Civil Penalty Procedures and Factors

Paul A. Hemmersbaugh
National Highway Traffic Safety Administration
September 21, 2015

[Federal Register Volume 80, Number 182 (Monday, September 21, 2015)]
[Proposed Rules]
[Pages 56944-56959]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-23164]


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DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

49 CFR Part 578

[Docket No. NHTSA-2015-0090]
RIN 2127-AL38


Civil Penalty Procedures and Factors

AGENCY: National Highway Traffic Safety Administration (NHTSA), 
Department of Transportation.

ACTION: Notice of proposed rulemaking (NPRM).

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SUMMARY: NHTSA is proposing a rule prescribing procedures for the 
assessment of civil penalties and for

[[Page 56945]]

interpreting the factors for determining the amount of a civil penalty 
or the amount of a compromise under the National Traffic and Motor 
Vehicle Safety Act (Safety Act), to implement the Moving Ahead for 
Progress in the 21st Century Act (MAP-21). MAP-21 states that the 
Secretary of Transportation shall determine the amount of civil penalty 
or compromise under the Safety Act. MAP-21 identifies mandatory factors 
that the Secretary must consider and discretionary factors for the 
Secretary to consider as appropriate in making such determinations. 
MAP-21 further directs NHTSA to issue a rule providing an 
interpretation of these penalty factors.
    NHTSA is also proposing to update our regulations to conform it to 
the statutory civil penalty maximums enacted in MAP-21, the increased 
penalties and damages for odometer fraud, and the statutory penalty for 
knowingly and willfully submitting materially false or misleading 
information to the Secretary after certifying the same information as 
accurate.

DATES: Submit comments on or before November 20, 2015.

ADDRESSES: You may submit comments to the docket number identified in 
the heading of this document by any of the following methods:
     Federal eRulemaking Portal: Go to http://www.regulations.gov. Follow the online instructions for submitting 
comments.
     Mail: Docket Management Facility, U.S. Department of 
Transportation, West Building, Ground Floor, Rm. W12-140, 1200 New 
Jersey Avenue SE., Washington, DC 20590.
     Hand Delivery or Courier: West Building Ground Floor, Room 
W12-140, 1200 New Jersey Avenue SE., between 9 a.m. and 5 p.m. Eastern 
Time, Monday through Friday, except Federal holidays.
     Fax: (202) 493-2251.
    Regardless of how you submit your comments, please be sure to 
mention the docket number of this document.
    You may call the Docket at 202-366-9322.
    Note that all comments received will be posted without change to 
http://www.regulations.gov, including any personal information 
provided. Please see the Privacy Act discussion below.
    Privacy Act: Anyone is able to search the electronic form of all 
comments received into any of our dockets by the name of the individual 
submitting the comment (or signing the comment, if submitted on behalf 
of an association, business, labor union, etc.). You may review DOT's 
complete Privacy Act Statement in the Federal Register published on 
April 11, 2000 (65 FR 19477-78).

FOR FURTHER INFORMATION CONTACT: Thomas Healy, Office of the Chief 
Counsel, NHTSA, 1200 New Jersey Ave. SE., West Building, W41-211, 
Washington, DC 20590. Telephone: (202) 366-2992 Fax: (202) 366-3820.

SUPPLEMENTARY INFORMATION:

I. Executive Summary
II. Civil Penalties under the Safety Act Prior to MAP-21
III. NHTSA's Proposed Procedures for Its Assessment of Civil 
Penalties under the Safety Act
    A. Initiation of the Proceeding by NHTSA
    B. Election of Process by the Respondent
    C. Administrative Appeal
    D. The Proposed Procedures Comport With Due Process
IV. NHTSA's Proposed Interpretation of the MAP-21 Civil Penalty 
Factors
    A. General Penalty Factors
    B. Discretionary Penalty Factors
V. Codification of Other MAP-21 Penalty Changes in 49 CFR part 578
VI. Rulemaking Analyses and Notices

I. Executive Summary

    The Moving Ahead for Progress in the 21st Century Act (MAP-21 or 
the Act) was signed into law on July 6, 2012 (Pub. L. 112-141). Section 
31203(a) of MAP-21 amends the civil penalty provision of the Safety 
Act, as amended and recodified, 49 U.S.C. chapter 301, by requiring the 
Secretary of Transportation to consider various factors in determining 
the amount of a civil penalty or compromise. This statutory language 
confirms that the Secretary has the power to assess civil penalties. 
The factors that the Secretary shall consider in determining the amount 
of civil penalty or compromise are codified in amendments to 49 U.S.C. 
30165(c). Section 31203(b) of MAP-21 requires the Secretary to issue a 
final rule, in accordance with 5 U.S.C. 553, providing an 
interpretation of the penalty factors set forth in MAP-21. Public Law 
112-141, section 31203, 126 Stat. 758 (2012). This NPRM proposes an 
interpretation of the civil penalty factors in 49 U.S.C. 30165(c) for 
NHTSA to consider in determining the amount of civil penalty or 
compromise and proposes procedures for NHTSA to assess civil penalties 
under a delegation from the Secretary, 49 CFR 1.95 and 1.81. The 
proposed procedure for assessing civil penalties and the proposed 
interpretation of the civil penalty factors is intended to apply only 
to matters falling under section 30165.
    This rulemaking also sets forth NHTSA's amendment of its penalty 
regulation, 49 CFR 578.6, to conform it to the statutory language and 
maximums enacted in MAP-21.

II. Civil Penalties Under the Safety Act Prior to MAP-21

    Prior to the enactment of MAP-21, 49 U.S.C. 30165(c) stated, ``In 
determining the amount of a civil penalty or compromise, the 
appropriateness of the penalty or compromise to the size of the 
business of the person charged and the gravity of the violation shall 
be considered.'' 49 U.S.C. 30165(c) (2011). The statute did not specify 
who would assess the civil penalties. However, the statute specifically 
stated that ``The Secretary of Transportation may compromise the amount 
of a civil penalty imposed under this section.'' 49 U.S.C. 30165(b)(1). 
Construing these provisions, NHTSA, through the authority delegated 
from the Secretary of Transportation pursuant to 49 CFR 1.50 (2011), 
compromised civil penalties, but did not assess them.
    NHTSA has in fact compromised, or settled, many civil penalty 
actions.\1\ However, if the action was not compromised, NHTSA had 
relied on the U.S. Department of Justice to initiate an action in U.S. 
District Court for the assessment of civil penalties.\2\
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    \1\ See, e.g., ``Civil Penalty Settlement Amounts,'' 1999-2012, 
at http://www.nhtsa.gov/Laws+&+Regulations/Civil_Penalties_1999-2012; ``Civil Penalty Settlement Amounts'' at http://www.nhtsa.gov/Laws+&+Regulations/Civil+Penalty+Settlement+Amounts.
    \2\ See, e.g., United States v. General Motors Corp., 385 
F.Supp. 598 (D.D.C. 1974), vacated and remanded by United States v. 
General Motors Corp., 527 F.2d 853 (D.C. Cir. 1975); United States 
v. General Motors Corp., 417 F.Supp. 933 (D.D.C. 1976), judgment 
remanded by United States v. GM, 565 F.2d 754 (D.C. Cir. 1977); and 
United States v. Snyder Computer Sys., Inc. dba Wildfire Motors, No. 
2:13-cv-311 (S.D. Ohio) (filed April 3, 2013).
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    Congress has revised the language in 49 U.S.C. 30165(c), which now 
states in part that ``In determining the amount of a civil penalty or 
compromise under this section, the Secretary of Transportation shall 
consider the nature, circumstances, extent, and gravity of the 
violation.'' The plain language of the statute indicates Congress' 
intent that the Secretary of Transportation is authorized to determine 
the amount of a civil penalty and to impose such penalty.
    NHTSA's reading of the statute, as amended, is supported by the 
legislative history. For example, on July 29, 2011, Senator Pryor 
introduced S. 1449, the Motor Vehicle and Highway Safety Improvement 
Act of 2011 (Mariah's Act). This bill contained language listing the 
factors that the Secretary of Transportation shall consider in 
determining the amount of civil penalty

[[Page 56946]]

or compromise.\3\ According to a Senate report, the provisions of S. 
1449 were enacted into law, with modifications, as title I of division 
C of the Moving Ahead for Progress in the 21st Century Act (MAP-21, 126 
Stat. 732), which was signed into law on July 6, 2012.\4\ The Report of 
the Senate Committee on Commerce, Science, and Transportation made 
clear that NHTSA was authorized to impose ``fines.'' For example, it 
stated, ``Before issuing a fine, the Secretary would be required to 
consider several relevant factors in setting the level of the fine, 
including the nature of the violation; the severity of the risk of 
injury; the actions taken by the person charged to identify, 
investigate, or mitigate the violation; the nature of the defect or 
noncompliance; and the size of the company.'' \5\ The use of the words 
``issuing a fine'' indicates that the monetary amount is due and owing 
to the public treasury. See, e.g., Black's Law Dictionary (10th ed. 
2014) (defining ``fine'' as ``[a] pecuniary criminal punishment or 
civil penalty payable to the public treasury.'').
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    \3\ Motor Vehicle and Highway Safety Improvement Act of 2011 or 
``Mariah's Act''. S. 1449, 112 Cong. (2011) at p. 65-66.
    \4\ U.S. Senate, Report of the Committee on Commerce, Science, 
and Transportation on S. 1449, S. Report No. 112-261 at 6-7.
    \5\ Id. at 14-15.
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    NHTSA historically has considered the gravity of the violation when 
compromising civil penalties. Consideration of the gravity of the 
violation has involved a variety of factors, depending on the case. The 
factors that have been important or germane have included the nature of 
the violation, the nature of a safety-related defect or noncompliance 
with Federal Motor Vehicle Safety Standards (``FMVSS''), the safety 
risk, the number of motor vehicles or items of motor vehicle equipment 
involved, the delay in submitting a defect and noncompliance 
information report, the information in the possession of the violator 
regarding the violation, other actions by the violator, and the 
relationship of the violation to the integrity and administration of 
the agency's programs.\6\
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    \6\ See, e.g., April 5, 2010 Demand Letter for TQ10-002 
available at ftp://ftp.nhtsa.dot.gov/TQ10-002/TQ10-002%20Resumes/TQ10-002%20Closing%20Resume/TQ10-002%20Sticky%20Pedal%20Demand%20Letter%204-5-10%20FINAL%20Signed.pdf 
(In discussing the gravity of Toyota's apparent violations as severe 
and potentially life-threatening, the agency stated, ``Toyota 
determined that the accelerator pedals installed on a significant 
number of vehicles sold and leased in the United States contained a 
safety-related defect as evidenced by, among other things, its 
issuance of a Technical Instruction and production improvement 
information on September 29, 2009, in 31 countries across Europe. 
Toyota knew or should have known that the same or substantially 
similar accelerator pedals were installed on approximately 2.3 
million vehicles sold or leased in the United States, and continued 
to sell and lease vehicles equipped with a defective accelerator 
pedal for months after this determination. Nonetheless, Toyota Motor 
Corporation affirmatively-and inexplicably-instructed Toyota Motor 
Engineering and Manufacturing North America, Inc. not to implement 
an Engineering Change Instruction in the U.S. market. Toyota gave 
this instruction despite the fact that it had issued similar or 
identical instructions in Canada and Europe and knew that the very 
same issues that prompted the European and Canadian actions existed 
on a significant number of vehicles in the United States. The result 
of these decisions by Toyota was to expose millions of American 
drivers, passengers and pedestrians to the dangers of driving with a 
defective accelerator pedal that could result, in Toyota's words, in 
`sticky accelerator pedals, sudden rpm increase and/or sudden 
vehicle acceleration.' '').
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    In the past, NHTSA also has considered the size of the violator 
when compromising civil penalties. With respect to civil penalties 
involving small businesses, among the factors that have been considered 
are the violator's ability to pay, including its ability to pay over 
time, and any effect on the violator's ability to continue to do 
business.

