Civil Penalties |
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James Clayton Owens
National Highway Traffic Safety Administration
14 January 2021
[Federal Register Volume 86, Number 9 (Thursday, January 14, 2021)]
[Rules and Regulations]
[Pages 3016-3026]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-00278]
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DEPARTMENT OF TRANSPORTATION
National Highway Traffic Safety Administration
49 CFR Part 578
[Docket No. NHTSA-2021-0001]
RIN 2127-AM32
Civil Penalties
AGENCY: National Highway Traffic Safety Administration (NHTSA),
Department of Transportation (DOT).
ACTION: Interim final rule; request for comments; response to petition
for rulemaking.
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SUMMARY: On October 2, 2020, NHTSA received a petition for rulemaking
from the Alliance for Automotive Innovation regarding when to apply an
increase to the civil penalty rate applicable to automobile
manufacturers that fail to meet applicable corporate average fuel
economy (CAFE) standards and are unable to offset such a deficit with
compliance credits. After carefully considering the issues raised,
NHTSA has granted the petition and promulgates an interim final rule
providing that the increase will go into effect beginning in model year
2022 in accordance with NHTSA's December 2016 rule on the same issue,
except if the August 31, 2020 decision of the United States Court of
Appeals for the Second Circuit in Case No. 19-2395 is vacated. This
interim final rule amends the relevant regulatory text accordingly and
requests comment. This document also responds to a petition for
reconsideration of NHTSA's July 2019 rule from the Institute for Policy
Integrity at New York University School of Law.
DATES:
Effective date: This rule is effective January 14, 2021
Comments: Comments must be received by January 25, 2021.
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, M-30, U.S. Department of
Transportation, West Building, Ground Floor, Room W12-140, 1200 New
Jersey Avenue SE, Washington, DC 20590.
Hand Delivery or Courier: U.S. Department of
Transportation, West Building, Ground Floor, Room W12-140, 1200 New
Jersey Avenue SE, Washington, DC, between 9 a.m. and 5 p.m. Eastern
time, Monday through Friday, except Federal holidays.
Fax: 202-493-2251
Instructions: NHTSA has established a docket for this
action. Direct your comments to Docket ID No. NHTSA-2021-0001. See the
SUPPLEMENTARY INFORMATION section on ``Public Participation'' for more
information about submitting written comments.
Docket: All documents in the docket are listed on the
www.regulations.gov website. Although listed in the index, some
information is not publicly available, e.g., confidential business
information or other information whose disclosure is restricted by
statute. Certain other material, such as copyrighted material, is not
placed on the internet and will be publicly available only in hard copy
form. Publicly available docket materials are available either
electronically through www.regulations.gov or in hard copy at the
following location: Docket Management Facility, M-30, U.S. Department
of Transportation, West Building, Ground Floor, Rm. W12-140, 1200 New
Jersey Avenue SE, Washington, DC 20590. The telephone number for the
docket management facility is (202) 366-9324. The docket management
facility is open between 9 a.m. and 5 p.m. Eastern Time, Monday through
Friday, except Federal holidays.
FOR FURTHER INFORMATION CONTACT: Michael Kuppersmith, Office of Chief
Counsel, NHTSA, email michael.kuppersmith@dot.gov, telephone (202) 366-
2992, facsimile (202) 366-3820, 1200 New Jersey Ave. SE, Washington, DC
20590.
SUPPLEMENTARY INFORMATION:
Table of Contents
A. Public Participation
B. Statutory and Regulatory Background
C. Civil Penalties Inflationary Adjustment Act Improvements Act of
2015
D. NHTSA's Actions to Date Regarding CAFE Civil Penalties
1. Interim Final Rule
2. Initial Petition for Reconsideration and Response
3. NHTSA Reconsideration
E. IPI Petition for Reconsideration
F. The Alliance Petition for Rulemaking
G. NHTSA Response to Petitions
H. Interim Final Rule and Public Comment
I. Rulemaking Analyses and Notices
1. Executive Order 12866, Executive Order 13563, and DOT
Regulatory Policies and Procedures
2. Regulatory Flexibility Act
3. Executive Order 13132 (Federalism)
4. Unfunded Mandates Reform Act of 1995
5. National Environmental Policy Act
6. Executive Order 12778 (Civil Justice Reform)
7. Paperwork Reduction Act
8. Privacy Act
9. Congressional Review Act
A. Public Participation
NHTSA requests comment on this interim final rule. This section
describes how you can participate in this process.
(1) How do I prepare and submit comments?
Your comments must be written and in English. To ensure that your
comments are correctly filed in the Docket, please include the Docket
number NHTSA-2021-0001 in your comments. Your comments must not be more
than 15 pages long.\1\ NHTSA established this limit to encourage you to
write your primary comments in a concise fashion. However, you may
attach necessary additional documents to your comments, and there is no
limit on the length of the attachments. If you are submitting comments
electronically as a PDF (Adobe) file, we ask that the documents
submitted be scanned using the Optical Character Recognition (OCR)
process, thus allowing the Agency to search and copy certain portions
of your submissions.\2\ Please note that pursuant to the Data Quality
Act, in order for the substantive data to be relied upon and used by
the Agency, it must meet the information quality standards set forth in
the OMB and Department of Transportation (DOT) Data Quality Act
guidelines. Accordingly, we encourage you to consult the guidelines in
preparing your comments. OMB's guidelines may be accessed at http://www.whitehouse.gov/omb/fedreg/reproducible.html. DOT's guidelines may
be accessed at http://www.dot.gov/dataquality.htm.
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\1\ See 49 CFR 553.21
\2\ Optical character recognition (OCR) is the process of
converting an image of text, such as a scanned paper document or
electronic fax file, into computer-editable text.
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(2) Tips for Preparing Your Comments
[[Page 3017]]
When submitting comments, please remember to:
Identify the rulemaking by docket number and other
identifying information (subject heading, Federal Register date and
page number).
Explain why you agree or disagree, suggest alternatives,
and substitute language for your requested changes.
Describe any assumptions and provide any technical
information and/or data that you used.
If you estimate potential costs or burdens, explain how
you arrived at your estimate in sufficient detail to allow for it to be
reproduced.
Provide specific examples to illustrate your concerns, and
suggest alternatives.
Explain your views as clearly as possible, avoiding the
use of profanity or personal threats.
Make sure to submit your comments by the comment period
deadline identified in the DATES section above.
(3) How can I be sure that my comments were received?
If you submit your comments by mail and wish Docket Management to
notify you upon its receipt of your comments, enclose a self-addressed,
stamped postcard in the envelope containing your comments. Upon
receiving your comments, Docket Management will return the postcard by
mail.
(4) How do I submit confidential business information?
If you wish to submit any information under a claim of
confidentiality, you should submit your complete submission, including
the information you claim to be confidential business information
(CBI), to the NHTSA Chief Counsel. When you send a comment containing
CBI, you should include a cover letter setting forth the information
specified in our CBI regulation.\3\ In addition, you should submit a
copy from which you have deleted the claimed CBI to the Docket by one
of the methods set forth above.
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\3\ See 49 CFR part 512.
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To facilitate social distancing due to COVID-19, NHTSA is treating
electronic submission as an acceptable method for submitting CBI to the
Agency under 49 CFR part 512. Any CBI submissions sent via email should
be sent to an attorney in the Office of Chief Counsel at the address
given above under FOR FURTHER INFORMATION CONTACT. Likewise, for CBI
submissions via a secure file transfer application, an attorney in the
Office of Chief Counsel must be set to receive a notification when
files are submitted and have access to retrieve the submitted files. At
this time, regulated entities should not send a duplicate hardcopy of
their electronic CBI submissions to DOT headquarters.
Please note that these modified submission procedures are only to
facilitate continued operations while maintaining appropriate social
distancing due to COVID-19. Regular procedures for part 512 submissions
will resume upon further notice, when NHTSA and regulated entities
discontinue operating primarily in telework status.
If you have any questions about CBI or the procedures for claiming
CBI, please consult the person identified in the FOR FURTHER
INFORMATION CONTACT section.
(5) How can I read the comments submitted by other people?
You may read the materials placed in the docket for this document
(e.g., the comments submitted in response to this document by other
interested persons) at any time by going to http://www.regulations.gov.
Follow the online instructions for accessing the dockets. You may also
read the materials at the NHTSA Docket Management Facility by going to
the street addresses given above under ADDRESSES.
B. Statutory and Regulatory Background
NHTSA sets \4\ and enforces \5\ corporate average fuel economy
(CAFE) standards for the United States light-duty automobile fleet, and
in doing so, assesses civil penalties against manufacturers that fall
short of their compliance obligations and are unable to make up the
shortfall with credits obtained for exceeding the standards.\6\ The
civil penalty amount for CAFE non-compliance was originally set by
statute in 1975, and beginning in 1997, included a rate of $5.50 per
each tenth of a mile per gallon (0.1) that a manufacturer's fleet
average CAFE level falls short of its compliance obligation. This
shortfall amount is then multiplied by the number of vehicles in that
manufacturer's fleet.\7\ The basic equation for calculating a
manufacturer's civil penalty amount before accounting for credits, is
as follows:
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\4\ 49 U.S.C. 32902. The authorities vested in the Secretary
under chapter 329 of Title 49, U.S.C., have been delegated to NHTSA.
