[Federal Register Volume 60, Number 65 (Wednesday, April 5, 1995)]
[Rules and Regulations]
[Pages 17254-17272]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-8130]



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DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

49 CFR Parts 552, 554, 573, 576, and 577

[Docket No. 93-68; Notice 2]
RIN 2127-AD83


Petitions for Rulemaking, Defect and Noncompliance Orders; 
Standards Enforcement and Defect Investigations; Defect and 
Noncompliance Reports; Record Retention; and Defect and Noncompliance 
Notification

AGENCY: National Highway Traffic Safety Administration, DOT.

ACTION: Final rule.

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SUMMARY: The National Highway Traffic Safety Administration (NHTSA) is 
amending several provisions of its regulations that pertain to its 
enforcement of the provisions of Chapter 301 of Title 49 of the United 
States Code (49 U.S.C. 30101-169, formerly the National Traffic and 
Motor Vehicle Safety Act), with respect to manufacturers' obligations 
to provide notification and remedy without charge to owners of motor 
vehicles or items of motor vehicle equipment that have been determined 
not to comply with a Federal motor vehicle safety standard or to 
contain a defect related to motor vehicle safety.
    Some of the rules published today implement provisions added by the 
Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA), 
regarding requirements for notification of certain vehicle lessees and 
for a second notification to owners of recalled vehicles and items of 
motor vehicle equipment in the event that NHTSA determines that the 
original notification has not resulted in an adequate number of 
vehicles or items of equipment being returned for remedy.
    This rule also amends the regulation governing NHTSA's 
consideration of petitions for rulemaking or for an investigation of an 
alleged safety-related defect or a noncompliance with a Federal motor 
vehicle safety standard (49 CFR part 552) and NHTSA's procedures 
following an initial determination that a safety-related defect exists. 
49 CFR part 554. The rule also makes several changes in the regulations 
governing the form and content of defect and noncompliance reports 
submitted to NHTSA by manufacturers (49 CFR part 573); and to the 
agency's record retention requirements. 49 CFR part 576. Finally, this 
rule amends various sections of 49 CFR part 577 regarding the 
requirements for notification to owners, purchasers, dealers and 
lessees of safety-related defects and noncompliances.

DATES: Effective date: The amendments made in this rule are effective 
May 5, 1995.
    Any petitions for reconsideration must be received by NHTSA no 
later than May 5, 1995.

ADDRESSES: Any petitions for reconsideration should refer to the docket 
and notice number of this notice and be submitted to: Docket Section, 
Room 5109, National Highway Traffic Safety Administration, 400 Seventh 
Street, SW., Washington, DC 20590. (Docket Room hours are 9:30 a.m.-4 
p.m., Monday through Friday.)

FOR FURTHER INFORMATION CONTACT: Jonathan D. White, Office of Defects 
Investigation, National Highway Traffic Safety Administration, 400 
Seventh Street, SW, room 5319, Washington, DC 20590; (202) 366-5227.

SUPPLEMENTARY INFORMATION: These amendments are being adopted by NHTSA 
after considering comments received from numerous sources in response 
to a Notice of Proposed Rulemaking (NPRM) published on September 27, 
1993. 58 FR 50314. NHTSA received comments on some or all of the 
proposed amendments from the following: ABAS Marketing, Inc. (Strait 
Stop); American Honda Motor Company (Honda); American Automobile 
Manufacturers Association (AAMA); Association of International 
Automobile Manufacturers (AIAM); Advocates for Highway and Auto Safety 
(Advocates); AM General Corporation (AM General); Blue Bird Body 
Company (Blue Bird); CIMS; Center for Auto Safety (CAS); Fleetwood 
Enterprises, Inc. (Fleetwood); The Kelly-Springfield Tire Company 
(Kelly-Springfield); Motor and Equipment Manufacturers' Association 
(MEMA); Mack Trucks, Inc. (Mack); Midland-Grau Heavy Duty Systems, Inc. 
(a subsidiary of Echlin, Inc.) (Midland); Navistar International 
Transportation Corporation (Navistar); National Automobile Dealers 
Association (NADA); R.L. Polk & Company (Polk); Sierra Products, Inc. 
(Sierra); Truck Manufacturers; Toyota Motor Corporate Services of North 
America (Toyota); and Volkswagen of America, Inc (Volkswagen). The 
reasons for the proposals were fully discussed in the NPRM.
    Not all of the amendments proposed in the NPRM are being adopted as 
final rules today. With respect to the proposed amendment of 49 CFR 
part 577 regarding the duty of manufacturers to notify dealers of 
defects and noncompliances that are determined to exist, discussed in 
the NPRM (see 58 FR at 50320), NHTSA has decided that it needs 
additional time to consider the appropriate action to take in light of 
the issues raised by some of the commenters. Since these issues do not 
affect the remaining proposed amendments, the agency has decided to 
issue a final rule with respect to those amendments while it resolves 
the issues relating to dealer notification.
    The regulatory provisions amended by this final rule implement the 
National Traffic and Motor Vehicle Safety Act of 1966, as amended 
(``Act''), which was originally set out at 15 U.S.C. 1381 et seq. 
Recently, as part of a comprehensive codification of transportation 
laws, the Act was reenacted as Chapter 301 of Title 49 of the United 
States Code. Pub.L. 103-272 (July 5, 1994). Congress specified in 
section 6(a) of the statute that the codification is not to be 
construed as making any substantive changes, but changed the wording of 
almost every section. Some of these changes affect the wording of 
sections of NHTSA's regulations that are being amended in this final 
rule. The agency believes it is desirable that the language of its 
regulations be consistent with that used in the statute. Therefore, 
this rule also makes technical amendments to the regulations covered by 
this notice to make their wording conform to the language used in the 
recodification. Any such amendments will be noted in the appropriate 
section of the preamble. The agency emphasizes that, because 
[[Page 17255]] Congress did not intend the changes in terminology to be 
substantive, these amendments are technical only and do not alter the 
meaning of the regulations.

Amendments to Part 552--Petitions for Rulemaking and for Defect and 
Noncompliance Investigations

    Part 552 implements the citizen petition provisions of 49 U.S.C. 
30162 (formerly section 124 of the Act). This rule adopts the proposed 
amendments to 49 CFR 552.6 and 552.8 in order to remove any possible 
ambiguity with regard to the factors that NHTSA may consider when 
deciding whether to grant or deny a citizen petition. The new language 
of Sec. 552.8 makes it clear that the regulation does not limit NHTSA's 
discretion to consider factors such as resource allocation, agency 
priorities, and likelihood of success in litigation which might arise 
from the order, when deciding whether to grant or deny petitions filed 
pursuant to the Act. The amendment also deletes the reference in 
Sec. 552.6 to a determination by the Associate Administrator that there 
is a ``reasonable possibility'' that the requested order will be 
issued.
    While the amended regulation lists some specific factors that the 
agency may consider in deciding whether to grant or deny the petition, 
the listing is not intended to be exhaustive. It does not preclude the 
agency from considering factors not listed. The rule does not require 
the agency to consider all factors listed, nor does it set an order of 
priority in which the factors must be considered.
    Two commenters, CAS and Advocates, expressed the view that the 
proposed amendment is too broad or vague, that it should specify safety 
as the first factor that NHTSA should consider, and that it should list 
certain other specific factors that the agency must consider. While 
safety is certainly one factor that the agency will consider, these 
commenters fail to recognize that the regulation is intended to be 
consistent with the broad discretion given to NHTSA by the Act to grant 
or deny petitions. The United States Court of Appeals for the District 
of Columbia Circuit recognized the breadth of the discretion conferred 
by the Act in Center for Auto Safety v. Dole, 846 F.2d 1532 (D.C. Cir. 
1988), on rehearing, vacating 828 F.2d 799 (1987). In that case, the 
court specifically rejected an argument by CAS that NHTSA could not 
consider factors other than safety in deciding whether to grant or deny 
a petition for a safety-related defect or noncompliance proceeding.

Amendments to Part 554--Safety Defect and Standards Noncompliance 
Decisions

    NHTSA is also amending 49 CFR 554.10 and 554.11, which implement 
the provisions of the Act governing initial and final decisions of 
safety-related defect or noncompliance by the Secretary. 49 U.S.C. 
30118(a) and (b) (formerly section 152 of the Act). Section 554.10 is 
amended by deleting subsection (e) in its entirety; and Sec. 554.11 is 
amended by deleting subsection (c), which provides that if the 
Administrator decides that a failure to comply or a safety-related 
defect ``does not exist,'' he or she will notify the manufacturer and 
publish ``this finding'' in the Federal Register.
    As stated in the NPRM, the Act does not require a decision by NHTSA 
that a failure to comply or a safety-related defect does not exist. 
And, as a practical matter, the Administrator rarely if ever makes an 
affirmative decision that there is no failure to comply or no safety-
related defect. Rather, if the Administrator believes that the 
information at his or her disposal does not warrant a final decision of 
defect or noncompliance, the investigation is closed, subject to its 
possible reopening if additional evidence is obtained.
    To minimize the possibility that the public might be subject to 
confusing assertions by manufacturers that there has been a decision 
that a safety-related defect or noncompliance does not exist, the 
agency has decided to adopt the amendments proposed in the NPRM. The 
amended section will provide that if the Administrator elects, 
following an initial decision under 49 U.S.C. 30118(a), to close an 
investigation without making a final decision that a failure to comply 
or a safety-related defect exists, he or she will notify the 
manufacturer and will publish a notice of that closing in the Federal 
Register.
    Honda commented that the regulation should give the agency the 
option of finding that a defect or noncompliance does not exist when it 
closes an investigation. Its rationale is that in the absence of such a 
decision, the public would be left in doubt about whether a vehicle did 
or did not have the defect or noncompliance. The agency has no reason 
to believe that the absence of such decisions in the past has been a 
source of confusion for the public. It sees no significant safety 
benefit to be gained from making such decisions; and continuing an 
investigation until proof of such a negative could be obtained would 
divert scarce resources from other areas.
    NHTSA also will delete Sec. 554.10(e), which provides that if the 
Administrator determines that a failure to comply or a safety-related 
defect ``does not exist,'' he or she may, at his/her discretion, within 
60 days invite interested persons to submit views on the investigation 
at a public meeting as superfluous. The agency has never held a public 
meeting following the closing of an investigation. However, if it 
should so choose, it may do so even in the absence of such a 
regulation. No commenter objected to this change.

Amendments to Part 573--Defect and Noncompliance Reports

    NHTSA is amending several sections of 49 CFR part 573 regarding 
leased vehicles; the timing and duration of remedy campaigns; 
submission of draft owner notification letters to the agency; advance 
submission of schedules for notification and availability of remedy 
under certain circumstances; quarterly reports on the progress of 
recall campaigns; identification by vehicle manufacturers of suppliers 
of defective or noncompliant equipment; identification by equipment 
manufacturers of vehicle manufacturers that have been supplied with 
defective or noncompliant equipment; and requirements for submission of 
information regarding the scope of a recall campaign in certain 
instances.

Definitions

    NHTSA is amending Sec. 573.4, ``Definitions,'' to include 
definitions of the terms ``leased motor vehicle,'' ``lessor,'' and 
``lessee,'' because those terms are not currently defined in part 573. 
(These definitions will also be added to part 577.) The definition of 
``leased motor vehicle'' is identical to that which appears in 49 
U.S.C. 30119(f)(1). The definitions of ``lessor'' and ``lessee'' in 
this amendment are consistent with the definition of ``leased motor 
vehicle.''
    Under the definitions proposed in the NPRM, only lessors that 
leased five or more vehicles for a term of at least four months in the 
year preceding the date of the notification would be covered by these 
regulatory provisions. One commenter, NADA, suggested that the 
definition of ``lessor'' be changed to make clear that the lessor is 
the owner, as reflected on the vehicle's title, of any five or more 
leased vehicles, as of the date of notification by the manufacturer of 
the recall.
    NHTSA believes that NADA's comment provides a useful clarification 
of the term ``lessor,'' by adding the lessor is the owner as shown on 
the vehicle's title. It is also reasonable to [[Page 17256]] limit the 
term ``lessor'' to those who have ownership at the time of the 
notification by the manufacturer of the recall, so that the obligations 
of lessors would not be imposed on those who no longer owned the 
recalled vehicle at that time.
    NHTSA is also adopting an amendment to Sec. 573.4 which defines the 
term ``readable form,'' to mean a form that is either readable by the 
unassisted eye or by machine. As proposed, the definition required 
parties submitting information in machine readable form to obtain prior 
written approval from NHTSA's Office of Defects Investigation, 
confirming that equipment needed to read the information is readily 
available to NHTSA. Toyota commented that for all similar information 
responses, once a manufacturer has obtained approval for the original 
response in that form, it should not have to obtain approval for future 
submissions in the same form. NHTSA believes that one-time approval of 
a machine-readable format should suffice to ensure that the agency 
receives information in a form which makes it accessible to it. 
Requiring approval each time information is submitted would be 
duplicative and would unnecessarily reduce the efficiency of the recall 
notification process. Accordingly, the rule adopted today incorporates 
the changes suggested by Toyota.
    NHTSA does not believe a system that permitted oral approval, as 
suggested by AAMA, would be workable. In the event that a question 
arose about the agency's approval of a particular format, it would be 
desirable to have a written record showing the scope of the approval.

