Federal Register / Vol. 86, No. 159 / Friday, August 20, 2021 / Proposed Rules 46811 

relying on alert originators to repeat (reoriginate) alerts they deem significant 

enough to warrant such treatment. 

Significantly, the Commission raises as 

alternatives for comment whether 

FEMA’s proposal on keeping the alert 

information or notification persistent is 

more appropriately configured in a next 

generation EAS, and whether FEMA’s 

recommendation is more appropriately 

addressed in the Notice of Inquiry in 

this proceeding (seeking comment on 

internet related updates and 

improvements to the EAS). 

Throughout the FNPRM, the 

Commission has raised and requested 

comment on various issues relating to 

the technical feasibility, costs, benefits 

and the potential impact of 

implementing FEMA’s proposed EAS 

rule changes. This information will 

assist with the Commission’s evaluation 

of the economic impact on small 

entities, and to determine if the 

proposed FEMA rule changes are 

adopted, how to minimize any 

significant economic for small entities 

and will help identify potential 

alternatives not already considered. The 

Commission expects to more fully 

consider the economic impact and 

alternatives for small entities following 

the review of comments and reply 

comments filed in response to the 

FNPRM. Moreover, the Commission’s 

evaluation of the comments will shape 

the final alternatives it considers, the 

final conclusions it reaches, and the 

actions it ultimately takes in this 

proceeding to minimize any significant 

economic impact that may occur on 

small entities, if any of the proposed 

FEMA recommendations are adopted. 

F. Federal Rules That May Duplicate, 

Overlap, or Conflict With the Proposed 

Rules 

None. 

Ordering Clauses 

Accordingly, it is ordered, pursuant to 

sections 1, 2, 4(i), 4(o), 301, 303(r), 

303(v), 307, 309, 335, 403, 624(g), 706, 

and 713 of the Communications Act of 

1934, as amended, 47 U.S.C. 151, 152, 

154(i), 154(o), 301, 303(r), 303(v), 307, 

309, 335, 403, 544(g), and 606, as well 

as by sections 602(a), (b), (c), (f), 603, 

604 and 606 of the WARN Act, 47 

U.S.C. 1202(a), (b), (c), (f), 1203, 1204 

and 1206, Section 202 of the TwentyFirst Century Communications and 

Video Accessibility Act of 2010, as 

amended, 47 U.S.C. 613, and the 

National Defense Authorization Act for 

Fiscal Year 2021, Public Law 116–283, 

134 Stat. 3388, section 9201, 47 U.S.C. 

1201, 1206, that this Report and Order 

and Further Notice of Proposed 

Rulemaking in PS Docket Nos. 15–94 

and 15–91 is hereby adopted. 

It is further ordered that the 

Commission’s Consumer and 

Governmental Affairs Bureau, Reference 

Information Center, shall send a copy of 

this Further Notice of Proposed 

Rulemaking, including the Initial 

Regulatory Flexibility Analysis, to the 

Chief Counsel for Advocacy of the Small 

Business Administration. 

Federal Communications Commission. 

Marlene Dortch, 

Secretary. 

[FR Doc. 2021–15174 Filed 8–19–21; 8:45 am] 

BILLING CODE 6712–01–P 

DEPARTMENT OF TRANSPORTATION 

National Highway Traffic Safety 

Administration 

49 CFR Part 578 

[Docket No. NHTSA–2021–0001] 

RIN 2127–AM32 

Civil Penalties 

AGENCY: National Highway Traffic 

Safety Administration (NHTSA), 

Department of Transportation (DOT). 

ACTION: Supplemental notice of 

proposed rulemaking. 

SUMMARY: On January 14, 2021, NHTSA 

published an interim final rule in 

response to a petition for rulemaking 

from the Alliance for Automotive 

Innovation (Alliance). The interim final 

rule provided that an inflation 

adjustment to the civil penalty rate 

applicable to automobile manufacturers 

that violate applicable corporate average 

fuel economy (CAFE) standards would 

apply beginning with vehicle Model 

Year 2022. The interim final rule also 

requested comment. In light of a 

subsequent Executive Order and the 

agency’s review of comments, NHTSA is 

reviewing and reconsidering that 

interim final rule. Accordingly, NHTSA 

is issuing this supplemental notice of 

proposed rulemaking (SNPRM) to 

consider the appropriate path forward 

and to allow interested parties sufficient 

time to provide comments. 

DATES: Comments: Comments must be 

received by September 20, 2021. 

ADDRESSES: You may submit comments 

to the docket number identified in the 

heading of this document by any of the 

following methods: 

• Federal eRulemaking Portal: Go to 

http://www.regulations.gov. Follow the 

online instructions for submitting 

comments. 

• Mail: Docket Management Facility, 

M–30, U.S. Department of 

Transportation, West Building, Ground 

Floor, Room W12–140, 1200 New Jersey 

Avenue SE, Washington, DC 20590. 

• Hand Delivery or Courier: U.S. 

Department of Transportation, West 

Building, Ground Floor, Room W12– 

140, 1200 New Jersey Avenue SE, 

Washington, DC, between 9 a.m. and 5 

p.m. Eastern time, Monday through 

Friday, except Federal holidays. 

• Fax: 202–493–2251. 

• Instructions: NHTSA has 

established a docket for this action. 

Direct your comments to Docket ID No. 

NHTSA–2021–0001. See the 

SUPPLEMENTARY INFORMATION section on 

‘‘Public Participation’’ for more 

information about submitting written 

comments. 

• Docket: All documents in the 

docket are listed on the 

www.regulations.gov website. Although 

listed in the index, some information is 

not publicly available, e.g., confidential 

business information or other 

information whose disclosure is 

restricted by statute. Certain other 

material, such as copyrighted material, 

is not placed on the internet and will be 

publicly available only in hard copy 

form. Publicly available docket 

materials are available either 

electronically through 

www.regulations.gov or in hard copy at 

the following location: Docket 

Management Facility, M–30, U.S. 

Department of Transportation, West 

Building, Ground Floor, Rm. W12–140, 

1200 New Jersey Avenue SE, 

Washington, DC 20590. The telephone 

number for the docket management 

facility is (202) 366–9324. The docket 

management facility is open between 9 

a.m. and 5 p.m. Eastern Time, Monday 

through Friday, except Federal holidays. 

FOR FURTHER INFORMATION CONTACT: 

Michael Kuppersmith, Office of Chief 

Counsel, NHTSA, email 

michael.kuppersmith@dot.gov, 

telephone (202) 366–2992, facsimile 

(202) 366–3820, 1200 New Jersey Ave. 

SE, Washington, DC 20590. 

SUPPLEMENTARY INFORMATION: 

Table of Contents 

A. Public Participation 

B. CAFE Statutory and Regulatory 

Background 

C. Civil Penalties Inflation Adjustment Act 

Improvements Act of 2015 

D. NHTSA’s Actions to Date Regarding CAFE 

Civil Penalties 

1. Initial Interim Final Rule 

2. Initial Petition for Reconsideration and 

Response 

3. NHTSA Reconsideration 

4. Subsequent Petitions and Interim Final 

Rule 


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1OCR is the process of converting an image of 

text, such as a scanned paper document or 

electronic fax file, into computer-editable text. 2See 49 CFR part 512. 

3 49 U.S.C. 32902. The authorities vested in the 

Secretary under chapter 329 of Title 49, U.S.C., 

have been delegated to NHTSA. 49 CFR 1.95(a). 4 49 U.S.C. 32911, 32912. 

5Within statutory constraints, credits may be 

either earned (for over-compliance by a given 

manufacturer’s fleet, in a given model year), 

transferred (from one fleet to another), or purchased 

(in which case, another manufacturer earned the 

credits by over-complying and chose to sell that 

surplus). 49 U.S.C. 32903. 

6A manufacturer may have up to three fleets of 

vehicles, for CAFE compliance purposes, in any 

given model year—a domestic passenger car fleet, 

an imported passenger car fleet, and a light truck 

fleet. Each fleet belonging to each manufacturer has 

its own compliance obligation, with the potential 

for either over-compliance or under-compliance. 

There is no overarching CAFE requirement for a 

manufacturer’s total production. 

E. Summary of Comments Received 

F. Supplemental Request for Public Comment 

G. Rulemaking Analyses and Notices 

1. Executive Order 12866, Executive Order 

13563, and DOT Regulatory Policies and 

Procedures 

2. Regulatory Flexibility Act 

3. Executive Order 13132 (Federalism) 

4. Unfunded Mandates Reform Act of 1995 

5. National Environmental Policy Act 

6. Executive Order 12778 (Civil Justice 

Reform) 

7. Paperwork Reduction Act 

8. Privacy Act 

A. Public Participation 

This section describes how you can 

participate in the commenting process. 

