83 FR 13904 - Civil Penalties
DEPARTMENT OF TRANSPORTATION
National Highway Traffic Safety Administration Federal Register Volume 83, Issue 63 (April 2, 2018)
National Highway Traffic Safety Administration
Federal Register Volume 83, Issue 63 (April 2, 2018)
| Page Range | 13904-13919 | |
| FR Document | 2018-06550 |
[Federal Register Volume 83, Number 63 (Monday, April 2, 2018)] [Proposed Rules] [Pages 13904-13919] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2018-06550] ======================================================================= ----------------------------------------------------------------------- DEPARTMENT OF TRANSPORTATION National Highway Traffic Safety Administration 49 CFR Part 578 [Docket No. NHTSA-2018-0017] RIN 2127-AL94 Civil Penalties AGENCY: National Highway Traffic Safety Administration (NHTSA), Department of Transportation (DOT). ACTION: Notice of proposed rulemaking. ----------------------------------------------------------------------- SUMMARY: This document proposes a 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. The agency is proposing this civil penalty rate based on a tentative determination regarding the applicability of the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, and in accordance with the Energy Policy and Conservation Act of 1975 (EPCA) and the Energy Independence and Security Act of 2007 (EISA). DATES: Comments: Comments must be received by May 2, 2018. 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 FOR FURTHER INFORMATION CONTACT: Kerry Kolodziej, Office of Chief Counsel, NHTSA, telephone (202) 366-2992, facsimile (202) 366-3820, 1200 New Jersey Ave, SE, Washington, DC 20590. SUPPLEMENTARY INFORMATION: Table of Contents A. Executive Summary 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. Final Rule 3. Reconsideration and Request for Comments E. Proposed Revisions to the CAFE Civil Penalty Rate 1. NHTSA is Proposing to Retain the $5.50 CAFE Civil Penalty Rate Because the 2015 Act is Inapplicable 2. The Agency Proposes a Finding That Increasing the CAFE Civil Penalty Rate Will Result in Negative Economic Impact 3. Increasing the CAFE Civil Penalty Rate to $14 Would Have a ``Negative Economic Impact,'' Even If The EPCA Factors Were Not Mandatory 4. The CAFE Civil Penalty Rate is Capped At $10 F. 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. Executive Order 13771 A. Executive Summary NHTSA has almost forty years of experience in implementing the corporate average fuel economy (CAFE) program and its civil penalty component. This includes oversight and administration of the program's operation, how the automobile manufacturers respond to CAFE standards and increases, and the role of civil penalties in achieving the CAFE program's objectives. NHTSA has carefully considered these objectives in reconsidering the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (Inflation Adjustment Act or 2015 Act) and its application to the CAFE civil penalty statute NHTSA administers. As a result of this review, NHTSA is proposing to retain the current civil penalty rate in 49 U.S.C. 32912(b) of $5.50 per tenth of a mile per gallon for automobile manufacturers that do not meet applicable CAFE standards and are unable to offset such a deficit with compliance credits. NHTSA's proposal is based on its tentative determination that the CAFE civil penalty rate is not a ``civil monetary penalty,'' as defined by the 2015 Act, that must be adjusted for inflation. NHTSA's previous Federal Register notices on its inflation adjustments under the 2015 Act did not consider whether the CAFE civil penalty rate fit the definition of a ``civil monetary penalty'' subject to adjustment under the 2015 Act, instead [[Page 13905]] proceeding--without analysis--as if the 2015 Act applied to the CAFE civil penalty rate. After taking the opportunity to fully analyze the issue, NHTSA tentatively concludes that the CAFE civil penalty rate is not covered by the 2015 Act and seeks comment on four ways that the provisions of the 2015 Act could be best approached. First, civil penalties assessed for CAFE violations under Section 32912(b) are not a ``penalty, fine, or other sanction that'' is either ``a maximum amount'' or ``a specific monetary amount.'' Rather, the civil penalties under consideration here are part of a complicated market-based enforcement mechanism. Any potential civil penalties for failing to satisfy fuel economy requirements, unlike other civil penalties, are not determined until the conclusion of a complex formula, credit-earning arrangement, and credit transfer and trading program. In fact, the ultimate penalty assessed is based on the noncompliant manufacturer's decision, not NHTSA's, on whether and how to acquire and apply any credits that may be available to the manufacturer, and on the decisions of other manufacturers to earn and sell credits to a potentially liable manufacturer. In other words, what the noncompliant manufacturer pays is as much a function of market forces as it is the CAFE penalty rate. Moreover, NHTSA tentatively concludes that Congress did not intend for the 2015 Act to apply to this specialized civil penalty rate, which has longstanding, strict procedures previously enacted by Congress that limit NHTSA's ability to increase the rate. Congress specifically contemplated that increases to the CAFE civil penalty rate for manufacturer non-compliance with CAFE standards may be appropriate and necessary and included a mechanism in the statute for such increases. Critically, this mechanism requires the Secretary of Transportation to determine specifically that any such increase will not lead to certain specific negative economic effects. In addition, Congress explicitly limited any such increase to $10 per tenth of a mile per gallon.\1\ These restrictions have been in place since the statute was amended in 1978. Though Congress later amended the CAFE civil penalty provision in 2007, Congress did not amend either the mechanism for increases or the upper limit of an increased civil penalty under the statute. NHTSA seeks comment on this analysis. --------------------------------------------------------------------------- \1\ NHTSA tentatively concludes the 2015 Act also does not apply to the $10 cap. --------------------------------------------------------------------------- Second, in the alternative, NHTSA is proposing to keep the civil penalty rate the same in order to comply with EPCA, which must be read harmoniously with the 2015 Act. The 2015 Act confers discretion to the head of each agency to adjust the amount of a civil monetary penalty by less than the amount otherwise required for the initial adjustment, with the concurrence with the Director of the Office of Management and Budget, upon determining that doing so would have a ``negative economic impact'' In EPCA, Congress previously identified specific factors that NHTSA is required to consider before making a determination about the ``impact on the economy'' as a prerequisite to increasing the applicable civil penalty rate. NHTSA believes that these statutory criteria are appropriate for determining whether an increase in the CAFE civil penalty rate would have a ``negative economic impact'' for purposes of the 2015 Act. Under EPCA, NHTSA faces a heavy burden to demonstrate that increasing the civil penalty rate ``will not have a substantial deleterious impact on the economy of the United States, a State, or a region of a State.'' Specifically, in order to establish that the increase would not have that ``substantial deleterious impact,'' NHTSA would need to affirmatively determine that it is likely that the increase would not cause a significant increase in unemployment in a State or a region of a State; adversely affect competition; or cause a significant increase in automobile imports. In light of those statutory factors--and the absence of evidence to the contrary--NHTSA tentatively concludes it is likely that increasing the CAFE civil penalty rate would have a negative economic impact and thus is proposing not to adjust the rate under the 2015 Act. NHTSA is soliciting comments on this proposal, including whether the inflation adjustment would have a ``negative economic impact,'' and if so, how much less than the amount otherwise required should the penalty level be adjusted. Third, even if EPCA's statutory factors for increasing civil penalties are not applied, NHTSA has tentatively determined that the $14 penalty will lead to a negative economic impact that merits leaving the CAFE civil penalty rate at $5.50. Based on available information, including information provided by commenters, the effect of applying the 2015 Act to the CAFE civil penalty could potentially drastically increase manufacturers' costs of compliance beyond those contemplated when NHTSA established the current CAFE standards in 2012. NHTSA is soliciting comments on this tentative conclusion, including the level at which the CAFE civil penalty rate should be set. Fourth, even if the CAFE civil penalty rate is a ``civil monetary penalty'' under the 2015 Act and regardless of whether increasing it would have a ``negative economic impact,'' the increase is capped by statute at $10 by EPCA. NHTSA seeks comment on this alternative, including whether the $10 cap is itself a ``civil monetary penalty'' that is required to be adjusted under the 2015 Act. NHTSA is also proposing an inflationary adjustment to the general penalty for other violations of EPCA, as amended. B. Statutory and Regulatory Background NHTSA sets \2\ and enforces \3\ corporate average fuel economy (CAFE) standards for the United States light-duty vehicle fleet, and in doing so, assesses civil penalties against vehicle manufacturers that fall short of their compliance obligations and are unable to make up the shortfall with credits.\4\ The civil penalty amount for CAFE non- compliance was originally set by statute in 1975, and since 1997, has 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.\5\ The basic equation for calculating a manufacturer's civil penalty amount before accounting for credits, is as follows: --------------------------------------------------------------------------- \2\ 49 U.S.C. 32902. \3\ 49 U.S.C. 32911, 32912. \4\ 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. \5\ 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. --------------------------------------------------------------------------- (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). Without even accounting for costs of generating or purchasing credits, automakers have paid more than $890 million in CAFE civil penalties, up to and including model year (MY) 2014 [[Page 13906]] vehicles.\6\ Starting with the model year 2011, provisions in the CAFE program provided for credit transfers among a manufacturer's various fleets. 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. Manufacturers are required to notify NHTSA of the volumes of credits traded or sold, but the agency does not receive any information regarding total cost paid or cost per credit. NHTSA believes it is likely that credit purchases involve significant expenditures and that an increase in the penalty rate would correlate with an increase in such expenditures. The agency currently anticipates many manufacturers will face the possibility of paying larger CAFE penalties or incurring increased costs to acquire credits over the next several years than at present.\7\ --------------------------------------------------------------------------- \6\ Fine reporting for MY15 and newer vehicles was not reported at the time of this proposal. The highest CAFE penalty paid to date for a shortfall in a single fleet was $30,257,920, paid by DaimlerChrysler for its imported passenger car fleet in MY 2006. Since MY 2012, only Jaguar Land Rover and Volvo have paid civil penalties. See https://one.nhtsa.gov/cafe_pic/CAFE_PIC_Fines_LIVE.html. \7\ NHTSA's Projected Fuel Economy Performance Report7 indicates that many manufacturers are falling behind the standards for model year 2016 and increasingly so for model year 2017. --------------------------------------------------------------------------- NHTSA has long had authority under the Energy Policy and Conservation Act (EPCA) of 1975, Public Law 94-163, 508, 89 Stat. 912 (1975), to raise the amount of the penalty for CAFE shortfalls if it can make certain findings,\8\ as well as the authority to compromise and remit such penalties under certain circumstances.\9\ If NHTSA were to raise the penalty rate for CAFE shortfalls, the higher amount would apply to any manufacturer that owed them; the authority to compromise and remit penalties, however, is extremely limited and on a case-by- case basis. To date, NHTSA has never utilized its ability to compromise or remit a CAFE civil penalty. --------------------------------------------------------------------------- \8\ 49 U.S.C. 32912. \9\ 49 U.S.C. 32913. --------------------------------------------------------------------------- Recognizing the economic harm that CAFE civil penalties could have on the automobile industry and the economy as a whole, Congress capped any increase in the original statutory penalty rate at $10 per tenth of a mile per gallon. Further--and significantly--it provided that NHTSA may only raise CAFE penalties under EPCA if it concludes through rulemaking that the increase in the penalty rate both (1) will result in, or substantially further, substantial energy conservation for automobiles in model years in which the increased penalty may be imposed, and (2) will not have a substantial deleterious impact on the economy of the United States, a State, or a region of the State. A finding of ``no substantial deleterious impact'' may only be made if NHTSA determines that it is likely that the increase in the penalty (A) will not cause a significant increase in unemployment in a State or a region of a State, (B) adversely affect competition, or (C) cause a significant increase in automobile imports. Nowhere does EPCA define ``substantial'' or ``significant'' in the context of this provision. If NHTSA seeks to compromise or remit penalties for a given manufacturer, a rulemaking is not necessary, but the amount of a penalty may be compromised or remitted only to the extent (1) necessary to prevent a manufacturer's insolvency or bankruptcy, (2) the manufacturer shows that the violation was caused by an act of God, a strike, or a fire, or (3) the Federal Trade Commission certifies that a reduction in the penalty is necessary to prevent a substantial lessening of competition. NHTSA has never previously attempted to undertake this process. 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, without providing the opportunity for public comment ordinarily required under the Administrative Procedure Act, for the initial ``catch-up'' adjustment by July 1, 2016. The method of calculating inflationary adjustments in the 2015 Act differs substantially from the methods used in past inflationary adjustment rulemakings conducted pursuant to the Federal Civil Penalties Inflation Adjustment Act of 1990 (the 1990 Inflation Adjustment Act), Public Law 101-410. Civil penalty adjustments under the 1990 Inflation Adjustment Act were conducted under rules that sometimes required significant rounding of figures. The 2015 Act altered these rounding rules. Now, penalties are simply rounded to the nearest $1. Furthermore, the 2015 Act ``resets'' the inflation calculations by excluding prior inflationary adjustments under the 1990 Inflation Adjustment Act. To do this, the 2015 Act requires agencies to identify, for each civil monetary penalty, the year and corresponding amount(s) for which the maximum penalty level or range of minimum and maximum penalties was established (i.e., originally enacted by Congress) or last adjusted other than pursuant to the 1990 Inflation Adjustment Act. The Director of the Office of Management and Budget (OMB) provided guidance to agencies in a February 24, 2016 memorandum.\10\ For those penalties an agency determined to be ``civil monetary penalties,'' the memorandum provided guidance on how to calculate 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, the 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, the 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, [[Page 13907]] 2016 memorandum or an amount equal to 250% of the current penalty. --------------------------------------------------------------------------- \10\ 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 (last accessed December 14, 2017). --------------------------------------------------------------------------- Additionally, the 2015 Act gives agencies discretion to adjust the amount of a civil monetary penalty by less than otherwise required if the 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. --------------------------------------------------------------------------- \11\ Public Law 114-74, Sec. 701(c). --------------------------------------------------------------------------- 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. One of the adjustments NHTSA made at the time was raising the civil penalty rate for CAFE non-compliance from $5.50 to $14.\12\ NHTSA also indicated in that notice that the maximum penalty rate that the Secretary is permitted to establish for such violations would increase from $10 to $25, although this was not codified in the regulatory text.\13\ NHTSA also raised the maximum civil penalty for other violations of EPCA, as amended, to $40,000.