49 CFR 1.95(a).
\5\ 49 U.S.C. 32911, 32912.
\6\ Credits may be either earned (for over-compliance by a given
manufacturer's fleet, in a given model year), transferred (from one
fleet to another), or purchased (in which case, another manufacturer
earned the credits by over-complying and chose to sell that
surplus). 49 U.S.C. 32903.
\7\ A manufacturer may have up to three fleets of vehicles, for
CAFE compliance purposes, in any given model year--a domestic
passenger car fleet, an imported passenger car fleet, and a light
truck fleet. Each fleet belonging to each manufacturer has its own
compliance obligation, with the potential for either over-compliance
or under-compliance. There is no overarching CAFE requirement for a
manufacturer's total production.
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(penalty rate, in $ per 0.1 mpg per vehicle) x (amount of shortfall, in
tenths of an mpg) x (# of vehicles in manufacturer's non-compliant
fleet).
Starting with model year 2011, the CAFE program was amended by the
Energy Independence and Security Act of 2007 (EISA) to provide for
credit transfers among a manufacturer's various fleets.\8\ Starting
with that model year, the law also provided for trading between vehicle
manufacturers, which has allowed vehicle manufacturers the opportunity
to acquire credits from competitors rather than paying civil penalties
for non-compliance. Credit purchases involve significant expenditures,
and NHTSA believes that an increase in the penalty rate would correlate
with an increase in such expenditures.
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\8\ Public Law 110-140, sec. 104.
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C. Civil Penalties Inflation Adjustment Act Improvements Act of 2015
On November 2, 2015, the Federal Civil Penalties Inflation
Adjustment Act Improvements Act (Inflation Adjustment Act or 2015 Act),
Public Law 114-74, Section 701, was signed into law. The 2015 Act
required Federal agencies to make an initial ``catch-up'' adjustment to
the ``civil monetary penalties,'' as defined, they administer through
an interim final rule and then to make subsequent annual adjustments
for inflation. The amount of increase for any ``catch-up'' adjustment
to a civil monetary penalty pursuant to the 2015 Act was limited to 150
percent of the then-current penalty. Agencies were required to issue an
interim final rule for the initial ``catch-up'' adjustment by July 1,
2016, without providing the opportunity for public comment ordinarily
required under the Administrative Procedure Act.
The Director of the Office of Management and Budget (OMB) provided
guidance to all Federal agencies in a February 24, 2016 memorandum.\9\
For those penalties an agency determined to be ``civil monetary
penalties,'' the memorandum provided guidance on how to calculate
[[Page 3018]]
the initial adjustment required by the 2015 Act. The initial catch up
adjustment is based on the change between the Consumer Price Index for
all Urban Consumers (CPI-U) for the month of October in the year the
penalty amount was established or last adjusted by Congress and the
October 2015 CPI-U. The February 24, 2016 memorandum contains a table
with a multiplier for the change in CPI-U from the year the penalty was
established or last adjusted to 2015. To arrive at the adjusted
penalty, an agency must multiply the penalty amount when it was
established or last adjusted by Congress, excluding adjustments under
the 1990 Inflation Adjustment Act, by the multiplier for the increase
in CPI-U from the year the penalty was established or adjusted as
provided in the February 24, 2016 memorandum. The 2015 Act limits the
initial inflationary increase to 150 percent of the current penalty. To
determine whether the increase in the adjusted penalty is less than 150
percent, an agency must multiply the current penalty by 250 percent.
The adjusted penalty is the lesser of either the adjusted penalty based
on the multiplier for CPI-U in Table A of the February 24, 2016
memorandum or an amount equal to 250 percent of the current penalty.
Ensuing guidance from OMB identifies the appropriate inflation
multiplier for agencies to use to calculate the subsequent annual
adjustments.\10\
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\9\ Memorandum from the Director of OMB to Heads of Executive
Departments and Agencies, Implementation of the Federal Civil
Penalties Inflation Adjustment Act Improvements Act of 2015 (Feb.
24, 2016), available online at https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/memoranda/2016/m-16-06.pdf.
\10\ Memorandum from the Director of OMB to Heads of Executive
Departments and Agencies, Implementation of the 2017 Annual
Adjustment Pursuant to the Federal Civil Penalties Inflation
Adjustment Act Improvements Act of 2015 (Dec. 16, 2016), available
online at https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/memoranda/2017/m-17-11_0.pdf; Memorandum from the Director of OMB to
Heads of Executive Departments and Agencies, Implementation of
Penalty Inflation Adjustments for 2018, Pursuant to the Federal
Civil Penalties Inflation Adjustment Act Improvements Act of 2015
(Dec. 15, 2017), available online at https://www.whitehouse.gov/wp-content/uploads/2017/11/M-18-03.pdf; Memorandum from the Director of
OMB to Heads of Executive Departments and Agencies, Implementation
of Penalty Inflation Adjustments for 2019, Pursuant to the Federal
Civil Penalties Inflation Adjustment Act Improvements Act of 2015
(Dec. 14, 2018), available online at https://www.whitehouse.gov/wp-content/uploads/2017/11/m_19_04.pdf; Memorandum from the Acting
Director of OMB to Heads of Executive Departments and Agencies,
Implementation of Penalty Inflation Adjustments for 2020, Pursuant
to the Federal Civil Penalties Inflation Adjustment Act Improvements
Act of 2015 (Dec. 16, 2019), available online at https://www.whitehouse.gov/wp-content/uploads/2019/12/M-20-05.pdf;
Memorandum from the Director of OMB to Heads of Executive
Departments and Agencies, Implementation of Penalty Inflation
Adjustments for 2021, Pursuant to the Federal Civil Penalties
Inflation Adjustment Act Improvements Act of 2015 (Dec. 23, 2020),
available online at https://www.whitehouse.gov/wp-content/uploads/2020/12/M-21-10.pdf.
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The 2015 Act also gives agencies discretion to adjust the amount of
a civil monetary penalty by less than otherwise required for the
initial catch-up adjustment if an agency determines that increasing the
civil monetary penalty by the otherwise required amount will have
either a negative economic impact or if the social costs of the
increased civil monetary penalty will outweigh the benefits.\11\ In
either instance, the agency must publish a notice, take and consider
comments on this finding, and receive concurrence on this determination
from the Director of OMB prior to finalizing a lower civil penalty
amount.
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\11\ Public Law 114-74, sec. 701(c).
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D. NHTSA's Actions to Date Regarding CAFE Civil Penalties
1. Interim Final Rule
On July 5, 2016, NHTSA published an interim final rule, adopting
inflation adjustments for civil penalties under its administration,
following the procedure and the formula in the 2015 Act. NHTSA did not
analyze at that time whether the 2015 Act applied to all of its civil
penalties, instead applying the inflation multiplier to increase all
amounts found in its penalty schemes as a rote matter. One of the
adjustments NHTSA made at the time was raising the civil penalty rate
for CAFE non-compliance from $5.50 to $14 starting with model year
2015.\12\ NHTSA also indicated in that interim final rule that the
maximum penalty rate that the Secretary is permitted to establish for
such violations would increase from $10 to $25, but did not codify this
change in the regulatory text. NHTSA also raised the maximum civil
penalty for other violations of EPCA, as amended, to $40,000.\13\
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\12\ 81 FR 43524 (July 5, 2016). This interim final rule also
updated the maximum civil penalty amounts for violations of all
statutes and regulations administered by NHTSA and was not limited
solely to penalties administered for CAFE violations.
\13\ 81 FR 43524 (July 5, 2016).
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2. Initial Petition for Reconsideration and Response
The then-Alliance of Automobile Manufacturers and the Association
of Global Automakers (since combined to form the Alliance for
Automotive Innovation) jointly petitioned NHTSA for reconsideration of
the CAFE penalty provisions issued in the interim final rule.\14\ This
petition raised concerns with the significant impact that the increased
penalty rate would have on CAFE compliance costs, which they estimated
to be at least $1 billion annually. Specifically, this petition
identified the issue of retroactivity (applying the penalty increase
associated with model years that have already been completed or for
which a company's compliance plan had already been ``set''); which
``base year'' (i.e., the year the penalty was established or last
adjusted) NHTSA should use for calculating the adjusted penalty rate;
and whether an increase in the penalty rate to $14 would cause a
``negative economic impact.''
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\14\ Jaguar Land Rover North America, LLC also filed a petition
for reconsideration in response to the July 5, 2016, interim final
rule raising the same concerns as those raised in the joint
petition. Both petitions, along with a supplement to the joint
petition, can be found in Docket ID NHTSA-2016-0075 at
www.regulations.gov.
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In response to the joint petition, NHTSA issued a final rule on
December 28, 2016.\15\ In that rule, NHTSA agreed that raising the
penalty rate for model years already fully complete would be
inappropriate, given how courts generally disfavor the retroactive
application of statutes and that doing so could not deter non-
compliance, incentivize compliance, or lead to any improvements in fuel
economy. NHTSA also agreed that raising the rate for model years for
which product changes were infeasible due to lack of lead time did not
seem consistent with Congress' intent that the CAFE program be
responsive to consumer demand. Accordingly, NHTSA stated that it would
not apply the inflation-adjusted penalty rate of $14 until model year
2019, as the Agency believed that would be the first year in which
product changes could reasonably be made in response to the higher
penalty rate.
