[Federal Register Volume 69, Number 24 (Thursday, February 5, 2004)]
[Notices]
[Pages 5654-5658]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-2462]


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DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

[Docket No. NHTSA 2003-17015]


Nissan North America, Inc.; Petition for Exemption From Two-Fleet 
Rule Affecting Compliance With the Passenger Car Fuel Economy Standard

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

ACTION: Notice of receipt of petition and request for comments.

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SUMMARY: This notice announces the receipt of a petition from Nissan 
North America, Inc. (Nissan) for exemption from the statutory 
requirement that a manufacturer's fleet of domestically-manufactured 
passenger automobiles must comply with the passenger automobile 
corporate average fuel economy (CAFE) standards separately from the 
manufacturer's fleet of non-domestically manufactured passenger 
automobiles. The statute requires the agency to grant this petition 
unless it determines that doing so would result in reduced employment 
in the U.S. related to motor vehicle manufacturing during the period of 
exemption.

DATES: Comments on this petition must be received by the agency by 
March 8, 2004.

ADDRESSES: The petition is available for public inspection in the 
docket whose number appears in the heading at the beginning of this 
notice. You may call the Docket Management System at (202) 366-0271 or 
you may visit the Docket Management System in Room PL-401, 400 Seventh 
Street, SW., Washington,

[[Page 5655]]

DC 20590 (10 a.m. to 5 p.m., Monday through Friday). You may also view 
the petition and any other information that becomes available on the 
Internet. To do this, do the following:
    (1) Go to the Docket Management System (DMS) Web page of the 
Department of Transportation (http://dms.dot.gov).
    (2) On that page, click on ``Simple Search.''
    (3) On the next page (http://dms.dot.gov/searchform.simple.cfm, 
type in the docket number ``xxxxxxx.'' After typing the docket number, 
click on ``Search.''
    (4) On the next page, which contains docket summary information for 
the docket you selected, click on the desired comments. You may 
download the comments and other materials.
    Comments: You may submit comments, making reference to the docket 
number in the heading at the beginning of this notice, by any of the 
following methods:
    <bullet<ls-thn-eq> Web site: http://dms.dot.gov. Follow the 
instructions for submitting comments on the DOT electronic docket site.
    <bullet<ls-thn-eq> Fax: 1-202-493-2251.
    <bullet<ls-thn-eq> Mail: Docket Management Facility; U.S. 
Department of Transportation, 400 Seventh Street, SW., Nassif Building, 
Room PL-401, Washington, DC 20590-001.
    <bullet<ls-thn-eq> Hand Delivery: Room PL-401 on the plaza level of 
the Nassif Building, 400 Seventh Street, SW., Washington, DC, between 9 
a.m. and 5 p.m., Monday through Friday, except Federal holidays.
    <bullet<ls-thn-eq> Federal Rulemaking Portal: Go to http://www.regulations.gov. Follow the online instructions for submitting 
comments.
    Please note that all comments received will be posted, without 
change, to http://dms.dot.gov, including any personal information 
provided.

FOR FURTHER INFORMATION CONTACT: For issues other than legal ones, 
please contact Peter Feather, Office of International Policy, Fuel 
Economy and Consumer Programs (NVS-132), National Highway Traffic 
Safety Administration, 400 Seventh Street, SW., Washington, DC 20590; 
(202) 366-0842).
    For legal issues, contact: Otto Matheke, Office of Chief Counsel, 
National Highway Traffic Safety Administration, 400 Seventh Street, 
SW., Washington, DC 20590; (202) 366-5263).

