UNITED STATES ENVIRONMENTAL PROTECTION AGENCY 

NATIONAL VEHICLE AND FUEL EMISSIONS LABORATORY 

2565 PLYMOUTH ROAD 

ANN ARBOR, MI 48105-2498 

OFFICE OF 

AIR AND RADIATION 

December 1, 2011 

MEMORANDUM 

Subject: 

From: 

To: 

Small Business Impact Memo, Proposed Tier 3 Motor Vehicle Emission 

Standards and Related Provisions 

Phil Carlson, Engineer ~ G-e.. -.-.~ _ Assessment and Standards Division 

Docket EPA- HQ-OAR-2011- 0135 

The Office of Transportation and Air Quality (OT AQ) is currently preparing a 

notice of proposed rulemaking (NPRM) that would reduce air pollution from passenger 

cars and trucks. This program includes new exhaust and evaporative emission standards 

for such vehicles and new sulfur limits for in-use gasoline. The proposed standards, 

referred to as the "Tier 3" standards, represent a "systems approach" to reducing vehiclerelated emissions by addressing both the vehicle and its fuel as a system. We first 

applied such an approach with our Tier 2 vehicle and gasoline sulfur standards (finalized 

in February 2000 ), and the Tier 3 proposal continues to apply those principles in the 

context of more recent vehicle technologies, fuels, and emissions data. 

The Regulatory Flexibility Act (RF A), as. amended by the Small Business 

Regulatory Enforcement Fairness Act of 1996 (SBREF A), generally requires an agency 

to prepare a regulatory flexibility analysis of any rule subject to notice and comment 

rulemaking requirements under the Administrative Procedures Act or any other statute 

unless the agency certifies that the rule will not have a significant economic impact on a 

substantial number of small entities. This analysis is intended to demonstrate the impacts 

of the proposed Tier 3 vehicle regulations on small entities. While we are also proposing 

in-use gasoline changes as part of the Tier 3 proposal, the impacts of the proposed fuel 

requirements on small businesses, such as refiners, are detailed separately. The reader is 

directed to Chapter 5 of the Draft RIA for the proposed rulemaking for more information 

on the small business impacts of the proposed Tier 3 fuel regulations. 

1 See 65 FR 6698 (dated February 10, 2000). 
For purposes of assessing the impacts of the proposed regulations on small 

entities, a small entity is defmed as: (1) a small business as defined by the Small Business 

Administration's (SBA' s) regulations at 13 CFR 121.201; (2) a small governmental 

jurisdiction that is a goverrunent of a city, county, town, school district or special district 

with a population of less than 50,000; and (3) a small organization that is any not-forprofit enterprise which is independently owned and operated and is not dominant in its 

field. 

Small governmental jurisdictions and small organizations as described above will 

not be directly regulated by the proposed Tier 3 rule. The main industry sector subject to 

the proposed Tier 3 vehicle regulations will be car and truck manufacturers. Another 

industry sector consisting of companies that import specialized cars and trucks into the 

United States (U.S.), referred to as Independent Commercial Importers (ICis), will also 

be subject to the proposed regulations. Finally, companies that convert vehicles, which 

are typically gasoline-fueled, to run on an alternative fuel will be subject to the proposed 

regulations. Therefore, the discussion below considers the impact on small business car 

and truck manufacturers, small business ICis, and small business alternative fuel 

converters. 

The following sections describe the three vehicle-related industry sectors to 

which the proposed rule would apply, the definition of small business for each sector, the 

proposed requirements that would apply to each sector, the number of small businesses to 

which the proposed rule would apply, and the estimated costs and impacts associated 

with the proposed Tier 3 vehicle requirements. It is important to note that calculations of 

burden for the impacts of the proposed rule are incremental to a baseline that includes 

current market factors and presumes full compliance with all existing applicable statutory 

or regulatory requirements, including both federal and state requirements. 

