Interpretation ID: nht92-3.9

DATE: October 23, 1992

FROM: Paul Jackson Rice -- Chief Counsel, NHTSA

TO: A. Mary Schiavo -- Inspector General for the Department of Transportation

COPYEE: Gerard Tucker -- Special Agent, DOT Office of Inspector General

TITLE: None

TEXT:

Special Agent Gerard H. Tucker, Jr. of your staff asked me to provide you with some information about the National Highway Traffic Safety Administration's regulations dealing with certification and vehicles manufactured in two or more stages. This information should prove helpful in connection with an investigation of Bus Industries of America by your office in which Mr. Tucker has been involved.

Mr. Tucker presented the following facts. A Canadian company (Ontario Bus Industries, Inc.) manufactured some buses at its plant in Canada. It certified these buses as conforming with all U.S. vehicle safety standards and affixed a label to that effect, in accordance with 49 CFR Part 567, Certification. These buses were then imported into the United States bearing the certification label that had been affixed by the Canadian manufacturer. After the vehicles were imported into the United States, the U.S. company that had imported the buses (Bus Industries of America) removed the Canadian manufacturer's certification label and affixed a new certification label that identified the U.S. company as the manufacturer of these buses. With respect to the information other than the name of the manufacturer, the certification label substituted by the importer was identical to the certification label affixed by the Canadian manufacturer.

Mr. Tucker asked us to explain this agency's certification regulations as they apply to vehicles manufactured in two or more stages, and to comment on the assertion that the certification label placed on the buses by the Canadian manufacturer did not meet this agency's certification requirements. I am pleased to have this opportunity to do so.

The National Traffic and Motor Vehicle Safety Act of 1966 includes the following provision at 15 U.S.C. 1403:

Every manufacturer or distributor of a motor vehicle or motor vehicle equipment shall furnish to the distributor or dealer at the time of delivery of such vehicle or equipment by such manufacturer or distributor the certification that each such vehicle or item of motor vehicle equipment conforms to all applicable Federal motor vehicle safety standards. ** In the case of a motor vehicle such certification shall be in the form of a label or tag permanently affixed to such motor vehicle.

NHTSA has issued a regulation (49 CFR Part 567) specifying the content and location of, and other requirements for, the vehicle certification label or tag required by this statutory provision. That regulation is relatively straightforward with respect to vehicles produced by a single manufacturer. The manufacturer must permanently affix a label containing specified

information, including the name of the manufacturer, the date of manufacture, the vehicle identification number, and a certification that the vehicle conforms to all applicable Federal motor vehicle safety standards, in a specified location on the vehicle.

The certification regulation becomes more complex in the case of vehicles manufactured in two or more stages and certified vehicles that are altered before they have been sold to the public for the first time. In those situations, there is more than one manufacturer's input needed for the certification of the finished vehicle. Accordingly, NHTSA has included special provisions in Part 567 specifying the certification requirements for these vehicles and adopted a separate regulation at 49 CFR Part 568, Vehicles Manufactured in Two or More Stages, specifying the responsibilities of the various manufacturers in ensuring conformity of the completed vehicle with all applicable Federal motor vehicle safety standards.

With respect to the Canadian buses described by Mr. Tucker, those vehicles appear to fall into the category of vehicles produced by a single manufacturer. The relevant certification requirements for such vehicles are set forth at 49 CFR S567.4. It appears that the Canadian company in this case followed those requirements and affixed a label in accordance with S567.4.

Mr. Tucker indicated that Bus Industries of America had argued that it was required to affix its own certification label for two different reasons. First, for some of these buses, Bus Industries of America had produced various component subassemblies (e.g., frame, drivetrain, etc.) and shipped those component subassemblies to Canada to be used in manufacturing these buses. Because of this, Bus Industries of America argued that it had to certify the vehicles in its capacity as the manufacturer of the incomplete vehicle.

It is true that 49 CFR Parts 567 and 568 impose responsibilities on incomplete vehicle manufacturers, and even allow incomplete vehicle manufacturers to assume legal responsibility for the completed vehicle. See S567.5(e) and S568.7(a). However, a party that ships various component subassemblies to another party would not be an incomplete vehicle manufacturer for purposes of NHTSA's certification regulations. The following definitions appear in S568.3:

Incomplete vehicle manufacturer means a person who manufactures an incomplete vehicle by assembling components none of which, taken separately, constitute an incomplete vehicle.