Scope of Recall

    The agency is amending 49 CFR 573.5(c)(2) to require, as part of 
the manufacturer's report to NHTSA of its defect or noncompliance 
decision, an explicit statement of how the population that will be 
covered by the recall was identified and of how the recall population 
differs from any similar vehicles or items of equipment that are not 
covered by the recall. If the information is not available to the 
manufacturer at the time of filing its part 573 report, it must so 
state in that report and furnish an estimated date when it expects it 
to be available. When there is such a delay, the manufacturer must 
furnish the information to NHTSA within five Federal government working 
days of when it becomes available.
    Manufacturers often decide that a safety-related defect or 
noncompliance exists in only some portion of their production of a 
given model or item of equipment; for example, in vehicles or items of 
equipment manufactured between certain dates, or in certain locations, 
or with certain engines or options. On several occasions within the 
past few years, manufacturers have had to revise the scope of their 
recalls after they or NHTSA uncovered information indicating that 
additional vehicles or equipment items contained the defect or 
noncompliance.
    Although some manufacturers have included information in their part 
573 reports that explains the basis on which they selected the specific 
vehicles or equipment items that will be covered by a recall, NHTSA's 
current regulations do not explicitly require manufacturers to do so. 
NHTSA has found that when this information is not provided, it has been 
difficult to ascertain whether the scope of the recall proposed by the 
manufacturer is adequate. The amendment will ensure that the agency has 
the information it needs to ensure that the recall scope proposed by 
the manufacturer is correct.
    AAMA and Blue Bird opposed the amendment on the ground that the 
agency already has the authority to request this information in 
individual cases as needed. AAMA also commented that requiring it in 
all cases will be unduly burdensome, and that NHTSA does not need this 
information for every recall. These were the only comments on this 
proposal.
    The fact that NHTSA has authority to ask for this information in 
individual cases is not a reason for not requiring it across the board. 
Requiring it by regulation will make NHTSA's oversight of the recall 
process more efficient, because it will eliminate the need for the 
agency to decide in each case whether to ask for the information. 
Moreover, it will ensure that the information is available even in 
those instances in which NHTSA might fail to request the information 
because the need for it is not apparent at the time the manufacturer 
submits its defect or noncompliance report.
    NHTSA does not believe it is unduly burdensome to require this 
information, which will ordinarily be readily available to the 
manufacturer at the time it files its part 573 report. In making a 
defect or noncompliance decision, the manufacturer is likely to have 
identified the particular vehicles or items of equipment covered by the 
recall, and it will, of necessity, have a basis for that 
identification. The amendment does permit later filing when a 
manufacturer does not have the information at the time the report is 
submitted.
    NHTSA also disagrees with AAMA's contention that the agency does 
not ``need'' the information in every recall. Whenever the manufacturer 
is recalling fewer than all similar vehicles or items of equipment, the 
agency needs to know why the scope of the recall is limited in order to 
ensure that the recall campaign adequately covers the population 
affected by the defect or noncompliance. In the past, there have been 
instances in which a manufacturer expanded the scope of a recall after 
NHTSA obtained information showing that other vehicles or items of 
equipment had the same defect or noncompliance. The delay in the 
agency's learning about the additional defective or noncomplying 
vehicles or equipment items exposed members of the public to a safety 
risk that could have been avoided had the information explaining the 
scope of the recall been available to NHTSA when the manufacturer first 
notified NHTSA of its decision to recall.

Identification of Suppliers and Customers

    NHTSA is amending Sec. 573.5(c)(2) to require the manufacturer of a 
recalled vehicle or item of equipment to identify the supplier (if 
different from the vehicle manufacturer) of any component or assembly 
that contains the defect or noncompliance, and to require an equipment 
manufacturer that decides that a defect or non-compliance exists in its 
product to identify all manufacturers that purchased the defective or 
non-complying components for use in new motor vehicles or new items of 
equipment.
    Both of these requirements will assist the agency in assuring at an 
early point in the recall process that a recall encompasses all 
vehicles and items of equipment that contain defective or noncomplying 
components rather than being inappropriately limited to a single 
manufacturer's production. Identification of the supplier will, at the 
outset of the campaign, permit the agency to contact the supplier 
promptly to ascertain whether the same component was distributed to 
other manufacturers or as replacement equipment. Likewise, early 
identification of the supplier's other customers (if any) will permit 
the agency to contact the affected manufacturers sooner to apprise them 
of their responsibilities under the Act once a defect or noncompliance 
in an item of equipment has been identified.
    AAMA, AM General and Blue Bird expressed views about this proposal. 
AAMA and Blue Bird contended that such a requirement would be unduly 
burdensome for manufacturers. The agency disagrees. In many instances, 
manufacturers already provide this information to NHTSA when they are 
[[Page 17257]] conducting a recall. Moreover, in most if not all 
recalls, the manufacturer will know the particular component or 
components that caused the defect or noncompliance in the completed 
product, and will certainly be aware of the identity of the entity that 
supplied the component. If the manufacturer believes that the defect or 
noncompliance is not caused by a component or assembly from an outside 
supplier, it need not provide any information in response to this 
provision. Moreover, any burden is far outweighed by the safety benefit 
of allowing the agency to identify other vehicles or items of equipment 
with the same defective or noncompliant component.
    Both Blue Bird and AAMA also noted that the agency already has the 
authority to request this information in individual recalls. While this 
statement is correct, it is not a reason for not adopting this 
provision. The information required by the amendment is obviously more 
accessible to the manufacturer than to the agency; the agency may not 
be able to identify all cases in which it is appropriate to request 
such information. Moreover, the amendment ensures that this type of 
information will be available to NHTSA at the beginning of the recall 
process. This will have the safety benefit of permitting earlier 
identification of other vehicles or items of equipment with the same 
defect or noncompliance, which will minimize the length of time that 
the public is exposed to a safety risk because it avoids unnecessary 
delay in making the remedy available to all affected owners.
    Section 30102(b)(1) of Title 49 does not, as AAMA argues, prohibit 
the agency from requiring manufacturers to provide this information for 
components that are not replacement equipment as defined by that 
section. That section merely states that the vehicle manufacturer, and 
not the component manufacturer, is responsible for remedying a defect 
or noncompliance in a component installed in a vehicle as original 
equipment. It does not preclude NHTSA from obtaining information about 
the identity of the manufacturer or supplier of components used as 
original equipment. The agency does not intend to use the information 
to hold the component manufacturer responsible for remedying the defect 
or noncompliance. Its purpose is to learn from the latter whether any 
other vehicle manufacturer used the same component in its vehicles, so 
that the agency can then contact the manufacturer of those vehicles to 
ascertain whether additional recalls should be conducted.
    AM General expressed a concern that this provision could have an 
adverse effect on suppliers whose components are identified by 
manufacturers as defective, in instances where further examination 
reveals that they are not in fact the cause of the defect or 
noncompliance. The number of instances in which such incorrect 
identification occurs is likely to be quite small because, in most 
instances, the cause of the problem has already been identified by the 
time the manufacturer makes its decision that there is a safety-related 
defect or noncompliance. If a manufacturer is still uncertain as to 
whether a defect or noncompliance is attributable to a component or 
assembly from an outside supplier when it files its defect or 
noncompliance report with NHTSA, the manufacturer's report should make 
that uncertainty clear. Any adverse publicity that does erroneously 
affect a supplier can be countered by publicizing the correct 
information when it becomes available. Finally, the safety benefit of 
having this information available to NHTSA, as described above, will 
far outweigh the risk that, in a few instances, a supplier might be 
incorrectly identified as the origin of a defective or noncomplying 
product.

Schedule for Notification Campaigns

    Although many recalls are implemented within a reasonable time of 
the decision that a safety-related defect or noncompliance exists, 
NHTSA has noted an increase in the number of recalls in which there has 
been a significant delay between the manufacturer's decision that a 
defect or noncompliance exists and the commencement of the 
manufacturer's recall campaign. There have also been a limited number 
of instances in which the duration of the campaign was inordinately 
extended. The manufacturers in question have generally sought to 
justify these delays and extensions on the basis that needed parts and/
or facilities were not available and it would therefore be pointless to 
notify owners of the defect or noncompliance.
    While such unavailability may in certain cases justify some delay, 
it is important that the agency be aware of the manufacturer's 
anticipated schedule at the earliest possible time in order to assure 
that notification campaigns under the Act are commenced in a timely 
fashion and completed within an appropriate time period. In addition, 
in some instances, even if implementation of the remedy must be 
deferred (e.g., because needed parts are not available), it is 
appropriate for the manufacturer to send an interim notification to 
advise consumers of actions they should take prior to repairs being 
made. Finally, the agency needs to be able to respond to questions 
about the timing of the recall from the public and/or the media.
    Therefore, NHTSA proposed to amend 49 CFR 573.5(c)(8) to require 
manufacturers to provide information about their schedule for owner 
notification, along with a description of any factors that they 
anticipated could interfere with the schedule. Under the proposal, 
schedules would have been required for all recalls. In addition, the 
NPRM proposed that if a manufacturer planned to begin the campaign more 
than 30 days after its defect or noncompliance decision, or planned to 
spread the notification campaign over more than 45 days, the 
manufacturer would have to identify the basis for such a delay. In 
addition, the NPRM proposed that if a manufacturer were unable to 
follow the schedule it had originally submitted, it would have to 
inform NHTSA promptly and submit a revised schedule.
    AAMA opposed the proposal on several grounds: that it would make 
NHTSA a participant in, rather than an observer of, the recall process; 
that it would use manufacturer resources that would otherwise be 
devoted to implementing the recall campaign; that it is unneeded 
because most recall campaigns are implemented within a reasonable time; 
and that the requirement for a schedule would not speed up the remedy 
of vehicles because manufacturers would still need time to design and 
test parts, design and test the remedy, and train personnel.
    NHTSA, as the agency charged by Congress with enforcement of the 
notification and remedy provisions of the Act, is of necessity a 
``participant'' in the recall process. An integral part of this 
responsibility is to ensure that manufacturers carry out their recall 
obligations in a reasonable manner, which includes avoiding undue delay 
in sending owners notification of the defect or noncompliance.
    The agency does not believe that the requirement will divert 
resources that would otherwise be used in the campaign; or that it will 
cause a delay in the implementation of recall campaigns, as Blue Bird 
commented. A manufacturer that determines that a recall is necessary 
will necessarily have to develop a schedule for implementing the 
recall. The proposal and the rule as adopted simply require that, for 
those relatively rare recalls for which a delay is anticipated, the 
schedule, along with [[Page 17258]] an explanation thereof, be provided 
to NHTSA.
    AIAM opposed the proposal because it did not believe that 
manufacturers should be required to explain normal design, production, 
and distribution delays. It argued that only unique delays in a 
particular recall campaign, or delays of more than 75 or 90 days in 
sending out notification, should have to be explained. Moreover, it 
noted that foreign-based manufacturers need more than 30 days to 
initiate notification and begin the remedy because of the need to be in 
contact with their headquarters, and that it often takes more than 30 
days to get an updated owner list from R. L. Polk.
    The purpose of this provision is to ensure that the recall campaign 
is initiated within a reasonable time after the defect or noncompliance 
determination. NHTSA is not concerned with whether the delay is due to 
ordinary or unique circumstances. Its interest is in whether it is 
reasonable. The information the amendment requires is intended to 
enable NHTSA to evaluate the reasonableness of the delay, and to 
provide for interim notification where appropriate.
    NHTSA believes that most notification campaigns can be commenced 
within 30 days of a manufacturer's defect or noncompliance decision and 
completed within 45 after they are commenced. However, to eliminate any 
ambiguity in calculating time periods, and to provide manufacturers 
with slightly more time, NHTSA has revised the final rule so that the 
periods in question are calculated from the date of the notice to the 
agency of the defect or noncompliance decision.
    Based on past experience, and given the availability of telefax and 
other rapid electronic means of communication, that time period should 
be sufficient to allow manufacturers to obtain the information they 
need, either from Polk or from parent companies or suppliers located 
overseas. Moreover, if more time is required, the manufacturer need 
only advise the agency and explain the basis for the delay. NHTSA will 
not disapprove reasonable schedules for recall campaigns.
    Advocates supported the requirement for a schedule, but also 
suggested that manufacturers be required to notify all owners within 30 
days of notifying NHTSA of the defect or noncompliance. Advocates 
explained that any delays in the availability of the remedy could be 
explained to owners in the notification letter. NHTSA believes that a 
30-day requirement for notification under all circumstances is 
unnecessarily rigid. It prefers to have the flexibility to decide on a 
case-by-case basis whether a proposed schedule is unreasonable.
    AM General opposed the proposal because it believed that the 
manufacturer would be bound by the schedule, which would limit its 
flexibility in conducting the recall campaign. It also expressed 
concern that NHTSA needed to define more clearly the circumstances 
under which it would take action against a manufacturer under this 
section and what the action would be. Finally, it commented that NHTSA 
normally is able to learn of problems with recall campaigns through its 
regular interaction with manufacturers, and that the agency already has 
sufficient means at its disposal to compel a manufacturer to act more 
quickly.
    Contrary to AM General's contention, the amendment does not 
unreasonably limit manufacturer flexibility. The amendment clearly 
states that if unexpected circumstances arise, that would result in 
unanticipated delay, the manufacturer may submit a revised schedule. If 
there are valid reasons for the delay, there would be no agency action 
against the manufacturer.
    Honda commented that a definition of the term ``campaign'' is 
needed, to clarify whether it means notification to owners or the 
availability of the remedy. The agency has revised the regulatory 
language to clarify that the time periods triggering the need to submit 
a schedule refer to owner notification. However, NHTSA has also added 
language to clarify that if the remedy will not be available at the 
time owners are notified of the defect or noncompliance, the 
manufacturer's report must state when the remedy will be provided. This 
requirement makes explicit what was already implicit in existing 
Sec. 573.5(c)(8) (redesignated by this amendment as 
Sec. 573.5(c)(8)(i)), which requires each manufacturer to include in 
its report ``a description of its program for remedying the defect or 
noncompliance.'' (Emphasis added.)
    Based on its consideration of the comments received on the NPRM, 
and on its experience in monitoring manufacturer compliance with the 
notification and remedy requirements of the Act, NHTSA now believes 
that it is not appropriate to require manufacturers to submit the 
detailed scheduling information such as that proposed in the NPRM for 
every recall campaign. Instead, the agency believes it is appropriate 
to focus on recalls in which the manufacturer intends to delay 
commencement or completion of the notification campaign to assure that 
such delays are not unreasonable.
    For recalls in which the manufacturer intends to commence owner 
notification within 30 days, and to complete the notification campaign 
within 75 days of notifying NHTSA, it is unlikely that the agency would 
find that the schedule was unreasonable or would create a significant 
safety problem. Accordingly, the detailed scheduling information 
proposed in the NPRM will not be required for those recalls. (Of 
course, NHTSA has the authority to require manufacturers to provide 
scheduling and related information on a case-by-case basis, even apart 
from these general regulatory requirements.)
    In those cases where the manufacturer intends to exceed the time 
periods set out in the amended final rule, there is a greater 
likelihood that the remedy will not be available within a reasonable 
time, as required by 49 U.S.C. 30120(c). Therefore, the amendment 
adopted today retains the requirement proposed in the NPRM for filing a 
schedule for the campaign and a detailed description of the factors on 
which the proposed schedule is based in such instances. Such factors 
will often include the time frame for development and testing of the 
specific remedy for the defect or noncompliance, the time frame for 
production of any necessary parts, and the anticipated date(s) for 
distribution of those parts to dealers and/or owners.
    The final rule also retains the requirement that if a manufacturer 
becomes aware that circumstances will delay implementation of the 
recall, it must promptly inform NHTSA of the reasons for the delay and 
submit a new schedule. Such submission must also contain the basis for 
the new schedule, which shall also be subject to disapproval by the 
Administrator.
    The preamble to the NPRM noted that a manufacturer that intended to 
seek an exemption from the recall requirements of the Act pursuant to 
49 U.S.C. 30118(d) and 30120(h) and 49 CFR part 556 on the basis that 
the defect or noncompliance was ``inconsequential as it relates to 
motor vehicle safety'' would have to advise the agency of its intention 
to do so in its initial report under part 573. In its comments, AIAM 
suggested that the schedule requirement be waived when a manufacturer 
intends to file an inconsequentiality petition.
    The agency agrees that it would not be appropriate to require a 
manufacturer that intends to petition for inconsequentiality to file a 
schedule at the time it notifies the agency of a defect or 
noncompliance, since no recall will take place if the petition is 
granted. However, this does not mean that the schedule requirement 
should be completely waived in such [[Page 17259]] circumstances, since 
if the petition is denied, the manufacturer will have to conduct a 
recall within a reasonable time thereafter. Therefore, NHTSA has added 
a new Sec. 573.5(c)(8)(v) to clarify that the time periods for filing a 
schedule for owner notification shall run from the date of the agency's 
denial of the petition, whether or not the manufacturer appeals that 
denial pursuant to 49 CFR 556.7.
    The final rule also adds a new Sec. 573.5(c)(8)(vi) to require that 
in the event a manufacturer that had informed NHTSA in its part 573 
report that it intended to file a petition for an inconsequentiality 
exemption does not do so within the 30-day period established by 49 CFR 
556.4(c), the time frame for filing a schedule specified in 
Sec. 573.5(c)(8)(ii) would begin to run from the end of that 30-day 
period. If NHTSA finds that manufacturers are abusing this provision in 
order to avoid filing the required schedules, it will take appropriate 
action.