I. Brief Description of the Industry 

Based on Environmental Protection Agency (EPA) records, we have identified a 

total of27 car and truck manufacturers which have certified vehicles for sale in the U.S. 

in model years 201 0 or 201 1. Over the last decade, the total sales of cars and trucks for 

the U.S. have ranged as high as 17 million cars and trucks per year. However, because of 

the recent economic downturn, total sales have dropped dramatically, and current 

estimates show that 11.8 million cars and trucks were sold in 2010, the most recent year 

for which sales information is available. The car and truck market is dominated by large 

businesses. Based on U.S. sales levels for cars and trucks, the top 1 0 car and truck 

manufacturers have consistently comprised 90 percent or more of the total market, while 

the remaining companies make up the remaining roughly 10 percent. 

In addition, we have identified 8 ICis that are currently importing cars and trucks 

into the U.S. ICls work with customers to bring in cars from overseas either because the 

owners are moving to the U.S., or because the vehicle is not otherwise available in the 

U.S. (e.g., high-performance sports cars and right-hand drive vehicles). ICis import very 

2 
small numbers of vehicles, with EPA estimating total imports of less than 200 vehicles 

per year for all of the I Cis in recent years. 

Finally, we have identified 12 alternative fuel converters that are currently 

certifying vehicles with EPA. Most of these companies convert gasoline-fueled vehicles 

to run on compressed natural gas. Sales for these companies are also relatively small, 

with EPA estimating total sales of less than 5,000 vehicles per year from all of the 

alternative fuel converters. 

The number of entities participating in the small business, ICI, and alternative fuel 

converter markets varies from year to year. The sales of these entities tend to vary with 

broader economic conditions. 

II. Definition of Small Business 

For car and truck manufacturers, SBA defmes a small business as one with fewer 

than I ,000 employees. For I Cis, SBA defines a small business as one with fewer than 

100 employees or less than $7 million in annual revenues, depending on the primary 

industry classification of the ICI. For alternative fuel converters, SBA defines a small 

business as one with fewer than 1,000 or 750 employees, or less than $7 million in annual 

revenues, depending on the primary industry classification of the alternative fuel 

converter. (Both ICis and alternative fuel converters potentially fall under several 

different types of primary industry classifications. The criteria used by SBA to establish 

whether an entity is a small business depends upon the primary industry classification of 

the entity.) Furthermore, SBA defines a small business as a concern that is organized for 

profit, with a place of business in the U.S., and which operates primarily within the U.S. 

or makes a significant contribution to the U.S. economy through payment of taxes or use 

of American products, materials, or labor. We have used these criteria to determine the 

number of small businesses affected by the proposed Tier 3 standards for the analysis 

presented in this memorandum. 

III. Current and Anticipated Regulations 

(A) Current Requirements 

As noted earlier, EPA published the Tier 2 requirements for light-duty vehicles 

and trucks in February 2000. The Tier 2 exhaust standards were phased-in over a number 

of years beginning in model year (MY) 2004 and ending in MY 2009. EPA published 

the current evaporative emission standards for light-duty vehicles and trucks in February 

2007. These evaporative emission standards were phased-in between MY 2009 and MY 

2010? Current Federal onboard diagnostic (OBD) requirements for LDVs and LDTs 

were in place for the 1999 MY and for HDEs below 14,000 lbs GVWR in 2007.3 In 

2 See 72 FR 8428 (dated February 26, 2007). 

3 See 63 FR 70694 (dated December 22, 1998) and see 65 FR 59961 (dated Oct 6, 

2000,66 FR 5160 (dated Jan 18, 2001), and 70 FR 75410 (dated Dec 20, 2005). 

3 
response to the current exhaust and evaporative emission standards, vehicle 

manufacturers have developed a wide range of technologies capable of reducing key 

exhaust emissions, especially VOC, NOx, and PM as well as evaporative emissions. In 

addition, the California Air Resources Board's LEV II program has been instrumental in 

additional technology improvements by requiring year after year reductions in the fleet 

average hydrocarbon levels, as well as requiring the introduction of advanced exhaust 

and evaporative emission controls in partial zero emission vehicles (PZEVs). This 

progress in vehicle technology has made it possible for manufacturers to achieve 

emission reductions beyond the requirements of the Tier 2 program if in-use gasoline 

sulfur levels are reduced below their current levels. 

