Interpretation ID: nht92-5.26

DATE: July 8, 1992

FROM: Andrew H. Card, Jr. -- NHTSA Secretary of Transportation

TO: Matthew G. Martinez -- U.S. House of Representatives

TITLE: None

ATTACHMT: Attached to letter dated 6/11/92 from Matthew G. Martinez to Andrew Card (OCC 7386)

TEXT:

Thank you for your letter regarding Philatron International.

The National Highway Traffic Safety Administration (NHTSA) closely examined Philatron's request and determined that the requested relief cannot be provided. The reasons underlying this conclusion are fully explained in a May 26, 1992, letter from NHTSA Chief Counsel Paul Jackson Rice to Anthony D. Padgett, counsel for Philatron.

In his letter, the Chief Counsel explained that Philatron, as a manufacturer of motor vehicle equipment, is not eligible to be considered for an exemption from compliance with the motor vehicle safety standards under the National Traffic and Motor Vehicle Safety Act. The Chief Counsel also concluded that a proceeding resulting from Philatron's rulemaking petition must include a full notice and comment procedure. A copy of the letter is enclosed.

Let me assure you that the Department of Transportation supports and implements President Bush's deregulatory policies and initiatives. However, the President has emphasized that deregulation should not compromise safety. With respect to the issue at hand, interested parties have raised serious questions as to whether the oil resistance requirement of the standard should be eliminated and, if so, whether other requirements should be substituted. It is this concern for safety that compels NHTSA not to eliminate summarily the regulatory requirement in question.

Attachment

Letter dated 5/26/92 from Paul Jackson Rice to Anthony D. Padgett, Esq., Thelen, Marrin, Johnson & Bridges, regarding Philatron. Text of letter follows.

Dear Mr. Padgett:

General Curry has asked me to respond to your letter of April 24, 1992, in which you requested the National Highway Traffic Safety Administration ("NHTSA") to grant an "immediate temporary exemption" from the oil resistance requirements of section S7.3.4 of Federal Motor Vehicle Safety Standard ("FMVSS") No. 106 to Philatron International, Inc. The purpose of such an exemption would be to permit Philatron to manufacture and sell its coiled brake hose products, which do not comply with S7.3.4, during the pendency of the rulemaking proceeding that NHTSA has commenced in response to Philatron's petition for rulemaking to amend that provision.

Section 123 of the National Traffic and Motor Vehicle Safety Act ("Act"), 15 U.S.C. S 1410, provides NHTSA with the authority to grant exemptions from safety standards under limited circumstances. However, we have concluded that Philatron would not be eligible to receive an exemption under that section. First, section 123 only authorizes exemptions to manufacturers of "motor vehicles," not to manufacturers of motor vehicle equipment such as Philatron. You have suggested that "it would strain logical reasoning" to allow exemptions to be granted to manufacturers of complete vehicles but not to manufacturers of individual components. However, this is a distinction that Congress may make and has made. As you are aware, section 157 of the Act, 15 U.S.C. S 1417, authorizes NHTSA to grant to all manufacturers, including manufacturers of equipment items, an exemption from the notification and remedy requirements of sections 151-154 of the Act if the agency determines that a noncompliance or defect is inconsequential as it relates to motor vehicle safety. Congress did not provide similar authority in section 123 regarding exemptions from section 108 of the Act, which precludes the manufacture and sale of motor vehicle equipment that does not comply with applicable safety standards.

Second, even if NHTSA could exempt equipment items under section 123, the number of hose assemblies manufactured by Philatron would disqualify it due to the numerical restrictions established by section 123(d). Moreover, although you have not indicated which specific subsection of section 123 you believe would be applicable to Philatron, it is questionable whether the company could satisfy any of the substantive bases for an exemption under that section.

I should also point out that, pursuant to section 123(a), NHTSA must provide notice and an opportunity for public comment before it may grant an exemption. Since Philatron's sole reason for requesting an exemption is to enable it to continue to manufacture and sell its products during the pendency of the ongoing rulemaking proceeding, commencing a separate notice and comment proceeding to consider whether to grant a temporary exemption would not provide any real benefit to the company.

It is also clear that, notwithstanding your reference to cases involving other agencies, NHTSA does not have authority to grant exemptions except as provided under section 123. In the early years of the Safety Act, the agency claimed that it had inherent authority to grant to a single manufacturer (Checker Motors Corporation) an extension of the effective date for complying with a standard. On review, the courts held that such an extension was equivalent to an exemption from a safety standard and that NHTSA did not have authority to grant any exemptions except as provided under section 123.

As the District Court stated in Nader v. Volpe, 320 F. Supp. 266, 269 (D.D.C. 1970):

The Court notes that when the Act was originally adopted, Section 1410 did not exist. At first, the Department of Transportation did not feel that it had the statutory authority to grant single manufacturer extensions, but due to the hardship felt by some small manufacturers of specialty cars, the Congress enacted Section 1410. This section, however, is specifically limited to manufacturers who annually produce five hundred cars or less.

Thus, when there was an awareness on the part of Congress that special provisions should be made for single manufacturers, such provisions were restricted. Congress did not provide extensions for single car manufacturers across the board. In fact, from the action it did take, it is logical to presume that it never intended to have a single manufacturer extension for producers who exceeded the five hundred vehicle limit, and the Court so holds.