Submission of Proposed Owner Letters to the Agency

    NHTSA is also amending 49 CFR 573.5(c) to add a requirement that 
manufacturers submit to the agency for review, copies of their proposed 
owner notification letters before, rather than after, the letter is 
sent to owners. (In the NPRM, this proposed amendment was added to 
paragraph (9) of Sec. 573.5(c). However, for the sake of clarity the 
agency has decided that this requirement should be in a separate 
paragraph. Accordingly, in the final rule, the requirement for 
submission of proposed owner letters will be paragraph (10) of 
Sec. 573.5(c). The paragraph on recall campaign numbers, designated as 
(10) in the NPRM will now be paragraph (11).) The final rule provides 
that the manufacturer must submit a proposed owner notification letter 
to the Office of Defects Investigation (ODI) at least five Federal 
government business days prior to the date it intends to begin mailing. 
As noted in the NPRM, the purpose of this requirement is to allow NHTSA 
to review a manufacturer's draft to ascertain whether it complies with 
all statutory and regulatory requirements before mailing, since sending 
a corrected letter after the first mailing causes unnecessary expense 
and could confuse owners.
    AAMA asserted that NHTSA lacks the statutory authority to 
``dictate, edit or approve in advance'' a manufacturer's notification 
to owners. The amendment does not purport to grant to the agency any 
authority to ``dictate'' the precise wording of owner notification 
letters. While NHTSA has the authority pursuant to 49 U.S.C. 30118(e) 
(formerly section 156 of the Act) to order manufacturers to take 
specified steps if it decides that they have not adequately carried out 
their notification responsibilities, this amendment is part of a more 
informal process. NHTSA's experience has been that when it identifies 
deficiencies in a proposed owner notification letter, most 
manufacturers are willing to make appropriate changes. In any event, 
the fact that the agency may not be able to compel a manufacturer 
legally to modify an owner notification letter at that stage does not 
mean that the agency cannot or should not take steps to try to convince 
manufacturers to make appropriate changes in an effort to maximize the 
response to recall campaigns.
    AAMA's fear that the regulation will lead to NHTSA's 
``micromanaging'' the form and content of letters simply is not 
warranted. The agency has neither the time nor the interest to get 
involved in the minute details of rewriting owner notification letters 
that meet statutory and regulatory requirements. The extent of its 
involvement will be to ensure to the maximum possible extent that those 
letters meet all such requirements.
    Several commenters expressed concern that requiring such advance 
review could unduly delay the recall notification process. Some also 
suggested that the agency add a provision permitting a manufacturer to 
send the letter if it has not heard from NHTSA within a specified time. 
As noted above, this amendment does not provide NHTSA with the 
authority to force a manufacturer to delay its owner notification 
campaign until the agency approves the wording of the manufacturer's 
proposed owner letter. Thus, the amendment is unlikely to add any delay 
at all, since manufacturers almost always prepare drafts of owner 
notification letters well before the actual mailing begins. In any 
event, the amendment specifically authorizes the agency to waive this 
requirement where warranted by safety considerations or other 
appropriate factors.
    Nevertheless, in order to ensure that the agency has adequate time 
to review the draft letter and contact the manufacturer to resolve any 
problems, the amendment requires the manufacturer to submit the 
proposed letter by a means which allows verification that the letter 
was received by ODI and indicates the date of receipt. The agency 
encourages manufacturers to send their draft notification letters to 
ODI by fax, at 202-366-7882 (primary) or 202-366-1767 (alternate). 
Other means that provide verification of receipt are overnight delivery 
(either by Express Mail or private delivery service) addressed to: 
Office of Defects Investigation, National Highway Traffic Safety 
Administration, 400 Seventh Street, SW., Room 5319, Washington, DC 
20590; and hand delivery to ODI at that address. Neither first-class 
mail nor certified mail would be acceptable because of lengthier 
delivery times and/or the absence of proof of receipt.
    Two commenters, AAMA and Truck Manufacturers, support the present 
system, which requires manufacturers to submit copies of owner 
notification letters to NHTSA only after mailing to owners. AM General 
suggested amending the proposal to require sending copies of owner 
notification letters to NHTSA on the same day they are mailed to 
owners. AAMA states that there is no need for the amendment because 
most letters already meet the requirements of part 577 and because many 
manufacturers currently send draft copies of owner notification letters 
to NHTSA in advance of mailing.
    The fact that many manufacturers already seek out NHTSA's advance 
approval is not an argument against the amendment. To the contrary, it 
shows that it is practicable and desirable. Similarly, the fact that 
most owner letters comply with regulatory requirements does not provide 
a basis for not trying to assure that even more letters fully comply.
    As pointed out in the NPRM, NHTSA has had several experiences in 
which an owner notification letter has failed to comply with all of the 
requirements of part 577. In such instances, it would rarely be 
productive (and might be confusing and counterproductive) to require 
the manufacturer to send a second, corrected letter. The amendment will 
also increase the agency's ability to respond to questions about the 
recall from the public and/or the media by ensuring that the agency is 
informed about the specifics of the notification letter before the 
manufacturer actually initiates the recall.
    Finally, the agency views as neither necessary nor desirable 
Toyota's suggestion that NHTSA incorporate in its regulations a 
provision allowing it to waive requirements for owner notification 
letters in certain instances, such as negotiated settlements. NHTSA's 
broad discretion to enter into negotiated settlements of enforcement 
matters has already been recognized by the courts. See Center for Auto 
Safety v. Lewis, 685 F.2d 1381 (D.C. Cir. 1982). In any event, the 
amendment as proposed and adopted specifically allows the agency to 
waive this requirement. [[Page 17260]] 

Quarterly Reports

    NHTSA is amending 49 CFR 573.6(a) to establish specific due dates 
for quarterly reports on the progress of ongoing recall campaigns. The 
NPRM proposed to amend this section by establishing due dates for 
quarterly reports on the twentieth calendar day after the close of each 
calendar quarter.
    Most commenters favored the idea of amending this provision. The 
two that did not--Midland and Truck Manufacturers--favored maintaining 
the present system largely because the proposed schedule would not give 
enough time for some manufacturers (especially small companies that are 
not computerized) to submit their reports. AAMA favored amending the 
due dates, but also expressed the view that the dates in the proposal 
would not allow some companies enough time. Kelly-Springfield expressed 
the same view. The agency has decided to adopt the schedule suggested 
by AAMA, which sets definite calendar dates on which the reports would 
be due, but allows more time than the language proposed in the NPRM. 
Under the final rule, manufacturers must file their quarterly reports 
of recall campaign status no later than April 30 for the quarter ending 
March 31, July 30 for the quarter ending June 30, October 30 for the 
quarter ending September 30; and January 30 for the quarter ending 
December 31, unless the specified filing date falls on a weekend or 
Federal holiday. In such cases, the quarterly report would be due on 
the next day on which the Federal government is open for business.
    NHTSA believes that this schedule allows a reasonable amount of 
time for all manufacturers, even those that are small and lack computer 
facilities. Since the date is always the same, i.e., the 30th of the 
given month, the agency believes it will be easier to keep track of 
than Kelly-Springfield's suggestion, which was the last business day of 
the month.
    The NPRM also proposed to amend Sec. 573.6(b) by adding a new 
paragraph (6) that would require both vehicle and equipment 
manufacturers to indicate separately in their quarterly reports the 
number of vehicles and items of equipment that are repaired and/or 
returned by dealers prior to their first sale to the public. AAMA, AM 
General, Blue Bird, and Truck Manufacturers opposed the proposal 
because of the added cost and time that would be needed to prepare the 
quarterly report. AAMA added that it saw no justification for such a 
requirement. No other commenter opposed the proposal, with Midland 
favoring it and Volkswagen taking a neutral position but giving 
information on the time and cost entailed in making the changes that 
would be needed to its computer system to track inventory return 
information separately.
    After reviewing these comments, the agency has decided to make the 
requirement applicable only to equipment manufacturers, rather than to 
both vehicle and equipment manufacturers as proposed in the NPRM. Under 
49 U.S.C. 30116, defective and noncompliant motor vehicles in dealer 
inventory must be, and usually are, repaired by the dealer prior to 
sale to the public; whereas that section requires the manufacturer of 
equipment to repurchase the defective or noncomplying items that are in 
inventory at the time of the defect or noncompliance decision. In 
addition, the agency believes that there is a greater need for the 
agency to keep track of whether defective or noncomplying equipment is 
being returned by dealers and retailers to manufacturers because of the 
greater number of items that are involved in equipment recalls, the 
higher percentage of items that are kept in the inventories of dealers 
and retailers at any given time, and the greater likelihood that 
dealer/retailer inventory will contain items subject to recall. In 
addition, the agency is clarifying that manufacturers should include in 
this category items returned prior to first sale to the public from all 
retailers, not just ``dealers,'' as well as from distributors of the 
items in question.

Recordkeeping for Leased Vehicles

    NHTSA is amending 49 CFR 573.7 to require manufacturers to maintain 
information concerning notification of owners of leased vehicles if the 
manufacturer knows that a vehicle is leased, and to require lessors of 
leased vehicles to maintain certain information concerning 
notifications they send to the lessees of those vehicles. The final 
rule adds a provision that was not in the NPRM: that the records with 
respect to notification of lessees must be maintained for one calendar 
year following the expiration of the lease. The agency added this 
provision because it was necessary to make clear to lessors and 
manufacturers how long these records must be maintained. The other 
record retention requirements in part 573 specify a length of time for 
which the records must be kept.
    In the NPRM, NHTSA proposed to amend Sec. 573.7(a) to require the 
manufacturer to identify those vehicles on its list of owners/
purchasers receiving notification which it knows to be leased. The 
proposal would not have required a separate list of those vehicles that 
were leased, but would have required that leased vehicles be clearly 
identified as such. The agency also proposed to add a new 
Sec. 573.7(d), which would have required each lessor notifying its 
lessees of a defect or noncompliance to maintain a list of the names 
and address of the lessees, to include the name and address of the 
lessee, the VIN, and the date the lessor sent the notification to the 
lessee. Based on the comments received on that proposal, which are 
summarized below, the agency has decided to adopt a final rule which 
differs in some respects from the original proposal.
    AAMA, NADA, Polk, Truck Manufacturers and Toyota opposed the 
proposal in the NPRM. AIAM supported the proposal with modifications. 
AAMA, Truck Manufacturers and Toyota based their opposition on the 
difficulty that manufacturers would have identifying which vehicles in 
a recall are leased, and the cost and burden of developing a system 
that would enable a manufacturer to keep track of this information. 
Polk's opposition was based on the difficulty of ascertaining from 
state vehicle registration records whether or not a vehicle is leased.
    The agency notes that the proposal in the NPRM would have required 
manufacturers to maintain records of notifications sent to ``known 
lessors.'' This would not have required manufacturers to identify in 
its records leased vehicles other than those it already knew to be 
leased. However, because of the apparent misunderstanding of the extent 
of the manufacturer's obligation under the first proposal, NHTSA is 
implementing a revised and simplified version of this requirement, 
which is intended to make clear that the lists maintained by 
manufacturers under this section do not need to identify those vehicles 
that are leased except to the extent that the manufacturer already has 
that information at the time it sends the notification letter.
    AAMA also noted that to assure that lessees receive notification of 
a recall, it would be necessary to include language in the notification 
letter directing lessors to notify lessees in all notification letters. 
Although the first NPRM did not propose such a requirement, the agency 
has decided, after considering comments on the proposed amendments to 
part 577 regarding notification of lessees, that the simplest and most 
effective way to ensure that lessees will be notified is to require 
manufacturers to include in all [[Page 17261]] notification letters 
sent to vehicle owners a statement that if the vehicle is leased, the 
lessor must send the notification letter (or a copy thereof) to the 
lessee. That amendment is discussed more fully elsewhere in this 
notice.
    NADA opposed the proposal to require each lessor to maintain a list 
of the names and addresses of the lessees it has notified. NADA stated 
that if lessors are required to forward all recall notification letters 
to lessees, there is no need to require lessors to keep records of 
those lessees to which it sent the letters. It also commented that it 
would be unduly burdensome for small leasing companies to keep the 
``detailed'' records that would be required by the proposal.
    NHTSA notes that the obligation of lessors to keep records of all 
lessees who have been notified of a recall is analogous to the 
obligation of a manufacturer to keep records of those whom it has 
notified. It is, however, less complex because, unlike the manufacturer 
list, it does not need to be updated each quarter for status of the 
remedy, and requires only a one-time entry for the date on which the 
notification was sent to the lessee.
    As stated in the NPRM, NHTSA has found the information maintained 
by manufacturers pursuant to Sec. 573.7 to be useful in the agency's 
efforts to evaluate whether manufacturers' notification and remedy 
campaigns are adequate. Because Congress amended the Safety Act to 
require lessors to send recall notifications to lessees (see 49 U.S.C. 
30119(f)), NHTSA needs the same type of information from lessors in 
order to evaluate whether lessors are adequately carrying out their 
obligations. While the agency recognizes that this recordkeeping may 
impose a burden on some lessors, that burden is outweighed by the 
safety benefit of having such information available.