\14\ --------------------------------------------------------------------------- \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\ For the reasons described in Section E.1, NHTSA is proposing to leave the maximum penalty rate that the Secretary is permitted to establish for such violations at $10. \14\ 81 FR 43524 (July 5, 2016). --------------------------------------------------------------------------- In response to the changes to the CAFE penalty provisions issued in the interim final rule, the Alliance of Automobile Manufacturers (Alliance) and the Association of Global Automakers (Global) jointly petitioned NHTSA for reconsideration (the Industry Petition).\15\ The Industry Petition raised concerns with the significant impact, which they estimated to be at least $1 billion annually, that the increased penalty rate would have on CAFE compliance costs. Specifically, the Industry Petition raised: 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.'' --------------------------------------------------------------------------- \15\ 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 Industry Petition. Both petitions, along with a supplement to the Industry Petition, can be found in Docket ID NHTSA-2016-0075 at www.regulations.gov. --------------------------------------------------------------------------- 2. Final Rule In response to the Industry Petition, NHTSA issued a final rule on December 28, 2016.\16\ 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. 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. NHTSA therefore 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 be made in response to the higher penalty rate. --------------------------------------------------------------------------- \16\ 81 FR 95489 (December 28, 2016). --------------------------------------------------------------------------- 3. Reconsideration and Request for Comments Before NHTSA's December 2016 final rule became effective, in January 2017, NHTSA took action to delay the effective date of the December 2016 CAFE civil penalties rule.\17\ As part of that action, and in light of CAFE compliance data submitted by manufacturers to NHTSA showing that many automakers would begin to fall behind in meeting their applicable CAFE standards beginning in model years 2016 and 2017,\18\ the agency requested public comment on the civil penalties--the first opportunity the public had to do so.\19\ The comment period closed on October 10, 2017. NHTSA received thirteen comments from various interested parties. --------------------------------------------------------------------------- \17\ 82 FR 8694 (January 30, 2017); 82 FR 15302 (March 28, 2017); 82 FR 29009 (June 27, 2017); 82 FR 32139 (July 12, 2017). The portions of the July 5, 2016 interim final rule not dealing with CAFE remain in effect and are expected to be finalized as part of NHTSA's 2018 inflationary adjustments. \18\ ``MYs 2016 and 2017 Projected Fuel Economy Performance Report,'' February 14, 2017, available at https://one.nhtsa.gov/cafe_pic/AdditionalInfo.htm \19\ 82 FR 32140 (July 12, 2017). --------------------------------------------------------------------------- Commenters included industry stakeholders and citizens. The array of commenters also included representatives from environmental groups, academia, and state governments such as attorneys general and environmental quality divisions. Industry stakeholders included comments from trade organizations and vehicle manufacturers.\20\ --------------------------------------------------------------------------- \20\ Comments on this notice of proposed rulemaking can be found at: https://www.regulations.gov/docket?D=NHTSA-2017-0059. --------------------------------------------------------------------------- Generally, commenters from environmental organizations, attorneys general of 10 states, and academia expressed support for upholding the December 2016 final rule. In addition, those supporting the $14 civil penalty generally asserted reconsidering the 2016 final rule was outside of NHTSA's authority. None of the comments received from commenters specifically addressed whether the CAFE civil penalty rate was a ``civil monetary penalty'' as defined by the 2015 Act. Vehicle manufacturers, either directly or via their respective representing organizations, also expressed support for the reconsideration of the 2016 final rule. These commenters provided an analysis of how increased CAFE civil penalties could potentially impact their efforts to develop and sell vehicles in the marketplace when faced with anticipated increases in CAFE stringencies. These commenters expressed support for using 2007 as the base year for calculating inflation adjusted increases in CAFE civil penalty amounts. Additionally, some commenters suggested civil penalty amounts of 47 dollars per 0.1 mpg and $8.47 per 0.1 mpg, the latter a 54% increase over the $5.50 per 0.1 mpg value. The California Air Resources Board (CARB) commented that NHTSA's considerations when adjusting a civil penalty rate under EPCA do not matter for purposes of making an adjustment under the 2015 Act. CARB also stated that in past joint documents, NHTSA did not indicate that the $5.50 civil penalty rate would have a negative economic impact. The Alliance and Global suggested that NHTSA's considerations when adjusting a civil penalty rate under EPCA are informative for purposes of making a determination of negative economic impact under the 2015 Act. The December 28, 2016 final rule is not yet effective, and during reconsideration, the applicable civil penalty rate was $5.50 per tenth of a [[Page 13908]] mile per gallon, which was the civil penalty rate prior to NHTSA's inflationary adjustment.\21\ NHTSA's delay of the final rule pending reconsideration did not affect the amount of any CAFE penalties that would have otherwise applied prior to Model Year 2019. --------------------------------------------------------------------------- \21\ 82 FR 32140 (July 12, 2017). If the December 28, 2016 final rule had gone into effect, the penalty rate would have remained $5.50 until MY 2019. --------------------------------------------------------------------------- E. Proposed Revisions to the CAFE Civil Penalty Rate In this notice of proposed rulemaking (NPRM), NHTSA is announcing that it has tentatively determined, upon reconsideration, that the 2015 Act should not be applied to the CAFE civil penalty formula provision found in 49 U.S.C. 32912 and is proposing to retain the current civil penalty rate of $5.50 per .1 of a mile per gallon.\22\ The agency is proposing this based on a legal determination that the CAFE civil penalty rate is not a ``civil monetary penalty'' as contemplated by the 2015 Act and that therefore the 2015 Act should not be applied to the NHTSA CAFE civil penalty formula. Additionally, in the alternative, NHTSA is proposing to maintain the current civil penalty rate based on a tentative finding that--in light of the factors Congress requires NHTSA to analyze in determining whether an increase in the civil penalty rate will have ``a substantial deleterious impact on the economy''--increasing the CAFE civil penalty rate would result in negative economic impact. Pursuant to OMB's guidance, NHTSA has consulted with OMB before proposing this reduced catch-up adjustment determination and submitted this notice of proposed rulemaking (NPRM) to the Office of Information and Regulatory Affairs (OIRA) for review. . In addition, if NHTSA determines that a reduced catch-up adjustment is appropriate in its final rule, it will seek OMB's concurrence before promulgating the rule, as required by the 2015 Act and confirmed by OMB's guidance. Finally, in this NPRM NHTSA has provided a series of tentative interpretations of the 2015 Act. In light of OMB's role in providing agencies guidance about the 2015 Act, NHTSA has requested OMB's views about the 2015 Act. --------------------------------------------------------------------------- \22\ NHTSA chose to reconsider its prior determination consistent with its statutory authority to administer the CAFE standards program and its inherent authority to do so efficiently and in the public interest. See, e.g., Tokyo Kikai Seisakusho, Ltd. v. United States, 529 F.3d 1352, 1360-61 (Fed. Cir. 2008) (``[A]dministrative agencies possess inherent authority to reconsider their decisions, subject to certain limitations, regardless of whether they possess explicit statutory authority to do so.''). OMB's February 2016 guidance confirms that each agency is ``responsible for identifying the civil monetary penalties that fall under the statutes and regulations [it] enforce[s].'' And, as repeatedly confirmed by courts, an agency may reconsider how it previously interpreted a statute, particularly when its updated interpretation ``closely fits the design of the statute as a whole and its object and policy.'' Good Samaritan Hosp. v. Shalala, 508 U.S. 402, 417-18 (1993) (cleaned up); see also Nat'l Classification Comm. v. United States, 22 F.3d 1174, 1177 (D.C. Cir. 1994) (``[A]n agency may depart from its past interpretation [of a statute] so long as it provides a reasoned basis for the change.'') (citing Motor Vehicles Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 42 (1983)); Torrington Extend-A-Care Employee Ass'n v. N.L.R.B., 17 F.3d 580, 589 (2d Cir. 1994) (similar). In the 2015 Act specifically, Congress did not prohibit or otherwise restrict agencies from reconsidering whether an initial catch-up adjustment is required or, if so, the magnitude of such an adjustment. Moreover, NHTSA's regulations provide broadly that ``[t]he Administrator may initiate any further rulemaking proceedings that he finds necessary or desirable.'' 49 CFR 553.25. --------------------------------------------------------------------------- NHTSA is also proposing to finalize the 2017 and 2018 inflationary adjustments for the maximum penalty for general CAFE violations in 49 U.S.C. 32912(a). 1. NHTSA Is Proposing To Retain the $5.50 CAFE Civil Penalty Rate Because the 2015 Act Is Inapplicable Upon reconsideration, NHTSA has tentatively determined that the 2015 Act is not applicable to the CAFE civil penalty formula. The penalty in 49 U.S.C. 32912(b) for a manufacturer that violates fuel economy standards is not a ``civil monetary penalty'' subject to inflationary adjustment under the 2015 Act. This reflects a change in NHTSA's position on this issue from when NHTSA previously adjusted the CAFE civil penalty rate from $5 to $5.50.\23\ Given that the current penalty figure has been in effect since it was set twenty years ago, NHTSA proposes to apply its new position on a prospective basis only from the effective date of the final rule of this rulemaking. As a result of this change, NHTSA is proposing to retain the $5.50 multiplier in the CAFE civil penalty formula. NHTSA requests comment on this issue. --------------------------------------------------------------------------- \23\ NHTSA may consider a separate rulemaking to consider whether the CAFE civil penalty rate should be $5. --------------------------------------------------------------------------- The 2015 Act requires agencies to adjust ``civil monetary penalties'' for inflation.\24\ A ```civil monetary penalty' means any penalty, fine, or other sanction'' that meets three requirements.\25\ First, the ``penalty, fine, or other sanction'' must be ``for a specific monetary amount as provided by Federal law'' or have ``a maximum amount provided for by Federal law.'' \26\ Second, the ``penalty, fine, or other sanction'' must be ``assessed or enforced by an agency pursuant to Federal law.'' \27\ Third, the ``penalty, fine, or other sanction'' must be ``assessed or enforced pursuant to an administrative proceeding or a civil action in the Federal courts.'' \28\ --------------------------------------------------------------------------- \24\ EPCA's use of the terminology ``civil penalty'' in 49 U.S.C. 32912(b) is not dispositive. The 2015 Act does not apply to all civil penalties, but rather ``civil monetary penalties,'' a defined term. \25\ 28 U.S.C. 2461 note, Federal Civil Penalties Inflation Adjustment Sec. 3(2). \26\ Id. \27\ Id. \28\ Id. --------------------------------------------------------------------------- The 2015 Act required the Office of Management and Budget (OMB) to ``issue guidance to agencies on implementing the inflation adjustments'' under the Act.\29\ OMB issued guidance on February 24, 2016 that stated: ``Agencies are responsible for identifying the civil monetary penalties that fall under the statutes and regulations they enforce'' and for determining the ``applicability of the inflation adjustment requirement to an individual penalty . . . .'' \30\ In none of NHTSA's July 2016 interim final rule, its December final rule, its July 2017 request for comments, nor its earlier adjustment from $5 to $5.50 did NHTSA specifically address whether the penalty for manufacturer violations of fuel economy standards in 49 U.S.C. 32912(b) is a ``civil monetary penalty'' subject to inflationary adjustment under the 2015 Act, or more generally, whether the 2015 Act should be made applicable to the penalty in Section 32912(b). Instead, it applied the 2015 Act without specific analysis of these issues. --------------------------------------------------------------------------- \29\ Id. Sec. 7(a). \30\ OMB Guidance at 2. OMB's guidance included the definition of ``civil monetary penalty'' applicable to the 2015 Act and explained: ``Agencies with questions on the applicability of the inflation adjustment requirement to an individual penalty, should first consult with the Office of General Counsel of the agency for the applicable statute, and then seek clarifying guidance from OMB if necessary.'' --------------------------------------------------------------------------- Upon evaluation, NHTSA has tentatively concluded the penalty for manufacturer violations of fuel economy standards in 49 U.S.C. 32912(b) is not a ``civil monetary penalty'' subject to adjustment under the 2015 Act. Upon similar evaluation, NHTSA also has tentatively concluded the $10 limit for such violations in 49 U.S.C. 32912(c)(1)(B) is not a ``civil monetary penalty'' subject to adjustment under the 2015 Act either. To be a ``civil monetary penalty,'' a penalty must meet all three criteria in the statutory definition.\31\ The penalty for manufacturer violations of fuel economy [[Page 13909]] standards, which includes a rate of $5.50 per .1 mile in its formula, does not meet the first set of criteria in the definition. It is not a ``penalty, fine, or other sanction'' that is either ``a specific monetary amount'' or ``a maximum amount.'' Instead, the statute outlines a process that NHTSA uses to determine a proposed penalty and that manufacturers use to assess their specific penalty. In particular, the $5.50 per .1 mile is merely a rate that goes into a complex, statutory formula used to calculate a variable penalty. Other factors, such as the manufacturer's credit earning arrangement and its participation in the credit trading program, are also integral parts of the multifaceted formula used to calculate a manufacturer's penalty for violations of the fuel economy standards in 49 U.S.C. 32912(b). Moreover, the decisions of other manufacturers to generate or not generate and sell or not sell credits will also influence the amount that a potentially liable manufacturer pays. NHTSA does not believe this complex formula and credit trading program generates the kind of simple civil penalty that lends itself to rote application of the 2015 Act. --------------------------------------------------------------------------- \31\ The three criteria in the definition are joined by the conjunctive ``and.'' --------------------------------------------------------------------------- Unlike other civil penalties under NHTSA's jurisdiction, the penalty for manufacturer violations of fuel economy standards is not for ``a maximum amount.'' One example of a penalty that is for ``a maximum amount'' is the ``general penalty'' in EPCA for violations of 49 U.S.C. 32911(a). That ``general penalty'' is ``a civil penalty of not more than $10,000 for each violation.'' \32\ This sets ``a maximum amount'' of $10,000 per violation. In other words, EPCA set ``a maximum amount'' of $10,000 per violation of requirements such as the requirement for manufacturers to submit pre-model year and mid-model year reports to NHTSA on whether they will comply with the average fuel economy standards.\33\ Accordingly, this civil penalty level was properly adjusted to $40,000 in NHTSA's interim final rule and is further adjusted here for 2017 and 2018.\34\ Violations of the Safety Act are also generally subject to ``a maximum amount'' of $21,000 per violation and $105 million for a related series of violations.