ICis are subject to special provisions under EPA regulations (see 40 CFR Part 85, 

Subpart P). In general, ICis that import less than 50 vehicles per year into the U.S. must 

demonstrate that such vehicles comply with the EPA emission standards that were in 

effect for the build date of the vehicle being imported. For example, ifthe vehicle being 

imported was built in 2007 and is imported into the U.S. in 2015, the applicable standards 

are EPA's MY 2007 standards. To meet these standards, ICis upgrade the technology on 

the vehicle and then perform emissions testing to demonstrate compliance with the 

appropriate standards. Under current EPA provisions, I Cis that import less than 300 

vehicles per year that have an EPA-certified equivalent version of the vehicle being 

imported, are allowed to have reduced testing requirements to demonstrate compliance 

with the applicable standards. 

Alternative fuel converters are also subject to special provisions under EPA 

regulations (see 40 CFR Part 85, Subpart F). In general, alternative fuel converters are 

required to meet the same emission standards that apply to vehicle manufacturers. By 

complying with the alternative fuel conversion provisions, alternative fuel converters are 

exempted from the tampering prohibition in Clean Air Act section 203(a) that would 

otherwise apply. EPA recently adopted new requirements for alternative fuel conversions 

in an April 2011 final rule, "Clean Alternative Fuel Vehicle and Engine Conversions." 4 

The April2011 rule streamlined the process by which manufacturers of clean alternative 

fuel conversion systems may demonstrate compliance with the emission requirements. 

The rulemaking reduced some economic and procedural impediments to clean alternative 

fuel conversions while maintaining environmental safeguards to ensure that acceptable 

emission levels from converted vehicles are sustained. 

(B) Anticipated Require.ments 

For the Tier 3 program, we are proposing new standards for exhaust emissions of 

non-methane organic gases (NMOG), NOx, and PM, as well as evaporative emissions 

standards. (Concurrent with the new standards, EPA is proposing more stringent sulfur 

requirements for in-use gasoline.) The proposed emission standards would phase in over 

a number of model years beginning with MY 2017. The proposed Tier 3 standards are 

very similar in structure to those in the existing Tier 2 program. As with the Tier 2 

4 See 76 FR 19830 (dated April 8, 2011 ). 

4 
program, the proposed standards would apply to all light-duty vehicles (i.e., LDVs, or 

passenger cars), light-duty trucks below 8,500 pounds Gross Vehicle Weight Rating 

(GVWR) (i.e., LDTls, LDT2s, LDT3s, and LDT4s), and Medium-Duty Passenger 

Vehicles between 8,500 and 10,000 pounds GVWR (i.e., MDPVs). We are also 

proposing separate, but closely related, standards for heavy-duty vehicles up to 14,000 

pounds GVWR and evaporative emission standards for all heavy-duty gasoline vehicles. 

Vehicles imported by ICis and vehicles converted to run on an alternative fuel would be 

subject to the proposed Tier 3 standards as well. 

We are proposing a number offlexibilities for small businesses in the Tier 3 rule 

that are described below. These flexibilities would be available to any manufacturer that 

meets the SBA small business definition or has sales less than 5,000 vehicles per year. 

While only a few car and truck manufacturers will qualify as a small business, we expect 

that all of the existing I Cis would be eligible for the proposed flexibilities. In addition, 

we expect that each of the alternative fuel converters currently certifying with EPA 

would be eligible for the proposed flexibilities either because they are a small business 

under the SBA definition, or they sell less than 5,000 vehicles per year. 

First, EPA is proposing that small businesses be given additional lead time to 

comply with the potential Tier 3 exhaust and evaporative emission standards and 

upgraded OBD requirements by allowing small businesses to comply with the standards 

with 1 00 percent of their vehicles starting in model year 2022 instead of meeting model 

year phase-in requirements. Second, EPA is proposing that small businesses be allowed 

the option to use EPA-developed assigned deterioration factors in demonstrating 

compliance with the Tier 3 exhaust and evaporative emission standards in lieu of 

developing their own values. Third, EPA is proposing that small businesses be allowed 

to have reduced burden under the in-use testing program for Tier 3 vehicles. Fourth, 

EPA is proposing to allow a waiver for PM testing in the Tier 3 timeframe under which 

small businesses would not be required to measure PM emissions when they certify to the 

Tier 3 emission standards. 