Copies of Manufacturer Communications

    NHTSA is also amending Sec. 573.8 to clarify that the requirement 
that manufacturers furnish NHTSA with copies of ``all notices, 
bulletins and other communications * * * sent to more than one 
manufacturer, distributor, dealer, or purchaser, regarding any defect 
in his vehicles or items of equipment * * *  whether or not such defect 
is safety-related,'' applies to communications made by electronic 
means. It is making the same amendment to Sec. 573.5(c)(9), which 
requires manufacturers to send to NHTSA ``a representative copy of all 
notices, bulletins, and other communications that relate directly to 
the defect or noncompliance and are sent to more than one manufacturer, 
distributor, dealer or purchaser,'' within five days of sending them to 
the manufacturers, distributors, dealers or purchasers.
    Only one commenter, AIAM, opposed this proposal. It stated that 
NHTSA lacks the authority under the Act to require this ``additional'' 
information from manufacturers. AIAM's objection is misplaced. The 
amendment does not increase the scope of the agency's existing 
authority to require manufacturers to submit certain types of 
information. It merely makes explicit a requirement that was already 
inherent in the regulations as previously written.

Recall Identification Numbers

    In order to minimize confusion during NHTSA's monitoring of recall 
campaigns and to improve the agency's response to owners and 
prospective purchasers, NHTSA is adding a new provision to part 573 
(Sec. 573.5(c)(11)), which requires manufacturers to provide the 
manufacturer's identification number for each recall if it is not 
identical to the campaign number assigned by the agency. In the NPRM, 
this amendment was designated Sec. 573.5(c)(10). However, the agency 
has decided to redesignate it as Sec. 573.5(c)(11) in the final rule 
because it has revised the numbering of the preceding paragraph. The 
amendment is otherwise identical to that proposed in the NPRM. No 
commenter raised any issues relating to this amendment.

Amendments to Part 576--Record Retention

    NHTSA is amending 49 CFR 576.5 to provide that records concerning 
malfunctions that may be related to motor vehicle safety and that refer 
to a specific vehicle must be retained for eight years from the close 
of the model year during which the vehicle was manufactured (i.e., the 
date on which the last vehicle was produced for the model year). This 
amendment differs from that proposed in the NPRM. In the amendment as 
proposed, the eight-year time period began to run with the date the 
vehicle was sold, and retention would also have been required for 
records for five years after they were acquired or generated, if that 
was later than eight years after the date of sale.
    NHTSA decided to change the language from that proposed in the NPRM 
after considering the comments of several manufacturers, whose 
objections to the proposal focused principally on the requirement that 
the eight years be counted from the date of sale. These manufacturers 
asserted that a requirement that records be kept according to sale date 
would be unworkable and unreasonably costly and burdensome. See 
comments of AAMA, AIAM, Chrysler, Navistar and Toyota. These 
commenters, as well as Blue Bird and Fleetwood, suggested that basing 
the record retention requirement on the model year of production would 
be more workable.
    After careful consideration, NHTSA believes that the commenters 
have raised legitimate concerns. The suggested alternative would be 
more workable and less costly, and would not reduce the availability of 
relevant records.
    The agency has also decided to eliminate the language in the NPRM 
that would have required manufacturers to maintain records for five 
years from the date they were acquired or generated, if that would be 
later than eight years from the date of sale. The number of records 
that would be retained beyond those that are generated within the first 
eight years after the model year of production is likely to be small. 
Moreover, the potential benefits would be slight, since most 
investigations of defects and noncompliances begin far earlier than 
eight years after production. However, notwithstanding this amendment, 
the agency retains the authority to require a manufacturer to retain 
records for vehicles more than eight years old if it has an open 
investigation of an alleged noncompliance or safety-related defect that 
includes such vehicles.

Amendments to Part 577--Defect and Noncompliance Notification

    The agency is amending several sections of 49 CFR part 577 to 
revise the provisions regarding notification of safety-related defects 
and noncompliances with Federal motor vehicle safety standards.

Definitions

    NHTSA is amending Sec. 577.4, ``Definitions,'' to add definitions 
of the terms ``lessor,'' ``lessee'' and ``leased motor vehicle.'' As 
was the case with the amendment of the definition section of part 573 
to incorporate these terms, the amendment to this section is being made 
to implement 49 U.S.C. 30119(f), the statutory section that requires 
that lessees of motor vehicles receive notification of safety-related 
defects and noncompliances.
    The definition of ``lessor'' adopted today is slightly different 
from that in the NPRM. This is necessary to make it consistent with the 
definition of the same term in part 573 as amended today. The agency 
decided to adopt a suggestion of a commenter, NADA, that 
[[Page 17262]] defines the lessor as the owner, as reflected on the 
vehicle's title, of any five or more leased vehicles, as of the date of 
notification by the manufacturer of the recall. The definitions adopted 
today for the terms ``lessee'' and ``leased motor vehicle'' are the 
same as those in the NPRM. No commenter objected to the proposed 
changes in Sec. 577.4.

Marking of Recall Notification Envelopes

    The agency is amending Sec. 577.5(a) to add a requirement for 
marking the envelope in which recall notification letters are sent by 
requiring that the envelope containing the notification bear, in all 
capital letters, the words ``SAFETY,'' ``RECALL'' and ``NOTICE,'' in 
any order. Other words may be included, and the type may be any size as 
long as it is larger than that used for the address. The language must 
be also be distinguishable from other wording on the front of the 
envelope in some manner other than size, such as by typeface (e.g., 
bold, italic), color, and/or underlining.
    This amendment differs slightly from the proposal in the NPRM. The 
proposal would have required use of the phrase, ``SAFETY RECALL 
NOTICE'' in boldface capital letters. In response, several commenters 
suggested alternative wording. Others expressed the view that the 
current system works well enough, that the proposal did not give 
manufacturers enough flexibility, or that it would be too costly and/or 
burdensome to change the envelopes now in use.
    NHTSA believes that the cost of adding new wording to recall 
notification envelopes will be relatively low, and will be outweighed 
by the safety benefit of making it more likely that the recipient will 
read the letter. Moreover, while the present system works well, in many 
cases there is need for improvement in the rate of owner response to 
recalls. Accordingly, the agency believes that it is appropriate to 
require manufacturers to mark the outside of recall notification 
envelopes to alert recipients to the importance of their contents.
    However, there is merit to the view expressed in some comments that 
more flexibility should be allowed than would have been permitted under 
the proposal in the NPRM. The agency believes that the amendment 
adopted today should satisfy concerns about flexibility in envelope 
format while calling recipients' attention to the contents of the 
envelope. However, to ensure that envelopes comply with regulatory 
requirements, the amendment includes a requirement for one-time 
submission of envelope format to the agency. Once a given format is 
approved, the manufacturer need not submit its envelope format again 
before using it for other recalls, unless there are changes.
    This review will, like the agency review of draft notification 
letters discussed earlier in this preamble, be limited to ensuring that 
the envelope markings comply with the minimum requirements of the 
regulations. The agency's experience with advance review of 
notification letters has been that it makes the notification process 
more efficient because it allows the manufacturer to correct any 
aspects of the material that do not comply with the regulations before 
undertaking the entire mailing. Advance review of envelope format would 
doubtless have the same effect.

Notification for Leased Vehicles

     NHTSA is amending Sec. 577.5 to add new subsections (h) and (i), 
which establish requirements for notification of lessees of leased 
vehicles concerning the existence of safety-related defects or 
noncompliances in their vehicles.
    As proposed in the NPRM, subsection (h) would have required a 
manufacturer to send different notification letters, depending on 
whether or not the vehicle was leased. The proposal would have required 
the manufacturer to include language describing the lessor's duty to 
provide notification to the lessee only in letters sent by the 
manufacturer to a known lessor of a leased motor vehicle, and to 
provide the lessor with a copy of the notification to be sent to 
lessees.
    A number of commenters noted that to the extent that the proposed 
amendment would require manufacturers to identify the vehicles in the 
recall population that are leased, it would present a problem because 
manufacturers often do not know which vehicles are leased and which are 
not. For example, Polk opposed the proposal on the grounds that state 
vehicle registration records do not identify lessors/lessees, so that 
obtaining this information for notification purposes would be extremely 
difficult. AIAM and Honda made similar comments.
    Other commenters objected to notifying lessors or lessees 
separately from other vehicle owners, or to the requirement that 
manufacturers include a separate copy of the notification letter for 
the lessee in the mailing to the lessor. See comments of NADA, Toyota 
and Truck Manufacturers. These commenters suggested including in all 
owner notification letters a statement of a lessor's obligation to 
notify a lessee of the recall campaign.
    NHTSA believes that there is merit to the concerns these commenters 
have raised about this aspect of the proposal. In addition, to the 
extent that the language of the proposal would have meant that only 
owners of vehicles known by the manufacturer to be leased vehicles 
would have received a notification that informed them of their 
obligation to provide notification to lessees, it would have meant that 
lessees of vehicles not known by the manufacturer to be leased--a 
potentially large number--would not receive any notification of safety-
related defects or noncompliances and the availability of a remedy 
without charge.
    Accordingly, NHTSA has decided to modify subsection (h) to require 
manufacturers to include in all notification letters a statement of 
lessors' obligations regarding recall notification letters. If the 
manufacturer is sending the letter to a recipient that it knows to be a 
lessor of lessee of a leased vehicle it may use language that is not 
identical to that in letters sent to recipients whose vehicles are not 
known to be leased. However, in all cases, the letter must clearly 
state the lessor's obligation under Federal law to provide notification 
to lessees of its vehicles and to comply with regulations regarding 
retaining records of notifications sent to lessees. The amendment does 
not require the manufacturer to furnish the lessor with a separate copy 
of the notification letter to be sent to lessees.
    The final rule adopts Sec. 577.5(i) as proposed in the NPRM. That 
subsection restates the requirement of 49 U.S.C. 30119(f), which 
requires a lessor who receives notification of a safety-related defect 
or noncompliance in a leased motor vehicle to send a copy of the 
notification to the lessee of the vehicle. It adds to the statutory 
language requirements that the lessor send the notification to the 
lessee as prescribed by new Sec. 577.7(a)(2)(iv), which requires that 
the notice be sent by first-class mail, and that it be sent to the 
lessee no more than 10 calendar days from the date the lessor received 
the notification from the manufacturer. Finally, it clarifies that the 
requirement applies to all notifications, both initial and follow-up, 
except where the manufacturer has notified all of a lessor's lessees 
directly.