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\15\ 81 FR 95489 (December 28, 2016).
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3. NHTSA Reconsideration
Beginning in January 2017, NHTSA took a series of actions to delay
the effective date of the December 2016 final rule as it, for the first
time, assessed whether the CAFE civil penalty rate was subject to the
2015 Act.\16\ As a result of a subsequent decision of the United States
Court of Appeals for the Second Circuit, however, that December 2016
final rule was considered to be in force.\17\ That decision by the
Second Circuit did not affect NHTSA's authority to reconsider the
applicability of the 2015 Act to the EPCA CAFE civil penalty provision
through notice-and-
[[Page 3019]]
comment rulemaking. Absent any further action, the rate would have
increased beginning with model year 2019.\18\
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\16\ 82 FR 8694 (January 30, 2017); 82 FR 15302 (March 28,
2017); 82 FR 29009 (June 27, 2017); 82 FR 32139 (July 12, 2017).
\17\ Order, ECF No. 196, NRDC v. NHTSA, Case No. 17-2780 (2d
Cir., Apr. 24, 2018); Opinion, ECF No. 205, NRDC v. NHTSA, Case No.
17-2780, at 44 (2d Cir., June 29, 2018) (``The Civil Penalties Rule,
81 FR 95,489, 95,489-92 (December 28, 2016), no longer suspended, is
now in force.'').
\18\ See 81 FR 95489, 95492 (Dec. 28, 2016). Civil penalties are
determined after the end of a model year, following NHTSA's receipt
of final reports from the Environmental Protection Agency (EPA),
i.e., no earlier than April for the previous model year's non-
compliance. See 77 FR 62624, 63126 (Oct. 15, 2012).
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In July 2019, NHTSA finalized a rule determining that the 2015 Act
did not apply to the CAFE civil penalty rate. In line with its
statutory role and pursuant to its previous guidance to all Federal
Agencies, OMB provided guidance to NHTSA agreeing with this statutory
interpretation.\19\ The July 2019 rule also stated that, in the
alternative, even if the 2015 Act applied, increasing the CAFE civil
penalty rate would have a negative economic impact. As discussed in the
July 2019 rule, OMB concurred with this negative economic impact
determination, as required by the 2015 Act.\20\ In either case, NHTSA
concluded that the current CAFE civil penalty rate of $5.50 should be
retained, instead of increasing to $14 beginning with model year 2019.
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\19\ July 12, 2019 Letter from Russell T. Vought, Acting
Director of the Office of Management and Budget, to Elaine L. Chao,
Secretary of the United States Department of Transportation,
available at Docket No. NHTSA-2018-0017-0018 (OMB Non-Applicability
Letter).
\20\ July 12, 2019 Letter from Russell T. Vought, Acting
Director of the Office of Management and Budget, to Elaine L. Chao,
Secretary of the United States Department of Transportation,
available at Docket No. NHTSA-2018-0017-0019 (OMB Negative Economic
Impact Letter).
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On August 31, 2020, the United States Court of Appeals for the
Second Circuit issued a ruling vacating the July 2019 rule and
announcing that the December 2016 rule is back in force. The Second
Circuit denied panel rehearing on November 2, 2020. NHTSA stands by the
reasoning set forth in its July 2019 rule, but recognizes that the
Second Circuit's decision is currently binding and remains in effect
absent a Supreme Court decision to the contrary.
E. IPI Petition for Reconsideration
On September 9, 2019, the Institute for Policy Integrity at New
York University School of Law (IPI) submitted a petition for
reconsideration of NHTSA's July 2019 final rule. IPI argued that the
rule was unreasonable and not in the public interest for ignoring and
improperly weighing the costs and benefits.\21\ IPI also alleged that
the OMB letters NHTSA relied on were not presented for public comment,
contained factual misstatements, and contradicted NHTSA's reasoning.
Lastly, IPI challenged NHTSA's statutory interpretations.
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\21\ IPI Petition, at 1-2.
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F. The Alliance Petition for Rulemaking
On October 2, 2020, the Alliance for Automotive Innovation (the
Alliance) submitted a petition for rulemaking (Alliance Petition) to
delay the applicability of the increased $14 CAFE civil penalty rate
until model year 2022 for largely the same reasons NHTSA relied on in
the December 2016 rule.\22\ According to the Alliance Petition, ``Model
Years 2019 and 2020 are effectively lapsed now,'' and ``[m]anufacturers
are unable to change MY 2021 plans at this point.'' \23\ The Alliance
argued that applying the increased penalty to any non-compliances that
are temporally impossible to avoid or cannot practically be remedied
does not serve the statutory purposes of deterring prohibited conduct
or incentivizing favored conduct. Doing so would effectively be
punishing violators retroactively.
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\22\ The Alliance also submitted a supplement to its petition on
October 22, 2020 (Alliance Supplement).
\23\ Alliance Petition, at 4.
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In addition to relying on the reasoning of the December 2016 rule,
the Alliance Petition notes the significant economic impact suffered by
the industry due to COVID-19. Accordingly, the Alliance Petition also
cites Executive Order 13924, requiring Federal Agencies to take
appropriate action, consistent with applicable law, to combat the
economic emergency caused by COVID-19.\24\ Several individual vehicle
manufacturers submitted supplemental information to NHTSA further
articulating the negative economic position they are in due to COVID-19
and the potential and significant adverse economic consequences of the
increased civil penalty rate, particularly during this time of stress
on the industry.
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\24\ ``Executive Order on Regulatory Relief to Support Economic
Recovery,'' E.O. 13924 (May 19, 2020).
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G. NHTSA Response to Petitions
NHTSA granted the Alliance Petition and commenced this rulemaking
action. Having carefully considered the issues raised by the petitioner
and other available information, NHTSA issues this interim final rule
and requests comment. If the August 31, 2020 decision of the United
States Court of Appeals for the Second Circuit in Case No. 19-2395 is
vacated, NHTSA's July 2019 rule keeping the CAFE civil penalty rate at
$5.50 will be reinstated. If that decision is not vacated, however, the
CAFE civil penalty rate will increase to $14 beginning with model year
2022, pursuant to the 2015 Act. NHTSA will make any subsequent annual
adjustments as necessary and appropriate.\25\
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\25\ None of the annual inflation adjustment multipliers since
the initial catch-up adjustment has been high enough to require a
subsequent adjustment of the CAFE civil penalty rate. That is, if
the catch-up adjustment to $14 had applied beginning in 2016, the
rate would still be $14 through at least 2021.
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Prior to granting the petition, NHTSA had to determine whether it
had authority to issue the requested rule as a threshold matter. NHTSA
notes first that it has authority to administer the CAFE program.\26\
It is common practice for agencies--including NHTSA--to exercise their
authority to administer programs they oversee.\27\ NHTSA also
[[Page 3020]]
has specific statutory authority to administer the program \28\ and
possesses the general authority--beyond its inherent authority--to do
so efficiently and in the public interest.\29\ NHTSA's obligation to
administer the CAFE program consistent with law includes the statutory
requirement to establish maximum feasible fuel economy standards
through a balancing of competing factors, including economic
practicability, and to do so at least eighteen months in advance for
more stringent standards.\30\ CAFE civil penalties are merely one
component of this overall program.
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\26\ See Morton v. Ruiz, 415 U.S. 199, 231 (1974) (``The power
of an administrative agency to administer a congressionally created
and funded program necessarily requires the formulation of policy
and the making of rules to fill any gap left, implicitly or
explicitly, by Congress.''); see also Friends of Boundary Waters
Wilderness v. Bosworth, 437 F.3d 815, 823-24 (8th Cir. 2006)
(``Agencies given the authority to promulgate a quota are presumed
to have the authority to adjust that quota.''); S. California Edison
Co. v. F.E.R.C., 415 F.3d 17, 22-23 (D.C. Cir. 2005) (``[O]f course,
agencies may alter regulations. Agencies may even alter their own
regulations sua sponte, in the absence of complaints, provided they
have sufficient reason to do so and follow applicable
procedures.''); Ober v. Whitman, 243 F.3d 1190, 1194-95 (9th Cir.
2001) (indicating that agencies have the inherent authority to
exempt de minimis violations from regulation if not prohibited by
statute); Tate & Lyle, Inc. v. C.I.R., 87 F.3d 99, 104 (3d Cir.
1996) (``Inherent in the powers of an administrative agency is the
authority to formulate policies and to promulgate rules to fill any
gaps left, either implicitly or explicitly, by Congress.'') (citing
Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837,
843 (1984)); Fla. Cellular Mobil Commc'ns Corp. v. F.C.C., 28 F.3d
191, 196 (D.C. Cir. 1994) (``If an agency is to function
effectively, however, it must have some opportunity to amend its
rules and regulations in light of its experience.''); Rainbow Broad.