III. NHTSA's Proposed Procedures for Its Assessment of Civil Penalties 
Under the Safety Act

    MAP-21 vests authority, responsibility, and discretion in the 
Secretary to impose civil penalties for violations of the Safety Act 
and regulations thereunder. Pursuant to 49 CFR 1.95, this authority has 
been delegated to NHTSA. The amendments to MAP-21 providing the 
Secretary with the authority to assess civil penalties do not establish 
procedures for the assessment of those penalties. In order to ensure 
that NHTSA's assessment of civil penalties, as delegated to NHTSA by 
the Secretary, comports with the constitutional requirements of due 
process, NHTSA is proposing to adopt informal procedures to assess 
civil penalties pursuant to 49 U.S.C. 30165.\7\ These procedures 
include three options for the respondent \8\ to elect after NHTSA makes 
an initial demand for civil penalties: (1) Pay the demanded penalty; 
(2) provide an informal response, or (3) request a hearing.
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    \7\ NHTSA notes that the proposed procedures for assessing civil 
penalties in this NPRM do not, are not intended to, displace the 
agency's existing practice of compromising civil penalties. See, 
e.g., Consent Order Between NHTSA and FCA US LLC (July 24, 2015), 
available at http://www.safercar.gov/rs/chrysler/pdfs/FCA_Consent_Order.pdf ; Consent Order Between NHTSA and Forest 
River, Inc. (July 8, 2015), available at http://www.safercar.gov/staticfiles/safercar/pdf/Forest-River-consent-order.pdf; Consent 
Order Between NHTSA and Spartan Motors, Inc., available at http://www.safercar.gov/staticfiles/safercar/pdf/Spartan-consent-order.pdf 
(July 8, 2015).
    \8\ For the sake of consistence and clarity, we will refer to 
the person charged with liability for a civil penalty for a 
violation of the Safety Act or regulations as the ``respondent'' in 
this notice and in the proposed rule.
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    In developing the procedures for conducting a hearing to impose 
civil penalties, NHTSA considered its past practices with respect to 
civil penalty actions related to odometer fraud under 49 U.S.C. chapter 
327, proceedings under 49 CFR part 599, as well as its other procedures 
relating to making determinations related to violations of the Safety 
Act and the practices of other operating administrations of the 
Department of Transportation.
    The procedures for a hearing to assess civil penalties need not 
take all the formal trappings of a trial in a court of law. The Supreme 
Court has recognized that due process is flexible and that the 
procedural protections needed to ensure due process differ as the 
situation demands. See Mathews v. Eldridge, 424 U.S. 319, 334 (1976). 
An Agency has discretion to formulate its procedures. Vermont Yankee 
Nuclear Power Corp. v. Natural Resources Defense Council, Inc., 435 
U.S. 519, 524 (1978).
    NHTSA does not believe that a formal adjudication is required in 
order to impose civil penalties for a violation of the Safety Act or 
regulations thereunder. If Congress wanted a proceeding with a formal 
adjudication on the record, it would have made that intent clear. 
Indeed, in another statute administered by NHTSA, such a procedure is 
required to determine certain violations. See e.g. 49 U.S.C. 32911(a) 
(stating that ``The Secretary of Transportation shall conduct a 
proceeding, with an opportunity for a hearing on the record, to decide 
whether a person has committed a violation.''). As NHTSA does not 
believe that a formal adjudication falling within the purview of 
sections 5, 7, and 8 of the Administrative Procedure Act (5 U.S.C. 554, 
556, 557) is required, NHTSA is adopting informal procedures that 
provide respondents with administrative due process, that will allow 
for the efficient enforcement of statutes administered by NHTSA, and 
that will lead to the creation of a record in each individual 
proceeding that can form the basis for judicial review without a new 
trial of all the facts and issues in the district court. NHTSA 
anticipates that judicial review of orders assessing civil penalties 
issued pursuant to these procedures will consist of the ``arbitrary, 
capricious, an abuse of discretion, or otherwise not in

[[Page 56947]]

accordance with law'' standard prescribed by 5 U.S.C. 706(2)(A).

A. Initiation of the Proceeding by NHTSA

    Under the proposed procedures, NHTSA, through the Assistant Chief 
Counsel for Litigation and Enforcement, will begin a civil penalty 
proceeding by serving a notice of initial demand for civil penalties on 
a person (i.e. respondent) charging him or her with having violated one 
or more laws administered by NHTSA. This notice of initial demand for 
civil penalties will include a statement of the provision(s) which the 
respondent is believed to have violated as of the date of the initial 
demand for civil penalties; a statement of the factual allegations upon 
which the proposed civil penalty is being sought; notice of the maximum 
amount of civil penalty for which the respondent may be liable as of 
that date for the violations alleged; notice of the amount of the civil 
penalty proposed to be assessed; a description of the manner in which 
the respondent should make payment of any money to the United States; a 
statement of the respondent's right to present written explanations, 
information or any materials in answer to the charges or in mitigation 
of the penalty; and a statement of the respondent's right to request a 
hearing and the procedures for requesting a hearing. The notice will 
include a statement that failure: (i) To pay the amount of the civil 
penalty; (ii) to elect to provide an informal response; or (iii) to 
request a hearing within 30 days of the date of the initial demand 
authorizes the NHTSA Chief Counsel, without further notice to the 
respondent, to find the facts to be as alleged in the initial demand 
for civil penalties and to assess an appropriate civil penalty.
    The notice will also include documentation that the Assistant Chief 
Counsel for Litigation and Enforcement relied on to determine the 
alleged violations of a statute or regulation administered by NHTSA 
giving rise to liability for civil penalties or the amount of civil 
penalties in the initial demand.\9\ This notice may be amended at any 
time prior to the entry of an order assessing a civil penalty, 
including amendment to the amount of civil penalties demanded. The 
notice of initial demand for civil penalties may contain proposed civil 
penalties for multiple unrelated violations. The maximum civil penalty 
stated in the notice of initial demand for civil penalties will reflect 
whether the violations in the notice are related or unrelated.
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    \9\ This documentation may be redacted if permitted or required 
by Federal law.
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    NHTSA proposes that the Assistant Chief Counsel for Litigation and 
Enforcement or his or her designee serve the initial demand for civil 
penalties via U.S mail, overnight or express courier service, 
facsimile, electronic mail, or personally. NHTSA proposes that service 
of the initial demand for civil penalties or order by a person's duly 
authorized representative (including, but not limited to, a person's 
agent for accepting service designated pursuant to 49 CFR part 551) 
constitutes service upon that person.

B. Election of Process by the Respondent

    Within 30 calendar days of the date on which the initial demand for 
civil penalties is issued, the respondent must pay the amount of the 
civil penalty, elect to provide an informal response, or request a 
hearing. If the respondent does not pay the amount of the civil 
penalty, elect to provide an informal response, or request a hearing 
within the 30 day limit, NHTSA proposes to construe this as a waiver of 
the respondent's right to appear and contest the allegations. This 
would authorize the Chief Counsel, without further notice to the 
respondent, to find the facts to be as alleged in the initial demand 
for civil penalties and to assess an appropriate civil penalty.
1. Payment of the Civil Penalty Proposed
    The respondent may elect to pay the civil penalty that was proposed 
in the initial demand. If the respondent elects to make the payment, 
NHTSA will direct the respondent as to how to make the payment, 
including any installment plan permitted.
2. Election of Informal Response
    If the respondent to the initial demand for civil penalties elects 
to make an informal response, that person must submit to the Chief 
Counsel and to the Assistant Chief Counsel for Litigation and 
Enforcement in writing any arguments, views or supporting documentation 
that dispute or mitigate that person's liability for, or the amount of, 
civil penalties to be imposed. The respondent must submit these 
materials within 30 days of the date on which the initial demand for 
civil penalties is issued. A person who has elected to make an informal 
response to an initial demand for civil penalties may also request a 
conference with the Chief Counsel. Because traveling to the Department 
of Transportation's headquarters in Washington, DC may be burdensome 
for some smaller companies responding to an initial demand for civil 
penalties, we are proposing to allow a person responding to an initial 
demand for civil penalties to request that the conference with the 
Chief Counsel be conducted by telephone. If the respondent elects to 
request a conference with the Chief Counsel and fails to attend the 
conference without good cause shown, the Chief Counsel may, without 
further notice to the respondent, find the facts to be as alleged in 
the initial demand for civil penalties and assess an appropriate civil 
penalty. This decision will constitute final agency action and no 
appeal to the Administrator will be permitted.
    The Assistant Chief Counsel for Litigation and Enforcement would be 
permitted to provide rebuttal information to the Chief Counsel, 
replying to the information submitted by the respondent. After 
consideration of the submissions of the Assistant Chief Counsel and the 
Respondent, including any relevant information presented at a 
conference, the Chief Counsel may dismiss the initial demand for civil 
penalties in whole or in part. If the Chief Counsel does not dismiss 
the demand in its entirety, he or she may issue an order assessing a 
civil penalty. For civil penalty orders exceeding $1,000,000, the 
decision of the Chief Counsel becomes a final decision 20 days 
(including weekends and holidays) after it is issued unless the 
respondent files a timely appeal with the Administrator. If the 
respondent elects not to appeal to the Administrator within the 20-day 
period, then the Chief Counsel's decision is a final decision subject 
to judicial review. Civil penalty orders of $1,000,000 or less are 
final upon issuance by the Chief Counsel and subject to judicial review 
at that time.
    Any assessment of civil penalties will be made only after 
considering the nature, circumstances, extent and gravity of the 
violation. As appropriate, the determination will include consideration 
of the nature of the defect or noncompliance; knowledge by the 
respondent of its obligations under 49 U.S.C. chapter 301; the severity 
of the risk of injury posed by the defect or non-compliance; the 
occurrence or absence or injury; the number of motor vehicles or items 
of motor vehicle equipment distributed with the defect or 
noncompliance; actions taken by the respondent to identify, 
investigate, or mitigate the condition; the appropriateness of such 
penalty in relation to the size of the business of the respondent, 
including the potential for undue adverse economic impacts; and other 
relevant and appropriate factors.

[[Page 56948]]

