37878 Federal Register / Vol. 74, No. 144 / Wednesday, July 29, 2009 / Rules and Regulations 

DEPARTMENT OF TRANSPORTATION 

National Highway Traffic Safety 

Administration 

49 CFR Parts 512 and 599 

[Docket No. NHTSA–2009–0120] 

RIN 2127–AK53 

Requirements and Procedures for 

Consumer Assistance To Recycle and 

Save Program 

AGENCY: National Highway Traffic 

Safety Administration (NHTSA), 

Department of Transportation (DOT). 

ACTION: Final rule. 

SUMMARY: This final rule sets forth 

requirements and procedures for the 

voluntary vehicle trade-in and 

purchase/lease program under the 

Consumer Assistance to Recycle and 

Save Act of 2009. This program helps 

consumers pay for a new, more fuel 

efficient car or truck from a 

participating dealer when they trade in 

a less fuel efficient car or truck. The rule 

establishes a process by which dealers 

can register in order to participate in the 

program and establishes the criteria this 

agency will use to determine which 

disposal facilities are eligible to receive 

and either crush or shred the trade-in 

vehicles. It also sets forth the criteria 

that trade-in vehicles and new vehicles 

must meet in order for purchases and 

leases to qualify for assistance under 

this program and establishes the 

requirements that must be met by 

consumers, dealers, disposal facilities 

and others. Finally, the rule sets forth 

enforcement procedures and provisions 

for punishing fraud and other violations 

of the program requirements. 

DATES: This final rule is effective July 

29, 2009. Petitions: If you wish to 

petition for reconsideration of this rule, 

your petition must be received by 

September 14, 2009. 

ADDRESSES: If you submit a petition for 

reconsideration of this rule, you should 

refer in your petition to the docket 

number of this document and submit 

your petition to: Administrator, 

National Highway Traffic Safety 

Administration, 1200 New Jersey 

Avenue, SE., West Building, 

Washington, DC 20590. 

The petition will be placed in the 

public docket. Anyone is able to search 

the electronic form of all documents 

received into any of our dockets by the 

name of the individual submitting the 

document (or signing the document, if 

submitted on behalf of an association, 

business, labor union, etc.). You may 

review the complete User Notice and 

Privacy Notice for Regulations.gov at 

http://www.regulations.gov/search/ 

footer/privacyanduse.jsp. 

FOR FURTHER INFORMATION CONTACT: You 

may obtain additional information about 

the CARS program by calling the CARS 

Hotline at 1–866–CAR–7891. It is 

dedicated to calls about the program. 

For non-legal issues, you may call, Mr. 

Frank Borris, NHTSA Office of 

Enforcement, telephone (202) 366–8089. 

For legal issues, you may call David 

Bonelli, NHTSA Office of Chief 

Counsel, telephone (202) 366–5834. 

SUPPLEMENTARY INFORMATION: 

Table of Contents 

I. Background 

II. Questions and Comments From the Public 

About the CARS Program 

III. Public Outreach and Consultation 

IV. The Regulation 

a. Definitions (§ 599.102) 

b. Registration of Dealers (§ 599.200) 

c. Identification of Disposal Facilities 

(§ 599.201) 

d. Determining Eligibility of Trade-in 

Vehicles and New Vehicles (§ 599.300) 

1. Vehicle Definitions 

2. Eligibility of Trade-in Vehicles 

3. Eligibility of New Vehicles 

e. Requirements for Qualifying 

Transactions (§§ 599.300 and 301) 

1. Vehicle Categories and Credit Amounts 

2. Special Requirements for Trade-in 

Vehicles 

3. Restrictions and Limitations on 

Transactions 

f. Requirements for Dealer Reimbursement 

(§ 599.302–304) 

g. Disposal of Trade-In Vehicles 

(§ 599.400–403) 

h. Enforcement (§ 599.500–517) 

1. Prevention of Fraud 

2. Civil Penalties and Other Sanctions 

V. Confidential Information and Privacy 

a. Determinations of the Confidentiality of 

CARS Data Based on FOIA Exemptions 

4 and 6 

b. Approach—Class Determinations vs. 

Individual Assessments 

c. Class Determinations Based on FOIA 

Exemption 4 

d. Data Submitted to NHTSA for the CARS 

Program 

1. Manufacturer Data 

2. Dealer Information and Transaction Data 

3. Disposal Facility and Destruction Data 

e. CARS Data Class Determinations Based 

on FOIA Exemption 4 

1. Manufacturer Assigned Dealer 

Identification 

2. Dealer Bank Name, ABA Routing 

Number, Bank Account Number 

3. CARS Dealer ID and CARS 

Authorization Codes 

f. Class Determination Based on FOIA 

Exemption 6 

VI. Costs and Benefits 

VII. Statutory Basis for This Action 

VIII. Effective Date 

IX. Regulatory Analyses and Notices 

I. Background 

On June 24, 2009, the President 

signed into law the Consumer 

Assistance to Recycle and Save Act of 

2009 (the CARS Act or the Act) (Pub. L. 

111–32). The Act establishes, within the 

National Highway Traffic Safety 

Administration (NHTSA or the agency), 

a temporary program under which an 

owner of a motor vehicle meeting 

statutorily specified criteria may trade 

in the vehicle and receive a monetary 

credit from the dealer toward the 

purchase or lease of a new motor 

vehicle meeting statutorily specified 

criteria. 

Generally, the trade-in vehicle must 

have a combined fuel economy, as 

determined by the Environmental 

Protection Agency (EPA), below a 

specified value and the new vehicle 

must have an EPA combined fuel 

economy above a higher specified value. 

(Combined fuel economy is an EPA 

calculation representing the weighted 

average of a vehicle’s city and highway 

fuel economy as determined according 

to the method described in EPA 

regulations at 40 CFR 600.210–08(c)). 

The program covers qualifying 

transactions that occur between July 1, 

2009 and November 1, 2009, so long as 

funds appropriated by Congress are not 

exhausted. If all of the conditions of 

eligibility are met and the dealer 

provides NHTSA with sufficient 

documentation relating to the 

transaction, NHTSA will make an 

electronic payment to the dealer equal 

to the amount of the credit extended by 

the dealer to the consumer, not 

exceeding the statutorily authorized 

amount. The dealer must agree to 

transfer the trade-in vehicle to a 

disposal facility that will crush or shred 

it so that it will never be returned to the 

road, although parts of the vehicle, other 

than the engine block and drive train 

(unless the drive train is sold in separate 

parts), may be sold. 

The CARS Act requires the Secretary 

of Transportation, acting through 

NHTSA, to issue final regulations 

within 30 days after enactment (i.e., by 

July 24, 2009), ‘‘notwithstanding’’ the 

notice and comment requirements of the 

Administrative Procedure Act (5 U.S.C. 

553). The regulations must, among other 

things: (1) Provide for a means of 

registering dealers for participation in 

the program; (2) establish procedures for 

reimbursement of dealers participating 

in the program; (3) require that dealers 

use the credit in addition to any other 

rebate or discount advertised by the 

dealer or offered by the manufacturer 

and prohibit the dealer from using the 

credit to offset any such other rebate or 

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

discount; (4) require that dealers 

disclose to the person trading in an 

eligible vehicle the best estimate of the 

scrappage value of such vehicle and 

permit dealers to retain $50 of the 

amount paid for the scrappage value as 

payment for any administrative costs of 

participation in the program; (5) 

establish requirements and procedures 

for the disposal of eligible trade-in 

vehicles; and (6) provide for the 

enforcement of penalties for violations 

of the program requirements. 

Separate from the rulemaking 

requirement, the CARS Act directs the 

agency to establish a Web site to convey 

information about the program, 

including instructions on how to 

determine if a vehicle is an eligible 

trade-in vehicle, how to participate in 

the program and how to determine if a 

dealer is participating in the program. 

The agency established this Web site at 

http://www.cars.gov. Among other 

things, the Web site contains an 

interactive tool for determining eligible 

vehicles, a list of participating dealers 

and disposal facilities, responses to 

frequently asked questions, and 

information on how to determine the 

EPA combined fuel economy of trade-in 

vehicles and of new vehicles. In 

addition, NHTSA set up a hotline ((866) 

227–7891) to answer questions about 

the program and, on July 2, 2009, 

published a document in the Federal 

Register (74 FR 31812) providing 

additional useful information, in 

advance of issuance of this final rule. 

The Act provides that the program 

covers eligible transactions beginning 

on July 1, 2009, prior to today’s final 

rule. NHTSA advised the public through 

the July 2 Federal Register document, 

the Web site, and the hotline that it was 

prudent to wait until the details of the 

program were specified in today’s final 

rule. Nevertheless, if transactions 

occurring on or after July 1, 2009, but 

before today’s final rule, meet all of the 

requirements identified in this final 

rule, registered dealers may follow the 

application procedures of the rule and 

apply for reimbursement for those 

transactions. To expedite processing, 

the rule relies, wherever possible, on 

electronic submissions through secure 

agency Web sites. 

In order to implement this new 

program, NHTSA has had to quickly 

create a new organization. NHTSA has 

established the Office of the Car 

Allowance Rebate System within the 

Office of Enforcement. The new office 

will consist of three divisions. The 

Transaction Oversight Division will 

work closely with the contractor 

NHTSA has retained to review incoming 

requests for payment from dealers to 

ensure that those requests are reviewed 

correctly and in a timely way. The Data 

Analysis and Reporting Division will 

review data generated in connection 

with the program to help ensure the 

system’s efficiency and detect problems 

with the process or indications of 

potential compliance issues. That 

division will also produce reports on all 

aspects of the system. The Compliance 

Division will work to detect and deter 

possible noncompliance related to the 

program and coordinate closely with 

NHTSA’s Office of Chief Counsel when 

possible violations are found. That 

division will also coordinate closely 

with the DOT’s Office of Inspector 

General on issues related to possible 

fraud in connection with the program. 

The agency also has decided to use 

the name Car Allowance Rebate System 

(CARS) for its program implementing 

the Act. The use of the term ‘‘rebate’’ in 

the name NHTSA has chosen for the 

program is not intended to have any 

effect on how CARS transactions are 

treated under State or Federal tax laws. 

The CARS Act provides that the credit 

is not income to the purchaser, but does 

not address any other possible tax 

issues. NHTSA lacks expertise and 

authority in tax matters and makes no 

attempt here to provide any guidance on 

those matters. 

II. Questions and Comments From the 

Public About the CARS Program 

During the period between enactment 

of the CARS Act and publication of 

today’s rule, the agency received 

numerous questions and comments 

about various provisions of the Act. The 

final rule seeks to address these 

comments and questions, and details 

appear later in this document. However, 

the agency provides here a brief 

summary discussion of some of the 

issues raised. As noted earlier, NHTSA’s 

Web site for the CARS program contains 

responses to frequently asked questions 

by members of the public. 

The CARS program assists consumers 

who trade in their older, less fuel 

efficient vehicles for new, more fuel 

efficient vehicles. The program is 

designed to remove these older, less fuel 

efficient vehicles from the road, by 

requiring the trade-in vehicle to be 

crushed or shredded. Some consumers 

were unaware that their trade-in vehicle 

must be destroyed as a statutory 

condition of participating in this 

program. Because of that condition, 

consumers purchasing or leasing a new 

vehicle under this program should not 

expect to receive the full trade-in value 

of their old vehicle when negotiating 

with a dealer. 

As detailed below, the program has 

different requirements for different 

types of trade-in vehicles (e.g., 

passenger cars, SUVs and vans, pickups, 

and trucks) because these vehicles have 

varying levels of EPA combined fuel 

economy. In general, passenger cars 

have the highest combined fuel 

economy. Therefore, even though a 

passenger car may be quite old and/or 

in poor condition, it may not be an 

eligible trade-in vehicle under the 

program because its combined fuel 

economy at the time of its manufacture 

(as measured by the EPA) exceeds 

statutory limits. Some consumers have 

expressed surprise at this result. 

However, the agency must follow the 

requirements of the statute. Larger, older 

pickups and SUVs, on the other hand, 

do not typically have very high fuel 

economy. The statutory requirements 

for trading in these vehicles are less 

strict than for trading in passenger cars. 

Consumers may find that more of the 

vehicles in these categories are eligible 

as trade-in vehicles under the program. 

Questions have arisen as to which 

persons are eligible to participate in the 

program and whether a person can trade 

in a vehicle owned by someone else, 

such as a family member. The agency 

has concluded that individuals as well 

as legal entities, such as corporations 

and partnerships, may participate in the 

program. However, a person may not 

trade in a vehicle owned by someone 

else under the program. The Act’s oneyear insurance requirement is satisfied 

so long as the trade-in vehicle is 

insured, irrespective of the identity of 

the person holding the insurance policy. 

The specifics of these requirements are 

explained later in this document. 

The agency has received questions 

regarding the value and disposition of 

the trade-in vehicle. The CARS Act 

specifies that while many parts of the 

trade-in vehicle are permitted to be 

removed and sold, in the end the 

residual vehicle, including the engine 

block, must be crushed or shredded. 

Therefore, the trade-in value of the 

vehicle is not likely to exceed its scrap 

value. Purchasers should not expect to 

receive the same trade-in value as they 

might if the vehicle were to remain on 

the road. The Act also requires dealers 

to disclose to purchasers the scrap value 

of the trade-in vehicle at the time of the 

trade-in and allows dealers to retain up 

to $50 of the scrap value of the vehicle 

for their administrative costs of 

participation in the program. 

Some consumers have expressed 

concern that the combined fuel 

economy value of their vehicles, as 

determined on the http:// 

fueleconomy.gov Web site of the EPA, is 

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

not an accurate measure of the actual 

fuel economy they experience. EPA 

determines these values for each make, 

model, and model year with regard to 

each vehicle at the time of its 

manufacture. These consumers contend 

that if another means were used to 

calculate combined fuel economy, their 

vehicle would be an eligible trade-in 

vehicle under the program. The CARS 

Act is prescriptive in this regard, and 

requires NHTSA to use the EPA 

calculation, and not any other 

calculation, to determine whether a 

trade-in vehicle is eligible under the 

program. 

Some consumers have asked whether 

they may participate in more than one 

reimbursed transaction, either singly or 

as joint-registered owners of a vehicle. 

The CARS Act specifies that each 

person may receive only one credit and 

that only one credit may be issued to the 

joint-registered owners of a single tradein vehicle under the program. 

Consequently, a person may participate 

in a transaction that receives a credit 

under this program only once. 

The CARS Act is specific as to the 

characteristics of the vehicle that may 

be traded in and the characteristics of 

the new vehicle that may be purchased 

or leased, and these two requirements 

are interdependent (i.e., whether a new 

vehicle is eligible under the program 

depends, in part, on the characteristics 

of the trade-in vehicle). For example, 

the trade-in requirements for a large 

work truck differ from those of 

passenger cars under the program. 

Similarly, some vehicles—notably 

motorcycles—simply are not eligible 

under the CARS Act, either as trade-in 

vehicles or for purchase or lease, even 

though consumers have noted that 

transactions involving those vehicles 

might reduce fuel use and improve the 

environment. 

III. Public Outreach and Consultation 

The extremely short time afforded by 

the Act to develop and complete this 

rulemaking precluded publishing a 

proposed rule for notice and comment. 

Therefore, the agency took a variety of 

steps to obtain public input as it moved 

forward to develop this rule. It 

established a Web site that invited 

public inquiries. As it received 

inquiries, it posted a steadily growing 

list of questions and answers, which in 

turn led to additional inquiries. It 

hosted a ‘‘webinar’’ that elicited 

hundreds of inquiries. In addition, it 

met with representatives of a wide 

variety of environmental interest 

groups. 

The agency also directly consulted 

with organizations representing original 

equipment manufacturers (OEMs), 

including the Alliance of Automobile 

Manufacturers and the Association of 

International Automobile 

Manufacturers, to obtain information on 

franchised dealerships. The agency 

involved the OEMs because they 

possess comprehensive and readily 

available lists of new vehicle dealers 

licensed under State law. As detailed 

below, the agency is using lists of 

franchised dealers provided by the 

OEMs to aid in the process of registering 

dealers under the program. 

NHTSA met with automobile dealers 

and dealer organizations, including the 

National Automobile Dealers 

Association and the American 

International Automobile Dealers 

Association, to better understand the 

typical vehicle trade-in and purchase/ 

lease transaction. The agency consulted 

with groups representing disposal 

facilities, salvage auctions, and 

reporting entities, including the 

American Salvage Pool Association, the 

Automotive Recyclers Association, 

CoPart, Mannheim, Insurance Auto 

Auctions, the Institute of Scrap 

Recycling Industries, Inc., and the 

National Salvage Vehicle Reporting 

Program, to learn about the processes 

involved in recycling and scrapping old 

vehicles. The information learned by the 

agency from dealer and disposal facility 

organizations was critical to an 

informed rulemaking process. 

The agency also consulted with 

officials from Texas, California and 

Germany. These officials provided 

valuable information to the agency, 

based on their experience administering 

and enforcing similar vehicle purchase 

and trade-in programs. Each of these 

officials cautioned NHTSA that it would 

need to be vigilant to guard against 

fraud. 

Finally, as required under the CARS 

Act, the agency coordinated with 

appropriate Federal agencies. With 

respect to the National Motor Vehicle 

Title Information System (NMVTIS), the 

agency met with the Department of 

Justice and its NMVTIS program 

administrator, the American Association 

of Motor Vehicle Administrators, to 

develop procedures for updating the 

NMVTIS to reflect the crushing or 

shredding of trade-in vehicles under the 

program. The agency consulted with the 

EPA on the listing of categories of 

eligible vehicles and on the listing of 

disposal facilities and requirements and 

procedures for the proper disposal of 

refrigerants, antifreeze, mercury 

switches, and other substances prior to 

crushing or shredding the trade-in 

vehicle. The agency also consulted with 

EPA concerning a method to disable the 

engines of the vehicles that are traded 

in. 

Memoranda providing the dates and 

summaries of meetings with these 

organizations and various other groups 

are included in the docket for this rule. 

IV. The Regulation 

As directed by the CARS Act, today’s 

final rule sets forth requirements and 

procedures for registering participating 

dealers and listing participating 

disposal facilities, reimbursing dealers 

for qualifying transactions, disposing of 

trade-in vehicles, and enforcing 

penalties for program violations. 

The rule is being issued without first 

providing a notice and an opportunity 

for public comment. As noted above, the 

Act provides that the rule shall be 

issued within 30 days after enactment, 

‘‘notwithstanding’’ the requirements of 

5 U.S.C. 553, the Federal law requiring 

notice and comment. Further, given that 

schedule and the necessity of quickly 

beginning to implement this 4-month 

program with a statutorily fixed end 

date, the agency finds for good cause 

that providing notice and comment is 

impracticable and contrary to the public 

interest. Drafting and issuing a proposed 

rule, providing a period for public 

comment, and addressing those 

comments in the final rule would have 

been highly impracticable in the time 

available and would have substantially 

delayed issuance of this final rule 

beyond the legislatively mandated 

issuance date of July 24. We think the 

public interest is best served by issuing 

this rule on the mandated date so that 

its requirements are known and can be 

followed by all participants. This is 

especially true because transactions 

since July 1 have been potentially 

eligible for credits under this program. 

The CARS Act prescribes a 

rulemaking period of just 30 days before 

the program is to be fully implemented 

and capable of accommodating a 

potentially very large number of 

transactions. Mindful of this 

requirement, the agency placed 

significant emphasis on efficient 

transaction processes and data 

exchange. To that end, most of the 

transactional requirements imposed by 

today’s rule are met through electronic 

online submissions. Where this is so, 

the rule identifies the particular data or 

information required in the electronic 

submission and, in one case, refers to an 

appendix with a facsimile of the 

electronic form for easy reference. 

The Act requires the agency to 

develop certain lists to assist consumers 

and dealers (e.g., a comprehensive list of 

new fuel efficient vehicles meeting the 

program requirements, a list of disposal 

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1The agency chose to involve the OEMs in this 

process to eliminate the opportunity for 

unscrupulous individuals or entities to identify 

themselves as franchised dealers. 2The registration process was made available to 

dealers beginning on July 24, 2009. 

3As discussed later in this document, other 

requirements apply to these earlier transactions as 

well. 

entities to which dealers may transfer 

eligible trade-in vehicles). Here, the rule 

makes use of references to the CARS 

Web site for convenient reference to 

these helpful lists. 

Much of the CARS Act is specific and 

directive. However, where a statutory 

term or provision is not clear or gives 

the agency discretion, the rule generally 

strikes the balance in favor of an 

interpretation that promotes smooth and 

expeditious completion of transactions 

or one that decreases opportunities for 

fraud. 

a. Definitions (§ 599.102) 

The CARS Act defines a dealer as a 

person licensed by a ‘‘State’’ and 

identifies an eligible trade-in vehicle in 

terms of its insurance and registration 

status under ‘‘State’’ law. Read together, 

these statutory provisions restrict the 

transactions that are eligible for a credit 

under the CARS program. More 

specifically, a dealer must be a United 

States dealer and a trade-in vehicle must 

be insured and registered in the United 

States. However, nothing in the Act 

excludes U.S. territories from the reach 

of the program. Consequently, in section 

599.102, the agency has defined ‘‘State’’ 

to include the 50 United States, the 

District of Columbia, Puerto Rico, the 

Virgin Islands, Guam, American Samoa, 

and the Commonwealth of the Northern 

Mariana Islands. 

The CARS Act uses the term ‘‘person’’ 

to describe those eligible to purchase or 

lease a new vehicle under the Program. 

See Sections 1302(c–d). In the absence 

of a definition of this term in the CARS 

Act, the agency relies on the universal 

definition that appears in 1 U.S.C. 1, 

which includes corporations, 

companies, associations, firms, 

partnerships, societies, and joint stock 

companies, as well as individuals. The 

agency adopts this definition for the 

term ‘‘person’’ in Section 599.102, and 

also defines a ‘‘purchaser’’ in that 

section as a person purchasing or 

leasing a new vehicle under the CARS 

program. Of course, each person is 

subject to the statutory restriction that 

precludes participation by any person in 

this program more than once. 

b. Registration of Dealers (§ 599.200) 

The Act requires the agency to 

provide for a means of registering 

dealers for participation in the program. 

(Section 1302(d)(1)). A dealer is defined 

under the Act as a person licensed by 

a State who engages in the sale of new 

automobiles to ultimate purchasers 

(Section 1302(i)(6)), a definition we 

have restated in Section 599.102. After 

consultation with dealer and OEM 

organizations, the agency is 

implementing the dealer registration 

requirement through a several step 

process. First, on June 30, 2009, the 

agency requested and later received a 

list of franchised dealers from their 

respective OEMs, including each 

dealer’s legal business name, doingbusiness-as name, mailing address, 

point of contact, and OEM franchise 

identifier.1 OEM franchised dealers, as a 

group, satisfy the requirement for State 

licensing. The agency has learned that, 

without an active OEM franchise 

agreement, a dealer is unable to offer 

manufacturer purchasing incentives and 

may not be able, in some cases, to 

extend the full manufacturer warranty 

to the new vehicles it sells. For this 

reason, the agency includes the 

requirement for a currently active OEM 

franchise agreement as part of the dealer 

registration process. (The OEMs have 

agreed to update this list weekly, to add 

newly franchised dealerships and 

remove dealerships that are no longer 

under franchise agreement.) The agency 

then contacted all listed dealers by mail, 

providing instructions on how to 

register under the program. Dealers 

received separate letters and were 

instructed to register separately for each 

make of vehicle they sell. Section 

599.200(b) identifies the required dealer 

qualifications for registration, which 

flow from the statutory requirement for 

State licensing and from the need to 

perform transactions electronically. 

OEM franchised dealers should easily 

satisfy these requirements. 

