Opinion ID: 426343
Heading Depth: 3
Heading Rank: 3

Heading: Exclusion of Specialty Parts from the Certification Program

Text: 41 Petitioner SEMA challenges the exclusion of specialty parts from the certification program. SEMA's dispute with EPA centers on two separate actions by the agency: its explicit exclusion of specialty parts from the certification program and its rejection of the use of short tests as an alternative method of certification. The latter action had the practical effect of making certification inaccessible to specialty parts manufacturers. We agree with SEMA that the explicit exclusion and de facto exclusion of specialty parts (through the rejection of short tests for certification purposes) were arbitrary and capricious. 42 Under EPA's proposed rule, all aftermarket parts affecting emissions would have been eligible for certification. See 44 Fed.Reg. 46,688 (1979). This is true, at least theoretically, in the final rule as well. According to EPA, to carry out the purpose of Section 207(b) it is important that no parts affecting emissions be excluded from the Part Certification Program. 45 Fed.Reg. 78,450 (1980). Yet, under the final regulations, only those parts for which emission critical parameters ha[d] been set forth may be certified, at least for the present. 40 C.F.R. Sec. 85.2112(a) (1982); see also 45 Fed.Reg. 78,451 (1980). Because no emission critical parameters were identified for specialty parts, EPA excluded them from the program, reserving judgment on whether they should be excluded permanently. 45 Fed.Reg. 78,451 (1980). In a separate action, EPA rejected the use of short tests as an alternative basis for certification, even though short tests appeared to be the only available testing method that would make certification accessible to specialty parts manufacturers. See id. at 78,452-53. 43 We agree with most of SEMA's substantive challenges to the regulations. As a preliminary matter, however, we reject SEMA's procedural claim that specialty parts manufacturers had inadequate notice and opportunity to comment on EPA's exclusion of their parts from the certification program. In its proposed rule, EPA explicitly asked for comments on the role of specialty parts: 44 Of greater concern was the question of whether modified and add-on parts should be eligible for certification. As presently drafted, the proposal would allow these parts to be certified if they will have no immediate or long term adverse effect on emissions. 45 .... 46 ... The Agency invites public comment on the inclusion of modified and add-on parts in this program. 47 44 Fed.Reg. 46,688 (1979). In light of this invitation, it is clear that specialty parts manufacturers had sufficient opportunity to comment on the inclusion of their parts in the program. 48 As to SEMA's substantive claims, we first address EPA's de facto exclusion of specialty parts through its rejection of short tests as a method of certification. Our opinion in the companion case of MVMA v. EPA explains the central role of EPA-approved short tests under the performance warranty program. Short tests are used to determine whether an in-use vehicle exceeds emission standards, thereby triggering the vehicle manufacturer's warranty under section 207(b). Specialty parts manufacturers recommended that EPA use short tests under the certification program as well. Because specialty parts, by definition, differ from and go beyond original equipment parts, it is not possible to develop emission critical parameters for them that are comparable to the original equipment. Moreover, the cost of the FTP makes it an impractical method of certification for most small parts manufacturers. SEMA indicated during the comment period on the proposed certification rule that it favored the use of short tests as an alternative method of certification, at least until a better test was developed to measure specialty part emissions. 49 Although couched in policy terms (the use of short tests as a basis for certification would be unwise), EPA's rejection of short tests for certification purposes apparently rests on its interpretation of section 207(a)(2). See 45 Fed.Reg. 78,452-53 (1980). According to EPA, the short tests do not, in themselves, demonstrate compliance with Federal Emission Standards. Id. at 78,452. Quoting the language of section 207(a)(2), EPA argued that, since short tests only indicate gross violations of emission standards, mere compliance with a short test would not allow a manufacturer to certify 'that use of such part will not result in a failure of the vehicle or engine to comply with emission standards promulgated under section 202' as is set forth in the Act. Id. Although the Act's certification provision does refer directly to the strict emission standards set forth in section 202, EPA ignores the other command of section 207(a)(2), which requires the agency to promulgate regulations to carry out the purposes of section 207(b), the very provision which authorizes EPA to develop a short test for use in the performance warranty program. 