    NHTSA intends for this informal response process to be less rigid 
than the procedures for conducting a hearing discussed below. For 
example, a respondent that elects an informal response would be 
permitted to bring in employees or other representatives (within 
reason) to explain facts and circumstances relating to the events 
described in the initial demand for civil penalties or any other 
factors that the respondent believes are relevant. A respondent may 
find it beneficial to be able to present the views of employees or 
representatives to the Chief Counsel in person, considering that if the 
respondent elects a hearing the presentation of witness testimony will 
be committed to the discretion of the Hearing Officer. Further, NHTSA 
envisions that any written materials that the respondent provides as 
part of an informal response would not have the formality of legal 
briefs submitted pursuant to the hearing procedures in this proposal 
and would allow for flexibility in the respondent's response. It is 
also NHTSA's intent that the conference between the Chief Counsel and 
the respondent consist of informal discussion and would not take on the 
structure of an adversarial proceeding.
3. Election of a Hearing
    If, in response to an initial demand for civil penalties, a person 
requests a hearing, the Chief Counsel will designate a Hearing Officer 
to preside over the hearing. The Hearing Officer appointed by the Chief 
Counsel may have no other responsibility, either direct or supervisory, 
for the investigation or enforcement of the violation for which the 
initial demand for civil penalties relates and will not have any prior 
connection to the case.
    The Hearing Officer will have the authority to conduct the 
proceeding and arrange for NHTSA and the person served with the initial 
demand for civil penalties to submit additional documents for the 
administrative record, regulate the course of the hearing, and take 
notice of matters that are not subject to a bona fide dispute and are 
commonly known in the community or are ascertainable from readily 
available sources of known accuracy.
    With respect to the type of hearing proposed, NHTSA believes that 
most civil penalty determinations can be made based solely on written 
submissions because in the vast majority of instances, the evidence to 
establish, or refute, a respondent's liability for civil penalties and 
facts for the application of the penalty factors will consist of 
documents. Therefore, we are proposing that the Hearing Officer will 
have the discretion to conduct an in-person hearing and allow witness 
testimony only if an in-person hearing is needed, in the opinion of the 
Hearing Officer, to resolve any factual and/or legal issues that cannot 
be easily resolved by written submissions.
    If the respondent elects to request a hearing, the respondent must 
submit to the Assistant Chief Counsel for Litigation and Enforcement 
two complete copies via hand delivery, use of an overnight or express 
courier service, facsimile, or electronic mail containing: (1) A 
detailed statement of factual and legal issues in dispute; and (2) all 
statements and documents supporting the respondent's case within 30 
days of the date on which the initial demand for civil penalties is 
issued. If the respondent wishes for the hearing to be conducted in-
person, the respondent must also submit the basis for its request for 
the in-person hearing (i.e. why an in-person hearing and witness 
testimony are necessary to resolve any factual or legal issues present 
in the case), a list of witnesses that the respondent wishes to call at 
the hearing, a description of each witness's expected testimony, a 
description of the factual basis for each witness's expected testimony, 
and whether the respondent will arrange to have a verbatim transcript 
prepared at its own expense.\10\ These materials must be provided 
within 30 days of the date on which the initial demand for civil 
penalties is issued. If an in-person hearing is requested, the Hearing 
Officer will notify the respondent and NHTSA in writing of his or her 
decision to grant or deny a request for an in-person hearing.
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    \10\ NHTSA has determined that in order to minimize the expense 
of conducting a hearing, a verbatim transcript of any in-person 
hearing will not normally be prepared. Any person requesting an in-
person hearing in response to an initial demand for civil penalties 
may arrange for a transcript to be created at its own expense if an 
in-person hearing is granted.
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    If an in-person hearing is granted and the respondent fails to 
attend the in-person hearing without good cause shown, the Hearing 
Officer is authorized, without further notice to the respondent, to 
find the facts as alleged in the initial demand for civil penalties and 
to assess an appropriate civil penalty. This decision will constitute 
final agency action and no appeal to the Administrator will be 
permitted.
    NHTSA may supplement the record with additional information, 
including disclosure of proposed witnesses and their expected 
testimony, prior to the hearing. A copy of such information will be 
provided to the respondent no later than 3 days before the hearing. 
These procedures allow the Hearing Officer to focus the inquiry at the 
hearing and eliminate the need for discovery because both the agency 
and respondent will be in possession of the documents on which the 
other party intends to rely and appraised of all expected witness 
testimony. Therefore, we propose that discovery not be permitted in any 
hearing conducted pursuant to these procedures.
    The administrative record of an in-person hearing shall contain the 
notice of initial demand for civil penalties and any supporting 
documentation that accompanied the initial demand; any documentation 
submitted by the respondent, any further documentation submitted by the 
Agency as a reply to the request for a hearing or presented at an in-
person hearing; any additional materials presented at an in-person 
hearing; the transcript of the hearing (if any); and any other 
materials that the Hearing Officer determines are relevant. In 
considering the admission of evidence into the administrative record, 
the Hearing Officer will not be bound by the Federal Rules of Evidence.
    In the event that the Hearing Officer determines that witness 
testimony is not necessary, the Assistant Chief Counsel for Litigation 
and Enforcement will submit a written reply with the agency's responses 
to the arguments and documents included in the respondent's request for 
a hearing. With respect to the administrative record where there is no 
in-person hearing, NHTSA proposes that all documents contained in and 
with its initial demand, any response thereto, or any reply 
automatically would be part of the administrative record. In 
considering the admission of evidence into the administrative record, 
the Hearing Officer will not be bound by the Federal Rules of Evidence.
    At the hearing, NHTSA will have the evidentiary burden of 
establishing the violation giving rise to civil penalties under 49 
U.S.C. 30165. In the event that the hearing is conducted by written 
submission, the Hearing Officer will make his or her decision based on 
NHTSA's initial demand for civil penalties and any included documents, 
the respondent's request for a hearing and any included documents, 
NHTSA's reply (including any documents) to the arguments and documents 
provided in the respondent's request for a hearing, and any other 
evidence in the record.
    In the event that the Hearing Officer grants an in-person hearing, 
NHTSA will first present any evidence the agency believes is relevant 
for the administrative record. If permitted by the Hearing Officer, 
NHTSA may call

[[Page 56949]]

witnesses. No later than three days prior to the hearing NHTSA will 
provide a list of witnesses that it expects to call at the hearing, a 
description of the witnesses' expected testimony and the factual basis 
for the expected testimony to the respondent. At the close of NHTSA's 
presentation of evidence, the respondent will have the right to respond 
to and rebut evidence and arguments presented by NHTSA. The respondent 
or his or her counsel may offer relevant information including 
testimony (if permitted) regarding the respondent's liability for civil 
penalties and the application of the penalty factors. At the close of 
the respondent's presentation of evidence, the Hearing Officer may 
allow the presentation of rebuttal evidence by NHTSA. The Hearing 
Officer, in his or her discretion, may allow the respondent to reply to 
any such rebuttal evidence submitted.
    In the event that the Hearing Officer grants an in-person hearing, 
the Assistant Chief Counsel for Litigation and Enforcement and the 
respondent may present arguments on the issues involved in the case 
after all the evidence has been presented.
    A respondent challenging the amount of a civil penalty proposed to 
be assessed will have the burden of proving the mitigating 
circumstances. For example, a respondent challenging the amount of a 
civil penalty on the grounds that the penalty would have an undue 
adverse economic impact would have the burden of proving that undue 
impact. It is appropriate that the burden is placed on the respondent 
as the respondent is more likely to have relevant financial evidence 
than NHTSA.
    After the hearing is completed, the Hearing Officer will issue a 
written decision based solely on the administrative record, including 
any testimony offered at an in-person hearing. Any assessment of civil 
penalties will be made only after considering the nature, 
circumstances, extent and gravity of the violation. As appropriate, the 
determination will include consideration of the nature of the defect or 
noncompliance, knowledge by the respondent of its obligations under 49 
U.S.C. chapter 301, the severity of the risk of injury, the occurrence 
or absence or injury, the number of motor vehicles or items of motor 
vehicle equipment distributed with the defect or noncompliance, actions 
taken by the respondent to identify, investigate, or mitigate the 
condition, the appropriateness of such penalty in relation to the size 
of the business of the respondent, including the potential for undue 
adverse economic impacts, and other relevant and appropriate factors, 
including those discussed below.
    For civil penalties exceeding $1,000,000, the decision of the 
Hearing Officer will become a final decision 20 calendar days 
(including weekends and holidays) after it is issued, unless the 
respondent files a timely appeal with the Administrator before the 
expiration of 20 days. If the respondent elects not to appeal to the 
Administrator within the 20-day period, then the Hearing Officer's 
decision is a final decision subject to judicial review. Civil penalty 
orders of $1,000,000 or less are final upon issuance by the Hearing 
Officer and subject to judicial review at that time.

C. Administrative Appeal

    In matters where the civil penalties assessed by either the Chief 
Counsel or the Hearing Officer exceed $1,000,000, the proposed 
regulations provide an opportunity for the respondent aggrieved by the 
order assessing a civil penalty to file an appeal with the 
Administrator.
    The Administrator will affirm the order unless the Administrator 
finds that the order was unsupported by the record as a whole; based on 
a mistake of law; or that new evidence, not available at the hearing, 
is available. Appeals that fail to allege and provide supporting basis 
for one of these grounds of appeal will be summarily dismissed. If the 
Administrator finds that the order was unsupported, based on a mistake 
of law, or that new evidence is available, then the Administrator may 
assess or modify a civil penalty; rescind the initial demand for civil 
penalty; or remand the case for new or additional proceedings. In the 
absence of a remand, the decision of the Administrator in an appeal is 
a final agency action.
    If the Administrator affirms the order assessing civil penalties 
and the respondent does not pay the civil penalty in the manner 
specified by the order within thirty (30) days after the 
Administrator's decision on appeal is issued, the matter may be 
referred to the Attorney General with a request that an action to 
collect the penalty be brought in the appropriate United States 
District Court pursuant to 49 U.S.C. 30163(c). See also 28 U.S.C. 1331. 
A party aggrieved by a final order from the Administrator or a final 
order from the Hearing Officer or Chief Counsel, may file a civil 
action in United States District Court seeking review of the final 
order pursuant to the Administrative Procedure Act. See 5 U.S.C. 706.

D. The Proposed Procedures Comport With Due Process

The proposed procedures for adjudicating civil penalties are consistent 
with the requirements for due process established by the U.S. Supreme 
Court in Mathews v. Eldridge. In that case the Court stated that three 
factors should be considered when determining what procedures must be 
provided before the government deprives a person of a property 
interest. The factors that the Court considers are:

the private interest that will be affected by the official action; . 
. . the risk of an erroneous deprivation of such interest through 
the procedures used, and the probable value, if any, of additional 
or substitute procedural safeguards; and . . . the Government's 
interest, including the function involved and the fiscal and 
administrative burdens that the additional or substitute procedural 
requirement would entail. See Eldridge, 424 U.S. at 335.

    In examining whether the private interest at stake requires 
additional procedural safeguards, the Supreme Court looks to the 
``degree of potential deprivation,'' and the gravity of the hardship 
borne by an entity wrongfully deprived of a property interest. See id. 
at 341, 343. In determining whether additional procedures would add to 
the fairness and reliability of the proceeding, the courts consider the 
nature of the issue at controversy. See id. Factors that the court 
considers include the nature of the evidence to be presented, such as 
whether the evidence consists mainly of documents or whether the 
resolution of the controversy hinges on the credibility of witness 
testimony. See id. at 343-44. When considering the government interest 
at stake, the courts examine the administrative burdens created by 
additional procedures and other societal costs that additional 
procedures would impose. See id. at 347.
    NHTSA believes that the private interest at stake in a proceeding 
to assess civil penalties, while substantial for some of the entities 
NHTSA regulates, does not rise to the level of hardship for which the 
Supreme Court has required heightened procedural protections.\11\ In 
many cases in which NHTSA has settled civil penalty liability with 
motor vehicle manufacturers, the total civil penalty amount was a small 
percentage of the

[[Page 56950]]

company's annual revenue.\12\ NHTSA will also apply its Civil Penalty 
Policy Under the Small Business Regulatory Enforcement Fairness Act 
when assessing a civil penalty against a small entity.\13\ As NHTSA 
considers a business' size in determining the penalty amount under this 
policy, the relative magnitude of the potential deprivation of the 
interest of smaller entities subject to civil penalties is 
minimized.\14\
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    \11\ See Goldberg v. Kelly, 397 U.S. 254 (1970) (holding that 
because the wrongful deprivation of a person's interest in welfare 
would deny the person of their means for subsistence, due process 
required a pre-termination evidentiary hearing).
    \12\ Compare Consent Order between NHTSA and General Motors Co. 
p. 4 (May 16, 2014) (agreeing to a civil penalty of $35 million and 
a penalty of $7,000 per day for failure to fully respond to a 
Special Order), available at http://www.nhtsa.gov/staticfiles/communications/pdf/May-16-2014-TQ14-001-Consent-Order.pdf, with 
General Motors Co., 2013 Annual Report p. 12 (2014) (showing $155 
billion in revenue for the 2013 Fiscal Year). Compare Consent Order 
between NHTSA and American Honda Motor Co. p. 5 (Dec. 29, 2014) 
(agreeing to a civil penalty of $70 million), available at http://www.nhtsa.gov/staticfiles/communications/pdf/Honda-consent-order-12292014.pdf, with Honda Motor Co., 2013 Annual Report p. 4 (2014) 
(showing $83 billion in revenue for the 2013 Fiscal Year). Cf. 
Consent Order between NHTSA and Ferrari S.p.A. and Ferrari North 
America p. 4 (agreeing to pay a civil penalty of $3.5 million), 
available at http://www.nhtsa.gov/staticfiles/communications/pdf/2014-10-31-Ferrari-Consent-Order.pdf.
    \13\ See NHTSA, Civil Penalty Policy Under the Small Business 
Regulatory Enforcement Fairness Act, 62 FR 37115 (July 10, 1997).
    \14\ See e.g. Settlement Agreement between NHTSA and Chapman 
Chevrolet LLC p. 2 (Oct. 1, 2014) (Chapman Chevrolet LLC agreed to 
pay a civil penalty of $50,000), available at http://www-odi.nhtsa.dot.gov/acms/cs/jaxrs/download/doc/UCM465636/INOT-AQ12002-60546.pdf; Settlement Agreement between NHTSA and Gwinnett Place 
Nissan p. 2 (Nov. 24, 2014) (Gwinnett Place Nissan agreed to pay a 
civil penalty of $110,000), available at http://www-odi.nhtsa.dot.gov/acms/cs/jaxrs/download/doc/UCM469202/INOT-AQ12003-61067.pdf; Consent Order between NHTSA and Ricon Corporation (Feb. 
6, 2015) (agreeing to pay a civil penalty of $1.75 million) 
available at http://www.nhtsa.gov/staticfiles/communications/pdf/Ricon-NHTSA-Consent-Order-02-2015.pdf.
---------------------------------------------------------------------------