Finally, EPA is proposing two additional flexibilities specific to alternative fuel 

converters in the Tier 3 proposal. EPA is proposing that small business alternative fuel 

converters have the option to substitute the Federal Test Procedure (FTP) emissions 

levels for the SC03 emissions results for purposes of compliance when calculating the 

Supplemental FTP (SFTP) emissions. (The SFTP would be a new requirement for 

alternative fueled vehicles in Tier 3.) In addition, EPA is proposing that small business 

alternative fuel converters may continue to comply with EPA's OBD requirements (see 

40 CFR 86.1806-05) when the Tier 3 standards become effective using the procedures 

identified in 40 CFR Part 85, Subpart F. (Other manufacturers will have new OBD 

requirements to comply with under the Tier 3 proposal.) EPA would still accept data 

generated for the California OBD program as part of this provision. 

IV. Number of Small Businesses to Which the Rule Applies 

Of the 27 car and truck manufacturers identified by EPA, four companies meet 

5 
the SBA definition of a small business. Two of the small businesses identified 

manufacture all-electric vehicles, one business manufactures a vehicle designed from the 

ground up for wheelchair accessibility (offered in both gasoline-fueled and natural gasfueled versions), and one business manufactures a gasoline-electric hybrid. 

Of the eight I Cis identified by EPA, all eight companies meet the SBA definition 

of a small business. Of the 12 alternative fuel converters identified by EPA, nine of the 

companies meet the SBA definition of a small business. 

V. Projected Business Impacts 

Manufacturers may be expected to incur increased costs in two areas as a result of 

the proposed Tier 3 standards. First, there may be increased hardware costs as 

manufacturers redesign their vehicles to comply with the proposed exhaust and 

evaporative emission standards. Second, there may be increased testing costs to 

demonstrate compliance with the proposed standards. The exact mix of hardware and 

testing costs will be different for car and truck manufacturers, I Cis, and alternative fuel 

converters. 

The following section summarizes the costs impacts for the small businesses 

affected by the proposed Tier 3 exhaust and evaporative emission standards and upgraded 

OBD requirements. The inputs used in this small business analysis for vehicles are based 

on the cost analysis described in Chapter 2 of the Draft RIA for the Tier 3 proposal, as 

well as EPA's April2011 fmal rule for "Clean Alternative Fuel Vehicle and Engine 

Conversions." The cost estimates take into consideration the small business flexibilities, 

as noted earlier, that are included in the Tier 3 proposal. To gauge the impact of the 

proposed standards on small businesses, EPA employed a cost-to-sales ratio test to 

estimate the number of small businesses that would be impacted by less than one percent, 

between one and three percent, and above three percent. The following section describes 

the cost impact analysis for the three sectors affected by the Tier 3 proposal - car and 

truck manufacturers, ICis, and alternative fuel converters. 

(A) Estimated Cost Impacts on Car and Truck Manufacturers 

As noted earlier, EPA identified four small businesses that manufacture cars and 

trucks. Two of the small businesses, Azure Dynamics and Wheego Electric Cars, 

manufacture all-electric vehicles. Because all-electric vehicles do not have exhaust or 

evaporative emissions, the cost impact of the Tier 3 proposal on these two manufacturers 

is zero. 