As set forth in section 599.200(c), 

dealers that have been contacted by mail 

by the agency and that wish to 

participate must register to do so 

electronically, using the authorization 

code and following the instructions 

provided in the mailing, and fill out an 

electronic screen providing, among 

other things, name and contact 

information and bank account and 

routing data for receiving payment 

under the program.2 The agency will 

review this information to ensure 

completeness, and verify that the dealer 

has a still active franchise agreement 

(based on the continuously updated list 

provided by OEMs). Section 599.200(d) 

sets forth the procedures for approving 

and disapproving registration 

applications. Section 599.200(d)(1) 

provides that, where an application for 

registration is approved, the agency will 

notify the dealer of approval by e-mail, 

providing a user identification and 

password with which to conduct 

transactions, and add the dealer to the 

list of registered dealers on its Web site 

at http://www.cars.gov. Consumers may 

consult this list to identify registered 

dealers in their locality. Section 

599.200(d)(2) provides that, where an 

application for registration is rejected, 

the agency will notify the dealer by email, and provide the reasons for 

rejection. The agency anticipates that, 

unless rejected, confirmation of 

registration and addition to the list 

should occur within 2 to 4 business 

days after a dealer submits the required 

information. 

Section 599.200(e)(1) provides that 

the agency may automatically revoke a 

registration as a matter of course for 

termination or discontinuance of a 

franchise but the dealer’s registration 

may be reinstated upon a dealer’s 

showing of proper and adequate license 

to sell new vehicles to ultimate 

purchasers. Section 599.200(e)(2) states 

that the agency may suspend or revoke 

a dealer’s registration under the 

procedures in Section 599.504. Section 

599.200(f) requires a registered dealer to 

immediately notify the agency of any 

change in the registration information it 

submitted or any change in the status of 

its State license or franchise. Finally, 

section 599.200(g) accommodates 

transactions that occurred after July 1, 

2009, but prior to the publication of 

today’s final rule, by permitting 

registration after a qualifying sale or 

lease transaction has occurred.3

The agency believes that this process 

is the most efficient and appropriate 

method to register dealers consistent 

with the requirements of the CARS Act. 

The Act requires that a dealer be 

licensed under State law, and the list 

provided by OEMs ensures that this is 

so. Using this list also allows the agency 

to verify dealer registration information 

in a timely manner. Since the OEMs 

have agreed to provide weekly updated 

lists, this process also will allow for 

registration of newly franchised dealers 

as they come into existence and the 

discontinuance of registrations for 

dealers that are no longer franchised. 

Newly franchised dealers will be 

contacted by mail with an authorization 

code, as the agency becomes aware of 

them from the weekly updated lists. A 

dealer whose franchise has been 

discontinued will be removed from the 

agency’s list, and will no longer be 

eligible to receive credits for 

transactions under the program. 

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4Participants in the CARS program are cautioned 

to consult the list on NHTSA’s CARS Web site, 

http://www.cars.gov/disposal, for eligible disposal 

facilities, not the list on the ELVS Web site. 

c. Identification of Disposal Facilities 

(§ 599.201) 

Under the Act, the agency is required 

to provide a list of entities to which 

dealers may transfer eligible trade-in 

vehicles for disposal. (Section 

1302(d)(5)). The Act also requires the 

Secretary to coordinate with the 

Attorney General to ensure that the 

National Motor Vehicle Title 

Information System (NMVTIS) is timely 

updated to reflect the crushing or 

shredding of trade-in vehicles and 

appropriate reclassification of their 

titles. (Section 1302(c)(2)(C)). 

The agency met with groups 

representing auto recyclers and other 

disposal facilities and salvage auctions, 

as well as officials from AAMVA and 

the Department of Justice responsible 

for administering the NMVTIS, to get an 

understanding of the vehicle salvage 

and disposal process. From those 

meetings, the agency learned that there 

is a wide range of entities involved in 

various aspects of the vehicle salvage 

and disposal business. The agency also 

consulted with the EPA about the CARS 

program and the requirement to produce 

a list of disposal facilities for 

disposition of the trade-in vehicles. 

Mindful of environmental issues, 

NHTSA sought to identify a universe of 

disposal facilities that was attentive to 

these concerns, while achieving the 

objectives of the CARS program. 

In the course of these consultations 

and based on advice from EPA, the 

agency identified the National Vehicle 

Mercury Switch Recovery Program 

(NVMSRP) as a comprehensive source 

of disposal facilities generally 

committed to meeting State and Federal 

environmental laws. The NVMSRP was 

established in 2006 under a 

memorandum of understanding (MOU) 

among the EPA, environmental groups, 

manufacturers and disposal facilities, to 

recover and recycle mercury switches 

from end-of-life vehicles before they are 

scrapped, crushed or shredded. This 

purpose is in alignment with the CARS 

Act’s requirement for proper vehicle 

disposition, including the removal of 

mercury switches. The MOU authorizes 

the End of Life Vehicle Solutions 

(ELVS), a corporation established by 

vehicle manufacturers to carry out 

responsibilities of the NVMSRP, 

including establishing a process for 

participants to enroll in the program 

and maintaining a database of 

participants who recover and submit 

mercury switches. 

Participants may enroll in the 

program by registering with ELVS. 

Information about ELVS can be found 

on its Web site at http:// 

www.elvsolutions.org. Currently, 

approximately 7,700 disposal facilities 

are participants, and EPA estimates that 

approximately 1,500 of these facilities 

actively turn in the switches. The 

agency has determined that disposal 

facilities that are participants on the 

ELVS list present the best assurance of 

compliance with State and Federal 

environmental laws. 

With this in mind, NHTSA has 

identified disposal facilities that are 

ELVS participants for listing as 

approved disposal facilities under this 

program, and these disposal facilities 

are listed on the agency’s Web site at 

http://www.cars.gov/disposal. However, 

some entities on this list may dispose of 

mercury switches as part of their 

business (for example, auto repair 

businesses) but do not actually engage 

in dismantling or recycling of vehicles. 

Therefore, the fact that a facility is on 

the list does not automatically ensure 

that it is equipped to dispose of vehicles 

properly. To be eligible for participation 

in the CARS Program, a facility on the 

ELVS list must be able to crush or shred 

motor vehicles, either with its own 

equipment or by use of a mobile 

crusher. NHTSA was not able to obtain 

accurate lists of all entities that have 

this capacity within the time allowed, 

but is informed that many of the entities 

on the ELVS list are capable of at least 

obtaining the services of a mobile 

crusher. Dealers will have to inquire of 

specific entities concerning their 

capacity to crush or shred the vehicle. 

Any facility that does participate will 

have to certify that it has that capacity 

to crush or shred and will dispose of the 

vehicle through crushing or shredding. 

These facilities must additionally 

agree to turn in mercury switches in 

accordance with the NVMSRP from any 

CARS trade-in vehicles they accept (to 

the extent the vehicles have such 

switches), by certifying that they will do 

so. In addition, because the CARS Act 

directs the agency to ensure that 

pollutants are removed from vehicles 

and properly disposed of, that vehicles 

are crushed or shredded, and that 

NMVITS is updated to reflect the 

disposition of the vehicle, as a condition 

of participation in the program, the 

listed participants must also agree to 

remove pollutants from the CARS tradein vehicles in compliance with State 

and Federal law, crush or shred the 

vehicle, update NMVTIS to reflect the 

disposition of the vehicle, and certify to 

having done so. The certification 

requires the disposal facility to certify 

that it will dispose of refrigerants, 

antifreeze, lead products, mercury 

switches, and other toxic or hazardous 

vehicle components prior to crushing or 

shredding, in accordance with 

applicable Federal and State 

requirements. The rule does not impose 

additional requirements; for example, it 

does not require removal of all lead 

products such as lead solder 

connections that are ordinarily not 

removed during the shredding process. 

NHTSA is aware, from consultations 

with EPA, that the State of Maine and 

the U.S. territories are not participants 

in the NVMSRP and that the ELVS list 

contains no disposal facilities in these 

areas. Maine has its own program for 

recycling mercury switches, which is 

comparable to the NVMSRP. Under 

Maine law, a vehicle may not be 

crushed without first removing and 

properly disposing of mercury switches, 

and disposal facilities are covered by 

that law. NHTSA obtained a list of 

disposal facilities in Maine from the 

State Bureau of Motor Vehicles, and 

these facilities are included along with 

the ELVS facilities from other states, on 

the agency’s Web site at http:// 

www.cars.gov/disposal. As a condition 

of participating, these Maine facilities 

must make the same certifications as 

required of the ELVS facilities. 

In the case of the U. S. Territories, the 

agency is informed that participation in 

ELVS is currently impracticable for cost 

reasons related to sending mercury 

switches to the Continental United 

States. Therefore, the rule does not 

include disposal facilities on the list for 

the Territories, but allows dealers to 

select disposal facilities within the 

territories that are able to make the same 

certifications required of the ELVS and 

Maine facilities. 

The agency plans to update this 

disposal facility list periodically, to add 

entities that become ELVS participants 

and to remove entities that are no longer 

ELVS participants or for other reasons 

discussed elsewhere in this document. 

The rule requires dealers to consult this 

list on the CARS Web site at the time 

of the transfer of the trade-in vehicle, as 

an entity that does not appear on the list 

on that date is not eligible to receive the 

vehicle for crushing or shredding.4

One issue that has arisen is the 

participation of entities that shred 

vehicles in the CARS process. Shredders 

turn crushed vehicles into materials 

useful in various industrial processes. 

Shredders are relatively few in number, 

with less than 300 shredding machines 

distributed nationwide. Disposal 

facilities with shredders may be ELVS 

participants and, if they are, they can 

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5Section 1302(i) of the CARS Act defines those 

categories largely with reference to statutory 

categories of vehicles subject to the Corporate 

Average Fuel Economy (CAFE) Standards as 

follows: ‘‘passenger automobile’’ means a passenger 

automobile, as defined in section 32901(a)(18) of 

title 49, United States Code, that has a combined 

fuel economy value of at least 22 miles per gallon; 

‘‘category 1 truck’’ means a non-passenger 

automobile, as defined in section 32901(a)(17) of 

title 49, United States Code, that has a combined 

fuel economy value of at least 18 miles per gallon, 

except that such term does not include a category 

2 truck; ‘‘category 2 truck’’ means a large van or a 

large pickup, as categorized by the Secretary using 

the method used by the Environmental Protection 

Agency and described in the report entitled 

‘‘Light-Duty Automotive Technology and Fuel 

Economy Trends: 1975 through 2008’’; ‘‘category 3 

truck’’ means a work truck, as defined in section 

32901(a)(19) of title 49, United States Code. Under 

regulations implementing the CAFE program (see 

49 CFR Part 523), ‘‘passenger automobiles’’ 

currently include all passenger cars and ‘‘nonpassenger automobiles’’ include all SUVs, vans and 

pickup trucks up to 8,500 pounds GVWR. 

6The five ground clearance characteristics are: (1) 

An approach angle of not less than 28 degrees; (2) 

a breakover angle of not less than 14 degrees; (3) 

a departure angle of not less than 20 degrees; (4) 

a running clearance of not less than 20 centimeters; 

and (5) front and rear axle clearances of not less 

than 18 centimeters each. These characteristics are 

calculated when the automobile is at curb weight, 

on a level surface, with the front wheels parallel to 

the automobile’s longitudinal centerline, and the 

tires inflated to the manufacturer’s recommended 

pressure. See 49 CFR Part 523.5(b)(2). 

participate fully in the CARS program. 

To the extent these facilities are not 

ELVS participants, they may still play a 

role in the ultimate disposition of the 

vehicle. The final rule places no 

restrictions on a trade-in vehicle once it 

is crushed. Once crushed, the agency 

assumes the vehicle will be transferred 

to a shredder so that its materials can be 

recycled. The rule does not require any 

tracking of this ultimate shredding of a 

crushed vehicle, so the entity receiving 

the crushed vehicle for shredding does 

not have to submit a CARS certification 

form. 

Because of the requirement, discussed 

later in this document, that dealers must 

disable the trade-in vehicle’s engine 

prior to transferring the vehicle to a 

disposal facility, the agency believes 

that the statutory interest in ensuring 

that the vehicle is not returned to use on 

the road in this or any other country is 

largely met before it leaves the dealer’s 

possession. Prior engine disablement 

reduces the likelihood that a trade-in 

vehicle will be returned to use as an onroad automobile. With the extra 

assurance provided by engine 

disablement, the smooth operation of 

the program is better served if 

limitations on participation in the 

disposal stream are kept to a minimum, 

ensuring a reasonable geographic 

distribution of entities that may receive 

trade-in vehicles from dealers under the 

program. 

With these points in mind, the agency 

consulted with representatives of the 

salvage auction industry. The agency 

believes it is practicable to provide for 

the participation of salvage auctions in 

the transfer of trade-in vehicles to 

disposal facilities under the CARS 

program, in order to broaden the 

avenues of disposal available to dealers. 

Therefore, salvage auctions may receive 

a CARS trade-in vehicle, provided that, 

as a condition of participation, these 

entities agree to limit their auction sales 

of CARS trade-in vehicles to the 

disposal facilities described above that 

appear on the agency’s list. We believe 

that including listed disposal facilities, 

and requiring salvage auctions to sell at 

auction the scrap trade-in vehicles only 

to approved disposal facilities strikes 

the appropriate balance between 

program and environmental 

accountability, on the one hand, and 

geographic distribution and dealer 

access, on the other. 

NHTSA was unable to develop a 

comprehensive list of salvage auctions 

within the time allowed. Although we 

heard from representatives of some of 

the largest auctions and their 

associations (including CoPart, 

Mannheim, the Insurance Auto 

Auctions, and the Automotive Salvage 

Pool Association), we concluded that 

simply listing their members, absent 

more information, would not be 

appropriate. However, we understand 

from representatives of those 

organizations and companies that they 

and their members are willing to restrict 

the sale of CARS trade-in vehicles to 

just those entities on the CARS program 

disposal facility list and make the 

necessary certifications about the 

disposal of those vehicles. Any other 

salvage auctions willing to abide by 

these restrictions and submit the 

necessary forms and certifications under 

penalty of law may participate in the 

CARS program. All participants must 

understand the specific requirements of 

this rule and the substantial penalties 

they may incur if they violate it or 

submit false information in connection 

with the program. Also, all who 

participate must understand that their 

records, premises, and CARS vehicles in 

their possession are subject to 

inspection by NHTSA and the DOT 

Office of Inspector General. 

Section 599.201 implements the 

requirements for identification of 

salvage auctions and disposal facilities. 

Section 599.201(a) identifies the 

participating entities, including salvage 

auctions, disposal facilities listed on the 

agency’s Web site, and disposal 

facilities in the U.S. territories. Section 

599.201(b) describes the conditions 

these entities must follow in order to 

participate in the program. 

d. Determining Eligibility of Trade-in 

Vehicles and New Vehicles (§ 599.300) 

The CARS Act prescribes detailed 

requirements concerning eligible tradein vehicles and eligible new vehicles for 

qualifying transactions under the 

Program. This final rule implements 

these requirements in close adherence 

to the statutory language. 

1. Vehicle Definitions 

The CARS Act divides eligible tradein vehicles and new vehicles into four 

groups: passenger automobiles, category 

1 trucks, category 2 trucks, and category 

3 trucks.5 The term ‘‘passenger 

automobile’’ and its definition are taken 

from the agency’s fuel economy statute. 

The definition excludes vehicles that 

NHTSA has determined are (1) not 

manufactured primarily for transporting 

persons and (2) vehicles that are capable 

of off-highway operation. Vehicles not 

manufactured primarily for transporting 

persons include pickup trucks and 

certain vehicles that permit expanded 

use of the vehicle for cargo-carrying 

purposes, including vehicles which are 

designed to transport more than 10 

persons; provide temporary living 

quarters, transport property on an open 

bed, provide greater cargo-carrying than 

passenger-carrying volume, or permit 

expanded use of the automobile for 

cargo-carrying purposes or other 

nonpassenger-carrying purposes. (See 

49 CFR 523.5(a)). 

Vehicles that are capable of offhighway operation include three groups 

of vehicles. (See 49 CFR 523.5(b)). The 

first includes vehicles that have 4-wheel 

drive and have at least four out of five 

specified physical characteristics 

relating to ground clearance.6 The 

second includes vehicles that are rated 

at more than 6,000 pounds gross vehicle 

weight and have at least four out of five 

specified physical characteristics 

relating to ground clearance, but do not 

have 4-wheel drive. The third includes 

2-wheel drive SUVs (regardless of 

GVWR) which came in a 4-wheel drive 

version that met four of five specified 

physical characteristics related to 

ground clearance. Beginning with the 

2011 model year, NHTSA will reclassify 

this third group of vehicles as passenger 

cars. See Average Fuel Economy 

Standards—Passenger Cars and Light 

Trucks—Model Year 2011, Section XI 

(Vehicle Classification); 74 FR 14419, 

March 30, 2009. Although neither 

specified nor prohibited in the CARS 

Act, the agency has concluded that it is 

most appropriate to define passenger 

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7Medium-duty passenger vehicles are defined in 

49 CFR 523.2. 

8As noted in footnote 2, the statutory definition 

of the term ‘‘category 2 truck’’ is based on the 

categorization method used by the Environmental 

Protection Agency and described in the report 

entitled ‘‘Light-Duty Automotive Technology and 

Fuel Economy Trends: 1975 through 2008.’’ (A copy 

of this report has been placed in the docket for this 

rule.) Based on that method of categorization, large 

vans and pickup trucks, which would otherwise fall 

within category 1, instead fall within category 2. 

The method is based primarily on published 

wheelbase data according to the following criteria: 

A small pickup is less than 105′′, a midsize pickup 

is 105′′ to 115′′, a large pickup is more than 115′′; 

A small van is less than 109′′, a midsize van is 109′′ 

to 124′′, a large van is more than 124′′; A small SUV 

is less than 100′′, a midsize SUV is 100′′ to 110′′, 

a large SUV is more than 110′′. This classification 

scheme is similar to that used in many trade and 

consumer publications. 

For those vehicle nameplates with a variety of 

wheelbases, the size classification was determined 

by considering only the smallest wheelbase 

produced. The classification of a vehicle for this 

report is based on the author’s engineering 

judgment and is not a replacement for definitions 

used in implementing automotive standards 

legislation. [Emphasis added.] 

9This means that all pre-model year 1984 

vehicles, and most model year 1984 vehicles, are 

not eligible as trade-in vehicles. 

10As discussed in later in this preamble, under 

‘‘Requirements for qualifying transactions,’’ the 

combined fuel economy of the trade-in vehicle must 

satisfy the statutory requirements related to the 

difference between its fuel economy and that of the 

new vehicle, as well as meeting this 18 miles per 

gallon absolute threshold. 

11There is no minimum for category 3 trucks 

because they do not have fuel economy ratings. 

cars using the NHTSA regulations and 

policy which are applicable to 2010 and 

earlier model year vehicles. Therefore, 

the third group of vehicles will continue 

to be classified as trucks for CARS 

purposes (and will be excluded from the 

definition of a passenger automobile). 

A ‘‘category 1 truck’’ is a nonpassenger automobile. This category 

includes sport utility vehicles (SUVs), 

medium-duty passenger vehicles,7 small 

and medium pickup trucks, minivans, 

and small and medium passenger and 

cargo vans. It does not include vehicles 

that are defined as category 2 trucks.8

A ‘‘category 2 truck’’ is a large van or 

a large pickup truck, based upon the 

length of the wheelbase (more than 115 

inches for pickup trucks and more than 

124 inches for vans). If the vehicle 

nameplate contains a variety of 

wheelbases, the size classification is 

determined by considering only the 

shortest wheelbase produced. In 

addition, some pickup trucks and cargo 

vans which exceed these thresholds are 

treated as category 3 trucks instead of 

category 2 trucks. 

A ‘‘category 3 truck’’ is a work truck 

and is rated between 8,500 and 10,000 

pounds gross vehicle weight. This 

category includes very large pickup 

trucks (those with cargo beds 72 inches 

or more in length) and very large cargo 

vans. 

As previously stated, for category 1 

and 2 trucks with a variety of 

wheelbases, the size classification is 

determined by considering only the 

shortest wheelbase produced. If a 

secondary manufacturer modifies and 

introduces into commerce a vehicle 

with only a limited portion of the 

wheelbases offered by the original 

equipment manufacturer (OEM), the 

size classification for the secondary 

manufacturer will be determined by 

(and consistent with) the size 

classification determined for the OEM. 

For example, if General Motors 

produces 2008 model year Chevrolet 

Colorado pickup trucks with wheelbases 

of 111, 119 and 126 inches, Colorado 

pickup trucks would be classified as 

category 1 trucks for CARS purposes 

(because the shortest wheelbase 

Colorado pickup truck was less than or 

equal to 115 inches). If a secondary 

manufacturer introduces into commerce 

2008 model year Colorado ZZZ vehicles 

(high performance Colorado pickups 

with 126 inch wheelbase only), 

Colorado ZZZ models would also be 

classified as a category 1 pickup trucks. 

The rule defines these four groups of 

vehicles in section 599.102 and makes 

use of these categories throughout 

sections 599.300(f) and 599.300(g). 

2. Eligibility of Trade-in Vehicles 

The CARS Act establishes four criteria 

for an eligible trade-in vehicle. The 

trade-in vehicle must: 

(1) Be in drivable condition; 

(2) Have been continuously insured, 

in accordance with State law, and 

registered in the same owner’s name for 

the one-year period immediately prior 

to the trade-in; 

(3) Have been manufactured not 

earlier than 25 years before the date of 

trade-in 9 and, in the case of a category 

3 vehicle, also be from a model year not 

later than model year 2001; and 

(4) Have a combined fuel economy 

value of 18 miles per gallon or less,10 if 

it is a passenger automobile, a category 

1 truck, or a category 2 truck.11

The agency must have a means of 

evaluating these criteria as it determines 

whether a transaction qualifies under 

this program. 

(i) ‘‘Drivable Condition’’ 

The agency intends that ‘‘drivable 

condition’’ be demonstrated by several 

means. First, it must be confirmed by 

the trade-in vehicle being operated, 

under its own power, by the dealer on 

public roads on the date the vehicle is 

traded in. The dealer must then certify 

to the operation of the vehicle when it 

submits its request for reimbursement. 

Separately, the person trading in the 

vehicle must certify that it is in drivable 

condition. This latter certification also 

must be submitted by the dealer with its 

application requesting reimbursement. 

This approach is adopted in section 

599.300(b)(1) of the final rule, and the 

required dealer and purchaser 

certifications are contained in the 

Summary of Sale/Lease and 

Certifications (Appendix A, 

certifications section). Note that the 

Summary of Sale/Lease and 

Certifications form has two 

components—a section for the dealer to 

input information summarizing the 

terms of the sale or lease transaction and 

a section containing certifications that 

must be made by both the dealer and the 

purchaser. The section summarizing the 

transaction is discussed later in this 

notice. 

(ii) Insurance 

In addressing the requirement that the 

trade-in vehicle be ‘‘continuously 

insured consistent with the applicable 

State law’’ for a period of not less than 

one year prior to the transaction, the 

agency notes the complication that not 

all States require vehicle owners to 

purchase automobile insurance 

coverage. Several States provide vehicle 

owners with the option, for example, to 

post a surety bond, leave a cash deposit 

or self-insure in lieu of purchasing 

automobile insurance. Two States have 

little or no insurance requirements. 

The agency recognizes that insurance 

requirements differ throughout the 

country. However, the agency believes 

that the Act requires the continuous 

one-year insurance condition to be met 

as a threshold matter, with respect to 

any trade-in vehicle under the program. 

In a State where the conditions and 

requirements of insurance are specified 

in law (e.g., liability minimums, 

deductible requirements), the insurance 

coverage would then need to be in 

accordance with those conditions and 

requirements. To qualify under this 

requirement, a purchaser must provide 

proof of insurance covering the trade-in 

vehicle for a period of at least one year 

prior to the date of the trade-in. 

