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12-00245._ITA_Defective_Tire_Exportation

Sarah L. Wilson

Covington & Burling LLP

1201 Pennsylvania Ave. N.W.

Washington, D.C. 20004-2401

 

Re: TREAD Act Provisions involving Defective Tires

 

Dear Ms. Wilson:

 

This letter responds to your January 19, 2012 letter on behalf of ITR USA, Inc. requesting an interpretation of certain provisions of the Transportation Recall Enhancement, Accountability, and Documentation Act, Pub. L. No. 106-414, 114 Stat. 1800 et. seq. (2000) (TREAD Act). You ask for clarification regarding two requirements under the TREAD Act: the requirement in Section 7 that directs tire manufacturers, which includes importers, conducting recalls to include in their remedy program plans addressing how to prevent replaced tires from being resold for installation on a motor vehicle and the prohibition in Section 8 that forbids the sale or lease of motor vehicle equipment (including tires), for installation on a motor vehicle, that is the subject of a recall. Sections 7 and 8 have been codified in 49 U.S.C. 30120(d) and (j), respectively.

 

You ask three questions: (1) Do 49 U.S.C. 30120(d) and (j) and 49 CFR 573.12 prohibit the export of recalled, defective or noncompliant tires for resale in foreign countries for use on a motor vehicle? (2) Must recalled tires be incapacitated pursuant to 49 U.S.C.

30120(d) and 49 CFR 573.6(c)(9)(ii)(A) by means of permanent physical alteration (e.g., by cutting a hole in their sidewalls) or would cosmetic alteration (e.g., removal of Department of Transportation identification numbers) be sufficient? And (3) May a manufacturer dispose of recalled tires pursuant to 49 U.S.C. 30120(d) and 49 CFR 573.6(c)(9)(iii) by exporting them for either vehicular or non-vehicular use?

 

A brief background on the National Traffic and Motor Vehicle Safety Act, as amended including by the TREAD Act (as amended, the Safety Act) will be helpful in understanding these TREAD Act requirements.

 

The TREAD Act and Regulation of Tire Recalls.

 

The Safety Act requires manufacturers to recall motor vehicles and motor vehicle equipment that do not comply with an applicable Federal motor vehicle safety standard (FMVSS) or contain a defect related to motor vehicle safety. See 49 U.S.C. 30118(c).


 

One part of a recall is the remedy program. See 49 U.S.C. 30120. Under the Safety Act, both the fabricating manufacturer and the importer of vehicles and equipment are responsible for implementing a recall. See 49 U.S.C. 30102(a)(5), 49 CFR 573.5.

 

Congress passed the TREAD Act in 2000, in part, as a reaction to congressional concerns related to tire recalls conducted by Bridgestone/Firestone, Inc. See 66 Fed. Reg. 65165 (Dec. 18, 2001). As reflected in your letter, the TREAD Act addresses the sale of recalled tires that are noncompliant or contain a safety-related defect. 49 U.S.C. 30120(j) prohibits the sale or lease of any motor vehicle equipment (including a tire) for installation on a motor vehicle, that is subject to a recall under 49 U.S.C. 30118(b) or (c) in a condition that the equipment may be reasonably used for its original purpose. There are two limited exceptions to this prohibition: (1) the defect or noncompliance is remedied as required by

30120 before delivery under the sale or lease, or (2) notification of the defect or noncompliance is required under 30118(b) but enforcement of the order is set aside in a civil action. 49 U.S.C. 30120(j)(1) and (2). In addition, 49 U.S.C. 30120(d) addresses remedies. It provides, in part: In the case of a remedy program involving the replacement of tires, the manufacturer shall include a plan addressing how to prevent, to the extent reasonably within the control of the manufacturer, replaced tires from being resold for installation on motor vehicles . . . .

 

The regulations implementing 49 U.S.C. 30120(d) address the sale of defective tires more particularly. 49 CFR 573.6(c)(9) specifies a number of requirements on a manufacturers remedy program for replacement of defective or noncompliant tires. To begin, the manufacturers plan must address how the manufacturer will assure that the entities replacing tires are aware of legal requirements. A manufacturer must notify its owned stores and distributors, as well as independent outlets that are authorized to replace the tires that are subject to the recall, about the ban on sales of new defective or noncompliant tires (49 CFR 573.11), the prohibition on the sale of new and used defective and noncompliant tires (49 CFR 573.12), and the duty to notify NHTSA of any sale of a new or used recalled tire for use on a motor vehicle (49 CFR 573.10). 49 CFR 573.6(c)(9)(i). In addition, the manufacturers remedy program must address how it will prevent, to the extent reasonably within its control, the recalled tires from being resold for installation on a motor vehicle. 573.6(c)(9)(ii). The plan must include written directions to alter the recalled tires permanently so that they cannot be used on a motor vehicle. See 573.6(c)(9)(ii)(A), (B) and (C).

 

In addition to preventing recalled tires from being installed on motor vehicles, the TREAD Act also sought to limit, to the extent reasonably within the control of the manufacturer, the disposal of recalled tires in landfills, particularly through shredding, crumbling, recycling, recovery, and other alternative-beneficial non-vehicular uses. See

49 U.S.C. 30120(d); 49 CFR 573.6(c)(9) (implementing regulations).

A.    Exporting recalled tires for use on a motor vehicle.

Your first question asks: Do 49 U.S.C. 30120(d) and (j) and 49 CFR 573.12 prohibit the export of recalled, defective or noncompliant tires for resale in foreign countries for use on a motor vehicle? As noted above, 49 U.S.C. 30120(j) explicitly prohibits the sale or lease of any motor vehicle equipment, including a tire, for installation on a motor vehicle that is subject to a recall. There are only two narrow exceptions, which arise if the defect or noncompliance is remedied or enforcement of the recall notice has been set aside in a civil action. 49 U.S.C. 30120(j)(1) and (2). Section 30120(j) clearly prohibits any sale or lease of a recalled tire, including an export that involves a sale, in a condition in which it can be used on a vehicle. In as much as this is a remedial provision, the term sale would be construed broadly.