Timing of Owner Notification Letters

    The agency is amending Sec. 577.7, ``Time and Manner of 
Notification,'' with modifications from the language proposed in the 
NPRM. Those changes [[Page 17263]] are based on its consideration of 
the comments on the NPRM.
    The NPRM proposed to amend Sec. 577.7(a)(1) to give the agency 
authority to order a manufacturer to notify owners of a safety-related 
defect or noncompliance on a specific date, when it finds that such a 
letter would be in the public interest. A number of manufacturers 
objected to the original proposal because it did not contain any 
criteria upon which the decision would be based, and failed to require 
NHTSA to consult with the manufacturer before deciding to order 
notification on a specific date. The agency believes that it is 
desirable to provide a list of criteria to assure both manufacturers 
and the public that the decision is based on consideration of all 
appropriate and relevant factors. It is also desirable to allow the 
manufacturer to make its views known to the agency before the decision 
is made.
    Accordingly, the agency has modified the proposed regulatory 
language by adding a list of factors that may be considered by the 
agency, and a requirement that the agency consult with the manufacturer 
before making the decision. The factors that may be considered include 
the severity of the risk to safety; the likelihood of occurrence of the 
defect or noncompliance; whether there is something that an owner can 
do to reduce either the likelihood of occurrence of the defect or 
noncompliance or the severity of the consequences; whether there will 
be a delay in the availability of the remedy from the manufacturer; and 
the anticipated length of any such delay. The agency may also consider 
other factors relevant to whether early notification would be in the 
interest of safety.
    Several commenters objected to the proposed change on the grounds 
that the agency already has the authority to require owner notification 
on a specific date. NHTSA agrees with this statement, but does not 
agree that it is a reason for not adopting this provision. The agency 
believes that it is desirable to make this authority explicit because 
there have been instances when manufacturers have refused to notify 
owners of a safety-related defect or noncompliance in conformity with a 
NHTSA request. Having a regulation authorizing the agency to require 
notification on a date certain will make manufacturer compliance more 
certain.
    AAMA and Chrysler commented that the change is unnecessary because 
the manufacturer, and not the agency, is in the best position to know 
when early notification (i.e., notification prior to the time a remedy 
is available) is warranted. NHTSA disagrees. As the agency charged by 
statute with enforcing the notification and remedy requirements of the 
Act, it is in the best position to consider objectively all of the 
factors, including the safety of the public, that need to be 
considered, and to give them appropriate weight. Based on some 
manufacturers' past history of undue reluctance to comply with NHTSA 
requests to notify owners of a defect or noncompliance prior to the 
availability of a remedy, the agency believes that it is unwise to 
entrust responsibility for making this judgment solely to the 
manufacturer. Moreover, the changes made in the NPRM language to give 
manufacturers the opportunity to submit their views should be adequate 
to address concerns expressed by some manufacturers that their concerns 
would not be considered.
    The agency notes that it does not intend to exercise the authority 
to designate a date for owner notification letters except in cases 
where the commencement of the remedial campaign will be delayed 
substantially and there appear to be safety benefits associated with a 
prompt owner notification.
    Advocates commented that all owners should be notified immediately 
after the agency is informed of the existence of the defect or 
noncompliance, so that they would be able to take measures to minimize 
the effect of the defect or noncompliance until the remedy is 
available. It proposes a two-step notification process for all recalls, 
with the first owner notification to be sent within 30 days of agency 
notification, and a second notice to be sent later regarding the 
remedy. CAS also supported a 30-day deadline for notification in all 
recalls.
    As stated above in connection with the amendment to 
Sec. 573.5(c)(8), the agency does not believe it would be productive to 
establish a 30-day deadline for all recalls, or to institute a 
mandatory two-step notification process for all recalls. Given that 
recalls can vary widely in such matters as the number of items, the 
severity of the hazard, the complexity of the remedy and the size and 
resources of the manufacturer, the agency believes that an approach 
that allows for flexibility in handling each recall individually is 
preferable. Further, the two-step notification process introduces the 
possibility of owner confusion. The agency believes that these factors, 
along with the increased cost of sending a second owner letter, will 
outweigh the safety benefit of such a process in most circumstances.

Timing of Notification to Lessees

    The agency is also adding a new paragraph (iv) to subsection (a)(2) 
of Sec. 577.7. The new paragraph requires that a lessor must send its 
lessees a copy of the manufacturer's notification letter by first-class 
mail within 10 days of receiving it. No commenter opposed this 
proposal.

Disclaimers

    NHTSA is amending Sec. 577.8, ``Disclaimers,'' to make clear that 
that section's prohibition of disclaimers of the existence of a safety-
related defect or noncompliance applies equally to follow-up 
notifications. The agency received no comments on this proposal.

Follow-up Notification

    The final rule also adds a new Sec. 577.10, which sets forth the 
criteria under which the agency will determine whether a manufacturer 
must conduct a follow-up notification campaign and the requirements 
applicable to such campaigns. This new section implements 49 U.S.C. 
30119(e) (formerly section 153(d) of the Act), which authorizes NHTSA 
to require manufacturers to send a second notification of a defect or 
noncompliance, ``in such manner as (NHTSA) may by regulation 
prescribe,'' where the agency determines that the initial notification 
campaign has not resulted in an adequate number of vehicles or items of 
equipment being returned for remedy. With minor changes, the final rule 
adopts the proposals in the NPRM.
    New Sec. 577.10(b) sets forth criteria that NHTSA may consider in 
making a determination under this provision. The criteria include, but 
are not limited to, the percentage of covered vehicles or items of 
equipment that have already been returned for remedy; the amount of 
time that has elapsed since the prior notification was sent; the 
likelihood that a follow-up notification will increase the number of 
vehicles or items of equipment receiving the remedy; the seriousness of 
the safety risk from the defect or noncompliance; and whether the prior 
notification(s) undertaken by the manufacturer complied with the 
requirements of the statute and regulations.
    The agency does not intend that this list of factors be exhaustive. 
Accordingly, paragraph (b)(6) makes it clear that NHTSA may consider 
additional factors as it deems appropriate.
    Section 577.10(c) provides that a manufacturer is required to 
provide follow-up notification only with respect [[Page 17264]] to 
vehicles or items of equipment that have not been returned for remedy 
pursuant to the prior notification(s). Pursuant to paragraph (d), the 
manufacturer is required to send the follow-up notification to all 
categories of recipients (i.e., owners, first purchasers, lessors, 
lessees, manufacturers, distributors, dealers, and retailers) that 
received the prior notification(s), except where the agency determines 
that a lesser scope is appropriate.
    Paragraph (e) describes the required contents of the follow-up 
notification. The notice will have to include a statement that 
identifies it as a follow-up to an earlier notification, and must urge 
the recipient to present the vehicle or item of equipment for remedy. 
In addition, except where the agency determines otherwise, the notice 
must include the other information required to be included in an 
initial notification letter.
    Paragraph (f) requires that the outside of the envelope or other 
communication containing the follow-up notification meet the same 
requirements as an envelope containing an initial notification, as set 
forth in 49 CFR 577.5(a). Unlike the NPRM, the final rule does not 
recite those requirements verbatim, but rather incorporates them by 
reference to the appropriate section of these regulations.
    Paragraph (g) allows the agency to authorize use of postcards or 
other media rather than letters for follow-up notification where 
appropriate.
    AAMA and Blue Bird commented that the regulation is not needed 
because manufacturers already send out follow-up notification, and that 
follow-up notifications are likely to cause owner confusion. These 
comments challenge the wisdom of the decision by Congress to authorize 
NHTSA to require follow-up notification, rather than the substantive 
merit of NHTSA's proposed regulation. Since Congress has decided that 
it is appropriate to give NHTSA this authority, and has authorized 
NHTSA to promulgate implementing regulations, these comments are not 
persuasive.
    AIAM and Toyota commented that the regulation should mandate, 
rather than permit, NHTSA to consider the factors listed. The agency 
believes that mandatory language would be unwise because it would 
unduly restrict its discretion. Flexibility is essential to 
administration of the agency's recall program, given the highly varied 
nature of safety recalls. However, the agency will generally consider 
the enumerated factors, since they are relevant to the need for a 
follow-up notification.
    The NPRM proposed that the scope, timing, form and content of the 
follow-up notification would be ``designed by the Administrator, in 
consultation with the manufacturer.'' AIAM commented that the 
regulation should state that the follow-up notification letter will be 
``developed,'' rather than ``designed'' by the agency, and that the 
content of the letter should be a cooperative effort between NHTSA and 
the manufacturer. Toyota also commented that the agency should only be 
involved in ``approving'' the follow-up notification, not in 
``designing'' it; and that if NHTSA has problems with a manufacturer's 
follow-up notification, it should consult with the manufacturer to work 
out the problem.
    The agency interprets these comments to express reservations about 
the extent of NHTSA's control over follow-up notification letters. The 
agency believes that it must have such control, in order to carry out 
its statutory responsibility to maximize the effectiveness of recall 
campaigns. However, the agency has decided to change the word 
``designed'' in Sec. 577.10(a) to ``established,'' to reflect the fact 
that the scope, timing, form, and content of the follow-up notification 
will result from consultation between NHTSA and the manufacturer, 
rather than from independent NHTSA action.
    Advocates and CAS commented that evaluation of safety risk should 
not be a criterion equal to the others, since the existence of a recall 
indicates that there is a safety risk. While recalls under the Act are 
by their nature safety-related, some defects and noncompliances pose a 
much greater risk to safety than others, by virtue of such factors as 
the severity of the consequences and the likelihood that the problem 
will occur. NHTSA believes that it is entirely appropriate for it to 
consider the degree of the risk to safety as a factor in deciding 
whether to require a manufacturer to undertake a follow-up 
notification. However, the agency notes that it is not required to give 
equal weight to all of the listed criteria.
    Advocates and CAS also favored setting a minimum permissible 
completion rate for all recalls, with follow-up notification for all 
recalls falling below that percentage. Midland commented that NHTSA 
should define what is considered to be an inadequate completion rate; 
and Navistar said NHTSA should set ``guidelines'' for when a follow-up 
notification would be required.
    As previously stated, NHTSA believes that it is important for it to 
retain substantial discretion and flexibility in order to carry out the 
responsibility to maximize the effectiveness of recalls. Setting a 
minimum completion requirement for all recalls would seriously restrict 
this flexibility. Moreover, such a system would be neither fair nor 
workable, given the number of factors that affect the completion rate, 
such as the nature of the item (whether vehicle, tire or equipment), 
its age, the seriousness of the defect, and the means used to notify 
owners (e.g., individual notification letter or public notice).
    CAS suggested that follow-up notification should be required for 
all recalls involving a defect or noncompliance that poses a 
significant safety risk. In addition to the difficulty of defining when 
a defect or noncompliance presents a ``significant safety risk,'' the 
agency does not believe it would be reasonable to impose a requirement 
such as this, which fails to take into account whether a recall has 
achieved a high completion rate.
    CAS also commented that the follow-up notification should be sent 
by certified mail, not post card. NHTSA continues to believe that it 
should retain discretion to decide what medium or media would be the 
most effective for follow-up notification in each individual case.
    Mack Truck supported the follow-up notification regulation, noting 
that it has a practice of automatically sending a second notice if 
recall work has not been done on a vehicle by the end of the second 
calendar quarter of a recall campaign.
    Navistar commented that the recall completion rate should be based 
on the number of vehicles in service, not the number produced. The 
agency assumes that this comment refers to one of the factors the NPRM 
listed for consideration by NHTSA in deciding whether to require 
follow-up notification: the percentage of vehicles or items of 
equipment that have been presented for remedy (proposed 
Sec. 577.10(b)(1)). The agency believes it is reasonable to continue 
its practice of computing recall completion rates based on the number 
of recalled units produced, rather than the number in service as 
suggested by Navistar. The number of items produced is a definite 
number that is provided to NHTSA by the manufacturer when it reports 
its decision that there is a safety-related defect or noncompliance, 
whereas the number of items in service can never be more than a rough 
estimate. Having such a definite number makes it possible for NHTSA to 
compute recall completion rates with greater accuracy than would be 
possible using an estimate of how many items are in service. 
[[Page 17265]] 
    Moreover, the number of items in service will change during the 
course of any recall, which would greatly complicate the task of 
arriving at precise completion rates. Moreover, the final rule 
specifically provides that recall completion rate is only one of 
several criteria upon which the agency will base a decision to require 
a follow-up notification. In deciding whether a recall completion rate 
is inadequate, the agency will consider the age of the recalled items 
and other factors which might significantly reduce the number of items 
in service at the time of the recall. It recognizes that a lower 
completion rate is to be expected where there has been significant 
attrition in the population of items in use by the time of the recall, 
or where the nature of the recalled item (e.g., something that is 
disposable or very inexpensive) makes it less likely that owners will 
respond to a recall.
    Navistar also commented that NHTSA should only require a follow-up 
notification where it can be shown that it will significantly improve 
the completion rate. Such a standard is unworkable and is also 
inconsistent with the language Congress used in authorizing NHTSA to 
require follow-up notification. It would be difficult, if not 
impossible, to demonstrate in advance that a follow-up notification 
would result in a significant improvement of the recall completion 
rate. Moreover, the Navistar standard is inconsistent with 49 U.S.C. 
30119(e), which authorizes the agency to order a second notification 
when ``notification * * * has not resulted in an adequate number of 
vehicles or items of motor vehicle equipment being returned for 
remedy.''
    Navistar also expressed concern that unnecessary follow-up notices 
could result in customer confusion and wasted effort, especially when 
recalled vehicles are old and a significant number have been scrapped. 
The agency believes that the criteria to be considered by the agency 
will provide adequate protection against the ``wasted effort'' that 
Navistar fears.
    Polk commented that state vehicle registration records do not 
identify lessors/lessees, so that obtaining this information for 
renotification purpose would be extremely difficult. The agency has 
addressed these concerns in the sections of the final rule concerned 
with leased vehicle notification by requiring all notification letters 
to include a statement directing lessors to notify their lessees. See 
49 CFR 577.5(i).
    Toyota suggested adding another factor to be considered: the 
likelihood that the owner will experience the safety-related defect or 
noncompliance. NHTSA does not believe that this is an appropriate 
criterion. In the large majority of recalls, there is no way of 
predicting the likelihood that an owner will experience the defect or 
noncompliance. It would be inconsistent with the purpose of the Act, 
which is to prevent accidents, injuries and fatalities before they 
happen, to fail to notify an owner based on a prediction that the 
problem is not likely to occur in a particular vehicle. The final rule 
does take account of the fact that there may be instances in which the 
population that is appropriate for follow-up notification will be 
smaller than that covered by the original recall campaign. Section 
577.10(d) allows NHTSA to narrow the scope of the population that will 
receive follow-up notification in appropriate instances.
    Toyota also commented that a low completion rate should not be the 
only reason the agency uses to justify requiring renotification. In 
Sec. 577.10(b), the final rule lists five specific factors, including 
but not limited to the completion rate, that the agency may consider. 
It also authorizes NHTSA to consider other factors that are consistent 
with the purpose of the Act.

NHTSA's Toll-Free Hotline

    The agency is adopting a final rule amending Sec. 577.5(g)(1)(vii) 
to state that the telephone number for its toll-free Auto Safety 
Hotline for calls originating in the Washington, D.C. area is (202) 
366-0123. The agency received no comments on this proposed change.