Although Congress subsequently amended section 123 to broaden the circumstances under which exemptions could be granted, the foregoing legal principle was affirmed by the D.C. Circuit. Nader v. Volpe, 475 F.2d 916, 918 (D.C. Cir. 1973):

And we think it clear, both under the version of Section 1410 initially before us and under Section 1410 as amended by Public Law No. 91-548, that the Secretary's sole authority to exempt a manufacturer from a safety standard, even if that exemption takes the form of a postponement of the effective date of the safety standard for a single manufacturer, derives from Section 1410. THERE IS NO IMPLIED AUTHORITY TO GRANT EXEMPTIONS OR POSTPONEMENTS IN SITUATIONS NOT ENCOMPASSED BY THAT SECTION (emphasis supplied).

Although your April 24 letter focussed on Philatron's request for a temporary exemption, you have also suggested that the agency could amend FMVSS No. 106 "without resort to the full (notice and comment) rulemaking procedure," citing 49 CFR S 553.13. Contrary to the implication of your letter, the fact that NHTSA has granted Philatron's petition for a determination of inconsequentiality with respect to the hose assemblies that were manufactured and sold before the company's determination of noncompliance does not automatically mean that it is appropriate to amend the standard prospectively without prior notice and comment. Moreover, even if the agency had decided that an amendment was appropriate, it would still need to determine the precise form and content of the amendment. For example, we must ensure that the amendment goes no further than is consistent with safety. Identifying where and how to achieve that balancing is precisely the sort of decision that notice and comment was intended to help agencies analyze and resolve.

Under section 553.13 and section 553(b)(B) of the Administrative Procedure Act, 5 U.S.C. S 551(b)(B), NHTSA must provide notice of and an opportunity to comment on proposed rules unless the Administrator, "for good cause, finds that notice is impracticable, unnecessary, or contrary to the public interest ...." We are unable to make such a finding in this rulemaking proceeding. Courts have upheld agency actions bypassing the notice-and-comment requirement only under circumstances that are far more compelling than those which confront NHTSA and Philatron in this rulemaking.

The term "impracticable" is narrowly construed by the courts. The legislative history of the APA emphasizes that narrowness: "'Impracticable' means a situation in which the due and required execution of the agency functions would be unavoidably prevented by its undertaking public rulemaking procedures." S. Rep. No. 752, 79th Cong., 1st Sess. 16 (1945). The difficulty of showing impracticability is demonstrated by the fact that the existence of a near- term statutory or judicial deadline is not, by itself, sufficient to establish impracticability. U. S. Steel Corp. v. Environmental Protection Agency, 595

F.2d 207, 213 (5th Cir. 1979). An agency faced with such a deadline must go further and show that even had it acted diligently, there was insufficient time available to obtain public comment. The extent of the necessary showing is suggested in a case involving a different type of deadline. In that case, an agency was upheld after it adopted a last-minute temporary delay in the implementation of a new requirement without providing notice and comment. The agency was able to demonstrate that, despite its diligence in attempting to implement the requirement, it was forced to conclude shortly before the requirement's effective date that compliance by industry in general with the requirement was not yet feasible. Council of the Southern Mountains, Inc., v. Donovan, 653 F.2d 573 (D.C. Cir. 1981).

In the present situation, there is no showing that notice and comment would be impracticable. The oil resistance requirement has been a part of FMVSS No. 106 for many years. Pre-production testing by Philatron of its hose to determine whether there was sufficient basis to certify compliance with all applicable requirements should have revealed that there would be a compliance problem, and should have led Philatron to seek an amendment to the standard at that time.

"Unnecessary," as used in section 553, is confined to those situations in which the administrative rule is "a routine determination, "insignificant in nature and impact," and inconsequential "to the industry and to the public." Texaco, Inc. v. Federal Power Commission, 412 F.2d 740 (3rd Cir. 1969). It is clear that Philatron's requested amendment to FMVSS No. 106 is a significant matter that is important to the brake hose and motor vehicle industry. As you are aware, Philatron's petition for an inconsequentiality determination elicited a large and contentious response. Further, the issues in a rulemaking to amend the oil resistance requirement would not be limited, as they were in the inconsequentiality proceeding, to the safety significance of the failure of the hoses previously manufactured by Philatron to comply with that requirement. The agency would also have to address such issues as which applications of brake hose should be excluded from the oil resistance requirement, whether hoses so excluded should be subjected to a labelling requirement, and whether other requirements should be adopted in lieu of the oil resistance test. Therefore, we cannot conclude that notice and comment is "unnecessary."

Further, we cannot conclude that notice and comment would be "contrary to the public interest." According to the legislative history of the APA, "'Public interest' supplements the terms 'impracticable' or 'unnecessary;' it requires that public ride-making procedures shall not prevent an agency from operating, and that, on the other hand, lack of public interest in rule-making warrants an agency to dispense with public procedure." S. Rep. No. 752 at 16. The public interest exception only applies when the delay caused by notice and comment would cause real harm to the public, not mere inconvenience to the agency or members of the public.

NHTSA is aware of Philatron's assertion that if the standard is not amended promptly, the company will have to lay off workers. It is also aware of Philatron's claim about the performance of its hoses relative to the hoses of its competitors. However, the benefits and safety consequences of Philatron's hoses are not universally accepted. Based on the public response to the petition for an inconsequentiality determination, it is highly likely that there would be a similar outpouring of comments in response to a proposal to amend the oil resistance requirements as Philatron has suggested. Accordingly,

the agency is unable to conclude on the basis of the present record that the public interest warrants an immediate amendment of the standard.

In view of the foregoing, NHTSA will seek public comment on its impending proposal to amend FMVSS No. 106. Please be assured that the agency will take appropriate steps to complete this proceeding as quickly as possible.

Sincerely,

Paul Jackson Rice Chief Counsel, NHTSA