(1) How do I prepare and submit 

comments? 

Your comments must be written. To 

ensure that your comments are correctly 

filed in the docket, please include the 

docket number NHTSA–2021–0001 in 

your comments. If you are submitting 

comments electronically as a PDF 

(Adobe) file, we ask that the documents 

submitted be scanned using the Optical 

Character Recognition (OCR) process, 

thus allowing NHTSA to search and 

copy certain portions of your 

submissions.1 Please note that pursuant 

to the Data Quality Act, in order for the 

substantive data to be relied upon and 

used by NHTSA, it must meet the 

information quality standards set forth 

in the Office of Management and Budget 

(OMB) and Department of 

Transportation (DOT) Data Quality Act 

guidelines. Accordingly, we encourage 

you to consult the guidelines in 

preparing your comments. OMB’s 

guidelines may be accessed at https://

www.whitehouse.gov/omb/informationregulatory-affairs/information-policy/. 

DOT’s guidelines may be accessed at 

https://www.transportation.gov/dotinformation-dissemination-qualityguidelines. 

(2) Tips for Preparing Your Comments 

When submitting comments, please 

remember to: 

• Identify the rulemaking by docket 

number and other identifying 

information (subject heading, Federal 

Register date and page number). 

• Explain why you agree or disagree, 

suggest alternatives, and substitute 

language for your requested changes. 

• Describe any assumptions and 

provide any technical information and/ 

or data that you used. 

• If you estimate potential costs or 

burdens, explain how you arrived at 

your estimate in sufficient detail to 

allow for it to be reproduced. 

• Provide specific examples to 

illustrate your concerns, and suggest 

alternatives. 

• Explain your views as clearly as 

possible, avoiding the use of profanity 

or personal threats. 

• Make sure to submit your 

comments by the comment period 

deadline identified in the DATES section 

above. 

(3) How can I be sure that my comments 

were received? 

If you submit your comments by mail 

and wish Docket Management to notify 

you upon its receipt of your comments, 

enclose a self-addressed, stamped 

postcard in the envelope containing 

your comments. Upon receiving your 

comments, Docket Management will 

return the postcard by mail. If you 

submit information through email under 

a claim of confidentiality, as discussed 

below, you may request a delivery 

receipt. 

(4) How do I submit confidential 

business information? 

If you wish to submit any information 

under a claim of confidentiality, you 

should submit your complete 

submission, including the information 

you claim to be confidential business 

information (CBI), to the NHTSA Chief 

Counsel. When you send a comment 

containing CBI, you should include a 

cover letter setting forth the information 

specified in our CBI regulation.2 In 

addition, you should submit a copy 

from which you have deleted the 

claimed CBI to the docket by one of the 

methods set forth above. 

To facilitate social distancing due to 

COVID–19, NHTSA is treating 

electronic submission as an acceptable 

method for submitting CBI to NHTSA 

under 49 CFR part 512. Any CBI 

submissions sent via email should be 

sent to an attorney in the Office of Chief 

Counsel at the address given above 

under FOR FURTHER INFORMATION

CONTACT. Likewise, for CBI submissions 

via a secure file transfer application, an 

attorney in the Office of Chief Counsel 

must be set to receive a notification 

when files are submitted and have 

access to retrieve the submitted files. At 

this time, regulated entities should not 

send a duplicate hardcopy of their 

electronic CBI submissions to DOT 

headquarters. 

Please note that these modified 

submission procedures are only to 

facilitate continued operations while 

maintaining appropriate social 

distancing due to COVID–19. Regular 

procedures for Part 512 submissions 

will resume upon further notice, when 

NHTSA and regulated entities 

discontinue operating primarily in 

telework status. 

If you have any questions about CBI 

or the procedures for claiming CBI, 

please consult the person identified in 

the FOR FURTHER INFORMATION CONTACT

section. 

(5) How can I read the comments 

submitted by other people? 

You may read the materials placed in 

the docket for this document (e.g., the 

comments submitted in response to this 

document by other interested persons) 

at any time by going to http://

www.regulations.gov. Follow the online 

instructions for accessing the dockets. 

You may also read the materials at the 

NHTSA Docket Management Facility by 

going to the street addresses given above 

under ADDRESSES. 

B. CAFE Statutory and Regulatory 

Background 

NHTSA sets 3 and enforces 4 corporate 

average fuel economy (CAFE) standards 

for the United States light-duty 

automobile fleet, and in doing so, 

assesses civil penalties against 

manufacturers that violate applicable 

standards and are unable to make up the 

shortfall with credits.5 The civil penalty 

amount for CAFE violations was 

originally set by statute in 1975, and 

beginning in 1997, included a rate of 

$5.50 per each tenth of a mile per gallon 

(0.1) that a manufacturer’s CAFE 

performance falls short of its 

compliance obligation. This shortfall 

amount is then multiplied by the 

number of vehicles in that 

manufacturer’s fleet.6 The basic 

equation for calculating a 

manufacturer’s civil penalty amount, 

before accounting for credits, is as 

follows: 

(penalty rate, in $ per 0.1 mpg per 

vehicle) × (amount of shortfall, in 


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7The process of determining civil penalties 

occurs after the end of a model year, following 

NHTSA’s receipt of final reports from the 

Environmental Protection Agency (EPA). See 77 FR 

62624, 63126 (Oct. 15, 2012). 

8Public Law 110–140, 104. 

9 42 U.S.C. 7521, see also 74 FR 66495 (Dec. 15, 

2009) (‘‘Endangerment and Cause or Contribute 

Findings for Greenhouse Gases under Section 

202(a) of the Clean Air Act’’). 

10 49 U.S.C. 32902(b)(4). 

11Memorandum from the Director of OMB to 

Heads of Executive Departments and Agencies, 

Implementation of the Federal Civil Penalties 

Inflation Adjustment Act Improvements Act of 2015 

(Feb. 24, 2016), available online at https://

www.whitehouse.gov/sites/whitehouse.gov/files/ 

omb/memoranda/2016/m-16-06.pdf. 

12Memorandum from the Director of OMB to 

Heads of Executive Departments and Agencies, 

Implementation of the 2017 Annual Adjustment 

Pursuant to the Federal Civil Penalties Inflation 

Adjustment Act Improvements Act of 2015 (Dec. 16, 

2016), available online at https://

www.whitehouse.gov/sites/whitehouse.gov/files/ 

omb/memoranda/2017/m-17-11_0.pdf; 

Memorandum from the Director of OMB to Heads 

of Executive Departments and Agencies, 

Implementation of Penalty Inflation Adjustments 

for 2018, Pursuant to the Federal Civil Penalties 

Inflation Adjustment Act Improvements Act of 2015 

(Dec. 15, 2017), available online at https://

www.whitehouse.gov/wp-content/uploads/2017/11/ 

M-18-03.pdf; Memorandum from the Director of 

OMB to Heads of Executive Departments and 

Agencies, Implementation of Penalty Inflation 

Adjustments for 2019, Pursuant to the Federal Civil 

Penalties Inflation Adjustment Act Improvements 

Act of 2015 (Dec. 14, 2018), available online at 

https://www.whitehouse.gov/wp-content/uploads/ 

2017/11/m_19_04.pdf; Memorandum from the 

Acting Director of OMB to Heads of Executive 

Departments and Agencies, Implementation of 

Penalty Inflation Adjustments for 2020, Pursuant to 

the Federal Civil Penalties Inflation Adjustment Act 

Improvements Act of 2015 (Dec. 16, 2019), available 

online at https://www.whitehouse.gov/wp-content/ 

uploads/2019/12/M-20-05.pdf; Memorandum from 

the Director of OMB to Heads of Executive 

Departments and Agencies, Implementation of 

Penalty Inflation Adjustments for 2021, Pursuant to 

the Federal Civil Penalties Inflation Adjustment Act 

Improvements Act of 2015 (Dec. 23, 2020), available 

online at https://www.whitehouse.gov/wp-content/ 

uploads/2020/12/M-21-10.pdf. 

13 81 FR 43524 (July 5, 2016). 

14 Jaguar Land Rover North America, LLC also 

filed a petition for reconsideration in response to 

the July 5, 2016 interim final rule raising the same 

concerns as those raised in the joint petition. Both 

petitions, along with a supplement to the joint 

petition, can be found in Docket No. NHTSA–2016– 

0075 at www.regulations.gov. 

tenths of an mpg) × (# of vehicles 

in manufacturer’s fleet).7

Starting with Model Year 2011, the 

Energy Independence and Security Act 

of 2007 (EISA) provided for credit 

transfers among a manufacturer’s 

various fleets.8 Starting with that model 

year, the law also provided for trading 

between vehicle manufacturers, which 

has allowed vehicle manufacturers the 

opportunity to acquire credits from 

competitors rather than paying civil 

penalties for violations. Manufacturers 

can choose to carry back credits to apply 

to any of three model years before they 

are earned or carry them forward to 

apply to any of the five model years 

after they are earned. 