The agency is aware that, in some 

cases, consumers may have insurance 

cards that state clearly the period of 

insurance coverage, while in other 

cases, an insurance card is unavailable 

or does not convey the period-ofcoverage information. To provide for an 

alternative, the agency consulted with 

several insurance associations, 

including the Insurance Information 

Institute, American Insurance 

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12The trade-in vehicle is also subject to statutory 

requirements related to the difference between its 

combined fuel economy and that of the new 

vehicle. 

13As described later in this document, the 

combined fuel economy of new vehicles is derived 

from the Monroney label, which lists only fuel 

economy based on gasoline. 

Association, National Association of 

Mutual Insurance Companies, and 

Property Casualty Insurers Association 

of America. These entities agreed to 

assist the agency through their member 

insurance companies. They indicated 

that purchasers could contact their 

insurers to obtain proof of insurance in 

a form that provides the details needed 

to identify the insured vehicle and the 

one year period of coverage required 

under the program. 

To implement this process, the agency 

is requiring the owner of the trade-in 

vehicle to provide proof, at the time the 

vehicle is traded in, that the trade-in 

vehicle has been insured continuously 

for one year prior to the trade-in. This 

proof may take one of three forms. The 

proof may consist of one or more 

insurance cards containing the make, 

model, model year, and vehicle 

identification number (VIN) of the 

insured vehicle, but only if, taken 

together, the cards display on their face 

a continuous one-year period of 

insurance coverage. The proof may also 

consist of insurance policy documents 

(e.g., declarations pages) showing the 

same information. Finally, the proof 

may consist of a signed letter, on 

insurance company letterhead, 

identifying the same vehicle 

identification information (i.e., make, 

model, model year, and VIN) of the 

insured vehicle and the period of 

continuous coverage, which must be for 

at least one year prior to the date of the 

trade-in. In addition, for each of the 

three options, the consumer must certify 

that the trade-in vehicle has been 

continuously insured for the requisite 

period. This proof of insurance, along 

with the consumer certification, must be 

submitted by the dealer in its 

application to the agency requesting 

reimbursement. Section 599.300(b)(2) 

and Appendix A, certifications section, 

implement these requirements. 

(iii) Registration 

The requirement that the trade-in 

vehicle be registered to the same owner 

for a continuous period of one year prior 

to the transaction requires clarification. 

The agency interprets this provision as 

requiring the trade-in vehicle to be 

registered to and owned by the person 

purchasing or leasing the new vehicle 

under the program. In a transaction 

involving more than one person, the 

trade-in vehicle must have been 

registered to and owned by at least one 

of the persons purchasing or leasing the 

vehicle under the program. 

To qualify under this requirement, the 

purchaser will need to provide proof of 

registration covering the trade-in vehicle 

for a period of at least one year prior to 

the date of the trade-in. The agency 

recognizes that this proof of registration 

presents complications for purchasers. 

In several States, registration cards or 

documents do not indicate a period of 

coverage of more than one year. In some 

of these States, purchasers have a 

difficult time obtaining prior 

registration information from the State. 

Seeking a less burdensome alternative, 

the agency evaluated the capabilities of 

commercial vehicle information 

services, such as Polk and Experian, to 

determine the type of vehicle 

information that is readily available to 

consumers. The agency discovered that 

purchasers may obtain a history of 

vehicle registration information from 

these services. 

To implement this process, the agency 

has determined that proof of registration 

may be demonstrated by any of the 

following: a current State registration 

document or series of registration 

documents in the name of the purchaser 

evidencing registration for a period of 

not less than one year immediately prior 

to the trade-in; a current State 

registration document showing 

registration in the name of the purchaser 

and a document of title that confers title 

on the purchaser not less than one year 

immediately prior to the trade-in; or a 

current State registration document 

showing registration in the name of the 

purchaser and a document from a 

commercially available vehicle history 

provider evidencing registration for a 

period of not less than one year 

immediately prior to the trade-in. 

Changes in ownership during this 

period to delete a co-owner due to death 

or divorce do not interrupt the 

continuity of the registration, so long as 

the purchaser has been shown as an 

owner on the registration for the entire 

period. In addition, for each of the three 

options, the consumer must certify that 

the trade-in vehicle was continuously 

registered for the requisite period. This 

proof of registration, along with the 

consumer certification, must be 

submitted by the dealer in its 

application to the agency requesting 

reimbursement. Section 599.300(b)(3) 

and Appendix A, certifications section, 

implements these requirements. 

(iv) Manufacture Date 

The requirement that the trade-in 

vehicle be manufactured not earlier than 

25 years before the date of trade-in is 

straightforward, and is implemented in 

section 599.300(b)(4). Ordinarily, the 

model year of the vehicle, which 

appears on the title, will serve to satisfy 

this requirement. Where that 

information is inconclusive (e.g., certain 

model year 1984 and 1985 vehicles), the 

month and year of manufacture may be 

retrieved from the safety standard 

certification label that appears on the 

frame or edge of the driver’s door in 

most vehicles. The rule allows the 25- 

year period to be satisfied provided it 

falls any time within the month that the 

vehicle is traded in. Section 599.300(f) 

implements the additional requirement, 

in the case of a category 3 vehicle, that 

the trade-in vehicle be manufactured 

not later than model year 2001. The 

dealer must certify that the trade-in 

vehicle meets this manufacturing date 

requirement. (Appendix A, 

certifications section). 

(v) Combined Fuel Economy 

The specified combined fuel economy 

rating of 18 mpg or less for the trade-in 

vehicle (excepting category 3 vehicles) 

is implemented throughout sections 

599.300(f) and 599.300(g).12 Under the 

Act, combined fuel economy for an 

eligible trade-in vehicle is defined as the 

number posted under the words 

‘‘Estimated New EPA MPG’’ and above 

the word ‘‘Combined’’ for vehicles of 

model year 1984 through 2007, or 

posted under the words ‘‘New EPA 

MPG’’ and above the word ‘‘Combined’’ 

for vehicles of model year 2008 or later 

on the fueleconomy.gov Web site of the 

Environmental Protection Agency for 

the make, model, and year of such 

vehicle. (Section 1302(i)(5)(B)). The 

agency adopts this definition in section 

599.102, but includes language limiting 

its application to combined fuel 

economy based on gasoline. This 

treatment of trade-in vehicles is 

consistent with the CARS Act 

requirements for defining the combined 

fuel economy of new vehicles.13

EPA changed the way it calculated 

fuel economy ratings starting in Model 

Year 2008, and has estimated the 

revised ratings for Model Years 1985– 

2007. Therefore, as described above, 

eligibility is determined by the revised 

ratings rather than the original EPA 

sticker on the vehicle. Since the revised 

ratings reflect a lower fuel economy, 

vehicles that would not be eligible 

under their original EPA rating may 

qualify for trade-in. 

3. Eligibility of New Vehicles 

The Act specifies that a new vehicle 

must be a passenger automobile, a 

category 1 truck, a category 2 truck, or 

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14NHTSA intends to maintain an up-to-date 

running balance of available funds on the Web site 

at http://www.cars.gov. 

15We note that a definition of manner is ‘‘the 

mode or method in which something is done or 

happens.’’ Webster’s Third New International 

Dictionary 1376 (2002). Among the definitions of 

mode are ‘‘a condition or state of being,’’ ‘‘a 

particular form or variety of something’’ and ‘‘a 

manner of doing something or of performing a 

particular function or activity.’’ Ibid. at 1451. We 

further note generally that, to the extent that there 

are ambiguities or questions of interpretation in 

statutes within an agency’s jurisdiction to 

administer, Congress has delegated authority to the 

a category 3 truck. The characteristics of 

these vehicles were described earlier 

under Section c.1, ‘‘Vehicle 

Definitions,’’ and they are defined in 

section 599.102. To further assist 

consumers in determining the eligibility 

of new vehicles, the CARS Web site, at 

http://www.cars.gov, contains an 

interactive tool. Consumers may 

identify their trade-in vehicle, select a 

new vehicle, and determine whether the 

transaction qualifies for a credit (and the 

amount of the credit) under the 

program. 

In addition to the definitional 

categories, the new vehicle purchased or 

leased under the program must achieve 

a minimum combined fuel economy 

level. For new passenger automobiles 

the combined fuel economy must be at 

least 22 miles per gallon, for category 1 

trucks it must be at least 18 miles per 

gallon, and for category 2 trucks it must 

be at least 15 miles per gallon. Category 

3 trucks have no minimum fuel 

economy requirement. Under the Act, 

combined fuel economy for new 

vehicles is defined as the number, 

expressed in miles per gallon, centered 

below the words ‘‘Combined Fuel 

Economy’’ on the label required to be 

affixed or caused to be affixed on a new 

automobile pursuant to subpart D of 

part 600 of title 40 Code of Federal 

Regulations (‘‘Monroney Label’’). 

(Section 1302(i)(5)(A)). The agency 

adopts this definition, without change, 

in section 599.102. 

The new vehicle must also have a 

manufacturer’s suggested retail price 

(MSRP) of $45,000 or less to be eligible 

for purchase or lease under the program. 

The agency interprets this requirement 

to be the base MSRP—the price on the 

Monroney label affixed to the vehicle 

before any dealer accessories, optional 

equipment, taxes or destination charges 

are added to the price. This 

interpretation is consistent with the 

Automobile Information Disclosure Act, 

which identifies the retail price 

separately from the retail delivered 

price with optional equipment. See 15 

U.S.C. 1232(f)(1). To implement this 

approach, we have added a definition of 

the term MSRP in section 599.102 and 

stated the limitation in section 

599.300(c)(2). 

The CARS Act allows the new vehicle 

to be either purchased or leased. In the 

case of a lease, the Act requires the lease 

to be for a period of not less than 5 

years. The agency implements this 

requirement in section 599.300(c)(1). 

Additionally, the agency has added a 

definition of ‘‘lease’’ in section 599.102, 

specifying its minimum duration and 

making clear that a lease that 

incorporates a balloon payment at any 

time prior to five years does not meet 

the statutory requirement. 

e. Requirements for Qualifying 

Transactions (§§ 599.300 and 301) 

1. Vehicle Categories and Credit 

Amounts 

The preceding section described 

eligibility requirements for the trade-in 

vehicle and for the purchased or leased 

new vehicle. Under the CARS Act, a 

transaction does not qualify for a credit 

unless the trade-in vehicle and the new 

vehicle, considered together, satisfy all 

requirements. In addition, the amount of 

the credit (either $3,500 or $4,500) is 

dependent on the category and fuel 

economy of the two vehicles making up 

the transaction. 

For example, in a transaction 

involving a trade-in vehicle that is a 

passenger automobile, a category 1 

truck, or a category 2 truck and a new 

vehicle that is a passenger automobile, 

each meeting the eligibility criteria 

discussed in the last section, if the new 

vehicle has a combined fuel economy 

that is 4 to 9 miles per gallon higher 

than the trade-in vehicle, the credit is 

$3,500. If the new vehicle has a 

combined fuel economy that is at least 

10 miles per gallon higher than the 

trade-in vehicle, the credit is $4,500. 

If the transaction involves a trade-in 

vehicle that is a passenger automobile, 

a category 1 truck, or a category 2 truck 

and a new vehicle that is a category 1 

truck each meeting the eligibility 

criteria, a gain of 2 to 4 miles per gallon 

results in a credit of $3,500; a gain of at 

least 5 miles per gallon results in a 

credit of $4,500. 

In the case of a new category 2 or 

category 3 truck, the trade-in vehicle 

categories are different. For a new 

category 2 truck, the trade-in vehicle 

must be a category 2 or a category 3 

truck. If the transaction involves two 

category 2 trucks each meeting the 

eligibility criteria, a gain of 1 mile per 

gallon results in a credit of $3,500; a 

gain of at least 2 miles per gallon results 

in a credit of $4,500. A category 3 truck 

that is traded in for a new category 2 

truck is entitled to a $3,500 credit, 

without fuel economy restriction. 

(Category 3 trucks are not rated for fuel 

economy by EPA.) A category 3 truck 

that is traded in for another category 3 

truck is entitled to a $3,500 credit if the 

new vehicle is ‘‘smaller or similar in 

size.’’ In view of the fact that Congress 

has not spoken directly to the precise 

meaning of this term, consistent with 

available information, NHTSA has 

incorporated this statutory requirement 

as satisfied if the gross vehicle weight 

rating of the new category 3 truck is no 

greater than that of the trade-in category 

3 truck. 

The full universe of qualifying 

transactions, together with the 

corresponding amount of the credit, is 

set forth in sections 599.300(f) and 

599.300(g). 

The CARS Act limits the amount of 

funds that can be used to provide 

credits for purchases or leases of work 

trucks (category 3 trucks) to 7.5 percent 

of the funds appropriated for the 

program. Once that limit is reached, 

NHTSA will stop making payments for 

these transactions. The total amount 

available for the program is $1 billion, 

with $50 million available to the agency 

to administer the program. NHTSA 

intends to provide ongoing information 

about the balance of funds remaining 

available for these and all other 

categories of transactions under the 

program.14

2. Special Requirements for Trade-in 

Vehicles 

The CARS Act requires dealers to 

disclose to purchasers trading in an 

eligible vehicle the best estimate of the 

scrap value of the vehicle, and permits 

the dealer to retain $50 of any amount 

paid to the dealer for scrappage of the 

vehicle as payment for the 

administrative costs of participation in 

the program. The agency has restated 

this requirement in section 

599.300(d)(1) and in the dealer 

certifications in Appendix A, 

certifications section. 

The CARS Act requires a dealer that 

receives an eligible trade-in vehicle 

under the program to certify to the 

Secretary of Transportation, as 

prescribed by rule, that the dealer will 

transfer the vehicle (including the 

engine block), ‘‘in such manner as the 

Secretary prescribes,’’ to a entity that 

will ensure that the vehicle will be 

crushed or shredded, and will not be 

sold, leased, or exchanged. While 

Congress authorized the agency to 

promulgate a rule, it did not define 

‘‘manner’’ or otherwise speak directly to 

its meaning. NHTSA interprets 

‘‘manner’’ 15 to include the methods 

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agency to fill the statutory gap or make an 

interpretation in a reasonable fashion. 

16We understand that this very kind of continued 

use of the vehicle as an automobile has occurred in 

at least Germany’s program despite certifications 

that the vehicle had been disposed of. 

applied by the dealer and the condition 

of the vehicle transferred by the dealer. 

Specifically, the agency is prescribing in 

today’s rule that the dealer is to transfer 

the trade-in vehicle with its engine 

permanently disabled, as detailed 

below. 

In enacting the CARS Act, the 

Congress was concerned about fraud. 

See Section 1302(a)(4). The agency is 

aware of the significant disparity in 

value that exists between a vehicle that 

is in ‘‘drivable condition,’’ as the tradein vehicle must be under this program, 

and a vehicle that is scrapped and 

ultimately destroyed, which is the 

required disposition for that trade-in 

vehicle. A substantial opportunity exists 

for fraudulent diversion of the trade-in 

vehicle, largely because its stillfunctioning engine makes it attractive to 

return the vehicle to the road rather 

than relegate it to the scrap yard.16

Moreover, continued use of the trade-in 

vehicle completely defeats the 

environmental purpose of the CARS 

Act, which is to remove these vehicles 

from the road permanently. 

The CARS Act contains an explicit 

Congressional instruction to take 

measures to prevent fraud and the 

statute’s clear environmental objective 

is to ensure that the fuel inefficient parts 

of the vehicle are never again used on 

the highway. Taking the above 

considerations into account, including 

the Secretary’s authority to prescribe the 

manner in which the trade-in vehicle, 

including its engine block, is transferred 

to a disposal facility, the agency has 

determined that the prudent course of 

action, consistent with Congressional 

concerns about crushing or shredding, 

resale and fraud, is to require permanent 

disablement of the trade-in vehicle’s 

engine block as a part of the qualifying 

transaction under this program. 

In this context, we note that the 

statutory term engine block is not 

defined and that Congress did not speak 

directly to its meaning. In general, the 

term engine block may refer to the block 

casting, or to a short block or long block. 

The short and long blocks contain the 

block casting and, among others, a crank 

shaft, connecting rods, bearings and 

pistons. Long blocks also include the 

cylinder head(s) and the cam(s). In a 

pushrod engine, the short block 

contains the cam. We interpret ‘‘engine 

block’’ to mean the part of the engine 

containing the cylinders and typically 

incorporating water cooling jackets and 

also including the crank, rods, pistons, 

bearings, cam(s) and cylinder heads. In 

the case of a rotary engine, the block 

includes the rotor housing and rotor. In 

light of the statute’s purpose of 

removing fuel inefficient vehicles from 

the nation’s highways, which of course 

are powered by engines that consume 

substantial amounts of fuel the agency 

believes it is reasonable to read the 

word ‘‘engine block’’ in a way that 

includes engine parts traditionally 

considered part of the ‘‘long block.’’ We 

do not believe that parts from the engine 

such as the pistons and cylinder head 

that could be removed and used to 

reconstruct the engine from the trade invehicle should remain available to 

recreate the fuel consuming engine. 

Finally, the engine disabling procedure 

using sodium silicate can not be 

performed if the engine parts such as 

the head(s) are removed. 

The agency has determined that a 

quick, inexpensive, and 

environmentally safe process exists to 

disable the engine of the trade-in 

vehicle while in the dealer’s possession. 

Removing the engine oil from the 

crankcase, replacing it with a 40 percent 

solution of sodium silicate (a substance 

used in similar concentrations in many 

common vehicle applications, including 

patching mufflers and radiators), and 

running the engine for a short period of 

time at low speeds renders the engine 

inoperable. Generally, this will require 

just two quarts of the sodium silicate 

solution. The retail price for two quarts 

of this solution (enough to disable the 

largest engine under the program) is 

under $7, and the time involved should 

not substantially exceed that of a typical 

oil change. The agency has tested this 

method at its Vehicle Research and Test 

Center and found it safe, quick, and 

effective. As with many materials used 

in the vehicle service area of a 

dealership, certain common precautions 

need to be taken when using sodium 

silicate. The same is true with regard to 

workers who may come in contact with 

the substance during the crushing or 

shredding of the engine block. We have 

discussed the matter with the EPA and 

the Occupational Safety and Health 

Administration (OSHA) and are aware 

of no detrimental effects related to the 

disposal of the engine block with this 

material in it. 

The agency considered several 

possible methods of rendering the 

engine inoperable. The agency was 

looking for a method that was safe for 

workers involved, completely effective, 

environmentally sound, and relatively 

inexpensive for a dealer to use. 

NHTSA’s Vehicle Research and Test 

Center (VRTC) tested various methods 

and prepared a report (placed in the 

docket) summarizing the tests. VRTC 

evaluated four options: (1) The use of 

sodium silicate solution in the manner 

the agency has now adopted; (2) 

destroying the oil filter sealing land and 

threaded fastener boss; (3) drilling a 

hole in the engine block; and (4) 

running the engine without oil. VRTC 

concluded that the sodium silicate 

method was the best option. The other 

methods all had significant problems 

related to their effectiveness, practical 

limitations based on vehicle variations, 

and/or safety risks for workers involved. 

Sodium Silicate solution is a mixture 

of water and sodium silicate solids. 

When, after draining the oil, it is 

introduced into the engine oil system, 

the oil pump is able to distribute the 

solution throughout the engine oiling 

system. The heat of the operating engine 

then dehydrates the solution leaving 

solid sodium silicate distributed 

throughout the engine’s oiled surfaces 

and moving parts. These solids quickly 

abrade the bearings causing the engine 

to seize while damaging the moving 

parts of the engine and coating all of the 

oil passages. Only a small amount of 

sodium silicate remains in solution after 

completion of the process. Many of the 

engine parts will be unaffected by this 

process such as: intake and exhaust 

manifolds, bolt-on components, and fuel 

system components. 

The agency reviewed available 

information about sodium silicate and 

its properties, including a toxicology 

report and material safety data sheets 

that are available in the docket. Sodium 

silicate is a commonly used substance 

found in a wide range of products, 

including even dishwasher detergent. 

The Food and Drug Administration lists 

it as a GRAS (Generally Regarded as 

Safe) substance. It is used to treat 

hazardous wastes, and is frequently 

used in the automotive industry as a 

rust inhibitor in cooling systems, and to 

seal leaks in cooling systems, head 

gaskets, and exhaust systems. Neither 

our review of available information nor 

our discussions with other agencies 

(EPA and OSHA) gave the agency reason 

to be concerned about the use of sodium 

silicate as a significant health or 

environmental issue. 

It is important to note that there are 

many varieties of sodium silicates, 

which are differentiated by weight ratio 

(the ratio of the silicon dioxide and 

sodium oxide that make up the 

compound). The weight ratios range 

from 1.0 to 3.5, with the higher ratio 

formulations being less irritating for 

humans and less corrosive in an engine 

environment. The material that dealers 

will be required to use under this rule 

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17Expert Report of Margaret H. Whittaker, Ph.D., 

M.P.H., D.A.B.T., July 23, 2009. 

is at the higher end of the range—3.2— 

which means that it is far less of a 

potential health or environmental issue 

than other lower range formulations of 

the product. 

Like many household and workplace 

products, sodium silicate solution can 

be harmful if swallowed or inhaled and 

can cause irritation to the eyes or 

respiratory tract if used improperly. 

Employers whose employees may come 

in contact with the material need to 

provide them with adequate warning of 

these risks and appropriate protection. 

Because sodium silicate has been used 

in automotive repair for decades, it has 

long been present both in repair shops 

and in vehicles at various stages of 

recycling. It is reasonable to assume, 

therefore, that dealerships, scrap yards, 

and shredder facilities are well 

equipped to take appropriate measures 

to protect their workers. 

Nor did we find reason to have 

significant concerns about the 

environmental effects of sodium silicate 

in this application. The EPA does not 

regulate it as a hazardous substance. 

Given the high weight ratio of the 

formulation that will be used to disable 

the engines, the risk of its causing 

corrosion is very low. In a report 

prepared for the agency, a toxicology 

expert reviewed the process required by 

this rule concluded: ‘‘Provided adequate 

safety equipment is used by personnel 

in dealerships and shredder operations, 

and dust control measures are employed 

at shredder operations to minimize 

airborne particulates, the use of sodium 

silicate solutions to disable automobile 

engines is not expected to adversely 

affect occupationally exposed workers, 

nor are sodium silicate particulates 

expected to harm the environment.’’ 17

The agency has decided to implement 

this process in the rule, requiring a 

dealer that receives an eligible trade-in 

vehicle under the CARS program to 

disable that vehicle’s engine prior to 

transferring the vehicle to a disposal 

facility, and to provide a certification to 

the agency that it has done so at the time 

the dealer submits its request for 

reimbursement. Section 599.300(d)(2) 

specifies the requirement for the dealer 

to disable the engine, Appendix B sets 

forth, in a simple and precise manner, 

the procedures that the dealer must 

follow to disable the engine and the 

workplace precautions that should be 

taken, and Appendix A, certifications 

section, contains the required dealer 

certification. 

The rule contains one exception to the 

general requirement that the dealer 

disable the engine prior to transferring 

the vehicle to the disposal facility. With 

regard to transactions that occurred 

prior to the effective date of this rule, 

the dealer may have already transferred 

the vehicle to a disposal facility, 

whether or not using a salvage auction 

to transfer the vehicle. In that case, the 

rule permits the dealer to locate the 

vehicle at the disposal facility and 

either disable the engine at that location 

or, if the vehicle, including the engine 

block and drive train (unless the 

transmission, drive shaft, and rear end 

are sold separately), has already been 

crushed or shredded, to obtain proof, in 

the form of the affidavit, from the 

disposal facility that the crushing or 

shredding has occurred. Section 

599.300(e) implements this exception. 

