred to any                    (1) Using comprehensive lists of
                                                 affixed on a new automobile pursuant to                  person other than the purchaser.                      franchised dealers provided by original
                                                 subpart D of 40 CFR part 600.                              Non-titling Jurisdiction means a State              equipment manufacturers, as updated
                                                    (2) With respect to an eligible trade-                that does not issue a title for certain               by these manufacturers, the agency will
                                                 in vehicle of model year 1985 or later,                  typically older vehicles.                             mail a letter to each listed dealer
                                                 the number posted under the words                          Passenger automobile means a                        describing a secure electronic process
                                                 ‘‘Estimated New EPA MPG’’ or ‘‘New                       passenger automobile, as defined in                   and providing an authorization code by
                                                 EPA MPG’’ and above the word                             section 49 U.S.C. 32901(a)(18) and 49                 which the dealer, following the process
                                                 ‘‘Combined,’’ except that for a bi-fuel,                 CFR 523.4.                                            in paragraph (c)(2) of this section, can
                                                 dual fuel, or flexible fueled vehicle, that                Person means an individual,                         effect registration.
                                                 number must also be below the word                       corporation, company, association, firm,                 (2) A dealer contacted in accordance
                                                 ‘‘Gasoline,’’ on the                     partnership, society, or joint stock                  with paragraph (c)(1) of this section may
                                                 Web site of the Environmental                            company.                                              register electronically as a participating
                                                 Protection Agency for the make, model,                     Purchaser means a person purchasing                 dealer under the CARS Program by
                                                 and year of such vehicle.                                or leasing a new vehicle under the                    using the authorization code and
                                                    Credit means an electronic payment                    CARS Program.                                         following the instructions provided in
                                                 to a dealer for a qualifying transaction                   Salvage auction means an entity that                the letter mailed under paragraph (c)(1)
                                                 under the program.                                       receives a CARS trade-in vehicle from a               of this section, and submitting the
                                                    Dealer means a person licensed by a                   dealer and is authorized to sell it only              following information electronically or
                                                 State who engages in the sale of a new                   to a disposal facility on the Disposal                validating the information, where it
                                                 automobile to a person who in good                       Facility List and that will make all the              exists already on an electronic form:
                                                 faith purchases such automobile for                      necessary certifications for salvage                     (i) Dealer’s Federal Tax Identification
                                                 purposes other than resale.                              auctions under the CARS program.                      Number (TIN) and OEM assigned dealer
                                                    Disposal facility means a facility                      State means any one of the 50 United                franchise number;
                                                 listed on                   States, the District of Columbia, Puerto                 (ii) Legal business name, doing
                                                 as eligible to receive a trade-in vehicle                Rico, the Virgin Islands, Guam,                       business as name (if applicable),
                                                 for crushing or shredding under the                      American Samoa, or the Commonwealth                   dealership physical and mailing
                                                 CARS program, except in the case of a                    of the Northern Mariana Islands.                      address, telephone number, and fax
                                                 U.S. territory.                                                                                                number;
                                                                                                          Subpart B—Participating Dealers,
                                                    End-of-Life Vehicle Solutions or ELVS                                                                          (iii) Name and title of dealer
                                                                                                          Salvage Auctions and Disposal
                                                 means an entity established under the                                                                          representative authorized to submit
                                                 National Vehicle Mercury Switch                                                                                transactions under this program, and
                                                 Recovery Program for the collection,                     § 599.200    Registration of participating            phone number and e-mail address of
                                                 recycling and disposal of elemental                      dealers.                                              representative; and
                                                 mercury from automotive switches.                           (a) In general. A dealer may apply for                (iv) Name of U.S. bank used by
                                                    Engine block means the part of the                    a credit under the CARS Program only                  dealership, bank account number, and
                                                 engine containing the cylinders and                      if it meets the Required Dealer                       bank account routing number.
                                                 typically incorporating water cooling                    Qualifications for Registration under                    (3) A dealer must register separately,
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                                                 jackets and also including the crank                     this subpart, is registered in accordance             following the process under paragraph
                                                 shaft, connecting rods, pistons, bearings,               with this subpart, and is currently                   (c)(2) of this section, for each make of
                                                 cam(s), and cylinder head(s). In a rotary                registered at the time it submits an                  vehicle it sells, using the authorization
                                                 engine, the block includes the rotor                     application for reimbursement.                        code associated with that vehicle make.
                                                 housing and rotor.                                          (b) Required dealer qualifications for                (d) Disposition of registration
                                                    GVWR means gross vehicle weight                       registration. A dealer seeking to register            application. The agency will review the
                                                 rating.                                                  must have:                                            registration application for compliance

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                                                                   Federal Register / Vol. 74, No. 144 / Wednesday, July 29, 2009 / Rules and Regulations                                         37899

                                                 with this part, including completeness,                  § 599.201 Identification of salvage                   facility or through a qualifying salvage
                                                 and notify the dealer as follows:                        auctions and disposal facilities.                     auction, and register and submit a
                                                    (1) For an approved registration:                        (a) Participating entities. Subject to             complete application for reimbursement
                                                    (i) By e-mail notification to the                     the conditions and requirements of                    to NHTSA, demonstrating that it meets
                                                 authorized dealer representative, with a                 paragraph (b), participation in the                   all the requirements of this part.