\35\ The agency determines the appropriate amount of such penalties, up to the statutory maximum. On the other hand, the penalty for manufacturer violations of fuel economy standards in 49 U.S.C. 32912(b) does not provide ``a maximum amount'' of a penalty and instead contains only a complex process for determining a penalty. Setting aside any credits available to the manufacturer, the greater shortfall there is in a manufacturer's corporate average fuel economy, the greater the potential exists for the eventual application of a civil penalty for that shortfall. --------------------------------------------------------------------------- \32\ 49 U.S.C. 32912(a). Since the penalty in 49 U.S.C. 32912(a) is for a maximum amount, it is subject to inflationary adjustment under the 2015 Act. NHTSA's inflationary adjustment of that civil penalty in the July 2016 IFR to a maximum penalty of $40,000 was therefore appropriate. The penalty in 49 U.S.C. 32912(a) is subject to additional inflationary adjustment for 2017 and 2018. Applying the multiplier for 2017 of 1.01636, as specified in OMB's December 16, 2016 guidance, results in an adjusted maximum penalty of $40,654. Applying the multiplier for 2018 of 1.02041, as specified in OMB's December 15, 2017, results in an adjusted maximum penalty of $41,484. NHTSA is proposing to finalize that inflationary adjustment. \33\ See id.; 49 U.S.C. 32907(a). \34\ 81 FR 43524, 43526 (July 5, 2016). \35\ 49 U.S.C. 30165(a)(1). These civil penalty amounts were established by Section 24110 of the Fixing America's Surface Transportation Act (FAST Act), Public Law 114-94, after the 2015 Act was enacted, and thus were not adjusted in the interim final rule. --------------------------------------------------------------------------- The penalty for manufacturer violations of fuel economy standards also does not meet the definition of a ``civil monetary penalty'' because the fuel economy standards statute does not provide a ``specific monetary amount'' for manufacturer violations of fuel economy standards. In contrast to other provisions of the statute that provide for a specific amount on a per violation basis, often in the tens of thousands of dollars, section 32912(b) provides no specific amount. It only provides a $5.50 rate, which is one input in a market- based enforcement mechanism involving the calculation established in 49 U.S.C. 32912(b), the ultimate result of which--the penalty owed--is determined by how a manufacturer decides to use any available credits it has, or can acquire, to make up for the initial shortfall identified by NHTSA which in turn is based on the market price for credits which is dependent on the actions of other manufacturers. For a manufacturer that does not meet an applicable fuel economy standard, NHTSA sends what is known as a ``shortfall letter'' to the manufacturer. NHTSA can only do so after it knows the average fuel economy ``calculated under section 32904(a)(1)(A) or (B) of this title for automobiles to which the standard applies manufactured by the manufacturer during the model year.'' \36\ The fuel economy calculation is conducted by the Environmental Protection Agency (EPA). Following the end of a model year, manufacturers submit final model year reports to EPA. EPA reviews and verifies the information and values manufacturers provide before providing the reports to NHTSA, generally more than six months after the end of a model year. --------------------------------------------------------------------------- \36\ 49 U.S.C. 32912(b)(1). --------------------------------------------------------------------------- Once NHTSA receives the average fuel economy calculation from EPA, NHTSA must then determine whether the manufacturer's average fuel economy fails to meet the applicable average fuel economy standard.\37\ If so, the manufacturer has a shortfall. NHTSA then prepares a preliminary calculation of the manufacturer's potential civil penalty, which, as described above, varies depending on the relationship between the manufacturer's average fuel economy and the average fuel economy standards. NHTSA sends the manufacturer a shortfall letter with the preliminary calculation, which requires the manufacturer to respond by either submitting a plan on how it intends to make up the shortfall or by paying a penalty. --------------------------------------------------------------------------- \37\ 49 U.S.C. 32912(b)(1). --------------------------------------------------------------------------- NHTSA's preliminary calculation is determined by multiplying three numbers: (1) $5.50, (2) each tenth of a mile per gallon by which the average fuel economy falls short of the applicable average fuel economy standard, and (3) the number of automobiles manufactured by the manufacturer during the model year.\38\ That calculation does not yield a final civil penalty amount because the statute requires that calculation to include a reduction ``by the credits available to the manufacturer under section 32903 of this title for the model year.'' \39\ --------------------------------------------------------------------------- \38\ 49 U.S.C. 32912(b)(2). \39\ 49 U.S.C. 32912(b)(3). --------------------------------------------------------------------------- However, applying the reduction for the number of available credits is not a matter of simple mathematics because manufacturers have control over both the amount of credits available to them and the use of their credits. If a manufacturer's performance for a given fleet does not meet the applicable standard, then the manufacturer must elect how to satisfy its shortfall. Whether and to what extent the penalty calculation is reduced ``by the credits available to the manufacturer under section 32903 of this title for the model year'' (i.e., how to deal with a non-compliance) is ultimately determined by the manufacturer. Only after this step in the process outlined in section 32912 occurs is the penalty calculation complete. Each manufacturer controls the allocation of its own credits, if credits are available.\40\ A manufacturer that earned credits in a compliance category before MY 2008 [[Page 13910]] may apply those credits to that same compliance category for the three model years prior to, and three model years after, the year in which the credits were earned.\41\ A manufacturer that earned credits in a compliance category during and after MY 2008 may apply those credits to the same compliance category for three model years prior to, and five model years after, the year in which the credits were earned.\42\ Manufacturers instruct NHTSA on how they wish to allocate their credits, or account for shortfalls.\43\ --------------------------------------------------------------------------- \40\ See 49 CFR 536.5(c), (d)(2), (6). \41\ Id. 536.6(a). \42\ Id. 536.6(b). \43\ See 49 CFR 536.5(d)(2), (6). --------------------------------------------------------------------------- Only once NHTSA hears back from the manufacturer on how it wishes to satisfy its shortfall does NHTSA know the specific civil penalty that the manufacturer owes for falling short of the applicable average fuel economy standard. In other words, the manufacturer's decision regarding use of credits is one of the several inputs in the complex formula set forth in the fuel economy standards statute, which ultimately produces the civil penalty for a manufacturer's violation of fuel economy standards. In sum, the statute describes a process to determine a penalty amount, but does not itself provide for a penalty, fine or sanction that is ``for a specific amount.'' Instead,, due to additional flexibilities of credit transfers and trades, a manufacturer determines the amount of the civil penalty that is actually owed.\44\ Considering this framework, the formula established under 49 U.S.C. 32912(b) and the variable amounts that result from application of the formula, are not a ``specific monetary amount'' of a penalty for manufacturer violations of fuel economy standards subject to adjustment pursuant to the 2015 Act. --------------------------------------------------------------------------- \44\ Public Law 110-140, Title I, 104(a), 121 Stat. 1501 (2007). --------------------------------------------------------------------------- NHTSA must conduct a preliminary calculation for each of the manufacturer's fleets. CAFE standards are fleet-wide standards that apply to the vehicles a manufacturer produced for sale in each of three compliance categories: passenger cars manufactured domestically, imported passenger cars, and light trucks.\45\ Within specified limits, EISA permitted manufacturers to transfer credits across fleets. For example, credits earned for a manufacturer's domestic passenger fleet may be transferred to its domestic light-truck fleet. Likewise, EISA permitted manufacturers to sell (i.e., trade) their credits to other manufacturers. The ability to trade credits with another manufacturer, authorized for the first time by EISA in 2007, introduced a new level of complexity that further differentiated civil penalties for violations of fuel economy requirements from other types of civil penalties. This added wrinkle further supports NHTSA's current understanding that the statutory CAFE civil penalty process is not included within the scope of the 2015 Act. --------------------------------------------------------------------------- \45\ Id. 32902-04. --------------------------------------------------------------------------- Since manufacturers control the use of their available credits, NHTSA has no way of determining on its own the amount of a penalty that a manufacturer must pay, or even if a manufacturer must pay any penalty at all.\46\ The options are plentiful.\47\ A manufacturer can choose to use no credits and pay a penalty. A manufacturer can choose to use credits from the same compliance category and pay no penalty. A manufacturer can choose to use some credits from the same compliance category and pay a smaller penalty. A manufacturer can choose to transfer credits from another compliance category and pay no penalty. A manufacturer can choose to transfer some credits from another compliance category and pay a smaller penalty. A manufacturer can choose to purchase credits from another manufacturer and pay no penalty. A manufacturer can choose to purchase some credits from another manufacturer and pay a smaller penalty. A manufacturer can combine credits from the same compliance category and/or transfer credits from another compliance category and/or purchase credits from another manufacturer and pay no penalty or a smaller penalty. --------------------------------------------------------------------------- \46\ NHTSA is able to request supplemental reports and audit a manufacturer's compliance plan, see, e.g., 49 CFR 537.8, but ultimately, it is the manufacturer's decision on how to use the credits available to it. \47\ See 49 U.S.C. 32903. --------------------------------------------------------------------------- Those are just the options for credits already earned. A manufacturer can also elect not to pay a penalty or pay a smaller penalty by using a ``carryback'' plan, in which the manufacturer applies credits it expects to earn in future model years.\48\ --------------------------------------------------------------------------- \48\ See 49 CFR 536.5(d). --------------------------------------------------------------------------- There are additional considerations that strongly supports NHTSA's conclusion that the 2015 Act should not be applied to the CAFE civil penalty. Congress already adopted a specific scheme for increasing the civil penalty in 49 U.S.C. 32912(b) that requires a far more intensive and restrictive process than the summary approach in the 2015 Act. First, EPCA placed an absolute limit on such an increase to ``not more than $10 for each .1 of a mile a gallon.'' \49\ Moreover, Congress set a high bar for adopting an increase. Specifically: --------------------------------------------------------------------------- \49\ 49 U.S.C. 32912(c). The Secretary of Transportation shall prescribe by regulation a higher amount for each .1 of a mile a gallon to be used in calculating a civil penalty under subsection (b) of this section, if the Secretary decides that the increase in the penalty--(i) will result in, or substantially further, substantial energy conservation for automobiles in model years in which the increased penalty may be imposed; and (ii) will not have a substantial deleterious impact on the economy of the United States, a State, or a region of a State.\50\ --------------------------------------------------------------------------- \50\ 49 U.S.C. 32912(c)(1)(A). Further, the Secretary must decide that an increase will not have a substantial deleterious impact ``only when the Secretary decides that it is likely that the increase in the penalty will not--(i) cause a significant increase in unemployment in a State or a region of a State; (ii) adversely affect competition; or (iii) cause a significant increase in automobile imports.'' \51\ These factors, which appear to demonstrate Congress' concern that the CAFE civil penalties program could damage the economy, are far more specific and tailored to the CAFE program than any provisions in the 2015 Act. Although it is not specifically identified in the statute, the legislative history indicates that the ``impact'' of concern relates to ``the automobile industry.'' \52\ In its report on EPCA's original fuel economy provisions in 1975, the House Commerce Committee recognized: --------------------------------------------------------------------------- \51\ Id. 32912(c)(1)(C). \52\ ``Energy Initiatives of the 95th Congress,'' S. Rep. No. 96-10, at 175-76 (1979) (``Representative Dingell (D-Mich.), concerned that increasing the penalties could lead to layoffs in the automobile industry, insisted that raising the penalties be contingent upon findings by the Secretary of Transportation that increasing the penalties would achieve energy savings and would not be harmful to the economy.''). The automobile industry has a central role in our national economy and that any regulatory program must be carefully drafted so as to require of the industry what is attainable without either imposing impossible burdens on it or unduly limiting consumer choice as to capacity and performance of motor vehicles.\53\ --------------------------------------------------------------------------- \53\ H.R. Rep. No. 94-340, at 87 (1975). See also 121 Cong. Rec. 18675 (June 12, 1975) (statement of Rep. Sharp) (``[W]e recognize that we have serious unemployment in the American auto industry and we want to preserve this important segment of the economy.''). Notably, Congress was aware that inflation would effectively reduce the real value of the civil penalty rate over time--the CBO Director and NHTSA Administrator recognized that the civil penalty structure under 1975 EPCA [[Page 13911]] ``actually become less stringent over time . . . as inflation erodes [the penalties'] effect''--yet chose to require this strict procedure to increase the rate without allowing for inflationary adjustments to the multiplier in the formula. In contrast, Congress expressly purposes of the 2015 Act (and its predecessor) ``to establish a mechanism that shall . . . maintain the deterrent effect of civil monetary penalties . . . .'' The omission of any inflation adjustment procedure makes sense in light of Congress' requirement for NHTSA to continually increase fuel economy standards to maximum feasible levels.\54\ Rather than increase the penalty each year, Congress directed NHTSA to determine whether fuel economy standards should be increased, because the goal of the CAFE standards is to increase fuel economy not punish manufacturers, as with other penalties subject to the 2015 Act. Requiring mandatory penalty inflation adjustments and continuous fuel standard increases would multiply the amount assessed against manufacturers in a way that does not occur with other types of penalties. --------------------------------------------------------------------------- \54\ 49 U.S.C. 32902(a). --------------------------------------------------------------------------- Congress also recognized the need for lead time in increasing the civil penalty for violations of fuel economy standards by specifying that an increase ``is effective for the model year beginning at least 18 months after the regulation stating the higher amount becomes final.'' \55\ --------------------------------------------------------------------------- \55\ Id. 32912(c)(1)(D). --------------------------------------------------------------------------- Congress additionally recognized the need for extensive input from the public and other parts of the Government before any such increase. It required that: The Secretary shall publish in the Federal Register a proposed regulation under this subsection and a statement of the basis for the regulation and provide each manufacturer of automobiles a copy of the proposed regulation and the statement. The Secretary shall provide a period of at least 45 days for written public comments on the proposed regulation. The Secretary shall submit a copy of the proposed regulation to the Federal Trade Commission and request the Commission to comment on the proposed regulation within that period. After that period, the Secretary shall give interested persons and the Commission an opportunity at a public hearing to present oral information, views, and arguments and to direct questions about disputed issues of material fact to--(A) other interested persons making oral presentations; (B) employees and contractors of the Government that made written comments or an oral presentation or participated in the development or consideration of the proposed regulation; and (C) experts and consultants that provided information to a person that the person includes, or refers to, in an oral presentation.\56\ --------------------------------------------------------------------------- \56\ Id. 32912(c)(2). These extensive, statutorily-mandated procedures specifically applicable to increases in the penalty rate in 49 U.S.C. 32912(b) are in stark contrast to the procedures applicable to the 2015 Act. For the initial catch-up adjustment, the 2015 Act specified that agencies should use an interim final rule.