In complement to NHTSA’s regulation 

of fuel economy, the Environmental 

Protection Agency (EPA) regulates the 

emissions of light-duty vehicles. These 

regulations include standards to 

regulate greenhouse gas emissions from 

the light-duty fleet. The Clean Air Act 

requires EPA to set greenhouse gas 

(GHG) emissions standards from lightduty vehicles since EPA has made an 

‘‘endangerment finding’’ that 

greenhouse gases ‘‘cause[s] or 

contribute[s] to air pollution which may 

reasonably be anticipated to endanger 

public health or welfare.’’ 9 Although 

NHTSA and EPA have different roles 

and independent enforcement and 

compliance obligations, and operate 

under different statutory authority, the 

agencies work together to achieve the 

goals of their respective statutes. Since 

Model Year 2012, the agencies have 

issued joint rulemakings regulating fuel 

economy (NHTSA) and GHGs (EPA) 

from light-duty vehicles that have 

different requirements but are 

harmonized to the extent possible to 

work in tandem. The CAFE program is 

subject to various statutory 

requirements not applicable to the EPA 

GHG program. One such requirement, 

for example, requires automakers to 

meet a separate average fleet 

requirement for automobiles that are 

manufactured domestically.10 The Clean 

Air Act does not include a similar 

requirement for EPA’s GHG standards. 

C. Civil Penalties Inflation Adjustment 

Act Improvements Act of 2015 

On November 2, 2015, the Federal 

Civil Penalties Inflation Adjustment Act 

Improvements Act (Inflation 

Adjustment Act or 2015 Act), Public 

Law 114–74, Section 701, was signed 

into law. The 2015 Act required Federal 

agencies to promulgate an interim final 

rule to make an initial ‘‘catch-up’’ 

adjustment to the civil monetary 

penalties they administer, and then to 

make subsequent annual adjustments 

for inflation. The 2015 Act limited the 

initial inflation increase to 150 percent 

of the then-current penalty. 

In a February 24, 2016 memorandum, 

the Director of the Office of 

Management and Budget (OMB) 

provided initial guidance to all Federal 

agencies on how to calculate the initial 

adjustment required by the 2015 Act.11

The initial ‘‘catch-up’’ adjustment was 

based on the change between the 

Consumer Price Index for all Urban 

Consumers (CPI–U) for the month of 

October in the year the penalty amount 

was established or last adjusted by 

Congress and the October 2015 CPI–U. 

The February 24, 2016 memorandum 

contained a table with a multiplier for 

the change in CPI–U from the year the 

penalty was established or last adjusted 

to 2015. To arrive at the adjusted 

penalty, the agency multiplied the 

penalty amount when it was established 

or last adjusted by Congress, excluding 

adjustments under the 1990 Inflation 

Adjustment Act, by the multiplier for 

the increase in CPI–U from the year the 

penalty was established or adjusted. 

Ensuing guidance from OMB identifies 

the appropriate inflation multiplier for 

agencies to use to calculate the 

subsequent annual adjustments.12

D. NHTSA’s Actions to Date Regarding 

CAFE Civil Penalties 

1. Initial Interim Final Rule 

On July 5, 2016, NHTSA published an 

interim final rule, adopting inflation 

adjustments for all civil penalties under 

its administration, following the 

procedure and the formula in the 2015 

Act. One of the adjustments NHTSA 

made at the time was raising the civil 

penalty rate for CAFE violations from 

$5.50 to $14.13 NHTSA also indicated in 

that notice that the maximum penalty 

rate that the Secretary is permitted to 

establish for such violations would 

similarly increase to reflect inflation 

from the statutory cap of $10 to $25, but 

did not codify this change in the 

regulatory text. That initial interim final 

rule became effective on August 4, 2016. 

2. Initial Petition for Reconsideration 

and Response 

On August 1, 2016, the then-Alliance 

of Automobile Manufacturers and the 

Association of Global Automakers (since 

combined to form the Alliance for 

Automotive Innovation) jointly 

petitioned NHTSA for reconsideration 

of the CAFE penalty provisions issued 

in the interim final rule.14 This petition 

raised concerns with the impact that the 

increased penalty rate would have on 

CAFE compliance costs, which they 

estimated to be at least $1 billion 

annually. Specifically, this petition 

identified several issues, including 

retroactivity. The petitioners were 

concerned that applying the penalty 

increase associated with model years 

that had already been completed or for 

which a company’s compliance plan 

had already been ‘‘set’’ was a retroactive 

application of the inflation adjustment. 

In response to the joint petition, 

NHTSA issued a final rule on December 


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15 81 FR 95489 (December 28, 2016). 16 82 FR 8694 (January 30, 2017); 82 FR 15302 

(March 28, 2017); 82 FR 29009 (June 27, 2017); 82 

FR 32139 (July 12, 2017). 17Order, ECF No. 196, NRDC v. NHTSA, Case No. 

17–2780 (2d Cir., Apr. 24, 2018); Opinion, ECF No. 

205, NRDC v. NHTSA, Case No. 17–2780, at 44 (2d 

Cir., June 29, 2018) (‘‘The Civil Penalties Rule, 81 

FR 95,489, 95,489–92 (December 28, 2016), no 

longer suspended, is now in force.’’). 

18The Alliance also submitted a supplement to its 

petition on October 22, 2020 (Alliance 

Supplement). 

19See Executive Order 14018, 86 FR 11855, 

‘‘Revocation of Certain Presidential Actions’’ (Feb. 

24, 2021). 

20The rate is increasing to $14, plus any 

adjustments for inflation that occurred or may 

occur. 49 CFR 578.6(h)(2). 

21The reasoning for the interim final rule is set 

forth more fully in the January 14, 2021 notice 

published at 86 FR 3016. 22NRDC v. NHTSA, No. 21–139 (2d Cir.); New 

York v. NHTSA, No. 21–339 (2d Cir.); Tesla v. 

NHTSA, No. 21–70367 (9th Cir.). 23NHTSA–2021–0001–0001; NHTSA–2021– 

0001–0009. 24 86 FR 3016, 3023 n.74 (Jan. 14, 2021). 25NHTSA received a ninth comment that simply 

said, ‘‘Help.’’ NHTSA–2021–0001–0018. Without 

28, 2016.15 In that rule, NHTSA agreed 

that raising the penalty rate for model 

years already fully complete at the time 

the 2015 Act was enacted would be 

inappropriate, given that courts 

generally disfavor the retroactive 

application of statutes, and that 

applying penalties to model years that 

were already completed could not deter 

non-compliance, incentivize 

compliance, or lead to any 

improvements in fuel economy. NHTSA 

also agreed that raising the rate for 

model years for which product changes 

were infeasible due to lack of lead time 

from the enactment of the 2015 Act did 

not seem consistent with Congress’ 

intent that the CAFE program be 

responsive to consumer demand. 

Accordingly, NHTSA stated that it 

would not apply the inflation-adjusted 

penalty rate of $14 (plus any 

adjustments for inflation that occurred 

or may occur) until Model Year 2019, as 

the agency believed that 2019 would be 

the first year after the 2015 Act in which 

product changes could reasonably be 

made in response to the higher penalty 

rate. This final rule had an effective date 

of January 27, 2017. 

3. NHTSA Reconsideration 

Beginning in January 2017, NHTSA 

took a series of actions to delay the 

effective date of the December 2016 

final rule, ultimately leading to a rule 

announcing that the effective date 

would be delayed indefinitely.16 In 

April 2018, the United States Court of 

Appeals for the Second Circuit vacated 

NHTSA’s indefinite delay of the rule’s 

effective date, clarifying that the 

December 2016 rule was in force.17

In July 2019, NHTSA finalized a rule 

determining that the 2015 Act did not 

apply to the CAFE civil penalty rate. On 

August 31, 2020, the United States 

Court of Appeals for the Second Circuit 

vacated the July 2019 rule and ruled 

that the December 2016 rule was back 

in force. The Second Circuit denied 

panel rehearing on November 2, 2020. 

4. Subsequent Petitions and Interim 

Final Rule 

On September 9, 2019, the Institute 

for Policy Integrity at New York 

University School of Law (IPI) 

submitted a petition for reconsideration 

of NHTSA’s July 2019 final rule. IPI 

argued that the rule was unreasonable 

and not in the public interest because it 

did not properly account for the 

associated costs and benefits. 

Additionally, IPI challenged NHTSA’s 

statutory interpretations. NHTSA did 

not issue a decision on the petition prior 

to the Second Circuit’s decision 

vacating the rule. 