    NHTSA does not believe that additional procedural safeguards beyond 
what are proposed in today's NPRM would add to the fairness and 
reliability of civil penalty determinations under the proposed 
procedures. NHTSA believes that most of the evidence regarding a 
person's liability for civil penalties will consist of documents such 
as test reports, documents submitted in compliance with 49 CFR part 579 
subpart C, Reporting of Early Warning Information; technical service 
bulletins and other notices submitted in compliance with 49 CFR 579.5, 
Notices, Bulletins, Customer Satisfaction Campaigns, Consumer 
Advisories and Other Communications; vehicle owner questionnaires 
submitted by consumers; and documents and responses submitted in 
response to Information Requests, General Orders, and Special Orders. 
This is the type of evidence for which witness demeanor and credibility 
is not at issue and a hearing conducted by written submission is 
appropriate. See Pinnacle Armor, Inc. v. United States, 648 F.3d 708, 
717 (9th Cir. 2011) (stating that, in the context of an administrative 
adjudication, documentary ``evidence lends itself to the kind of paper 
review a district court might engage in on a motion for summary 
judgment and does not require a full trial.''). In the rare instance in 
which liability for civil penalties hinges on issues that involve 
witness credibility, the Hearing Officer will have the discretion to 
permit witness testimony and cross examination.
    NHTSA also does not believe that additional procedures for 
conducting administrative discovery before the hearing would increase 
the reliability or fairness of a hearing to determine liability for 
civil penalties. See Eldridge, 424 U.S. at 343. Under the proposed 
hearing procedures, the Assistant Chief Counsel for Litigation and 
Enforcement must attach to the notice of initial demand for civil 
penalties any documentation that he or she relied on in determining an 
alleged violation of a statute or regulation that NHTSA contends gives 
rise to liability for civil penalties or the amount of civil penalties 
in the initial demand. If NHTSA later wishes to present materials not 
provided with the initial demand, NHTSA must provide these materials to 
the respondent. These procedures will ensure that the respondent 
receives all of the materials that the agency will rely on to establish 
a violation giving rise to civil penalties and to support its demanded 
amount.\15\ Furthermore, most of the materials relevant to the 
respondent's liability for civil penalties will have been obtained by 
NHTSA from the respondent in the first instance (either through the 
reporting requirements in 49 CFR part 579 or during the course of an 
investigation by the Agency), or will otherwise be publicly available. 
Therefore, we propose that discovery not be permitted in any hearing 
conducted pursuant to these procedures.
---------------------------------------------------------------------------

    \15\ NHTSA may rely on documents not provided to the respondent 
with the initial demand for civil penalties to rebut statements made 
on behalf of the respondent.
---------------------------------------------------------------------------

    Finally, the procedures for determining civil penalties proposed in 
today's NPRM will advance the government's interest in increasing the 
administrative efficiency of the resolution of civil penalty cases. The 
proposed procedures will also serve society's interests by allowing 
NHTSA to more efficiently and effectively enforce the Safety Act and 
regulations prescribed thereunder by allowing the Agency to assess 
civil penalties without protracted proceedings. Fair, timely, and 
efficient imposition of civil penalties on persons who violate the 
statutes administered by NHTSA and regulations prescribed thereunder 
should lead to greater compliance with those statutes and regulations.
    Moreover, a final order on civil penalties would be a final agency 
action subject to judicial review under the Administrative Procedure 
Act, 5 U.S.C. 701 et seq. A challenge to a NHTSA civil penalty final 
order could be brought in the appropriate United States district court 
and subject to all of the procedural rights and protections afforded by 
federal courts in reviewing final agency orders. See e.g. 49 U.S.C. 
30163(c), 28 U.S.C. 1331. We anticipate that the standard of review in 
the U.S. district court would be the ``arbitrary, capricious, an abuse 
of discretion, or otherwise not in accordance with law'' standard 
prescribed by 5 U.S.C. 706(2)(A).\16\
---------------------------------------------------------------------------

    \16\ The statute providing the Secretary the authority to assess 
civil penalties does not expressly state the standard of review for 
actions challenging an order assessing civil penalties. NHTSA 
believes that the ``arbitrary, capricious, an abuse of discretion, 
or otherwise not in accordance with law'' standard prescribed by 5 
U.S.C. 706(2)(A) would apply. See Snyder Computer Systems, Inc. v. 
U.S. Dep't of Transp., 13 F.Supp.3d 848, 859-60 (S.D. Ohio 2014) 
(stating that because the Safety Act did specify a standard of 
review for recall remedy orders, the arbitrary, capricious, an abuse 
of discretion, or otherwise not in accordance with law standard of 
reviewed applied).
---------------------------------------------------------------------------

    For these reasons NHTSA believes that the procedures in today's 
NPRM would provide due process to persons alleged to have violated the 
statutes or regulations administered by NHTSA and regulations 
prescribed thereunder.

IV. NHTSA's Proposed Interpretation of the MAP-21 Civil Penalty Factors

    The MAP-21 legislation sets forth civil penalty factors to be 
considered by NHTSA in determining the amount of a civil penalty or 
compromise. The general provision in the amended section 30165(c) calls 
for consideration of the nature, circumstances, extent and gravity of 
the violation. The term ``violation'' refers to any violation addressed 
by 49 U.S.C. 30165(a)(1), (2), (3), or (4). The Secretary has the 
discretion to consider the totality of the circumstances surrounding a 
violation. The Secretary also has the discretion to consider the 
factors in 30165(c)(1) through (9) as appropriate.
    Our proposed approach to interpreting the MAP-21 factors is

[[Page 56951]]

based on the language of the statute, informed NHTSA's years of day-to-
day enforcement experience, and the manner in which NHTSA has 
compromised penalties in the past. In this section, we begin with our 
proposed interpretation of the general penalty factors: the nature, 
circumstances, extent, and gravity of the violation. Then we provide 
our proposed interpretation for each of the nine discretionary penalty 
factors. For each of the nine discretionary penalty factors, we provide 
an explanation of NHTSA's proposed interpretation, which may include 
specific examples of how the interpretation may be applied in practice, 
and/or illustrative scenarios and issues.

A. General Penalty Factors

    First, we propose to interpret the nature of the violation to mean 
the essential, fundamental character or constitution of the 
violation.\17\ This includes, but is not limited to, the nature of the 
defect (in a case involving a safety-related defect) or noncompliance. 
It also includes what the violation involves, for example, a violation 
of the Early Warning Reporting (``EWR'') requirements, the failure to 
provide timely notification of a safety-related defect or 
noncompliance, the failure to remedy, the lack of a reasonable basis 
for certification to the FMVSS, the sale of unremedied vehicles, or the 
failure to respond fully and timely to a request issued under 49 U.S.C. 
30166.
---------------------------------------------------------------------------

    \17\ See e.g. Webster's Third New International Dictionary 
Unabridged, 1507 (defining nature as ``the essential character or 
constitution of something''); Black's Law Dictionary (10th ed. 2014) 
(defining nature as ``[a] fundamental quality that distinguishes one 
thing from another; the essence of something.'').
---------------------------------------------------------------------------

    Second, we propose to interpret the circumstances of the violation 
to mean the context, facts, and conditions having bearing on the 
violation.\18\ This would include whether the manufacturer has been 
recalcitrant or shown disregard for its obligations under the Safety 
Act.
---------------------------------------------------------------------------

    \18\ See e.g. Ehlert v. United States, 422 F.2d 332, 335 (9th 
Cir. 1970) (Duniway, J. concurring) (stating that Webster's New 
International Dictionary, 2d ed. defines ``circumstances'' as 
``conditions under which an act or event takes place or with respect 
to which a fact is determined.'').
---------------------------------------------------------------------------

    Third, we propose to interpret the extent of the violation to mean 
the range of inclusiveness over which the violation extends including 
the scope, time frame, and/or the degree of the violation.\19\ This 
includes the number of violations and whether the violations are 
related or unrelated.
---------------------------------------------------------------------------

    \19\ See e.g. Webster's Third New International Dictionary 
Unabridged, 805 (defining extent as the ``range (as of inclusiveness 
or application) over which something extends.'').
---------------------------------------------------------------------------

    Finally, we propose to interpret the gravity of the violation to 
mean the importance, significance, and/or seriousness of the 
violation.\20\
---------------------------------------------------------------------------

    \20\ See e.g. Black's Law Dictionary (10th ed. 2014) (defining 
``gravity'' as ``[s]eriousness of harm, an offense, etc., as judged 
from an objective, legal standpoint.''); Webster's Third New 
International Dictionary Unabridged, 993 (defining gravity as the 
importance, significance, or seriousness).
---------------------------------------------------------------------------

B. Discretionary Penalty Factors

    The penalty factors listed in 49 U.S.C. 30165(c)(1) through (9) are 
discretionary factors that NHTSA may apply in making civil penalty 
amount determinations and determining the amount of compromise.
1. The nature of the Defect or Noncompliance
    We propose to interpret ``the nature of the defect or 
noncompliance,'' 49 U.S.C. 30165(c)(1), to mean the essential, 
fundamental characteristic or constitution of the safety-related defect 
or noncompliance. This is consistent with the dictionary definition of 
``nature.'' \21\ ``Defect'' is defined at 49 U.S.C. 30102(a)(2) as 
including ``any defect in performance, construction, a component, or 
material or a motor vehicle or motor vehicle equipment.'' 
``Noncompliance'' under this statutory factor includes a noncompliance 
with an FMVSS, as well as other violations subject to penalties under 
49 U.S.C. 30165. Noncompliance may include, but is not limited to, 
noncompliance(s) with the FMVSS; the manufacture, sale, or importation 
of noncomplying motor vehicles and equipment or defective vehicles or 
equipment covered by a notice or order regarding the defect; failure to 
certify or have a reasonable basis to certify that a motor vehicle or 
item of motor vehicle equipment complies with applicable motor vehicle 
safety standards; failure to maintain records as required; failure to 
provide timely notification of defects and noncompliances with the 
FMVSS; failure to follow the notification procedures set forth in 49 
U.S.C. 30119 and regulations prescribed thereunder; failure to remedy 
defects and noncompliances pursuant to 49 U.S.C. 30120 and regulations 
prescribed thereunder; making safety devices and elements inoperative; 
failure to comply with regulations relating to school buses and school 
bus equipment; failure to comply with Early Warning Reporting 
requirements; and/or the failure to respond to an information request, 
Special Order, General Order, subpoena or other required reports.\22\
---------------------------------------------------------------------------

    \21\ See e.g. Webster's Third New International Dictionary 
Unabridged, 1507 (defining nature as ``the essential character or 
constitution of something''); Black's Law Dictionary (9th ed. 2009) 
(defining nature as ``[a] fundamental quality that distinguishes one 
thing from another; the essence of something.'').
    \22\ The foregoing list is intended to be illustrative only, and 
is not exhaustive.
---------------------------------------------------------------------------