\57\ For subsequent annual adjustments, the 2015 Act specified that agencies ``shall make the adjustment notwithstanding section 553 of title 5, United States Code,'' which contain the Administrative Procedure Act's requirements for rulemaking.\58\ --------------------------------------------------------------------------- \57\ 28 U.S.C. 2461 note, Federal Civil Penalties Inflation Adjustment Sec. 4(b)(1)(A). \58\ Id. Sec. 4(b)(2). --------------------------------------------------------------------------- Finally, before Congress passed the 2015 Act, the CBO provided an assessment of the revenue that inflation adjustments pursuant to the 2015 Act would provide the Federal government. CBO determined that all inflation adjustments pursuant to the 2015 Act (across every Federal agency) would provide in total $1.3 billion of revenue across ten years.\59\ Commenters indicate that adjusting the civil penalty rate to $14 could cost up to $1 billion annually in penalty payments.\60\ Across ten years, the penalty payments under this provision of the statute alone could dwarf CBO's contemporaneous estimate of the 2015 Act's effect on revenues from all civil monetary penalties across all statutes. The drastic difference between CBO's estimate of revenue from all inflation adjustments across ten years and the potential revenue from this adjustment alone further suggests Congress had not considered the civil penalty rate subject to the 2015 Act's inflation adjustment. This is bolstered by the rounding rule adopted by Congress. The 2015 Act states, ``[a]ny increase determined under this subsection shall be rounded to the nearest multiple of $1.'' \61\ This rounding rule suggests the Act was not intended to apply to the small dollar value CAFE civil penalty rate, since it would not serve a de minimis rounding function. As a practical matter, if the rounding rule applied to a small dollar penalty rate, it would prevent any annual inflationary increases (absent extraordinary inflation). --------------------------------------------------------------------------- \59\ See ``Estimate of the Budgetary Effects of H.R. 1314, the Bipartisan Budget Act of 2015, as reported by the House Committee on Rules on October 27, 2015,'' at 4, available at https://www.cbo.gov/sites/default/files/114th-congress-2015-2016/costestimate/hr1314.pdf. Title VII of the Bipartisan Budget Act of 2015 includes three sections and the revenue estimate was for title VII in its entirety. Section 701 is the 2015 Act. The other two sections are the rescission of money deposited or available in two funds which CBO recognized would decrease direct government spending. Therefore, the 2015 Act is likely the only portion of title VII to provide revenue, and the CBO's revenue estimate for title VII can be understood as a revenue estimate for the 2015 Act. \60\ See, e.g., Comment ID NHTSA-2017-0059-0019, available at https://www.regulations.gov/. \61\ 28 U.S.C. 2461 note, Federal Civil Penalties Inflation Adjustment Sec. 5(a). --------------------------------------------------------------------------- NHTSA believes that applying the 2015 Act to the penalty in 49 U.S.C. 32912(b) would evade the statutory safeguards and limitations directly applicable to that penalty, in contrast to Congress's original awareness of penalty rate adjustments, and could result in the imposition of a potentially massive increase in civil penalties, in contrast to contemporaneous, pre-enactment evidence about the effect of the 2015 Act. NHTSA has previously sought comment on related issues, but NHTSA believes it is important to provide the public with an opportunity to provide additional comments in light of NHTSA's analysis. Accordingly, NHTSA requests comments on this analysis. For these reasons, NHTSA tentatively concludes that it is not appropriate to apply the 2015 Act and is proposing to retain the $5.50 rate in the CAFE civil penalty. 2. The Agency Tentatively Finds That Increasing the CAFE Civil Penalty Rate Will Result in Negative Economic Impact NHTSA is proposing to retain the CAFE civil penalty rate of $5.50 per tenth of a mile per gallon, even if one were to assume that the penalties are subject to the 2015 Act, because NHTSA tentatively concludes that, in light of the statutory requirements in EPCA for raising the penalty rate, applying the increase would lead to a ``negative economic impact'' under the 2015 Act. The 2015 Act states, ``[a]ny increase determined under this subsection shall be rounded to the nearest multiple of $1.'' \62\ NHTSA requests comment on whether, and if so, how, this rounding rule should apply if NHTSA ultimately concludes that adjusting the $5.50 CAFE civil penalty rate upwards would have a ``negative economic impact.'' Specifically, does the 2015 Act rule require a $5.50 civil penalty rate, if finalized, to be rounded to $6? Commenters should consider the potential application of the rounding rule to the initial catch-up adjustment, [[Page 13912]] as well as the 2017 and 2018 adjustments and future annual adjustments. Commenters should also consider the relationship, if any, between the rounding rule and the criteria required to be met to raise the civil penalty under EPCA. --------------------------------------------------------------------------- \62\ 28 U.S.C. 2461 note, Federal Civil Penalties Inflation Adjustment Sec. 5(a). --------------------------------------------------------------------------- a. Negative Economic Impact i. ``Negative Economic Impact'' Is Not Defined Under the 2015 Inflation Adjustment Act, NHTSA, under authority delegated by the Secretary, may adjust the amount of a civil monetary penalty by the less than the amount otherwise required for the ``catch- up adjustment'' upon determining in a final rule, after notice-and comment, that increasing the civil monetary penalty by the otherwise required amount will have a ``negative economic impact,'' or the social costs of increasing the civil monetary penalty by the otherwise required amount outweigh the benefits.\63\ In either case, the Director of the Office of Management and Budget must concur with the agency's determination. --------------------------------------------------------------------------- \63\ 28 U.S.C. 2461 note, Federal Civil Penalties Inflation Adjustment Sec. 4(c)(1). --------------------------------------------------------------------------- To determine whether increasing the CAFE civil penalty rate by the amount calculated under the inflation adjustment formula would have a ``negative economic impact,'' NHTSA must first establish the meaning of ``negative economic impact.'' The statute does not define ``negative economic impact.'' OMB issued a memorandum providing guidance to the heads of executive departments and agencies on how to implement the Inflation Adjustment Act, but the guidance does not define ``negative economic impact'' either.\64\ --------------------------------------------------------------------------- \64\ 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 at https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/memoranda/2016/m-16-06.pdf. --------------------------------------------------------------------------- ii. How To Interpret ``Negative Economic Impact'' In interpreting ``negative economic impact,'' NHTSA cannot just consider the Inflation Adjustment Act in isolation: statutory interpretation is not conducted in a vacuum.\65\ ``It is a fundamental canon of statutory construction that the words of a statute must be read in their context and with a view to their place in the overall statutory scheme.'' \66\ --------------------------------------------------------------------------- \65\ Davis v. Michigan Dep't of Treasury, 489 U.S. 803, 809 (1989). \66\ Id. (citing United States v. Morton, 467 U.S. 822, 828 (1984)). --------------------------------------------------------------------------- Accordingly, NHTSA must interpret Congress' Inflation Adjustment Act in light of the longstanding CAFE civil penalty structure previously enacted by Congress. Interpreting the Inflation Adjustment Act in context is particularly important in determining the appropriate adjustment to make to the CAFE civil penalty rate given the unique nature of the CAFE civil penalties program. For example, in contrast to other federal civil penalty programs, the CAFE statute requires a minimum of eighteen months' lead time in advance of a model year before a higher civil penalty amount can become effective.\67\ Congress mandated this interval because ``manufacturers' product and compliance plans are difficult to alter significantly for years ahead of a given model year.'' \68\ Indeed, ``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.'' \69\ For similar reasons, when DOT amends a fuel economy standard to make it more stringent, that new standard must be promulgated ``at least 18 months before the beginning of the model year to which the amendment applies.'' \70\ --------------------------------------------------------------------------- \67\ 49 U.S.C. 32912(c)(1)(D). \68\ 81 FR 95491 (December 28, 2016). \69\ Id. \70\ 49 U.S.C. 32902(a)(2). --------------------------------------------------------------------------- CAFE civil penalties are also atypical in that they follow a prescribed formula that can only be compromised or remitted by NHTSA in exceptionally limited circumstances.\71\ In practice, therefore, any increase in the CAFE civil penalty rate would apply to all non- compliant manufacturers, regardless of the circumstances, and in turn, would likely increase the price of credits.\72\ Contrast this constrained structure with NHTSA's general civil penalty authority, which allows the Secretary to determine or compromise the amount of a civil penalty and delineates multiple factors for the Secretary to consider in making such a determination, including the nature, circumstances, extent, and gravity of the violation.\73\ --------------------------------------------------------------------------- \71\ 49 U.S.C. 32913 (authorizing the Secretary to ``compromise or remit the amount of civil penalty imposed'' under CAFE ``only to the extent'' (1) necessary to prevent a manufacturer's insolvency or bankruptcy; (2) the manufacturer shows that the violation was caused by an act of God, a strike, or a fire; or (3) the Federal Trade Commission certifies that a reduction is necessary to prevent a substantial lessening of competition). NHTSA has never attempted to utilize this provision to compromise or remit a CAFE civil penalty. \72\ See H.R. Rep. No. 95-1751, at 112 (1978) (Conf. Rep.) (``[T]he higher penalty . . . will be the same for all manufacturers when adopted. . ..''). \73\ 49 U.S.C. 30165(b)-(c). --------------------------------------------------------------------------- The principles underlying other traditional canons of statutory interpretation further support NHTSA's proposed approach. For example, statutes that relate to the same or to similar subjects are in pari materia. Such statutes should be construed together, even if they do not expressly reference each other or were passed at different times, unless a contrary intent is clearly expressed by Congress. Here, both the inflationary adjustment statute and the relevant provisions of the CAFE statute involve civil penalties and must be read in pari materia.\74\ And when one of the statutes is generalized and passed later--like the Inflation Adjustment Act--it cannot be read to implicitly repeal an earlier, more specific statute--like EPCA's establishment of the CAFE civil penalties structure.\75\ This approach to statutory interpretation is consistent with NHTSA's past practice.\76\ --------------------------------------------------------------------------- \74\ See Wisconsin Cent. Ltd. v. United States, 194 F. Supp. 3d 728, 738 (N.D. Ill. 2016), aff'd, 856 F.3d 490 (7th Cir. 2017) (```[C]onceptual similarity' . . . is precisely the point of the in pari materia canon: `statutes addressing the same subject matter generally should be read as if they were one law,' with the traditional tools of statutory interpretation applied accordingly. . . . [A]lthough FICA does not by completely define the RRTA's various contours, examining the former to elucidate related provisions of the latter is an acceptable mode of statutory interpretation given the close linkages between the statutes.'') (internal citation omitted) (emphasis in original); cf. Pound v. Airosol Co., 498 F.3d 1089, 1094 n.2 (10th Cir. 2007) (``The penalty provisions of the CAA and the Clean Water Act (CWA) are virtually identical; thus, CWA cases are instructive in analyzing issues arising from the CAA''); United States v. Dell'Aquilla, 150 F.3d 329, 338 n.9 (3d Cir. 1998) (``[T]he Clean Water Act and the Clean Air Act are in pari materia, and courts often rely upon interpretations of the Clean Water Act to assist with an analysis under the Clean Air Act.'') (citations omitted). \75\ See Crawford Fitting Co. v. J. T. Gibbons, Inc., 482 U.S. 437, 445 (1987) (``Where there is no clear intention otherwise, a specific statute will not be controlled or nullified by a general one, regardless of the priority of enactment.'') (cleaned up); Radzanower v. Touche Ross & Co., 426 U.S. 148, 153 (1976) (``It is a basic principle of statutory construction that a statute dealing with a narrow, precise, and specific subject is not submerged by a later enacted statute covering a more generalized spectrum.''). \76\ See, e.g., 80 FR 40137, 40171 (Aug. 12, 2015) (interpreting a term in EISA by looking to how the term is defined in the Motor Vehicle Safety Act, ``[g]iven the absence of any apparent contrary intent on the part of Congress in EISA''). --------------------------------------------------------------------------- The principles underlying the rule of lenity also substantiate interpreting the Inflation Adjustment Act narrowly in light of EPCA. This canon instructs that statutes imposing penalties should be construed narrowly in favor of those against whom the penalties will be imposed. Although the rule of lenity is [[Page 13913]] traditionally applied in criminal contexts,\77\ the principles underlying the rule are worth considering when there are severe punitive implications of a broad interpretation, as is the case here. Construing the statute strictly is particularly important here because the inflation adjustment essentially acts as a ``one-way ratchet,'' where all subsequent annual adjustments will be based off this ``catch- up'' adjustment with no ensuing opportunity to invoke the ``negative economic impact'' exception.\78\ --------------------------------------------------------------------------- \77\ Some courts have applied the rule of lenity in civil and administrative contexts as well. See, e.g., United States v. Thompson/Ctr. Arms Co., 504 U.S. 505, 518 (1992); Rand v. C.I.R., 141 T.C. 376, 393 (2013), overturned on other grounds due to legislative action. \78\ This ``one-way ratchet'' constraint is also imposed by EPCA. H.R. Rep. No. 95-1751, at 113 (1978) (Conf. Rep.) (``No provision [in EPCA] is made for lowering the penalty.''). --------------------------------------------------------------------------- iii. Reading Section 32912 With the Inflationary Adjustment Act Under 49 U.S.C. 32912(b), a manufacturer that violates a fuel economy standard is potentially subject to a civil penalty rate for each tenth of a mile per gallon that the manufacturer misses the applicable average fuel economy standard for the number of automobiles manufactured by the manufacturer during the model year, unless the manufacturer is able and willing to apply credits or establish a plan to generate and apply credits in subsequent years, as discussed above. NHTSA has exceptionally limited discretion in whether to impose the penalty or the amount of the preliminary calculation of the penalty when it does indeed apply. The Secretary is required to increase the applicable civil penalty rate up to $10 per each tenth of a mile per gallon if she decides that the increase in the penalty: (i) will result in, or substantially further, substantial energy conservation for automobiles in model years in which the increased penalty may be imposed; and (ii) will not have a substantial deleterious impact on the economy of the United States, a State, or a region of a State.\79\ --------------------------------------------------------------------------- \79\ 49 U.S.C. 32912(c)(1)(A)-(B). --------------------------------------------------------------------------- The Secretary can only decide that the increase ``will not have a substantial deleterious impact on the economy'' if she decides that it is likely that the increase in the penalty will not: (i) Cause a significant increase in unemployment in a State or a region of a State; (ii) adversely affect competition; or (iii) cause a significant increase in automobile imports.\80\ --------------------------------------------------------------------------- \80\ 49 U.S.C. 32912(c)(1)(C). --------------------------------------------------------------------------- Thus, to increase the civil penalty rate for CAFE violations, the Secretary must affirmatively determine that doing so ``will not have a substantial deleterious impact on the economy of the United States, a State, or a region of a State.'' Critically, if she is unable to make such a determination or, put another way, if she determines that increasing the civil penalty may have ``a substantial deleterious impact on the economy of the United States, a State, or a region of a State,'' she is prohibited by statute from increasing the applicable civil penalty rate.