Following the Second Circuit’s 

decision, on October 2, 2020, NHTSA 

received a petition for rulemaking from 

the Alliance for Automotive Innovation 

requesting that the adjustment to $14 

not be applied until Model Year 2022.18

According to the Alliance Petition, 

‘‘Model Years 2019 and 2020 are 

effectively lapsed now,’’ and 

‘‘[m]anufacturers are unable to change 

MY 2021 plans at this point.’’ The 

Alliance argued that, as in the December 

2016 rule, applying the increased 

penalty to any violations that are 

temporally impossible to avoid or 

cannot practically be remedied does not 

serve the statutory purposes of deterring 

prohibited conduct or incentivizing 

favored conduct. According to the 

Alliance, doing so would effectively be 

punishing violators retroactively. 

In addition to relying on the reasoning 

of the December 2016 rule as it applied 

to the increase based on the timing of 

the enactment of the 2015 Act, the 

Alliance Petition noted, but did not 

provide detailed evidence of, the 

significant economic impact suffered by 

the industry due to COVID–19. 

Accordingly, the Alliance Petition also 

cited the now-revoked Executive Order 

13924,19 requiring Federal agencies to 

take appropriate action, consistent with 

applicable law, to combat the economic 

emergency caused by COVID–19. 

Several individual vehicle 

manufacturers submitted supplemental 

information to NHTSA further 

articulating the negative economic 

position they were in due to the 

COVID–19 public health emergency and 

the potential and significant adverse 

economic consequences of the increased 

civil penalty rate. 

After considering the issues raised, 

NHTSA granted the Alliance’s petition 

and promulgated an interim final rule 

providing that the increase 20 will apply 

beginning with Model Year 2022. The 

interim final rule contended that 

applying the increased civil penalty rate 

to vehicles in Model Years 2019, 2020, 

and 2021 would not result in additional 

fuel savings and would impose higher 

penalties retroactively because those 

model years were already completed, or, 

for Model Year 2021, production plans 

were set prior to the Second Circuit’s 

decision striking down the 2019 rule. 

The interim final rule relied in large 

part on the reasoning in the December 

2016 final rule, though it did not 

discuss the extent to which the four 

years between the two rules should 

affect that reasoning. Additionally, the 

interim final rule attempted to account 

for the negative economic impact on the 

automotive sector caused by the global 

outbreak of COVID–19.21 That interim 

final rule amended the relevant 

regulatory text accordingly—effective 

immediately and without having 

afforded prior notice or the ability to 

comment in advance—and requested 

comment within ten days. The interim 

final rule also noted that IPI’s petition 

was moot, and, to the extent it was not 

moot, NHTSA denied it. 

The interim final rule is currently the 

subject of legal challenges in the Second 

Circuit and Ninth Circuit.22

E. Summary of Comments Received 

Before NHTSA’s interim final rule 

was published but after the agency had 

announced, through the publication of 

the Fall 2020 Unified Agenda of 

Regulatory and Deregulatory Actions, 

that it had initiated a rulemaking in 

response to the Alliance’s petition, 

NHTSA received two letters regarding 

the rulemaking: one jointly from the 

State of New York, the Natural 

Resources Defense Council, and the 

Sierra Club, and one from Tesla.23 These 

letters raised concerns with NHTSA’s 

rulemaking, particularly with the 

entities’ inability to comment on the 

Alliance’s petition for rulemaking in 

advance. NHTSA did not respond to 

these letters prior to the publication of 

the interim final rule, but included both 

letters in the docket when the interim 

final rule was published and noted that 

they ‘‘will be treated as comments for 

appropriate consideration.’’ 24

After the interim final rule was 

published, NHTSA received eight 

substantive comments.25 NHTSA 

received comments from: 


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any additional information, NHTSA cannot 

reasonably address or respond to this commenter’s 

concern. 

26NHTSA–2021–0001–0017. 

27NHTSA–2021–0001–0015. 

28NHTSA–2021–0001–0013. 

29NHTSA–2021–0001–0011. 

30NHTSA–2021–0001–0012. 

31NHTSA–2021–0001–0014. 

32NHTSA–2021–0001–0016. 

33NHTSA–2021–0001–0019. 

34 86 FR 7037, 7037 (Jan. 25, 2021). 

35Memorandum from the Acting General Counsel 

of DOT to the Chief Counsel and Acting Deputy 

Administrator of NHTSA and Special Advisor, 

‘‘Implementation of Executive Order 13990, entitled 

‘Protecting Public Health and the Environment and 

Restoring Science to Tackle the Climate Crisis’ ’’ 

(Feb. 22, 2021). https://www.transportation.gov/ 

sites/dot.gov/files/2021-02/Memo-to-NHTSA.pdf. 

36Nat. Res. Def. Council v. Nat’l Highway Traffic 

Safety Admin., 894 F.3d 95, 116 (2d Cir. 2018); New 

York v. Nat’l Highway Traffic Safety Admin., 974 

F.3d 87, 101 (2d Cir. 2020). 

• The Attorneys General of California, 

New York, Connecticut, Delaware, 

Illinois, Iowa, Maine, Maryland, 

Massachusetts, Minnesota, New Jersey, 

Oregon, Pennsylvania, Rhode Island, 

Washington, and Vermont; 26

• American Council for an EnergyEfficient Economy, Center for Auto 

Safety, Center for Biological Diversity, 

Consumer Federation of America, 

Consumer Reports, The Ecology Center 

(Michigan), Environmental Law and 

Policy Center, Interfaith Power & Light, 

Sierra Club, Union of Concerned 

Scientists; 27

• Natural Resources Defense Council 

and Sierra Club; 28

• The Institute for Policy Integrity at 

New York University School of Law; 29

• Tesla; 30

• The Alliance for Automotive 

Innovation; 31

• The National Automobile Dealers 

Association (NADA); 32 and 

• An anonymous individual.33

Most of the comments opposed the 

interim final rule, raising serious 

procedural, legal, and substantive 

concerns. In general, these comments 

argued that NHTSA did not have the 

authority to delay the application of the 

inflation increase beyond Model Year 

2019 and that, regardless, NHTSA 

would have to do so through notice-andcomment, not by an interim final rule 

that was effective immediately without 

prior notice and without the 

opportunity to comment in advance. In 

supporting these arguments, the 

commenters relied, in part, upon the 

two earlier decisions by the Second 

Circuit. 

Most of these comments also 

challenged the interim final rule as 

arbitrary and capricious on multiple 

grounds. For example, the comments 

discussed that applying the increased 

rate before Model Year 2022 would not 

be retroactive because the increased rate 

was originally applied in 2016 when it 

was still prospective, and NHTSA’s 

subsequent actions, which were all 

stricken down by the Second Circuit, 

did not change that fact. In these 

commenters’ view, manufacturers have 

been on notice of the increase well 

before Model Year 2019, and any 

reliance to the contrary was undue. 

These comments argued that this was 

particularly true given the rulings from 

the Second Circuit litigation, in which 

many of these commenters and the 

Alliance were involved, with the 

Alliance being an intervening party. The 

comments further argued that delaying 

the application of the increased rate 

would affect future compliance because 

manufacturers may be incentivized to 

hold credits for model years when the 

higher rate will apply. The comments 

also argued that the interim final rule 

improperly analyzed the economic 

effects of the COVID–19 pandemic, for 

example, by not accounting for any 

positive economic data and disregarding 

that some of the relevant conduct 

occurred before the pandemic. 

These comments also argued that the 

interim final rule violated the National 

Environmental Policy Act of 1969 

(NEPA). Lastly, in response to NHTSA’s 

request for comment about whether the 

adjustment should be delayed further 

until Model Year 2023, these comments 

opposed any additional delay. Some of 

these comments also expressed concern 

with the short ten-day comment period 

provided by the interim final rule—and 

only after the rule was already effective 

without any opportunity to comment 

beforehand. 

Two comments supported the interim 

final rule. The Alliance reiterated the 

reasoning set forth in its petition, which 

NHTSA granted in the interim final 

rule. According to the Alliance, the 

interim final rule was consistent with 

NHTSA’s December 2016 rule; 

appropriately accounted for the 

industry’s production and design 

processes, including the unforeseen 

challenges of the COVID–19 public 

health emergency; and fairly 

implemented the Second Circuit’s 

decision. The Alliance also noted that 

Model Year 2022 vehicles could have 

begun being produced as early as 

January 2, 2021—about two weeks 

before the interim final rule was 

published—but it believes NHTSA was 

reasonable to make the inflation 

adjustment applicable beginning in 

Model Year 2022, declining to request a 

further delay in the adjustment to Model 

Year 2023. NADA supported the 

Alliance’s comment, adding that 

increased CAFE civil penalties before 

Model Year 2022 would lead to higher 

vehicle prices for consumers or 

manufacturer shifts in available 

offerings, without any associated 

environmental or safety benefits. 