The agency is making this allowance 

only to accommodate dealers who, 

rather than waiting for the final rule to 

be issued as the agency had advised, 

proceeded to conduct transactions that 

were otherwise completely in 

accordance with this final rule. Dealers 

should note that all other requirements 

of this rule, except for the disposal 

facility certifications, apply to these 

transactions. 

Although there was not time to 

provide notice and an opportunity to 

comment prior to issuance of this final 

rule, NHTSA did engage in extensive 

outreach prior to its issuance with 

representatives of those entities most 

knowledgeable about the subject matter. 

In those discussions, the method 

NHTSA has now chosen for disabling 

the engine block was identified as an 

option NHTSA might adopt. Several of 

the organizations that participated in 

the discussions wrote to NHTSA 

concerning that methodology. (These 

letters are in the docket.) 

In its letter of July 21, 2009, NADA 

contends that Congress did not assign 

the task of making the engine inoperable 

to the dealers, and that if required to 

accomplish this task the dealers should 

be compensated. As discussed above, 

the agency interprets the CARS Act as 

giving NHTSA substantial discretion in 

determining the manner in which the 

vehicle, including the engine block, is to 

be transferred for ultimate disposal. We 

believe that having the engine 

permanently disabled at the dealer 

greatly reduces the risk of fraud and 

helps ensure that the statute’s 

environmental objectives will be 

achieved. We believe that the dealers 

can disable the engine using the 

prescribed method at very low cost, 

which we estimate to be no greater than 

$30. It is possible that the total of the 

cost of performing this task and the 

dealer’s other costs related to the 

program may exceed the $50 the dealer 

is allowed to retain from the trade-in’s 

scrappage value to cover its 

administrative costs. Nevertheless, we 

think the importance of having this task 

performed by the dealer is sufficient 

reason to require dealers to perform it. 

The CARS Act does not preclude 

NHTSA from imposing costs necessary 

to the proper implementation of the 

program. 

The Automotive Recyclers 

Association (ARA), which represents 

more than 4,500 scrap and junk yards, 

wrote to NHTSA on July 20. ARA argues 

that the use of sodium silicate will 

damage more than the engine block and 

jeopardize the resale of parts such as 

pistons, cams, and cylinder heads. ARA 

apparently believes that ‘‘block’’ has 

only one meaning, i.e., the so-called 

‘‘short block,’’ which generally refers 

only to the cast iron or aluminum 

casting. As discussed above, NHTSA 

has defined ‘‘engine block’’ in a way 

that includes the engine parts that ARA 

contends are not part of the block. 

NHTSA’s definition is a reasonable 

reading of the term ‘‘block,’’ and is 

consistent with a Congressional purpose 

to prevent these fuel inefficient engines 

from ever being operated again. 

Moreover, even if ARA’s more 

restrictive reading of ‘‘block’’ were to 

prevail, the statute merely permits the 

disposal facility to sell parts that are not 

part of the block; it does not preclude 

NHTSA from requiring measures that 

might affect some of those parts. ARA 

also contends that use of sodium silicate 

would contaminate the recycling of 

motor oil. ARA seems not to understand 

that, under the procedure set out in this 

rule, the dealer would drain the oil and 

recycle it as it would normally do. 

The Institute of Scrap Recycling 

Industries (ISRI) represents, among 

others, companies that shred vehicles 

that have previously been crushed, 

either at their facility or at another 

disposal facility that lacks a shredder. 

ISRI wrote to NHTSA on July 20. ISRI 

contends, based on the judgment of its 

own director of environmental 

management, that the use of sodium 

silicate could pose hazards to workers at 

shredders and could cause certain 

metals to corrode, which could lead to 

excess metal ions in storm water runoff, 

which in turn could make storm water 

compliance more challenging. ISRI’s 

contentions appear to be based on an 

incorrect assumption as to the quantity 

of sodium silicate that would be in each 

CARS trade-in vehicle; the procedure in 

most cases will require no more than 

two quarts, while ISRI assumes three to 

four quarts. ISRI asserts that a 

substantial portion of the material will 

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remain unreacted after the procedure, 

which is not the case. 

As discussed previously, NHTSA has 

no reason to believe that the use of 

sodium silicate will expose any 

workers, including those at shredders, 

to unreasonable risks. Those who 

manage the shredders will simply need 

to require their employees to take the 

precautions necessary to protect 

themselves from exposure to sodium 

silicate. Presumably those who work at 

shredders are appropriately trained and 

equipped to deal with hazards that may 

be related to the materials with which 

they are working. More importantly, 

sodium silicate has been present in 

motor vehicles for decades because of 

its common use in the repair of 

mufflers, radiators—and engines. We 

assume that shredders have taken note 

of the presence of the material before 

now. The use of dust respirators would 

be advisable. 

With regard to the potential 

environmental risks, ISRI has not made 

an effective case, and NHTSA has no 

reason to believe that any such risk 

exists with regard to sodium silicate. 

The heart of ISRI’s argument is that the 

unreacted portion of the sodium silicate 

could cause corrosion of metals during 

the shredding process. As noted above, 

the formulation of sodium silicate used 

in the engine disablement procedure is 

among those least likely to have a severe 

corrosive effect. In fact, sodium silicate 

is used in vehicle cooling systems to 

inhibit corrosion and is used in metal 

pipes to help prevent corrosion that 

could increase lead levels in drinking 

water. In any event, the agency has no 

reason to believe that the untoward 

environmental effects that ISRI suggests 

may occur are a realistic possibility. 

The rule also requires that, prior to 

submitting a copy of the title along with 

its request for reimbursement, the dealer 

clearly mark the title on both sides with 

the words, ‘‘Junk Automobile, 

CARS.gov.’’ Section 599.300(d)(3) 

implements this requirement. The 

marking must be placed so as not to 

obscure the vehicle owner’s name, VIN, 

or other writing. Having this special 

label or brand on the title will inform all 

who subsequently handle it that the 

vehicle is a trade-in under this program 

and should not be registered or titled for 

further use as an automobile. State 

registration officials should pay special 

attention to this marking on a title 

because it indicates that the vehicle has 

been traded in under the CARS program 

with the understanding that it would 

never again be used as an automobile in 

this or any other country and is suitable 

only to be used for scrap or parts. 

3. Restrictions and Limitations on 

Transactions 

The CARS Act places some 

restrictions and limitations on 

qualifying transactions under the 

program. Section 1302(c)(1)(A) of the 

Act provides that a credit may be issued 

only for a qualifying transaction that 

occurs between July 1, 2009 and 

November 1, 2009. Additionally, 

section1302(c)(1)(B) provides that not 

more than 1 credit may be issued for a 

single person and not more than 1 credit 

may be issued for the joint registered 

owners of a single eligible trade-in 

vehicle, and § 1302(c)(1)(C) provides 

that only 1 credit issued under the 

Program may be applied toward the 

purchase or qualifying lease of a single 

new vehicle. Reading these 

requirements together, the agency has 

determined that only one credit may be 

issued for each transaction under the 

program and that once a person 

participates in a transaction, whether as 

an individual owner or a joint-registered 

owner of either an eligible trade-in 

vehicle, a new vehicle, or both, the 

person may not receive another credit or 

be named in a transaction receiving a 

credit under the program. These time 

and transaction limitations are specified 

in sections 599.301(a), (b), and (c). 

One additional restriction, although 

not specifically stated in the CARS Act, 

flows naturally from its operation. The 

agency has concluded that in order to be 

entitled to reimbursement under the 

program, a dealer must obtain clear title 

to the trade-in vehicle. Without clear 

title, the dealer is not in a position to 

make the statutorily required legal 

certification as to disposal of the tradein vehicle that serves as a prerequisite 

to reimbursement. Similarly, disposal 

facilities would generally be unable to 

crush or shred the trade-in vehicle, as 

required under the Act. The agency is 

informed that in many new car 

purchases involving trade-in vehicles, 

the title to the trade-in vehicle is not 

immediately available, either because it 

is held by a lienholder or for some other 

reason. Nevertheless, the dealer 

proceeds with the transaction, even 

though title is obtained and transferred 

to the dealer at a later time. In some 

small percentage of such transactions, 

the dealer is unable to obtain clear title 

to the trade-in vehicle. Were that to 

occur under this program, the dealer 

would not be able to ensure that the 

trade-in vehicle would be disposed of in 

accordance with the Act. If NHTSA had 

already reimbursed the dealer for the 

credit amount, NHTSA would have 

provided the credit under circumstances 

beyond its authority under the statute 

and would have to recover the funds. 

NHTSA does not believe it has a duty 

to fund any such tentative deal and will 

not do so. Such a transaction does not 

qualify for reimbursement under the 

program until the dealer obtains the title 

(assuming that other eligibility criteria 

are met). Consequently, the dealer may 

not submit an application for 

reimbursement (discussed later in this 

document) until title to the trade-in 

vehicle, free of all liens and 

encumbrances, is transferred to it. If the 

title to the trade-in vehicle has been 

lost, the owner will need to acquire 

duplicate title from the State. Section 

599.301(d) implements this requirement 

for transfer of the trade-in title. 

The agency recognizes that five 

States—Georgia, Maine, New 

Hampshire, Rhode Island and 

Vermont—do not issue titles in 

transactions involving some older 

vehicles that may be eligible for tradein under this program. In some of these 

States, liens may be documented on the 

registrations. In these States and for 

these vehicles, a current registration in 

the name of the person intending to 

purchase the new vehicle, with no 

evidence of lien, and a bill of sale 

conferring ownership of the trade-in 

vehicle from the purchaser of the new 

vehicle to the dealer, serves in lieu of 

the title. Section 599.301(e) of the rule 

allows use of a current registration and 

bill of sale in lieu of a title in these 

limited situations. 

f. Requirements for Dealer 

Reimbursement (§§ 599.302–304) 

As a precondition for reimbursing a 

dealer for a qualifying transaction under 

the Program, NHTSA must have a 

means of verifying that all the statutory 

conditions have been met. The rule 

requires a dealer to submit an 

application for reimbursement to 

NHTSA, containing the information and 

certifications necessary for NHTSA to 

do so. The dealer must use its user 

account and password (discussed 

earlier) to access a secure Web site and 

submit an application. The application 

consists of an electronic transaction 

form (portion reproduced in Appendix 

C) that requires inputting of information 

into relevant fields, attaching electronic 

copies of supporting documents, and 

making applicable certifications. 

The electronic form requires the 

dealer to input and attach several pieces 

of information about the vehicle 

purchaser, trade-in vehicle, and new 

vehicle. For a purchaser, a dealer must 

collect individual or entity name, 

address and State or corporate 

identification number (e.g., driver’s 

license number, State identification 

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18The agency also decided to include certain 

disposal facilities in the State of Maine, as 

explained earlier in this document. The list does 

not include disposal facilities for the territories. 

However, disposal facilities in the territories must 

make the certification discussed in this paragraph. 

19Section 599.102 contains a definition of the 

term ‘‘engine block.’’ 

number, corporate tax identification 

number). This information is used to 

verify the identity of the purchaser and 

to confirm no prior participation in the 

program. For the trade-in vehicle and 

new vehicle, the dealer must input 

characteristics of the vehicle (e.g., make, 

model, model year, combined fuel 

economy, odometer reading, VIN, base 

MSRP, engine and transmission 

description), and input and attach 

evidence of vehicle insurance, 

registration and title. This information 

is used to determine that each of these 

vehicles is eligible under the Program 

and that the transaction meets the 

requirements for fuel economy 

improvement. 

The dealer must also attach additional 

information to verify the transaction, 

including a copy of the purchase 

contract or lease agreement, the 

Manufacturer’s Certificate of Origin or 

Manufacturer’s Statement of Origin, and 

certifications from the salvage auction 

or disposal facility. The dealer must also 

complete and attach a Summary of Sale/ 

Lease and Certifications Form 

(Appendix A, certifications section). 

This form conveys that the dealer has 

extended a CARS credit, as well as any 

other rebate and manufacturer 

incentive, and has disclosed the 

scrappage value of the trade-in vehicle 

to the purchaser. The form also sets 

forth required dealer and purchaser 

certifications. The dealer and purchaser 

must sign this form, attesting that each 

has followed the requirements of the 

CARS Act and its implementing 

regulations. In addition to the 

certifications on this form, the dealer 

must also make required certifications 

listed on the electronic transaction form. 

Finally, the agency requests that the 

dealer attach a completed customer 

survey (Appendix D). This survey 

should be presented to the customer for 

completion prior to the submission of 

an application for reimbursement. The 

information in the survey is important 

for the agency to meet its Congressional 

reporting requirement. The 

requirements associated with dealer 

applications are implemented in section 

599.302. 

Upon receipt of the application, the 

agency will review the application to 

determine whether it is complete and 

satisfies all the requirements of a 

qualifying transaction. An application 

that meets the requirements of the CARS 

Program will be approved for payment 

and the agency will reimburse the 

dealer, by electronic transfer to the 

account identified under the registration 

process in section 599.200. 

If an application is incomplete or 

otherwise fails to meet all the 

requirements of for a qualifying 

transaction, the application will be 

rejected and the submitter will be 

informed electronically of the reason for 

rejection. A dealer may correct and 

resubmit a rejected application for 

reimbursement without penalty, but the 

application will be treated as a new 

application as of the date it is 

resubmitted. The requirements 

concerning application review and 

payment of dealers are implemented in 

sections 599.303 and 304. 

g. Disposal of Trade-In Vehicles 

(§§ 599.400–403) 

In addressing the trade-in vehicle 

disposal process (Section III.b., 

Identification of Disposal Facilities), the 

agency decided to include disposal 

facilities participating in the ELVS 

program (currently numbering 

approximately 7,700) 18 on the list of 

facilities that may participate in the 

disposal process, subject to certain 

conditions and certifications. As a 

condition of accepting transfer of the 

trade-in vehicle, the disposal facility 

must certify that it meets all applicable 

State and Federal laws and has a 

currently active State license to operate 

as a disposal facility in that State. The 

disposal facility must also certify that it 

will not sell, lease, exchange, or 

otherwise dispose of the vehicle for use 

as an automobile in the United States or 

any other country, that the vehicle will 

be crushed or shredded onsite within 

six months after the date of its transfer 

from the dealer, and that the vehicle 

will not be transferred to another 

disposal facility prior to being crushed 

or shredded. Finally, it must certify that 

it will update NMVTIS, within 7 days 

after receiving the trade-in vehicle and 

again within 7 days after crushing or 

shredding the vehicle. During the sixmonth period prior to the required 

crushing or shredding of the trade-in 

vehicle, the disposal facility may sell 

any parts of the vehicle other than the 

engine block 19 or drive train (unless the 

drive train is dismantled and sold in 

parts). These requirements for disposal 

facilities are implemented in sections 

599.400(b) and 401 and Appendix E. 

The agency also has determined that, 

in lieu of direct transfer to a disposal 

facility that appears on the agency’s list, 

the dealer may opt to transfer the tradein vehicle to a salvage auction, subject 

to certain conditions and certifications. 

As a condition of accepting transfer of 

the trade-in vehicle, the salvage auction 

must certify that it meets all applicable 

State and Federal laws and has a 

currently active State license to conduct 

business as a salvage auction in that 

State. The salvage auction must also 

certify that it will not sell, lease, 

exchange, or otherwise dispose of the 

vehicle for use as an automobile in the 

United States or any other country. It 

must certify that it will limit 

participation in the auction of a tradein vehicle under the CARS program to 

a disposal facility that currently appears 

on the agency’s CARS list of disposal 

facilities and will obtain from the 

disposal facility the same certification 

the disposal facility would have 

provided upon direct transfer of a tradein vehicle from the dealer, and provide 

that certification to NHTSA. Finally, the 

salvage auction must certify that it will 

update NMVTIS, within 3 days after 

receipt of the trade-in vehicle from the 

dealer, or prior to auction, whichever is 

earlier. These requirements for salvage 

auctions are implemented in sections 

599.400(c) and 402 and Appendix F. 

Finally, a dealer receiving certifications 

from a disposal facility or a salvage 

auction under these procedures is 

required to send them to the agency 

within 7 days of receipt. Section 

599.403 sets forth this requirement. 

It is important to note that the 

requirement under the CARS Act and its 

implementing regulations for disposal 

facilities and salvage auctions 

participating in the CARS program to 

update NMVTIS are distinct from the 

monthly reporting requirement imposed 

on junk and salvage yards pursuant to 

49 U.S.C. 30504. In accordance with 

regulations implemented by the 

Department of Justice at 28 CFR 25.56, 

any individual or entity engaged in the 

business of operating a junk yard or 

salvage yard within the United States 

shall provide, or cause to be provided 

on its behalf, to the operator of NMVTIS 

and in a format acceptable to the 

operator, an inventory of all junk 

automobiles or salvage automobiles 

obtained in whole or in part by that 

entity in the prior month. Updates by 

junk and salvage yards to NMVTIS 

under the CARS Act and its 

implementing regulations, however, 

may fulfill this separate NMVTIS 

monthly reporting requirement 

regarding such vehicles, provided the 

updates contain all of the information 

required by the Department of Justice 

under 28 CFR Part 25. 

The procedures described above allow 

a trade-in vehicle to be transferred no 

more than two times subsequent to the 

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dealer taking title and prior to its 

crushing or shredding, either directly to 

an entity currently appearing on the list 

of eligible disposal facilities, where the 

vehicle must remain until it is crushed 

or shredded, or to a salvage auction that 

subsequently transfers the vehicle to 

that entity. This approach for the 

vehicle disposal process is adopted in 

Subpart D and the required 

certifications appear in Appendices E 

and F. Nothing in the rule proscribes 

further transfer of a crushed vehicle to 

another disposal facility, including a 

shredder. 

h. Enforcement (§§ 599.500–517) 

1. Prevention of Fraud 

The funds Congress provided for the 

CARS program are intended only for 

qualifying transactions, and the 

requirement to destroy the trade-in 

vehicle is an important part of the 

program. To protect the taxpaying 

public, NHTSA will enforce the Act and 

this implementing regulation strictly 

and will work with the DOT Inspector 

General, the Department of Justice, and 

other government agencies to punish 

violations and fraud. 

In the rule being issued today, 

NHTSA has taken a number of steps to 

minimize the potential for fraud in the 

first instance. Among other things, 

NHTSA has created a system that will 

provide payments only for qualifying 

transactions under the CARS program. 

NHTSA will make electronic funds 

transfers only to a registered dealer that 

has submitted the required proof and 

made the required certifications under 

penalty of law. The rule establishes a 

registration system to identify licensed, 

franchised new vehicle dealers and to 

obtain the information necessary for 

making secure electronic transfers. Only 

registered dealers will have access to the 

payment system. 

At the time of the transaction at the 

dealer, a purchaser who is trading in a 

vehicle will need to provide evidence of 

ownership and proof that the vehicle 

has been continuously registered to that 

owner and insured throughout the last 

12 months. To prevent repeated use of 

the program by the same person, the 

consumer will need to provide evidence 

of identity and permit that information 

to become part of the documentation of 

the transaction. 

We believe that dealers will have 

every reason to avoid entering into a 

transaction for which the dealer cannot 

be reimbursed under this program. 

Dealers will be expected to verify that 

the trade-in vehicle and the vehicle 

being purchased or leased are both 

eligible under the program. For both 

vehicles, the dealer will need to verify 

the combined fuel economy. With 

regard to the trade-in vehicle, the dealer 

will need to verify that the registration 

and insurance information is accurate 

and that the vehicle is in drivable 

condition. 

Also, this rule provides measures to 

ensure that the trade-in vehicle is never 

used again as an automobile in this or 

any other country. These measures 

include requiring the dealer to disable 

the trade-in vehicle’s engine prior to 

transferring the vehicle, requiring 

binding certifications from all entities 

involved in handling these vehicles, 

updating the NMVTIS system at all 

crucial junctures to ensure the 

availability of information about the 

vehicle’s status, and labeling the title of 

those vehicles as ‘‘junk automobiles’’ to 

defer further sale of them as vehicles 

authorized for on-road use. 

The process set out in this rule 

includes obtaining certifications from 

purchasers, dealers, salvage auctions, 

and disposal facilities involved with 

CARS transactions. Those certifications 

will be made on paper or electronic 

forms that make clear that there are 

significant penalties for submitting false 

information. NHTSA, working with 

DOT’s Office of Inspector General and 

the Department of Justice, will 

vigorously pursue actions against 

anyone it believes has submitted false 

information in connection with this 

program. 

The agency will conduct inspections 

of records, premises and vehicles to 

detect possible violations. Should 

NHTSA identify a violation or fraud, we 

intend to enforce the CARS Act’s 

requirements vigorously. The public is 

encouraged to contact NHTSA if it 

suspects any fraud is occurring in 

connection with the CARS program. 

Please call 1–866–CAR–7891, which is 

NHTSA’s dedicated hotline for calls 

about the program, Monday–Friday 8 

a.m. to 10 p.m., TTY: 1–800–424–9153. 

Anyone who thinks illegal activity 

related to this program has occurred 

may also call the Hotline of the Office 

of the Inspector General (OIG) at the 

U.S. Department of Transportation. The 

toll free number is 1–800–424–9071. 

The OIG Hotline is an important tool for 

reporting allegations of fraud, waste, 

abuse, or mismanagement in the 

Department’s programs or operations, 

including the CARS program. The 

Hotline is set-up to receive allegations 

in a variety of forms, including by email (hotline@oig.dot.gov), regular mail 

(DOT Inspector General, P.O. Box 708, 

Fredericksburg, VA 22404), fax (540– 

373–2090), and the toll free number 

identified above. The OIG Hotline is 

open 24 hours a day, seven days a week. 

Those who think the Internet has been 

used to commit a crime related to this 

program may also contact the Internet 

Crime Complaint Center (IC3), a 

partnership among the Federal Bureau 

of Investigation http://www.fbi.gov 

(FBI), the National White Collar Crime 

Center http://www.nw3c.org/ (NW3C), 

and the Bureau of Justice Assistance 

http://www.ojp.usdoj.gov/BJA/ (BJA). 

IC3’s mission is to serve as a vehicle to 

receive, develop, and refer criminal 

complaints regarding the rapidly 

expanding arena of cyber crime. The IC3 

gives the victims of cyber crime a 

convenient and easy-to-use reporting 

mechanism that alerts authorities of 

suspected criminal or civil violations. 

2. Civil Penalties and Other Sanctions 

While NHTSA expects that the vast 

majority of activities under the CARS 

Act will comply with it and the 

implementing regulations, NHTSA 

intends to penalize violators. Section 

1302(d)(6) of the CARS Act requires 

NHTSA’s regulations implementing the 

program to provide for the enforcement 

of the penalties described in Section 

1302(e). Section 1302(e)(1) provides that 

it shall be unlawful for any person to 

violate any provision under this section 

(i.e., under the CARS Act) or any 

regulations issued pursuant to the CARS 

Act. 

Section 1302(e)(2) provides that any 

person who commits a violation 

described in Section 1302(e)(1) shall be 

liable to the United States Government 

for a civil penalty of not more than 

$15,000 for each violation, and that the 

Secretary shall have the authority to 

assess and compromise such penalties 

and to require from any entity the 

records and inspections necessary to 

enforce this program. In determining the 

amount of the civil penalty, the severity 

of the violation and the intent and 

history of the person committing the 

violation shall be taken into account. 

As authorized by Section 1302(e)(2) of 

the CARS Act, which grants NHTSA the 

authority to require from any entity the 

records and inspections necessary to 

enforce this program, NHTSA will use 

information gathering mechanisms 

comparable to those it currently 

employs under other statutes the agency 

administers. 