\81\ Therefore, in determining whether adjusting the CAFE civil penalty rate for inflation will have a ``negative economic impact,'' it is appropriate to consider the potential negative economic impact the adjustment would have not just on the United States in general, but also, at a minimum, on whether such impact could occur in any particular State or region of a State. --------------------------------------------------------------------------- \81\ In addition to the substantive findings that must be made before the civil penalty rate can be increased, Section 32912 also imposes procedural requirements. For instance, the Secretary must hold a public hearing during which interested persons and the Federal Trade Commission be allowed to make presentations. 49 U.S.C. 32912(c)(2). --------------------------------------------------------------------------- NHTSA also believes it is appropriate to consider the impact raising the CAFE civil penalty rate would have on individual manufacturers who fall short of fuel economy standards, and those affected, such as dealers. Such a broad interpretation is consistent with how other statutory provisions permitting or requiring agencies to consider economic impacts have been interpreted. For example, under the Safety Act, a discretionary factor in determining the amount of a penalty is ``the appropriateness of such penalty in relation to the size of the business of the person charged, including the potential for undue adverse economic impacts.'' \82\ NHTSA interpreted that factor in its regulation to include consideration of ``financial factors such as liquidity, solvency, and profitability.'' \83\ Other federal statutes likewise contemplate consideration of negative economic impacts on individual actors in determining an appropriate civil penalty.\84\ NHTSA's proposal, which includes consideration of the ``negative economic impact'' the level would have on individual noncompliant actors, represents a uniform approach with how it determines the appropriate civil penalty level in these other, non-CAFE cases. Moreover, the Senate Conference report on the 1975 version of EPCA directed ``the Secretary [to] weigh the benefits to the nation of a higher average fuel economy standard against the difficulties of individual automobile manufacturers.'' \85\ --------------------------------------------------------------------------- \82\ 49 U.S.C. 30165(c)(7) (emphasis added). \83\ 49 CFR 578.8. \84\ See 15 U.S.C. 2069(b), (c) (Consumer Product Safety Commission); 33 U.S.C. 1232(a)(1) (Coast Guard); 33 U.S.C. 1319(d), 1321(b)(8) (Environmental Protection Agency). \85\ S. Rep. No. 94-516, at 155 (1975) (Conf. Rep.). --------------------------------------------------------------------------- Note also that ``negative economic impact,'' as used in the Inflation Adjustment Act, need not mean ``net negative economic impact.'' Congress expressly utilized the ``net'' concept in the very next provision of the statute, authorizing a lesser increase to a civil penalty if the agency determines that ``the social costs of increasing the civil monetary penalty by the otherwise required amount outweigh the benefits.'' \86\ The absence of comparable phrasing for the ``negative economic impact'' provision immediately prior implies either that term is ambiguous or that Congress intentionally omitted the word ``net.'' Either way, without any express indications that Congress meant ``net negative economic impact,'' NHTSA proposes that the provision should be interpreted without reference to any potential benefits of increasing the penalty. --------------------------------------------------------------------------- \86\ 28 U.S.C. 2461 note, Federal Civil Penalties Inflation Adjustment Sec. 4(c)(1)(B) (emphasis added). --------------------------------------------------------------------------- a. NHTSA has not Determined That an Increase in the CAFE Civil Penalty Rate Will Not Have a Substantial Deleterious Impact on the Economy To summarize: The 2015 Act allows an agency to set a lower penalty amount than would otherwise be required if it can show that raising the penalty in accordance with the 2015 Act will lead to a ``negative economic impact,'' which is not defined either in the 2015 Act or OMB's implementing guidance. However, the statute specifically related to penalties for violations of NHTSA's fuel economy standards has a provision allowing for an increase in the penalty rate only if the agency can determine that increasing the rate will not have a ``substantial deleterious impact on the economy.'' To read these two provisions together harmoniously, NHTSA interprets the statutes to mean that the agency must be able to affirmatively show that increasing the penalty as would be required by the 2015 Act will not have the adverse economic effects identified in the definition of ``substantial deleterious impact.'' Since the agency cannot make those affirmative findings, discussed further [[Page 13914]] below, it is therefore prohibited from raising the penalty rate because doing so would have a ``negative economic impact.'' Since NHTSA does not have sufficient evidence to make the requisite finding under EPCA that an increase in the CAFE penalty rate will not have a substantial deleterious impact on the economy, NHTSA is proposing to retain the $5.50 penalty rate pursuant to the negative economic impact exception to inflationary adjustments. NHTSA invites comments on whether this is the appropriate penalty level, and if not, requests data or other evidence that would support the findings necessary under EPCA that would allow for such an increase. The comments should take into account that the factors are probabilistic and prospective, that is, to increase the penalty rate, the Secretary must determine that doing so likely would not have the statutorily-enumerated effects in the future. The comments should also reflect the considerable burdens that must be overcome to make the findings needed to increase the civil penalty under EPCA, in part reflected in the statute's repeated use of ``substantial'' and ``significant.'' Indeed, the burden is so great that NHTSA has been unable to make all of the determinations necessary since the provisions were added in 1978. The comments should also address the impact of increasingly stringent fuel economy standards established in existing statute and NHTSA regulation, and whether this increasing stringency has a relationship to a ``negative economic impact'' or ``substantial deleterious impact determination.'' b. NHTSA has not Determined That an Increase in the CAFE Civil Penalty Rate Will Not Cause a Significant Increase in Unemployment in a State or Region of a State NHTSA tentatively concludes that an increase in the CAFE penalty rate could plausibly cause a significant increase in unemployment in a State or a region of a State. For instance, vehicle price increases-- resulting from increased penalty payments or compliance costs passed through to customers--could result in customers keeping their current vehicles longer or shifting purchases towards less expensive new vehicles or toward the used vehicle market. Either outcome could lead to fewer jobs with vehicle manufacturers. Losses may be concentrated in particular States and regions within those States where automobile manufacturing plants are located. Some manufacturers who have historically paid civil penalties in lieu of compliance have automobile assembly and parts manufacturing plants located in the Midwest and Southeastern U.S. These plants employing thousands of people could be most adversely impacted by a civil penalty increase resulting in employment losses. In response to substantial increases in potential penalties, some manufacturers could plausibly lose sales due to resulting higher prices, which may result in reduced employment at facilities currently producing vehicles and engines. Fewer new vehicle sales attributable to price increases resulting from increased penalty payments and/or compliance costs could also plausibly result in fewer jobs within new motor vehicle dealerships franchised to sell vehicles manufactured or distributed by manufacturers subject to penalties and/or increased compliance costs. A manufacturer's decision to change allocation of vehicles distributed to dealers to address increased penalties and/or compliance costs could also result in job losses within the franchised dealer network. For example, one might expect that increased CAFE penalties could lead to a decrease in the number of vehicles with powerful engines being produced or sold. Dealers in States or intra-State regions where these types of vehicles are more popular would be affected disproportionately. c. NHTSA Has Not Determined That an Increase in the CAFE Civil Penalty Rate Will Not Adversely Affect Competition Notably, unlike the other two factors, this factor does not require a finding of a ``significant'' effect. The absence of this modifier implies that even a modest adverse effect on competition would suffice to block a civil penalty increase. This phrasing similarly contrasts with the provision in the next section of the Code, describing the compromising or remitting the amount of a CAFE civil penalty. That provision requires the Federal Trade Commission to certify that a reduction in the penalty is ``necessary to prevent a substantial lessening of competition.'' \87\ --------------------------------------------------------------------------- \87\ 49 U.S.C. 32913(a)(3). --------------------------------------------------------------------------- In establishing CAFE stringency requirements, NHTSA has consistently evaluated risks to competition, including the potential effects on individual automakers. For instance, in the 1985 rulemaking, NHTSA analyzed the potential effect of a 1.5 mpg fuel economy improvement on the domestic auto industry, stating: It is always possible that higher levels of fuel economy could be achieved by the domestic manufacturers if they were to restrict severely their product offerings. For example, sales of particular larger light truck models and larger displacement engines could be limited or eliminated entirely. As discussed by the October 1984 notice, Ford submitted an analysis of the potential effects of restricting product offerings in this manner. This analysis showed that to achieve a 1.5 mpg average fuel economy benefit through such restrictions, sales reductions of 100,000 to 180,000 units at Ford could occur, with resulting employment losses of 12,000 to 23,000 positions at Ford, its dealers and suppliers. The agency believes this analysis to be a reasonable projection of the impacts of restricting the availability of larger light trucks in the current market. Impacts of this magnitude go beyond the realm of ``economic practicability'' as contemplated in the Act. This is particularly true since it is likely that a standard set at a level resulting in impacts of this magnitude would result in little or no net fuel economy benefit. This is because consumers could meet their demand for larger light trucks by merely shifting their purchases to other manufacturers which continue to offer such trucks. The other manufacturers could increase sales of these vehicles without risking noncompliance with the standards. An additional possible negative economic consequence would be reduced competition in the market for larger light trucks. Given the small number of manufacturers producing larger light trucks, a decision by Ford (or GM or [Chrysler]) to significantly reduce its role in this market could have serious consequences for competition.\88\ --------------------------------------------------------------------------- \88\ 50 FR 40398, 40400-40401 (Oct. 3, 1985). NHTSA continues to believe that, in the context of CAFE rulemakings, an analysis of the effects of a regulation on competition should be undertaken in a broad manner, similar to the analysis traditionally used in establishing CAFE stringency requirements, and seeks comments on this approach. NHTSA tentatively concludes that it is reasonable to believe that an increase in the CAFE penalty rate could distort the normal market competition that would be expected in a free market by favoring one group of manufacturers over another. This could adversely impact the affected manufacturers through higher prices for their products (without corresponding benefits to consumers), restricted product offerings, and reduced profitability. An increased CAFE penalty benefits fleets of already-compliant fuel efficient vehicles over fleets of less fuel-efficient vehicles. A manufacturer who is already generating or possesses over-compliance credits will find itself with much more valuable credits to sell and may use this additional capital to invest more heavily in research and development, marketing, add other features to its [[Page 13915]] vehicles which make them more desirable to consumers, or reduce the price of its vehicles. Through model year 2015, manufacturers with positive credit balances had credits in varying amounts up to nearly 396 million credits.\89\ A hypothetical manufacturer with 10 million credits could see the potential value of its credits increase from $55 million to $140 million, while a hypothetical manufacturer with 100 million credits could see the potential value even more dramatically increase from $550 million to $1.4 billion. Meanwhile, a manufacturer who is not compliant and facing increased difficulties in meeting future stringency requirements may be forced to purchase credits at an increased price, invest more heavily in fuel economy improvements, discontinue less fuel-efficient models or configurations, increase vehicle prices, or some combination of these options--instead of investing in other areas to address consumer demands that would have been satisfied if the manufacturer was able to pay a lower penalty. While this result may be beneficial for purposes of fuel savings, it would further diminish the competitiveness of those manufacturers who are least able to comply with CAFE standards. --------------------------------------------------------------------------- \89\ See ``CAFE Public Information Center,'' available at https://one.nhtsa.gov/cafe_pic/CAFE_PIC_Credit_LIVE.html. --------------------------------------------------------------------------- In addition to the impact on competition an increase in penalties might have on market participants, it could also have an impact on the market itself by limiting consumer choice involving vehicles and vehicle configurations that would otherwise be produced with penalties at their current values. For instance, faced with the prospect of having to pay larger penalties in the future, a manufacturer could decide that it makes financial sense to shift resources from its planned investments in capital towards payment of possible future penalties. If the possibility of paying penalties looms too large, a manufacturer could go out of business, reducing competition even further. d. NHTSA has not Determined That an Increase in the CAFE Civil Penalty Rate will not Cause a Significant Increase in Automobile Imports Final model year fuel economy performance reports published by NHTSA indicate import passenger car fleets are performing better than domestic passenger car fleets. The model year 2015 fleet performance report \90\, the latest available, indicates the performance of the imported passenger car fleet has a one-tenth of one mpg advantage. While this slight advantage could be viewed as negligible, performance has varied significantly in recent years--the most significant being model year 2010 where the import fleet outpaced the domestic fleet by more than two mpg. --------------------------------------------------------------------------- \90\ Available at https://one.nhtsa.gov/cafe_pic/CAFE_PIC_fleet_LIVE.html (last accessed December 15, 2017) --------------------------------------------------------------------------- In light of this historical variation, it is unclear whether increasing the civil penalty fine amount would have a significant effect on either the domestic or import passenger cars fleets, and NHTSA seeks comment on potential positive or negative impacts civil penalties may have on the domestic and import passenger car fleets, along with any potential positive or negative impacts to the light truck fleet. Please provide supporting information for your position. iv. Analysis of Comments Received on ``Negative Economic Impact'' and EPCA Considerations NHTSA has reviewed the comments it received on the July 2017 notice regarding ``negative economic impact,'' and--from previous requests for comment--on the EPCA considerations. NHTSA did not identify anything persuasive in the submissions that would undermine NHTSA's proposed interpretation of ``negative economic impact.'' In its July 2017 request for comments, NHTSA specifically sought comments on: Whether the EPCA considerations for ``substantial deleterious impact'' are relevant to a determination of ``negative economic impact''? And if so, whether those considerations must be accounted for in determining negative economic impact, or simply that they are informational, and what is the legal basis for that belief? Only two commenters submitted comments touching on these questions. But none of the comments addressed whether the EPCA criteria for ``substantial deleterious impact on the economy'' should guide NHTSA's consideration of whether the inflation adjustment would have a ``negative economic impact,'' and if so, how much less than the otherwise required amount should the penalty level be adjusted after analyzing data relevant to the EPCA factors. CARB observed that the 2016 joint Technical Assessment Report stated that manufacturers ``who have consistently chosen to pay CAFE fines in the past may continue to do so,'' even if the civil penalty rate changes. CARB concluded from that NHTSA saw no reason at the time to think its fines would have a negative economic impact. However, this conclusion does not necessarily follow, as the greatly increased civil penalty rate, in light of longstanding expectations about the steadiness of that rate, could significantly upset manufacturers' expectations about compliance and thus cause operational or other challenges given the lead time necessary to make significant fuel economy improvements in subsequent model years. The Alliance and Global jointly submitted comments that also relate to these issues. These associations contended that although the EPCA factors ``do not override'' the Inflation Adjustment Act and ``are not binding'' in the inflation adjustment, they provide ``helpful support'' and ``useful guidance'' in deciding whether there would be a ``negative economic impact'' and, if so, how much to adjust the civil penalty amount. In their view, the ``stringent'' factors required by EPCA demonstrate that the CAFE civil penalty amount should not be increased without evidence of ``substantial net benefits'' and evidence that there would be ``no substantial harm to the economy.'' \91\ --------------------------------------------------------------------------- \91\ The groups go on to claim that the evidence shows that adjusting the penalty to $14 ``will cost society $3.5 billion and will not produce commensurate benefits.'' --------------------------------------------------------------------------- NHTSA has previously sought comment on the EPCA civil penalty criteria in other rulemaking proceedings. In 2009, NHTSA sought comment on whether it should initiate a proceeding to consider raising the CAFE civil penalty under EPCA. Most of the comments on this issue focused on the energy conservation factor, rather than the impact on the economy. But no commenter argued that raising the penalty would have a positive or neutral impact on the economy.