Co. v. F.C.C., 949 F.2d 405, 409 (D.C. Cir. 1991) (``Agencies enjoy
wide latitude when using rulemaking to change their own policies and
the manner by which their policies are implemented.''); Nat. Res.
Def. Council, Inc. v. Sec. & Exch. Comm'n, 606 F.2d 1031, 1056 (D.C.
Cir. 1979) (``An agency is allowed to be master of its own house,
lest effective agency decisionmaking not occur in [a]ny
proceeding.'').
\27\ 76 FR 22565, 22578 (Apr. 21, 2011) (``[A]n agency may
reconsider its methodologies and application of its statutory
requirements and may even completely reverse course, regardless of
whether a court has determined that its original regulation is
flawed, so long as the agency explains its bases for doing so.'')
(citations omitted); 75 FR 6883, 6884 (Feb. 12, 2010) (``The
Department [of Labor] has inherent authority to change its
regulations in accordance with the Administrative Procedure Act
(APA).''); 64 FR 60556, 60580 (Nov. 5, 1999) (NHTSA ``believe[s]
that nothing in [the statute] derogates our inherent authority to
make temporary adjustments in the requirements we adopt if, in our
judgment, such adjustments are necessary or prudent to promote the
smooth and effective achievement of the goals of the amendments.'').
\28\ See, e.g., 49 U.S.C. 32902, 32912. The Secretary's
authority under EPCA is delegated to NHTSA. 49 CFR 1.95(a), (j)
(delegating authority to NHTSA to exercise the authority vested in
the Secretary under chapter 329 of title 49 of the U.S. Code and
certain sections of the Energy Independence and Security Act of
2007, Public Law 110-140); see also 49 CFR 1.94(c). Moreover,
NHTSA's regulations provide that ``[t]he Administrator may initiate
any further rulemaking proceedings that he finds necessary or
desirable.'' 49 CFR 553.25.
\29\ See 49 U.S.C. 302(a) (stating the Secretary of
Transportation is governed by the transportation policy described in
part in 49 U.S.C. 13101(b), which provides that oversight of the
modes of transportation ``shall be administered and enforced to
carry out the policy of this section and to promote the public
interest''); 49 U.S.C. 322(a) (``The Secretary of Transportation may
prescribe regulations to carry out the duties and powers of the
Secretary. An officer of the Department of Transportation may
prescribe regulations to carry out the duties and powers of the
officer.''); 49 U.S.C. 105(c)(2) (directing the NHTSA Administrator
to ``carry out . . . additional duties and powers prescribed by the
Secretary''); 49 CFR 1.81(a)(3) (``Except as prescribed by the
Secretary of Transportation, each Administrator is authorized to . .
. [e]xercise the authority vested in the Secretary to prescribe
regulations under 49 U.S.C. 322(a) with respect to statutory
provisions for which authority is delegated by other sections in
this part.'').
\30\ 49 U.S.C. 32902(a), (f), (g)(2).
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Moreover, EPCA expressly details a procedure for NHTSA, as
delegated by the Secretary, to increase the CAFE civil penalty
rate.\31\ EPCA's delegation necessarily implies that NHTSA also has
authority to oversee the administration and enforcement of the rate
more generally.\32\ Indeed, NHTSA already promulgated a similar rule in
December 2016 establishing the first model years to which the increased
CAFE civil penalty rate would apply, which was not challenged and has
been held to be operative twice by the Second Circuit. The 2015 Act
also applies only to penalties that are ``assessed or enforced by an
Agency pursuant to Federal law.'' \33\ For the CAFE civil penalty rate
to be covered under the 2015 Act, NHTSA must have authority to assess
or enforce it, and thus inevitably the authority to oversee and
administer it as appropriate. To the extent there is any statutory
ambiguity, NHTSA is the expert agency on its CAFE program, has been
given authority to administer the Federal fuel economy program, and has
expert authority to interpret and apply the requirements of EPCA and
EISA, including the civil penalty provisions.
---------------------------------------------------------------------------
\31\ See 49 U.S.C. 32912(c).
\32\ See Thomas W. Merrill & Kristin E. Hickman, Chevron's
Domain, 89 Geo. L.J. 833, 876 (2001) (``All administrative agencies
have certain powers inherent in their status as units of the
executive branch; all executive officers have inherent authority to
interpret the law.'' (footnote omitted)).
\33\ 28 U.S.C. 2461 note, sec. 3(2)(B).
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If the August 31, 2020 decision of the United States Court of
Appeals for the Second Circuit in Case No. 19-2395 is vacated, NHTSA's
July 2019 rule will be reinstated, keeping the CAFE civil penalty rate
at $5.50. But turning to the merits of the Alliance Petition, NHTSA
will assume arguendo that the July 2019 rule remains vacated. Under
those circumstances, NHTSA agrees with the petitioner that the
reasoning of the Agency's December 2016 rule applies here. As NHTSA
said then, ``[i]f all the vehicles for a model year have already been
produced, then there is no way for their manufacturers to raise the
fuel economy level of those vehicles in order to avoid higher penalty
rates for non-compliance.'' \34\ At the time, NHTSA noted that by
November 2015, ``nearly all manufacturers subject to the CAFE standards
had completed both model years 2014 and 2015, and no further vehicles
in those model years were being produced in significant numbers.''
Likewise now, vehicles for model years 2019 and 2020 have largely if
not entirely been produced already, many manufacturers are already
selling model year 2021 vehicles, and since some manufacturers launch
subsequent model year vehicles as early as the spring, it is reasonable
to assume that model year 2022 vehicles will be launched in the coming
months. Applying the increased civil penalty rate to violations in
these model years ``would not result in additional fuel savings, and
thus would seem to impose retroactive punishment without accomplishing
Congress' specific intent in establishing the civil penalty provision
of the Energy Policy and Conservation Act (`EPCA').'' \35\
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\34\ 81 FR 95489, 95490 (Dec. 28, 2016).
\35\ 81 FR 95489, 95490 (Dec. 28, 2016).
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As NHTSA explained previously, ``the purpose of civil penalties for
non-compliance is to encourage manufacturers to comply with the CAFE
standards.'' \36\ And more generally, one of the stated purposes of the
2015 Act is to ``maintain the deterrent effect of civil monetary
penalties and promote compliance with the law.'' \37\ NHTSA agrees with
the petitioner that it would be inappropriate to apply the adjustment
to model years that could have no deterrence effect and promote no
additional compliance with the law.\38\
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\36\ 81 FR 95489, 95490 (Dec. 28, 2016) (citing 49 CFR 578.2)
(section addressing penalties states that a ``purpose of this part
is to effectuate the remedial impact of civil penalties and to
foster compliance with the law''); see generally, 49 U.S.C. 32911-
32912; United States v. General Motors, 385 F. Supp. 598, 604
(D.D.C. 1974), vacated on other grounds, 527 F.2d 853 (D.C. Cir.
1975) (``The policy of the Act with regard to civil penalties is
clearly to discourage noncompliance'').
\37\ 28 U.S.C. 2461 note, sec. 2(b)(2).
\38\ NHTSA's proposal to retain the $5.50 rate was published
weeks before the Second Circuit's decision vacating the indefinite
delay of the December 2016 rule. Accordingly, manufacturers were
aware of NHTSA's tentative reconsideration decision and could begin
planning accordingly, despite the December 2016 rule being in force.
---------------------------------------------------------------------------
In addition to failing to serve the purpose of the statutory
framework and the regulatory scheme, applying the increased civil
penalty rate to completed or largely completed model years would raise
serious retroactivity concerns. As NHTSA explained in the December 2016
rule, and in various other contexts, ``[r]etroactivity is not favored
in the law.'' \39\ NHTSA does not believe that it is appropriate to
impose a higher civil penalty rate for model years when doing so would
not have incentivized improvements to fuel economy--one of the core
purposes of EPCA.\40\ Moreover, as NHTSA noted in the December 2016
rule, ``[t]he decision not to apply the increased penalties
retroactively is similar to the approach taken by various other
[F]ederal [a]gencies in implementing the Federal Civil Penalties
Inflation Adjustment Act Improvements Act of 2015.'' \41\ For instance,
a fellow DOT agency concluded that applying an inflation adjustment
when a penalty had been proposed but not finalized ``would not induce
further compliance'' and would
[[Page 3021]]
thus be contrary to the goals of its specific enforcement statute.\42\
Accordingly, the agency announced it would not retroactively adjust the
proposed penalty amounts for violations that predated the inflation
adjustments.
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\39\ 81 FR 95489, 95490 n.8 (Dec. 28, 2016). The Supreme Court
has stated that ``congressional enactments . . . will not be
construed to have retroactive effect unless their language requires
this result.'' Landgraf v. USI Film Products, 511 U.S. 244, 280
(1994) (citing Bowen v. Georgetown University Hospital, 488 U.S.
204, 208 (1988)).
\40\ The 2015 Act provides that any increases to civil monetary
penalties only apply to penalties that ``are assessed after the date
the increase takes effect.'' 28 U.S.C. 2461 note, sec. 6. Therefore,
at a minimum, any adjustment to the CAFE civil penalty rate would
not apply to any penalties that have already been assessed.