In the rule being issued today, 

NHTSA has established administrative 

procedures to assess civil penalties 

quickly and fairly once a likely violation 

is identified. These procedures are set 

forth at subpart E. Under these 

procedures, any person may report an 

apparent violation to NHTSA. When a 

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20The term ‘‘trade secrets’’ has been narrowly 

defined by the Court of Appeals for the District of 

Columbia Circuit for the purpose of FOIA 

Exemption 4 as encompassing a secret, 

commercially valuable plan, formula, process, or 

device that is used for the making, preparing, 

compounding, or processing of trade commodities 

and that can be said to be the end product of either 

innovation or substantial effort. Public Citizen 

Health Research Group v. FDA, 704 F.2d 1280, 1288 

(D.C. Cir. 1983). 

21 Impairment to the Government’s ability to 

obtain the information in the future serves as an 

independent basis for withholding under 

Exemption 4. See National Parks, 498 F.2d at 770. 

Case law also strongly points to the availability of 

a ‘‘third prong’’ protecting other governmental 

interests, such as compliance and program 

effectiveness. See Critical Mass v. NRC, 975 F.2d 

871, 879 (D.C. Cir. 1992) (noting that Exemption 4 

can protect interests beyond impairment and 

competitive harm. See also 9 to 5 Org. for Women 

Office Workers v. Bd. of Governors of the Fed. Res. 

System, 721 F.2d 1, 11 (1st Cir. 1983) (adopting a 

third prong under Exemption 4 based on the 

government’s interest in administrative efficiency 

and effectiveness). 

report of an apparent violation is 

received, or when an apparent violation 

has been detected by any person 

working for NHTSA, the matter may be 

investigated or evaluated by NHTSA 

enforcement personnel. If NHTSA 

enforcement personnel believe that a 

violation may have occurred, a report of 

the investigation will be prepared and 

sent to the NHTSA Chief Counsel for 

review. The Chief Counsel will review 

the report to determine if there is 

sufficient information to establish a 

likely violation. If the Chief Counsel 

determines that a violation has likely 

occurred, the Chief Counsel may issue 

a Notice of Violation to the party, or 

make other enforcement 

recommendations, such as suspensions 

or revocations. The alleged violator will 

have an opportunity to present its views 

to NHTSA and reach a settlement of the 

civil penalty case. If the alleged violator 

instead requests a hearing, the Chief 

Counsel will forward a case file to a 

Hearing Officer, with a recommended 

action. The Hearing Officer’s functions 

are separate from those of NHTSA’s 

enforcement personnel and Chief 

Counsel, and the Hearing Officer has no 

other responsibility, direct or 

supervisory, for the investigation of 

cases referred for the assessment of civil 

penalties. 

A party receiving the Notice of 

Violation may pay the proposed penalty 

or decline the Notice of Violation. If the 

Notice of Violation is timely declined, 

the regulations provide for a hearing 

prior to a final assessment of a penalty 

by the Hearing Officer. Failure to either 

pay the proposed penalty on the Notice 

of Violation or request a hearing within 

30 days of the date shown on the Notice 

of Violation will result in a finding of 

default, and NHTSA will assess the civil 

penalty in the amount proposed on the 

Notice of Violation without a hearing. 

The hearings will be held at the 

headquarters of the U.S. Department of 

Transportation in Washington, DC, 

either telephonically or in person, 

before a Hearing Officer. Unlike another 

statute administered by NHTSA, the 

CARS Act does not require a hearing on 

the record before assessing civil 

penalties. For example, Section 

508(a)(1) of the Motor Vehicle 

Information and Cost Savings Act 

(formerly 15 U.S.C. 2008 (1994), and 

now codified at 49 U.S.C. 32911), 

provided that if fuel economy 

calculations indicate that any 

manufacturer has violated specified 

provisions, the Secretary shall 

commence a proceeding. Section 

508(a)(2) of the Cost Savings Act then 

went on to state that, if on the record 

after opportunity for agency hearing, the 

Secretary determines that such 

manufacturer has violated provisions, 

the Secretary shall assess the penalties 

provided for under subsection (b). This 

provision was recodified at 49 U.S.C. 

32911(b) and 32912 so as to clearly 

provide for ‘‘an opportunity for a 

hearing on the record’’ to decide 

whether a violation has been 

committed. In view of the language in 

the Cost Savings Act, NHTSA adopted 

regulations establishing formal 

Administrative Procedure Act (APA) 

adjudicative hearing procedures before 

an administrative law judge (ALJ), 

which may result in civil penalties. See 

49 CFR Part 511, Adjudicative 

Procedures. In view of the absence of 

any statutory requirement in the CARS 

Act for an on-the-record hearing or, in 

fact, for any hearing, as set forth in the 

regulatory text, the formal APA 

adjudication procedures set forth at 5 

U.S.C. 554, 556 and 557 do not apply to 

civil penalty proceedings under the 

CARS Act and NHTSA need not employ 

an ALJ as the hearing officer. There is 

no right to discovery. In receiving 

evidence, the Hearing Officer is not 

bound by strict rules of evidence. At the 

conclusion of the hearing, the Hearing 

Officer assesses civil penalties, if 

appropriate. If civil penalties are in 

excess of $100,000.00, the Hearing 

Officer’s decision may be appealed to 

the NHTSA Administrator. 

NHTSA also has the authority under 

the CARS Act to compromise (i.e., 

settle) civil penalties, and parties 

receiving notices of violations will be 

given the opportunity early in the 

process to settle with the Government, 

should they choose to do so. Finally, we 

note that these penalties are not 

exclusive. For example, violators could 

also face penalties under the False 

Claims Act or criminal prosecution. 

V. Confidential Information and 

Privacy 

Administration of the CARS program 

requires that information about 

qualifying transactions be submitted to 

NHTSA from different entities and 

individuals. Some of this data is 

sensitive. As discussed below, NHTSA 

is amending its existing regulations 

governing confidential treatment, found 

at 49 CFR Part 512, to address these 

issues. 

a. Determinations of the Confidentiality 

of CARS Data Based on FOIA 

Exemptions 4 and 6 

The confidentiality of most CARS 

data is based on Freedom of Information 

Act (FOIA) Exemptions 4 and 6, 5 

U.S.C. 552(b)(4) and (b)(6). FOIA 

Exemption 4 allows withholding of 

trade secrets and commercial or 

financial information obtained from a 

person and privileged or confidential. 

Under Exemption 4, the standard for 

assessing the confidentiality of 

information that parties are required to 

submit to the government is whether 

disclosure of the information is likely to 

have either of the following effects: (1) 

To impair the Government’s ability to 

obtain necessary information in the 

future; or (2) to cause substantial 

competitive harm to the competitive 

position of the person from whom the 

information was obtained.20 National 

Parks & Conservation Ass’n v. Morton, 

498 F.2d 765, 770 (D.C. Cir. 1974). 

Because of the nature of the information 

at issue here, our discussion is limited 

to examination of the competitive harm 

test even though other standards could 

justify non-disclosure.21

Under the competitive harm test of 

National Parks, there must be actual 

competition and a likelihood of 

substantial competitive injury from 

disclosure of the information. CNA 

Financial Corp. v. Donovan, 830 F.2d 

1132, 1152 (D.C. Cir. 1987). This 

standard requires only that disclosure of 

information would ‘‘likely’’ cause 

competitive harm. McDonnell Douglas 

Corp. v. U.S. Dept. of the Air Force, 375 

F.3d 1182, 1187 (D.C. Cir. 2004); see 

also Occidental Petroleum Corp. v. SEC, 

873 F.2d 325, 341 (D.C. Cir. 1989). 

Under this test, the agency assesses the 

likelihood of substantial injury; it does 

not make that assessment and then 

further balance it against other matters 

such as the public’s interest in the 

information. Public Citizen Health 

Research Group v. FDA, 185 F.3d 898, 

904–05 (D.C. Cir. 1999). 

Exemption 6 of the FOIA addresses 

the withholding of ‘‘personnel and 

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22See the discussion of the categories of CARS 

information below. Those discussions demonstrate 

that the submitters have a commercial interest in 

the data. 

medical files and similar files the 

disclosure of which would constitute a 

clearly unwarranted invasion of 

personal privacy’’ to the subject of those 

files. See 5 U.S.C. 52(b)(6). The first 

inquiry in examining withholding 

information under Exemption 6 is a 

determination of what data is at stake 

and the nature and degree of any 

privacy interest in the information. The 

second step is an assessment of the 

public interest in disclosure. Under 

Exemption 6, the concept of public 

interest is limited to shedding light on 

the government’s performance of its 

statutory duties. U.S. Dep’t of Justice v. 

Reporters Comm. for Freedom of the 

Press, 489 U.S. 749, 773 (1989); 

National Ass’n of Retired Federal 

Employees v. Horner, 879 F.2d 873, 879 

(D.C. Cir. 1989); cf., DOD v. FLRA, 510 

U.S. 487, 497 (1994). Finally, there is a 

weighing of the privacy interests at 

stake against the public interest in 

disclosure. Ripkis v. Dept. Hous. and 

Urban Dev., 746 F.2d 1, 3 (D.C. Cir. 

1984). 

Data submitted under the CARS 

program includes personally identifying 

information for consumers. This 

information falls within the 

classification of ‘‘similar files’’ under 

Exemption 6. In Center for Auto Safety 

v. National Highway Traffic Safety 

Administration, 809 F. Supp. 148 

(D.D.C. 1993), an advocacy group sought 

the release of names and addresses of 

consumers filing complaints directly to 

NHTSA. The Court found that the 

complainant’s names and addresses 

invoked a privacy interest within the 

scope of Exemption 6 and ruled in favor 

of non-disclosure because there was no 

ascertainable public interest of 

sufficient significance or certainty to 

outweigh a complainant’s privacy right 

justifying release of the information. 

b. Approach—Class Determinations vs. 

Individual Assessments 

As employed in the agency’s 

regulations governing confidentiality 

determinations (49 CFR Part 512), class 

determinations declare that certain 

categories of data submitted to NHTSA 

will be kept confidential. Under this 

approach, submitters need not request 

confidential treatment; such treatment is 

given automatically. 

NHTSA is promulgating class 

determinations on the confidentiality of 

some categories of CARS data. In 

adopting this approach, we have 

considered a number of matters. First, 

NHTSA may adopt categorical rules to 

manage the tasks Congress assigned to it 

under the CARS Act. Public Citizen v. 

Mineta, 427 F. Supp. 2d 7, 13 (D. D.C. 

2006). Second, we have identified and 

assessed the alternatives. One 

alternative is to require entities to 

submit individual requests for 

confidentiality for each transaction. A 

second alternative is presumptive 

categorical determinations of 

confidentiality. A third alternative is to 

adopt binding class determinations. 

Concerns involved in considering these 

alternatives include providing clear 

direction to CARS participants, 

predictability, consistency and 

efficiency. 

Requiring individual requests for 

confidential treatment of CARS data 

would force thousands of entities, 

almost all of them small businesses, to 

submit requests for confidentiality for 

each transaction. These entities, having 

virtually no experience in making such 

requests, would likely submit a wide 

variety of documents written in 

different ways. Some requests would 

meet the applicable standards for 

confidential treatment and some would 

not. Given our past experience with 

first-time requests, many would not 

meet procedural requirements, would be 

denied and would then be followed by 

reconsideration requests. The burden 

imposed on entities requesting 

confidential treatment and on the 

agency would be substantial. NHTSA 

already receives about 550 requests for 

confidential treatment every year. 

Adding the expected number of CARS 

submissions to the existing 

confidentiality request workload would 

overwhelm the agency and lead to a 

huge backlog. Consistent with our 

practice, information would be withheld 

until NHTSA decides if it is 

confidential. Disclosure of rightfully 

public information would be delayed 

and the public interest would be 

impacted, particularly if other agency 

resources were diverted to address the 

backlog. In view of the foregoing, 

requiring and processing individual 

requests for confidential treatment for 

CARS data is not a viable alternative. 

A second alternative is presumptive 

class determinations. Presumptive 

determinations are a middle ground 

between ad hoc determinations and 

binding class determinations. Unlike the 

latter, that operate automatically, 

presumptive determinations require 

submitters to provide abbreviated 

written requests and supporting 

justifications. In our view, presumptive 

confidentiality determinations are 

inappropriate for CARS. While 

presumptive determinations would 

provide direction to NHTSA’s clients 

and avoid inconsistent confidentiality 

determinations, they would not 

eliminate individual confidentiality 

requests and the significant burdens 

those requests would impose. 

A third alternative is to proceed by 

binding rule. Binding determinations for 

CARS data are appropriate mechanisms 

to address the confidentiality of 

sensitive data. CARS reports are 

submitted by filling out standardized 

electronic templates that are used 

repeatedly. Each manufacturer, dealer 

and salvage yard files the same reports 

as other CARS participants in the same 

category. 

Binding determinations provide 

direction to the regulated community. 

They also assure consistency and avoid 

resource burdens, particularly for small 

businesses. They conserve agency 

resources that would otherwise be used 

to respond to thousands of individual 

confidentiality requests and allow more 

rapid disclosure of information that is 

not confidential. This is in the public 

interest. In view of the foregoing, 

NHTSA believes that binding 

determinations are appropriate. 

c. Class Determinations Based on FOIA 

Exemption 4 

FOIA Exemption 4 covers commercial 

or financial information obtained from a 

person that is privileged or confidential. 

5 U.S.C. 552(b)(4). The terms 

‘‘commercial’’ or ‘‘financial’’ 

information are given their ordinary 

meanings. Public Citizen Health 

Research Group v. FDA, 704 F.2d 1280, 

1290 (D.C. Cir. 1983). Some CARS data 

meet this element of Exemption 4.22

Second, the information must be 

obtained from a ‘‘person.’’ The word 

‘‘person’’ encompasses business 

establishments, including corporations. 

See FlightSafety Servs. v. Dep’t of Labor, 

326 F.3d 607, 611 (5th Cir. 2003). CARS 

data from manufacturers, dealers and 

salvage auctions and disposal facilities 

is obtained from persons within the 

meaning of Exemption 4. Third, the 

information must be confidential. As 

noted above, the National Parks Court 

declared that commercial or financial 

data is ‘‘confidential’’ for the purposes 

of Exemption 4 if disclosure of the 

information would be likely to cause 

substantial competitive harm to the 

competitive position of the person from 

whom the information was obtained. 

498 F.2d at 770. Actual competitive 

harm need not be demonstrated; actual 

competition and a likelihood of 

substantial competitive injury is all that 

need be shown. CNA Financial Corp. v. 

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Donovan, 830 F.2d 1132, 1152 (D.C. Cir. 

1987). 

We now turn to certain categories of 

information that manufacturers, dealers 

and disposal facilities must submit 

under the CARS rule. 

d. Data Submitted to NHTSA for the 

CARS Program 

1. Manufacturer Data 

Vehicle manufacturers will provide 

NHTSA with both dealer and vehicle 

information needed for administration 

of the CARS program. The dealer 

information is used to identify dealers 

and determine if they are authorized 

new car dealers for a particular make. 

Manufacturers will provide NHTSA 

with information about the vehicles 

they manufacture. 

2. Dealer Information and Transaction 

Data 

New car dealers participating in the 

CARS program must submit information 

related to their business as well as data 

for individual sales. To take part in the 

CARS program, dealers must register 

with NHTSA. The required registration 

data includes identifying information 

and the identity and contact information 

for a designated CARS contact person. 

Once registered, dealers have to submit 

information needed to establish a CARS 

account. This includes the registration 

data discussed above and additional 

data needed for financial transactions. 

For each individual sale, dealers also 

submit dealer data, new vehicle 

purchaser data, trade-in vehicle data, 

and new vehicle data. 

3. Disposal Facility Information and 

Destruction Data 

Disposal Facilities are required to 

submit certifications to NHTSA 

regarding their business operations and 

to verify proper destruction of CARS 

trade-in vehicles. 

e. CARS Data Class Determinations 

Based on FOIA Exemption 4 

With a few exceptions, the data 

submitted by businesses participating in 

the CARS program is already a matter of 

public record. Dealer addresses, 

telephone numbers, fax numbers and email addresses are freely given. Other 

information, such as a dealer or salvage 

yard business license number, legal 

name and legal address, are available 

through public records. Still more data 

can be ascertained through publicly 

available search engines. For example, 

Employer Identification Numbers (EINs) 

for businesses are routinely released on 

tax forms, public filings and, in some 

instances, on employee pay stubs. As a 

result, an employer’s EIN may be 

searched and retrieved by name from a 

number of Web based providers for a 

nominal fee. Nonetheless, some data 

provided to NHTSA under the CARS 

program is not publicly available and 

entitled to confidential treatment. This 

data is discussed below. 

1. Manufacturer Assigned Dealer 

Identification 

Vehicle manufacturers assign 

identification codes to their individual 

dealers. One manufacturer, Ford, 

indicates that these codes are 

confidential and that release of this 

information would be likely to cause 

competitive harm by increasing the 

possibility of fraud perpetrated by 

impostors using dealer codes. Because 

fraudulent use of this information 

would be likely to cause competitive 

harm, this final rule establishes a class 

determination extending confidential 

treatment to these manufacturer 

assigned dealer codes. 

2. Dealer Bank Name, ABA Routing 

Number, Bank Account Number 

Participating dealers will be 

identifying their bank, its American 

Banking Association (ABA) routing 

number and a bank account number in 

forms submitted to NHTSA. This 

information is kept confidential by these 

dealers and its release would cause 

substantial harm to those dealers. Public 

disclosure of this information presents 

an open and obvious potential for fraud 

or abuse that could result in serious 

financial loss. Indeed, even the 

inadvertent disclosure of a bank account 

number and a subsequent change to 

another account can cause significant 

disruption in business operations. The 

agency believes that a class 

determination is an appropriate means 

for protecting this information. 

3. CARS Dealer ID and CARS 

Authorization Codes 

NHTSA will provide participating 

dealers with unique identifiers for 

CARS purposes and issue CARS 

authorization codes for individual 

CARS transactions. Dealers must use 

this unique identifier and authorization 

code when submitting requests for 

reimbursement. Public disclosure of a 

dealer’s unique CARS ID and 

authorization code increases the 

potential that this identifier will be used 

improperly or to perpetuate fraud. 

Unauthorized and improper use of the 

unique CARS ID and code would be 

likely to cause the ‘‘owner’’ of the ID to 

suffer competitive harm. The legitimate 

‘‘owner’’ of the ID and authorization 

code may be subject to financial claims, 

suspension or removal from the CARS 

program and other costs associated with 

improper use of a CARS code and ID. 

Accordingly, this final rule establishes a 

class determination according 

confidential treatment to this data. 

f. Class Determination Based on FOIA 

Exemption 6 

The CARS rule requires dealers to 

provide NHTSA with the name, address, 

telephone number, state identification 

number, trade-in vehicle VIN, trade-in 

insurance information and new vehicle 

VIN for consumers participating in the 

CARS program. NHTSA has long held 

the view that Exemption 6 of the FOIA 

authorizes confidential treatment of 

consumer personally identifying 

information. See 5 U.S.C. 552(b)(6). 

Accordingly, consumer names, 

addresses and telephone numbers are 

routinely accorded confidential 

treatment. The agency’s policy has been 

to redact personal identifiers from 

owner complaints (whether filed 

directly with the agency or from 

documents obtained from manufacturers 

in the course of a defect investigation) 

before placing them on the public 

record. 

The privacy interest in protecting 

personal identifiers and contact 

information is no less compelling when 

a consumer purchases a new vehicle 

under the CARS program. Furthermore, 

disclosure of personal identifiers and 

the erosion of privacy that would result 

might dissuade consumers from 

participating in CARS. This would 

frustrate achievement of the program’s 

principal goal—to encourage 

replacement of older less fuel efficient 

vehicles with new more fuel-efficient 

cars and trucks. 

The consumer data at issue—name, 

address, telephone number, state 

identification number and vehicle 

identification number (VIN)—is within 

the scope of Exemption 6. VINs, when 

coupled with other data, can be used to 

identify vehicle owners and obtain other 

personal data. As this data has privacy 

implications, the next inquiry is an 

assessment of the public interest in 

disclosure. Congress has directed the 

disclosure of trade-in vehicle VINs to 

the commercial market to help verify 

destruction of these vehicles. For the 

remaining personal data, the concept of 

public interest under Exemption 6 is 

limited to shedding light on the 

government’s performance of its 

statutory duties. United States 

Department of Justice v. Reporters 

Comm. for Freedom of the Press, 489 

U.S. 749, 773 (1989); National Ass’n of 

Retired Federal Employees v. Horner, 

879 F.2d 873, 879 (D.C. Cir. 1989); cf., 

DOD v. FLRA, 510 U.S. 487, 497 (1994). 

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With the limited redaction of part of the 

VIN under this rulemaking, the public 

would be able to review identification of 

the make, model and model year of the 

new vehicle. This apprises the public of 

information central to the core purpose 

of the CARS program. Disclosing 

additional VIN information, with the 

sequential number unique to the 

vehicle, that would enable someone to 

identify the owner of the new vehicle 

and other personal information would 

not, however, further serve the public 

interest. If disclosed, it would not 

answer the question of ‘‘what the 

government is up to.’’ Reporters Comm., 

489 U.S. at 773 (1989). 

The final step in an Exemption 6 

analysis is weighing the competing 

privacy and public interests against one 

another. See Ripskis v. HUD, 746 F.2d 

1, 3 (D.C. Cir. 1984). In the case of the 

CARS VIN information, there is a 

privacy interest in not being contacted 

about a new vehicle purchase, such as 

by companies selling warranties. On the 

other hand, the public interest, in terms 

of information that reveals ‘‘what the 

government is up to’’ is better served by 

other publicly available information. On 

balance, NHTSA has concluded that the 

privacy interests in non-disclosure of 

consumer personal identifying 

information outweigh the limited public 

interest served by disclosing this 

information when other data is available 

to better address public concerns. 

NHTSA is amending 49 CFR Part 512 

by revising Appendix E to provide new 

class determinations applying to 

information provided for the CARS 

program. These class determinations do 

not apply as a rule of general 

application to the agency’s treatment of 

similar information in other instances. 

Revising Appendix E requires addition 

of a new Appendix F to accommodate 

information previously found in 

Appendix E. 

VI. Costs and Benefits 

The CARS Act will have various 

economic, employment, safety and 

environmental effects. The employment 

impacts of the Act will affect NHTSA, 

and may affect manufacturer and dealer 

employment. At this time, NHTSA is 

planning to hire 30 employees and over 

200 contractor employees to handle this 

program over a period of 6 months. 

Manufacturers’ and dealers’ 

employment levels are unlikely to be 

impacted by the Act. The impact of the 

Act will most likely not be large enough 

to increase production by 

manufacturers, and dealers on average 

will only be selling an additional 12 

vehicles (250,000 estimated number of 

vehicles sold during the program 

divided by 19,700 dealers as of early 

2009) during the course of the program. 

Another benefit of the program is the 

increased incorporation of improved 

fuel efficiency into the on-road vehicle 

fleet. This will decrease greenhouse 

gases and criteria pollutants by 

decreasing fuel consumption, resulting 

in air pollution benefits. These benefits 

are ultimately dependent upon which 

types of vehicles consumers purchase. 

Certain costs may be incurred by 

dealers. However, the CARS Act 

provides that dealers may retain up to 

$50 from the scrap value of trade-in 

vehicles to offset any administrative 

costs of participating in the program. 

Disposal facilities and salvage auctions 

will also incur some costs in complying 

with the Act. Related industries, such as 

auto repair shops, may lose some profit 

due to foregone repairs by vehicle 

owners. Additionally, the Act may 

shorten the vehicle life cycle depending 

on the age and condition of the tradein vehicles. 

Cost and benefit information 

associated with this rulemaking is set 

forth in the final regulatory impact 

analysis prepared by NHTSA and 

included in the public docket. 

VII. Statutory Basis for This Action 

This final rule implements the 

Consumer Assistance to Recycle and 

Save Act (Cars Act) (Pub. L. 111–32), 

which directs the Secretary to issue 

final regulations within 30 days after 

enactment. 