Technical Amendments

    NHTSA is adopting several technical amendments to 49 CFR Parts 552, 
554, 573 and 577 that are needed to make these parts consistent with 
the new codification of the enabling statute as Chapter 301 of Title 49 
of the United States Code (Pub. L. 103-272 (July 5, 1994)) and with the 
language of the amendments adopted today. These amendments did not 
appear in the NPRM, but do not require notice and comment because they 
are technical amendments only. They do not change the meaning of these 
regulations.
    With respect to part 552, the technical amendments are as follows. 
Because the final rule amends the title of Sec. 552.8 to replace 
``Determination whether to commence a proceeding'' with ``Notification 
of agency action on the petition,'' the contents to part 552 is amended 
to reflect this change. In addition, Sec. 30162(a) of Title 49 of the 
United States Code now refers to a petition for a proceeding to decide, 
rather than to determine, whether to issue an order requiring a 
manufacturer to provide notification and remedy for a safety-related 
defect or noncompliance. Accordingly, Sec. 552.1, Scope, is amended to 
change the word ``determination'' to ``decision.'' Section 552.2, 
Purpose, is amended to change ``determinations'' to ``decisions.'' 
Section 552.3, General, is amended to change ``determine'' to 
``decide.'' The first sentence of Sec. 552.7, Public Meeting, is 
amended to change ``determination'' to ``decision.'' Finally, 
Sec. 552.9(b), Grant of Petition, is amended to change ``determine'' to 
``decide.''
    The agency is also adopting the following technical amendments to 
part 554. The contents section is amended to change the word 
``determinations'' to ``decisions'' for the headings of Secs. 554.10 
and 554.11. Section 554.2, Purpose, is amended to change ``National 
Traffic and Motor Vehicle Safety Act (the Act)'' to ``49 U.S.C. Chapter 
301.'' Section 554.3, Application, is amended to change the statutory 
citations to reflect the new codification in Title 49. The headings of 
Secs. 554.10 and 554.11 are amended to change the word 
``determinations'' to ``decisions,'' in order to be consistent with the 
new statutory language at 49 U.S.C. 30118. The text of these 
subsections is also amended to replace the words ``determine[s]'' or 
``determination'' with ``decide[s]'' or ``decision'', respectively, 
wherever they appear.
    The technical amendments to part 573 are as follows. Paragraphs 
(b)-(f) of Sec. 573.3 are amended to change the words ``determined to 
exist'' to ``decided to exist.'' The definition of ``Act'' in the first 
paragraph of Sec. 573.4, Definitions, is amended to replace ``the 
National Traffic and Motor Vehicle Safety Act of 1966, as amended (15 
U.S.C. 1381, et seq.)'' with ``49 U.S.C. Chapter 301.'' The agency is 
also amending the second sentence of Sec. 573.5(c)(1) to replace 
``Sec. 110(e) of the National Traffic and Motor Vehicle Safety Act (15 
U.S.C. 1399(e)'' with ``49 U.S.C. Sec. 30164(a).'' The latter two 
amendments are necessary because the July 1994 codification repealed 
the National Traffic and Motor Vehicle Safety Act of 1966, as amended, 
and replaced it with a codification in Title 49 of the United States 
Code.
    The agency is adopting the following technical amendments to part 
577. The Contents to part 577 is amended by changing ``Sec. 577.5 
Notification pursuant to a manufacturer's determination'' to ``Sec. 
577.5 Notification pursuant to a manufacturer's decision''; and by 
changing ``Sec. 577.6 Notification pursuant to Administrator's 
[[Page 17266]] determination'' to ``Sec. 577.6 Notification pursuant to 
Administrator's decision.'' Section 577.4, Definitions, is amended by 
changing the definition of the term ``Act'' from ``the National Traffic 
and Motor Vehicle Safety Act of 1966, as amended, 15 U.S.C. 1391 et 
seq.'' to ``49 U.S.C. Chapter 301.''
    The title of section 577.5 is changed from ``Notification pursuant 
to a manufacturer's determination'' to ``Notification pursuant to a 
manufacturer's decision.'' The first sentence of Sec. 577.5(a) is 
amended by changing ``section 157 of the Act'' to ``49 U.S.C. 
30118(e).'' Paragraphs (1) and (2) of Sec. 577.5(c) are amended to 
replace the word ``determined'' with ``decided'' in the text to be used 
by manufacturers in recall notification letters. Section 577.5(d) is 
amended by changing ``determines'' to ``decides.''
    The title of Sec. 577.6 is changed from ``Notification pursuant to 
Administrator's determination'' to ``Notification pursuant to 
Administrator's decision.'' Section 577.6(a) is amended by changing 
``section 152 of the Act'' to ``49 U.S.C. section 30118(b).'' Section 
577.6(b) is amended by changing ``determines'' to ``decides'' in 
subsection (3); by changing ``determination'' to ``decision'' in 
subsection (5); by changing ``determination'' to ``decision'' in 
subsections (9)(i) (A) and (C); and by changing ``determination'' to 
``decision'' in subsections (10)(iv) and (11). Section 577.6(c)(1) is 
amended by changing ``determination'' to ``decision.'' Section 577.7, 
Time and manner of notification, is amended by revising subsection 
(a)(2)(ii)(B) by replacing ``determined'' by ``decided,'' by replacing 
``necessary'' with ``required'' and by replacing ``determine'' with 
``require.''

Rulemaking Analyses and Notices

1. Executive Order 12291 (Federal Regulation) and DOT Regulatory 
Policies and Procedures

    NHTSA has analyzed this final rule and determined that it is 
neither ``major'' within the meaning of Executive Order 12291 nor 
``significant'' within the meaning of the Department of Transportation 
regulatory policies and procedures.
    The provisions of this final rule that would result in additional 
costs would be the one that extends from five to a maximum of eight 
years the period for which motor vehicle manufacturers must retain 
records concerning malfunctions that may be related to motor vehicle 
safety; and the one that authorizes NHTSA to require manufacturers of 
motor vehicles and motor vehicle equipment to mail a follow-up 
notification of a safety-related defect or noncompliance if it 
determines that the number of vehicles or items of equipment that have 
received the remedy is inadequate.
    Other provisions that will result in additional costs are the one 
that would require vehicle lessors to mail notification of safety-
related defects or noncompliances with Federal motor vehicle safety 
standards to each lessee of a vehicle covered by the notification and 
remedy campaign and the requirement that lessors maintain lists of 
lessees to whom they send such notification.
    The costs associated with requiring manufacturers to retain records 
for a longer period should be minimal if not negligible, and would be 
offset by the benefit that would result from the manufacturers' ability 
to determine the existence of safety-related defects and noncompliances 
with safety standards in a wider range of vehicles, as well as the 
enhancement of NHTSA's enforcement efforts, particularly with respect 
to latent defects and noncompliances. The cost of sending out a follow-
up notification will be less than that incurred for an initial 
notification, as it will be required only in those cases in which the 
agency makes a determination that the response to the first 
notification is inadequate; and will only involve a fraction of the 
vehicles or items of equipment subject to the initial recall, i.e., 
those that have not yet been remedied. The cost of the follow-up 
notification will be outweighed by the benefit of increasing the number 
of noncompliant and defective vehicles and items of motor vehicle 
equipment that are remedied. In addition, the provisions relating to 
follow-up notification are required by the amendments added by ISTEA.
    The cost of vehicle lessor notification of lessees is offset by the 
safety benefit that would result from the increased number of 
individuals who would return for remedy a vehicle or item of equipment 
that has a safety-related defect or does not comply with a Federal 
motor vehicle safety standard. In addition, this provision is required 
by the amendments added by ISTEA.
    The cost of the requirement that vehicle lessors maintain lists of 
lessees of leased vehicles involved in notification and remedy 
campaigns is outweighed by the fact that these records will enable 
NHTSA to enforce the statutory requirement that lessees be notified of 
the existence of safety-related defects or standards noncompliances in 
their vehicles and of the availability of a remedy without charge for 
the defect or noncompliance. In addition, the information to be 
retained is minimal, consisting only of the identities of the vehicle, 
the lessee and the recall, and the date the lessor sent the 
notification to the lessee.

2. Regulatory Flexibility Act

    The agency has also considered the effects of this rulemaking 
action under the Regulatory Flexibility Act (5 U.S.C. 601 et seq.). I 
certify that this proposed rule will not, if promulgated, have a 
significant economic impact on a substantial number of small entities.
    The regulations implementing the statutory amendment authorizing 
NHTSA to require a follow-up notification in instances where it 
determines that an initial notification has not resulted in the remedy 
of an adequate number of defective or non-complying vehicles or items 
of motor vehicle equipment will affect motor vehicle equipment 
manufacturers who are small businesses. However, the agency anticipates 
that the effect on those entities will not be significant because the 
proposed regulations implementing this provision allow flexibility in 
the amount of information that would be required for the second 
notification, and also permit reducing postage costs through the use of 
post-cards instead of first-class letters in appropriate circumstances.
    The new provisions requiring lessors to notify lessees of safety-
related defects or noncompliances in leased motor vehicles, which are 
being adopted pursuant to a statutory amendment requiring such 
notification, will also affect vehicle lessors who are small 
businesses. However, NHTSA anticipates that the effect of these 
amendments on these entities will be minimized by the exception to the 
requirement for notification by the lessor in cases where a lessor and 
a manufacturer have agreed that the manufacturer will notify lessees 
directly. In addition, the amendments provisions should result in a 
safety benefit as more leased vehicles will be returned for remedy of 
safety-related defects and noncompliances with Federal motor vehicle 
safety standards.
    With respect to the additional recordkeeping requirements adopted 
for vehicle lessors, the amount of information required is small and 
should not place any significant cost burdens on the lessors. The 
information is essential to the agency's ability to enforce the new 
provisions requiring lessors to notify lessees of safety-related 
defects and noncompliances with Federal motor vehicle safety standards 
in their vehicles, and the economic [[Page 17267]] impact will be 
outweighed by the benefit to safety from NHTSA's ability to enforce 
this provision effectively.
    To the extent the above amendments do have an impact on small 
businesses, those impacts are minimal and would be offset by the safety 
benefits that they would provide.

3. National Environmental Policy Act

    In accordance with the National Environmental Policy Act of 1969, 
the agency has analyzed the environmental impacts of this rulemaking 
action and determined that implementation of this action will not have 
a significant impact on the quality of the human environment. The new 
record-keeping requirements will not introduce any new or harmful 
matter into the environment.

4. Paperwork Reduction Act

    Certain provisions in the final rule that would require 
manufacturers to submit information to NHTSA, and to retain other 
information, are considered to be information collection requirements, 
as that term is defined by the Office of Management and Budget (OMB) in 
5 CFR part 1320. The provision in the rule that would require vehicle 
lessors to retain information is considered to be an information 
collection requirement, as that term is defined by the Office of 
Management and Budget (OMB) in 5 CFR part 1320. Accordingly, this 
requirement has been submitted to OMB for its approval, pursuant to the 
requirements of the Paperwork Reduction Act (44 U.S.C. 3501 et seq.). 
Comments on the proposed information collection requirements were 
solicited in the NPRM. No comments on these requirements were received 
by NHTSA.

5. Executive Order 12612 (Federalism)

    This action has been analyzed in accordance with the principles and 
criteria contained in Executive Order 12612, and it has been determined 
that the rulemaking does not have sufficient federalism implications to 
warrant the preparation of a Federalism Assessment.

List of Subjects

49 CFR Part 552

    Administrative practice and procedure; Motor vehicle safety; 
Reporting and recordkeeping requirements.

49 CFR Part 554

    Administrative practice and procedure; Motor vehicle safety.

49 CFR Part 573

    Imports; Motor vehicle safety; Motor vehicles; Reporting and 
recordkeeping requirements; tires.

49 CFR Part 576

    Motor vehicle safety; Reporting and recordkeeping requirements.

49 CFR Part 577

    Motor vehicle safety.
    In consideration of the foregoing, parts 552, 554, 573, 576, and 
577 of title 49 of the Code of Federal Regulations are amended as 
follows:

PART 552--PETITIONS FOR RULEMAKING, DEFECT, AND NONCOMPLIANCE 
ORDERS

    1. The authority citation for Part 552 is revised to read as 
follows:

    Authority: 49 U.S.C. 30111, 30118, 30162; delegation of 
authority at 49 CFR 1.50.

    2.-3. Section 552.1 is revised to read as follows:


Sec. 552.1  Scope.

    This part establishes procedures for the submission and disposition 
of petitions filed by interested persons pursuant to 49 U.S.C. Chapters 
301, 305, 321, 323, 325, 327, 329 and 331 to initiate rulemaking or to 
make a decision that a motor vehicle or item of replacement equipment 
does not comply with an applicable Federal motor vehicle safety 
standard or contains a defect which relates to motor vehicle safety.
    4. Section 552.2 is revised to read as follows:


Sec. 552.2  Purpose.

    The purpose of this part is to enable the National Highway Traffic 
Safety Administration to identify and respond on a timely basis to 
petitions for rulemaking or defect or noncompliance decisions, and to 
inform the public of the procedures following in response to such 
petitions.
    5. Section 552.3 is revised to read as follows:


Sec. 552.3  General.

    Any interested person may file with the Administrator a petition 
requesting him:
    (a) to commence a proceeding respecting the issuance, amendment or 
revocation of a motor vehicle safety standard, or
    (b) to commence a proceeding to decide whether to issue an order 
concerning the notification and remedy of a failure of a motor vehicle 
or item of replacement equipment to comply with an applicable motor 
vehicle safety standard or a defect in such vehicle or equipment that 
relates to motor vehicle safety.
    6. Section 552.6 is revised to read as follows:


Sec. 552.6  Technical review.

    The appropriate Associate Administrator conducts a technical review 
of the petition. The technical review may consist of an analysis of the 
material submitted, together with information already in the possession 
of the agency. It may also include the collection of additional 
information, or a public meeting in accordance with Sec. 552.7.
    7. Section 552.8 is revised to read as follows:


Sec. 552.8  Notification of agency action on the petition.

    After considering the technical review conducted under Sec. 552.6, 
and taking into account appropriate factors, which may include, among 
others, allocation of agency resources, agency priorities and the 
likelihood of success in litigation which might arise from the order, 
the Administrator will grant or deny the petition. NHTSA will notify 
the petitioner of the decision to grant or deny the petition within 120 
days after its receipt of the petition.

PART 554--STANDARDS ENFORCEMENT AND DEFECT INVESTIGATIONS

    8. The authority citation for part 554 is revised to read as 
follows:

    Authority: 49 U.S.C. 30102-103, 30111-112, 30117-121, 30162, 
30165-67; delegation of authority at 49 CFR 1.50.