\41\ See, e.g., Department of Justice, interim final rule with
request for comments: Civil Monetary Penalties Inflation Adjustment,
81 FR 42491 (June 30, 2016) (applying increased penalties only to
violations after November 2, 2015, the date of the Act's enactment);
Federal Aviation Administration, interim final rule: Revisions to
Civil Penalty Inflation Adjustment Tables, 81 FR 43463 (July 5,
2016) (applying increased penalties only to violations after August
1, 2016).
\42\ 81 FR 41453, 41454 (June 27, 2016) (Federal Motor Carrier
Safety Administration).
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For similar reasons--and applying the same reasoning as in the
December 2016 rule--NHTSA concludes that it would be inappropriate to
apply the increased civil penalty rate to model year 2021 as well. In
the December 2016 rule, NHTSA recognized the reality of the timeline
for the design, development, and production of new vehicles: ``because
of industry design, development, and production cycles, vehicle designs
(including drivetrains, which are where many fuel economy improvements
are made) are often fixed years in advance, making adjustments to fleet
fuel economy difficult without a lead time of multiple years.'' \43\ At
the time of the recent judicial decision indicating that the increase
would go into effect, the industry plans for what remains of model year
2020 and model year 2021 were ``fixed and inalterable.'' \44\
Accordingly, ``it is too late at this juncture to make significant
changes to those plans and avoid non-compliances.'' \45\
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\43\ 81 FR 95489, 95490 (Dec. 28, 2016).
\44\ 81 FR 95489, 95490 (Dec. 28, 2016).
\45\ 81 FR 95489, 95490 (Dec. 28, 2016).
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NHTSA's decision here also takes account of the industry's serious
reliance interests, having made design, development, and production
plans based on the $5.50 rate. And reliance upon that rate was
reasonable, as NHTSA reconsidered application of the 2015 Act by
proposing in 2018 that the 2015 Act did not apply and finalizing the
proposal in 2019.\46\ The Director of the Office of Management and
Budget--the Agency charged with overseeing implementation of the 2015
Act--also issued guidance concurring with NHTSA that the 2015 Act did
not apply to the CAFE penalty rate with the final rule, further
increasing the reasonableness of such reliance.
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\46\ 83 FR 13904 (Apr. 2, 2018); 84 FR 36007 (July 26, 2019).
---------------------------------------------------------------------------
The Alliance Petition observes that ``[m]anufacturers long ago made
their technology choices, locked in suppliers and production
requirements, developed credit purchase/sales strategies, and have
largely begun to implement their planned production runs for Model Year
2021''--all with the $5.50 rate in effect.\47\ The issue of credits is
particularly noteworthy as manufacturers can apply credits well beyond
one or two model years. Manufacturers can choose to carry back credits
to apply to any of three model years before they are earned or carry
them forward to apply to any of the five model years after they are
earned. With such a long window of potential applicability, it is
likely that manufacturers make long-term plans in determining how to
acquire and apply credits. Increasing the rate is likely to lead to an
increase in the price of credits, many of which have already been
planned around and negotiated and contracted for. For example, in a
recent securities filing, Fiat Chrysler Automobiles N.V. stated that it
``has accrued estimated amounts for any probable CAFE penalty based on
the $5.50 rate,'' but if the rate was applied to model year 2019, ``FCA
may need to accrue additional amounts due to increased CAFE penalties
and additional amounts owed under certain agreements for the purchase
of regulatory emissions credits'' and ``[t]he amounts accrued could be
up to [euro]500 million [nearly $600 million].'' \48\ To disregard the
industry's serious reliance interests would be unfair and improper.\49\
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\47\ Alliance Petition, at 4.
\48\ FCA N.V. Interim Report, 6-K (Current report) EX-99.1, at
41 (Sept. 30, 2020).
\49\ See, e.g., Encino Motorcars LLC v. Navarro, 136 S. Ct.
2117, 2125 (2016); FCC v. Fox Television Stations, Inc., 556 U.S.
502, 515-16 (2009).
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Accounting for the timeline of vehicle development comports with
NHTSA's broader approach to establishing fuel economy standards. As
NHTSA explained in the December 2016 rule, NHTSA ``includes product
cadence in its assessment of CAFE standards, by limiting application of
technology in its analytical model to years in which vehicles are
refreshed or redesigned.'' \50\ Not only does this consideration
function within the industry's long-established development cycle,
``NHTSA believes that this approach facilitates continued fuel economy
improvements over the longer term by accounting for the fact that
manufacturers will seek to make improvements when and where they are
most cost-effective.'' \51\
---------------------------------------------------------------------------
\50\ 81 FR 95489, 95491 (Dec. 28, 2016).
\51\ 81 FR 95489, 95491 (Dec. 28, 2016).
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In the December 2016 rule, NHTSA also analogized the need to
provide appropriate lead time for an increase in the civil penalty rate
to the EPCA provision requiring that when NHTSA amends a fuel economy
standard to make it more stringent, NHTSA must promulgate the standard
``at least 18 months before the beginning of the model year to which
the amendment applies.'' \52\ As NHTSA explained:
---------------------------------------------------------------------------
\52\ 49 U.S.C. 32902(a)(2).
---------------------------------------------------------------------------
The 18 months' notice requirement for increases in fuel economy
standards represents a congressional acknowledgement of the importance
of advance notice to vehicle manufacturers to allow them the lead time
necessary to adjust their product plans, designs, and compliance plans
to address changes in fuel economy standards. Similarly here, affording
manufacturers lead time to adjust their products and compliance plans
helps them to account for such an increase in the civil penalty amount.
In this unique case, the 18-month lead time for increases in the
stringency of fuel economy standards provides a reasonable proxy for
appropriate advance notice of the application of substantially
increased--here nearly tripled--civil penalties.\53\
---------------------------------------------------------------------------
\53\ 81 FR 95489, 95491 (Dec. 28, 2016).
---------------------------------------------------------------------------
Similarly, EPCA provides that an increase in the CAFE civil penalty
rate prescribed through the statutory process can also only take effect
``for the model year beginning at least 18 months after the regulation
stating the higher amount becomes final.'' \54\
---------------------------------------------------------------------------
\54\ See 49 U.S.C. 32912(c)(1)(D).
---------------------------------------------------------------------------
As in the December 2016 rule, NHTSA acknowledges that--while none
of the individual manufacturers that submitted supplemental information
indicated this to be the case--it is conceivable that some
manufacturers might be able to change production volumes of certain
lower- or higher-fuel-economy models for model years that have not
happened yet, which could help them to reduce or avoid CAFE non-
compliance penalties. However, NHTSA noted then and reiterates here
that compelling such a change by immediately adjusting the civil
penalty rate to apply to design decisions that are already locked in
would contravene a fundamental purpose of the CAFE program--namely, the
statutory requirement that fuel economy standards be attribute-based
and thus responsive to consumer demand.\55\ Affording some lead time to
manufacturers mitigates the concern that manufacturers will be forced
to disregard consumer demand, for example by having to restrict the
availability of vehicles that consumers want.
---------------------------------------------------------------------------
\55\ See 49 U.S.C. 32902(b)(3).
---------------------------------------------------------------------------
The Alliance Petition was submitted on October 2, 2020, and
requested that the adjustment apply beginning in model year 2022. While
NHTSA accepts that the petitioner believes that timeline provides a
sufficient and reasonable
[[Page 3022]]
lead time under the circumstances for its industry members to adjust
reasonably to the increased penalty rate and, in this interim final
rule, postpones the increased rate until that model year, NHTSA also
seeks comment on whether it should provide 18 months of lead time
before the increase becomes effective. Since NHTSA treats model years
as commencing in October of the calendar year prior to the model year,
an 18-month lead time would have the $14 penalty rate apply to the 2023
model year under this approach. Such an approach would be consistent
with the December 2016 rule's application of the adjustment beginning
in model year 2019.
NHTSA also recognizes the significant negative economic
consequences caused by the global outbreak of COVID-19. On May 19,
2020, President Trump issued Executive Order (E.O.) 13924, ``Regulatory
Relief to Support Economic Recovery,'' ordering agencies to address the
economic emergency caused by the pandemic ``by rescinding, modifying,
waiving, or providing exemptions from regulations and other
requirements that may inhibit economic recovery, consistent with
applicable law and with protection of the public health and safety,
with national and homeland security, and with budgetary priorities and
operational feasibility.'' \56\ Where such measures are made
temporarily, agencies must evaluate whether those measures would
``promote economic recovery if made permanent.''
---------------------------------------------------------------------------
\56\ 85 FR 31353, 31354 (May 22, 2020).
---------------------------------------------------------------------------
The Alliance Petition provided information about the significant
negative economic impact on the automotive sector caused by COVID-19.