F. Supplemental Request for Public 

Comment 

On January 20, 2021, the President 

issued Executive Order 13990, entitled 

‘‘Protecting Public Health and the 

Environment and Restoring Science to 

Tackle the Climate Crisis.’’ E.O. 13990 

directs the heads of all agencies to 

immediately review all existing 

regulations, orders, guidance 

documents, policies, and any other 

similar agency actions promulgated, 

issued, or adopted between January 20, 

2017 and January 20, 2021, that are or 

may be inconsistent with, or present 

obstacles to, the policy set forth in E.O. 

13990: A policy ‘‘to listen to the science; 

to improve public health and protect 

our environment; to ensure access to 

clean air and water; to limit exposure to 

dangerous chemicals and pesticides; to 

hold polluters accountable, including 

those who disproportionately harm 

communities of color and low-income 

communities; to reduce greenhouse gas 

emissions; to bolster resilience to the 

impacts of climate change; to restore 

and expand our national treasures and 

monuments; and to prioritize both 

environmental justice and the creation 

of the well-paying union jobs necessary 

to deliver on these goals.’’ 34 The 

Secretary of Transportation expressly 

identified the January 14, 2021 CAFE 

civil penalties interim final rule as one 

to be reviewed pursuant to E.O. 13990.35

In accord with E.O. 13990 and the 

Secretary’s determination, and in light 

of the significant concerns raised by the 

commenters, NHTSA is reviewing and 

reconsidering the January 14, 2021 

interim final rule. Specifically, NHTSA 

is considering withdrawing the interim 

final rule and reverting to the December 

2016 final rule that would apply the 

inflation adjustment beginning with 

Model Year 2019—the rule that the 

Second Circuit has said twice is ‘‘now 

in force.’’ 36 The vast majority of 

comments submitted to date support 

returning to the December 2016 final 

rule. Upon further consideration, 

automakers were aware as of December 

2016 that the inflation adjustment 

would apply beginning with Model Year 

2019. It was not until Model Year 2019 

was already nearly complete that the 

agency issued a final rule changing that, 

which the Second Circuit subsequently 

determined was legally invalid. The 

Alliance participated in that litigation as 


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37See ‘‘Civil Penalties,’’ available at https://

one.nhtsa.gov/cafe_pic/CAFE_PIC_Fines_

LIVE.html. 

38 49 U.S.C. 32903(f)(2), (g)(4); 49 CFR 536.9(c). 

39See ‘‘MYs 2018 and 2019 Projected Fuel 

Economy Performance Report,’’ available at https:// 

one.nhtsa.gov/cafe_pic/AdditionalInfo.htm. This 

projection is based on information received from 

manufacturers’ mid-model year reports required by 

49 CFR part 537. The data from these reports has 

not been verified by EPA or NHTSA. NHTSA 

assesses manufacturers’ compliance only using 

EPA-verified final model year data. The final model 

year data may differ from the mid-model year 

projections due to the mixture of vehicles actually 

produced throughout the model year. 

40 In looking at the total fleet performance across 

the country, manufacturers who over-complied 

with the standard may benefit from an expected 

increase in the value of credits as a result of an 

inflation increase in the penalty rate, while those 

that have made a business decision not to comply 

with the standards would likely have to pay more 

an intervenor and was well aware of the 

possibility that the Second Circuit 

would restore the applicability of the 

inflation increase beginning with Model 

Year 2019. In fact, the Second Circuit 

did just that. NHTSA is therefore of the 

view that it would be appropriate to 

revisit the characterization of the 

application of the inflation adjustment 

beginning with Model Year 2019 as 

‘‘retroactive.’’ Moreover, commenters 

have raised valid concerns regarding the 

procedures that the agency used in 

issuing the interim final rule, which did 

not proceed through a more typical 

notice-and-comment process and made 

the rule effective immediately upon 

publication. In addition, based upon 

further review and consideration of the 

Second Circuit’s prior decisions and, in 

light of the ongoing litigation, the 

agency is assessing the legal risk of 

leaving the interim final rule in place, 

as the interim final rule was based on 

an assertion of discretion that NHTSA 

now tentatively believes is in conflict 

with the Inflation Adjustment Act and 

the Second Circuit’s decisions. 

For these reasons, the agency is now 

considering withdrawing the interim 

final rule and reverting to the December 

2016 final rule. 

That said, the agency has not yet 

reached any final determinations, and 

instead believes that an additional 

period of public comment would aid the 

agency in its reexamination of the issues 

involved in the interim final rule. 

Considering the importance of this 

rulemaking and the short comment 

period—ten days—previously provided 

to interested parties, NHTSA is issuing 

this notice to provide the public with an 

appropriate amount of time to comment 

and to enable NHTSA to more fully 

review and consider the issues. In doing 

so, NHTSA is expressly requesting 

comment on whether it should proceed 

to a final rule that withdraws the 

interim final rule and reverts to the 

December 2016 final rule, restoring the 

application of the increased CAFE civil 

penalty rate beginning with Model Year 

2019. NHTSA will also accept 

comments on whether the inflation 

adjustment should apply beginning with 

a model year later than Model Year 

2019. Commenters arguing for such a 

position should explain how it is 

consistent with the 2015 Act and the 

Second Circuit’s decisions. NHTSA will 

also consider comments already 

submitted in response to the interim 

final rule as part of its ongoing review 

and the anticipated promulgation of a 

final rule following this comment 

period. 

G. Rulemaking Analyses and Notices 

1. Executive Order 12866, Executive 

Order 13563, and DOT Regulatory 

Policies and Procedures 

NHTSA has considered the impact of 

this rulemaking action under Executive 

Order 12866, Executive Order 13563, 

and the Department of Transportation’s 

regulatory policies and procedures. This 

rulemaking document has been 

considered a ‘‘significant regulatory 

action’’ under Executive Order 12866. 

NHTSA believes that this rulemaking 

will be ‘‘economically significant,’’ as 

NHTSA believes that the difference in 

the amount of penalties received by the 

government as a result of this rule are 

likely to exceed $100 million in at least 

one of the years affected by this 

rulemaking and that there may be some 

further economic effects as discussed 

below. 

As a general matter, the civil penalty 

rate as adjusted for inflation will likely 

induce some degree of greater 

compliance. Manufacturers that are 

paying civil penalties for CAFE 

violations have likely calculated that it 

is less costly or otherwise preferable to 

pay the penalties than to meet the 

statutory and regulatory requirements. 

An increased penalty rate changes this 

calculation, as it likely raises either the 

costs of credits a noncompliant 

manufacturer may choose to purchase, 

the total penalty amount a manufacturer 

will pay, or both. However, the Second 

Circuit has made clear that the Inflation 

Adjustment Act applies to these 

penalties and, thus, the question over 

whether these penalties should be 

adjusted for inflation has been settled. 

In this rule, NHTSA is proposing to 

remove the interim final rule, which 

delayed the inflation adjusted penalty 

rate by three model years, two of which 

are already complete and the last one 

which is considerably underway. An 

analysis here would be limited to 

estimating over this short time horizon: 

(1) Which manufacturers did not 

produce compliant fleets for Model 

Years 2019 and 2020 and are likely to 

not produce compliant fleets for Model 

Year 2021; (2) what the shortfalls will be 

for those non-compliant manufacturers; 

and (3) the extent to which those 

manufactures will choose to use credits 

(either their own or those purchased 

from over-compliant manufacturers) or 

pay penalties to address these shortfalls. 

Pointedly, this analysis does not have 

sufficient information to account for 

whether, and if so, how manufacturers 

will adjust the composition of the fleet 

for these model years in response to the 

penalty change. 

Any analysis would estimate what the 

compliance shortfalls will be and 

whether manufacturers will pay 

penalties or use credits. These estimates 

could be used to estimate the effects on 

individual manufactures in the form of 

higher penalty payments, higher 

payments to other manufacturers for 

credits, or higher receipts for 

overcomplying manufacturers for 

credits sold to other manufacturers. 