    When considering the nature of a safety-related defect or 
noncompliance with an FMVSS, NHTSA may examine the conditions or 
circumstances under which the defect or noncompliance arises, the 
performance problem, and actual and probable consequences of the defect 
or noncompliance. When considering the nature of the noncompliance with 
the Safety Act or a regulation promulgated thereunder, NHTSA may 
examine the circumstances surrounding the violation.
    For example, NHTSA has a process by which a manufacturer can 
petition for an exemption from the notification and remedy requirements 
of 49 U.S.C. 30118 and 30120 on the basis that a noncompliance is 
inconsequential to motor vehicle safety. 49 U.S.C. 30118(d) and 
30120(h), 49 CFR part 556. If a petition for inconsequential 
noncompliance is granted, then it could serve as mitigation under this 
factor.
    When considering the nature of the noncompliance with the Safety 
Act or a regulation promulgated thereunder, NHTSA also may examine the 
circumstances surrounding the violation.
2. Knowledge by the Respondent of Its Obligations Under This Chapter
    We propose to interpret the ``knowledge by the . . . [respondent] 
of its obligations under this chapter,'' 49 U.S.C. 30165(c)(2), as all 
knowledge, legal and factual, actual, presumed and constructive, of the 
respondent of its obligations under 49 U.S.C. chapter 301. We propose 
that if a respondent is other than an individual, including but not 
limited to a corporation or a partnership, then the knowledge of an 
employee or employees of that non-natural person be imputed to that 
non-natural person. We propose to interpret the knowledge of an agent 
as being imputed to a principal. We propose that a non-natural person, 
such as a corporation, with multiple employees will be charged with the 
knowledge of each employee, regardless of whether the employees have 
communicated that knowledge among each other or to a decision maker for 
the non-natural person.
    Under this proposed interpretation of ``knowledge,'' delays 
resulting from or caused by a manufacturer's internal

[[Page 56952]]

reporting processes would not excuse a manufacturer's failure to report 
a defect or noncompliance to NHTSA. Further, NHTSA may examine the 
actions of a respondent in assessing or imputing knowledge. For 
instance, NHTSA may examine such factors as whether the respondent is a 
new manufacturer or whether the respondent began producing parts to 
remedy a particular defect or noncompliance with an FMVSS prior to 
reporting the defect or noncompliance with an FMVSS to NHTSA. NHTSA may 
also consider communication between the respondent (e.g. a 
manufacturer) and other entities such as dealers and owners in 
determining its knowledge of a violation. NHTSA may consider the 
information NHTSA provided to the respondent, including notification of 
apparent noncompliance, information on the recall process, information 
on governing regulations, and information on consequences of failure to 
comply with regulatory requirements. NHTSA may also consider whether 
the respondent has been proactive in discerning other potential safety 
issues, and whether it has attempted to mislead the agency or conceal 
its full information, including its knowledge of a defect or 
noncompliance.
3. The Severity of the Risk of Injury
    We propose to interpret the ``severity of the risk of injury,'' 49 
U.S.C. 30165(c)(3), as the gravity of exposure to potential injury, 
including the potential for injury or death of drivers, passengers, 
other motorists, pedestrians and others. The severity of the risk 
includes the likelihood of an injury occurring and the population group 
exposed.
    The severity of the risk of injury may depend on the component of a 
motor vehicle that is defective or noncompliant with an FMVSS. For 
example, a defective steering component or airbag system may pose a 
more severe risk of injury than a defective door handle. A grant of a 
petition for inconsequential noncompliance could serve as a mitigation 
under this penalty factor.
4. The Occurrence or Absence of Injury
    We propose to interpret ``the occurrence or absence of injury,'' 49 
U.S.C. 30165(c)(4), as whether injuries or deaths have occurred as a 
result of a defect, noncompliance, or other violation of the Safety Act 
or implementing regulations. NHTSA may also take into consideration 
allegations of death or injury.
    In evaluating this factor, it is important to emphasize that the 
absence of deaths or injuries is not dispositive of the existence of a 
defect or noncompliance or a person's liability for civil penalties.
5. The Number of Motor Vehicles or Items of Motor Vehicle Equipment 
Distributed With the Defect or Noncompliance
    We propose to interpret ``the number of motor vehicles or items of 
motor vehicle equipment distributed with the defect or noncompliance,'' 
49 U.S.C. 30165(c)(5), as referring to the total number of vehicles or 
items of motor vehicle equipment distributed with the defect or 
noncompliance with an FMVSS, or the percentage of the vehicles or items 
of motor vehicle equipment of the subject population with the defect or 
noncompliance with an FMVSS. That is, NHTSA may look not only at 
absolute numbers of motor vehicles or items of motor vehicle equipment; 
rather it may also take into account the portion of a vehicle or 
equipment population with the defect, noncompliance, or other 
violation. NHTSA may also consider the percentage of motor vehicles 
that contain the defect or noncompliance with an FMVSS as a percentage 
of the manufacturer's total annual production of vehicles if multiple 
make, model and model years of motor vehicles are affected by the 
defect or noncompliance with an FMVSS.
    Further, NHTSA may choose to make a distinction between those 
defective or noncompliant products distributed in commerce that 
consumers received, and those defective or noncompliant products 
distributed in commerce that consumers have not received.
6. Actions Taken by the Respondent To Identify, Investigate, or 
Mitigate the Condition
    We propose to interpret ``actions taken by the . . . [respondent] 
to identify, investigate, or mitigate the condition,'' 49 U.S.C. 
30165(c)(6), as actions actually taken, the time frame when those 
actions were taken, what those actions involved and how they 
ameliorated or otherwise related to the condition, what remained after 
those actions were taken, and the speed with which the actions were 
taken. We propose that in assessing actions, a failure to act may also 
be considered.
    For example, under this factor, NHTSA may consider whether the 
respondent has been diligent in endeavoring to meet the requirements of 
the Safety Act and regulations thereunder, including whether it has set 
up processes to facilitate timely and accurate reporting, and whether 
it has audited such systems. NHTSA may also consider the measures taken 
by the respondent to proactively bring potential issues to NHTSA's 
attention, including whether the respondent timely informed NHTSA of 
potential violations of Safety Act requirements. NHTSA may also take 
into account the investigative activities the respondent has undertaken 
relating to the scope of the issues identified by NHTSA. NHTSA may also 
consider whether the respondent delayed in reporting a safety-related 
defect or a noncompliance with an FMVSS (a person is required to file a 
49 CFR part 573 report not more than five working days after a person 
knew or should have known of the safety-related defect or noncompliance 
with an FMVSS). NHTSA may also consider whether the respondent remedied 
the safety-related defect or noncompliance with an FMVSS in a timely 
manner. For instance, NHTSA may consider whether a recall remedy is 
adequate, whether a new safety-related defect or noncompliance with an 
FMVSS arose from an inadequate recall remedy, and whether the scope of 
a recall was adequate. NHTSA may also consider the timeliness and 
adequacy of the respondent's communications with owners and dealers.
7. The Appropriateness of Such Penalty in Relation to the Size of the 
Business of the Respondent, Including the Potential for Undue Adverse 
Economic Impacts
    NHTSA takes the Small Business Regulatory Enforcement Fairness Act 
of 1996 (SBREFA) into account prior to setting any final penalty 
amount.\23\ This policy will continue in light of the MAP-21 amendments 
to 49 U.S.C. 30165(c).
---------------------------------------------------------------------------

    \23\ See NHTSA, Civil Penalty Policy Under the Small Business 
Regulatory Enforcement Fairness Act, 62 FR 37115 (July 10, 1997).
---------------------------------------------------------------------------

    Upon a showing by a violator that it is a small entity, NHTSA will 
make appropriate adjustments to the proposed penalty or settlement 
amount (although certain exceptions may apply).\24\ If the respondent 
wants to assert it is a ``small business,'' NHTSA expects the 
respondent to provide the supporting documentation. Under the Small 
Business Administration's standards, an entity is considered ``small'' 
if it is independently owned and operated and is not dominant in its 
field of operation,\25\ or if its number of employees or the dollar 
volume of its business does not exceed specific thresholds.\26\ For 
example, 13 CFR

[[Page 56953]]

Section 121.201 specifically identifies as ``small entities'' 
manufacturers of motor vehicles, passenger car bodies, and motor homes 
that employ 1,000 people or less, manufacturers of motor vehicle parts 
and accessories that employ 750 people or less, automobile and tire 
wholesalers that employ 100 people or less, new car dealers that employ 
200 people or less and automotive parts and accessory stores with 
annual receipts less than $15 million.
---------------------------------------------------------------------------

    \24\ Id. at 37117.
    \25\ Id. at 37115.
    \26\ Id.
---------------------------------------------------------------------------

    NHTSA interprets ``potential for undue adverse economic impacts,'' 
49 U.S.C. 30165(c)(7), as the possibility that payment of a civil 
penalty amount would affect the ability of the respondent to continue 
to operate. NHTSA may consider a respondent's ability to pay, including 
in installments over time, and any effect of a penalty on that person's 
ability to continue to do business. The ability of a business to pay a 
penalty is not dictated by its size. In some cases for small 
businesses, however, these two considerations may relate to one 
another. NHTSA may consider relevant financial factors such as 
capitalization, liquidity, solvency, and profitability to determine a 
small business' ability to pay a penalty. NHTSA may also consider 
whether the business has been deliberately undercapitalized. The burden 
to present sufficient evidence relating to a charged business' size and 
ability to pay rests on that business. More generally, in cases where 
the respondent claims that it is financially unable to pay the civil 
penalty or that the penalty would have undue adverse economic impacts, 
the burden of proof is on the respondent. In the case of closely-held 
or privately-held companies, NHTSA may provide the respondent the 
opportunity to submit personal financial documentation for 
consideration.
8. Whether the Respondent has Been Assessed Civil Penalties Under This 
Section During the Most Recent 5 Years
    We propose to interpret ``whether the [respondent] has been 
assessed civil penalties under this section during the most recent 5 
years,'' 49 U.S.C. 30165(c)(8), as including an assessment of civil 
penalties, a settlement agreement containing a penalty, or a consent 
order or a lawsuit involving a penalty or payment of a civil penalty in 
the most recent 5 years from the date of the alleged violation, 
regardless of whether there was any admission of a violation or of 
liability under 49 U.S.C. 30165.
9. Other Appropriate Factors
    We propose to interpret other appropriate factors as factors not 
specifically identified in Section 31203(a) of MAP-21 which are 
appropriately considered, including both aggravating and mitigating 
factors.
    Such factors may include, but are not limited to:
    a. A history of violations. NHTSA may increase penalties for 
repeated violations of the Safety Act or implementing regulations, or 
for a pattern or practice of violations.
    b. An economic gain from the violation. NHTSA may consider whether 
the respondent benefitted economically from a violation, including a 
delay in complying with the Safety Act, a failure to comply with the 
Safety Act, or a delay or failure to comply with the regulations 
thereunder.
    c. Effect of the respondent's conduct on the integrity of programs 
administered by NHTSA. The Agency's programs depend in large part on 
timely and accurate reporting and certification by manufacturers. 
Therefore, NHTSA may consider whether a person has been forthright with 
the Agency. NHTSA may also consider whether a person has attempted to 
mislead the Agency or conceal relevant information. For instance, NHTSA 
may consider whether a manufacturer has provided accurate and timely 
statements consistent with its Early Warning Reporting obligations. 
NHTSA may also consider whether a registered importer has provided 
accurate conformity packages and/or other information consistent with 
49 U.S.C. 30141-30147 and the implementing regulations.
    d. Responding to requests for information or remedial action. NHTSA 
may consider a person's failure to respond in a timely and complete 
fashion to requests from NHTSA for information or for remedial action. 
NHTSA may also consider whether the agency needed to make multiple 
requests to receive requested information.

V. Codification of Other MAP-21 Penalty Changes in 49 CFR Part 578

    MAP-21 increased the maximum penalties under the Safety Act, 49 
U.S.C. 30165(a)(1), (3) to $35,000,000. MAP-21 31203(a), 126 Stat. 758. 
It also increased the penalties and damages for odometer fraud. MAP-21 
31206, 126 Stat. 761. MAP-21 also established civil penalties for 
violations of corporate responsibility provisions in 49 U.S.C. 30166 of 
$5,000 per day and a maximum penalty of $1,000,000. MAP-21 31304(b), 
126 Stat. 764. These new penalties and increased penalties and damages 
are all currently in effect. NHTSA intends to amend its penalty 
regulation, 49 CFR 578.6, to conform it to MAP-21 amendments.
    Where changes to provisions, penalties and damages are made by 
statute, NHTSA may amend its penalty regulation, 49 CFR 578.6, without 
notice and comment, effective the date of the statutory amendment. See 
e.g., 65 FR 68108-68110 (Nov. 14, 2000). While notice is not required, 
this provides notice of NHTSA's intention to amend its penalty 
regulations to conform to the statutory changes made by MAP-21.