Of the two remaining small businesses, The Vehicle Production Group (VPG) 

manufactures a vehicle designed from the ground up for wheelchair accessibility in both 

a gasoline-powered and natural gas-powered version, and Fisker Automotive 

manufactures a hybrid gasoline-electric vehicle. Both of these manufacturers purchase 

engines from larger manufacturers and then use the engines in their vehicles. Because 

the manufacturers purchase their engines from larger manufacturers, we expect those 

6 
engines will have already been redesigned to comply with the Tier 3 standards by the 

larger manufacturers. Therefore, the increased hardware cost would be the same as that 

estimated by EPA for a typical manufacturer. EPA has estimated the hardware cost of 

the Tier 3 standards for manufacturers, based on various vehicle/technology 

classifications, in Chapter 2 of the Draft RIA. The engine used by VPG in the wheelchair 

accessible vehicle is an eight cylinder engine used in light-duty trucks, and is estimated to 

cost an additional $264 once the Tier 3 standards are fully phased in. The engine used by 

Fisker Automotive in the gasoline-electric vehicle is a four-cylinder engine used in lightduty vehicles, and is estimated to cost an additional $95 once the Tier 3 standards are 

fully phased in. 

Both of these manufacturers use third-parties to perform emissions testing for 

them. Therefore, even though the engines purchased from larger manufacturers are 

expected to be equipped with Tier 3 technologies, both of these manufacturers will need 

to have emissions testing performed in order to certify their vehicles. Using information 

developed for the recent alternative fuel converter rulemaking, EPA estimates that the 

cost of having a third-party perform certification testing is approximately $60,000 per test 

group. Because the wheelchair accessible vehicle is offered in both gasoline-powered 

and natural gas-powered versions, there would be two test groups for VPG, while there 

would be one test group for Fisker Automotive. The testing costs are expected to be 

amortized by each of the manufacturers over a several year period, with a five-year 

period being typical. Based on estimated U.S. sales of 12,000 per year for VPG's 

wheelchair accessible vehicle5 and 6,000 per year for Fisker Automotive's gasolineelectric vehicle, 6 the estimated cost of testing is calculated to be $2 per vehicle for both 

manufacturers. 

To evaluate the impact of the increased cost on these two small businesses, EPA 

compared the estimated incremental cost for complying with the Tier 3 standards to the 

price of the manufacturers' vehicles. The following table shows that the estimated 

incremental cost due to the Tier 3 standards is estimated to be less than one percent of the 

vehicle price for both of these small businesses. (For completeness sake, the estimated 

impact on the two small businesses that manufacture all-electric vehicles is also 

summarized in the table.) 

c OS tl mpac t o fT" ter 3 St an d ar d son S ma II B us mess . c aran dT rue kM anu f: ac t urers 

Vehicle Increased Cost Vehicle Tier 3 Costs 

Manufacturer Technology Testing Total Price Compared to 

Vehicle Price 

VPG - wheelchair $264 $2 $266 $42,000' 0.6% 

accessible vehicle 

5 Estimate for Vehicle Production Group as noted in "First of AM General's 

Wheelchair Accessible Vehicles Delivered," SouthBendTribune.com, Qctober 20, 2011. 

6 Estimate for Fisker Automotive as noted in "The Coming EV Glut," 

Businessweek, October 13, 2011. 

7 Based on www.vpgautos.com 

7 
Fisker - $95 $2 $97 $96,85011 0.1% 

gasoline/electric 

vehicle 

Azure Dynamics $0 $0 $0 -- 0% 

- electric vehicle 

Wheego Electric $0 $0 $0 -- 0% 

Cars- electric 

vehicle 

(B) Estimated Cost Impacts on !Cis 

As noted earlier, EPA identified eight small business ICis. Under the proposed 

Tier 3 program, the cost of upgrading a vehicle to meet the standards will increase as 

vehicles built in 2022 and later are imported into the U.S. and need to demonstrate 

compliance with Tier 3 standards. The types of vehicles currently imported by I Cis into 

the U.S. cover a wide range and include right-hand steering wheel vehicles used for mail 

delivery as well as sports cars. Based on the average of the cost estimates for fourcylinder, six-cylinder, and eight-cylinder light-duty vehicles as presented in Chapter 2 of 

the Draft RIA, the increased cost due to the Tier 3 standards is estimated to be $170 per 

vehicle once the Tier 3 standards are fully phased in. With regard to testing, the Tier 3 

proposal includes no new additional requirements for ICls, so the incremental testing cost 

is expected to be zero for ICis. (While there are new PM testing requirements with the 

Tier3 standards, as noted earlier we are proposing a PM testing waiver for small 

businesses.) Therefore, the total incremental cost of the Tier 3 standards is estimated to 

be $170 per vehicle for ICis. ICI's will still have to meet OBD requirements. 