\92\ --------------------------------------------------------------------------- \92\ 74 FR 14195, 14427 (Mar. 30, 2009). --------------------------------------------------------------------------- In 2010, NHTSA specifically solicited comments on how raising or not raising the penalty amount under EPCA would impact the economy. Only Ferrari and Daimler commented on this issue. Both manufacturers argued that raising the penalty would have no impact on fuel savings and would simply hurt the manufacturers forced to pay it. Daimler stated further that manufacturers pay fines because they cannot increase energy savings any further. No commenter argued or provided any information supporting the opposing [[Page 13916]] position that raising the penalty amount would have a positive or neutral impact on the economy. Ultimately, NHTSA ``defer[red] consideration of this issue for purposes of this rulemaking.'' \93\ --------------------------------------------------------------------------- \93\ 75 FR 25323, 25666-67 (May 7, 2010). --------------------------------------------------------------------------- In 2012, NHTSA again solicited comments on how raising or not raising the penalty amount under EPCA would impact the economy. This time, ``no comments specific to this issue were received,'' so NHTSA declared it would ``continue to attempt to evaluate this issue on its own.'' \94\ --------------------------------------------------------------------------- \94\ 77 FR 62623, 63131 (Oct. 15, 2012). --------------------------------------------------------------------------- The public has had multiple opportunities to comment on the EPCA civil penalty provisions and now the Inflation Adjustment Act. NHTSA has considered all the comments it received in generating this proposed rule. Based on the findings discussed above, NHTSA has tentatively made a determination that negative economic impact will result if the CAFE civil penalty rate is increased. For this reason, NHTSA is proposing to retain the existing CAFE civil penalty rate of $5.50 per .1 of a mile per gallon. NHTSA also seeks comment on whether a modest increase in the CAFE civil penalty rate, less than the amount that would otherwise be required if the 2015 Act applies, would ``result in, or substantially further, substantial energy conservation for automobiles in model years in which the increased penalty may be imposed,'' as expected by EPCA. 3. Increasing the CAFE Civil Penalty Rate to $14 Would Have a ``Negative Economic Impact,'' Even If The EPCA Factors Were Not Mandatory Even if NHTSA was not required to apply the EPCA factors, NHTSA has tentatively determined that raising the CAFE civil penalty rate to $14 would have a ``negative economic impact.'' NHTSA believes that the economic consequences described above are a reasonable estimate of what would occur if the CAFE civil penalty rate was increased 150 percent, regardless of any effect from EPCA. That is, increasing the penalty rate to $14 would lead to significantly greater costs than the agency had anticipated when it set the CAFE standards because manufacturers who had planned to use penalties as one way to make up their shortfall would now need to pay increased penalty amounts, purchase additional credits at likely higher prices, or make modifications to their vehicles outside of their ordinary redesign cycles. NHTSA believes all of these options would increase manufacturers' compliance costs, many of which would be passed along to consumers. Considering the agency's past analyses of CAFE's impact on vehicle costs, NHTSA tentatively concludes that the estimate provided by industry showing annual costs of at least one billion dollars is a reasonable estimate of this impact. NHTSA requests comments, including any substantive analysis, on this issue. The agency further believes that an increase in costs of this significant magnitude exceeds the range of adjustments Congress intended to cover when it enacted the 2015 Act, as described above. If NHTSA determines that raising the CAFE civil penalty rate to $14 would have a ``negative economic impact,'' it is permitted to adjust the rate by less than the otherwise required amount. Without any statutory direction or OMB guidance on how much to adjust the rate, if at all, it falls to NHTSA to determine the appropriate adjustment--and NHTSA has wide discretion in making this determination.\95\ --------------------------------------------------------------------------- \95\ Nat'l Shooting Sports Found., Inc. v. Jones, 716 F.3d 200, 214-15 (D.C. Cir. 2013) (``An agency has `wide discretion' in making line-drawing decisions and `[t]he relevant question is whether the agency's numbers are within a zone of reasonableness, not whether its numbers are precisely right.' . . . An agency `is not required to identify the optimal threshold with pinpoint precision. It is only required to identify the standard and explain its relationship to the underlying regulatory concerns.''') (quoting WorldCom, Inc. v. FCC, 238 F.3d 449, 461-62 (D.C. Cir. 2001)). --------------------------------------------------------------------------- In light of the regulatory concerns described above, and in consideration of the unique regulatory structure with non-discretionary penalties tied to standards that increase over time, NHTSA is proposing to keep the CAFE civil penalty rate at $5.50 because it tentatively concludes that retaining the $5.50 rate would avoid the ``negative economic impact'' caused by any adjustment upwards. Although NHTSA has previously sought comment on these issues, NHTSA believes it is important to provide the public with an opportunity to provide additional information in light of NHTSA's analysis. Therefore, NHTSA requests comment on whether increasing the CAFE civil penalty rate to $14 would have a ``negative economic impact,'' and if so, to what level the rate should be raised, if at all. 4. The CAFE Civil Penalty Rate is Capped At $10 Under 49 U.S.C. 32912(c)(1)(B), if the CAFE civil penalty rate is increased, the rate at which it is set ``may not be more than $10 for each .1 of a mile a gallon.'' This upper limit has been in effect since EPCA was amended in 1978 and was left in place when Congress amended the civil penalty provision in 2007.\96\ --------------------------------------------------------------------------- \96\ In the interim final rule required by the 2015 Act, NHTSA announced that the adjusted maximum civil penalty would be increased from $10 to $25. 82 FR 32139 (July 12, 2017). However, this change was never formally codified in the Code of Federal Regulations nor adopted by Congress. Even if the adjustment is considered to have been adopted, however, NHTSA is now reconsidering that decision for the reasons explained above. --------------------------------------------------------------------------- The 2015 Act requires adjustments of ``civil monetary penalties,'' which must be penalties that are ``assessed or enforced by an agency pursuant to Federal law.'' \97\ NHTSA believes that the $10 cap is not the maximum amount of a penalty that is ``assessed or enforced.'' Rather, it is a limit on the amount NHTSA can set for the CAFE civil penalty rate if the required determinations are made. NHTSA cannot assess or enforce the $10 cap against anyone. In contrast, other penalties in EPCA have a maximum amount that can be ``assessed or enforced.'' One example of such a penalty is the ``general penalty'' in EPCA for violations of 49 U.S.C. 32911(a). That ``general penalty'' is ``a civil penalty of not more than $10,000 for each violation.'' NHTSA has the authority, without any additional rulemakings, to subject the entity committing a violation to the maximum amount--$10,000--for that violation, or a lower amount, in its discretion. By contrast NHTSA has no discretion to enforce anything other than the result of the CAFE formula against a manufacturer, which includes the current $5.50 multiplier. The $10 figure is not part of that formula and could only become so after further rulemaking. --------------------------------------------------------------------------- \97\ 28 U.S.C. 2461 note, Federal Civil Penalties Inflation Adjustment Sec. 3(2)(B), (C). --------------------------------------------------------------------------- Accordingly, NHTSA is tentatively proposing in the alternative that any potential adjustment NHTSA makes to the CAFE civil penalty rate be capped at $10 and seeks comment on this proposal. Commenters should consider whether the $10 limit is itself a ``civil monetary penalty'' that must be adjusted under the 2015 Act, keeping in mind that the level was kept the same when the previous adjustment was made in 1997. Commenters should also consider the effect of the 2007 amendments in ratifying the $10 level and whether the market-based complexities established by those amendments bear on what Congress meant subsequently by ``civil monetary penalty'' in the 2015 Act. [[Page 13917]] F. 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. At this stage, NHTSA believes that this rulemaking could also be ``economically significant,'' but cannot definitively make that determination until the final rule stage, as it depends entirely on the civil penalty rate established in the final rule. 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). 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. SBREFA amended the Regulatory Flexibility Act to require Federal agencies to provide a statement of the factual basis for certifying that a proposal will not have a significant economic impact on a substantial number of small entities. NHTSA has considered the impacts of this notice of proposed rulemaking under the Regulatory Flexibility Act and certifies that this rule would not 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 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 49 CFR 578.6(h)(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 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 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 Mandates assessment will be prepared. 5. National Environmental Policy Act The National Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321-4347) requires Federal agencies to analyze the environmental impacts of proposed major Federal actions significantly affecting the quality of the human environment, as well as the impacts of alternatives to the proposed action. 42 U.S.C. 4332(2)(C). When a Federal agency prepares an environmental assessment, the Council on Environmental Quality (CEQ) NEPA implementing regulations (40 CFR parts 1500-1508) require it to ``include brief discussions of the need for the proposal, of alternatives [. . .], of the environmental impacts of the proposed action and alternatives, and a listing of agencies and persons consulted.'' 40 CFR 1508.9(b). This section serves as the agency's Draft Environmental Assessment (Draft EA). NHTSA invites public comments on the contents and tentative conclusions of this Draft EA. i. Purpose and Need This notice of proposed rulemaking sets forth the purpose of and need for this action. NHTSA is required to consider whether it is appropriate, pursuant to the Inflation Adjustment Act, to make an initial ``catch-up'' adjustment to the civil monetary penalties it administers for the CAFE program. Further, if the agency determines that the Inflation Adjustment Act applies, it must consider the appropriate approach to undertake pursuant to the legislation. The purpose of this notice of proposed rulemaking is to consider the applicability of the Inflation Adjustment Act and to propose adjustments pursuant to the Act, consistent with its [[Page 13918]] requirements as well as the agency's responsibilities under EPCA (as amended by EISA). ii. Alternatives NHTSA has considered a range of alternatives for the proposed action, including maintaining the civil penalty amount at $5.50 per each tenth of a mile per gallon (the No Action Alternative) and increasing the civil penalty amount to $14.00 per each tenth of a mile per gallon (as previously proposed). This notice of proposed rulemaking also seeks public comment on whether it is required to increase the civil penalty amount to $6.00 per each tenth of a mile per gallon (rounding pursuant to the 2015 Act) or whether the civil penalty amount is capped at $10.00 per each tenth of a mile per gallon (pursuant to EPCA). In this notice of proposed rulemaking, the agency proposes maintaining the civil penalty amount at $5.50 as its preferred alternative, although it may select any value along this range of alternatives, including any civil penalty amount between $5.50 and $14.00. NHTSA is also proposing to increase the ``general penalty'' to a maximum penalty of $41,484,\98\ pursuant to the requirements of the Inflation Adjustment Act. --------------------------------------------------------------------------- \98\ NHTSA adjusted this penalty to a maximum of $40,000 in its July 2016 IFR. Applying 1.01636 multiplier for 2017 inflationary adjustments, as specified in OMB's December 16, 2016 guidance, results in an adjusted maximum penalty of $40,654. Applying the multiplier for 2018 of 1.02041, as specified in OMB's December 15, 2017, results in an adjusted maximum penalty of $41,484. --------------------------------------------------------------------------- iii. Environmental Impacts of the Proposed Action and Alternatives Under all of the alternatives under consideration, the agency would maintain or increase the civil penalty amount for a manufacturer's failure to meet its fleet's average fuel economy target (assuming the manufacturer does not have sufficient credits available to cover the shortfall). When deciding whether to add fuel-saving technology to its vehicles, a manufacturer might consider the cost to add the technology, the price and availability of credits, the potential reduction in its civil penalty liability, and the value to the vehicle purchaser of the change in fuel outlays over a specified ``payback period.'' A higher civil penalty amount could encourage manufacturers to improve the average fuel economy of their passenger car and light truck fleets if the benefits of installing fuel-saving technology (i.e., lower civil penalty liability and increased revenue from vehicle sales) outweigh the costs of installing the technology. However, there are many reasons why this might not occur to the degree anticipated. Apart from the civil penalty rate, as CAFE standards increase in stringency, manufacturers have needed to research and install increasingly less cost-effective technology that may not obtain levels of consumer acceptance necessary to offset the investment. A higher civil penalty amount combined with the value of the potential added fuel economy benefit of new, advanced technology to the vehicle purchaser may not be sufficient to outweigh the added technology costs (including both the financial outlays and the risk that consumers may not value the technology or accept its impact on the driving experience, therefore opting not to purchase those models). This may be especially true when gas prices are low. If the added cost in civil penalty payments is borne by the manufacturer, this may result in reduced investment in fuel saving technology or reduced consumer choice. If the added cost in civil penalty payments is passed on to the consumer, the consumer would see higher vehicle purchase costs without a corresponding fuel economy benefit or other benefits, resulting in fewer purchases of newer, more fuel-efficient vehicles. Based on the foregoing, NHTSA believes that each of the alternatives under consideration in this notice of proposed rulemaking could result, at most, only marginally better levels of compliance with the applicable fuel economy targets. An increase in a motor vehicle's fuel economy is associated with reductions in fuel consumption and greenhouse gas (GHG) emissions for an equivalent distance of travel. Increased global GHG emissions are associated with climate change, which includes increasing average global temperatures, rising sea levels, changing precipitation patterns, increasing intensity of severe weather events, and increasing impacts on water resources. These, in turn, could affect human health and safety, infrastructure, food and water supplies, and natural ecosystems. Fewer GHG emissions would reduce the likelihood of these impacts. Changes in motor vehicle fuel economy are also associated with impacts on criteria and hazardous air pollutant emissions, safety, life-cycle environmental impacts, and more. As part of recent rulemaking actions establishing CAFE standards, NHTSA evaluated the impacts of increasing fuel economy standards for passenger cars and light trucks on these and other environmental impact areas.