                                                 user identification and password that                    transfer and disposal of a trade-in                      (b) Threshold eligibility requirements
                                                 will allow the submission of                             vehicle under the CARS program is                     that apply to all trade-in vehicles. The
                                                 transactions; and                                        limited to the following entities:                    trade-in vehicle must be:
                                                    (ii) By listing the ‘‘doing business as’’                (1) A salvage auction that will transfer              (1) In drivable condition, as
                                                 name, physical address, and general                      trade-in vehicles received under this                 demonstrated by actual operation of the
                                                 telephone number of the dealer on the                    program only to a disposal facility                   motor vehicle on public roads by the
                                                 agency Web site at                  identified in paragraph (b)(2) or (b)(3) of           dealer and by certification by the dealer
                                                    (2) For a disapproved registration, by                this section.                                         and by the purchaser, as provided in
                                                 withholding the dealer identification                       (2) A disposal facility listed on the              Appendix A to this part, certifications
                                                 information from the agency’s Web site                   Web site at                      section, that the vehicle was in drivable
                                                 and providing e-mail notification to the                 disposal; or                                          condition on the date of the qualifying
                                                 authorized dealer representative of the                     (3) A facility that disposes of vehicles           transaction;
                                                 reasons for rejecting the application.                   in Puerto Rico, the Virgin Islands,                      (2) Continuously insured consistent
                                                    (e) Revocation of Dealer Registration.                Guam, American Samoa, or the                          with the applicable State law for a
                                                    (1) Termination or Discontinuance of                  Commonwealth of the Northern Mariana                  period of not less than 1 year
                                                 Franchise.                                               Islands.                                              immediately prior to the trade-in, as
                                                    (i) A dealer whose franchise                             (b) Conditions of Participation. A                 demonstrated by:
                                                 agreement with an original equipment                     participating entity identified in                       (i) One or more current insurance
                                                 manufacturer (OEM) has expired                           paragraph (a) of this section must:                   cards specifying the make, model,
                                                 without renewal, has been terminated,                       (1) Comply with all the provisions                 model year, and vehicle identification
                                                 or otherwise is no longer in effect shall                and restrictions and make all the                     number (VIN) of the insured vehicle and
                                                 be automatically removed as a matter of                  required certifications contained in                  displaying a continuous one-year period
                                                 course, subject to paragraph (e)(1)(iii),                subpart D of this part.                               of insurance coverage; or a copy of an
                                                 from the agency’s list of registered                        (2) In the case of a disposal facility             insurance policy document (e.g., a
                                                 dealers and may no longer receive a                      identified in paragraph (a)(2) of this                declarations page or pages) showing a
                                                 credit for new transactions under the                    section, be currently listed on the Web               continuous one-year period of insurance
                                                 CARS Program submitted for repayment                     site at, as              coverage for the vehicle; or a signed
                                                 on or after the date that the franchise                  of the date of its participation in the               letter, on insurance company letterhead,
                                                 expired or no longer is in effect.                       disposal of the trade-in vehicle.                     specifying the same vehicle
                                                    (ii) Paragraph (e)(1)(i) of this section                 (c) Removal of authority to                        identification information (i.e., make,
                                                 does not preclude a dealer registered                    participate.                                          model, model year, and VIN) of the
                                                 under other franchise agreements from                       (1) A disposal facility that qualifies as          insured vehicle and identifying the
                                                 receiving a credit for transactions under                such by active membership in ELVS and                 period of continuous coverage, which
                                                 those agreements that have not expired                   that fails to maintain active ELVS                    must be for at least one year prior to the
                                                 or been discontinued.                                    membership may be automatically                       date of the trade-in; and
                                                    (iii) A dealer whose name is removed                  removed as a matter of course from the                   (ii) By certification by the purchaser,
                                                 from the agency’s list of registered                     agency’s list of disposal facilities                  as provided in Appendix A to this part,
                                                 dealers under paragraph (e)(1)(i) shall be               maintained at                    certifications section, that the vehicle
                                                 reinstated to the list of registered dealers             disposal authorized to participate in the             was so insured;
                                                 upon a showing to NHTSA of proper                        CARS program.                                            (3) Continuously registered in a State
                                                 and adequate license to sell new                            (2) The agency may also suspend or                 to the purchaser for a period of not less
                                                 vehicles to ultimate purchasers.                         remove a salvage auction’s or disposal                than one year immediately prior to the
                                                                                                          facility’s authority to participate in the            trade-in, as demonstrated by:
                                                    (2) Other suspension or revocations
                                                                                                          CARS program in accordance with the
                                                 actions. The agency may also suspend                                                                              (i) A current State registration
                                                                                                          procedures of § 599.504.
                                                 or revoke the registration of a dealer as                                                                      document or series of registration
                                                 provided in § 599.504.                                   Subpart C—Qualifying Transactions                     documents in the name of the purchaser
                                                    (f) Notification of changes. A                        and Reimbursement                                     evidencing registration for a period of
                                                 registered dealer shall immediately                                                                            not less than one year immediately prior
                                                 notify the agency of any change to the                   599.300 Requirements for qualifying                   to the trade-in; or a current State
                                                 information submitted under this                         transactions.                                         registration document showing
                                                 section and any change to the status of                     (a) In general. To qualify for a credit            registration in the name of the purchaser
                                                 its State license or franchise.                          under the CARS Program, a dealer must                 and a title that confers title on the
                                                    (g) Pre-registration transactions. An                 sell or lease a new vehicle that meets                purchaser not less than one year
                                                 otherwise qualifying transaction that                    eligibility requirements to a purchaser,              immediately prior to the trade-in; or a
                                                 occurs during the time period                            obtain a trade-in vehicle that meets                  current State registration document
                                                 prescribed under § 599.301(a) is not a                   eligibility requirements from the                     showing registration in the name of the
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                                                 non-complying transaction solely                         purchaser, satisfy combined fuel                      purchaser and a document from a
                                                 because a dealer is not registered at the                economy requirements for both the new                 commercially available vehicle history
                                                 time of the transaction, except that the                 and trade-in vehicles, disable the engine             provider evidencing registration for a
                                                 dealer must be eligible to register and                  of the trade-in vehicle, satisfy the                  period of not less than one year
                                                 must register under § 599.200 in order to                limitations and restrictions of the                   immediately prior to the trade-in; and
                                                 be entitled to reimbursement for a credit                program, arrange for disposal of the                     (ii) By certification by the purchaser,
                                                 extended under the CARS program.                         trade-in vehicle at a qualifying disposal             as provided in Appendix A to this part,

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                                                 37900             Federal Register / Vol. 74, No. 144 / Wednesday, July 29, 2009 / Rules and Regulations

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

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                                                 the trade-in vehicle or as a purchaser of                   (ii) Trade-in vehicle information.                    (2) Attach the following supporting
                                                 the new vehicle.                                            (A) Make. The make of the vehicle.                 documentation in electronic format
                                                    (d) Transfer of title.                                   (B) Model. The model of the vehicle.               (pdf, tif, jpeg) in the following order:
                                                    (1) Except as provided in paragraph                      (C) Model year. The model year of the                 (i) Proof of title. A copy of the front
                                                 (d)(2) of this section, a dealer may not                 vehicle.                                              and back of the title of the trade-in
                                                 apply for or receive reimbursement for                      (D) Vehicle identification number                  vehicle, showing assignment to the
                                                 a credit extended to a purchaser under                   (VIN). The 17 digit VIN of the vehicle.               dealer free and clear of any lien or
                                                 a CARS program transaction unless it                        (E) CARS Act vehicle category. The                 encumbrance on the vehicle’s title, with
                                                 has been conveyed clear title and                        category of vehicle as defined under the              the ‘‘Junk Automobile,’’
                                                 physically possesses the title to the                    CARS Act. (Enter, as applicable,                      marking on both sides.