All domestic auto factories were closed by April 2020, for the first
time since World War II, for approximately eight weeks.\57\ One analyst
described the second quarter of 2020 as ``likely to be the toughest in
modern history'' for the automotive sector, as companies ``grappled
with close to a zero revenue environment for a few months.'' \58\
Market projections as of September 2020 indicate that domestic vehicle
sales for all of 2020 will be down by as much as 26 percent from
2019.\59\ And beyond the immediate economic hit, this negative economic
impact is expected to have effects beyond 2020. One market analyst
predicts that the auto sector recovery will take several years and that
the market will not reach the sales that were previously projected for
2020 until at least 2025.\60\ The analyst also notes that because of
the COVID-19 effects on sales and revenue, manufacturers have been
forced to delay capital-intensive product actions to conserve
resources, with the greatest impact to showrooms in calendar years 2023
and 2024.\61\
---------------------------------------------------------------------------
\57\ Alliance Petition, at 5 (citing ALLIANCE FOR AUTOMOTIVE
INNOVATION, READING THE METER: SEPTEMBER 30, 2020, https://www.autosinnovate.org/wp-content/uploads/2020/10/Meter-State-of-the-Industry-9-30-2020.pdf at page 16).
\58\ Alliance Petition, at 5 (citing Michael Wayland, Five
Things Investors are Watching as GM and Ford Report Coronavirus-
Ravaged Earnings, CNBC (July 28, 2020 8:27 a.m.), https://www.cnbc.com/2020/07/28/what-to-watch-for-as-gm-and-ford-report-coronavirus-ravaged-earnings.html).
\59\ Alliance Petition, at 5 (citing ALLIANCE FOR AUTOMOTIVE
INNOVATION, READING THE METER: SEPTEMBER 23, 2020, https://www.autosinnovate.org/wp-content/uploads/2020/09/Meter-State-of-the-Industry-9-23-2020.pdf at pages 2-3).
\60\ Alliance Petition, at 5 (citing IHS MARKIT, IHS MARKIT
MONTHLY AUTOMOTIVE UPDATE--AUGUST 2020 (Aug. 14, 2020)).
\61\ Alliance Petition, at 5 (citing IHS MARKIT, AUTOMOTIVE
COVID-19 RECOVERY SERIES: THE OEM LANDSCAPE--FOCUS ON US (Sept. 8,
2020)).
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NHTSA also received information from five individual vehicle
manufacturers supplementing the Alliance Petition: Mercedes-Benz AG,
Jaguar Land Rover North America, LLC, FCA US LLC, Ford Motor Company,
and Ferrari North America, Inc.\62\ Each cited the ongoing pandemic in
concluding that applying the increased CAFE civil penalty rate prior to
model year 2022 would present a substantial hardship.
---------------------------------------------------------------------------
\62\ The companies have requested confidential treatment for
some of the business information included in each of their
individual submissions, pursuant to 49 CFR part 512. The publicly
available portions of their submissions can be found in the docket
for this action at www.regulations.gov.
---------------------------------------------------------------------------
Mercedes-Benz indicated that since March of this year, it has
experienced pandemic-related disruption of supply chains, production,
and work force, which has caused unforeseen financial loss for the
company and has created a tenuous financial climate. Jaguar Land Rover
indicated that due to the pandemic, it had to close showrooms and
manufacturing plants, and pause engineering work for months, resulting
in reduced sale revenue and the prevention of investment in future
fuel-efficient technology product programs. FCA and Ford detailed
similar negative economic impacts to their companies. Each company
argued that a decision to apply the civil penalty of $14 vehicles prior
to MY 2022 would only aggravate their financial hardships during this
economic emergency. These economic consequences are on top of those
NHTSA already projected for the increase from $5.50 to $14, including
the significant increase in costs to manufacturers, increased
unemployment, adverse effects on competition, and increases in
automobile imports.\63\ And these impacts come at a time where NHTSA
data shows that the number of fleets with credit shortfalls has
substantially increased, while the number of fleets generating credit
surpluses has decreased, indicating that more manufacturers--
particularly domestic manufacturers--are expected to need to pay
penalties going forward.\64\ The financial burden on domestic
manufacturers is exacerbated by the statutory prohibition against the
use of credits acquired by another automaker or transferred from
another fleet to offset any non-compliance with the domestic passenger
car minimum standard.\65\ Manufacturers have already begun to realize
this impact: One manufacturer paid over $77 million in civil penalties
for failing to meet the minimum domestic passenger car standard for
model year 2016 and over $79 million in model year 2017, the highest
civil penalties assessed in the history of the CAFE program. Ferrari
stated that applying the $14 rate before model year 2022 would save no
fuel, instead serving only as a wealth transfer to the manufacturers
that have surplus CAFE credits. Other facets of the CAFE program, such
as credit transfer caps, credit adjustment factors, availability and
price of tradeable credits, and credit banking, are causing similar
economic pressures.\66\
---------------------------------------------------------------------------
\63\ 84 FR 36007, 36023-36029 (July 26, 2019).
\64\ 84 FR 36007, 36029 (July 26, 2019); see also Alliance
Supplement, at 1-2.
\65\ 84 FR 36007, 36029 (July 26, 2019); 49 U.S.C. 32903(f)(2),
(g)(4); 49 CFR 536.9.
\66\ See Alliance Supplement, at 2-4.
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Based on the available information, NHTSA believes that applying
the adjustment to the CAFE civil penalty rate beginning in model year
2019 ``may inhibit economic recovery,'' while applying the adjustment
beginning in model year 2022 is an appropriate action to take ``for the
purpose of promoting job creation and economic growth.'' \67\
---------------------------------------------------------------------------
\67\ 85 FR 31353, 31354 (May 22, 2020).
---------------------------------------------------------------------------
If the August 31, 2020 decision of the United States Court of
Appeals for the Second Circuit in Case No. 19-2395 is vacated, NHTSA's
July 2019 rule will be reinstated, keeping the CAFE civil penalty rate
at $5.50. Regardless, NHTSA will continue to apply the $5.50 civil
penalty rate for violations that occur prior to model year 2022. If the
July 2019 rule remains vacated, per the Second Circuit's ruling, the
rate will be adjusted to $14 beginning in model year 2022 under this
interim final rule for all of the foregoing reasons. And if
[[Page 3023]]
NHTSA's determination in the July 2019 rule that the CAFE civil penalty
rate is not a ``civil monetary penalty'' under the 2015 Act is not
restored, NHTSA expects to make subsequent annual adjustments to the
rate as appropriate, pursuant to the 2015 Act and in accordance with
EPCA and EISA.\68\ As it did in the December 2016 rule, ``NHTSA
believes this approach appropriately harmonizes the two congressional
directives of adjusting civil penalties to account for inflation and
maintaining attribute-based, consumer-demand-focused standards, applied
in the context of the presumption against retroactive application of
statutes'' and particularly ``in the unique context of multi-year
vehicle product cycles.'' \69\
---------------------------------------------------------------------------
\68\ See Public Law 114-74, Sec. 701(b)(2).
\69\ 81 FR 95489, 95491 (Dec. 28, 2016).
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Either the Second Circuit's vacatur of the July 2019 final rule or
the promulgation of this interim final rule is sufficient to render
IPI's petition for reconsideration of the July 2019 final rule moot,
since NHTSA's July 2019 final rule is no longer operative. To the
extent that the petition is not moot, it is denied. As IPI noted, many
of the arguments raised in its petition were already presented to NHTSA
in its comments to the April 2018 NPRM.\70\ NHTSA adequately responded
to these comments in the July 2019 final rule and reaffirms those
points here.\71\ In accord with OMB's government-wide guidance on
implementing the statute, NHTSA sought clarifying guidance from OMB
and, as required by the 2015 Act, NHTSA requested OMB's concurrence in
its ``negative economic impact'' determination. OMB's interpretations
were consistent with those presented in NHTSA's NPRM, on which IPI
commented. And OMB's guidance did not contain any material
misstatements that undercut NHTSA's determinations in the July 2019
final rule.
---------------------------------------------------------------------------
\70\ IPI Petition, at 2.
\71\ See, e.g., 84 FR 36007, 36016, 36023, 36030 (July 26,
2019); see also 49 CFR 553.35(c) (``The Administrator does not
consider repetitious petitions.'').
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H. Interim Final Rule and Public Comment
Pursuant to the 2015 Act and 5 U.S.C. 553(b)(3)(B), NHTSA finds
that good cause exists for immediate implementation of this interim
final rule without prior notice and comment because it would be
impracticable to delay publication of this rule for notice and comment,
public comment is unnecessary, and doing so is in the public interest.
As explained above, manufacturers have a compelling need for ample
advance notice of an increase to the CAFE civil penalty rate in order
to modify their design, development, and production plans accordingly,
in order for the inflation adjustment to have its statutorily-intended
effect, and as a matter of fairness. It would be impracticable to
follow notice-and-comment procedures, further delaying a decision on
when the rate should be adjusted. That would leave in place an
increased rate applicable to model years 2019 and 2020, which are
complete, as well as model year 2021, which is underway. To the extent
any manufacturers would have been able to adjust their production
volumes in response to an increased penalty rate, NHTSA cannot
effectively compel them to do so because it would disregard consumer
demand, in contravention of NHTSA's statutory duties. Thus, there is
good cause for an immediate effective date to avoid any retroactive
application of an increased rate to model years for which manufacturers
could not plan to accommodate.
Public comment is also unnecessary. The 2015 Act provides that the
first adjustment shall be made through an interim final rulemaking.