VIII. Effective Date 

Section 1302(d) of the CARS Act 

provides that notwithstanding the 

requirements of section 553 of title 5, 

United States Code, the Secretary shall 

promulgate final regulations to 

implement the Program not later than 30 

days after the date of the enactment of 

this Act. The agency finds that it has 

good cause to make this rule effective 

fewer than 30 days after the publication 

in the Federal Register. The CARS 

program is a short-term program that 

Congress expected NHTSA to 

implement promptly. Under the CARS 

Act, a credit issued under the Program 

may be used only in connection with 

the purchase or qualifying lease of new 

fuel efficient automobiles that occur 

between July 1, 2009, and November 1, 

2009. In view of the fact that the 

regulations being published today have 

not been previously available, sales of 

new vehicles under the program have 

not begun in volume. It would, 

therefore, be inconsistent with 

Congressional intent, impracticable, and 

contrary to the public interest, to delay 

the effective date of the regulations, 

which would, in turn, delay the 

implementation of the program and 

effectively compress its applicability. 

This rulemaking is also major under 

Chapter 8 of 5 U.S.C. (Congressional 

Review of Agency Rulemakings) 

because it has an annual effect on the 

economy of $100,000,000 or more. For 

the same reasons noted in the prior 

paragraph, we find good cause under 

section 808 of Title 5 that notice and 

public procedure are impracticable and 

contrary to the public interest, and that 

the rule shall take effect upon 

publication in the Federal Register. 

Accordingly, the effective date of this 

final rule is July 29, 2009. 

IX. Regulatory Analyses and Notices 

A. Executive Order 12866 and DOT 

Regulatory Policies and Procedures 

Executive Order 12866, ‘‘Regulatory 

Planning and Review’’ (58 FR 51735, 

October 4, 1993), provides for making 

determinations whether a regulatory 

action is ’’significant’’ and therefore 

subject to Office of Management and 

Budget (OMB) review and to the 

requirements of the Executive Order. 

The Order defines a ‘‘significant 

regulatory action’’ as one that is likely 

to result in a rule that may: (1) Have an 

annual effect on the economy of $100 

million or more or adversely affect in a 

material way the economy, a sector of 

the economy, productivity, competition, 

jobs, the environment, public health or 

safety, or State, local, or Tribal 

governments or communities; (2) create 

a serious inconsistency or otherwise 

interfere with an action taken or 

planned by another agency; (3) 

materially alter the budgetary impact of 

entitlements, grants, user fees, or loan 

programs or the rights and obligations of 

recipients thereof; or (4) raise novel 

legal or policy issues arising out of legal 

mandates, the President’s priorities, or 

the principles set forth in the Executive 

Order. 

This rulemaking is economically 

significant. Accordingly, OMB reviewed 

it under Executive Order 12866. The 

rule is also significant within the 

meaning of the Department of 

Transportation’s Regulatory Policies and 

Procedures. The agency has prepared a 

Final Regulatory Impact Analysis (FRIA) 

and placed it in the docket and on the 

agency’s Web site. 

B. National Environmental Policy Act 

NHTSA has considered this 

rulemaking action for the purposes of 

the National Environmental Policy Act 

(NEPA). It is established law that NEPA 

compliance is required unless there is a 

clear conflict of statutory authority. 

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

23The initial sentence of subsection (a), Section 

604, Final regulatory flexibility analysis, of the 

Regulatory Flexibility Act provides that when an 

agency promulgates a final rule under section 553 

of this title, after being required by that section or 

any other law to publish a general notice of 

proposed rulemaking, or promulgates a final 

interpretative rule involving the internal revenue 

laws of the United States as described in section 

603(a), the agency shall prepare a final regulatory 

flexibility analysis. 

Calvert Cliffs’ Coordinating Committee, 

inc. v. Atomic Energy Commission, 449 

F.2d 1109 (D.C. Cir 1971). NEPA 

analysis is not required where, as here, 

a statutorily-mandated time frame for 

the Government’s action does not 

permit it. See, e.g., Flint Ridge 

Development Co. v. Scenic Rivers Ass’n 

of Oklahoma, 426 U.S. 776 (1976) and 

Kandra v. U.S., 145 F. Supp.2d 1192 (D. 

Or. 2001). The Consumer Assistance to 

Recycle and Save Act of 2009 requires 

the Secretary of Transportation, through 

NHTSA, to issue final regulations 

within 30 days after enactment (i.e., by 

July 24, 2009) and since it is impossible 

to perform a NEPA analysis within this 

tight time frame, no NEPA analysis is 

required prior to issuing the final 

regulation. 

C. Regulatory Flexibility Act 

Pursuant to the Regulatory Flexibility 

Act of 1980 (5 U.S.C. 601 et seq., as 

amended by the Small Business 

Regulatory Enforcement Fairness Act 

(SBREFA) of 1996), whenever an agency 

is required to provide for notice and 

comment for any proposed or final rule, 

it must prepare and make available for 

public comment a regulatory flexibility 

analysis that describes the effect of the 

rule on small entities (i.e., small 

businesses, small organizations, and 

small governmental jurisdictions). The 

agency has not prepared a final 

regulatory flexibility analysis for this 

final rule because the Regulatory 

Flexibility Act does not require such an 

analysis when a final rule was not 

required to be preceded by an NPRM.23

As noted elsewhere in this preamble, 

the agency determined that an NPRM 

was not required for this rulemaking. 

Nevertheless, the agency has examined 

impacts on small entities, including 

small businesses, and included them in 

its regulatory analysis for this final rule. 

D. Executive Order 13132, Federalism 

Executive Order 13132, ‘‘Federalism’’ 

(64 FR 43255, August 10, 1999), requires 

NHTSA to develop an accountable 

process to ensure ‘‘meaningful and 

timely input by State and local officials 

in the development of regulatory 

policies that have federalism 

implications.’’ ‘‘Policies that have 

federalism implications’’ are defined in 

the Executive Order to include 

regulations that have substantial direct 

effects on the States, on the relationship 

between the national government and 

the States, or on the distribution of 

power and responsibilities among the 

various levels of government. Under 

Executive Order 13132, the agency may 

not issue a regulation with federalism 

implications that imposes substantial 

direct compliance costs and that is not 

required by statute unless the Federal 

Government provides the funds 

necessary to pay the direct compliance 

costs incurred by State and local 

governments or the agency consults 

with State and local governments in the 

process of developing the proposed 

regulation. The agency also may not 

issue a regulation with federalism 

implications that preempts a State law 

without consulting with State and local 

officials. 

NHTSA has examined today’s final 

rule pursuant to Executive Order 13132 

and concluded that consultation with 

States, local governments, or their 

representatives is not required. The 

agency has concluded that the rule does 

not have federalism implications, 

because the rule does not have a 

substantial direct effect on the States, on 

the relationship between the national 

government and the States, or on the 

distribution of power and the 

responsibilities among the various 

levels of government. This rule will 

have no effect on the ability of States to 

adopt and/or implement their own 

incentive plans. 

E. Executive Order 12988 

Pursuant to Executive Order 12988, 

‘‘Civil Justice Reform’’ the agency has 

considered whether this final rule 

would have any retroactive effect. 

Agencies may promulgate retroactive 

rules pursuant to the express authority 

of Congress to do so. See, e.g., Bowen v. 

Georgetown Univ. Hospital, 488 U.S. 

204, 208 (1988); National Mining 

Association v. Dep’t of Labor, 292 F.3d 

849, 859 (D.C. Cir. 2002). On June 24, 

2009, the President signed the CARS 

Act into law (Pub. L. 111–32). The 

CARS Act required the Secretary of 

Transportation, acting through NHTSA, 

to issue final regulations to implement 

the program within 30 days after 

enactment (i.e., by July 24, 2009). 

However, the CARS Act provides that 

the program covers eligible transactions 

beginning on July 1, 2009, prior to 

today’s final rule. Accordingly, as set 

forth in today’s final rule, if transactions 

occurring on or after July 1, 2009 but 

prior to July 29, 2009 meet all of the 

requirements identified in this final 

rule, registered dealers may follow the 

application procedures of the rule and 

apply for reimbursement for those 

transactions. 

F. Paperwork Reduction Act 

Under the Paperwork Reduction Act 

of 1995 (PRA) (44 U.S.C. 3501, et seq.), 

a person is not required to respond to 

a collection of information by a Federal 

agency unless the collection displays a 

valid OMB control number. As part of 

this final rule, the agency must among 

other matters, request information from 

persons to register as participating 

dealers, provide a list of eligible 

vehicles and process credit transactions 

under the program. 

The agency has received approval 

from OMB to collect the following 

information: 

Title: CARS Program; Dealer 

Information, OMB Control No. 2127– 

0657, Expiration Date: December 31, 

2009. 

This approval covers NHTSA Form 

1070. NHTSA has been given OMB 

approval to collect 57,000 responses, for 

a total of 11,395 burden hours. 

Title: CARS Program; Disposal 

Facility and Salvage Auction 

Information, OMB Control No. 2127– 

0658, Expiration Date: January 31, 2010. 

This approval covers NHTSA Form 

1073, ‘‘Disposal Facility Certification 

Form’’ and NHTSA Form 1074, 

‘‘Salvage Auction Certification Form.’’ 

NHTSA has been given OMB approval 

to collect 3,750,000 responses, for a total 

of 31,248 burden hours. 

Title: CARS Program; Survey of 

Customer Response to CARS Initiative, 

OMB Control No. 2127–0659, 

Expiration Date: January 31, 2010. 

This approval covers NHTSA Form 

1075, ‘‘Survey of Consumer Response to 

CARS Initiative.’’ NHTSA has been 

given OMB approval to collect 168,750 

responses, for a total of 9,375 burden 

hours. 

Title: CARS Program; Dealer and 

Buyer Transaction Information, OMB 

Control No. 2127–0660, Expiration 

Date: January 31, 2010. 

This approval covers NHTSA Form 

1071 ‘‘Transaction Form’’ (an electronic 

form) and NHTSA Form 1072 

‘‘Certifications and Summary of Sale 

Language.’’ NHTSA has been given 

OMB approval to collect 500,000 

responses, for a total of 108,334 burden 

hours. 

G. The Unfunded Mandates Reform Act 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 (UMRA) 

requires Federal agencies to prepare a 

written assessment of the costs, benefits, 

and other effects of proposed or final 

rules that include a Federal mandate 

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

likely to result in the expenditure by 

State, local, or Tribal governments, in 

the aggregate, or by the private sector, of 

more than $100 million annually 

(adjusted for inflation with a base year 

of 1995). This requirement, however, 

only applies to ‘‘a final rule for which 

a general notice of proposed rulemaking 

was published’’; as noted earlier in this 

final rule, an NPRM was not published. 

H. Regulatory Identifier Number (RIN) 

The Department of Transportation 

assigns a regulation identifier number 

(RIN) to each regulatory action listed in 

the Unified Agenda of Federal 

Regulations. The Regulatory Information 

Service Center publishes the Unified 

Agenda in April and October of each 

year. You may use the RIN contained in 

the heading at the beginning of this 

document to find this action in the 

Unified Agenda. 

I. Privacy Act 

Please note that anyone is able to 

search the electronic form of all 

comments received into any of our 

dockets by the name of the individual 

submitting the comment (or signing the 

comment, if submitted on behalf of an 

association, business, labor union, etc.). 

You may review the complete User 

Notice and Privacy Notice for 

Regulations.gov at http:// 

www.regulations.gov/search/footer/ 

privacyanduse.jsp. 

List of Subjects 

49 CFR Part 512 

Administrative procedure and 

practice, Confidential business 

information, Freedom of information, 

Motor vehicle safety, Reporting and 

record keeping requirements. 

49 CFR Part 599 

Fuel economy, Motor vehicle safety. 

■ In consideration of the foregoing, 

NHTSA hereby amends 49 CFR Chapter 

V as set forth below. 

PART 512—CONFIDENTIAL BUSINESS 

INFORMATION 

■ 1. The authority citation for Part 512 

continues to read as follows: 

Authority: 49 U.S.C. 322; 5 U.S.C. 552; 49 

U.S.C. 30166, 49 U.S.C. 30167; 49 U.S.C. 

32307; 49 U.S.C. 32505; 49 U.S.C. 32708; 49 

U.S.C. 32910; 49 U.S.C. 33116; delegation of 

authority at 49 CFR 1.50. 

■ 2. Revise Appendix E to Part 512 to 

read as follows: 

Appendix E to Part 512—Consumer 

Assistance to Recycle and Save (CARS) 

Class Determinations 

(a) The Chief Counsel has determined that 

the following information required to be 

submitted to the agency under 49 CFR part 

599, if released, is likely to cause substantial 

harm to the competitive position of the entity 

submitting the information: 

(1) Vehicle Manufacturer Issued Dealer 

Identification Code; 

(2) Dealer Bank Name, ABA Routing 

Number and Bank Account Number; and 

(3) CARS Dealer Code and Authorization 

Code. 

(b) The Chief Counsel has determined that 

the disclosure of the new vehicle owner’s 

name, home address, telephone number, state 

identification number and last six (6) 

characters, when disclosed along with the 

first eleven (11) characters, of the new 

vehicle identification numbers reported in 

transactions submitted to the agency under 

49 CFR Part 599 will constitute a clearly 

unwarranted invasion of personal privacy 

within the meaning of 5 U.S.C. 552(b)(6). 

■ 3. Add Appendix F to part 512 to read 

as follows: 

Appendix F to Part 512—OMB 

Clearance 

The OMB clearance number for this part 

512 is 2127–0025. 

■ 4. Add part 599 to read as follows: 

PART 599—REQUIREMENTS AND 

PROCEDURES FOR CONSUMER 

ASSISTANCE TO RECYCLE AND SAVE 

ACT PROGRAM 

Subpart A—General 

Sec. 

599.100 Purpose. 

599.101 Scope. 

599.102 Definitions. 

Subpart B—Participating Dealers, Salvage 

Auctions and Disposal Facilities 

599.200 Registration of participating 

dealers. 

599.201 Identification of salvage auctions 

and disposal facilities. 

Subpart C—Qualifying Transactions and 

Reimbursement 

599.300 Requirements for qualifying 

transactions. 

599.301 Limitations and restrictions on 

qualifying transactions. 

599.302 Dealer application for 

reimbursement—submission, contents. 

599.303 Agency disposition of dealer 

application for reimbursement. 

599.304 Payment to dealer. 

Subpart D—Disposal of Trade-in Vehicle 

599.400 Transfer or consignment by dealer 

of trade-in vehicle. 

599.401 Requirements and limitations for 

disposal Facilities that receive trade-in 

vehicles under the CARS program. 

599.402 Requirements and limitations for 

salvage auctions that are consigned 

trade-in vehicles under the CARS 

program. 

599.403 Requirements and limitations for 

dealers. 

Subpart E—Enforcement 

599.500 Definitions. 

599.501 Generally. 

599.502 Record retention. 

599.503 Access to records. 

599.504 Suspension, revocation, and 

reinstatement of registration and 

participation eligibility. 

599.505 Reports and investigations. 

599.506 Notice of violation. 

599.507 Disclosure of evidence. 

599.508 Statements of matters in dispute 

and submission of supporting 

information. 

599.509 Hearing officer. 

599.510 Initiation of action before the 

hearing officer. 

599.511 Counsel. 

599.512 Hearing location and costs. 

599.513 Hearing procedures. 

599.514 Assessment of civil penalties. 

599.515 Appeals of civil penalties in excess 

of $100,000.00. 

599.516 Collection of assessed or 

compromised civil penalties. 

599.517 Other sanctions. 

Appendix A to Part 599—Summary of Sale/ 

Lease and Certifications 

Appendix B to Part 599—Engine Disablement 

Procedures for the CARS Program 

Appendix C to Part 599—Electronic 

Transaction Screen 

Appendix D to Part 599—CARS Purchaser 

Survey 

Appendix E to Part 599—Disposal Facility 

Certification Form 

Appendix F to Part 599—Salvage Auction 

Certification Form 

Authority: 49 U.S.C. 32901, Notes; 

delegation of authority at 49 CFR 1.50. 

Subpart A—General 

§ 599.100 Purpose. 

This part establishes requirements 

and procedures implementing the 

program authorized under the 

Consumer Assistance to Recycle and 

Save Act of 2009. 

§ 599.101 Scope. 

The requirements of this part apply to 

new vehicle purchase or lease 

transactions, in combination with tradein vehicle transactions that occur on or 

after July 1, 2009 up to and including 

November 1, 2009, and to the disposal 

of trade-in vehicles under the CARS 

Act. 

§ 599.102 Definitions. 

As used in this part— 

Agency or NHTSA means the National 

Highway Traffic Safety Administration. 

CARS Act means the Consumer 

Assistance to Recycle and Save Act of 

2009, Public Law 111–32, 123 Stat. 1859 

(June 24, 2009). 

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CARS Program means the program 

authorized under the Consumer 

Assistance to Recycle and Save Act of 

2009, which NHTSA refers to as the Car 

Allowance Rebate System. 

Category 1 truck means a nonpassenger automobile, as defined in 

section 49 U.S.C. 32901(a)(17) and 49 

CFR 523.3, except that such term does 

not include a category 2 truck. 

Category 2 truck means a large van 

with a wheelbase of 124 inches or more, 

or a large pickup with a wheelbase of 

115 inches or more. 

Category 3 truck means a work truck, 

as defined in 49 U.S.C. 32901(a)(19). 

Clear title means title to a vehicle that 

is free from all liens and encumbrances. 

Combined Fuel Economy means— 

(1) With respect to an eligible new 

vehicle, the number, expressed in miles 

per gallon, centered below the words 

‘‘Combined Fuel Economy’’ on the label 

required to be affixed or caused to be 

affixed on a new automobile pursuant to 

subpart D of 40 CFR part 600. 

(2) With respect to an eligible tradein vehicle of model year 1985 or later, 

the number posted under the words 

‘‘Estimated New EPA MPG’’ or ‘‘New 

EPA MPG’’ and above the word 

‘‘Combined,’’ except that for a bi-fuel, 

dual fuel, or flexible fueled vehicle, that 

number must also be below the word 

‘‘Gasoline,’’ on the fueleconomy.gov 

Web site of the Environmental 

Protection Agency for the make, model, 

and year of such vehicle. 

Credit means an electronic payment 

to a dealer for a qualifying transaction 

under the program. 

Dealer means a person licensed by a 

State who engages in the sale of a new 

automobile to a person who in good 

faith purchases such automobile for 

purposes other than resale. 

Disposal facility means a facility 

listed on http://www.cars.gov/disposal 

as eligible to receive a trade-in vehicle 

for crushing or shredding under the 

CARS program, except in the case of a 

U.S. territory. 

End-of-Life Vehicle Solutions or ELVS 

means an entity established under the 

National Vehicle Mercury Switch 

Recovery Program for the collection, 

recycling and disposal of elemental 

mercury from automotive switches. 

Engine block means the part of the 

engine containing the cylinders and 

typically incorporating water cooling 

jackets and also including the crank 

shaft, connecting rods, pistons, bearings, 

cam(s), and cylinder head(s). In a rotary 

engine, the block includes the rotor 

housing and rotor. 

GVWR means gross vehicle weight 

rating. 

Lease means a lease of a new vehicle 

for a period of not less than 5 years, 

excluding any lease with a balloon 

payment due prior to the elapsing of 5 

years. 

Manufacturer’s Suggested Retail Price 

or MSRP means the base Manufacturer’s 

Suggested Retail Price, excluding any 

dealer accessories, optional equipment, 

taxes and destination charges. 

National Motor Vehicle Title 

Information System or NMVTIS means 

the online system established under the 

oversight of the Department of Justice 

that enables consumers and others to 

access vehicle history information, 

including salvage history, total loss 

information, and title branding and 

odometer information, and to which 

insurance companies and salvage yards 

must report vehicle status information. 

(http://www. nmvtis.gov.) 

New Vehicle means an automobile or 

work truck, the equitable or legal title of 

which has not been transferred to any 

person other than the purchaser. 

Non-titling Jurisdiction means a State 

that does not issue a title for certain 

typically older vehicles. 

Passenger automobile means a 

passenger automobile, as defined in 

section 49 U.S.C. 32901(a)(18) and 49 

CFR 523.4. 

Person means an individual, 

corporation, company, association, firm, 

partnership, society, or joint stock 

company. 

Purchaser means a person purchasing 

or leasing a new vehicle under the 

CARS Program. 

Salvage auction means an entity that 

receives a CARS trade-in vehicle from a 

dealer and is authorized to sell it only 

to a disposal facility on the Disposal 

Facility List and that will make all the 

necessary certifications for salvage 

auctions under the CARS program. 

State means any one of the 50 United 

States, the District of Columbia, Puerto 

Rico, the Virgin Islands, Guam, 

American Samoa, or the Commonwealth 

of the Northern Mariana Islands. 

Subpart B—Participating Dealers, 

Salvage Auctions and Disposal 

Facilities 

§ 599.200 Registration of participating 

dealers. 

(a) In general. A dealer may apply for 

a credit under the CARS Program only 

if it meets the Required Dealer 

Qualifications for Registration under 

this subpart, is registered in accordance 

with this subpart, and is currently 

registered at the time it submits an 

application for reimbursement. 

(b) Required dealer qualifications for 

registration. A dealer seeking to register 

must have: 

(1) A currently operating new 

automobile dealership and business 

address within a State in the United 

States; 

(2) A currently active business license 

under the law of the State where the 

new automobile dealership is located to 

operate that dealership; 

(3) A currently active franchise 

agreement to sell new automobiles with 

an original equipment manufacturer of 

automobiles; 

(4) A bank account in a U.S. bank in 

a State and a bank account routing 

number for electronic transfer of funds; 

(5) The ability to submit application 

materials and perform transactions 

electronically using the Internet; and 

(6) Not been convicted of a crime 

involving motor vehicles or any fraud or 

financial crime under State or Federal 

law. 

(c) Registration procedures. 

(1) Using comprehensive lists of 

franchised dealers provided by original 

equipment manufacturers, as updated 

by these manufacturers, the agency will 

mail a letter to each listed dealer 

describing a secure electronic process 

and providing an authorization code by 

which the dealer, following the process 

in paragraph (c)(2) of this section, can 

effect registration. 

(2) A dealer contacted in accordance 

with paragraph (c)(1) of this section may 

register electronically as a participating 

dealer under the CARS Program by 

using the authorization code and 

following the instructions provided in 

the letter mailed under paragraph (c)(1) 

of this section, and submitting the 

following information electronically or 

validating the information, where it 

exists already on an electronic form: 

(i) Dealer’s Federal Tax Identification 

Number (TIN) and OEM assigned dealer 

franchise number; 

(ii) Legal business name, doing 

business as name (if applicable), 

dealership physical and mailing 

address, telephone number, and fax 

number; 

(iii) Name and title of dealer 

representative authorized to submit 

transactions under this program, and 

phone number and e-mail address of 

representative; and 

(iv) Name of U.S. bank used by 

dealership, bank account number, and 

bank account routing number. 

(3) A dealer must register separately, 

following the process under paragraph 

(c)(2) of this section, for each make of 

vehicle it sells, using the authorization 

code associated with that vehicle make. 

(d) Disposition of registration 

application. The agency will review the 

registration application for compliance 

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with this part, including completeness, 

and notify the dealer as follows: 

(1) For an approved registration: 

(i) By e-mail notification to the 

authorized dealer representative, with a 

user identification and password that 

will allow the submission of 

transactions; and 

(ii) By listing the ‘‘doing business as’’ 

name, physical address, and general 

telephone number of the dealer on the 

agency Web site at http://www.cars.gov. 

(2) For a disapproved registration, by 

withholding the dealer identification 

information from the agency’s Web site 

and providing e-mail notification to the 

authorized dealer representative of the 

reasons for rejecting the application. 

(e) Revocation of Dealer Registration. 

(1) Termination or Discontinuance of 

Franchise. 