                                                 trade-in vehicle.                                        passenger automobile, category 1 truck,                  (ii) Proof of insurance. A copy of
                                                    (2) In the case of a trade-in vehicle                 category 2 truck or category 3 truck.)                insurance policy cards or documents for
                                                 registered in a State that is a non-titling                 (F) State of title.                                the trade-in vehicle to confirm that the
                                                 jurisdiction and that, in accordance                        (G) State of registration.                         trade-in vehicle insurance was
                                                 with State law, has no title, the                           (H) Start date of registration.                    continuous for a period of not less than
                                                 requirement in paragraph (d)(1) of this                     (I) Start date of insurance.                       one year prior to trade in.
                                                 section that clear title be conveyed is                     (J) End date of registration.                         (iii) Proof of registration. A copy of
                                                 satisfied if the purchaser shows proof of                   (K) Odometer reading. The odometer                 the registration card or documents for
                                                 registration in the purchaser’s name and                 reading of the vehicle at the time of the             the trade-in vehicle identifying the
                                                 provides a bill of sale conferring                       trade-in.                                             owner, the vehicle, and dates of
                                                 ownership of the trade-in vehicle to the                    (L) EPA combined fuel economy. The                 registration to confirm that the vehicle
                                                 dealer.                                                  listed EPA combined fuel economy of                   was registered to the purchaser for a
                                                                                                          the vehicle.                                          period of not less than one year prior to
                                                 § 599.302 Dealer application for                            (M) Vehicle description. The exact                 trade in.
                                                 reimbursement—submission, contents.                      ‘‘vehicle description’’ for the vehicle                  (iv) Purchaser identification.
                                                    (a) In general. A dealer’s application                found on                     (v) Summary of sale/lease and
                                                 for reimbursement must demonstrate                          (iii) New vehicle information.                     certifications form (Appendix A to this
                                                 that the requirements and limitations                       (A) Make. The make of the vehicle.                 part, summary section).
                                                 governing qualifying transactions in                        (B) Model. The model of the vehicle.                  (vi) Manufacturer certificate of origin
                                                 § 599.300 and § 599.301 of this subpart                     (C) Model year. The model year of the              or manufacturer statement of origin of
                                                 have been met, and must comply with                      vehicle.                                              the new vehicle.
                                                 the submission and contents                                 (D) Vehicle identification number                     (vii) CARS purchaser survey.
                                                 requirements of this section.                            (VIN). The 17 digit VIN of the vehicle.                  (viii) side-by-side
                                                    (b) Electronic submission. The                           (E) EPA combined fuel economy. The                 comparison of the trade-in vehicle and
                                                 application for reimbursement must be                    listed EPA combined fuel economy of                   the new vehicle.
                                                 submitted by using the login and                         the vehicle.                                             (ix) Certification from salvage auction
                                                 password provided under                                     (F) CARS Act vehicle category. The                 or disposal facility.
                                                 § 599.200(d)(1) and following the                        category of vehicle as defined under the                 (x) Copy of vehicle sales or lease
                                                 procedures provided in the letter mailed                 CARS Act. (Enter, as applicable,                      contract.
                                                 under § 599.200(c)(1) of this part.                      passenger automobile, category 1 truck,                  (3) Make the certifications provided in
                                                    (c) Application contents. An                          category 2 truck or category 3 truck.)                Appendix A to this part, certifications
                                                 application shall consist of an electronic                  (G) Base manufacturer’s suggested                  section.
                                                 transaction form (portion reproduced in                  retail price (MSRP). The price of the
                                                 Appendix C to this part) requiring input                 new vehicle affixed to the Monroney                   599.303 Agency disposition of dealer
                                                 of information into relevant fields,                     label prior to the addition of any                    application for reimbursement.
                                                 electronic copies of supporting                          options, features, taxes or destination                  (a) Application review. Upon receipt
                                                 documents, and applicable                                charges.                                              of an application for reimbursement, the
                                                 certifications, as provided in Appendix                     (H) Vehicle description. The exact                 agency shall review the application to
                                                 A to this part, certifications section. As               ‘‘vehicle description’’ for the vehicle               determine whether it is complete and
                                                 its application for each transaction, the                found on                  satisfies all the requirements of this
                                                 dealer shall:                                               (iv) Trade-in vehicle disposition                  subpart.
                                                    (1) Input the following information                   information.                                             (b) Complying application. An
                                                 into relevant fields on the transaction                     (A) Identification of entity. The name,            application that is determined to meet
                                                 form:                                                    address and telephone number of the                   all the requirements of this subpart shall
                                                    (i) Purchaser information.                            disposal facility or salvage auction to               be approved for payment, in accordance
                                                    (A) Name. The first name, middle                      which the vehicle will be or has been                 with the provisions of § 599.304.
                                                 initial and last name of each purchaser,                 transferred or consigned.                                (c) Non-complying application. An
                                                 if an individual, or the full legal name                    (B) Disposal facility number. The                  application that is incomplete or that
                                                 of the company, association or other                     unique identifier assigned to the                     otherwise fails to meet all the
                                                 organization that is the purchaser.                      disposal facility identified on the CARS              requirements of this subpart shall be
                                                    (B) Residence address (or, for an                     Web site, and to which the vehicle is                 rejected, and the submitter shall be
                                                 organization, business address). The full                being transferred or consigned.                       informed electronically of the reason for
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                                                 address of each purchaser.                                  (v) Transaction information.                       rejection. NHTSA shall have no
                                                    (C) Driver’s license or State                            (A) Date of sale or lease. The date on             obligation to correct a non-conforming
                                                 identification number. The State                         which the vehicle transaction with the                submission.