Because this action is establishing the parameters of NHTSA's first
adjustment of the CAFE civil penalty rate, NHTSA is utilizing the
process provided by the 2015 Act. NHTSA also notes that pursuant to the
2015 Act, its initial catch-up adjustment was promulgated through an
interim final rule without public comment and, more significantly, the
December 2016 rule on which this action is largely based was also
promulgated without public comment.
The public interest also counsels towards NHTSA's issuance of an
interim final rule. As discussed above, the automotive industry has
faced unprecedented economic challenges arising from the COVID-19
national emergency situation.\72\ The entire manufacturing base was
effectively shut down mere months ago, and the industry still faces
severe supply chain constraints that have reduced automobile
production. Similarly, the general economic difficulties facing the
nation have significantly reduced vehicle sales, reducing revenue for
manufacturers. Applying the adjustment to the CAFE civil penalty rate
beginning in model year 2019 will result in serious harm, including
increased penalties for manufacturers with no corresponding societal
gain and could very well inhibit economic recovery by reducing the
capital manufacturers would have to invest in their product. Applying
the adjustment beginning in model year 2022 is an appropriate action to
take to avoid serious harm and ``for the purpose of promoting job
creation and economic growth.'' \73\
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\72\ See ``Proclamation on Declaring a National Emergency
Concerning the Novel Coronavirus Disease (COVID-19) Outbreak,''
Presidential Proclamation 9994 (Mar. 13, 2020), available online at
https://www.whitehouse.gov/presidential-actions/proclamation-declaring-national-emergency-concerning-novel-coronavirus-disease-covid-19-outbreak/.
\73\ 85 FR 31353, 31354 (May 22, 2020).
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Issuing an interim final rule now while the COVID-19 emergency is
ongoing is particularly in the public interest, and consistent with the
Executive order to promote the economic recovery. For these reasons,
NHTSA finds that notice-and-comment before the interim final rule is
promulgated would be impracticable, is unnecessary in this situation,
and is contrary to the public interest. NHTSA is nonetheless providing
an opportunity for interested parties to comment on the interim final
rule.\74\
---------------------------------------------------------------------------
\74\ Shortly prior to publication of this interim final rule,
NHTSA received two letters regarding this rulemaking. Both letters
are included in the docket for this matter and will be treated as
comments for appropriate consideration.
---------------------------------------------------------------------------
For these reasons, the Agency has also determined that it has good
cause under 5 U.S.C. 553(d)(3) and 5 U.S.C. 808(2) to issue this rule
with an immediate effective date. In addition, a delayed effective in
not required under 5 U.S.C 553(d)(2) because it ``relieves a
restriction'' by allowing additional time before the higher penalty
rate begins to apply.
I. Rulemaking Analyses and Notices
1. 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 has been considered a ``significant regulatory action'' under
Executive Order 12866. NHTSA also believes that this rulemaking is
``economically significant,'' as the Agency believes that the
difference in the amount of penalties received by the government as a
result of this rule, classified as ``transfers,'' are likely to exceed
$100 million in at least one of the years affected by this rulemaking.
As noted above, the Agency believes this rule will have a limited
effect, in any, on the composition of the fleet, as model years 2019
and 2020 are complete and model year 2021 is
[[Page 3024]]
already well under way.\75\ If the August 31, 2020 decision of the
United States Court of Appeals for the Second Circuit in Case No. 19-
2395 is not vacated, NHTSA would have no discretion in whether to make
the adjustment to $14 and thus no regulatory impact analysis is
required. If the August 31, 2020 decision of the United States Court of
Appeals for the Second Circuit in Case No. 19-2395 is vacated, NHTSA's
July 2019 rule keeping the CAFE civil penalty rate at $5.50 will be
reinstated, and as noted in that rule, it has no economic impact
because it merely maintains the existing penalty rate.
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\75\ NHTSA reaffirms the position on economic analysis taken its
July 2019 rule. 84 FR 36007, 36030 (July 26, 2019).
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2. Regulatory Flexibility Act
Pursuant to the Regulatory Flexibility Act (5 U.S.C. 601 et seq.,
as amended by the Small Business Regulatory Enforcement Fairness Act
(SBREFA) of 1996), whenever an agency is required to publish a notice
of proposed rulemaking or final rule, it must prepare and make
available for public comment a regulatory flexibility analysis that
describes the effect of the rule on small entities (i.e., small
businesses, small organizations, and small governmental jurisdictions).
Because this is an interim final rule, no regulatory flexibility
analysis is required. In any event, no regulatory flexibility analysis
is required if the head of an agency certifies the proposal will not
have a significant economic impact on a substantial number of small
entities.
Even though this is an interim final rule for which no regulatory
flexibility analysis is required, NHTSA has considered the impacts of
this notice under the Regulatory Flexibility Act and does not believe
that this rule would have a significant economic impact on a
substantial number of small entities. NHTSA requests comment on the
economic impact of this interim final rule on small entities.
The Small Business Administration's (SBA) regulations define a
small business in part as a ``business entity organized for profit,
with a place of business located in the United States, and which
operates primarily within the United States or which makes a
significant contribution to the U.S. economy through payment of taxes
or use of American products, materials or labor.'' 13 CFR 121.105(a).
SBA's size standards were previously organized according to Standard
Industrial Classification (``SIC'') Codes. SIC Code 336211 ``Motor
Vehicle Body Manufacturing'' applied a small business size standard of
1,000 employees or fewer. SBA now uses size standards based on the
North American Industry Classification System (``NAICS''), Subsector
336--Transportation Equipment Manufacturing. This action is expected to
affect manufacturers of motor vehicles. Specifically, this action
affects manufacturers from NAICS codes 336111--Automobile
Manufacturing, and 336112--Light Truck and Utility Vehicle
Manufacturing, which both have a small business size standard threshold
of 1,500 employees.
Though civil penalties collected under 49 CFR 578.6(h)(1) and (2)
apply to some small manufacturers, low volume manufacturers can
petition for an exemption from the Corporate Average Fuel Economy
standards under 49 CFR part 525. This would lessen the impacts of this
rulemaking on small business by allowing them to avoid liability for
penalties under 49 CFR 578.6(h)(2). Small organizations and
governmental jurisdictions will not be significantly affected as the
price of motor vehicles and equipment ought not change as the result of
this rule.
3. 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 [N]ational [G]overnment 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 rule will 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.
The reason is that this rule will generally apply to motor vehicle
manufacturers. Thus, the requirements of Section 6 of the Executive
order do not apply.
4. 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 rule is not expected to include a
Federal mandate, no unfunded mandate assessment will be prepared.
5. National Environmental Policy Act
The National Environmental Policy Act of 1969 (NEPA) \76\ directs
that Federal agencies proposing ``major Federal actions significantly
affecting the quality of the human environment'' must, ``to the fullest
extent possible,'' prepare ``a detailed statement'' on the
environmental impacts of the proposed action (including alternatives to
the proposed action).\77\ However, as a threshold question, Federal
agencies must assess whether NEPA applies to a particular proposed
activity or decision.\78\ If an agency determines that NEPA is
inapplicable, no further analysis is required pursuant to NEPA or the
Council on Environmental Quality's (CEQ) NEPA implementing
regulations.\79\
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\76\ 42 U.S.C. 4321-4347.
\77\ 42 U.S.C. 4332.
\78\ 40 CFR 1501.1(a).
\79\ 40 CFR parts 1500-1508. NHTSA has not yet revised its own
NEPA implementing regulations (49 CFR part 520) to conform with
CEQ's recently revised regulations. See 40 CFR 1507.3. However,
where an agency's existing NEPA procedures are inconsistent with the
CEQ's regulations, the CEQ regulations control. 40 CFR 1507.3(a). If
NEPA is inapplicable under 40 CFR 1501.1(a), then NHTSA's own NEPA
implementing regulations, promulgated pursuant to NEPA and CEQ
guidelines, similarly do not apply.
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In assessing whether NEPA applies, NHTSA has considered ``[w]hether
compliance with NEPA would be inconsistent with Congressional intent
expressed in another statute.'' \80\ In particular, NHTSA has
considered the Congressional intent with regard to both EPCA (as
amended by EISA) and the 2015 Act. As quoted above from the December
2016 rule, ``the purpose of civil penalties for non-compliance is to
encourage manufacturers to comply with the CAFE standards.'' \81\ And
more
[[Page 3025]]
generally, one of the stated purposes of the 2015 Act is to ``maintain
the deterrent effect of civil monetary penalties and promote compliance
with the law.'' \82\ Further, as part of the statutory scheme
established by EPCA and the 2015 Act, Congress requires NHTSA to
account for such issues as lead time, consumer demand, and negative
economic impacts of its actions (especially in light of COVID-19 and
the Executive order to combat the economic emergency caused by it).
Assuming arguendo that NHTSA is obligated to raise the civil penalty
rate to $14, the aforementioned factors, as well as legal doctrines of
retroactivity and fairness, all point to the necessity of delaying
effectiveness until at least model year 2022. Consideration of
environmental impacts is inconsistent with these obligations and
Congressional intent, and no further analysis pursuant to NEPA is
required.
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\80\ 40 CFR 1501.1(a)(3).
\81\ 81 FR at 95490.