\99\ The analyses assumed a civil monetary penalty of $5.50 per each tenth of a mile per gallon. Though particular values reported in its recent Environmental Impact Statements (EISs) may no longer be replicable due to updated assumptions and new information obtained since their publication, the agency believes that the environmental impact trends reported remain adequate and valid. The agency has considered the information and trends presented in those EISs in preparing this proposal. For example, the MY 2017-2025 CAFE EIS showed that the large stringency increases in the fuel economy standards as a result of that rulemaking would result in reductions of global mean surface temperature increases of no more than 0.016[deg]C by 2100. Further, that EIS showed nationwide reductions in most criteria pollutant emissions in 2040 (usually in ranges of 10% or less) and small increases or reductions in most toxic pollutant emissions in 2040 (usually in ranges of 3% or less). NHTSA believes the impacts on fuel economy resulting from this action would be very small compared to the impacts on fuel economy resulting from the stringency increases that were reported in those EISs. Therefore, NHTSA anticipates that the environmental impacts resulting from the proposed action would range from no change (No Action Alternative) to negligible impacts consistent with, but to a much smaller degree than, the trends reported in those EISs (increase in the civil penalty). --------------------------------------------------------------------------- \99\ See, e.g., NHTSA, Final Environmental Impact Statement, Corporate Average Fuel Economy Standards, Passenger Cars and Light Trucks, Model Years 2017-2025. Docket No. NHTSA-2011-0056. July 2012. --------------------------------------------------------------------------- NHTSA will prepare a new EIS for its forthcoming proposal for new CAFE standards.\100\ The agency's civil penalty rate is an input in the CAFE Model that will inform the development of that EIS and, ultimately, the agency's final decision for setting CAFE standards. The agency does not believe the civil penalty rate being proposed will limit its ability to set ``maximum feasible'' standards pursuant to 49 U.S.C. 32902(b)(2)(B), nor will it unreasonably constrain the potential environmental outcomes associated with future rulemakings. In addition, NHTSA will review the new EIS and the updated CAFE Model as it prepares its final EA for this action, which will ultimately inform the development of the final rule. --------------------------------------------------------------------------- \100\ NHTSA, Notice of Intent to Prepare an Environmental Impact Statement for Model Year 2022-2025 Corporate Average Fuel Economy Standards. 82 FR 34740 (Jul. 26, 2017). --------------------------------------------------------------------------- NHTSA is also proposing to increase the ``general penalty'' pursuant to the [[Page 13919]] Inflation Adjustment Act. This increase is not anticipated to have impacts on the quality of the human environment. The ``general penalty'' is applicable to other violations, such as a manufacturer's failure to submit pre-model year and mid-model year reports to NHTSA on whether they will comply with the average fuel economy standards. These violations are not directly related to on-road fuel economy, and therefore the penalties are not anticipated to directly or indirectly affect fuel use or emissions. iv. Agencies and Persons Consulted NHTSA and DOT have consulted with OMB as described earlier in this proposal. NHTSA and DOT have not consulted with any other agencies in the development of this proposal. v. Conclusion NHTSA has reviewed the information presented in this Draft EA and concludes that the proposed action and alternatives would have no impact or a small positive impact on the quality of the human environment. The preferred alternative is anticipated to have no impact on the quality of the human environment, as it would result in no change, as compared to current law, to the civil penalty amount for failure to meet fuel economy targets. Further, the proposed change to the ``general penalty'' is not anticipated to affect on-road emissions. Any of the impacts anticipated to result from the alternatives under consideration are not expected to rise to a level of significance that necessitates the preparation of an Environmental Impact Statement. Based on the information in this Draft EA and assuming no additional information or changed circumstances, NHTSA expects to issue a Finding of No Significant Impact (FONSI). Such a finding will not be made before careful review of all public comments received. A Final EA and a FONSI, if appropriate, will be issued as part of the final rule. 6. Executive Order 12778 (Civil Justice Reform) This rule does not have a retroactive or preemptive effect. Judicial review of a rule based on this proposal 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 (Volume 65, Number 70; Pages 19477-78), or you may visit http://dms.dot.gov. 9. Executive Order 13771 This proposed rule is expected to be a deregulatory action under Executive Order 13771, although NHTSA, at this point, has not been able to quantify potential cost savings. Proposed Regulatory Text List of Subjects in 49 CFR Part 578 Imports, Motor vehicle safety, Motor vehicles, Rubber and rubber products, Tires, Penalties. In consideration of the foregoing, 49 CFR part 578 is proposed to be amended as set forth below. PART 578--CIVIL AND CRIMINAL PENALTIES 0 1. The authority citation for 49 CFR part 578 is revised to read as follows: Authority: Pub. L. 101-410, Pub. L. 104-134, Pub. L. 109-59, Pub. L. 114-74, Pub. L. 114-94, 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 $41,484 for each violation. A separate violation occurs for each day the violation continues. (2) Except as provided in 49 U.S.C. 32912(c), 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 $5.50 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. * * * * * Issued in Washington, DC, under authority delegated in 49 CFR 1.81, 1.95, and 501.5 Heidi R. King, Deputy Administrator. [FR Doc. 2018-06550 Filed 3-30-18; 8:45 am] BILLING CODE 4910-59-P
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the DATES section of the proposed rule DEPARTMENT OF TRANSPORTATION D. NHTSA’s Actions to Date Regarding CAFE
published on March 21, 2018, Civil Penalties
National Highway Traffic Safety 1. Interim Final Rule
inaccurately reflected a 60-day comment
Administration 2. Final Rule
period and 90-day reply comment 3. Reconsideration and Request for
period, instead of the 30-day comment, Comments
45-day reply comment deadline stated 49 CFR Part 578 E. Proposed Revisions to the CAFE Civil
in the proposed rule. Any comments [Docket No. NHTSA–2018–0017] Penalty Rate
made before this correction is published 1. NHTSA is Proposing to Retain the $5.50
RIN 2127–AL94 CAFE Civil Penalty Rate Because the
will be considered.
2015 Act is Inapplicable
DATES: Comments are due on or before Civil Penalties 2. The Agency Proposes a Finding That
April 30, 2018; reply comments are due Increasing the CAFE Civil Penalty Rate
AGENCY: National Highway Traffic Will Result in Negative Economic Impact
on or before May 15, 2018. Safety Administration (NHTSA), 3. Increasing the CAFE Civil Penalty Rate
ADDRESSES: You may submit comments, Department of Transportation (DOT). to $14 Would Have a ‘‘Negative
identified by MB Docket No. 18–20, by ACTION: Notice of proposed rulemaking. Economic Impact,’’ Even If The EPCA
Factors Were Not Mandatory
any of the following methods: SUMMARY: This document proposes a 4. The CAFE Civil Penalty Rate is Capped
• Federal Communications civil penalty rate applicable to At $10
Commission’s website: http:// automobile manufacturers that fail to F. Rulemaking Analyses and Notices
www.fcc.gov/cgb/ecfs/. Follow the meet applicable corporate average fuel 1. Executive Order 12866, Executive Order
13563, and DOT Regulatory Policies and
instructions for submitting comments. economy (CAFE) standards and are
Procedures
• Mail: Filings can be sent by hand or unable to offset such a deficit with 2. Regulatory Flexibility Act
messenger delivery, by commercial compliance credits. The agency is 3. Executive Order 13132 (Federalism)
proposing this civil penalty rate based 4. Unfunded Mandates Reform Act of 1995
overnight courier, or by first-class or
on a tentative determination regarding 5. National Environmental Policy Act
overnight U.S. Postal Service mail
the applicability of the Federal Civil 6. Executive Order 12778 (Civil Justice
(although the Commission continues to Reform)
Penalties Inflation Adjustment Act
experience delays in receiving U.S. Improvements Act of 2015, and in 7. Paperwork Reduction Act
Postal Service mail). All filings must be accordance with the Energy Policy and 8. Privacy Act
addressed to the Commission’s 9. Executive Order 13771
Conservation Act of 1975 (EPCA) and
• Secretary, Office of the Secretary, the Energy Independence and Security A. Executive Summary
Federal Communications Commission. Act of 2007 (EISA). NHTSA has almost forty years of
• People With Disabilities: Contact DATES: Comments: Comments must be experience in implementing the
the FCC to request reasonable received by May 2, 2018. corporate average fuel economy (CAFE)
accommodations (accessible format ADDRESSES: You may submit comments program and its civil penalty
documents, sign language interpreters, to the docket number identified in the component. This includes oversight and
CART, etc.) by email: FCC504@fcc.gov heading of this document by any of the administration of the program’s
or phone: (202) 418–0530 or TTY: (202) following methods: operation, how the automobile
418–0432. For detailed instructions for • Federal eRulemaking Portal: Go to manufacturers respond to CAFE
submitting comments and additional http://www.regulations.gov. Follow the standards and increases, and the role of
online instructions for submitting civil penalties in achieving the CAFE
information on the rulemaking process,
comments. program’s objectives. NHTSA has
see the SUPPLEMENTARY INFORMATION • Mail: Docket Management Facility,
section of this document. carefully considered these objectives in
M–30, U.S. Department of reconsidering the Federal Civil Penalties
FOR FURTHER INFORMATION CONTACT: For Transportation, West Building, Ground Inflation Adjustment Act Improvements
additional information, contact Jonathan Floor, Room W12–140, 1200 New Jersey Act of 2015 (Inflation Adjustment Act or
Mark, Jonathan.Mark@fcc.gov, of the Avenue SE, Washington, DC 20590. 2015 Act) and its application to the
Media Bureau, Policy Division, (202) • Hand Delivery or Courier: U.S. CAFE civil penalty statute NHTSA
418–3634. Direct press inquiries to Department of Transportation, West administers.
Janice Wise at (202) 418–8165. Building, Ground Floor, Room W12– As a result of this review, NHTSA is
140, 1200 New Jersey Avenue SE, proposing to retain the current civil
Correction: In the Federal Register of Washington, DC, between 9 a.m. and 5 penalty rate in 49 U.S.C. 32912(b) of
March 21, 2018, in FR Doc. 2018–05726, p.m. Eastern time, Monday through $5.50 per tenth of a mile per gallon for
on page 12313, in the third column, Friday, except Federal holidays. automobile manufacturers that do not
correct the DATES caption to read: • Fax: 202–493–2251 meet applicable CAFE standards and are
DATES: Comments are due on or before FOR FURTHER INFORMATION CONTACT: unable to offset such a deficit with
April 30, 2018; reply comments are due Kerry Kolodziej, Office of Chief compliance credits. NHTSA’s proposal
on or before May 15, 2018. Counsel, NHTSA, telephone (202) 366– is based on its tentative determination
2992, facsimile (202) 366–3820, 1200 that the CAFE civil penalty rate is not
Dated: March 28, 2018. New Jersey Ave, SE, Washington, DC a ‘‘civil monetary penalty,’’ as defined
daltland on DSKBBV9HB2PROD with PROPOSALS
Federal Communications Commission. 20590. by the 2015 Act, that must be adjusted
Katura Jackson, SUPPLEMENTARY INFORMATION: for inflation. NHTSA’s previous Federal
Federal Register Liaison Officer, Office of the Register notices on its inflation
Secretary. Table of Contents adjustments under the 2015 Act did not
[FR Doc. 2018–06599 Filed 3–30–18; 8:45 am] A. Executive Summary consider whether the CAFE civil
BILLING CODE 6712–01–P B. Statutory and Regulatory Background penalty rate fit the definition of a ‘‘civil
C. Civil Penalties Inflationary Adjustment monetary penalty’’ subject to adjustment
Act Improvements Act of 2015 under the 2015 Act, instead
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![13908 Federal Register / Vol. 83, No. 63 / Monday, April 2, 2018 / Proposed Rules
mile per gallon, which was the civil economy’’—increasing the CAFE civil specific monetary amount as provided
penalty rate prior to NHTSA’s penalty rate would result in negative by Federal law’’ or have ‘‘a maximum
inflationary adjustment.21 NHTSA’s economic impact. Pursuant to OMB’s amount provided for by Federal law.’’ 26
delay of the final rule pending guidance, NHTSA has consulted with Second, the ‘‘penalty, fine, or other
reconsideration did not affect the OMB before proposing this reduced sanction’’ must be ‘‘assessed or enforced
amount of any CAFE penalties that catch-up adjustment determination and by an agency pursuant to Federal
would have otherwise applied prior to submitted this notice of proposed law.’’ 27 Third, the ‘‘penalty, fine, or
Model Year 2019. rulemaking (NPRM) to the Office of other sanction’’ must be ‘‘assessed or
Information and Regulatory Affairs enforced pursuant to an administrative
E. Proposed Revisions to the CAFE Civil
(OIRA) for review. . In addition, if proceeding or a civil action in the
Penalty Rate
NHTSA determines that a reduced Federal courts.’’ 28
In this notice of proposed rulemaking catch-up adjustment is appropriate in its The 2015 Act required the Office of
(NPRM), NHTSA is announcing that it final rule, it will seek OMB’s Management and Budget (OMB) to
has tentatively determined, upon concurrence before promulgating the ‘‘issue guidance to agencies on
reconsideration, that the 2015 Act rule, as required by the 2015 Act and implementing the inflation
should not be applied to the CAFE civil confirmed by OMB’s guidance. Finally, adjustments’’ under the Act.29 OMB
penalty formula provision found in 49 in this NPRM NHTSA has provided a issued guidance on February 24, 2016
U.S.C. 32912 and is proposing to retain series of tentative interpretations of the that stated: ‘‘Agencies are responsible
the current civil penalty rate of $5.50 2015 Act. In light of OMB’s role in for identifying the civil monetary
per .1 of a mile per gallon.22 The agency providing agencies guidance about the penalties that fall under the statutes and
is proposing this based on a legal 2015 Act, NHTSA has requested OMB’s regulations they enforce’’ and for
determination that the CAFE civil views about the 2015 Act. determining the ‘‘applicability of the
penalty rate is not a ‘‘civil monetary NHTSA is also proposing to finalize inflation adjustment requirement to an
penalty’’ as contemplated by the 2015 the 2017 and 2018 inflationary individual penalty . . . .’’ 30 In none of
Act and that therefore the 2015 Act adjustments for the maximum penalty NHTSA’s July 2016 interim final rule,
should not be applied to the NHTSA for general CAFE violations in 49 U.S.C. its December final rule, its July 2017
CAFE civil penalty formula. 32912(a). request for comments, nor its earlier
Additionally, in the alternative, NHTSA adjustment from $5 to $5.50 did NHTSA
is proposing to maintain the current 1. NHTSA Is Proposing To Retain the specifically address whether the penalty
civil penalty rate based on a tentative $5.50 CAFE Civil Penalty Rate Because for manufacturer violations of fuel
finding that—in light of the factors the 2015 Act Is Inapplicable economy standards in 49 U.S.C.