                                                 driver’s license or State identification                 purchaser occurred.                                      (d) Electronic rejection. An
                                                 number of each purchaser or, for an                         (B) Transaction request amount. The                application is automatically rejected,
                                                 organization, its tax identification                     amount of the credit for which the                    with system notification to the
                                                 number.                                                  dealer is applying.                                   tendering dealer, if the transaction falls

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                                                 outside of the permissible time period,                  authorized the salvage auction to sell                   (ii) Agree to make the certifications in
                                                 exceeds the permissible MSRP,                            the trade-in vehicle.                                 the Salvage Auction Certification Form
                                                 identifies a purchaser that has                            (1) Make the certifications contained               (Appendix F to this part).
                                                 participated in a previous transaction,                  in the Salvage Auction Certification                     (3) As a condition of transferring title
                                                 or identifies the vehicle identification                 Form to the dealer that authorized the                to the disposal facility, obtain from that
                                                 number of a new or trade-in vehicle that                 salvage auction to sell the trade-in                  facility the signed Disposal Facility
                                                 was involved in a previous transaction.                  vehicle; and                                          Certification Form (Appendix E to this
                                                   (e) Correction and resubmission. A                       (3) Comply with the requirements and                part), insert on the top of the form the
                                                 dealer may correct and resubmit a                        limitations of § 599.402.                             appropriate CARS invoice number
                                                 rejected application for reimbursement,                                                                        received from the dealer, if known, and
                                                                                                          § 599.401 Requirements and limitations for
                                                 without penalty.                                         disposal facilities that receive trade-in             provide the form to NHTSA at
                                                                                                          vehicles under the CARS program.            , and include that
                                                 § 599.304   Payment to dealer.                                                                                 invoice number in the e-mail subject
                                                    Upon completion of review of an                          (a) The disposal facility must:
                                                                                                             (1) Not more than 7 days after                     line.
                                                 application for reimbursement from a                                                                              (b) [Reserved]
                                                                                                          receiving the vehicle, report the vehicle
                                                 registered dealer that satisfies all the
                                                                                                          to NMVTIS as a scrap vehicle.                         § 599.403    Requirements and limitations for
                                                 requirements of this part, the agency
                                                                                                             (2) Remove and dispose of all                      dealers.
                                                 shall reimburse the dealer, by electronic
                                                                                                          refrigerants, antifreeze, lead products,                A dealer receiving a Disposal Facility
                                                 transfer to the account identified under
                                                                                                          mercury switches, and such other toxic                Certification Form or Salvage Auction
                                                 the process in § 599.200(c) of this part.
                                                                                                          or hazardous vehicle components prior                 Certification Form under § 599.400(b)(2)
                                                 Subpart D—Disposal of Trade-in                           to crushing or shredding in accordance                or (c)(2) shall insert on the top of the
                                                 Vehicle                                                  with applicable Federal and State                     form the appropriate CARS invoice
                                                                                                          requirements;                                         number, if known, and within 7 days of
                                                 § 599.400 Transfer or consignment by                        (3) Crush or shred the trade-in vehicle
                                                 dealer of trade-in vehicle.
                                                                                                                                                                receipt, submit such certification form
                                                                                                          onsite, including the engine block and
                                                                                                                                                                to NHTSA at
                                                    (a) In general.                                       the drive train (unless with respect to
                                                    (1) A trade-in vehicle accepted as part               the drive train, the transmission, drive              Subpart E—Enforcement
                                                 of an eligible transaction may be                        shaft, and rear end are sold separately),
                                                 provided for disposal by a dealer either                 using its own machinery or a mobile                   § 599.500    Definitions.
                                                 to a disposal facility or to a salvage                   crusher, within 180 days after receipt of                As used in this subpart—
                                                 auction, as described in and subject to                  the vehicle from the dealer or salvage                   Administrator means the
                                                 the conditions of § 599.201 of this part.                auction;                                              Administrator of the National Highway
                                                    (2) Dealers, disposal facilities, and                    (4) Not more than 7 days after the                 Traffic Safety Administration, or his or
                                                 salvage auctions involved in the                         vehicle is crushed or shredded, report                her designee.
                                                 disposal of the trade-in vehicle must                    the vehicle to NMVTIS as crushed or                      Chief Counsel means the NHTSA
                                                 each comply with the applicable                          shredded.                                             Chief Counsel, or his or her designee.
                                                 provisions of this subpart.                                 (b) The disposal facility may not sell                Hearing Officer means a NHTSA
                                                    (b) Transfer by dealer or salvage                     or transfer the engine block of the                   employee who has been delegated the
                                                 auction to a disposal facility. If the                   vehicle or, except as allowed under                   authority to assess civil penalties.
                                                 trade-in vehicle is transferred by the                   paragraph (c)(2) of this section, the drive              NHTSA Enforcement means the
                                                 dealer or salvage auction to a disposal                  train before they are crushed or                      NHTSA Associate Administrator for
                                                 facility, the disposal facility must, as a               shredded or otherwise allow the vehicle               Enforcement, or his or her designee.
                                                 condition of the transfer:                               to leave the disposal facility before it is              Notice of violation means a
                                                    (1) Make the certifications contained                 crushed or shredded.                                  notification of violation and preliminary
                                                 in the Disposal Facility Certification                      (c) The disposal facility may:                     assessment of penalty issued by the
                                                 Form in Appendix E to this part, signed                     (1) Sell any part of the vehicle other             Chief Counsel to a party.
                                                 by an official with authority to bind the                than the engine block or drive train;                    Party means the person alleged to
                                                 disposal facility;                                          (2) Notwithstanding paragraph (c)(1)               have committed a violation of the CARS
                                                    (2) At the time of the transfer, deliver              of this section, sell the drive train                 Act, regulations thereunder, or other
                                                 the signed Disposal Facility                             provided the transmission, drive shaft,               applicable law, and includes an
                                                 Certification Form to the dealer or                      and rear end are sold as separate parts;              individual, a public or private
                                                 salvage auction that transferred the                        (3) Retain the proceeds from parts                 corporation, and a partnership or other
                                                 trade-in vehicle; and                                    sold under this paragraph.                            association.