SUPPLEMENTARY INFORMATION:

Statutory Background

    In 1975, Congress enacted the Energy Policy and Conservation Act 
(EPCA), mandating CAFE standards for passenger automobiles and for non-
passenger automobiles. Public Law 94-163. See 49 U.S.C. 32901 et seq. 
In general, fuel economy ratings for domestically manufactured 
passenger automobiles may not be averaged together with those for non-
domestically manufactured automobiles for purposes of determining 
compliance with CAFE standards. See 49 U.S.C. 32904(b)(1). This 
requirement is variously known as the ``two-fleet rule'' or ``fleet-
split'' provision.
    As originally enacted, the two-fleet rule provided that a passenger 
automobile is considered to be ``domestically manufactured'' if at 
least 75 percent of the cost to the manufacturer of such automobile is 
attributable to value added in the U.S. or Canada. See 49 U.S.C. 
32904(b)(2). All other vehicles are treated as non-domestically 
manufactured, including any whose final assembly takes place in the 
U.S., but which use imported components whose value is more than 25 
percent of the automobile's total value.
    The two-fleet rule was enacted to keep the CAFE program from 
causing a loss of U.S. jobs by inducing U.S. based manufacturers to 
import fuel efficient passenger automobiles from abroad. However, the 
two-fleet rule can have the effect of discouraging foreign 
manufacturers from producing automobiles in the U.S. or from increasing 
the domestic content of their automobiles. For example, a foreign 
manufacturer might want to produce its most fuel-efficient vehicles in 
the U.S., rather than producing them abroad and exporting them to the 
U.S. As long as the domestic content of its U.S. produced vehicles 
remained below 75 percent, that manufacturer could continue to average 
together the fuel economy values of all its vehicles to be sold in the 
U.S. to comply with CAFE standards. However, if it exceeded the 75 
percent domestic content level in its U.S. produced fleet (thereby 
increasing employment in the U.S.), it would become subject to the 
requirement that its two fleets must comply separately with CAFE 
standards. While its combined fleet of foreign and U.S.-produced 
vehicles might readily meet those standards, its fleet of foreign-
produced vehicles imported into the U.S. (with the fuel efficient U.S.-
produced vehicles excluded) might not comply. In such a situation, the 
manufacturer might well decide to continue to rely on more imported 
components. In the case of a foreign manufacturer that had not yet 
begun U.S. production, the manufacturer might choose not to begin U.S. 
production in the first instance.
    To reduce this disincentive, Congress enacted the Automotive Fuel 
Efficiency Act of 1980, which provided for exemptions from the two-
fleet rule for companies that began U.S. production in the 1975-85 
period. Public Law 96-425. The exemption provision requires the agency 
to grant a manufacturer's petition unless the agency determines that 
granting the petition would result in reduced employment in the United 
States related to motor vehicle manufacturing. See 49 U.S.C. 
32904(b)(6)(B).\1\
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    \1\ ``The Secretary of Transportation shall grant the exemption 
unless the Secretary finds that the exemption would result in 
reduced employment in the United States related to motor vehicle 
manufacturing during the period of the exemption.''
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    Under 49 U.S.C. 32904(b)(6)(C), the agency must grant or deny a 
petition by the 90th day after its receipt, but may extend the period 
to as much as the 150th day after receipt. If the agency extends the 
period, it must publish notice of, and reasons for, the extension in 
the Federal Register. The statute provides that if the agency does not 
make a decision within the time provided, the petition is deemed to 
have been granted.
    Exemptions from the two-fleet rule may be granted for five years or 
longer should the manufacturer request and the agency so provide.
    In November 1981, Volkswagen became the first and, to this date, 
only manufacturer exempted under this provision. See 46 FR 54453; 
November 2, 1981. The agency stated that, without an exemption, VW 
could continue to produce Rabbits in the U.S. with domestic content 
just below the 75 percent threshold and thus could continue to combine 
those passenger automobiles with its passenger automobiles produced 
elsewhere. It said that, with an exemption, VW might well increase the 
domestic content of its U.S. produced Rabbits, and thus increase U.S. 
employment. On the other hand, the agency noted that the exemption 
would eliminate the possibility of a future penalty for VW's non-
domestically manufactured fleet of passenger and of an accompanying 
very small sales loss. On balance, the agency said that the U.S. 
employments benefits associated with increasing the domestic content of 
the U.S. produced Rabbits would greatly outweigh any U.S. employment 
loss resulting from a slightly lower retail price (due to the avoidance 
of civil penalties) for VW's non-domestically manufactured fleet.
    In 1994, in adopting legislation implementing the North American 
Free