VI. Rulemaking Analyses and Notices

Executive Order 12866, Executive Order 13563, and DOT Regulatory 
Policies and Procedures

    NHTSA has considered the impact of this rulemaking action under 
Executive Order 12866, Executive Order 13563, and the Department of 
Transportation's regulatory policies and procedures. This rulemaking 
document was not reviewed under Executive Order 12866 or Executive 
Order 13563. This action would establish procedures for NHTSA to follow 
when assessing civil penalties and state how NHTSA would apply the 
civil penalty factors in 49 U.S.C. 30165. Because this rulemaking only 
seeks to explain and streamline the process by which the agency 
determines and resolves civil penalties and does not change the number 
of entities subject to civil penalties or the amount of civil 
penalties,\27\ the impacts of the rule are limited. Therefore, this 
rulemaking has been determined to be not ``significant'' under the 
Department of Transportation's regulatory policies and procedures and 
the policies of the Office of Management and Budget.
---------------------------------------------------------------------------

    \27\ MAP-21 increased the amount of civil penalties for a 
related series of violations of the Vehicle Safety Act to 
$35,000,000. The proposed revisions to the to the civil penalty 
amounts in this rulemaking merely update 49 CFR 578.6 to reflect the 
maximum civil penalty already in effect and therefore do not 
increase the maximum penalty that NHTSA may seek for violations of 
the Safety Act or implementing regulations.
---------------------------------------------------------------------------

Regulatory Flexibility Act

    We have also considered the impacts of this notice under the 
Regulatory Flexibility Act. I certify that this rule is not expected to 
have a significant economic impact on a substantial number of small 
entities. The following provides the factual basis for this 
certification under 5 U.S.C. 605(b). The amendments almost entirely 
affect manufacturers of motor vehicles and motor vehicle equipment.

[[Page 56954]]

    SBA uses size standards based on the North American Industry 
Classification System (``NAICS''), Subsector 336--Transportation 
Equipment Manufacturing, which provides a small business size standard 
of 1,000 employees or fewer for automobile manufacturing businesses. 
Other motor vehicle-related industries have lower size requirements 
that range between 100 and 750 employees.
    For example, according to the SBA coding system, businesses that 
manufacture truck trailers, travel trailers/campers, and vehicular 
lighting equipment, qualify as small businesses if they employ 500 or 
fewer employees. Many small businesses are subject to the penalty 
provisions of 49 U.S.C. 30165 and therefore may be affected by the 
procedures for assessing civil penalties and the civil penalty factors 
in this NPRM. The impacts of this rulemaking on small businesses are 
minimal, as NHTSA will continue to consider the Small Business 
Regulatory Enforcement Fairness Act of 1996 (SBREFA).\28\
---------------------------------------------------------------------------

    \28\ See NHTSA, Civil Penalty Policy under the Small Business 
Regulatory Enforcement Fairness Act, 62 FR 37115 (July 10, 1997).
---------------------------------------------------------------------------

Small Business Regulatory Enforcement Fairness Act (SBREFA)

    This NPRM would not materially affect our civil penalty policy 
toward small businesses. Because NHTSA will continue to consider SBREFA 
and consider the business' size including the potential that a civil 
penalty would have undue adverse economic impacts on a small business 
before assessing a civil penalty, the impacts of this rulemaking on 
small businesses are minimal.

Executive Order 13132 (Federalism)

    Executive Order 13132 requires NHTSA to develop an accountable 
process to ensure ``meaningful and timely input by State and local 
officials in the development of regulatory policies that have 
federalism implications.'' ``Policies that have federalism 
implications'' is defined in the Executive Order to include regulations 
that have ``substantial direct effects on the States, on the 
relationship between the national government and the States, or on the 
distribution of power and responsibilities among the various levels of 
government.'' Under Executive Order 13132, the agency may not issue a 
regulation with Federalism implications, that imposes substantial 
direct compliance costs, and that is not required by statute, unless 
the Federal government provides the funds necessary to pay the direct 
compliance costs incurred by State and local governments, the agency 
consults with State and local governments, or the agency consults with 
State and local officials early in the process of developing the 
proposed regulation.
    This NPRM would not have substantial direct effects on the States, 
on the relationship between the national government and the States, or 
on the distribution of power and responsibilities among the various 
levels of government, as specified in Executive Order 13132.
    This proposed rule generally would apply to private motor vehicle 
and motor vehicle equipment manufacturers (including importers), 
entities that sell motor vehicles and equipment and motor vehicle 
repair businesses. Thus, Executive Order 13132 is not implicated and 
consultation with State and local officials is not required.

Unfunded Mandates Reform Act of 1995

    The Unfunded Mandates Reform Act of 1995, Public Law 104-4, 
requires agencies to prepare a written assessment of the cost, benefits 
and other effects of proposed or final rules that include a Federal 
mandate likely to result in the expenditure by State, local, or tribal 
governments, in the aggregate, or by the private sector, of more than 
$100 million annually. Because this rulemaking would not have a $100 
million effect, no Unfunded Mandates assessment will be prepared.

Executive Order 12988 (Civil Justice Reform)

    With respect to the review of the promulgation of a new regulation, 
section 3(b) of Executive Order 12988, ``Civil Justice Reform'' (61 FR 
4729; Feb. 7, 1996), requires that Executive agencies make every 
reasonable effort to ensure that the regulation: (1) Clearly specifies 
the preemptive effect; (2) clearly specifies the effect on existing 
Federal law or regulation; (3) provides a clear legal standard for 
affected conduct, while promoting simplification and burden reduction; 
(4) clearly specifies the retroactive effect, if any; (5) specifies 
whether administrative proceedings are to be required before parties 
file suit in court; (6) adequately defines key terms; and (7) addresses 
other important issues affecting clarity and general draftsmanship 
under any guidelines issued by the Attorney General. This document is 
consistent with that requirement.
    Pursuant to this Order, NHTSA notes as follows: This proposed rule 
would establish procedures for NHTSA to follow in assessing civil 
penalties pursuant to 49 U.S.C. 30165 under delegation from the 
Secretary of Transportation. The proposed rule clearly identifies the 
section of the Safety Act or regulation thereunder that, if violated, 
would subject a person to a demand for civil penalties pursuant to the 
procedures in this NPRM. This proposed rule also lists the mandatory 
and discretionary factors for NHTSA to consider when assessing civil 
penalties. The rule would not have retroactive effect.

Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1980, we state 
that there are no requirements for information collection associated 
with this rulemaking action.

Regulatory Identifier Number (RIN)

    The Department of Transportation assigns a regulation identifier 
number (RIN) to each regulatory action listed in the Unified Agenda of 
Federal Regulations. The Regulatory Information Service Center 
publishes the Unified Agenda in April and October of each year. You may 
use the RIN contained in the heading at the beginning of this document 
to find this action in the Unified Agenda.

Privacy Act

    Anyone is able to search the electronic form of all comments 
received into any of our dockets by the name of the individual 
submitting the comment (or signing the comment, if submitted on behalf 
of an association, business, labor union, etc.). You may review DOT's 
complete Privacy Act Statement in the Federal Register published on 
April 11, 2000 (65 FR 19477-78).

List of Subjects in 49 CFR Part 578

    Administrative practice and procedure, Civil and criminal 
penalties, Civil penalty factors, Imports, Motor vehicle safety, Motor 
vehicles, Rubber and rubber products, Tires.

Proposed Regulatory Text

    For the reasons set forth in the preamble, NHTSA proposes to amend 
49 CFR part 578 as follows:

PART 578--CIVIL AND CRIMINAL PENALTIES

0
1. The authority citation for part 578 is revised to read as follows:

    Authority: Pub. L. 101-410, Pub. L. 104-134, Pub. L. 112-141, 49 
U.S.C. 322, 30165, 30170, 30505, 32308, 32309, 32507, 32709, 32710, 
32902, 32912, and 33115 as amended; delegation of authority at 49 
CFR 1.81 and 1.95.
0
2. Revise Sec.  578.1 to read as follows:

[[Page 56955]]

Sec.  578.1  Scope.

    This part specifies the civil penalties for violations of statutes 
and regulations administered by the National Highway Traffic Safety 
Administration (NHTSA), as adjusted for inflation. It also sets forth 
the procedures NHTSA must follow in assessing civil penalties under 49 
U.S.C. chapter 301. This part also sets forth NHTSA's interpretation of 
the civil penalty factors listed in 49 U.S.C. 30165(c). In addition, 
this part sets forth the requirements regarding the reasonable time and 
the manner of correction for a person seeking safe harbor protection 
from criminal liability under 49 U.S.C. 30170(a).
0
3. Revise Sec.  578.2 to read as follows:


Sec.  578.2  Purpose.

    One purpose of this part is to effectuate the remedial impact of 
civil penalties and to foster compliance with the law by specifying the 
civil penalties for statutory and regulatory violations, as adjusted 
for inflation. Another purpose of this part is to set forth the 
procedures for assessing civil penalties under 49 U.S.C. chapter 301. A 
third purpose of this part is to set forth NHTSA's interpretation of 
the civil penalty factors listed in 49 U.S.C. 30165(c). A fourth 
purpose of this part is to set forth the requirements regarding the 
reasonable time and the manner of correction for a person seeking safe 
harbor protection from criminal liability under 49 U.S.C. 30170(a).
0
4. Revise Sec.  578.3 to read as follows:


Sec.  578.3  Applicability.

    This part applies to civil penalties for violations of chapters 
301, 305, 323, 325, 327, 329, and 331 of title 49 of the United States 
Code or a regulation prescribed thereunder. This part applies to civil 
penalty factors under section 30165(c) of title 49 of the United States 
Code. This part also applies to the criminal penalty safe harbor 
provision of section 30170 of title 49 of the United States Code.
0
5. Amend Sec.  578.4 by adding in alphabetical order definitions of 
``Person'' and ``Respondent'' to read as follows:


Sec.  578.4  Definitions.

* * * * *
    Person means any individual, corporation, company, limited 
liability company, trust, association, firm, partnership, society, 
joint stock company, or any other entity.
    Respondent means any person charged with liability for a civil 
penalty for a violation of sections 30112, 30115, 30117 through 30122, 
30123(a), 30125(c), 30127, 30141 through 30147, or 30166 of title 49 of 
the United States Code or a regulation prescribed under any of those 
sections or any person to whom an initial demand for civil penalties is 
sent.
0
6. Amend Sec.  578.6 by revising paragraphs (a)(1) and (3), adding 
paragraph (a)(4), and revising paragraph (f) to read as follows:


Sec.  578.6  Civil penalties for violations of specified provisions of 
title 49 of the United States Code.

    (a) Motor vehicle safety--(1) In general. A person who violates any 
of sections 30112, 30115, 30117 through 30122, 30123(a), 30125(c), 
30127, or 30141 through 30147 of title 49 of the United States Code or 
a regulation prescribed under any of those sections is liable to the 
United States Government for a civil penalty of not more than $7,000 
for each violation. A separate violation occurs for each motor vehicle 
or item of motor vehicle equipment and for each failure or refusal to 
allow or perform an act required by any of those sections. The maximum 
civil penalty under this paragraph for a related series of violations 
is $35,000,000.
* * * * *
    (3) Section 30166. Except as provided in paragraph (a)(4) of this 
section, a person who violates section 30166 of title 49 of the United 
States Code or a regulation prescribed under that section is liable to 
the United States Government for a civil penalty for failing or 
refusing to allow or perform an act required under that section or 
regulation. The maximum penalty under this paragraph is $7,000 per 
violation per day. The maximum penalty under this paragraph for a 
related series of daily violations is $35,000,000.
    (4) Section 30166(o). A person who knowingly and willfully submits 
materially false or misleading information to the Secretary, after 
certifying the same as accurate under the process established pursuant 
to section 30166(o), shall be subject to a civil penalty of not more 
than $5,000 per day. The maximum penalty under this paragraph for a 
related series of daily violations is $1,000,000.
* * * * *
    (f) Odometer tampering and disclosure. (1) A person that violates 
49 U.S.C. chapter 327 or a regulation prescribed or order issued 
thereunder is liable to the United States Government for a civil 
penalty of not more than $10,000 for each violation. A separate 
violation occurs for each motor vehicle or device involved in the 
violation. The maximum civil penalty under this paragraph for a related 
series of violations is $1,000,000.
    (2) A person that violates 49 U.S.C. chapter 327 or a regulation 
prescribed or order issued thereunder, with intent to defraud, is 
liable for three times the actual damages or $10,000, whichever is 
greater.
* * * * *


Sec.  578.7  [Redesignated as Sec.  578.15]

0
7. Redesignate Sec.  578.7 as Sec.  578.15.
0
8. Add new Sec.  578.7 to read as follows:


Sec.  578.7  Notice of initial demand for civil penalties.