                                                    (3) Comply with the requirements and                  § 599.402 Requirements and limitations for               Violation means any non-
                                                 limitations of § 599.401.                                salvage auctions that are consigned trade-            conformance with the CARS Act or the
                                                    (c) Consignment by dealer to a salvage                in vehicles under the CARS program.                   regulations in this part except
                                                 auction. If the trade-in vehicle is                        (a) The salvage auction must:                       § 599.200(e)(1)(i) and § 599.201(c)(1),
                                                 consigned by the dealer to a salvage                       (1) Within 3 days after the date the                the submission of incomplete or
                                                 auction, the salvage auction must, as a                  dealer consigns the vehicle or prior to               inaccurate information to NHTSA or an
                                                 condition of the consignment:                            auctioning the vehicle, whichever is                  entity identified under this part, or the
                                                    (1) Make the certifications contained                 earlier, report the status of the vehicle             failure to maintain records, to permit
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                                                 in the Salvage Auction Certification                     to NMVTIS;                                            access to records or to update
                                                 Form in Appendix F to this part, signed                    (2) Limit participation in the auction              information that has been submitted to
                                                 by an official with authority to bind the                to disposal facilities that, when the                 NHTSA under this part, but does not
                                                 salvage auction;                                         auction is held:                                      include a clerical error. In the context of
                                                    (2) At the time of the consignment,                     (i) Appear on the list identified in                dealer registration and disposal facility
                                                 deliver the signed Salvage Auction                       § 599.201(a)(2) or are described in                   or salvage auction participation
                                                 Certification Form to the dealer that                    § 599.201(a)(3); and                                  eligibility, violation also includes any

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                                                 conviction of a crime involving motor                    reproduction or transfer, and when so                 to the dealer, salvage auction or disposal
                                                 vehicles or any fraud or financial crime                 reproduced or transferred the original                facility.
                                                 under State or Federal law.                              form may be treated as a duplicate.                      (7) There shall be no opportunity to
                                                                                                                                                                seek reconsideration of the
                                                 § 599.501   Generally.                                   § 599.503    Access to records.
                                                                                                                                                                Administrator’s decision issued under
                                                   The provisions of 5 U.S.C. 554, 556                       The Administrator shall have the right             this paragraph (a).
                                                 and 557 do not apply to any                              to enter onto the premises of                            (b) Reinstatement of suspended
                                                 proceedings conducted pursuant to this                   manufacturers, dealers, salvage auctions              registration or participation eligibility.
                                                 subpart.                                                 and disposal facilities during normal
                                                                                                                                                                   (1) When a registration or
                                                                                                          business hours in order to: access,
                                                 § 599.502   Record retention.                                                                                  participation eligibility has been
                                                                                                          inspect and audit records and other
                                                    (a) Manufacturers, dealers, salvage                                                                         suspended under this subpart, the
                                                                                                          sources of information maintained by
                                                 auctions, and disposal facilities shall                                                                        registration or participation eligibility
                                                                                                          any of these entities under this Program;
                                                 keep records of all transactions under                                                                         will be reinstated after the expiration of
                                                                                                          to inspect vehicles traded in or sold
                                                 the CARS Act and regulations                                                                                   the period of suspension specified by
                                                                                                          under this program, including taking all
                                                 thereunder for a period of five calendar                                                                       the Administrator, or such earlier date
                                                                                                          actions necessary to determine whether
                                                 years from the date on which they were                                                                         as the Administrator may subsequently
                                                                                                          trade-in vehicles have operative
                                                 generated or acquired by the                             engines; and/or to interview persons                  decide is appropriate.
                                                 manufacturer, salvage auction, dealer, or                who may have relevant knowledge.                         (2) Reinstatement is automatically
                                                 disposal facility, and shall promptly                                                                          effective as of the date previously set
                                                 make those records available to NHTSA                    § 599.504 Suspension, revocation, and                 forth in the Administrator’s written
                                                 Enforcement or DOT’s Office of the                       reinstatement of registration and                     notification of suspension, unless
                                                                                                          participation eligibility.                            another date is specified by the
                                                 Inspector General upon request.
                                                    (b) Records to be retained under this                    (a) Suspension or revocation of dealer             Administrator in writing.
                                                 subpart include all documentary                          registration, or salvage auction or                      (c) Effect of suspension or revocation
                                                 materials and other information-storing                  disposal facility participation eligibility.          of registration or participation
                                                 media that contain information                              (1) When the NHTSA Chief Counsel                   eligibility.
                                                 concerning transactions under the CARS                   determines that a violation has likely                   (1) If a dealer’s registration or a
                                                 Program, including any material                          occurred, the Administrator may notify                salvage auction or disposal facility’s
                                                 generated or communicated by                             the dealer, salvage auction or disposal               participation eligibility is suspended or
                                                 computer, electronic mail, or other                      facility in writing of the facts giving rise          revoked, as of the date of suspension or
                                                 electronic means. Such records include,                  to the allegation of a violation and the              revocation, the dealer, salvage auction
                                                 but are not limited to, lists,                           proposed length of a suspension, if                   or disposal facility will not be
                                                 compilations, certifications, dealer                     applicable, or revocation of registration,            considered registered or eligible to
                                                 application information, salvage auction                 in the case of a dealer, or participation             participate in the CARS Program, and
                                                 or disposal facility information, owner                  eligibility in the case of a salvage                  must cease participating in the program.
                                                 eligibility information, vehicle                         auction or disposal facility.                            (2) A dealer whose registration has
                                                                                                             (2) The notice shall afford the dealer,
                                                 eligibility information (including                                                                             been suspended will not be entitled to
                                                                                                          salvage auction or disposal facility an
                                                 vehicle fuel economy), dealer                                                                                  any rights or reimbursement of funds for
                                                                                                          opportunity to present data, views, and
                                                 applications for reimbursement under                     arguments, in writing and/or in person,               new transactions submitted as of the
                                                 the program, vehicle identification                      within 30 days of the date of the notice,             effective date of the suspension or
                                                 number data, vehicle ownership                           as to whether the violation occurred,                 revocation.
