Robert E. Norton II, Esq.
Senior Staff Counsel
Office of the General Counsel
1000 Chrysler Drive
Auburn Hills, MI 48326-2766
Dear Mr. Norton:
This responds to your letter dated November 8, 2002, concerning the lease of specially ordered prototype vehicles to the United States Army Tank-Automotive and Armaments Command. In your letter you state that your company is entering into a contract to provide the vehicles for a military research program. The vehicles will be built in conformity with contractual specifications. It is our understanding that the vehicles will not be certified to the Federal Motor Vehicle Safety Standards (FMVSS). You further state that DaimlerChrysler will retain the title to the vehicles and lease them to the Army. You ask us to interpret 49 CFR 571.7(c), which provides that no Federal motor vehicle standard applies to a vehicle or item of equipment manufactured for, and sold directly to, the Armed Forces of the United States in conformity with contractual specifications, as applying to this lease arrangement.
It is our opinion that a transaction where a vehicle is manufactured for, and leased directly to, the Army in conformity with contractual specifications is tantamount to a sale directly to the Army for purposes of 571.7(c). We note that as a general matter, applicability of the FMVSS does not vary depending upon whether a vehicle is sold or leased to a consumer. That is, all FMVSS applicable to vehicles sold by manufacturers are also applicable to vehicles leased by manufacturers. Similarly, in applying 571.7(c), we see no reason to treat vehicles manufactured for, and leased to, the military differently from vehicles sold to the military.
Please be advised that upon the termination of this lease arrangement, DaimlerChrysler cannot sell these vehicles to the general public, unless they were originally certified to the FMVSS. If the vehicles were not originally certified to the
FMVSS, DaimlerChrysler will need to take the necessary steps to prevent the vehicles subsequent use on U.S. highways. For example, DaimlerChrysler may choose to destroy the vehicles, export the vehicles, or sell the vehicles to the military.
I hope this information is helpful. If you have any further questions, please feel free to contact George Feygin of my staff at 202-366-2992.
Senior Assistant Chief Counsel