    (a) NHTSA, through the Assistant Chief Counsel for Litigation and 
Enforcement, begins a civil penalty proceeding by serving a notice of 
initial demand for civil penalties on a person (i.e. respondent) 
charging the person with having violated one or more provisions of 49 
U.S.C. 30112, 30115, 30117-30122, 30123(a), 30125(c), 30127, 30141-
30147, or 30166, or the regulations prescribed thereunder.
    (b) A notice of initial demand for civil penalties issued under 
this section includes:
    (1) A statement of the provision(s) which the respondent is alleged 
to have violated as of the date of the initial demand for civil 
penalties;
    (2) A statement of the factual allegations upon which the proposed 
civil penalty is being sought;
    (3) Notice of the maximum amount of civil penalty for which the 
respondent may be liable at the time of the notice for the violations 
alleged;
    (4) Notice of the amount of the civil penalty proposed to be 
assessed;
    (5) A description of the manner in which the respondent should make 
payment of any money to the United States;
    (6) A statement of the respondent's right to present written 
explanations, information or any materials in answer to the charges or 
in mitigation of the penalty;
    (7) A statement of the respondent's right to request a hearing and 
the procedures for requesting a hearing;
    (8) A statement that failure to pay the amount of the civil 
penalty, to elect to provide an informal response, or to request a 
hearing within 30 days of the date of the initial demand authorizes the 
NHTSA Chief Counsel, without further notice to the respondent, to find 
the facts to be as alleged in the initial demand for civil penalties 
and to assess an appropriate civil penalty; and
    (9) Documents relied on by the Assistant Chief Counsel for 
Litigation and Enforcement to establish that the person is liable for 
civil penalties or to

[[Page 56956]]

determining the amount of the initial demand. The documents may be 
provided in redacted form.
    (c) NHTSA may amend the initial demand for civil penalties at any 
time prior to the entry of an order assessing a civil penalty including 
by amending the amount of civil penalties demanded. If the amendment 
contains any new material allegation of fact, the respondent is given 
an opportunity to respond. In an amended notice, NHTSA may change the 
proposed amount of civil penalty up to and including the maximum 
penalty amount for each violation, to and including the maximum penalty 
amount for a related series of violations.
    (d) An initial demand for civil penalty, reply, or order issued by 
NHTSA under this section or Sec. Sec.  578.8, 578.9, 578.10, and 578.11 
may be delivered to the party by:
    (1) Mailing to the party (certified mail is not required);
    (2) Hand delivery;
    (3) Use of an overnight or express courier service; or
    (4) Facsimile transmission or electronic mail to the party or an 
agent or employee of the party.
    (e) Service of an initial demand for civil penalty or order by a 
person's duly authorized representative (including, but not limited to, 
a person's agent for accepting service designated pursuant to 49 CFR 
part 551) constitutes service upon that person.
    (f) Within thirty (30) calendar days of the date on which the 
initial demand for civil penalties is issued under this section, the 
respondent must:
    (1) Pay the amount of civil penalty proposed and thereby close the 
case;
    (2) Make an informal response as provided in Sec.  578.9; or
    (3) Request a hearing as provided in Sec.  578.10.
0
9. Add Sec.  578.8 to read as follows:


Sec.  578.8  Default judgments.

    (a) Failure of the respondent to reply by taking one of the three 
actions described in Sec.  578.7(f) within the period provided 
constitutes a waiver of his or her right to appear and contest the 
allegations and authorizes the Agency's Chief Counsel, without further 
notice to the respondent, to find the facts to be as alleged in the 
initial demand for civil penalties and to assess an appropriate civil 
penalty. This decision by the Chief Counsel will constitute final 
agency action. No appeal to the Administrator is permitted.
    (b) If respondent elects to request a conference with the Chief 
Counsel and fails to attend the conference without good cause shown, 
the Chief Counsel may, without further notice to the respondent, find 
the facts to be as alleged in the initial demand for civil penalties 
and assess an appropriate civil penalty. This decision by the Chief 
Counsel will constitute final agency action. No appeal to the 
Administrator is permitted.
    (c) If the respondent elects to request a hearing and is granted an 
in-person hearing, failure of the respondent to attend the hearing 
without good cause shown authorizes the Hearing Officer, without 
further notice to the respondent, to find the facts to be as alleged in 
the initial demand for civil penalties and assess an appropriate civil 
penalty. This decision by the Hearing Officer will constitute final 
agency action. No appeal to the Administrator is permitted.
0
10. Add Sec.  578.9 to read as follows:


Sec.  578.9  Procedures when an informal response is elected.

    (a) If a respondent elects to make an informal response to an 
initial demand for civil penalties, the respondent shall submit to the 
Chief Counsel and to the Assistant Chief Counsel for Litigation and 
Enforcement in writing any arguments, views or supporting documentation 
that dispute or mitigate that person's liability for, or the amount of, 
civil penalties to be imposed within 30 calendar days of the date on 
which the initial demand for civil penalties is issued. The informal 
response shall be submitted via hand delivery, use of an overnight or 
express courier service, facsimile or electronic mail. The respondent 
may include in his or her informal written response a request for a 
conference. Upon receipt of such a request, the Chief Counsel will 
arrange for a conference as soon as practicable at a time of mutual 
convenience. Unless otherwise specified by the Chief Counsel, the 
conference will take place at the Department's headquarters. Respondent 
may also request to conduct the conference by telephone if traveling to 
the Department's headquarters would be unduly burdensome.
    (b) Written explanations, information or materials submitted by the 
respondent and relevant information presented during any conference 
held under this section are considered by the Chief Counsel in 
reviewing the notice of initial demand for civil penalties and 
determining the fact of violation and the amount of any penalty to be 
assessed.
    (c) The Assistant Chief Counsel for Litigation and Enforcement is 
permitted to provide rebuttal information to the Chief Counsel replying 
to the information submitted by the respondent.
    (d) After consideration of the submissions in paragraphs (a) and 
(c) of this section, and any relevant information presented at a 
conference, the Chief Counsel may dismiss the initial demand for civil 
penalties in whole or in part. If the Chief Counsel does not dismiss 
the initial demand in its entirety, the Chief Counsel may issue an 
order assessing a civil penalty.
    (e) The NHTSA Chief Counsel will assess civil penalties under this 
section only after considering the nature, circumstances, extent and 
gravity of the violation. The determination may consider the nature of 
the defect or noncompliance; knowledge by the respondent of its 
obligations under this chapter; the severity of the risk of injury 
posed by the defect or noncompliance; the occurrence or absence or 
injury; the number of motor vehicles or items of motor vehicle 
equipment distributed with the defect or noncompliance; actions taken 
by the respondent to identify, investigate, or mitigate the condition; 
the appropriateness of such penalty in relation to the size of the 
business of the respondent, including the potential for undue adverse 
economic impacts; and other relevant and appropriate factors and 
information.
    (f) An order by the Chief Counsel assessing civil penalties 
exceeding $1,000,000 becomes a final decision 20 calendar days after it 
is issued unless the respondent files an appeal under Sec.  578.11 
within the 20 day period. An order by the Chief Counsel assessing civil 
penalties of $1,000,000 or less is a final decision upon issuance.
0
11. Add Sec.  578.10 to read as follows:


Sec.  578.10  Procedures when a hearing is elected.

    (a) A respondent or counsel for a respondent, responding to an 
initial demand for civil penalties by requesting a hearing must provide 
with the request for hearing two complete copies (via hand delivery, 
use of an overnight or express courier service, facsimile or electronic 
mail) containing a detailed statement of factual and legal issues in 
dispute and all statements and documents supporting the respondent's 
case within 30 calendar days of the date on which the initial demand 
for civil penalties is issued. If the respondent wishes to request an 
in-person hearing and the opportunity to present witness testimony, the 
respondent must also provide with the request for a hearing a statement 
of the factual and/or legal issues that an in-person hearing is 
necessary to resolve, a statement containing the names of individuals 
whom the respondent wishes to call as witnesses at the hearing, a 
description

[[Page 56957]]

of the witnesses' expected testimony and the factual basis for such 
testimony, and whether the respondent will arrange to have a verbatim 
transcript prepared at its own expense. One copy of the respondent's 
submission set shall be labeled ``For Hearing Officer.'' Failure to 
specify any issue in the respondent's written submission will preclude 
its consideration.
    (b) When a hearing is requested and scheduled under this section, a 
Hearing Officer designated by the Chief Counsel convenes and presides 
over the hearing. The Hearing Officer is solely responsible for the 
case referred to him or her. The Hearing Officer shall have no other 
responsibility, direct or supervisory, for the investigation of the 
case referred for the assessment of civil penalties and must have no 
prior connection with the case. The Agency will be represented in the 
hearing by an attorney designated by the Chief Counsel.
    (c) The hearing will be conducted by written submission unless an 
in-person hearing is requested and the Hearing Officer determines that 
an in-person hearing is necessary to resolve factual or legal issues 
presented in the case. In a hearing conducted by written submission, 
the Assistant Chief Counsel for Litigation and Enforcement will submit 
a reply responding to the statement of factual and legal issues in 
dispute and the statements and documents provided with the respondent's 
request for a hearing submitted under paragraph (a) of this section. In 
a hearing by written submission, the Hearing Officer's decision will be 
based on the initial demand for civil penalties and all attached 
documents, the respondent's request for a hearing submitted under 
paragraph (a) of this section and all attached documents and 
statements, and the reply to the respondent's request for a hearing 
(including any documents) submitted under this paragraph. All of the 
materials described in this subsection are automatically part of the 
administrative record.
    (d) If the Hearing Officer determines that an in-person hearing is 
necessary to resolve factual and/or legal issues present in the case, 
the Hearing Officer will notify the respondent and NHTSA of his or her 
decision in writing and schedule an in-person hearing.
    (e) In order to regulate the course of a hearing, the Hearing 
Officer may:
    (1) Direct or arrange for the submission of additional materials 
for the administrative record in written form;
    (2) Receive testimony from witnesses during an in-person hearing;
    (3) Convene, recess, reconvene, and adjourn and otherwise regulate 
the course of the in-person hearing; and
    (4) Take administrative notice of matters that are not subject to a 
bona fide dispute and are commonly known in the community or are 
ascertainable from readily available sources of known accuracy. Prior 
to taking notice of a matter, the Hearing Officer shall give NHTSA and 
the respondent an opportunity to show why notice should not be taken. 
In any case in which notice is taken, the Hearing Officer shall place a 
written statement of the matters as to which notice was taken in the 
record, with the basis for such notice, including a statement that the 
parties consented to the notice being taken or a summary of each 
party's objections.
    (f) In considering the admission of evidence, the Hearing Officer 
is not bound by the Federal Rules of Evidence. In evaluating the 
evidence presented, the Hearing Officer must give due consideration to 
the reliability and relevance of each item of evidence.
    (g) If, in response to a request for an in-person hearing, the 
Hearing Officer determines that an in-person hearing is necessary, the 
respondent may appear and be heard on his or her own behalf or through 
counsel of his or her choice. The respondent or his or her counsel may 
offer relevant information which he or she believes should be 
considered in defense of the allegations or which may bear on the 
penalty proposed to be assessed. The respondent may also call witnesses 
at the in-person hearing, if permitted by the Hearing Officer. A 
respondent represented by counsel bears all of its own attorneys' fees 
and costs. If a respondent wishes to present testimony through a 
personal appearance, the respondent is responsible for any costs 
associated with such appearance. The Hearing Officer may, at his or her 
discretion, accept a stipulation, declaration, or affidavit in lieu of 
testimony.
    (h) If, in response to a request for an in-person hearing, the 
Hearing Officer determines that an in-person hearing is necessary, 
NHTSA may supplement the record with information prior to the in-person 
hearing. A copy of such information will be provided to the respondent 
no later than 3 days before the hearing. NHTSA may also call witnesses 
at the in-person hearing, if permitted by the Hearing Officer. NHTSA 
will provide to the respondent a list of witnesses that it expects to 
call at the in-person hearing, a description of the witnesses' expected 
testimony, and the factual basis for the expected testimony no later 
than three days prior to the in-person hearing. The Hearing Officer 
may, at his or her discretion, accept a stipulation, declaration, or 
affidavit in lieu of testimony.
    (i) If, in response to a request for an in-person hearing, the 
Hearing Officer determines that an in-person hearing is necessary, the 
Hearing Officer may allow for cross examination of witnesses.
    (j) A verbatim transcript of any in-person hearing will not 
normally be prepared. A respondent may, solely at its own expense, 
cause a verbatim transcript to be made. If a verbatim transcript is 
made, the respondent shall submit two copies to the Hearing Officer not 
later than 15 days after the in-person hearing. The Hearing Officer 
shall include such transcript in the record. A respondent who wishes a 
verbatim transcript of the in-person hearing to be made must notify the 
Hearing Officer and the Assistant Chief Counsel for Litigation and 
Enforcement in advance of the hearing.
    (k) The administrative record of an in-person hearing shall contain 
the notice of initial demand for civil penalties and any supporting 
documentation described in Sec.  578.7; any timely documentation 
submitted by the respondent; any further documentation submitted by the 
Agency or presented at an in-person hearing; any additional materials 
presented at an in-person hearing; the transcript of the hearing (if 
any); and any other materials that the Hearing Officer determines are 
relevant.
    (l) During an in-person hearing, NHTSA makes the first presentation 
of evidence. At the close of NHTSA's presentation of evidence, the 
respondent will have the right to respond to and rebut evidence and 
argument presented by NHTSA. The respondent or his or her counsel may 
offer relevant information including testimony (if permitted by the 
Hearing Officer) regarding the respondent's liability for civil 
penalties and the application of the penalty factors. At the close of 
the respondent's presentation of evidence, the Hearing Officer may 
allow the presentation of rebuttal evidence by NHTSA. The Hearing 
Officer, in his or her discretion, may allow the respondent to reply to 
any such rebuttal evidence submitted. NHTSA has the burden at the 
hearing of establishing a violation charged in Sec.  578.7 giving rise 
to liability for a civil penalty. A respondent challenging the amount 
of a proposed civil penalty will have the burden to establish 
mitigating circumstances. After the evidence in the case has been 
presented, NHTSA and the respondent may present arguments on the issues 
in the case. The decision of the Hearing Officer shall be made