To evaluate the impact of the increased cost on small business ICis, EPA 

compared the estimated cost for complying with the Tier 3 standards to the cost that I Cis 

charge for people wishing to import a vehicle into the U.S. (i.e., the cost for upgrading 

the vehicle to comply with EPA standards and performing the testing needed to make the 

compliance demonstration for EPA). While the actual cost for importation will vary by 

vehicle, based on information available from ICis on their websites and discussions with 

ICis, the estimated average cost for importing a vehicle is around $6,000. We increased 

this estimate by the $170 incremental cost due to the Tier 3 standards to result in a cost of 

importing a vehicle through an ICI to $6,170. Therefore, the impact of the Tier 3 

standards on I Cis is estimated to be 2.8% (i.e., $170/$6, 170). 

(C) Estimated Cost Impacts on Alternative Fuel Converters 

For alternative fuel converters, EPA identified nine small businesses. Under the 

proposed Tier 3 program, the cost of converting a vehicle to meet the standards will 

increase as vehicles need to demonstrate compliance with Tier 3 standards. Most of the 

vehicles currently converted by alternative fuel converters are fleet vehicles, so the fleet 

8 Based on www.fiskerautomotive.com 

8 
owner will already have paid any incremental cost for the Tier 3 hardware. The 

alternative fuel converter will add additional hardware to the vehicle to convert it to run 

on an alternative fuel, but we would not expect the Tier 3 standards to affect this process. 

Therefore, the increased hardware cost is projected to be zero for alternative fuel 

converters. 

Alternative fuel converters will have to test their vehicles to demonstrate 

compliance with the Tier 3 standards. This currently involves testing over the Federal 

Test Procedure (FTP) and a Fuel Economy Test. However, because EPA is proposing 

new Supplemental FTP (SFTP) requirements for alternative-fueled vehicles as part of the 

Tier 3 proposal, the testing costs will increase. SFTP testing normally requires 

manufacturers to test their vehicles over two additional test cycles, the US06 and the 

SC03 test cycles. As noted earlier, EPA is proposing that small business alternative fuel 

converters will have the option to substitute the FTP emissions levels for the SC03 

emissions results for purposes of calculating SFTP emissions. Therefore, the alternative 

fuel converters will only need to perform one additional test under the Tier 3 program, 

the US06 test cycle. (Also, as noted earlier, the OBD requirements are being revised in 

the Tier 3 proposal, but alternative fuel converters will be allowed to continue 

demonstrating compliance with EPA's OBD requirements using the provisions of 

40CFR85, Subpart F. As a result, there are no additional OBD-related costs for 

alternative fuel converters under the Tier 3 program.) 

In order to estimate the incremental testing cost due to the Tier 3 proposal, EPA 

relied on the testing cost estimates developed for EPA's April 20 II rule for fuel 

converters. The following table shows the third party lab costs for exhaust testing 

developed for the April 20 II rule. The table also shows EPA's incremental testing cost 

estimates for the Tier 3 rule and the assumptions behind those estimates. (EPA has not 

included any incremental testing costs for evaporative emissions because the new canister 

bleed emission standard and leak standard being proposed for Tier 3, does not apply to 

gaseous-fueled vehicles, and nearly all of the vehicles certified by alternative fuel 

converters are natural gas fueled.) 