However, NHTSA has only limited 

ability to estimate what strategies 

manufacturers will take either to use 

credits or pay penalties to deal with any 

noncompliance, as that is a decision 

that each manufacturer must take based 

on their unique circumstances. In the 

past, the vast majority of manufacturers 

pay no penalties, as only five 

manufacturers have paid civil penalties 

since Model Year 2011.37 And only one 

of those manufacturers faced 

particularly heavy penalties—even 

before the $14 rate would have gone 

into effect—for failing to comply with 

the minimum domestic passenger car 

standard, which cannot be made up 

through the application of transferred or 

traded credits.38

Despite this uncertainty, NHTSA is 

confident that, based on the experience 

of recent model years, this rule would 

lead to at least $100 million difference 

in the amount of penalties in at least 

one model year. For example, based on 

mid-model year fuel economy 

performance data, NHTSA projected a 

shortfall of 1.3 miles per gallon across 

the U.S. fleet in Model Year 2019.39

Assuming a similar magnitude of 

production from Model Year 2018 for 

Model Year 2019 would result in a 

nationwide fleet-wide net shortfall of 

approximately $115.4 million at the 

$5.50 rate or an approximately $293.9 

million shortfall at the $14 rate—an 

approximately $178.5 million 

difference.40 As noted, it is expected 


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for those credits. To the extent that a manufacturer 

cannot meet their shortfall with these credits or, in 

the case of the minimum domestic passenger car 

standard, are prohibited from doing so by law, they 

would need to pay penalties. 

41Although manufacturers’ design cycles vary, 

since they have been on notice since 2016 of an 

increase to the penalty beginning with Model Year 

2019, they have had and will continue to have 

opportunities in the coming model years to make 

design choices to increase compliance. 

42The 2015 Act, of course, did allow NHTSA one 

opportunity at the time of the initial catch-up to use 

the notice-and-comment process to adjust the rate 

‘‘less than the otherwise required amount’’ under 

two conditions, but the Second Circuit rejected 

NHTSA’s belated attempt to use this provision in 

its decision on the July 2019 final rule. See New 

York, 974 F.3d at 100–01. 

that much of this increase would likely 

fall on a single automobile manufacturer 

and likely due to a failure to comply 

with the minimum domestic passenger 

car standard. NHTSA does not yet have 

enough information for Model Year 

2020, which is now complete, or Model 

Year 2021, which is still underway, to 

make a similar estimate, but requests 

comment, data, or analysis on the 

potential compliance shortfalls, penalty 

payments, and effect on credit sales for 

those model years. 

In addition, NHTSA believes that 

commenters have raised valid questions 

about further economic effects. These 

commenters have argued that, regardless 

of the impact of this rulemaking action 

on Model Year 2019 through 2021 

vehicles, longer-term impacts may vary 

as a result of manufacturer multi-year 

planning, the transfer of credits across 

model years and between 

manufacturers, and the changing value 

of credits over time. According to these 

commenters, if such variation were to 

occur, applying the $14 penalty rate 

beginning in Model Year 2019 may 

result in manufacturers applying credit 

balances to Model Year 2019 through 

2021 vehicles and being incentivized to 

make fuel economy improvements in 

their fleet beyond that timeframe. And 

for manufacturers that do not currently 

have credits or cannot transfer or trade 

for them to make up a shortfall of the 

minimum domestic passenger car 

standard, applying the inflation 

adjusted penalty rate beginning in 

Model Year 2019 places an even greater 

incentive on future compliance and fuel 

economy improvements to avoid 

additional higher penalties going 

forward. 

A brief explanation of the statutory 

scheme that governs the use of credits 

is helpful in understanding how this 

could work. Manufacturers comply 

separately with the domestic passenger 

car, imported passenger car, and light 

truck standards. Thus, a manufacturer 

can comply (or over comply) with all 

standards, comply with some but not all 

standards, or fail to comply with all 

standards. To the extent that a 

manufacturer over-complies with the 

standard for a particular fleet, the 

manufacturer generates a credit for that 

over-compliance, which the 

manufacturer can hold-on to for future 

compliance for that standard, ‘‘transfer’’ 

from one fleet (e.g., light trucks) to its 

other fleet (e.g., imported passenger 

cars), or trade those credits to another 

manufacturer. Those manufacturers can 

either ‘‘bank’’ those credits for their own 

future use or sell them to non-compliant 

manufacturers, who seek the credit to 

make up for a shortfall. These earned 

credits can be ‘‘carried forward’’ to 

apply to any of the five model years 

after they are earned. Manufacturers can 

also choose to ‘‘carry back’’ credits to 

apply to any of three model years before 

they are earned. However, there are 

certain limitations on the use of credits, 

as manufacturers may not transfer more 

than 2.0 miles per gallon in credits from 

one of their fleets to another in a single 

model year and neither transferred nor 

traded credits may be used to meet the 

minimum domestic passenger car 

standard. 

Consistent with these constraints, if 

the rate for civil penalties instead 

remained at the $5.50 rate for Model 

Years 2019 through 2021, some 

manufacturers might choose to pay the 

lower penalty earlier and save the 

credits that could either carry forward 

or carry back for future model years 

when they are valued more due to the 

inflation adjustment. For example, a 

credit earned in Model Year 2017 could 

be used for any year up to Model Year 

2022, and, thus, if the adjusted rate 

applied in Model Year 2019, they may 

use that credit at that point, while they 

may have saved that credit for Model 

Year 2022 under the delay provided in 

the interim final rule. Likewise, credits 

earned in Model Years 2019 through 

2021 may be used through Model Years 

2024 and 2026, respectively. Thus, if the 

penalty rate remained $5.50 until Model 

Year 2022, a manufacturer with 

shortfalls in one fleet in Model Years 

2019 through 2021 may choose to pay 

penalties and hold on to any transferred 

or traded credits until the years in 

which the penalty rate has been 

adjusted for inflation, rather than using 

the credits earlier and making design 

changes to increase its compliance in 

the later model years. Likewise, a 

manufacturer who has a shortfall in its 

domestic passenger fleet might take 

actions to over-comply with the 

standard in future years when the 

penalty is increased to generate credits 

to apply to earlier years rather than 

paying the higher penalty.41 Finally, 

credits earned in Model Year 2022, 

which is not yet underway, could be 

applied back to Model Year 2019 

shortfalls, which have not been assessed 

yet, which a manufacturer may be more 

likely to do if the penalty rate for Model 

Year 2019 is the rate as adjusted for 

inflation. The agency has tentatively 

determined that these actions are 

possible and, thus, may mean that the 

argument put forward in the interim 

final rule that no effects beyond 

increased penalty payments are possible 

may be incorrect. NHTSA requests 

further comments on such potential 

effects, particularly as industry 

commenters did not provide detail as to 

whether and the extent to which any 

such potential variations are actually 

likely to occur. 

In any event, based on further 

consideration of the 2015 Act and the 

Second Circuit’s decisions on this issue, 

NHTSA tentatively believes that that it 

does not have discretion over when the 

inflation adjustment should begin to 

take effect. Further, the Inflation 

Adjustment Act provided NHTSA no 

discretion over what the adjusted rate 

should be, as that is merely a function 

of the formula established by Congress 

and calculated by OMB, and mandated 

streamlined processes for making both 

the initial adjustment and any 

subsequent adjustments that do not 

require accompanying analyses or 

public comment.42

2. Regulatory Flexibility Act 

Pursuant to the Regulatory Flexibility 

Act (5 U.S.C. 601 et seq., as amended by 

the Small Business Regulatory 

Enforcement Fairness Act (SBREFA) of 

1996), whenever an agency is required 

to publish a notice of proposed 

rulemaking or final rule, it must prepare 

and make available for public comment 

a regulatory flexibility analysis that 

describes the effect of the rule on small 

entities (i.e., small businesses, small 

organizations, and small governmental 

jurisdictions). No regulatory flexibility 

analysis is required, however, if the 

head of an agency certifies the proposal 

will not have a significant economic 

impact on a substantial number of small 

entities. 

NHTSA has considered the impacts of 

this document under the Regulatory 

Flexibility Act and certifies that this 

rulemaking will not have a significant 

economic impact on a substantial 

number of small entities. The following 

provides the factual basis for this 

certification under 5 U.S.C. 605(b). 


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43 42 U.S.C. 4321–4347. 

44 42 U.S.C. 4332. 

45See Dept. of Transp. v. Public Citizen, 541 U.S. 

752, 768–69 (2014) (holding that the agency need 

not prepare an Environmental Impact Statement 

(EIS) or analyze certain environmental effects in its 

EA, and stating, ‘‘[s]ince FMCSA has no ability 

categorically to prevent the cross-border operations 

of Mexican motor carriers, the environmental 

impact of the cross-border operations would have 

no effect on FMCSA’s decisionmaking—FMCSA 

simply lacks the power to act on whatever 

information might be contained in the EIS.’’). 

46 28 U.S.C. 2461 note, 4(c) (allowing an agency 

to make the first adjustment of the amount of a civil 

monetary penalty by less than the otherwise 

required amount if increasing the civil monetary 

penalty by the otherwise required amount would 

have a negative economic impact; or the social costs 

of increasing the civil monetary penalty by the 

otherwise required amount outweighed the 

benefits). NHTSA’s attempt to apply this exception 

through the ‘‘negative economic impact’’ prong was 

vacated by the Second Circuit as too late, and the 

statute provides that the exception could only be 

applied to the initial ‘‘catch-up’’ adjustment. 