                                                 information, vehicle title, registration                 why its registration or participation                    (3) NHTSA may take such action as
                                                 and insurance information, sales                         eligibility ought not to be suspended or              appropriate, including publication, to
                                                 agreements, bills of sale, lease                         revoked, or whether the suspension                    provide notice that a dealer’s
                                                 agreements, manufacturer’s certificate or                should be shorter than proposed. The                  registration, or salvage auction’s or
                                                 statement of origin, other rebate and/or                 Administrator may, for good cause,                    disposal facility’s participation
                                                 incentive programs used in conjunction                   reduce the time allowed for response.                 eligibility has been suspended or
                                                 with transactions under the program,                        (3) If the Administrator decides, on               revoked.
                                                 bank account and routing number                          the basis of the available information,
                                                 information, electronic funds transfer                                                                         § 599.505    Reports and investigations.
                                                                                                          that the dealer, salvage auction or
                                                 and payment information, reports made                    disposal facility has committed a                       (a) Any person may report an
                                                 to the National Motor Vehicle Title                      violation, the Administrator may                      apparent violation of the CARS Act or
                                                 Information System (NMVTIS), reports                     suspend or revoke the dealer                          regulations issued thereunder to
                                                 regarding vehicle scrappage values and                   registration or the participation                     NHTSA.
                                                 payment, reports in connection with the                  eligibility of the salvage auction or                   (b) NHTSA may independently
                                                 transfer of vehicles to salvage auctions                 disposal facility.                                    monitor for violations of the CARS Act
                                                 and disposal facilities; reports from                       (4) The Administrator shall notify the             or regulations issued thereunder.
                                                 disposal facilities in connection with                   dealer, salvage auction or disposal                     (c) When a report of an apparent
                                                 the crushing or shredding of vehicles                    facility in writing of the decision,                  violation has been received by NHTSA,
                                                 under the program, and any other                         including the reasons for it. The                     or when an apparent violation has been
                                                 documents that are related to                            decision shall reflect the gravity of the             detected by any person working for
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                                                 transactions.                                            offense.                                              NHTSA, the matter may be investigated
                                                    (c) Duplicate copies need not be                         (5) A suspension or revocation is                  or evaluated by NHTSA Enforcement. If
                                                 retained. Information may be                             effective as of the date of the                       NHTSA Enforcement believes that a
                                                 reproduced or transferred from one                       Administrator’s written notification,                 violation may have occurred, NHTSA
                                                 storage medium to another (e.g., from                    unless another date is specified therein.             Enforcement may prepare a report and
                                                 electronic format to CD–ROM) as long as                     (6) The Administrator shall state the              send the report to the NHTSA Chief
                                                 no information is lost in the                            period of any suspension in the notice                Counsel.

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                                                    (d) The NHTSA Chief Counsel will                      to a final assessment of a penalty by a               § 599.507    Disclosure of evidence.
                                                 review the reports prepared by NHTSA                     Hearing Officer.                                         The alleged violator may, upon
                                                 Enforcement to determine if there is                        (8) A statement that failure to either             request, receive a free copy of all the
                                                 sufficient information to establish a                    pay the proposed penalty on the Notice                written evidence in the case file, except
                                                 likely violation.                                        of Violation or to decline the Notice of              material that would disclose or could
                                                    (1) The matter may be returned to                     Violation and request a hearing within                lead to the disclosure of the identity of
                                                 NHTSA Enforcement for further                            30 days of the date shown on the Notice               a confidential source. Following a
                                                 investigation, if warranted.                             of Violation will result in a finding of              timely request for a hearing, other
                                                    (2) The Chief Counsel may close a                     violation by default and that NHTSA                   evidence or material, if any, of whatever
                                                 matter. A matter may be closed if, for                   will proceed with the civil penalty in                source or nature, may be examined at
                                                 example, the investigation has                           the amount proposed on the Notice of                  the Hearing Officer’s offices or such
                                                 established that a violation did not                     Violation without processing the                      other places and locations that the
                                                 occur, the alleged violator is unknown,                  violation under the hearing procedures                Hearing Officer may, in writing, direct,
                                                 there is insufficient information to                     set forth in this subpart.                            if there are adequate safeguards to
                                                 support the existence of a violation and                                                                       prevent loss or tampering.
                                                                                                             (c) The Notice of Violation may be
                                                 little likelihood of discovering
                                                                                                          delivered to the party by:                            § 599.508 Statements of matters in dispute
                                                 additional relevant facts, or the
                                                                                                             (1) Hand-delivery to the party or an               and submission of supporting information.
                                                 magnitude of the matter is, under the
                                                 circumstances, including availability of                 employee of the party;                                  (a) Within 30 days of the date shown
                                                 resources, insufficient to be pursued                       (2) Mailing to the party (certified mail           on the Notice of Violation, the party, or
                                                 further.                                                 is not required);                                     counsel for the party, shall submit to
                                                    (3) If the Chief Counsel determines                      (3) Use of an overnight or express                 NHTSA at the person or office listed in
                                                 that a violation has likely occurred, the                courier service; or                                   the Notice of Violation two complete
                                                 Chief Counsel may:                                                                                             copies via hand delivery, use of an
                                                                                                             (4) Facsimile transmission or                      overnight or express courier service,
                                                    (i) Issue a Notice of Violation to the                electronic mail (with or without
                                                 party, and/or                                                                                                  facsimile or electronic mail of:
                                                                                                          attachments) to the party or an                         (1) A detailed statement of factual and
                                                    (ii) In the case of a dealer recommend                employee of the party.
                                                 that the Administrator suspend or                                                                              legal issues in dispute; and,
                                                 revoke registration in the program or in                    (d) If a party submits a written request             (2) All statements and documents
                                                 the case of a salvage auction or disposal                for a hearing as provided in the Notice               supporting the party’s case.
                                                 facility, recommend that the                             of Violation within 30 days of the date                 (b) One copy of the party’s submission
                                                 Administrator suspend or revoke                          shown on the Notice of Violation, the                 set forth above shall be labeled ‘‘For
                                                 participation eligibility in the program.                case file will be sent to the Hearing                 Hearing Officer.’’
                                                                                                          Officer for processing under the hearing                (c) Failure to specify any non-
                                                    (4) In the case of either paragraphs
                                                                                                          procedures set forth in this subpart.                 jurisdictional issue in the party’s
                                                 (d)(3)(i) or (ii) of this section, the
                                                                                                             (e) If a party pays the proposed                   submission will preclude its
                                                 NHTSA Chief Counsel will prepare a
                                                                                                          penalty on the Notice of Violation or an              consideration.