[[Page 5656]]

Trade Agreement, Congress amended the two-fleet rule to treat value 
added in Mexico as domestic content. As amended, the two-fleet rule 
provided that a passenger automobile is considered to be ``domestically 
manufactured'' if at least 75 percent of the cost to the manufacturer 
of such automobile is attributable to value added in the U.S., Canada 
or Mexico. See 49 U.S.C. 32904(b)(3)(A). It did not mandate this change 
in the two-fleet rule be immediately effective, but provided that it 
would become effective not later than the 2005 model year.

Nissan's Petition

    Nissan submitted a petition for exemption from the two-fleet rule 
on January 23, 2004. It requested exemption for the 2006-2010 model 
year period or until circumstances remove the need for an exemption.
    Nissan noted that, beginning in the 2005 model year, its Sentra, 
which is primarily manufactured in Mexico, would become considered to 
be domestically manufactured as a result of the amendments made by the 
NAFTA implementation legislation. The value added in Mexico would 
become domestic content in that year, causing the Sentra to switch from 
its non-domestic fleet to its domestic fleet. This would cause the non-
domestic fleet to fail to meet the CAFE standard for passenger 
automobiles, and raise the CAFE of Nissan's domestic fleet well above 
the standard.
    Nissan said:

    * * * [I]t may be forced to decrease domestic content and 
outsource the production of one or all of its domestically 
manufactured vehicles--i.e., the Sentra, Altima or Maxima--in order 
to offset this imbalance. Decreasing the domestic content level of 
the Sentra could result in a decrease in the use of U.S.-made 
components, such as radiators, air conditioners, suspensions, engine 
parts and some engines, currently used in the Sentra. Likewise, 
decreasing the domestic content level of the Altima or Maxima, which 
currently make up Nissan's domestic fleet, would mean decreasing 
production at NNA's [Nissan's] Smyrna, Tennessee plan and reducing 
domestic engine production at the Decherd, Tennessee plant. Such 
reductions in domestic production of the Altima or Maxima could 
likely lead to reduction in employment at Nissan's Tennessee plants. 
Accordingly, an exemption from the [two-fleet] provision is 
necessary for Nissan to maintain existing levels of Sentra 
production in Mexico, and Altima and Maxima production at Smyrna, 
Tennessee, as well as the corresponding levels of engine and 
component production in Decherd, Tennessee. (at 4)

    Nissan said further:

    [A]n exemption from separate calculations under the CAFE program 
will allow Nissan to continue its current pace of expansion in U.S. 
production in model years 2006-2010 and to increase the level of 
local content beyond 75% in additional vehicles, without becoming 
subject to CAFE penalties. Failure to grant the petition will force 
Nissan to reconsider the current ramp up in U.S. investment as 
resources are diverted from expansion in the United States to 
addressing the CAFE issue. (at 8)

Request for Public Comments

    The agency invites any individuals or organizations that have 
information bearing on the effect that granting the petition might have 
on employment in the U.S. related to motor vehicle manufacturing to 
submit that information during the public comment period specified at 
the beginning of this notice.
    One approach to analyzing such a petition would be to analyze the 
likely effect of granting the petition on total employment in the U.S. 
related to motor vehicle manufacturing during the period for which the 
exemption is requested. We could measure this effect by determining the 
difference between projected total motor vehicle-related employment in 
the U.S. (i.e., all manufacturers in the U.S.) if the petition is 
granted, and the projected total level of U.S. motor vehicle-related 
employment if the petition is denied. Further, NHTSA might look across 
the entire spectrum of employment in the U.S. related to motor vehicle 
manufacturing, regardless of whether the employment is associated with 
``foreign'' or ``domestic'' manufacturers, and assess the net effect of 
granting or denying a petition on employment in the U.S. related to 
motor vehicle manufacturing during the period of exemption.
    To aid in the analysis of Nissan's petition, the agency seeks 
specific information from manufacturers of models that would compete 
with Nissan's vehicles. Nissan's petition states that if the agency 
declines to grant Nissan the requested exemption, Nissan is likely to 
re-source the content of some of its vehicles away from the U.S. (at 
14) Nissan's petition does not provide any estimates of costs (or 
savings) that might be associated with any such re-sourcing. Nissan's 
petition also does not provide details regarding the potential nature 
and costs (or savings) of re-sourcing content away from non-NAFTA 
countries (in particular, Japan) and toward NAFTA countries (in 
particular, the United States).
    We request that manufacturer comments on Nissan's petition provide 
information regarding costs or savings likely to result from different 
degrees of re-sourcing between different countries, as indicated in 
Table 1:

