Interpretation ID: nht90-1.37

TYPE: Interpretation-NHTSA

DATE: February 2, 1990

FROM: Philip A. Hutchinson, Jr. -- Vice President, Public Affairs, General Counsel & Secretary, Volkswagen of America, Inc.

TO: Jerry Ralph Curry -- Administrator, NHTSA

TITLE: Re CAFE Exemption Pursuant to 15 USC 2003(b)(3)

ATTACHMT: Attached to letter dated 10-1-90 from P.J. Rice to P.A. Hutchinson, Jr. (A36; CSA Sec. 503(b)(3))

TEXT:

This is to notify you that Volkswagen of America, Inc. (VWoA) is no longer manufacturing automobiles in the United States and that its exemption from 15 USC 2003(b)(1) granted on October 23, 1981 and published in 46 F.R. 54453 of November 2, 1981 has bec ome moot and is therefore effectively terminated.

On July 29, 1981 VWoA filed a petition pursuant to 15 USC 2003(b)(3)(A) seeking an exemption from the general statutory requirement that fuel economy ratings for imported passenger automobiles may not be averaged together with ratings from domestically m anufactured passenger automobiles for the purpose of determining compliance with the Motor Vehicle Information and Cost Savings Act, as amended. 15 USC 2003(b)(3)(B) authorizes exemptions to be granted for a period of five years or, at the request of th e manufacturer, such longer period as the agency may specify. VWoA requested that the exemption be granted indefinitely and the agency acceded to this request subject to its right to reconsider its action "should it appear that the exemption is no longer consistent with the purposes of the Act." (46 F.R. 54453)

VWoA sought an exemption of indefinite duration because it expected to maintain a domestic assembly facility indefinitely. The exemption was intended by VWoA to remove a possible disincentive associated with the expected increase in the domestic content in US produced passenger automobiles above 75% in the event VWoA imported and domestic passenger vehicle fleets were not capable separately to comply with CAFE standards.

The exemption was granted on October 23, 1981 and made effective beginning with the 1982 model year.

For model year 1982 VWoA distributed "imported" passenger vehicles only.

For model years 1983 through 1987 VWoA distributed both "imported" and "domestic" passenger automobiles as defined in 15 USC 2003(b)(1) and (b)(2)(E) and (F). The manufacture of "domestic" passenger automobiles within the meaning of the Act ended on Jun e 30, 1987. Effective July 14, 1988 VWoA shut down its entire production in the United States so that commencing with the 1988 model year only "imported" vehicles have been offered for sale in the United States by VWoA.

15 USC 2003(b)(3)(F) provides that "Notwithstanding section 2002(1) of this title, in the case of any model year for which an exemption under this subsection is effective for any manufacturer", the manufacturer may not earn or use any credit pursuant to 15 USC 2002(l)(1)(B) and 2002(l)(1)(C).

Since VWoA discontinued all vehicle assembly in the United States effective July 14, 1988, the exemption granted on October 23, 1981 should be deemed to have been mooted at least since July 1988. It should be noted, moreover, that the exemption has prod uced no "effect" on VWoA's status of compliance of its passenger vehicle fleet with CAFE requirements, i.e. has not been "effective for VWoA" within the meaning of Section 2003(b)(3)(F) and conferred no benefit on VWoA since June 30, 1987 when the last p assenger automobile with domestic content in excess of 75% was manufactured in the United States.

Based upon the facts set forth above, VWoA maintains that the prohibition against accumulation of fuel economy credits ended on June 30, 1987 but in no event later than July 14, 1988.

Please advise us of NHTSA's position on this matter. In the interest of certainty VWoA is interested in knowing the amount of credits which have accumulated in its account.

Thank you for your assistance.