Incomplete vehicle means an assemblage consisting, as a minimum, of frame and chassis structure, power train, steering system, suspension system, and braking system, to the extent that those systems are to be part of the completed vehicle, that requires further manufacturing operations, other than the addition of readily attachable components, such as mirrors or tire and rim assemblies, or minor finishing operations such as painting, to become a completed vehicle.

Reading these definitions, it is apparent that a party could not be considered an incomplete vehicle manufacturer if that party simply produced

certain component subsystems and shipped those subsystems off to another party to assemble into a motor vehicle. Based on the facts Mr. Tucker provided this office, the claim that Bus Industries of America should be considered an incomplete vehicle manufacturer of these buses has no merit.

Second, Mr. Tucker indicated that Bus Industries of America argued that it had to certify some of these buses because that company had performed minor finishing operations on some buses after it received them from Canada. It may be that Bus Industries of America is suggesting that it should be considered to be a final stage manufacturer of these vehicles, and therefore was responsible for certifying these vehicles per 49 CFR 567 and 568. Alternatively, Bus Industries of America may have been suggesting that it should be considered an alterer of these vehicles, and therefore required to certify them. Neither one of these arguments is supported by the facts.

A final stage manufacturer is defined at 49 CFR S568.3 as "a person who performs such manufacturing operations on an incomplete vehicle that it becomes a completed vehicle." The relevant question then is whether these buses were incomplete vehicles. As specified in the definition of "incomplete vehicle" quoted above, a vehicle that needs only minor finishing operations is not considered an incomplete vehicle. Instead, only those vehicles that need some further manufacturing operations to perform their intended function are considered incomplete vehicles. Since the buses in question had been certified by the Canadian manufacturer as completed vehicles and driven over the public roads from the Canadian plant to the U.S., there is no indication that the buses needed some further manufacturing operations to perform their intended function. Hence, Bus Industries of America was not a final stage manufacturer of those vehicles.

To the extent that Bus Industries of America wishes to be considered an alterer of a previously certified vehicle, 49 CFR S567.6 expressly sets forth requirements for persons that alter vehicles by performing minor finishing operations. That section provides: "A person ... who alters such a vehicle only by the addition, substitution, or removal of readily attachable components such as mirrors or tire and rim assemblies, or minor finishing operations such as painting, in such a manner that the vehicle's stated weight ratings are still valid, need not affix a label to the vehicle, but shall allow a manufacturer's label that conforms to the requirements of this part to remain affixed to the vehicle." The sample of the Canadian manufacturer's certification label that Mr. Tucker provided this office conforms to the requirements of Part 567. Hence, even if one accepts the argument by Bus Industries of America that it performed minor finishing operations on previously certified vehicles, it would have still been subject to an express regulatory duty to leave the Canadian manufacturer's certification label in place.

The final point I understand Bus Industries of America to be raising was that only a U.S. manufacturer could certify that a vehicle met the U.S. safety standards. This point is incorrect. A vehicle to be imported into the U.S. must be certified as conforming with all U.S. safety standards before it enters the United States. Such a certification is routinely made by manufacturers headquartered outside of the United States. There is no regulation or law administered by this agency that requires the certification to be made only by a U.S. company.

I hope this information is useful. If you have any further questions or need some additional information on this subject, please let me know.

Attachment

BUS INDUSTRIES OF AMERICA INC.

PRESENTED TO: NATIONAL HIGHWAY TRAFFIC SAFETY ADMINISTRATION

PRESENTED BY: OFFICE OF INSPECTOR GENERAL Gerard H. Tucker, Jr. Special Agent (215) 337-2725

SUMMARY

Background and history of Bus Industries of America, Inc. (BIA)

Allegations:

Title 18, United States Code, Section 1001 BIA provided a false statement to the government by certifying that they would meet the Buy America pro- vision of Section 165(b)(3) of the Surface Transportation and Uniform Relocation Assistance Act of 1982

Title 18, United States Code, Section 542 BIA attempted to introduce imported merchandise into the commerce of the U.S. by means of a false or fraudulent statement

Title 19, United States Code, Section 1304 tampering with, or removal of Manufacturers Label of Origin

Chronology of events leading to allegations

Defense Counsel (ECKERT SEAMANS CHERIN & MELLOTT) assertions

Assistant United States Attorney's request for clarification from NHTSA

ATTACHMENTS

1. Title 18 U.S.C. 542 2. Excerpts from defense counsel brief 3. Excerpt from interview of Keith Sheardown 4. Ontario Bus Industries Label of Origin 5. Bus Industries of America Label of Origin 6. 49 C.F.R. 567, 568 7. Title 15 U.S.C. 1403

(Remainder of text is omitted.)