(i) A dealer whose franchise 

agreement with an original equipment 

manufacturer (OEM) has expired 

without renewal, has been terminated, 

or otherwise is no longer in effect shall 

be automatically removed as a matter of 

course, subject to paragraph (e)(1)(iii), 

from the agency’s list of registered 

dealers and may no longer receive a 

credit for new transactions under the 

CARS Program submitted for repayment 

on or after the date that the franchise 

expired or no longer is in effect. 

(ii) Paragraph (e)(1)(i) of this section 

does not preclude a dealer registered 

under other franchise agreements from 

receiving a credit for transactions under 

those agreements that have not expired 

or been discontinued. 

(iii) A dealer whose name is removed 

from the agency’s list of registered 

dealers under paragraph (e)(1)(i) shall be 

reinstated to the list of registered dealers 

upon a showing to NHTSA of proper 

and adequate license to sell new 

vehicles to ultimate purchasers. 

(2) Other suspension or revocations 

actions. The agency may also suspend 

or revoke the registration of a dealer as 

provided in § 599.504. 

(f) Notification of changes. A 

registered dealer shall immediately 

notify the agency of any change to the 

information submitted under this 

section and any change to the status of 

its State license or franchise. 

(g) Pre-registration transactions. An 

otherwise qualifying transaction that 

occurs during the time period 

prescribed under § 599.301(a) is not a 

non-complying transaction solely 

because a dealer is not registered at the 

time of the transaction, except that the 

dealer must be eligible to register and 

must register under § 599.200 in order to 

be entitled to reimbursement for a credit 

extended under the CARS program. 

§ 599.201 Identification of salvage 

auctions and disposal facilities. 

(a) Participating entities. Subject to 

the conditions and requirements of 

paragraph (b), participation in the 

transfer and disposal of a trade-in 

vehicle under the CARS program is 

limited to the following entities: 

(1) A salvage auction that will transfer 

trade-in vehicles received under this 

program only to a disposal facility 

identified in paragraph (b)(2) or (b)(3) of 

this section. 

(2) A disposal facility listed on the 

Web site at http://www.cars.gov/ 

disposal; or 

(3) A facility that disposes of vehicles 

in Puerto Rico, the Virgin Islands, 

Guam, American Samoa, or the 

Commonwealth of the Northern Mariana 

Islands. 

(b) Conditions of Participation. A 

participating entity identified in 

paragraph (a) of this section must: 

(1) Comply with all the provisions 

and restrictions and make all the 

required certifications contained in 

subpart D of this part. 

(2) In the case of a disposal facility 

identified in paragraph (a)(2) of this 

section, be currently listed on the Web 

site at http://www.cars.gov/disposal, as 

of the date of its participation in the 

disposal of the trade-in vehicle. 

(c) Removal of authority to 

participate. 

(1) A disposal facility that qualifies as 

such by active membership in ELVS and 

that fails to maintain active ELVS 

membership may be automatically 

removed as a matter of course from the 

agency’s list of disposal facilities 

maintained at http://www.cars.gov/ 

disposal authorized to participate in the 

CARS program. 

(2) The agency may also suspend or 

remove a salvage auction’s or disposal 

facility’s authority to participate in the 

CARS program in accordance with the 

procedures of § 599.504. 

Subpart C—Qualifying Transactions 

and Reimbursement 

599.300 Requirements for qualifying 

transactions. 

(a) In general. To qualify for a credit 

under the CARS Program, a dealer must 

sell or lease a new vehicle that meets 

eligibility requirements to a purchaser, 

obtain a trade-in vehicle that meets 

eligibility requirements from the 

purchaser, satisfy combined fuel 

economy requirements for both the new 

and trade-in vehicles, disable the engine 

of the trade-in vehicle, satisfy the 

limitations and restrictions of the 

program, arrange for disposal of the 

trade-in vehicle at a qualifying disposal 

facility or through a qualifying salvage 

auction, and register and submit a 

complete application for reimbursement 

to NHTSA, demonstrating that it meets 

all the requirements of this part. 

(b) Threshold eligibility requirements 

that apply to all trade-in vehicles. The 

trade-in vehicle must be: 

(1) In drivable condition, as 

demonstrated by actual operation of the 

motor vehicle on public roads by the 

dealer and by certification by the dealer 

and by the purchaser, as provided in 

Appendix A to this part, certifications 

section, that the vehicle was in drivable 

condition on the date of the qualifying 

transaction; 

(2) Continuously insured consistent 

with the applicable State law for a 

period of not less than 1 year 

immediately prior to the trade-in, as 

demonstrated by: 

(i) One or more current insurance 

cards specifying the make, model, 

model year, and vehicle identification 

number (VIN) of the insured vehicle and 

displaying a continuous one-year period 

of insurance coverage; or a copy of an 

insurance policy document (e.g., a 

declarations page or pages) showing a 

continuous one-year period of insurance 

coverage for the vehicle; or a signed 

letter, on insurance company letterhead, 

specifying the same vehicle 

identification information (i.e., make, 

model, model year, and VIN) of the 

insured vehicle and identifying the 

period of continuous coverage, which 

must be for at least one year prior to the 

date of the trade-in; and 

(ii) By certification by the purchaser, 

as provided in Appendix A to this part, 

certifications section, that the vehicle 

was so insured; 

(3) Continuously registered in a State 

to the purchaser for a period of not less 

than one year immediately prior to the 

trade-in, as demonstrated by: 

(i) A current State registration 

document or series of registration 

documents in the name of the purchaser 

evidencing registration for a period of 

not less than one year immediately prior 

to the trade-in; or a current State 

registration document showing 

registration in the name of the purchaser 

and a title that confers title on the 

purchaser not less than one year 

immediately prior to the trade-in; or a 

current State registration document 

showing registration in the name of the 

purchaser and a document from a 

commercially available vehicle history 

provider evidencing registration for a 

period of not less than one year 

immediately prior to the trade-in; and 

(ii) By certification by the purchaser, 

as provided in Appendix A to this part, 

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certifications section, that the vehicle 

was so registered; 

(4) Manufactured less than 25 years 

before the date of the trade-in, as 

demonstrated by model year 

information on the title or, where that 

information is inconclusive, by direct 

observation by the dealer of the month 

and year of the vehicle’s manufacture, 

which appears on the safety standard 

certification label of the vehicle, 

provided that on the 25th year, the 25- 

year requirement is satisfied if the 

manufacture date falls anytime within 

the month 25 years before the date of 

trade-in, and by certification by the 

dealer, as provided in Appendix A to 

this part, certifications section, that the 

manufacture date is less than 25 years 

before the date of trade-in. 

(c) Threshold eligibility requirements 

that apply to all new vehicles. The new 

vehicle must: 

(1) Be either purchased or leased for 

a lease period of not less than 5 years; 

(2) Have a manufacturer’s suggested 

retail price of $45,000 or less. 

(d) Trade-in vehicle—disclosure of 

scrap value, engine disablement, and 

title marking. As part of a qualifying 

transaction under this part, and prior to 

submitting an application for 

reimbursement under § 599.302, the 

dealer shall: 

(1) During the transaction, disclose to 

the person purchasing or leasing an 

eligible new vehicle and trading in an 

eligible trade-in vehicle, the best 

estimate of the scrap value of the tradein vehicle, inform that person that the 

dealer is authorized to retain $50 of this 

amount as payment for its 

administrative costs of participation in 

the program, and certify, as provided in 

Appendix A to this part, certifications 

section, that it has made such 

disclosure; 

(2) Except as provided in paragraph 

(e) of this section, disable the engine of 

the eligible trade-in vehicle, following 

the procedures set forth in Appendix B 

to this part, and certify, as provided in 

Appendix A to this part, certifications 

section, that it has disabled the engine; 

and 

(3) Legibly mark the front and back of 

the trade-in vehicle’s title in prominent 

letters that do not obscure the owner’s 

name, VIN, or other writing as follows: 

‘‘Junk Automobile, CARS.gov.’’ 

(e) Dealer transfers prior to July 24, 

2009. 

(1) Subject to the provisions of 

paragraph (e)(2) of this section, if the 

dealer transferred the vehicle prior to 

July 24, 2009, the dealer may either: 

(i) Locate the vehicle, disable its 

engine following the procedures set for 

the in Appendix B to this part, and 

provide the certification in Appendix A 

to this part, certifications section, that it 

has disabled the engine; or 

(ii) Obtain a sworn affidavit from a 

disposal facility that it has crushed or 

shredded the vehicle, including the 

engine block, and provide supporting 

documents sufficient to establish that 

fact. 

(2) The dealer and disposal facility 

must comply with all other 

requirements of this part, including the 

requirement that the trade-in vehicle be 

crushed or shredded, except that the 

affidavit and supporting documents 

provided for under paragraph (e)(1)(ii) 

of this section may substitute for the 

disposal facility certification form. 

(f) Qualifying transactions ($3,500 

Credit). Subject to the requirements of 

paragraphs (b), (c), and (d), and, if 

applicable, paragraph (e) of this section 

and the additional requirements of 

§§ 599.301, 599.302, and 599.303 of this 

subpart, each of the following 

transactions qualifies for a credit of 

$3,500 under this program: 

(1) The new vehicle is a passenger 

automobile with a combined fuel 

economy of at least 22 mpg, the eligible 

trade-in vehicle has a combined fuel 

economy of 18 mpg or less and is a 

passenger automobile, category 1 truck, 

or category 2 truck, and the combined 

fuel economy of the new vehicle is at 

least 4 mpg, but less than 10 mpg higher 

than the combined fuel economy of the 

eligible trade-in vehicle. 

(2) The new vehicle is a category 1 

truck with a combined fuel economy of 

at least 18 mpg, the eligible trade-in 

vehicle has a combined fuel economy of 

18 mpg or less and is a passenger 

automobile, category 1 truck, or category 

2 truck, and the combined fuel economy 

of the new vehicle is at least 2 mpg, but 

less than 5 mpg higher than the 

combined fuel economy of the eligible 

trade-in vehicle. 

(3) The new vehicle is a category 2 

truck with a combined fuel economy of 

at least 15 mpg, the eligible trade-in 

vehicle has a combined fuel economy of 

18 mpg or less and is a category 2 truck, 

and the combined fuel economy of the 

new vehicle is 1 mpg higher than the 

combined fuel economy of the eligible 

trade-in vehicle. 

(4) The new vehicle is a category 2 

truck with a combined fuel economy of 

at least 15 mpg and the eligible tradein vehicle is a category 3 truck of model 

year 2001 or earlier. 

(5) The new vehicle is a category 3 

truck, the eligible trade-in vehicle is a 

category 3 truck of model year 2001 or 

earlier, and the new fuel efficient 

vehicle has a GVWR less than or equal 

to the GVWR of the eligible trade-in 

vehicle. 

(g) Qualifying transactions ($4,500 

Credit). Subject to the requirements of 

paragraphs (b), (c), and (d), and, if 

applicable, paragraph (e) of this section 

and the additional requirements of 

§§ 599.301, 599.302, and 599.303 of this 

subpart, each of the following 

transactions qualifies for a credit of 

$4,500 under this program: 

(1) The new vehicle is a passenger 

automobile with a combined fuel 

economy of at least 22 mpg, the eligible 

trade-in vehicle has a combined fuel 

economy of 18 mpg or less and is a 

passenger automobile, category 1 truck, 

or category 2 truck, and the combined 

fuel economy of the new vehicle is at 

least 10 mpg higher than the combined 

fuel economy of the eligible trade-in 

vehicle. 

(2) The new vehicle is a category 1 

truck with a combined fuel economy of 

at least 18 mpg, the eligible trade-in 

vehicle has a combined fuel economy of 

18 mpg or less and is a passenger 

automobile, category 1 truck, or category 

2 truck, and the combined fuel economy 

of the new vehicle is at least 5 mpg 

higher than the combined fuel economy 

of the eligible trade-in vehicle. 

(3) The new vehicle is a category 2 

truck with a combined fuel economy of 

at least 15 mpg, the eligible trade-in 

vehicle has a combined fuel economy of 

18 mpg or less and is a category 2 truck, 

and the combined fuel economy of the 

new vehicle is at least 2 mpg higher 

than the combined fuel economy of the 

eligible trade-in vehicle. 

(h) No other qualifying transactions. 

Transactions described under 

paragraphs (f) and (g) of this section are 

the only transactions that qualify for 

payment of a credit to a dealer under the 

CARS Program. 

§ 599.301 Limitations and restrictions on 

qualifying transactions. 

(a) Date of transaction. A qualifying 

transaction may not occur on a date 

before July 1, 2009 or after November 1, 

2009, and is subject to available agency 

funds for the CARS Program. 

(b) One credit per transaction. Only 

one credit may be applied towards the 

purchase or lease price of each new 

vehicle. 

(c) One credit per person. A person 

that participates in a transaction for 

which a credit is issued under the CARS 

Program, whether as a single owner or 

a joint-registered owner of either an 

eligible trade-in vehicle, a new vehicle, 

or both, may not participate or be 

named in another transaction for which 

a credit is issued under the CARS 

program, either as a registered owner of 

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the trade-in vehicle or as a purchaser of 

the new vehicle. 

(d) Transfer of title. 

(1) Except as provided in paragraph 

(d)(2) of this section, a dealer may not 

apply for or receive reimbursement for 

a credit extended to a purchaser under 

a CARS program transaction unless it 

has been conveyed clear title and 

physically possesses the title to the 

trade-in vehicle. 

(2) In the case of a trade-in vehicle 

registered in a State that is a non-titling 

jurisdiction and that, in accordance 

with State law, has no title, the 

requirement in paragraph (d)(1) of this 

section that clear title be conveyed is 

satisfied if the purchaser shows proof of 

registration in the purchaser’s name and 

provides a bill of sale conferring 

ownership of the trade-in vehicle to the 

dealer. 

§ 599.302 Dealer application for 

reimbursement—submission, contents. 

(a) In general. A dealer’s application 

for reimbursement must demonstrate 

that the requirements and limitations 

governing qualifying transactions in 

§ 599.300 and § 599.301 of this subpart 

have been met, and must comply with 

the submission and contents 

requirements of this section. 

(b) Electronic submission. The 

application for reimbursement must be 

submitted by using the login and 

password provided under 

§ 599.200(d)(1) and following the 

procedures provided in the letter mailed 

under § 599.200(c)(1) of this part. 

(c) Application contents. An 

application shall consist of an electronic 

transaction form (portion reproduced in 

Appendix C to this part) requiring input 

of information into relevant fields, 

electronic copies of supporting 

documents, and applicable 

certifications, as provided in Appendix 

A to this part, certifications section. As 

its application for each transaction, the 

dealer shall: 

(1) Input the following information 

into relevant fields on the transaction 

form: 

(i) Purchaser information. 

(A) Name. The first name, middle 

initial and last name of each purchaser, 

if an individual, or the full legal name 

of the company, association or other 

organization that is the purchaser. 

(B) Residence address (or, for an 

organization, business address). The full 

address of each purchaser. 

(C) Driver’s license or State 

identification number. The State 

driver’s license or State identification 

number of each purchaser or, for an 

organization, its tax identification 

number. 

(ii) Trade-in vehicle information. 

(A) Make. The make of the vehicle. 

(B) Model. The model of the vehicle. 

(C) Model year. The model year of the 

vehicle. 

(D) Vehicle identification number 

(VIN). The 17 digit VIN of the vehicle. 

(E) CARS Act vehicle category. The 

category of vehicle as defined under the 

CARS Act. (Enter, as applicable, 

passenger automobile, category 1 truck, 

category 2 truck or category 3 truck.) 

(F) State of title. 

(G) State of registration. 

(H) Start date of registration. 

(I) Start date of insurance. 

(J) End date of registration. 

(K) Odometer reading. The odometer 

reading of the vehicle at the time of the 

trade-in. 

(L) EPA combined fuel economy. The 

listed EPA combined fuel economy of 

the vehicle. 

(M) Vehicle description. The exact 

‘‘vehicle description’’ for the vehicle 

found on http://www.fueleconomy.gov. 

(iii) New vehicle information. 

(A) Make. The make of the vehicle. 

(B) Model. The model of the vehicle. 

(C) Model year. The model year of the 

vehicle. 

(D) Vehicle identification number 

(VIN). The 17 digit VIN of the vehicle. 

(E) EPA combined fuel economy. The 

listed EPA combined fuel economy of 

the vehicle. 

(F) CARS Act vehicle category. The 

category of vehicle as defined under the 

CARS Act. (Enter, as applicable, 

passenger automobile, category 1 truck, 

category 2 truck or category 3 truck.) 

(G) Base manufacturer’s suggested 

retail price (MSRP). The price of the 

new vehicle affixed to the Monroney 

label prior to the addition of any 

options, features, taxes or destination 

charges. 

(H) Vehicle description. The exact 

‘‘vehicle description’’ for the vehicle 

found on http://www.fueleconomy.gov. 

(iv) Trade-in vehicle disposition 

information. 

(A) Identification of entity. The name, 

address and telephone number of the 

disposal facility or salvage auction to 

which the vehicle will be or has been 

transferred or consigned. 

(B) Disposal facility number. The 

unique identifier assigned to the 

disposal facility identified on the CARS 

Web site, and to which the vehicle is 

being transferred or consigned. 

(v) Transaction information. 

(A) Date of sale or lease. The date on 

which the vehicle transaction with the 

purchaser occurred. 

(B) Transaction request amount. The 

amount of the credit for which the 

dealer is applying. 

(2) Attach the following supporting 

documentation in electronic format 

(pdf, tif, jpeg) in the following order: 

(i) Proof of title. A copy of the front 

and back of the title of the trade-in 

vehicle, showing assignment to the 

dealer free and clear of any lien or 

encumbrance on the vehicle’s title, with 

the ‘‘Junk Automobile, CARS.gov’’ 

marking on both sides. 

(ii) Proof of insurance. A copy of 

insurance policy cards or documents for 

the trade-in vehicle to confirm that the 

trade-in vehicle insurance was 

continuous for a period of not less than 

one year prior to trade in. 

(iii) Proof of registration. A copy of 

the registration card or documents for 

the trade-in vehicle identifying the 

owner, the vehicle, and dates of 

registration to confirm that the vehicle 

was registered to the purchaser for a 

period of not less than one year prior to 

trade in. 

(iv) Purchaser identification. 

(v) Summary of sale/lease and 

certifications form (Appendix A to this 

part, summary section). 

(vi) Manufacturer certificate of origin 

or manufacturer statement of origin of 

the new vehicle. 

(vii) CARS purchaser survey. 

(viii) Fueleconomy.gov side-by-side 

comparison of the trade-in vehicle and 

the new vehicle. 

(ix) Certification from salvage auction 

or disposal facility. 

(x) Copy of vehicle sales or lease 

contract. 

(3) Make the certifications provided in 

Appendix A to this part, certifications 

section. 

599.303 Agency disposition of dealer 

application for reimbursement. 

(a) Application review. Upon receipt 

of an application for reimbursement, the 

agency shall review the application to 

determine whether it is complete and 

satisfies all the requirements of this 

subpart. 

(b) Complying application. An 

application that is determined to meet 

all the requirements of this subpart shall 

be approved for payment, in accordance 

with the provisions of § 599.304. 

(c) Non-complying application. An 

application that is incomplete or that 

otherwise fails to meet all the 

requirements of this subpart shall be 

rejected, and the submitter shall be 

informed electronically of the reason for 

rejection. NHTSA shall have no 

obligation to correct a non-conforming 

submission. 

(d) Electronic rejection. An 

application is automatically rejected, 

with system notification to the 

tendering dealer, if the transaction falls 

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outside of the permissible time period, 

exceeds the permissible MSRP, 

identifies a purchaser that has 

participated in a previous transaction, 

or identifies the vehicle identification 

number of a new or trade-in vehicle that 

was involved in a previous transaction. 

(e) Correction and resubmission. A 

dealer may correct and resubmit a 

rejected application for reimbursement, 

without penalty. 

§ 599.304 Payment to dealer. 

Upon completion of review of an 

application for reimbursement from a 

registered dealer that satisfies all the 

requirements of this part, the agency 

shall reimburse the dealer, by electronic 

transfer to the account identified under 

the process in § 599.200(c) of this part. 

Subpart D—Disposal of Trade-in 

Vehicle 

§ 599.400 Transfer or consignment by 

dealer of trade-in vehicle. 

(a) In general. 

(1) A trade-in vehicle accepted as part 

of an eligible transaction may be 

provided for disposal by a dealer either 

to a disposal facility or to a salvage 

auction, as described in and subject to 

the conditions of § 599.201 of this part. 

(2) Dealers, disposal facilities, and 

salvage auctions involved in the 

disposal of the trade-in vehicle must 

each comply with the applicable 

provisions of this subpart. 

(b) Transfer by dealer or salvage 

auction to a disposal facility. If the 

trade-in vehicle is transferred by the 

dealer or salvage auction to a disposal 

facility, the disposal facility must, as a 

condition of the transfer: 

(1) Make the certifications contained 

in the Disposal Facility Certification 

Form in Appendix E to this part, signed 

by an official with authority to bind the 

disposal facility; 

(2) At the time of the transfer, deliver 

the signed Disposal Facility 

Certification Form to the dealer or 

salvage auction that transferred the 

trade-in vehicle; and 

(3) Comply with the requirements and 

limitations of § 599.401. 

(c) Consignment by dealer to a salvage 

auction. If the trade-in vehicle is 

consigned by the dealer to a salvage 

auction, the salvage auction must, as a 

condition of the consignment: 

(1) Make the certifications contained 

in the Salvage Auction Certification 

Form in Appendix F to this part, signed 

by an official with authority to bind the 

salvage auction; 

(2) At the time of the consignment, 

deliver the signed Salvage Auction 

Certification Form to the dealer that 

authorized the salvage auction to sell 

the trade-in vehicle. 

(1) Make the certifications contained 

in the Salvage Auction Certification 

Form to the dealer that authorized the 

salvage auction to sell the trade-in 

vehicle; and 

(3) Comply with the requirements and 

limitations of § 599.402. 

§ 599.401 Requirements and limitations for 

disposal facilities that receive trade-in 

vehicles under the CARS program. 

(a) The disposal facility must: 

(1) Not more than 7 days after 

receiving the vehicle, report the vehicle 

to NMVTIS as a scrap vehicle. 

(2) Remove and dispose of all 

refrigerants, antifreeze, lead products, 

mercury switches, and such other toxic 

or hazardous vehicle components prior 

to crushing or shredding in accordance 

with applicable Federal and State 

requirements; 

(3) Crush or shred the trade-in vehicle 

onsite, including the engine block and 

the drive train (unless with respect to 

the drive train, the transmission, drive 

shaft, and rear end are sold separately), 

using its own machinery or a mobile 

crusher, within 180 days after receipt of 

the vehicle from the dealer or salvage 

auction; 

(4) Not more than 7 days after the 

vehicle is crushed or shredded, report 

the vehicle to NMVTIS as crushed or 

shredded. 

(b) The disposal facility may not sell 

or transfer the engine block of the 

vehicle or, except as allowed under 

paragraph (c)(2) of this section, the drive 

train before they are crushed or 

shredded or otherwise allow the vehicle 

to leave the disposal facility before it is 

crushed or shredded. 

(c) The disposal facility may: 

(1) Sell any part of the vehicle other 

than the engine block or drive train; 

(2) Notwithstanding paragraph (c)(1) 

of this section, sell the drive train 

provided the transmission, drive shaft, 

and rear end are sold as separate parts; 

(3) Retain the proceeds from parts 

sold under this paragraph. 

§ 599.402 Requirements and limitations for 

salvage auctions that are consigned tradein vehicles under the CARS program. 