    9.-10. Section 554.2 is revised to read as follows:


Sec. 554.2  Purpose.

    The purpose of this part is to inform interested persons of the 
procedures followed by the National Highway Traffic Safety 
Administration in order more fairly and effectively to implement 49 
U.S.C. Chapter 301.
    11. Section 554.3 is revised to read as follows:


Sec. 554.3  Application.

    This part applies to actions, investigations, and defect and 
noncompliance decisions of the National Highway traffic Safety 
Administration under 49 U.S.C. 30116, 30117, 30118, 30120 and 30165.
    12. Section 554.10 is amended by revising paragraphs (a), (b), (c), 
introductory test, (c)(2) and (c)(4), and by removing paragraph (e), to 
read as follows: [[Page 17268]] 


Sec. 554.10  Initial decisions and public meetings.

    (a) An initial decision of failure to comply with safety standards 
or of a safety-related defect is made by the Administrator or his 
delegate based on the completed investigative file compiled by the 
appropriate office.
    (b) The decision is communicated to the manufacturer in a letter 
which makes available all information on which the decision is based. 
The letter advises the manufacturer of his right to present 
information, views, and arguments to establish that there is no defect 
or failure to comply or that the alleged defect does not affect motor 
vehicle safety. The letter also specifies the time and place of a 
public meeting for the presentation of arguments or sets a date by 
which written comments must be submitted. Submission of all 
information, whether at a public meeting or in written form, is 
normally scheduled about 30 days after the initial decision. The 
deadline for submission of information can be extended for good cause 
shown.
    (c) Public notice of an initial decision is made in a Federal 
Register notice that--
* * * * *
    (2) Summarizes the information on which the decision is based.
* * * * *
    (4) States the time and place of a public meeting or the deadline 
for written submission in which the manufacturer and interested persons 
may present information, views, and arguments respecting the decision.
* * * * *
    13. Section 554.11 is revised to read as follows:


Sec. 554.11  Final decisions.

    (a) The Administrator bases his final decision on the completed 
investigative file and on information, views, and arguments submitted 
at the public meeting.
    (b) If the Administrator decides that a failure to comply or a 
safety-related defect exists, he orders the manufacturer to furnish the 
notification specified in 49 U.S.C. 30118 and 30119 and to remedy the 
defect or failure to comply.
    (c) If the Administrator closes an investigation following an 
initial determination, without making a final determination that a 
failure to comply or a safety-related defect exists, he or she will so 
notify the manufacturer and publish a notice of that closing in the 
Federal Register.
    (d) A statement of the Administrator's final decision and the 
reasons for it appears in each completed public file.

PART 573--DEFECT AND NONCOMPLIANCE REPORTS

    14. The authority citation for part 573 is revised to read as 
follows:

    Authority: 49 U.S.C. 30102-103, 30112, 30117-121, 30166-167; 
delegation of authority at 49 CFR 1.50.

Sec. 573.3  [Amended]

    15. Section 573.3 is amending by revising paragraphs (b) through 
(f) to read as follows:
* * * * *
    (b) In the case of a defect or noncompliance decided to exist in a 
motor vehicle or equipment item imported into the United States, 
compliance with Secs. 573.5 and 573.6 by either the fabricating 
manufacturer or the importer of the vehicle or equipment item shall be 
considered compliance by both.
    (c) In the case of a defect or noncompliance decided to exist in a 
vehicle manufactured in two or more stages, compliance with Secs. 573.5 
and 573.6 by either the manufacturer of the incomplete vehicle or any 
subsequent manufacturer of the vehicle shall be considered compliance 
by all manufacturers.
    (d) In the case of a defect or noncompliance decided to exist in an 
item of replacement equipment (except tires) compliance with 
Secs. 573.5 and 573.6 by the brand name or trademark owner shall be 
considered compliance by the manufacturer. Tire brand name owners are 
considered manufacturers (49 U.S.C. 10102(b)(1)(E)) and have the same 
reporting requirements as manufacturers.
    (e) In the case of a defect or noncompliance decided to exist in an 
item of original equipment used in the vehicles of only one vehicle 
manufacturer, compliance with Secs. 573.5 and 573.6 by either the 
vehicle or equipment manufacturer shall be considered compliance by 
both.
    (f) In the case of a defect or noncompliance decided to exist in 
original equipment installed in the vehicles of more than one 
manufacturer, compliance with Sec. 573.5 is required of the equipment 
manufacturer as to the equipment item, and of each vehicle manufacturer 
as to the vehicles in which the equipment has been installed. 
Compliance with Sec. 573.6 is required of the manufacturer who is 
conducting the recall campaign.
    16. Section 573.4 is amended by revising the definition of ``Act'' 
and by adding the following definitions, in alphabetical order, to read 
as follows:


Sec. 573.4  Definitions.

* * * * *
    Act means 49 U.S.C. Chapter 301.
* * * * *
    Leased motor vehicle means any motor vehicle that is leased to a 
person for a term of at least four months by a lessor who has leased 
five or more vehicles in the twelve months preceding the date of 
notification by the vehicle manufacturer of the existence of a safety-
related defect or noncompliance with a Federal motor vehicle safety 
standard in the motor vehicle.
    Lessee means a person who is the lessee of a leased motor vehicle 
as defined in this section.
    Lessor means a person or entity that is the owner, as reflected on 
the vehicle's title, of any five or more leased vehicles (as defined in 
this section), as of the date of notification by the manufacturer of 
the existence of a safety-related defect or noncompliance with a 
Federal motor vehicle safety standard in one or more of the leased 
motor vehicles.
    Readable form means a form readable by the unassisted eye or 
readable by machine. If readable by machine, the submitting party must 
obtain written confirmation from the Office of Defects Investigation 
immediately prior to submission that the machine is readily available 
to NHTSA. For all similar information responses, once a manufacturer 
has obtained approval for the original response in that form, it will 
not have to obtain approval for future submissions in the same form. In 
addition, all coded information must be accompanied by an explanation 
of the codes used.
    17. Section 573.5 is amended by revising the second sentence of 
paragraph (c)(1) and the introductory text of paragraph (c)(2), by 
adding paragraphs (c)(2)(iv) and (v), by redesignating paragraph (c)(8) 
as paragraph (c)(8)(i), by adding new paragraphs (c)(8)(ii)--(vi), and 
by adding new paragraphs (c)(10) and (c)(11), to read as follows:


Sec. 573.5  Defect and noncompliance information report.

* * * * *
    (c) * * * In the case of a defect or noncompliance decided to exist 
in an imported vehicle or item of equipment, the agency designated by 
the fabricating manufacturer pursuant to 49 U.S.C. section 30164(a) 
shall be also stated. * * *
    (2) Identification of the vehicles or items of motor vehicle 
equipment potentially containing the defect or noncompliance, including 
a description of the manufacturer's basis for its 
[[Page 17269]] determination of the recall population and a description 
of how the vehicles or items of equipment to be recalled differ from 
similar vehicles or items of equipment that the manufacturer has not 
included in the recall.
* * * * *
    (iv) In the case of motor vehicles or items of motor vehicle 
equipment in which the component that contains the defect or 
noncompliance was manufactured by a different manufacturer from the 
reporting manufacturer, the reporting manufacturer shall identify the 
component and the manufacturer of the component by name, business 
address, and business telephone number. If the reporting manufacturer 
does not know the identity of the manufacturer of the component, it 
shall identify the entity from which it was obtained.
    (v) In the case of items of motor vehicle equipment, the 
manufacturer of the equipment shall identify by name, business address, 
and business telephone number every manufacturer that purchases the 
defective or noncomplying component for use or installation in new 
motor vehicles or new items of motor vehicle equipment.
* * * * *
    (8)(i) A description of the manufacturer's program for remedying 
the defect or noncompliance. The manufacturer's program will be 
available for inspection in the public docket, Room 5109, Nassif 
Building, 400 Seventh Street, SW, Washington DC 20590.
    (ii) If a manufacturer anticipates that its notification campaign 
will commence more than 30 days after it has notified NHTSA that a 
safety-related defect or noncompliance exists, or anticipates that the 
notification campaign will not be completed within 75 days after it has 
notified NHTSA of that decision, the manufacturer shall include with 
its report to NHTSA a proposed schedule for the notification campaign, 
from commencement through completion. If the remedy for the defect or 
noncompliance is not available at the time of the owner notification, 
the report shall state when the remedy will be provided to owners. The 
manufacturer shall also identify and describe in detail the factors on 
which the proposed schedule is based. The manufacturer's proposed 
schedule shall be subject to disapproval by the Administrator, if the 
Administrator determines that it will lead to unreasonable delays in 
the notification of and remedy for the defect or noncompliance.
    (iii) The manufacturer shall describe any factors that it 
anticipates could interfere with its ability to adhere to the proposed 
schedule and state with specificity the likely effect of each such 
factor.
    (iv) A manufacturer that is unable to conduct its notification 
campaign in accordance with the schedule submitted pursuant to 
paragraph (c)(8)(ii) of this section, or that is otherwise unable to 
complete owner notification within 75 days after notifying NHTSA of its 
defect or noncompliance decision, shall promptly advise NHTSA of its 
inability to do so and provide an explanation for such inability, along 
with a revised schedule, or a new schedule in those instances in which 
the manufacturer had not previously submitted a schedule. Such 
submission shall contain the basis for the new or revised schedule, 
which shall also be subject to disapproval by the Administrator.
    (v) If a manufacturer intends to file a petition for an exemption 
from the recall requirements of the Act on the basis that a defect or 
noncompliance is inconsequential as it relates to motor vehicle safety, 
it shall notify NHTSA of that intention in its original report to NHTSA 
of the defect or noncompliance. If such a petition is filed and 
subsequently denied, the time period under which an owner notification 
schedule must be filed under paragraph (c)(8) of this section shall run 
from the date of the denial of the petition.
    (vi) If a manufacturer advises NHTSA that it intends to file such a 
petition, and does not do so within the 30-day period established by 49 
CFR 556.4(c), the time periods for ascertaining whether an owner 
notification schedule must be filed under this section shall run from 
the end of that 30-day period. Any such schedule must be filed no later 
than the fifth business day after that date.
* * * * *
    (10) Except as authorized by the Administrator, the manufacturer 
shall submit a copy of its proposed owner notification letter to the 
Office of Defects Investigation (``ODI'') no fewer than five Federal 
government business days before it intends to begin mailing it to 
owners. Submission shall be made by any means which permits the 
manufacturer to verify promptly that the copy of the proposed letter 
was in fact received by ODI and the date it was received by ODI.
    (11) The manufacturer's campaign number, if it is not identical to 
the identification number assigned by NHTSA.
    18. Section 573.6 is amended by revising the first sentence of 
paragraph (a), adding a new paragraph (b)(6) and adding a new paragraph 
(d) to read as follows:


Sec. 573.6  Quarterly reports.

    (a) Each manufacturer who is conducting a defect or noncompliance 
notification campaign to manufacturers, distributors, dealers, or 
owners shall submit to NHTSA a report in accordance with paragraphs 
(b), (c), and (d) of this section. * * *
    (b) * * *
    (6) In reports by equipment manufacturers, the number of items of 
equipment repaired and/or returned by dealers, other retailers, and 
distributors to the manufacturer prior to their first sale to the 
public.
* * * * *
    (d) The reports required by this section shall be submitted in 
accordance with the following schedule, except that if the due date 
specified below falls on a Saturday, Sunday or Federal holiday, the 
report shall be submitted on the next day that is a business day for 
the Federal government:
    (1) For the first calendar quarter (January 1 through March 31), on 
or before April 30;
    (2) For the second calendar quarter (April 1 through June 30), on 
or before July 30;
    (3) For the third calendar quarter (July 1 through September 30), 
on or before October 30; and
    (4) For the fourth calendar quarter (October 1 through December 
31), on or before January 30.
    19. Section 573.7 is amended by revising the heading of the section 
and by adding new paragraphs (d) and (e) to read as follows:


Sec. 573.7  Lists of purchasers, owners, lessors and lessees.

* * * * *
    (d) If a manufacturer has in its possession at the time it sends 
notification of a safety-related defect or noncompliance information 
that a vehicle concerning which notification has been sent is a leased 
motor vehicle, the list(s) maintained by a manufacturer pursuant to 
paragraph (a) of this section shall identify the vehicle as a leased 
motor vehicle, and shall identify the person or entity to whom 
notification was sent as the lessor or lessee of the vehicle (as 
appropriate), if that information is known to the manufacturer. The 
manufacturer may also maintain a separate list which includes only 
leased vehicles, provided that it is clearly identified as such, and 
that it meets the other requirements for a list prepared pursuant to 
paragraph (a) of this section. [[Page 17270]] 
    (e) Each lessor of leased motor vehicles shall maintain, in a form 
suitable for inspection, such as computer information storage devices 
or card files, a list of the names and addresses of all lessees to 
which the lessor has provided notification of a defect or noncompliance 
pursuant to 49 CFR 577.5(i). The list shall also include the make, 
model, and vehicle identification number of each such leased vehicle, 
and either the date on which the lessor mailed notification of the 
defect or noncompliance to the lessee, or a statement that the 
manufacturer agreed on a specified date to mail the notification 
directly to the lessee. A manufacturer that provides notification 
directly to lessees shall maintain a list containing the same 
information as that required by this paragraph to be maintained by 
lessors sending notifications to lessees. The information required by 
this paragraph must be retained by the manufacturer or lessor 
(whichever sent the notification to the lessee) for one calendar year 
from the date the vehicle lease expires.
    20. Section 573.8 is revised to read as follows:


Sec. 573.8  Notices, bulletins, and other communications.