\82\ 28 U.S.C. 2461 note, sec. 2(b)(2).
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Still, NHTSA ``may prepare an environmental assessment on any
action in order to assist agency planning and decision making.'' \83\
When a Federal agency prepares an environmental assessment, the CEQ
NEPA implementing regulations require it to (1) ``[b]riefly provide
sufficient evidence and analysis for determining whether to prepare an
environmental impact statement or a finding of no significant impact''
and (2) ``[b]riefly discuss the purpose and need for the proposed
action, alternatives . . . , and the environmental impacts of the
proposed action and alternatives, and include a listing of [a]gencies
and persons consulted.'' \84\ Generally, based on the environmental
assessment, the agency must make a determination to prepare an
environmental impact statement or ``prepare a finding of no significant
impact if the [a]gency determines, based on the environmental
assessment, not to prepare an environmental impact statement because
the proposed action will not have significant effects.'' \85\ Although
NHTSA concludes that a NEPA analysis is not required, this section may
serve as the Agency's Environmental Assessment (EA) and Finding of No
Significant Impact (FONSI) for this interim final rule.
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\83\ 40 CFR 1501.5(b).
\84\ 40 CFR 1501.5(c).
\85\ 40 CFR 1501.6(a).
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I. Purpose and Need
This interim final rule sets forth the purpose of and need for this
action. In response to the Alliance Petition, NHTSA considered whether
it is appropriate, pursuant to the Inflation Adjustment Act and EPCA
(as amended by EISA), to increase the CAFE civil penalty rate beginning
in model year 2022. The Alliance Petition cited cost, retroactivity,
and lead time as reasons why a delay in effectiveness until model year
2022 is required. NHTSA considered the findings of this EA prior to
deciding that the adjusted rate will go into effect beginning in model
year 2022.
II. Alternatives
NHTSA considered a range of alternatives for this action, including
the No Action Alternative of adjusting the CAFE civil penalty rate from
$5.50 to $14 beginning in model year 2019 (as originally established by
the December 2016 final rule), and the alternatives of applying the
adjustment beginning in model years 2020, 2021, 2022, and 2023. This EA
describes the potential environmental impacts associated with the
various model years in comparison with each other.
Upon consideration of the information presented in this EA, NHTSA
is deciding to apply the adjustment beginning in model year 2022 in
this interim final rule. NHTSA is seeking comment on whether to instead
apply the increase beginning in model year 2023, and commenters should
consider NEPA in their discussions of such an approach.
III. Environmental Impacts of the Action and Alternatives
NHTSA considered a range of alternatives for when to apply the
inflation adjustment in the CAFE civil penalty rate from $5.50 to $14.
For the reasons explained in the preamble, NHTSA anticipates no
differences in environmental impacts associated with the alternatives
of applying the adjustment beginning in model years 2019, 2020, 2021,
or 2022. Vehicles for model years 2019 and 2020 have largely if not
entirely been produced already, and many manufacturers are already
selling model year 2021 vehicles. Since some manufacturers launch
subsequent model year vehicles as early as the spring, it is reasonable
to assume that model year 2022 vehicles will be launched in the coming
months. It is impossible for manufacturers to change the design and
manufacture of vehicles that are already on the market, and the
logistical realities of the industry make it infeasible for
manufacturers to change course in the middle of a model year that is
already underway or just prior to the start of a model year. Imposing a
higher penalty on manufacturers for vehicles that, at this point,
cannot be manufactured with improved fuel economy and for which
adjustment in production volumes costs manufacturers significantly more
compared to the higher civil penalty rate would have no environmental
benefit--only incurring costs to those manufacturers (which are likely
to be passed on to consumers). In fact, imposing those costs on
manufacturers now may make it even harder financially for those
manufacturers to make further gains in fuel economy in the future, with
less capital to invest in fuel-saving technology, design, marketing of
the benefits, and production.
While this interim final rule adjusts the CAFE civil penalty rate
beginning no earlier than model year 2022, NHTSA is seeking comment on
whether to apply the adjustment beginning in model year 2023. Based on
the information included in NHTSA's Final EA in its July 2019 rule,
NHTSA tentatively expects that applying the adjustment beginning in
model year 2023 would have a minimal environmental impact. NHTSA seeks
comments on the environmental impacts of applying the adjustment
beginning in model year 2023.
IV. Agencies and Persons Consulted
NHTSA and DOT have consulted with OMB and the U.S. Department of
Justice and provided other Federal agencies with the opportunity to
review and provide feedback on this rulemaking.
V. Conclusion
NHTSA has reviewed the information presented in this EA and
concludes that the alternatives to adjust the CAFE civil penalty rate
beginning in model years 2019, 2020, 2021, or 2022 all would have the
same environmental impacts on the quality of the human environment (or
the differences among alternatives would be de minimis). Given the
practical realities of the design and production process, the
environmental impact of adjusting the CAFE civil penalty rate in model
year 2022 is expected to be negligible as compared to the No Action
Alternative. NHTSA has not made a final decision on whether to apply
the adjustment beginning in model year 2023 and seeks comments on the
environmental impacts of that alternative.
VI. Finding of No Significant Impact
I have reviewed this EA. Based on the EA, I conclude that
implementation of any of the action alternatives through model year
2022 (including the interim final rule) will not have a significant
effect on the human environment and that a ``finding of no significant
impact''
[[Page 3026]]
is appropriate. This statement constitutes the Agency's ``finding of no
significant impact,'' and an environmental impact statement will not be
prepared.\86\ NHTSA will review comments regarding applying the
adjustment beginning in model year 2023 as appropriate.
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\86\ 40 CFR 1501.6(a).
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6. Executive Order 12778 (Civil Justice Reform)
This rule does not have a preemptive or retroactive effect--
specifically, it modifies a regulation to avoid having a retroactive
effect. Judicial review of a rule based on this interim final rule may
be obtained pursuant to 5 U.S.C. 702.
7. Paperwork Reduction Act
In accordance with the Paperwork Reduction Act of 1980, NHTSA
states that there are no requirements for information collection
associated with this rulemaking action.
8. Privacy Act
Please note that anyone is able to search the electronic form of
all comments received into any of DOT's 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), or you may visit http://dms.dot.gov.
9. Congressional Review Act
Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.),
the Office of Information and Regulatory Affairs designated this action
as a ``major rule,'' as defined by 5 U.S.C. 804(2). For the reasons
explained above, NHTSA finds that notice and public comment are
impracticable, unnecessary, and contrary to the public interest. NHTSA
will submit a rule report to each House of the Congress and to the
Comptroller General of the United States.
List of Subjects in 49 CFR Part 578
Imports, Motor vehicle safety, Motor vehicles, Penalties, Rubber
and rubber products, Tires.
In consideration of the foregoing, 49 CFR part 578 is amended as
set forth below.
PART 578--CIVIL AND CRIMINAL PENALTIES
0
1. The authority citation for 49 CFR part 578 continues to read as
follows:
Authority: Pub. L. 101-410, 104 Stat. 890; Pub. L. 104-134, 110
Stat. 1321; Pub. L. 109-59, 119 Stat. 1144; Pub. L. 114-74, 129
Stat. 584; Pub. L. 114-94, 129 Stat. 1312; 49 U.S.C. 30165, 30170,
30505, 32308, 32309, 32507, 32709, 32710, 32902, 32912, and 33115;
delegation of authority at 49 CFR 1.81, 1.95.
0
2. Amend Sec. 578.6 by revising paragraph (h) to read as follows:
Sec. 578.6 Civil penalties for violations of specified provisions of
Title 49 of the United States Code.
* * * * *
(h) Automobile fuel economy. (1) A person that violates 49 U.S.C.
32911(a) is liable to the United States Government for a civil penalty
of not more than $43,280 for each violation. A separate violation
occurs for each day the violation continues.
(2) Except as provided in 49 U.S.C. 32912(c), beginning with model
year 2022, a manufacturer that violates a standard prescribed for a
model year under 49 U.S.C. 32902 is liable to the United States
Government for a civil penalty of $14, plus any adjustments for
inflation that occurred or may occur (for model years before model year
2022), multiplied by each .1 of a mile a gallon by which the applicable
average fuel economy standard under that section exceeds the average
fuel economy--
(i) Calculated under 49 U.S.C. 32904(a)(1)(A) or (B) for
automobiles to which the standard applies manufactured by the
manufacturer during the model year;
(ii) Multiplied by the number of those automobiles; and
(iii) Reduced by the credits available to the manufacturer under 49
U.S.C. 32903 for the model year.
Note 1 to paragraph (h)(2): If the August 31, 2020 decision of the
United States Court of Appeals for the Second Circuit in Case No. 19-
2395 is vacated, 49 CFR 578.6(h)(2), revised October 1, 2019, would
apply to all model years, instead of paragraph (h)(2) of this section.
In such instance, NHTSA would amend this section in accordance with
such vacatur.
Issued in Washington, DC, under authority delegated in 49 CFR
1.95, and 501.5.
James Clayton Owens,
Deputy Administrator.
[FR Doc. 2021-00278 Filed 1-12-21; 11:15 am]
BILLING CODE 4910-59-P