James T. Pitts, Esq.
    Venable, Baetjer, Howard & Civiletti, LLP
    1201 New York Avenue, N.W., Suite 1000
    Washington, D.C. 20005-3917


    Dear Mr. Pitts:


    This is in reply to your letter of October 1, 2002, to Stephen R. Kratzke, Associate Administrator for Rulemaking.You wrote on behalf of your client, TBC Corporation ("TBC"), whose Director of Engineering and Quality Assurance, L. M. Hardy, was notified by Claude Harris, Director of Crash Avoidance Standards, NHTSA, on September 4, 2002, that its petition for an inconsequentiality determination was moot.The basis for this conclusion was that all the noncomplying tires covered by the petition remained in the possession of the company, and had not been distributed or sold.You have asked us to reconsider our position on the basis of alternative arguments that you presented.

    By way of background, paragraph S6.4 Treadwear indicators of 49 CFR 571.119, Motor Vehicle Safety Standard No. 119, "New Pneumatic Tires for Vehicles Other Than Passenger Cars," specifies that each tire to which the standard applies "shall have at least six treadwear indicators . . . ." TBC determined that certain of its tires had only five treadwear indicators.It then properly determined that this was a failure to comply with Standard No. 119, notified NHTSA as required by 49 CFR Part 573, and petitioned for a determination that the noncompliance was inconsequential to motor vehicle safety.As noted in the first paragraph, we considered the petition to be moot and further informed TBC that its noncompliant tires could not be legally sold (letter of Claude Harris, attached).

    In your first argument, you analogized to a 1979 case involving Vespa of America Corporation which had failed to provide a turn signal indicator on its motorcycles.We concurred with the company's argument that the rapid flashing of the front turn signal lamps to indicate a failure of the rear turn signal lamps was a functional equivalent of a turn signal indicator which would indicate a failure in the turn signal system (letter of Chief Counsel Frank Berndt, March 16, 1979).You have asked us to make a similar decision with respect to TBC's noncompliance.

    We have reviewed Mr. Berndt's letter.Significantly, Mr. Berndt stated that "we have determined that there is no failure to comply with the standard and your petition is moot." NHTSA's determination that there was no failure to comply with Standard No. 108 permitted Vespa to sell its complying motorcycles.With respect to TBC, we cannot make a determination that there was no failure to comply with Standard No. 119 on the basis of functional equivalence.The standard requires a minimum of six treadwear indicators.We cannot interpret this as meaning five treadwear indicators are the functional equivalent of "at least six treadwear indicators."

    In the alternative, you have presented your interpretations of 49 U.S.C. Sections 30112, 30118, and 30120.You asserted that "there is nothing in Section 30118(d)" or Section 30120. . . that requires that there be 'owners, purchasers, and dealers' as a prerequisite to an inconsequentiality determination." You concluded that "it is clear that NHTSA can make an 'inconsequential to safety determination' at a time when the noncomplying equipment is still in the hands of the manufacturer."You next argued that "The ability of the manufacturers to then sell that equipment turns on the language in section 30112(b)(2)(A), which excludes certain persons and equipment from the prohibitions in section 30112(a) relating to the sale of non-complying equipment." Specifically, you asserted that subsection (b)(2)(A) excludes persons exercising reasonable care who had no reason to know that the equipment "does not comply." You argued that "The exclusion, written in the present tense, does not assume that any of the actions prohibited in subsection (a) have already taken place. Otherwise, the exclusion would reference the lack of knowledge regarding the noncompliance of the equipment at the time the equipment was imported or sold, i.e., a past action, and not a present condition."You concluded that "TBC imported the tires in questions (sic) and had no reason to know then of their noncompliance.The equipment does not comply with an applicable standard.The exclusion from the flat prohibition of sale is thus satisfied and the tires can be sold without penalty if, and only if, NHTSA determines that the noncompliance is inconsequential to safety."

    The Motor Vehicle and School Bus Safety Amendments of 1974 amended the National Traffic and Motor Vehicle Safety Act of 1966 to add Section 157, Exemption for Inconsequential Defect or Failure to Comply (the Safety Act was recodified in 1994 and the provisions of Section 157 were divided between Section 30118(d), regarding notice, and Section 30120(h), regarding remedy.The 1974 Amendments required manufacturers of motor vehicles and motor vehicle equipment to remedy noncompliances and safety-related defects without charge.The obligation was absolute and Section 157 was added as a means of relieving manufacturers of the need to notify and remedy where noncompliances, such as those involving labels, and defects were inconsequential as they related to motor vehicle safety.The legislative history clearly indicates that this was the purpose of the inconsequentiality provisions:

      This section [157] enables a manufacturer to apply to the Secretary for an exemption from the obligation to give notice with respect to, or to remedy, a motor vehicle or item of motor vehicle equipment, which contains a defect relating to motor vehicle safety or which fails to comply with an applicable Federal motor vehicle safety standard. * * * Your Committee believes that this provision is a reasonable corollary to the new statutory obligation for manufacturer to remedy without charge. [H. Rep. 93-1191. 93d Cong. 2d Sess. 31 (1974)]

    We disagree with your analysis of Section 30112.Significantly, Section 157 referred only to relief from the notice and remedy provisions.It did not alter what is now Section 30112(a).Under Section 30112(a), sale of the noncomplying tires remains unlawful. We further read Section 30112 in context with Section 30165(a)(1).That section authorizes civil penalties for a person that violates Section 30112 (and other statutory provisions).TBC's importation of non-complying tires into the United States is a prima facie violation of Section 30112(a).However, if TBC can establish that, in the exercise of reasonable care, it did not know of the noncompliance at the time of importation, it will not be held to have violated Section 30112(a) for purposes of civil penalties.The existence of a reasonable care defense does not alter the fact that non-complying tires have been imported. If TBC then proceeds to engage in further violations of Section 30112(a), i.e., to "sell, offer for sale, introduce or deliver for introduction into interstate commerce" the defense of Section 30112(b)(2)(A) will no longer be available to it, and it will be liable for civil penalties under Section 30165.A determination that a noncompliance is inconsequential does not bring a noncompliant product into compliance, and such a determination is immaterial for purposes of knowing violations of Section 30112(a) (but an inconsequentiality determination would be relevant for the agency to weigh in determining the amount of a civil penalty for a violation of Section 30112(a), because the agency is required to consider the gravity of the violation that has occurred.See Section 30165(c)).

    For NHTSA to relieve a manufacturer of the obligation to notify owners, purchasers, and dealers when none of the noncomplying products have been delivered to them would be a meaningless exercise; under these circumstances the obligation does not arise in the first instance and the petition is moot. Similarly, the obligation to remedy under Section 30120 arises only when notification of a defect is required under Section 30118(c), and if this obligation is moot, so is the obligation to remedy.

    Sincerely,

    Jacqueline Glassman
    Chief Counsel

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