                                                 case file with recommended actions. A
                                                 record of any prior violations by the                    amount agreed on in compromise                        § 599.509    Hearing Officer.
                                                 same person or entity, shall be                          within 30 days of the date shown on the                  (a) If a party timely requests a hearing
                                                 forwarded with the case file.                            Notice of Violation, a finding of                     after receiving a Notice of Violation, the
                                                                                                          ‘‘resolved with payment’’ will be                     Hearing Officer shall hear the case.
                                                 § 599.506   Notice of Violation.                         entered into the case file. Such payment                 (b) The Hearing Officer is solely
                                                    (a) The agency has the authority to                   shall not be an admission of liability.               responsible for the case referred to him
                                                 assess a civil penalty for any violation                    (f) If the party agrees to pay the                 or her. The Hearing Officer has no other
                                                 of the CARS Act or this part. The                        proposed penalty, but has not made                    responsibility, direct or supervisory, for
                                                 penalty may not be more than $15,000                     payment within 30 days of the date                    the investigation of cases referred for the
                                                 for each violation.                                      shown on the Notice of Violation,                     assessment of civil penalties.
                                                    (b) The Chief Counsel may issue a                     NHTSA will enter a finding of violation                  (c) The Hearing Officer decides each
                                                 Notice of Violation to a party. Notice of                by default in the matter and NHTSA                    case on the basis of the information
                                                 Violation will contain the following                     will proceed with the civil penalty in                before him or her, and must have no
                                                 information:                                             the amount proposed on the Notice of                  prior connection with the case.
                                                    (1) The name and address of the party;                Violation without processing the
                                                    (2) The alleged violation and the                     violation under the hearing procedures                § 599.510 Initiation of action before the
                                                 applicable law or regulations violated;                  set forth in this subpart.
                                                                                                                                                                Hearing Officer.
                                                    (3) The amount of the maximum                                                                                 (a) After the Hearing Officer receives
                                                 penalty that may be assessed for each                       (g) If within 30 days of the date shown            a case file from the Chief Counsel, the
                                                 violation;                                               on the Notice of Violation a party fails              Hearing Officer notifies the party in
                                                    (4) The amount of proposed penalty;                   to pay the proposed penalty on the                    writing of:
                                                    (5) A statement that payment of the                   Notice of Violation; and fails to request               (1) The date, time and location of the
                                                 proposed penalty within 30 days will                     a hearing, then NHTSA will enter a                    hearing and whether the hearing will be
                                                 settle the case without admission of                     finding of violation by default in the                conducted telephonically or at the DOT
                                                 liability;                                               case file, and will assess the civil                  Headquarters building in Washington,
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                                                    (6) The place to which, and the                       penalty in the amount set forth on the                D.C.;
                                                 manner in which, payment is to be                        Notice of Violation without processing                  (2) The right to be represented at all
                                                 made;                                                    the violation under the hearing                       stages of the proceeding by counsel as
                                                    (7) A statement that the party may                    procedures set forth in this subpart.                 set forth in § 599.511; and,
                                                 decline the Notice of Violation and that                    (h) NHTSA’s order assessing the civil                (3) The right to a free copy of all
                                                 if the Notice of Violation is declined,                  penalty following a party’s default is                written evidence in the case file as set
                                                 the party has the right to a hearing prior               final agency action.                                  forth in § 599.507.

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                                                   (b) On the request of a party, or at the               costs associated with such appearance.                penalty by the Hearing Officer shall be
                                                 Hearing Officer’s direction, multiple                    The Hearing Officer may, at his or her                set forth in an accompanying final
                                                 proceedings may be consolidated if at                    discretion, accept a stipulation in lieu of           order.
                                                 any time it appears that such                            testimony.                                               (b) If the Hearing Officer assesses civil
                                                 consolidation is necessary or desirable.                    (g) At the close of the party’s                    penalties in excess of $100,000.00, the
                                                                                                          presentation of evidence, the Hearing                 Hearing Officer’s decision contains a
                                                 § 599.511   Counsel.                                     Officer may allow the introduction of                 statement advising the party of the right
                                                    A party has the right to be represented               rebuttal evidence that may be presented               to an administrative appeal to the
                                                 at all stages of the proceeding by                       by the Chief Counsel. The Hearing                     Administrator. The party is advised that
                                                 counsel. A party electing to be                          Officer may allow the party to respond                failure to submit an appeal within the
                                                 represented by counsel must notify the                   to any such evidence submitted.                       prescribed time will bar its
                                                 Hearing Officer of this election in                         (h) The Hearing Officer may take                   consideration and that failure to appeal
                                                 writing, after which point the Hearing                   notice of matters which are subject to a              on the basis of a particular issue will
                                                 Officer will direct all further                          high degree of indisputability and are                constitute a waiver of that issue in its
                                                 communications to that counsel. A                        commonly known in the community or                    appeal before the Administrator.
                                                 party represented by counsel bears all of                are ascertainable from readily available                 (c) The filing of a timely and complete
                                                 its own attorneys’ fees and costs.                       sources of known accuracy. Prior to                   appeal to the Administrator of a Hearing
                                                                                                          taking notice of a matter, the Hearing                Officer’s order assessing a civil penalty
                                                 § 599.512   Hearing location and costs.                  Officer shall give the party an                       shall suspend the operation of the
                                                    (a) Unless the party requests a hearing               opportunity to show why notice should                 Hearing Officer’s penalty.
                                                 at which the party appears before the                    not be taken. In any case in which                       (d) There shall be no administrative
                                                 Hearing Officer in Washington, DC, the                   notice is taken, the Hearing Officer                  appeals of civil penalties of $100,000.00
                                                 hearing shall be held telephonically.                    places a written statement of the matters             or less.
                                                 The hearing is held at the headquarters                  as to which notice was taken in the
                                                 of the U.S. Department of                                record, with the basis for such notice,               § 599.515 Appeals of civil penalties in
                                                 Transportation in Washington, DC.                        including a statement that the party                  excess of $100,000.00.
                                                    (b) The Hearing Officer may transfer                  consented to notice being taken or a                     (a) A party may appeal the Hearing
                                                 a case to another Hearing Officer at a                   summary of the party’s objections.                    Officer’s order assessing civil penalties
                                                 party’s request or at the Hearing                           (i) After the evidence in the case has             over $100,000.00 to the Administrator
                                                 Officer’s direction.                                     been presented, the Chief Counsel and                 within 21 days of the date of the
                                                    (c) A party is responsible for all fees               the party may present argument on the                 issuance of the Hearing Officer’s order.