(a) The salvage auction must: 

(1) Within 3 days after the date the 

dealer consigns the vehicle or prior to 

auctioning the vehicle, whichever is 

earlier, report the status of the vehicle 

to NMVTIS; 

(2) Limit participation in the auction 

to disposal facilities that, when the 

auction is held: 

(i) Appear on the list identified in 

§ 599.201(a)(2) or are described in 

§ 599.201(a)(3); and 

(ii) Agree to make the certifications in 

the Salvage Auction Certification Form 

(Appendix F to this part). 

(3) As a condition of transferring title 

to the disposal facility, obtain from that 

facility the signed Disposal Facility 

Certification Form (Appendix E to this 

part), insert on the top of the form the 

appropriate CARS invoice number 

received from the dealer, if known, and 

provide the form to NHTSA at 

disposal@cars.gov, and include that 

invoice number in the e-mail subject 

line. 

(b) [Reserved] 

§ 599.403 Requirements and limitations for 

dealers. 

A dealer receiving a Disposal Facility 

Certification Form or Salvage Auction 

Certification Form under § 599.400(b)(2) 

or (c)(2) shall insert on the top of the 

form the appropriate CARS invoice 

number, if known, and within 7 days of 

receipt, submit such certification form 

to NHTSA at disposal@cars.gov. 

Subpart E—Enforcement 

§ 599.500 Definitions. 

As used in this subpart— 

Administrator means the 

Administrator of the National Highway 

Traffic Safety Administration, or his or 

her designee. 

Chief Counsel means the NHTSA 

Chief Counsel, or his or her designee. 

Hearing Officer means a NHTSA 

employee who has been delegated the 

authority to assess civil penalties. 

NHTSA Enforcement means the 

NHTSA Associate Administrator for 

Enforcement, or his or her designee. 

Notice of violation means a 

notification of violation and preliminary 

assessment of penalty issued by the 

Chief Counsel to a party. 

Party means the person alleged to 

have committed a violation of the CARS 

Act, regulations thereunder, or other 

applicable law, and includes an 

individual, a public or private 

corporation, and a partnership or other 

association. 

Violation means any nonconformance with the CARS Act or the 

regulations in this part except 

§ 599.200(e)(1)(i) and § 599.201(c)(1), 

the submission of incomplete or 

inaccurate information to NHTSA or an 

entity identified under this part, or the 

failure to maintain records, to permit 

access to records or to update 

information that has been submitted to 

NHTSA under this part, but does not 

include a clerical error. In the context of 

dealer registration and disposal facility 

or salvage auction participation 

eligibility, violation also includes any 

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conviction of a crime involving motor 

vehicles or any fraud or financial crime 

under State or Federal law. 

§ 599.501 Generally. 

The provisions of 5 U.S.C. 554, 556 

and 557 do not apply to any 

proceedings conducted pursuant to this 

subpart. 

§ 599.502 Record retention. 

(a) Manufacturers, dealers, salvage 

auctions, and disposal facilities shall 

keep records of all transactions under 

the CARS Act and regulations 

thereunder for a period of five calendar 

years from the date on which they were 

generated or acquired by the 

manufacturer, salvage auction, dealer, or 

disposal facility, and shall promptly 

make those records available to NHTSA 

Enforcement or DOT’s Office of the 

Inspector General upon request. 

(b) Records to be retained under this 

subpart include all documentary 

materials and other information-storing 

media that contain information 

concerning transactions under the CARS 

Program, including any material 

generated or communicated by 

computer, electronic mail, or other 

electronic means. Such records include, 

but are not limited to, lists, 

compilations, certifications, dealer 

application information, salvage auction 

or disposal facility information, owner 

eligibility information, vehicle 

eligibility information (including 

vehicle fuel economy), dealer 

applications for reimbursement under 

the program, vehicle identification 

number data, vehicle ownership 

information, vehicle title, registration 

and insurance information, sales 

agreements, bills of sale, lease 

agreements, manufacturer’s certificate or 

statement of origin, other rebate and/or 

incentive programs used in conjunction 

with transactions under the program, 

bank account and routing number 

information, electronic funds transfer 

and payment information, reports made 

to the National Motor Vehicle Title 

Information System (NMVTIS), reports 

regarding vehicle scrappage values and 

payment, reports in connection with the 

transfer of vehicles to salvage auctions 

and disposal facilities; reports from 

disposal facilities in connection with 

the crushing or shredding of vehicles 

under the program, and any other 

documents that are related to 

transactions. 

(c) Duplicate copies need not be 

retained. Information may be 

reproduced or transferred from one 

storage medium to another (e.g., from 

electronic format to CD–ROM) as long as 

no information is lost in the 

reproduction or transfer, and when so 

reproduced or transferred the original 

form may be treated as a duplicate. 

§ 599.503 Access to records. 

The Administrator shall have the right 

to enter onto the premises of 

manufacturers, dealers, salvage auctions 

and disposal facilities during normal 

business hours in order to: access, 

inspect and audit records and other 

sources of information maintained by 

any of these entities under this Program; 

to inspect vehicles traded in or sold 

under this program, including taking all 

actions necessary to determine whether 

trade-in vehicles have operative 

engines; and/or to interview persons 

who may have relevant knowledge. 

§ 599.504 Suspension, revocation, and 

reinstatement of registration and 

participation eligibility. 

(a) Suspension or revocation of dealer 

registration, or salvage auction or 

disposal facility participation eligibility. 

(1) When the NHTSA Chief Counsel 

determines that a violation has likely 

occurred, the Administrator may notify 

the dealer, salvage auction or disposal 

facility in writing of the facts giving rise 

to the allegation of a violation and the 

proposed length of a suspension, if 

applicable, or revocation of registration, 

in the case of a dealer, or participation 

eligibility in the case of a salvage 

auction or disposal facility. 

(2) The notice shall afford the dealer, 

salvage auction or disposal facility an 

opportunity to present data, views, and 

arguments, in writing and/or in person, 

within 30 days of the date of the notice, 

as to whether the violation occurred, 

why its registration or participation 

eligibility ought not to be suspended or 

revoked, or whether the suspension 

should be shorter than proposed. The 

Administrator may, for good cause, 

reduce the time allowed for response. 

(3) If the Administrator decides, on 

the basis of the available information, 

that the dealer, salvage auction or 

disposal facility has committed a 

violation, the Administrator may 

suspend or revoke the dealer 

registration or the participation 

eligibility of the salvage auction or 

disposal facility. 

(4) The Administrator shall notify the 

dealer, salvage auction or disposal 

facility in writing of the decision, 

including the reasons for it. The 

decision shall reflect the gravity of the 

offense. 

(5) A suspension or revocation is 

effective as of the date of the 

Administrator’s written notification, 

unless another date is specified therein. 

(6) The Administrator shall state the 

period of any suspension in the notice 

to the dealer, salvage auction or disposal 

facility. 

(7) There shall be no opportunity to 

seek reconsideration of the 

Administrator’s decision issued under 

this paragraph (a). 

(b) Reinstatement of suspended 

registration or participation eligibility. 

(1) When a registration or 

participation eligibility has been 

suspended under this subpart, the 

registration or participation eligibility 

will be reinstated after the expiration of 

the period of suspension specified by 

the Administrator, or such earlier date 

as the Administrator may subsequently 

decide is appropriate. 

(2) Reinstatement is automatically 

effective as of the date previously set 

forth in the Administrator’s written 

notification of suspension, unless 

another date is specified by the 

Administrator in writing. 

(c) Effect of suspension or revocation 

of registration or participation 

eligibility. 

(1) If a dealer’s registration or a 

salvage auction or disposal facility’s 

participation eligibility is suspended or 

revoked, as of the date of suspension or 

revocation, the dealer, salvage auction 

or disposal facility will not be 

considered registered or eligible to 

participate in the CARS Program, and 

must cease participating in the program. 

(2) A dealer whose registration has 

been suspended will not be entitled to 

any rights or reimbursement of funds for 

new transactions submitted as of the 

effective date of the suspension or 

revocation. 

(3) NHTSA may take such action as 

appropriate, including publication, to 

provide notice that a dealer’s 

registration, or salvage auction’s or 

disposal facility’s participation 

eligibility has been suspended or 

revoked. 

§ 599.505 Reports and investigations. 

(a) Any person may report an 

apparent violation of the CARS Act or 

regulations issued thereunder to 

NHTSA. 

(b) NHTSA may independently 

monitor for violations of the CARS Act 

or regulations issued thereunder. 

(c) When a report of an apparent 

violation has been received by NHTSA, 

or when an apparent violation has been 

detected by any person working for 

NHTSA, the matter may be investigated 

or evaluated by NHTSA Enforcement. If 

NHTSA Enforcement believes that a 

violation may have occurred, NHTSA 

Enforcement may prepare a report and 

send the report to the NHTSA Chief 

Counsel. 

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(d) The NHTSA Chief Counsel will 

review the reports prepared by NHTSA 

Enforcement to determine if there is 

sufficient information to establish a 

likely violation. 

(1) The matter may be returned to 

NHTSA Enforcement for further 

investigation, if warranted. 

(2) The Chief Counsel may close a 

matter. A matter may be closed if, for 

example, the investigation has 

established that a violation did not 

occur, the alleged violator is unknown, 

there is insufficient information to 

support the existence of a violation and 

little likelihood of discovering 

additional relevant facts, or the 

magnitude of the matter is, under the 

circumstances, including availability of 

resources, insufficient to be pursued 

further. 

(3) If the Chief Counsel determines 

that a violation has likely occurred, the 

Chief Counsel may: 

(i) Issue a Notice of Violation to the 

party, and/or 

(ii) In the case of a dealer recommend 

that the Administrator suspend or 

revoke registration in the program or in 

the case of a salvage auction or disposal 

facility, recommend that the 

Administrator suspend or revoke 

participation eligibility in the program. 

(4) In the case of either paragraphs 

(d)(3)(i) or (ii) of this section, the 

NHTSA Chief Counsel will prepare a 

case file with recommended actions. A 

record of any prior violations by the 

same person or entity, shall be 

forwarded with the case file. 

§ 599.506 Notice of Violation. 

(a) The agency has the authority to 

assess a civil penalty for any violation 

of the CARS Act or this part. The 

penalty may not be more than $15,000 

for each violation. 

(b) The Chief Counsel may issue a 

Notice of Violation to a party. Notice of 

Violation will contain the following 

information: 

(1) The name and address of the party; 

(2) The alleged violation and the 

applicable law or regulations violated; 

(3) The amount of the maximum 

penalty that may be assessed for each 

violation; 

(4) The amount of proposed penalty; 

(5) A statement that payment of the 

proposed penalty within 30 days will 

settle the case without admission of 

liability; 

(6) The place to which, and the 

manner in which, payment is to be 

made; 

(7) A statement that the party may 

decline the Notice of Violation and that 

if the Notice of Violation is declined, 

the party has the right to a hearing prior 

to a final assessment of a penalty by a 

Hearing Officer. 

(8) A statement that failure to either 

pay the proposed penalty on the Notice 

of Violation or to decline the Notice of 

Violation and request a hearing within 

30 days of the date shown on the Notice 

of Violation will result in a finding of 

violation by default and that NHTSA 

will proceed with the civil penalty in 

the amount proposed on the Notice of 

Violation without processing the 

violation under the hearing procedures 

set forth in this subpart. 

(c) The Notice of Violation may be 

delivered to the party by: 

(1) Hand-delivery to the party or an 

employee of the party; 

(2) Mailing to the party (certified mail 

is not required); 

(3) Use of an overnight or express 

courier service; or 

(4) Facsimile transmission or 

electronic mail (with or without 

attachments) to the party or an 

employee of the party. 

(d) If a party submits a written request 

for a hearing as provided in the Notice 

of Violation within 30 days of the date 

shown on the Notice of Violation, the 

case file will be sent to the Hearing 

Officer for processing under the hearing 

procedures set forth in this subpart. 

(e) If a party pays the proposed 

penalty on the Notice of Violation or an 

amount agreed on in compromise 

within 30 days of the date shown on the 

Notice of Violation, a finding of 

‘‘resolved with payment’’ will be 

entered into the case file. Such payment 

shall not be an admission of liability. 

(f) If the party agrees to pay the 

proposed penalty, but has not made 

payment within 30 days of the date 

shown on the Notice of Violation, 

NHTSA will enter a finding of violation 

by default in the matter and NHTSA 

will proceed with the civil penalty in 

the amount proposed on the Notice of 

Violation without processing the 

violation under the hearing procedures 

set forth in this subpart. 

(g) If within 30 days of the date shown 

on the Notice of Violation a party fails 

to pay the proposed penalty on the 

Notice of Violation; and fails to request 

a hearing, then NHTSA will enter a 

finding of violation by default in the 

case file, and will assess the civil 

penalty in the amount set forth on the 

Notice of Violation without processing 

the violation under the hearing 

procedures set forth in this subpart. 

(h) NHTSA’s order assessing the civil 

penalty following a party’s default is 

final agency action. 

§ 599.507 Disclosure of evidence. 

The alleged violator may, upon 

request, receive a free copy of all the 

written evidence in the case file, except 

material that would disclose or could 

lead to the disclosure of the identity of 

a confidential source. Following a 

timely request for a hearing, other 

evidence or material, if any, of whatever 

source or nature, may be examined at 

the Hearing Officer’s offices or such 

other places and locations that the 

Hearing Officer may, in writing, direct, 

if there are adequate safeguards to 

prevent loss or tampering. 

§ 599.508 Statements of matters in dispute 

and submission of supporting information. 

(a) Within 30 days of the date shown 

on the Notice of Violation, the party, or 

counsel for the party, shall submit to 

NHTSA at the person or office listed in 

the Notice of Violation two complete 

copies via hand delivery, use of an 

overnight or express courier service, 

facsimile or electronic mail of: 

(1) A detailed statement of factual and 

legal issues in dispute; and, 

(2) All statements and documents 

supporting the party’s case. 

(b) One copy of the party’s submission 

set forth above shall be labeled ‘‘For 

Hearing Officer.’’ 

(c) Failure to specify any nonjurisdictional issue in the party’s 

submission will preclude its 

consideration. 

§ 599.509 Hearing Officer. 

(a) If a party timely requests a hearing 

after receiving a Notice of Violation, the 

Hearing Officer shall hear the case. 

(b) The Hearing Officer is solely 

responsible for the case referred to him 

or her. The Hearing Officer has no other 

responsibility, direct or supervisory, for 

the investigation of cases referred for the 

assessment of civil penalties. 

(c) The Hearing Officer decides each 

case on the basis of the information 

before him or her, and must have no 

prior connection with the case. 

§ 599.510 Initiation of action before the 

Hearing Officer. 

(a) After the Hearing Officer receives 

a case file from the Chief Counsel, the 

Hearing Officer notifies the party in 

writing of: 

(1) The date, time and location of the 

hearing and whether the hearing will be 

conducted telephonically or at the DOT 

Headquarters building in Washington, 

D.C.; 

(2) The right to be represented at all 

stages of the proceeding by counsel as 

set forth in § 599.511; and, 

(3) The right to a free copy of all 

written evidence in the case file as set 

forth in § 599.507. 

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(b) On the request of a party, or at the 

Hearing Officer’s direction, multiple 

proceedings may be consolidated if at 

any time it appears that such 

consolidation is necessary or desirable. 

§ 599.511 Counsel. 

A party has the right to be represented 

at all stages of the proceeding by 

counsel. A party electing to be 

represented by counsel must notify the 

Hearing Officer of this election in 

writing, after which point the Hearing 

Officer will direct all further 

communications to that counsel. A 

party represented by counsel bears all of 

its own attorneys’ fees and costs. 

§ 599.512 Hearing location and costs. 

(a) Unless the party requests a hearing 

at which the party appears before the 

Hearing Officer in Washington, DC, the 

hearing shall be held telephonically. 

The hearing is held at the headquarters 

of the U.S. Department of 

Transportation in Washington, DC. 

(b) The Hearing Officer may transfer 

a case to another Hearing Officer at a 

party’s request or at the Hearing 

Officer’s direction. 

(c) A party is responsible for all fees 

and costs (including attorneys’ fees and 

costs, and costs that may be associated 

with travel or accommodations) 

associated with attending a hearing. 

§ 599.513 Hearing procedures. 

(a) There is no right to discovery in 

any proceedings conducted pursuant to 

this subpart. 

(b) The material in the case file 

pertinent to the issues to be determined 

by the Hearing Officer is presented by 

the Chief Counsel or his or her designee. 

(c) The Chief Counsel may 

supplement the case file with 

information prior to the hearing. A copy 

of such information will be provided to 

the party no later than 3 days before the 

hearing. 

(d) At the close of the Chief Counsel’s 

presentation of evidence, the party has 

the right to examine, respond to and 

rebut material in the case file and other 

information presented by the Chief 

Counsel. 

(e) In receiving evidence, the Hearing 

Officer is not bound by strict rules of 

evidence. In evaluating the evidence 

presented, the Hearing Officer must give 

due consideration to the reliability and 

relevance of each item of evidence. 

(f) A party may present the testimony 

of any witness either through a written 

statement or a personal appearance. If a 

party wishes to present testimony 

through a personal appearance, the 

party is responsible for obtaining that 

personal appearance, including any 

costs associated with such appearance. 

The Hearing Officer may, at his or her 

discretion, accept a stipulation in lieu of 

testimony. 

(g) At the close of the party’s 

presentation of evidence, the Hearing 

Officer may allow the introduction of 

rebuttal evidence that may be presented 

by the Chief Counsel. The Hearing 

Officer may allow the party to respond 

to any such evidence submitted. 

(h) The Hearing Officer may take 

notice of matters which are subject to a 

high degree of indisputability and are 

commonly known in the community or 

are ascertainable from readily available 

sources of known accuracy. Prior to 

taking notice of a matter, the Hearing 

Officer shall give the party an 

opportunity to show why notice should 

not be taken. In any case in which 

notice is taken, the Hearing Officer 

places a written statement of the matters 

as to which notice was taken in the 

record, with the basis for such notice, 

including a statement that the party 

consented to notice being taken or a 

summary of the party’s objections. 

(i) After the evidence in the case has 

been presented, the Chief Counsel and 

the party may present argument on the 

issues in the case. The party may also 

request an opportunity to submit a 

written statement for consideration by 

the Hearing Officer and for further 

review. If granted, the Hearing Officer 

shall allow a reasonable time for 

submission of the statement and shall 

specify the date by which it must be 

received. If the statement is not received 

within the time prescribed, or within 

the limits of any extension of time 

granted by the Hearing Officer, the 

Hearing Officer prepares the decision in 

the case. 

(j) A verbatim transcript of the hearing 

will not normally be prepared. A party 

may, solely at its own expense, cause a 

verbatim transcript to be made. If a 

verbatim transcript is made, the party 

shall submit two copies to the Hearing 

Officer not later than 15 days of the 

hearing. The Hearing Officer shall 

include such transcript in the record. 

§ 599.514 Assessment of civil penalties. 

(a) Not later than 30 days following 

the close of the hearing, the Hearing 

Officer shall issue a written decision on 

the Notice of Violation, based on the 

hearing record. The decision shall set 

forth the basis for the Hearing Officer’s 

assessment of a civil penalty, or 

decision not to assess a civil penalty. In 

determining the amount of the civil 

penalty, the severity of the violation and 

the intent and history of the party 

committing the violation shall be taken 

into account. The assessment of a civil 

penalty by the Hearing Officer shall be 

set forth in an accompanying final 

order. 

(b) If the Hearing Officer assesses civil 

penalties in excess of $100,000.00, the 

Hearing Officer’s decision contains a 

statement advising the party of the right 

to an administrative appeal to the 

Administrator. The party is advised that 

failure to submit an appeal within the 

prescribed time will bar its 

consideration and that failure to appeal 

on the basis of a particular issue will 

constitute a waiver of that issue in its 

appeal before the Administrator. 

(c) The filing of a timely and complete 

appeal to the Administrator of a Hearing 

Officer’s order assessing a civil penalty 

shall suspend the operation of the 

Hearing Officer’s penalty. 

(d) There shall be no administrative 

appeals of civil penalties of $100,000.00 

or less. 

§ 599.515 Appeals of civil penalties in 

excess of $100,000.00. 

(a) A party may appeal the Hearing 

Officer’s order assessing civil penalties 

over $100,000.00 to the Administrator 

within 21 days of the date of the 

issuance of the Hearing Officer’s order. 

(b) The Administrator will affirm the 

decision of the Hearing Officer unless 

the Administrator finds that the Hearing 

Officer’s decision was unsupported by 

the record as a whole. 

(c) If the Administrator finds that the 

decision of the Hearing Officer was 

unsupported, in whole or in part, then 

the Administrator may: 

(1) Assess or modify a civil penalty; 

(2) Rescind the Notice of Violation; or 

(3) Remand the case back to the 

Hearing Officer for new or additional 

proceedings. 

(d) In the absence of a remand, the 

decision of the Administrator in an 

appeal is a final agency action. 

§ 599.516 Collection of assessed or 

compromised civil penalties. 

(a) Payment of a civil penalty, 

whether assessed or compromised, shall 

be made by check, postal money order, 

or electronic transfer of funds, as 

provided in instructions by the agency. 

A payment of civil penalties shall not be 

considered a request for a hearing. 

(b) The party must remit payment of 

any assessed civil penalty to NHTSA 

within 30 days after receipt of the 

Hearing Officer’s order assessing civil 

penalties or, in the case of an appeal to 

the Administrator, within 30 days after 

receipt of the Administrator’s decision 

on the appeal. Failure to make timely 

payment may result in the institution of 

appropriate action under the Federal 

Claims Collection Act, as amended, the 

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regulations issued thereunder, and other 

applicable law. 

(c) The party must remit payment of 

any compromised civil penalty to 

NHTSA on the date and under such 

terms and conditions as agreed to by the 

party and NHTSA. Failure to pay a 

compromised civil penalty to NHTSA 

on the date and under such terms and 

conditions as agreed to by the party and 

NHTSA may either result in the 

institution of appropriate action under 

the Federal Claims Collection Act, as 

amended, the regulations issued 

thereunder, and other applicable law, or 

NHTSA entering a finding of violation 

by default and assessing a civil penalty 

in the amount proposed in the Notice of 

Violation without processing the 

violation under the hearing procedures 

set forth in this part. 

§ 599.517 Other sanctions. 

The procedures and penalties 

described in this subpart are not the 

only procedures and penalties that may 

apply to someone who violates the 

CARS Act or submits a false 

certification required by this rule. 

Anyone who submits false information 

on these forms or otherwise violates the 

CARS Act or this part may not only be 

subject to the procedures and penalties 

described in this subpart, but also civil 

and criminal penalties. Such civil and 

criminal penalties may include 

penalties three times any amount falsely 

claimed to be due from the United 

States pursuant to the False Claims Act 

(31 U.S.C. 3729), or imprisonment of up 

to 5 years and fines of up to $250,000 

(18 U.S.C. 1001). In addition, NHTSA 

may request that the Attorney General 

seek appropriate injunctive relief to 

address violations of the CARS Act or 

this part. 

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Federal Register / Vol. 74, No. 144 / Wednesday, July 29, 2009 / Rules and Regulations 37915 


mstockstill on DSKH9S0YB1PROD with RULES3ER29JY09.009</GPH>
37916 Federal Register / Vol. 74, No. 144 / Wednesday, July 29, 2009 / Rules and Regulations 


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Federal Register / Vol. 74, No. 144 / Wednesday, July 29, 2009 / Rules and Regulations 37917 


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37918 Federal Register / Vol. 74, No. 144 / Wednesday, July 29, 2009 / Rules and Regulations 


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Federal Register / Vol. 74, No. 144 / Wednesday, July 29, 2009 / Rules and Regulations 37919 


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37920 Federal Register / Vol. 74, No. 144 / Wednesday, July 29, 2009 / Rules and Regulations 

Issued on: July 23, 2009. 

Ronald L. Medford, 

Acting Deputy Administrator. 

[FR Doc. E9–17994 Filed 7–24–09; 4:15 pm] 

BILLING CODE 4910–59–C 


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