                                     Table 1.--Average RPE Increase (Decrease) for Re-Sourcing, in 2003 U.S. Dollars
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                                Re-Sourcing                                                         Amount (share of value added)
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                    From                                   To                    1%         2%         5%        10%        20%        50%        100%
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Canada.....................................  Japan.........................  .........  .........  .........  .........  .........  .........  .........
Canada.....................................  Mexico........................  .........  .........  .........  .........  .........  .........  .........
Canada.....................................  U.S...........................  .........  .........  .........  .........  .........  .........  .........
Mexico.....................................  Canada........................  .........  .........  .........  .........  .........  .........  .........
Mexico.....................................  Japan.........................  .........  .........  .........  .........  .........  .........  .........
Mexico.....................................  U.S...........................  .........  .........  .........  .........  .........  .........  .........
U.S........................................  Canada........................  .........  .........  .........  .........  .........  .........  .........
U.S........................................  Mexico........................  .........  .........  .........  .........  .........  .........  .........
U.S........................................  Japan.........................  .........  .........  .........  .........  .........  .........  .........
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    Nissan's petition also indicates (at 18) that, even if the agency 
does not grant the requested exemption and the sale of Nissan's 
imported vehicles therefore declines, ``it is unlikely that domestic 
manufacturers would capture these lost sales'' because ``Nissan 
purchasers typically prefer import vehicles.'' The agency's 1981 
regulatory evaluation for VW's petition similarly concluded, inter 
alia, that ``there appears to be such a phenomenon as the `import 
buyer'.'' (at 10)
    We request that commenters address the extent to which such 
statements

[[Page 5657]]

might be relevant to the post-2005 marketplace. In particular, we ask 
that commenters provide the information indicated in Table 2 regarding 
any vehicle models they expect to compete, even partially, with any 
Nissan passenger automobile:

         Table 2.--Vehicles Competing with a Given Nissan Model
------------------------------------------------------------------------
                                          Vehicle competing with [Nissan
                                                      model]
------------------------------------------------------------------------
Name Plate.............................  ...............................
MSRP (2003$)...........................  ...............................
Curb Weight............................  ...............................
Displacement (liter)...................  ...............................
Power (hp).............................  ...............................
Value Added (%)........................  ...............................
    Canada.............................  ...............................
    Mexico.............................  ...............................
    U.S................................  ...............................
    Other..............................  ...............................
Assembly Location......................  ...............................
    Engine.............................  ...............................
    Transmission.......................  ...............................
    Vehicle (Final Assembly)...........  ...............................
Production Jobs/Vehicle................  ...............................
    Canada.............................  ...............................
    Mexico.............................  ...............................
    U.S................................  ...............................
    Other..............................  ...............................
Projected U.S. Sales...................  ...............................
    MY 2005............................  ...............................
    MY 2006............................  ...............................
    MY 2007............................  ...............................
    MY 2008............................  ...............................
    MY 2009............................  ...............................
    MY 2010............................  ...............................
Change in Sales if Price of Competing    ...............................
 Nissan Increases by.
    $50................................  ...............................
    $100...............................  ...............................
    $200...............................  ...............................
    $500...............................  ...............................
    $1,000.............................  ...............................
------------------------------------------------------------------------

    For each model that a commenter believes to be a competitor with a 
Nissan model, the commenter should explain the basis for that belief.