    Each manufacturer shall furnish to the NHTSA a copy of all notices, 
bulletins, and other communications (including those transmitted by 
computer, telefax or other electronic means, and including warranty and 
policy extension communiques and product improvement bulletins), other 
than those required to be submitted pursuant to Sec. 573.5(c)(9), sent 
to more than one manufacturer, distributor, dealer, lessor, lessee, or 
purchaser, regarding any defect in its vehicles or items of equipment 
(including any failure or malfunction beyond normal deterioration in 
use, or any failure of performance, or any flaw or unintended deviation 
from design specifications), whether or not such defect is safety-
related. Copies shall be in readable form and shall be submitted 
monthly, not more than five (5) working days after the end of each 
month.

PART 576--RECORD RETENTION

    21. The authority citation for part 576 is revised to read as 
follows:

    Authority: 49 U.S.C. 30112, 30115, 30117-121, 30166-167; 
delegation of authority at 49 CFR 1.50.

    22. Section 576.5 is revised to read as follows:


Sec. 576.5  Basic requirements.

    Each manufacturer of motor vehicles shall retain as specified in 
Sec. 576.7 every record described in Sec. 576.6 for eight years from 
the last date of the model year in which the vehicle to which it 
relates was produced.
    23. Section 576.6 is revised to read as follows:


Sec. 576.6  Records.

    Records to be retained by manufacturers under this part include all 
documentary materials, films, tapes, and other information-storing 
media that contain information concerning malfunctions that may be 
related to motor vehicle safety. Such records include, but are not 
limited to, communications from vehicle users and memoranda of user 
complaints; reports and other documents, including material generated 
or communicated by computer, telefax or other electronic means, that 
are related to work performed under, or claims made under, warranties; 
service reports or similar documents, including electronic 
transmissions, from dealers or manufacturer's field personnel; and any 
lists, compilations, analyses, or discussions of malfunctions that may 
be related to motor vehicle safety contained in internal or external 
correspondence of the manufacturer, including communications 
transmitted electronically.

PART 577--DEFECT AND NONCOMPLIANCE NOTIFICATION

    24. The authority citation for part 577 is revised to read as 
follows:

    Authority: 49 U.S.C. 30102-103, 30112, 30115, 30117-121, 30166-
167; delegations of authority at 49 CFR 1.50 and 49 CFR 501.8.

    25.-26. Section 577.4 is amended by revising the definition of 
``Act'', and by adding the following definitions, in alphabetical 
order, to read as follows:


Sec. 577.4  Definitions.

* * * * *
    Act means 49 U.S.C. Chapter 30101-30169.
* * * * *
    Leased motor vehicle means any motor vehicle that is leased to a 
person for a term of at least four months by a lessor who has leased 
five or more vehicles in the twelve months preceding the date of 
notification by the vehicle manufacturer of the existence of a safety-
related defect or noncompliance with a Federal motor vehicle safety 
standard in the motor vehicle.
    Lessee means a person who is the lessee of a leased motor vehicle 
as defined in this section.
    Lessor means a person or entity that is the owner, as reflected on 
the vehicle's title, of any five or more leased vehicles (as defined in 
this section), as of the date of notification by the manufacturer of 
the existence of a safety-related defect or noncompliance with a 
Federal motor vehicle safety standard in one or more of the leased 
motor vehicles.
* * * * *
    27. Section 577.5 is amended by revising the heading of the section 
and the fourth sentence of paragraph (a), by adding a new fifth, sixth 
and seventh sentence to paragraph (a), by revising paragraphs (c)(1) 
and (2) and the parenthetical in paragraph (g)(1)(vii), and by adding 
new paragraphs (h) and (i), to read as follows:


Sec. 577.5  Notification pursuant to a manufacturer's decision.

    (a) * * * The information required by paragraphs (d) through (h) of 
this section may be presented in any order. The manufacturer shall mark 
the outside of each envelope in which it sends an owner notification 
letter with a notation that includes the words ``SAFETY,'' RECALL,'' 
and ``NOTICE,'' all in capital letters and in type that is larger than 
that used in the address section, and is also distinguishable from the 
other type in a manner other than size. Except where the format of the 
envelope has been previously approved by NHTSA, each manufacturer must 
submit the envelope format it intends to use to NHTSA at least 5 
Federal government business days before mailing to owners, in the same 
manner as is required by Sec. 573.5(c)(9) for owner notification 
letters.
* * * * *
    (c) * * *
    (1) ``(Manufacturer's name or division) has decided that a defect 
which relates to motor vehicle safety exists in (identified motor 
vehicles, in the case of notification sent by a motor vehicle 
manufacturer; identified replacement equipment, in the case of 
notification sent by a replacement equipment manufacturer);'' or
    (2) ``(Manufacturer's name or division) has decided that 
(identified motor vehicles, in the case of notification sent by a motor 
vehicle manufacturer; identified replacement equipment, in the case of 
notification sent by a replacement equipment manufacturer) fail to 
conform to Federal Motor Vehicle Safety Standard No. (number and title 
of standard).''
    (g) * * *
    (1) * * * [[Page 17271]] 
    (vii) * * * (Washington, DC area residents may call 202-366-0123) * 
* *
* * * * *
    (h) A statement that describes a lessor's obligation under Federal 
law to provide a lessee of the vehicle to which the notification letter 
refers with a copy of the letter; and to maintain a record which 
identifies the lessee(s) to whom it sent a copy of the letter, the date 
it sent the letter, and the Vehicle Identification Number(s) of the 
vehicle(s) that it has leased to that lessee and to which the 
notification applies. The statement must also include the definition of 
``lessor'' set forth in Sec. 577.4 of this part. If the notification is 
being sent directly from a manufacturer to an individual or entity that 
the manufacturer knows to be a lessee, the manufacturer need not 
include a definition of lessor, but must state the requirement of 
Federal law regarding notification of lessees and that it is providing 
notification in place of the lessor.
    (i) Any lessor who receives a notification of a determination of a 
safety-related defect or noncompliance pertaining to any leased motor 
vehicle shall send a copy of such notice to the lessee as prescribed by 
Sec. 577.7(a)(2)(iv). This requirement applies to both initial and 
follow-up notifications, but does not apply where the manufacturer has 
notified a lessor's lessees directly.
    28. Section 577.6 is amended by revising the heading of the section 
and paragraph (a), paragraphs (b)(2)(i) and (ii), (b)(3), and (b)(5), 
paragraphs (b)(9)(i)(A) and (C), and paragraphs (b)(10)(iv), (b)(11), 
and (c)(1), to read as follows:


Sec. 577.6   Notification pursuant to Administrator's decision.

    (a) Agency-ordered notification. When a manufacturer is ordered 
pursuant to 49 U.S.C. 30118(b) to provide notification of a defect or 
noncompliance, he shall provide such notification in accordance with 
Secs. 577.5 and 577.7, except that the statement required by paragraph 
(c) of Sec. 577.5 shall indicate that the decision has been made by the 
Administrator of the National Highway Traffic Safety Administration.
    (b)  * * *
    (2)  * * *
    (i) ``The Administrator of the National Highway Traffic Safety 
Administration has decided that a defect which relates to motor vehicle 
safety exists in (identified motor vehicles, in the case of 
notification sent by a manufacturer of motor vehicles; identified 
replacement equipment, in the case of notification sent by a 
manufacturer of replacement equipment);'' or
    (ii) ``The Administrator of the National Highway Traffic Safety 
Administration has decided that (identified motor vehicles in the case 
of notification sent by a motor vehicle manufacturer; identified 
replacement equipment, in the case of notification sent by a 
manufacturer of replacement equipment) fail to conform to federal Motor 
Vehicle Safety Standard No. (number and title of standard).''
    (3) When the Administrator decides that the defect or noncompliance 
may not exist in each such vehicle or item of replacement equipment, 
the manufacturer may include an additional statement to that effect.
* * * * *
    (5) A clear description of the Administrator's stated basis for his 
decision, as provided in his order, including a brief summary of the 
evidence and reasoning that the Administrator relied upon in making his 
decision.
* * * * *
    (9) * * *
    (i) * * *
    (A) A statement that the remedy will be provided without charge to 
the owner if the Court upholds the Administrator's decision;
* * * * *
    (C) A statement that, if the Court upholds the Administrator's 
decision, he will reimburse the owner for any reasonable and necessary 
expenses that the owner incurs (not in excess of any amount specified 
by the Administrator) in repairing the defect or noncompliance 
following a date, specified by the manufacturer, which shall not be 
later than the date of the Administrator's order to issue this 
notification.
* * * * *
    (10) * * *
* * * * *
    (iv) The manufacturer's recommendations of service facilities where 
the owner could have the repairs performed, including (in the case of a 
manufacturer required to reimburse if the Administrator's decision is 
upheld in the court proceeding) at least one service facility for whose 
charges the owner will be fully reimbursed if the Administrator's 
decision is upheld.
    (11) A statement that further notice will be mailed by the 
manufacturer to the owner if the Administrator's decision is upheld in 
the court proceeding.
* * * * *
    (c) * * *
    (1) The statement required by paragraph (c) of Sec. 577.5 shall 
indicate that the decision has been made by the Administrator and that 
his decision has been upheld in a proceeding in the Federal courts; and
* * * * *
    29. Section 577.7 is amended by adding a new sentence at the end of 
paragraph (a)(1), by adding a new last sentence to paragraph (a)(2)(i), 
and by adding new paragraph (a)(2)(iv), and revising paragraph 
(a)(2)(ii)(B), to read as follows:


Sec. 577.7   Time and manner of notification.

    (a) * * *
    (1) Be furnished within a reasonable time after the manufacturer 
first decides that either a defect that relates to motor vehicle safety 
or a noncompliance exists. The Administrator may order a manufacturer 
to send the notification to owners on a specific date where the 
Administrator finds, after consideration of available information and 
the views of the manufacturer, that such notification is in the public 
interest. The factors that the Administrator may consider include, but 
are not limited to, the severity of the safety risk; the likelihood of 
occurrence of the defect or noncompliance; whether there is something 
that an owner can do to reduce either the likelihood of occurrence of 
the defect or noncompliance or the severity of the consequences; 
whether there will be a delay in the availability of the remedy from 
the manufacturer; and the anticipated length of any such delay.
    (2) * * *
    (i) * * * The manufacturer shall also provide notification to each 
lessee of a leased motor vehicle that is covered by an agreement 
between the manufacturer and a lessor under which the manufacturer is 
to notify lessees directly of safety-related defects and 
noncompliances.
    (ii) * * *
* * * * *
    (B) (Except in the case of a tire) if decided by the Administrator 
to be required for motor vehicle safety, by public notice in such 
manner as the Administrator may require after consultation with the 
manufacturer.
* * * * *
    (iv) In the case of a notification to be sent by a lessor to a 
lessee of a leased motor vehicle, by first-class mail to the most 
recent lessee known to the lessor. Such notification shall be mailed 
within ten days of the lessor's receipt of the notification from the 
vehicle manufacturer.
* * * * * [[Page 17272]] 
    30. Section 577.8 is revised to read as follows:


Sec. 577.8   Disclaimers.

    (a) A notification sent pursuant to Secs. 577.5, 577.6, 577.9 or 
577.10 regarding a defect which relates to motor vehicle safety shall 
not, except as specifically provided in this part, contain any 
statement or implication that there is no defect, that the defect does 
not relate to motor vehicle safety, or that the defect is not present 
in the owner's or lessee's vehicle or item of replacement equipment. 
This section also applies to any notification sent to a lessor or 
directly to a lessee by a manufacturer.
    (b) A notification sent pursuant to Secs. 577.5, 577.6, 577.9 or 
577.10 regarding a noncompliance with an applicable motor vehicle 
safety standard shall not, except as specifically provided in this 
part, contain any statement or implication that there is not a 
noncompliance, or that the noncompliance is not present in the owner's 
or lessee's vehicle or item of replacement equipment. This section also 
applies to any notification sent to a lessor or directly to a lessee by 
a manufacturer.
    31. A new Sec. 577.10 is added to read as follows:


Sec. 577.10   Follow-up notification.

    (a) If, based on quarterly reports submitted pursuant to Sec. 573.6 
of this part or other available information, the Administrator decides 
that a notification of a safety-related defect of a noncompliance with 
a Federal motor vehicle safety standard sent by a manufacturer has not 
resulted in an adequate number of vehicles or items of equipment being 
returned for remedy, the Administrator may direct the manufacturer to 
send a follow-up notification in accordance with this section. The 
scope, timing, form, and content of such follow-up notification will be 
established by the Administrator, in consultation with the 
manufacturer, to maximize the number of owners, purchasers, and lessees 
who will present their vehicles or items of equipment for remedy.
    (b) The Administrator may consider the following factors in 
deciding whether or not to require a manufacturer to undertake a 
follow-up notification campaign:
    (1) The percentage of covered vehicles or items of equipment that 
have been presented for the remedy;
    (2) The amount of time that has elapsed since the prior 
notification(s);
    (3) The likelihood that a follow-up notification will increase the 
number of vehicles or items of equipment receiving the remedy;
    (4) The seriousness of the safety risk from the defect or 
noncompliance;
    (5) Whether the prior notification(s) undertaken by the 
manufacturer complied with the requirements of the statute and 
regulations; and
    (6) Such other factors as are consistent with the purpose of the 
statute.
    (c) A manufacturer shall be required to provide a follow-up 
notification under this section only with respect to vehicles or items 
of equipment that have not been returned for remedy pursuant to the 
prior notification(s).
    (d) Except where the Administrator determines otherwise, the 
follow-up notification shall be sent to the same categories of 
recipients that received the prior notification(s).
    (e) A follow-up notification must include:
    (1) A statement that identifies it as a follow-up to an earlier 
communication;
    (2) A statement urging the recipient to present the vehicle or item 
of equipment for remedy; and
    (3) Except as determined by the Administrator, the information 
required to be included in the initial notification.
    (f) The manufacturer shall mark the outside of each envelope in 
which it sends a follow-up notification in a manner which meets the 
requirements of Sec. 577.5(a) of this part.
    (g) Notwithstanding any other provision of this Part, the 
Administrator may authorize the use of other media besides first-class 
mail for a follow-up notification.

    Issued on: March 24, 1995.
Ricardo Martinez,
Administrator.
[FR Doc. 95-8130 Filed 4-4-95; 8:45 am]
BILLING CODE 4910-59-P