 

NHTSAs multifaceted approach to implementing Section 30120(d) reflects the broad thrust of this program including the imperative of insuring that recalled tires do not end up being installed on vehicles. The manufacturers recall remedy plan must provide for incapacitation of the recalled tire. The plan must address how the manufacturer will prevent, to the extent reasonably within its control, replaced tires from being resold for installation on a motor vehicle. This includes written directions to manufacturer owned and controlled outlets to alter the recalled tires permanently so that they cannot be used on vehicles, including incapacitation of each recalled tire within 24 hours of receipt of the recalled tire at the outlet. In addition, written guidance is to be given to other outlets on how to alter the recalled tires promptly and permanently so that they cannot be used on vehicles. In the course of the rulemaking, NHTSA considered a petition for reconsideration to delete the requirement for prompt incapacitation of recalled tires. As the agency stated: For safety reasons, we have decided to retain a requirement for prompt incapacitation of returned recalled tires by retail outlets and others under the manufacturers control that receive such tires. 69 Fed. Reg. 50077, 50079 (Aug. 13, 2004). NHTSA explained: [w]e agree with [a commenter] that the best mechanism for ensuring that recalled tires are not reinstalled on vehicles (inadvertently or otherwise) is for prompt destruction of those tires. Id. at 50081.

 

Allowing a manufacturer to export recalled tires for resale in a foreign country would circumvent and undermine NHTSAs program, which implements 49 U.S.C. 30120(d) and (j). It would not ensure that recalled tires are not installed on vehicles. Unaltered defective tires exported by the manufacturer could be diverted to re-enter the stream of commerce or, if exported, could re-enter this country. Recalled tires would be resold for installation on a motor vehicle. Accordingly, the export of recalled defective or noncompliant tires for resale in foreign countries for use on a motor vehicle is prohibited by 49 U.S.C. 30120(d) and (j).

B.     Incapacitating tires by physical alteration.

Second, you ask whether recalled tires must be incapacitated pursuant to 49 U.S.C.

30120(d) and 49 CFR 573.6(c)(9)(ii)(A) by means of permanent physical alteration, or instead, whether cosmetic alteration is sufficient. As explained above, the TREAD Act requires manufacturers to develop a plan that addresses how they will prevent, within the extent reasonably within their control, recalled tires from being resold for installation on a motor vehicle. NHTSAs regulations require tire manufacturers to direct their owned and controlled outlets, and to provide written guidance to all other outlets, to alter or incapacitate the recalled tires promptly and permanently so that they cannot be used on vehicles. See 573.6(c)(9)(ii)(A)-B. Incapacitation in this context refers to the


 

destruction of those tires. 69 Fed. Reg. 50077, 50081 (Aug. 13, 2004). See also 66 Fed. Reg. at 65169 (alteration includes drilling substantial holes in the sidewalls, cutting the tire beads, or sawing the tires in half).

 

Cosmetic alterations, such as removing the DOT identification number, do not satisfy the agencys regulations. Cosmetic changes leave the tire functionally unchanged, allowing a recalled tire to be installed on a motor vehicle, whether inadvertently or otherwise. In addition, without identification numbers, potential dealers or purchasers may be unable to determine whether the tires were recalled. Accordingly, only functional incapacitation of unremedied recalled tires meets the requirements of 49 U.S.C. 30120(d) and 49 CFR 573.6(c)(9)(ii)(A).

C.    Disposal of recalled tires by exporting for either vehicular or non-vehicular use.

Last, you ask whether a manufacturer may dispose of recalled tires pursuant to 49 U.S.C. 30120(d) and 49 CFR 573.6(c)(9)(iii) by exporting them for either vehicular or non-vehicular use. As explained above, exporting unremedied recalled defective or noncompliant tires for resale in foreign countries for use on a motor vehicle in a condition that the tire may be reasonably used for its original purpose is prohibited by 49 U.S.C. 30120(d) and (j) and 49 CFR 573.6(c)(9)(iii). Similarly, this prohibition may not be circumvented by labeling such exportation of recalled tires that have not been incapacitated as disposal.

This prohibition on exporting tires that have not been incapacitated does not foreclose the disposal of incapacitated tires for non-vehicular use. For example, the incapacitated tires might be shredded and used in various ways. See 69 Fed. Reg. at 50082 ([T]he market conditions for recycling may change from time to time, and it would be inadvisable for us to advocate particular uses over others when those uses might become commercially infeasible, or when additional uses might subsequently be developed . . . . For these reasons, we are leaving the choice of beneficial non-vehicular reuse applications to manufacturers.). See also 66 Fed. Reg. at 65167 (discussing possible uses for scrap tires).

If you have questions regarding this matter, please contact Mr. Nicholas Englund, Litigation and Enforcement Attorney, the Office of Chief Counsel, at (202) 366-5263.

 

Sincerely,

 

 

 

 

O. Kevin Vincent

Chief Counsel

 

d: 10/3/12