47 40 CFR 1501.5(c). 

48 40 CFR 1501.6(a). 

The Small Business Administration’s 

(SBA) regulations define a small 

business in part as a ‘‘business entity 

organized for profit, with a place of 

business located in the United States, 

and which operates primarily within the 

United States or which makes a 

significant contribution to the U.S. 

economy through payment of taxes or 

use of American products, materials or 

labor.’’ 13 CFR 121.105(a). SBA’s size 

standards were previously organized 

according to Standard Industrial 

Classification (‘‘SIC’’) Codes. SIC Code 

336211 ‘‘Motor Vehicle Body 

Manufacturing’’ applied a small 

business size standard of 1,000 

employees or fewer. SBA now uses size 

standards based on the North American 

Industry Classification System 

(‘‘NAICS’’), Subsector 336— 

Transportation Equipment 

Manufacturing. This action is expected 

to affect manufacturers of motor 

vehicles. Specifically, this action affects 

manufacturers from NAICS codes 

336111—Automobile Manufacturing, 

and 336112—Light Truck and Utility 

Vehicle Manufacturing, which both 

have a small business size standard 

threshold of 1,500 employees. 

Though civil penalties collected 

under 49 CFR 578.6(h)(1) and (2) apply 

to some small manufacturers, lowvolume manufacturers can petition for 

an exemption from the Corporate 

Average Fuel Economy standards under 

49 CFR part 525. This would lessen the 

impacts of this rulemaking on small 

business by allowing them to avoid 

liability for penalties under 49 CFR 

578.6(h)(2). Small organizations and 

governmental jurisdictions will not be 

significantly affected, as the price of 

motor vehicles and equipment ought not 

change as the result of this rule. 

In the interim final rule, NHTSA 

stated that it did not believe that the 

rule would have a significant economic 

impact on a substantial number of small 

entities and requested comment on the 

issue. None of the comments NHTSA 

received discussed this issue. 

3. Executive Order 13132 (Federalism) 

Executive Order 13132 requires 

NHTSA to develop an accountable 

process to ensure ‘‘meaningful and 

timely input by State and local officials 

in the development of regulatory 

policies that have federalism 

implications.’’ ‘‘Policies that have 

federalism implications’’ is defined in 

the Executive order to include 

regulations that have ‘‘substantial direct 

effects on the States, on the relationship 

between the [N]ational [G]overnment 

and the States, or on the distribution of 

power and responsibilities among the 

various levels of government.’’ Under 

Executive Order 13132, the agency may 

not issue a regulation with federalism 

implications, that imposes substantial 

direct compliance costs, and that is not 

required by statute, unless the Federal 

Government provides the funds 

necessary to pay the direct compliance 

costs incurred by State and local 

governments, the agency consults with 

State and local governments, or the 

agency consults with State and local 

officials early in the process of 

developing the proposed regulation. 

As noted previously, this rulemaking 

will not have substantial direct effects 

on the States, on the relationship 

between the National Government and 

the States, or on the distribution of 

power and responsibilities among the 

various levels of government, as 

specified in Executive Order 13132. The 

reason is that this rulemaking is 

expected to generally apply to motor 

vehicle manufacturers. Thus, the 

requirements of Section 6 of the 

Executive Order do not apply. 

4. Unfunded Mandates Reform Act of 

1995 

The Unfunded Mandates Reform Act 

of 1995, Public Law 104–4, requires 

agencies to prepare a written assessment 

of the cost, benefits, and other effects of 

proposed or final rules that include a 

Federal mandate likely to result in the 

expenditure by State, local, or tribal 

governments, in the aggregate, or by the 

private sector, of more than $100 

million annually. Because this 

rulemaking is not expected to include a 

Federal mandate, no unfunded mandate 

assessment will be prepared. 

5. National Environmental Policy Act 

The National Environmental Policy 

Act of 1969 (NEPA) 43 directs that 

Federal agencies proposing ‘‘major 

Federal actions significantly affecting 

the quality of the human environment’’ 

must, ‘‘to the fullest extent possible,’’ 

prepare ‘‘a detailed statement’’ on the 

environmental impacts of the proposed 

action (including alternatives to the 

proposed action).44 However, there are 

some instances where NEPA does not 

apply to a particular proposed One 

consideration is whether the action at 

issue is a non-discretionary action to 

which NEPA may not apply or for 

which NEPA may require less detailed 

analysis.45 Under the 2015 Act, and as 

confirmed by the Second Circuit, 

NHTSA has no discretion in whether to 

adjust the CAFE civil penalty rate to 

$14, and NHTSA tentatively believes it 

has no discretion in when to do so. 

Further, the 2015 Act provides no basis 

for the consideration of environmental 

effects in making the required inflation 

adjustments, outside of an exception not 

applicable here.46 Accordingly, in line 

with legal precedent concerning nondiscretionary agency action, NHTSA 

believes that no further analysis 

pursuant to NEPA is required regarding 

increasing the CAFE civil penalty rate 

for inflation. 

Although NHTSA does not have 

discretion on whether to increase the 

CAFE civil penalty rate for inflation, 

NHTSA has prepared this 

environmental assessment to evaluate 

the effects of the timing of such an 

increase on the environment. When a 

Federal agency prepares an 

environmental assessment, the CEQ 

NEPA implementing regulations require 

the agency to (1) ‘‘[b]riefly provide 

sufficient evidence and analysis for 

determining whether to prepare an 

environmental impact statement or a 

finding of no significant impact,’’ and 

(2) ‘‘[b]riefly discuss the purpose and 

need for the proposed action, 

alternatives . . . , and the 

environmental impacts of the proposed 

action and alternatives, and include a 

listing of [a]gencies and persons 

consulted.’’ 47 Generally, based on the 

environmental assessment, the agency 

must make a determination to prepare 

an environmental impact statement or 

‘‘prepare a finding of no significant 

impact if the [a]gency determines, based 

on the environmental assessment, not to 

prepare an environmental impact 

statement because the proposed action 

will not have significant effects.’’ 48

The interim final rule included an 

Environmental Assessment (EA) and a 

Finding of No Significant Impact 


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49Comment from Natural Resources Defense 

Council and Sierra Club, NHTSA–2021–0001–0013; 

Comment from the New York University School of 

Law Institute of Policy Integrity, NHTSA–2021– 

0001–0011. 

50See NHTSA’s Final Environmental Impact 

Statements for the CAFE rulemaking for MYs 2017 

and beyond (Docket No. NHTSA–2011–0056) and 

for MYs 2021–2026 (Docket No. NHTSA–2017– 

0069), both of which illustrate these trends as fuel 

economy standard stringency increases across 

alternatives. Both EISs are also available on the 

agency’s fuel economy website: https://

www.nhtsa.gov/fuel-economy. 

51Because NHTSA does not have final model year 

performance data verified by EPA for these model 

years, any quantitative projections of the 

environmental impact across multiple model years 

would be too speculative to rely upon at this time. 

(FONSI) regarding the agency’s decision 

to increase the CAFE civil penalty rate 

for inflation beginning with Model Year 

2022. However, it sought comment on 

the environmental impacts of a longer 

delay to Model Year 2023. Two 

commenters alleged that the interim 

final rule violated NEPA because the 

agency did not consider the effect of 

CAFE penalties assessed in one year on 

manufacturers’ compliance decisions in 

future years.49 Like NHTSA’s approach 

in the interim final rule, this section 

may serve as NHTSA’s Draft 

Environmental Assessment (Draft EA). 

The issue raised by commenters on the 

EA presented in the interim final rule is 

addressed below. NHTSA invites public 

comments on the applicability of NEPA 

to this action and the contents and 

tentative conclusions of this Draft EA. 

I. Purpose and Need 

This SNPRM sets forth the purpose of 

and need for this action. Pursuant to the 

Inflation Adjustment Act and the 

Second Circuit’s decision, NHTSA is 

required to make an initial ‘‘catch-up’’ 

adjustment to the civil monetary 

penalties it administers for the CAFE 

program. The purpose of this SNPRM is 

to consider the timing of the application 

of the adjustment to the CAFE civil 

penalty rate, consistent with the 

statutory requirements. 

II. Alternatives 

The first alternative is to restore the 

status quo ante prior to the interim final 

rule, which is adjusting the CAFE civil 

penalty rate from $5.50 to $14 beginning 

in Model Year 2019. This timing was 

originally established by the December 

2016 final rule and was twice made 

effective by decisions of the Second 

Circuit. The second alternative is 

applying the adjustment beginning in 

Model Year 2022, which reflects the 

action taken in the interim final rule. 