Incremental Tier 3 Testing Costs for Alternative Fuel Converters 

Category Alternative Fuel Incremental Basis for Tier 3 Rule Cost 

Rule Cost9 Tier 3 Rule Estimate 

Cost Estimate 

Testing - FTP $1,11 6.67 $773.34 Cost for US06 test is 

Testing - Fuel $430.00 average of costs for FTP and 

EconomyNOx Fuel Economy tests 

NMOG Speciation $1,500.00 $500.00 Cost is 'h of original cost 

(aldehyde/ketones) (1 additional bag for US06 

on top of 3 bags for FTP 

~eciation) 

NMOG Speciation $250.00 $83.33 Cost is 'h of original cost 

9 Taken from Table VII.A-1 of AprilS, 2011 rule (See 76 FR 19830). 

9 
(alcohols) (1 additional bag for US06 

on top of 3 bags for FTP 

speciation) 

Third Party (Lab) $702.50 $35 1.25 Cost is ~ of original cost 

Labor Costs (1 US06 test added on top of 

2 current emission tests) 

Total Third Party -- $1,707.92 -- (Lab) Costs 

In addition to the third party costs associated with the testing, the alternative fuel 

converters would accrue additional costs for oversight of the testing. The following table 

presents the costs associated with testing oversight as developed for the April 2011 rule. 

The table also shows EPA's incremental cost estimates for the Tier 3 rule and the 

assumptions behind those estimates. 

Incremental Tier 3 Oversight Costs for Alternative Fuel Converters 

Category Alternative Fuel Incremental Basis for Tier 3 Rule Cost 

Rule Cose 0 Tier 3 Rule Estimate 

Cost Estimate 

Total Third Party -- $1,707.92 See previous table 

(Lab) Costs 

Oversight Labor $1,236.69 $618.35 Cost is ~ of original cost 

Costs (1 US06 test added on top of 

2 current emission tests) 

Oversight Lodging $280.00 $140.00 Cost is ~ of original cost 

Costs (1 US06 test added on top of 

2 clirrent emission tests) 

Oversight G & A $381.93 $160.31 Cost is 6.5% of all 

incremental costs 

Total Incremental -- $2,626.57 -- Cost for Tier 3 

As shown in the preceding table, the total incremental cost for alternative fuel 

converters is estimated to be $2,627 per test group. Based on confidential sales estimates 

provided by alternative fuel converters when they pay their certification fee, EPA 

estimated the incremental cost per vehicle converted for each of the small businesses. 

(While the incremental cost per vehicle converted varies by manufacturer, the average 

across all ofthe small business alternative fuel converters was calculated to be $125 per 

vehicle.) 

To evaluate the impact of the increased costs on the nine small businesses, EPA 

compared the total estimated incremental cost per vehicle sold for complying with the 

Tier 3 standards to the cost of each manufacturer's fuel conversion. EPA was able to 

estimate the cost of a fuel conversion for each manufacturer based on confidential 

10 Taken from Table VII.A-2 of April 8, 2011 rule (See 76 FR 19830). 

10 
information provided to EPA as part of the certification fee payment. (While the cost for 

an alternative fuel conversion varies by manufacturer, the average cost across all of the 

small business alternative fuel converters was approximately $7,000 per vehicle.) 

We estimated the impact of the Tier 3 standards on each alternative fuel converter 

by comparing the projected incremental Tier 3 cost (i.e., $2,627 divided by the 

manufacturer-specific sales estimates) to the cost of the actual conversion (determined for 

each manufacturer from the certification fee information). Of the nine small business 

alternative fuel converters, four are projected to incur compliance costs above three 

percent (ranging from 3.5% to 5.3%), three are projected to incur compliance costs 

between one and three percent (ranging from 1.6% to 2.1 % ), and two will be impacted by 

less than one percent (ranging from 0.4% to 0.7%). 

(D) Summary of Cost Impacts on Small Businesses 

The following table summarizes the impacts of the proposed Tier 3 vehicle 

requirements on small businesses as presented in this analysis. 

Summary of Small Business Impacts due to the Proposed Tier 3 Vehicle Standards 

Industry Sector Number of Small Estimated Cost-to-Sales Ratio 

Businesses 0-1 Percent 1-3 Percent >3 Percent 

Car/truck manufacturers 4 4 0 0 

I Cis 8 0 8 0 

Alternative fuel converters 9 2 3 4 

Totals 21 6 11 4 

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