Submission of Comments and Requests for Confidentiality

    Interested persons are invited to comment on this petition. It is 
requested, but not required, that two copies be submitted to the Office 
of Docket Management, Room PL-401, Nassif Building, 400 Seventh Street, 
SW., Washington, DC 20590.
    We request that all comments be limited to 15 pages in length. 
Necessary attachments may be appended to those submissions without 
regard to the 15-page limit. This limitation is intended to encourage 
commenters to detail their primary arguments in a concise fashion.
    If you wish to submit any information under a claim of 
confidentiality, you should submit three copies of your complete 
submission, including the information you claim to be confidential 
business information, to the Chief Counsel, NHTSA, at the address given 
above under FOR FURTHER INFORMATION CONTACT. In addition, you should 
submit two copies, from which you have deleted the claimed confidential 
business information, to Docket Management at the address given above 
under ADDRESSES. When you send a comment containing information claimed 
to be confidential business information, you should include a cover 
letter setting forth the information specified in our confidential 
business information regulation (49 CFR part 512).
    All comments received before the close of business on the comment 
closing date will be considered and will be available for examination 
in the docket at the above address before and after that date. To the 
extent possible, comments filed after the closing date will also be 
considered. However, action on the petition may proceed at any time 
after that date.

Timing of Decision

    As noted above, the agency must grant or deny a petition by the 
90th day after its receipt, but may extend the period to as much as the 
150th day after receipt. For the Nissan petition, the 90th day is April 
22, 2004, and the 150th day is June 21, 2004.

Analyses and Impacts

    NHTSA notes that it prepared an environmental assessment of its 
granting of the VW petition in 1981 and concluded that that action did 
not constitute a ``major Federal action significantly affecting the 
environment'' requiring an environmental impact statement. Since then, 
several U.S. Circuit Courts of Appeals held that NEPA compliance is 
unnecessary where the agency action at issue involves little or no 
discretion on the part of the agency.\2\ We believe that this is such a 
situation. NHTSA has no discretion to consider the environmental 
consequences of granting the petition and essentially no discretion 
whether to grant Nissan's petition. Under the CAFE statute, the only 
relevant issue is the impact on U.S. employment related to automobile 
manufacturing. Unless the

[[Page 5658]]

agency is able to find that granting the petition would reduce U.S. 
employment related to automobile manufacturing, the agency has no 
discretion--it must grant the petition. If the agency takes no action 
within the time prescribed by the statute, the statute provides that 
the petition will be automatically granted. Accordingly, the granting 
of the petition would not be a ``major Federal action'' within the 
meaning of NEPA.
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    \2\ Citizens Against Rails-to-Trails v. Surface Transp. Bd. 267 
F.3d 1144, 1153 (D.C. Cir. 2001). Sac & Fox Nation of Missouri v. 
Norton, 240 F.3d 1250, 1262 (10th Cir. 2001); Sierra Club v. 
Babbitt, 65 F.3d 1502, 1513 (9th Cir.1995).
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    Since this proceeding will not result in the issuance of a ``rule'' 
within the meaning of the Administrative Procedure Act or Executive 
Order 12866, neither the requirements of the Executive Order nor those 
of the Department's regulatory procedures apply. Therefore, no 
regulatory analysis or evaluation was prepared for the proposal. For 
the same reasons, the requirements of the Regulatory Flexibility Act do 
not apply.
    As appropriate, the agency will conduct further analyses of these 
impacts, considering information submitted during the comment period, 
in conjunction with the final decision on this petition.

(Authority: 49 U.S.C. 32904, delegations of authority at 49 CFR 1.50 
and 501.8.)

    Issued on February 2, 2004.
Stephen R. Kratzke,
Associate Administrator for Rulemaking.
[FR Doc. 04-2462 Filed 2-2-04; 3:27 pm]
BILLING CODE 4910-59-P