NHTSA is no longer considering the 

alternative of applying the adjustment 

beginning in Model Year 2023. NHTSA 

is accepting comments on whether it 

should consider other alternatives of the 

inflation adjustment applying beginning 

with a model year later than Model Year 

2019. Commenters arguing for such a 

position should explain how it is 

consistent with the 2015 Act and the 

Second Circuit’s decisions. 

III. Environmental Impacts of the Action 

and Alternatives 

In the interim final rule, NHTSA 

asserted that it anticipated no 

differences in environmental impacts 

associated with the alternatives of 

applying the adjustment beginning in 

Model Years 2019, 2020, 2021, or 2022. 

NHTSA based this conclusion on the 

fact that vehicles for Model Years 2019 

and 2020 had largely if not entirely been 

produced already, and many 

manufacturers were already selling 

Model Year 2021 vehicles. 

After reviewing the comments 

received in response to the interim final 

rule, NHTSA has reconsidered whether 

this assessment is complete. 

Commenters have argued that, 

regardless of the impact of this 

rulemaking action on Model Year 2019 

through 2021 vehicles, longer-term 

impacts may vary as a result of 

manufacturer multi-year planning, the 

transfer of credits across model years 

and between manufacturers, and the 

changing value of credits over time. If 

this is correct, applying the adjustment 

earlier could result in manufacturers 

applying credit balances to Model Year 

2019 through 2021 vehicles and being 

incentivized to make fuel economy 

improvements in their fleet beyond that 

timeframe, rather than paying civil 

penalties at the $5.50 rate for Model 

Years 2019 through 2021 and saving the 

credits for future model years when they 

could be valued more due to the 

inflation adjustment. Additionally, for 

manufacturers without credit balances, 

the potential application of a 

significantly higher civil penalty for 

Model Years 2019 through 2021 may 

spur more rapid implementation of fuelsaving technology in order to allow the 

manufacturer to accrue credits that may 

be carried back to cover the shortfall in 

Model Years 2019 through 2021. 

Overall, NHTSA anticipates that 

applying the adjustment beginning with 

Model Year 2019 may lead to the 

eventual application of more fuel-saving 

technology, resulting in fewer 

greenhouse gas emissions and 

reductions in many criteria and toxic air 

pollutants compared to applying the 

adjustment beginning in Model Year 

2022.50 Although Model Years 2019 and 

2020 are already completed, and Model 

Year 2021 is underway, the civil penalty 

assessment process is not yet complete 

for any of them.51 As a result, NHTSA 

does not yet know the anticipated 

manufacturer compliance shortfall for 

these model years. Because 

manufacturers can apply credits across 

a multi-year window, their decisions 

about how to apply credits in earlier 

model years will affect the availability 

of credits and the application of fuelsaving technology in later model years. 

However, NHTSA does not know 

whether and to what degree 

manufacturers will choose to pay fines 

in lieu of applying accrued credits, trade 

credits with other manufacturers, or rely 

on multi-year planning and credit carryforward and carry-back to address 

shortfalls. NHTSA invites comments, 

information, and analyses from the 

public on the degree to which this may 

occur as a result of changes to the civil 

penalty rate in Model Year 2019 versus 

Model Year 2022. 

At this time, however, NHTSA 

anticipates the impacts to be small. The 

difference between the alternatives 

contemplated in this action is only 

whether or not the civil penalty rate 

increase applies to three Model Years: 

2019, 2020, and 2021. NHTSA 

continues to believe the impacts on 

those Model Years alone is expected to 

be de minimis, as Model Years 2019 and 

2020 have largely if not entirely been 

produced already, and manufacturers 

are already selling Model Year 2021 

vehicles. Further, as NHTSA has 

addressed in its CAFE rulemakings, 

many manufacturers have been 

unwilling to pay civil penalties 

historically. Those manufacturers may 

continue to opt to apply credits even if 

a lower civil penalty rate applied, rather 

than hold credits for future model years 

when the civil penalty rate would be 

higher. NHTSA also seeks comments on 

these conclusions. 

IV. Agencies and Persons Consulted 

NHTSA and DOT have consulted with 

OMB and the U.S. Department of Justice 

and provided other Federal agencies 

with the opportunity to review and 

provide feedback on this rulemaking. 

V. Conclusion 

NHTSA has reviewed the information 

presented in this Draft EA and 

tentatively concludes that adjusting the 

CAFE civil penalty rate beginning with 

Model Year 2019, as compared to Model 

Year 2022, would have, at most, a more 

positive impact on the quality of the 


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human environment to the extent that 

manufacturers may be more likely to 

expend credit balances on Model Year 

2019 through 2021 vehicles than if the 

civil penalty rate remained at $5.50 for 

those model years. Lacking such credits 

in future years, manufacturers would be 

more likely to make improvements to 

the fuel economy of their fleets to avoid 

paying the higher civil penalty rates that 

would occur under either alternative. 

Additionally, higher civil penalty rates 

in Model Years 2019 through 2021 may 

cause manufacturers to more rapidly 

implement fuel-saving technology so 

that they may accrue credits to be 

carried back to cover compliance 

shortfalls. But NHTSA does not expect 

any differences in the impacts under 

either of the alternatives to rise to the 

level of significance that would 

necessitate the preparation of an 

Environmental Impact Statement. 

Based on the information in this Draft 

EA, and assuming no additional 

information or changed circumstances, 

NHTSA expects to make a Finding of No 

Significant Impact (FONSI). Such a 

finding will not be made before careful 

review of all public comments received. 

If NHTSA determines it is appropriate 

to do so, a Final EA and a FONSI will 

be issued as part of the final rule. 

6. Executive Order 12988 (Civil Justice 

Reform) 

This rulemaking is not expected to 

have a preemptive effect. This 

rulemaking is also not expected to have 

a retroactive effect, and NHTSA requests 

comment on this point. Judicial review 

of the interim final rule or a subsequent 

final rule may be obtained pursuant to 

5 U.S.C. 702. 

7. Paperwork Reduction Act 

In accordance with the Paperwork 

Reduction Act of 1980, NHTSA states 

that there are no requirements for 

information collection associated with 

this rulemaking action. 

8. Privacy Act 

Please note that anyone is able to 

search the electronic form of all 

comments received into any of DOT’s 

dockets by the name of the individual 

submitting the comment (or signing the 

comment, if submitted on behalf of an 

association, business, labor union, etc.). 

You may review DOT’s complete 

Privacy Act Statement in the Federal 

Register published on April 11, 2000 

(65 FR 19477), or you may visit https:// 

www.transportation.gov/privacy. 

List of Subjects in 49 CFR Part 578 

Imports, Motor vehicle safety, Motor 

vehicles, Penalties, Rubber and rubber 

products, Tires. 

In consideration of the foregoing, the 

National Highway Traffic Safety 

Administration proposes to amend 49 

CFR part 578 as set forth below. 

PART 578—CIVIL AND CRIMINAL 

PENALTIES 

■ 1. The authority citation for 49 CFR 

part 578 continues to read as follows: 

Authority: Pub. L. 101–410, 104 Stat. 890; 

Pub. L. 104–134, 110 Stat. 1321; Pub. L. 109– 

59, 119 Stat. 1144; Pub. L. 114–74, 129 Stat. 

584; Pub. L. 114–94, 129 Stat. 1312; 49 U.S.C. 

30165, 30170, 30505, 32308, 32309, 32507, 

32709, 32710, 32902, 32912, and 33115; 

delegation of authority at 49 CFR 1.81, 1.95. 

■ 2. Amend § 578.6 by revising 

paragraph (h)(2) to read as follows: 

§ 578.6 Civil penalties for violations of 

specified provisions of Title 49 of the United 

States Code. 

* * * * * 

(h) * * * 

(2) Except as provided in 49 U.S.C. 

32912(c), beginning with model year 

2019, a manufacturer that violates a 

standard prescribed for a model year 

under 49 U.S.C. 32902 is liable to the 

United States Government for a civil 

penalty of $14, plus any adjustments for 

inflation that occurred or may occur (for 

model years before model year 2019, the 

civil penalty is $5.50), multiplied by 

each .1 of a mile a gallon by which the 

applicable average fuel economy 

standard under that section exceeds the 

average fuel economy— 

(i) Calculated under 49 U.S.C. 

32904(a)(1)(A) or (B) for automobiles to 

which the standard applies produced by 

the manufacturer during the model year; 

(ii) Multiplied by the number of those 

automobiles; and 

(iii) Reduced by the credits available 

to the manufacturer under 49 U.S.C. 

32903 for the model year. 

Issued in Washington, DC, under authority 

delegated in 49 CFR 1.95, and 501.5. 

Steven S. Cliff, 

Acting Administrator. 

[FR Doc. 2021–17842 Filed 8–18–21; 11:15 am] 

BILLING CODE 4910–59–P 


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