                                                 and costs (including attorneys’ fees and                 issues in the case. The party may also                   (b) The Administrator will affirm the
                                                 costs, and costs that may be associated                  request an opportunity to submit a                    decision of the Hearing Officer unless
                                                 with travel or accommodations)                           written statement for consideration by                the Administrator finds that the Hearing
                                                 associated with attending a hearing.                     the Hearing Officer and for further                   Officer’s decision was unsupported by
                                                                                                          review. If granted, the Hearing Officer               the record as a whole.
                                                 § 599.513   Hearing procedures.
                                                                                                          shall allow a reasonable time for                        (c) If the Administrator finds that the
                                                   (a) There is no right to discovery in                  submission of the statement and shall                 decision of the Hearing Officer was
                                                 any proceedings conducted pursuant to                    specify the date by which it must be                  unsupported, in whole or in part, then
                                                 this subpart.                                            received. If the statement is not received            the Administrator may:
                                                   (b) The material in the case file                      within the time prescribed, or within                    (1) Assess or modify a civil penalty;
                                                 pertinent to the issues to be determined                 the limits of any extension of time                      (2) Rescind the Notice of Violation; or
                                                 by the Hearing Officer is presented by                   granted by the Hearing Officer, the                      (3) Remand the case back to the
                                                 the Chief Counsel or his or her designee.                Hearing Officer prepares the decision in              Hearing Officer for new or additional
                                                   (c) The Chief Counsel may                              the case.                                             proceedings.
                                                 supplement the case file with                               (j) A verbatim transcript of the hearing              (d) In the absence of a remand, the
                                                 information prior to the hearing. A copy                 will not normally be prepared. A party                decision of the Administrator in an
                                                 of such information will be provided to                  may, solely at its own expense, cause a               appeal is a final agency action.
                                                 the party no later than 3 days before the                verbatim transcript to be made. If a
                                                 hearing.                                                 verbatim transcript is made, the party                § 599.516 Collection of assessed or
                                                   (d) At the close of the Chief Counsel’s                                                                      compromised civil penalties.
                                                                                                          shall submit two copies to the Hearing
                                                 presentation of evidence, the party has                  Officer not later than 15 days of the                   (a) Payment of a civil penalty,
                                                 the right to examine, respond to and                     hearing. The Hearing Officer shall                    whether assessed or compromised, shall
                                                 rebut material in the case file and other                include such transcript in the record.                be made by check, postal money order,
                                                 information presented by the Chief                                                                             or electronic transfer of funds, as
                                                 Counsel.                                                 § 599.514    Assessment of civil penalties.           provided in instructions by the agency.
                                                   (e) In receiving evidence, the Hearing                   (a) Not later than 30 days following                A payment of civil penalties shall not be
                                                 Officer is not bound by strict rules of                  the close of the hearing, the Hearing                 considered a request for a hearing.
                                                 evidence. In evaluating the evidence                     Officer shall issue a written decision on               (b) The party must remit payment of
                                                 presented, the Hearing Officer must give                 the Notice of Violation, based on the                 any assessed civil penalty to NHTSA
                                                 due consideration to the reliability and                 hearing record. The decision shall set                within 30 days after receipt of the
                                                 relevance of each item of evidence.                      forth the basis for the Hearing Officer’s             Hearing Officer’s order assessing civil
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                                                   (f) A party may present the testimony                  assessment of a civil penalty, or                     penalties or, in the case of an appeal to
                                                 of any witness either through a written                  decision not to assess a civil penalty. In            the Administrator, within 30 days after
                                                 statement or a personal appearance. If a                 determining the amount of the civil                   receipt of the Administrator’s decision
                                                 party wishes to present testimony                        penalty, the severity of the violation and            on the appeal. Failure to make timely
                                                 through a personal appearance, the                       the intent and history of the party                   payment may result in the institution of
                                                 party is responsible for obtaining that                  committing the violation shall be taken               appropriate action under the Federal
                                                 personal appearance, including any                       into account. The assessment of a civil               Claims Collection Act, as amended, the

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                                                 regulations issued thereunder, and other                 by default and assessing a civil penalty              subject to the procedures and penalties
                                                 applicable law.                                          in the amount proposed in the Notice of               described in this subpart, but also civil
                                                   (c) The party must remit payment of                    Violation without processing the                      and criminal penalties. Such civil and
                                                 any compromised civil penalty to                         violation under the hearing procedures                criminal penalties may include
                                                 NHTSA on the date and under such                         set forth in this part.                               penalties three times any amount falsely
                                                 terms and conditions as agreed to by the                                                                       claimed to be due from the United
                                                 party and NHTSA. Failure to pay a                        § 599.517    Other sanctions.
                                                                                                                                                                States pursuant to the False Claims Act
                                                 compromised civil penalty to NHTSA                         The procedures and penalties                        (31 U.S.C. 3729), or imprisonment of up
                                                 on the date and under such terms and                     described in this subpart are not the
                                                                                                                                                                to 5 years and fines of up to $250,000
                                                 conditions as agreed to by the party and                 only procedures and penalties that may
                                                                                                                                                                (18 U.S.C. 1001). In addition, NHTSA
                                                 NHTSA may either result in the                           apply to someone who violates the
                                                                                                                                                                may request that the Attorney General
                                                 institution of appropriate action under                  CARS Act or submits a false
                                                 the Federal Claims Collection Act, as                    certification required by this rule.                  seek appropriate injunctive relief to
                                                 amended, the regulations issued                          Anyone who submits false information                  address violations of the CARS Act or
                                                 thereunder, and other applicable law, or                 on these forms or otherwise violates the              this part.
                                                 NHTSA entering a finding of violation                    CARS Act or this part may not only be                 BILLING CODE 4910–59–P
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                                                   Issued on: July 23, 2009.
                                                 Ronald L. Medford,
                                                 Acting Deputy Administrator.
                                                 [FR Doc. E9–17994 Filed 7–24–09; 4:15 pm]
                                                 BILLING CODE 4910–59–C
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