[[Page 56958]]

solely on the administrative record developed during the course of the 
hearing.
    (m) A Hearing Officer's decision and order assessing civil 
penalties exceeding $1,000,000 becomes a final order 20 calendar days 
after it is issued unless the respondent files an appeal within the 20 
day period to the Administrator under Sec.  578.11. A Hearing Officer's 
decision and order assessing civil penalties of $1,000,000 or less is a 
final order upon issuance.
    (n) The Hearing Officer will assess civil penalties under this 
section only after considering the nature, circumstances, extent and 
gravity of the violation. The determination may consider the nature of 
the defect or noncompliance; knowledge by the respondent of its 
obligations under this chapter; the severity of the risk of injury; the 
occurrence or absence or injury; the number of motor vehicles or items 
of motor vehicle equipment distributed with the defect or 
noncompliance; actions taken by the respondent to identify, 
investigate, or mitigate the condition; the appropriateness of such 
penalty in relation to the size of the business of the respondent, 
including the potential for undue adverse economic impacts; and other 
relevant and appropriate factors and information.
0
12. Add Sec.  578.11 to read as follows:


Sec.  578.11  Appeals to the Administrator.

    (a) A respondent aggrieved by an order issued by the Chief Counsel 
or Hearing Officer assessing a civil penalty of more than $1,000,000 
may file an appeal with the Administrator. The appeal must be filed 
within twenty (20) calendar days of date on which the order was issued 
and state the grounds for appeal and the factual or legal basis 
supporting the appeal. If no appeal is filed within 20 days of the date 
on which the order was issued, the order by the Chief Counsel or the 
Hearing Officer shall become a final agency order.
    (b) The Administrator will affirm the decision unless the 
Administrator finds that the decision was unsupported by the record as 
a whole; based on a mistake of law; or that new evidence, not available 
at the hearing, is available. Absent any of these bases, the appeal 
will be summarily dismissed.
    (c) If the Administrator finds that the decision was unsupported, 
in whole or in part; based on a mistake of law; or that new evidence is 
available, then the Administrator may: Assess or modify a civil 
penalty; rescind the initial demand for civil penalties; or remand the 
case back for new or additional proceedings.
    (d) In the absence of a remand, the decision of the Administrator 
in an appeal is a final agency action.
0
13. Add Sec.  578.12 to read as follows:


Sec.  578.12  Collection of assessed penalties.

    (a) Payment of a civil penalty shall be made by check, postal money 
order, or electronic transfer of funds, as provided in instructions by 
the Agency.
    (b) Failure by the respondent to submit in writing his/her 
acceptance of the terms of an order directing payment of a civil 
penalty and to remit the civil penalty to NHTSA within 30 days after an 
agency decision becomes final, may result in the institution of an 
action in an appropriate United States District Court to collect the 
civil penalty.
0
14. Add Sec.  578.13 to read as follows:


Sec.  578.13  Judicial review.

    (a) Any party to the underlying proceeding who is adversely 
affected by a final order issued under this part may petition for 
review of the order in the appropriate United States district court.
    (b) Judicial review will be based on whether the final order was 
arbitrary, capricious, an abuse of discretion, or otherwise not in 
accordance with law. No objection that has not been raised before the 
Agency will be considered by the court, unless reasonable grounds 
existed for failure to do so.
    (c) The commencement of proceedings under this section will not, 
unless ordered by the court, operate as a stay of the final order the 
Agency.
0
15. Add Sec.  578.14 to read as follows:


Sec.  578.14  Civil penalty factors under 49 U.S.C. chapter 301.

    (a) General civil penalty factors. This subsection interprets the 
terms nature, circumstances, extent, and gravity of the violation 
consistent with the factors in 49 U.S.C. 30165(c).
    (1) Nature of the violation means the essential, fundamental 
character or constitution of the violation. It includes but is not 
limited to the nature of a safety-related defect or noncompliance. It 
also includes what the violation involves.
    (2) Circumstances of the violation means the context, facts, and 
conditions having bearing on the violation.
    (3) Extent of the violation means the range of inclusiveness over 
which the violation extends including the scope, time frame and/or the 
degree of the violation. This includes the number of violations and 
whether the violations are related or unrelated.
    (4) Gravity of the violation means the importance, significance, 
and/or seriousness of the violation.
    (b) Discretionary civil penalty factors. This paragraph interprets 
the nine discretionary factors in 49 U.S.C. 30165(c)(1) through (9) 
that NHTSA may apply in making civil penalty amount determinations.
    (1) The nature of the defect or noncompliance means the essential, 
fundamental characteristic or constitution of the defect or 
noncompliance.
    (i) ``Defect'' is as defined in 49 U.S.C. 30102(a)(2). 
``Noncompliance'' under this factor includes a noncompliance with a 
Federal Motor Vehicle Safety Standard (``FMVSS''), as well as other 
violations subject to penalties under 49 U.S.C. 30165.
    (ii) When considering the nature of a safety-related defect or 
noncompliance with an FMVSS, NHTSA may examine the conditions or 
circumstances under which the defect or noncompliance arises, the 
performance problem, and actual and probable consequences of the defect 
or noncompliance. When considering the nature of the noncompliance with 
the Safety Act or a regulation promulgated thereunder, NHTSA may also 
examine the circumstances surrounding the violation.
    (2) Knowledge by the respondent of its obligations under this 
chapter means all knowledge, legal and factual, actual, presumed and 
constructive, of the respondent of its obligations under 49 U.S.C. 
chapter 301. If a respondent is other than a natural person, including 
but not limited to a corporation or a partnership, then the knowledge 
of an employee or employees of that non-natural person shall be imputed 
to that non-natural person. The knowledge of an agent is imputed to a 
principal. A person, such as a corporation, with multiple employees is 
charged with the knowledge of each employee, regardless of whether the 
employees have communicated that knowledge among each other, or to a 
decision maker for the non-natural person.
    (3) The severity of the risk of injury means the gravity of 
exposure to potential injury and includes the potential for injury or 
death of drivers, passengers, other motorists, pedestrians, and others. 
The severity of the risk includes the likelihood of an injury occurring 
and the population group exposed.
    (4) The occurrence or absence of injury means whether injuries or 
deaths have occurred as a result of a defect, noncompliance, or other 
violation of 49 U.S.C. chapter 301 or chapter 5 of title 49 of the Code 
of Federal Regulations. NHTSA may also take into consideration 
allegations of death or injury. The absence of deaths or injuries shall 
not be dispositive of

[[Page 56959]]

manufacturer's liability for civil penalties.
    (5) The number of motor vehicles or items of motor vehicle 
equipment distributed with the defect or noncompliance means the total 
number of vehicles or items of motor vehicle equipment distributed with 
the defect or noncompliance with an FMVSS or the percentage of vehicles 
or items of motor vehicle equipment of the subject population with the 
defect or noncompliance with an FMVSS. If multiple make, model and 
model years of motor vehicles are affected by the defect or 
noncompliance with an FMVSS, NHTSA may also consider the percentage of 
motor vehicles that contain the defect or noncompliance with an FMVSS 
as a percentage of the manufacturer's total annual production of 
vehicles. NHTSA may choose to make distinction between those defective 
or noncompliant products distributed in commerce that consumers 
received, and those defective or noncompliant products distributed in 
commerce that consumers have not received.
    (6) Actions taken by the respondent to identify, investigate, or 
mitigate the condition means actions actually taken, the time frame 
when those actions were taken, what those actions involved and how they 
ameliorated or otherwise related to the condition, what remained after 
those actions were taken, and the speed with which the actions were 
taken. A failure to act may also be considered.
    (7) The appropriateness of such penalty in relation to the size of 
the business of the respondent, including the potential for undue 
adverse economic impacts. NHTSA takes the Small Business Regulatory 
Enforcement Fairness Act of 1996 into account. Upon a showing that a 
violator is a small entity, NHTSA may include, but is not limited to, 
requiring the small entity to correct the violation within a reasonable 
correction period, considering whether the violation was discovered 
through the participation by the small entity in a compliance 
assistance program sponsored by the agency, considering whether the 
small entity has been subject to multiple enforcement actions by the 
agency, considering whether the violations involve willful or criminal 
conduct, considering whether the violations pose serious health, safety 
or environmental threats, and requiring a good faith effort to comply 
with the law. NHTSA may also consider the effect of the penalty on 
ability of the person to continue to operate. NHTSA may consider a 
person's ability to pay, including in installments over time, any 
effect of a penalty on the respondent's ability to continue to do 
business, and relevant financial factors such as liquidity, solvency, 
and profitability. NHTSA may also consider whether the business has 
been deliberately undercapitalized.
    (8) Whether the respondent has been assessed civil penalties under 
this section during the most recent 5 years means whether the 
respondent has been assessed civil penalties, including a settlement 
agreement containing a penalty, a consent order or a lawsuit involving 
a penalty or payment of a civil penalty in the most recent 5 years from 
the date of the alleged violation, regardless of whether there was any 
admission of a violation or of liability, under 49 U.S.C. 30165.
    (9) Other appropriate factors means other factors not identified 
above, including but not limited to aggravating and mitigating factors 
relating to the violation, such as whether there is a history of 
violations, whether a person benefitted economically from a violation, 
the effect of the respondent's conduct on the integrity of programs 
administered by NHTSA, and whether there was a failure to respond in a 
complete and timely manner to requests for information or remedial 
action.

    Issued in Washington, DC on September 8, 2015, under authority 
delegated pursuant to 49 CFR 1.95.
Paul A. Hemmersbaugh,
Acting Chief Counsel.
[FR Doc. 2015-23164 Filed 9-18-15; 8:45 am]
 BILLING CODE 4910-59-P