50 It is true that a short test will not indicate as many violations of emission standards as will the Federal Test Procedure, but Congress intended, in section 207(b), to provide a reasonably comparable surrogate for testing in-use vehicles in order to determine whether the performance warranty is triggered. If the short test we approved in MVMA is the only basis upon which a vehicle manufacturer will be required to honor a performance warranty, it is unreasonable to require a part to meet more stringent emission standards before it can be certified. In rejecting the use of short tests for certification, while adopting such tests for determining warranty liability, EPA prevents parts from being certified that would not cause a vehicle to fail a short test and therefore would not trigger a vehicle manufacturer's warranty. Given that Congress intended the certification program to be broad in scope--an interpretation which EPA itself adopts--EPA's conclusion that section 207(a)(2) prevents the use of short tests as a basis for certification is incorrect. 51 This conclusion does not mean that the Act requires EPA to authorize the use of short tests as a basis for certification. The statute grants EPA considerable discretion in developing an inexpensive, technically feasible certification program. There may be valid policy reasons for rejecting short tests, but they have not been articulated by EPA. The only policy rationale advanced by the agency when it promulgated the rule is that none of the approved short tests approved under the performance warranty program measure NO x , emissions which are regulated under section 202. 45 Fed.Reg. 78,452-53 (1980). This argument is specious in light of EPA's position before this court in MVMA urging us to approve those short tests, for performance warranty purposes, even though they do not measure NOx . moreover, thE agency did not explain why other short tests which do measure NOx could not be used in the certification program. 52 One of EPA's initial justifications for rejecting short tests under the proposed certification program was that short tests were unable to guarantee that a part would cause no increase in emissions. 44 Fed.Reg. 46,690 (1979). Once EPA rejected the no-increase certification standard for replacement parts, however, that justification evaporated. EPA's own reasoning in the proposed rule, in the final rule, and in adopting the short tests we approve today for performance warranty purposes, demonstrates that the rejection of short tests for certification of parts was arbitrary and capricious. 53 SEMA also challenges EPA's explicit exclusion of specialty parts from the certification program. The regulations limit eligibility for certification to those parts for which emission critical parameters have been identified. EPA offered two reasons for this explicit exclusion of specialty parts. First, [v]ehicle manufacturers do not believe they should be held responsible for such parts under the emission warranty. 45 Fed.Reg. 78,451 (1980). Obviously, a party's belief cannot substitute for the reasoned analysis required before we can uphold the agency. Second, EPA relied on the testimony of specialty parts manufacturers themselves, who stated that full testing under the FTP would be so time-consuming and expensive that absent an alternative method of certification, the Proposal did not provide a realistic opportunity for the certification of add-on or modified parts. Id. EPA therefore apparently assumed that specialty parts manufacturers did not want to use the FTP as a method for certification. 54 SEMA does not dispute that the FTP is an unrealistic method of certification on a permanent basis, but claims that it expected specialty parts to be included in the program even if the FTP were the only permissible basis for certification. In fact, EPA adopted one of SEMA's suggestions to lessen the burden of the FTP by reducing the number of required tests from four to two. 45 Fed.Reg. 78,453 (1980). (Indeed, the agency added insult to injury when it refused to allow specialty parts to be certified because of the cost of the FTP and then adopted SEMA's suggestions for reducing that cost for those parts which EPA did include in the program.) Unless the agency offers persuasive reasons for its decision, specialty parts manufacturers, at a minimum, should be allowed to participate in the certification program through the FTP method of certification. 55 The EPA's blanket exclusion of specialty parts from the certification program and its rejection of the use of short tests as a basis for certification were arbitrary and capricious. Although the agency's reasoning in support of the final certification regulations generally reflected a sensitive balancing of the competing and often conflicting purposes of the statute, such a reasoned analysis was lacking with regard to specialty parts. EPA's treatment of specialty parts was inconsistent with the remainder of the certification regulations, with the short test regulations, and with the performance warranty regulations promulgated pursuant to section 207(b) of the Act. See 40 C.F.R. Secs. 85.2201-.2218 (1982) (short test regulations); id. Secs. 85.2101-.2111 (performance warranty regulations). 56 In the final certification regulations, EPA concluded that the Act contemplates a certification program that is readily accessible to all aftermarket parts producers. Although there may be valid policy reasons for excluding specialty parts from the program, those reasons have not been articulated by EPA. The agency's treatment of specialty parts in the regulations--through its blanket exclusion of specialty parts and its rejection of the use of short tests--is inconsistent with its conclusion that all parts manufacturers are covered by section 207(a)(2).