Congress requires NHTSA to analyze in Upon reconsideration, NHTSA has 32912(b) is a ‘‘civil monetary penalty’’
determining whether an increase in the tentatively determined that the 2015 Act subject to inflationary adjustment under
civil penalty rate will have ‘‘a is not applicable to the CAFE civil the 2015 Act, or more generally,
substantial deleterious impact on the penalty formula. The penalty in 49 whether the 2015 Act should be made
U.S.C. 32912(b) for a manufacturer that applicable to the penalty in Section
21 82 FR 32140 (July 12, 2017). If the December
violates fuel economy standards is not 32912(b). Instead, it applied the 2015
28, 2016 final rule had gone into effect, the penalty
rate would have remained $5.50 until MY 2019. a ‘‘civil monetary penalty’’ subject to Act without specific analysis of these
22 NHTSA chose to reconsider its prior inflationary adjustment under the 2015 issues.
determination consistent with its statutory Act. This reflects a change in NHTSA’s Upon evaluation, NHTSA has
authority to administer the CAFE standards position on this issue from when tentatively concluded the penalty for
program and its inherent authority to do so manufacturer violations of fuel economy
efficiently and in the public interest. See, e.g., NHTSA previously adjusted the CAFE
Tokyo Kikai Seisakusho, Ltd. v. United States, 529 civil penalty rate from $5 to $5.50.23 standards in 49 U.S.C. 32912(b) is not a
F.3d 1352, 1360–61 (Fed. Cir. 2008) Given that the current penalty figure has ‘‘civil monetary penalty’’ subject to
(‘‘[A]dministrative agencies possess inherent been in effect since it was set twenty adjustment under the 2015 Act. Upon
authority to reconsider their decisions, subject to similar evaluation, NHTSA also has
certain limitations, regardless of whether they years ago, NHTSA proposes to apply its
possess explicit statutory authority to do so.’’). new position on a prospective basis tentatively concluded the $10 limit for
OMB’s February 2016 guidance confirms that each only from the effective date of the final such violations in 49 U.S.C.
agency is ‘‘responsible for identifying the civil rule of this rulemaking. As a result of 32912(c)(1)(B) is not a ‘‘civil monetary
monetary penalties that fall under the statutes and
regulations [it] enforce[s].’’ And, as repeatedly this change, NHTSA is proposing to penalty’’ subject to adjustment under
confirmed by courts, an agency may reconsider how retain the $5.50 multiplier in the CAFE the 2015 Act either. To be a ‘‘civil
it previously interpreted a statute, particularly civil penalty formula. NHTSA requests monetary penalty,’’ a penalty must meet
when its updated interpretation ‘‘closely fits the all three criteria in the statutory
design of the statute as a whole and its object and
comment on this issue.
policy.’’ Good Samaritan Hosp. v. Shalala, 508 U.S. The 2015 Act requires agencies to definition.31 The penalty for
402, 417–18 (1993) (cleaned up); see also Nat’l adjust ‘‘civil monetary penalties’’ for manufacturer violations of fuel economy
Classification Comm. v. United States, 22 F.3d inflation.24 A ‘‘‘civil monetary penalty’
1174, 1177 (D.C. Cir. 1994) (‘‘[A]n agency may 26 Id.
depart from its past interpretation [of a statute] so
means any penalty, fine, or other
27 Id.
long as it provides a reasoned basis for the sanction’’ that meets three
28 Id.
change.’’) (citing Motor Vehicles Mfrs. Ass’n v. State requirements.25 First, the ‘‘penalty, fine, 29 Id.
Farm Mut. Auto. Ins. Co., 463 U.S. 29, 42 (1983)); § 7(a).
or other sanction’’ must be ‘‘for a 30 OMB Guidance at 2. OMB’s guidance included
Torrington Extend-A-Care Employee Ass’n v.
daltland on DSKBBV9HB2PROD with PROPOSALS
N.L.R.B., 17 F.3d 580, 589 (2d Cir. 1994) (similar). the definition of ‘‘civil monetary penalty’’
23 NHTSA may consider a separate rulemaking to
In the 2015 Act specifically, Congress did not applicable to the 2015 Act and explained:
prohibit or otherwise restrict agencies from consider whether the CAFE civil penalty rate ‘‘Agencies with questions on the applicability of the
reconsidering whether an initial catch-up should be $5. inflation adjustment requirement to an individual
24 EPCA’s use of the terminology ‘‘civil penalty’’ penalty, should first consult with the Office of
adjustment is required or, if so, the magnitude of
such an adjustment. Moreover, NHTSA’s in 49 U.S.C. 32912(b) is not dispositive. The 2015 General Counsel of the agency for the applicable
regulations provide broadly that ‘‘[t]he Act does not apply to all civil penalties, but rather statute, and then seek clarifying guidance from
Administrator may initiate any further rulemaking ‘‘civil monetary penalties,’’ a defined term. OMB if necessary.’’
proceedings that he finds necessary or desirable.’’ 25 28 U.S.C. 2461 note, Federal Civil Penalties 31 The three criteria in the definition are joined
49 CFR 553.25. Inflation Adjustment § 3(2). by the conjunctive ‘‘and.’’
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![13910 Federal Register / Vol. 83, No. 63 / Monday, April 2, 2018 / Proposed Rules
may apply those credits to that same manufacturer, authorized for the first gallon.’’ 49 Moreover, Congress set a
compliance category for the three model time by EISA in 2007, introduced a new high bar for adopting an increase.
years prior to, and three model years level of complexity that further Specifically:
after, the year in which the credits were differentiated civil penalties for The Secretary of Transportation shall
earned.41 A manufacturer that earned violations of fuel economy requirements prescribe by regulation a higher amount for
credits in a compliance category during from other types of civil penalties. This each .1 of a mile a gallon to be used in
and after MY 2008 may apply those added wrinkle further supports calculating a civil penalty under subsection
credits to the same compliance category NHTSA’s current understanding that the (b) of this section, if the Secretary decides
for three model years prior to, and five statutory CAFE civil penalty process is that the increase in the penalty—(i) will
model years after, the year in which the not included within the scope of the result in, or substantially further, substantial
2015 Act. energy conservation for automobiles in
credits were earned.42 Manufacturers model years in which the increased penalty
instruct NHTSA on how they wish to Since manufacturers control the use
may be imposed; and (ii) will not have a
allocate their credits, or account for of their available credits, NHTSA has no substantial deleterious impact on the
shortfalls.43 way of determining on its own the economy of the United States, a State, or a
Only once NHTSA hears back from amount of a penalty that a manufacturer region of a State.50
the manufacturer on how it wishes to must pay, or even if a manufacturer
must pay any penalty at all.46 The Further, the Secretary must decide that
satisfy its shortfall does NHTSA know an increase will not have a substantial
the specific civil penalty that the options are plentiful.47 A manufacturer
can choose to use no credits and pay a deleterious impact ‘‘only when the
manufacturer owes for falling short of Secretary decides that it is likely that
the applicable average fuel economy penalty. A manufacturer can choose to
use credits from the same compliance the increase in the penalty will not—(i)
standard. In other words, the cause a significant increase in
manufacturer’s decision regarding use of category and pay no penalty. A
manufacturer can choose to use some unemployment in a State or a region of
credits is one of the several inputs in the a State; (ii) adversely affect competition;
complex formula set forth in the fuel credits from the same compliance
category and pay a smaller penalty. A or (iii) cause a significant increase in
economy standards statute, which automobile imports.’’ 51 These factors,
ultimately produces the civil penalty for manufacturer can choose to transfer
credits from another compliance which appear to demonstrate Congress’
a manufacturer’s violation of fuel concern that the CAFE civil penalties
economy standards. In sum, the statute category and pay no penalty. A
manufacturer can choose to transfer program could damage the economy, are
describes a process to determine a far more specific and tailored to the
penalty amount, but does not itself some credits from another compliance
category and pay a smaller penalty. A CAFE program than any provisions in
provide for a penalty, fine or sanction the 2015 Act. Although it is not
that is ‘‘for a specific amount.’’ Instead,, manufacturer can choose to purchase
credits from another manufacturer and specifically identified in the statute, the
due to additional flexibilities of credit legislative history indicates that the
transfers and trades, a manufacturer pay no penalty. A manufacturer can
choose to purchase some credits from ‘‘impact’’ of concern relates to ‘‘the
determines the amount of the civil automobile industry.’’ 52 In its report on
penalty that is actually owed.44 another manufacturer and pay a smaller
penalty. A manufacturer can combine EPCA’s original fuel economy
Considering this framework, the formula provisions in 1975, the House
established under 49 U.S.C. 32912(b) credits from the same compliance
category and/or transfer credits from Commerce Committee recognized:
and the variable amounts that result
from application of the formula, are not another compliance category and/or The automobile industry has a central role in
a ‘‘specific monetary amount’’ of a purchase credits from another our national economy and that any regulatory
manufacturer and pay no penalty or a program must be carefully drafted so as to
penalty for manufacturer violations of require of the industry what is attainable
fuel economy standards subject to smaller penalty.
Those are just the options for credits without either imposing impossible burdens
adjustment pursuant to the 2015 Act. on it or unduly limiting consumer choice as
NHTSA must conduct a preliminary already earned. A manufacturer can also
elect not to pay a penalty or pay a to capacity and performance of motor
calculation for each of the vehicles.53
manufacturer’s fleets. CAFE standards smaller penalty by using a ‘‘carryback’’
plan, in which the manufacturer applies Notably, Congress was aware that
are fleet-wide standards that apply to inflation would effectively reduce the
credits it expects to earn in future model
the vehicles a manufacturer produced real value of the civil penalty rate over
years.48
for sale in each of three compliance There are additional considerations time—the CBO Director and NHTSA
categories: passenger cars manufactured that strongly supports NHTSA’s Administrator recognized that the civil
domestically, imported passenger cars, conclusion that the 2015 Act should not penalty structure under 1975 EPCA
and light trucks.45 Within specified be applied to the CAFE civil penalty.
limits, EISA permitted manufacturers to Congress already adopted a specific 49 49 U.S.C. 32912(c).
transfer credits across fleets. For scheme for increasing the civil penalty 50 49 U.S.C. 32912(c)(1)(A).
example, credits earned for a in 49 U.S.C. 32912(b) that requires a far 51 Id. 32912(c)(1)(C).
manufacturer’s domestic passenger fleet more intensive and restrictive process
52 ‘‘Energy Initiatives of the 95th Congress,’’ S.
may be transferred to its domestic light- Rep. No. 96–10, at 175–76 (1979) (‘‘Representative
than the summary approach in the 2015 Dingell (D-Mich.), concerned that increasing the
truck fleet. Likewise, EISA permitted Act. First, EPCA placed an absolute penalties could lead to layoffs in the automobile
manufacturers to sell (i.e., trade) their limit on such an increase to ‘‘not more industry, insisted that raising the penalties be
daltland on DSKBBV9HB2PROD with PROPOSALS
credits to other manufacturers. The than $10 for each .1 of a mile a contingent upon findings by the Secretary of
ability to trade credits with another Transportation that increasing the penalties would
achieve energy savings and would not be harmful
46 NHTSA is able to request supplemental reports
41 Id.
to the economy.’’).
536.6(a). and audit a manufacturer’s compliance plan, see, 53 H.R. Rep. No. 94–340, at 87 (1975). See also
42 Id. 536.6(b).
e.g., 49 CFR 537.8, but ultimately, it is the 121 Cong. Rec. 18675 (June 12, 1975) (statement of
43 See 49 CFR 536.5(d)(2), (6). manufacturer’s decision on how to use the credits Rep. Sharp) (‘‘[W]e recognize that we have serious
44 Public Law 110–140, Title I, 104(a), 121 Stat. available to it. unemployment in the American auto industry and
1501 (2007). 47 See 49 U.S.C. 32903.
we want to preserve this important segment of the
45 Id. 32902–04. 48 See 49 CFR 536.5(d). economy.’’).
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![Federal Register / Vol. 83, No. 63 / Monday, April 2, 2018 / Proposed Rules 13911
‘‘actually become less stringent over information to a person that the person nearest multiple of $1.’’ 61 This
time . . . as inflation erodes [the includes, or refers to, in an oral rounding rule suggests the Act was not
penalties’] effect’’—yet chose to require presentation.56 intended to apply to the small dollar
this strict procedure to increase the rate value CAFE civil penalty rate, since it
without allowing for inflationary These extensive, statutorily-mandated would not serve a de minimis rounding
adjustments to the multiplier in the procedures specifically applicable to function. As a practical matter, if the
formula. In contrast, Congress expressly increases in the penalty rate in 49 U.S.C. rounding rule applied to a small dollar
purposes of the 2015 Act (and its 32912(b) are in stark contrast to the penalty rate, it would prevent any
predecessor) ‘‘to establish a mechanism procedures applicable to the 2015 Act. annual inflationary increases (absent
that shall . . . maintain the deterrent For the initial catch-up adjustment, the extraordinary inflation).
effect of civil monetary penalties . . . .’’ 2015 Act specified that agencies should NHTSA believes that applying the
The omission of any inflation use an interim final rule.57 For 2015 Act to the penalty in 49 U.S.C.
adjustment procedure makes sense in subsequent annual adjustments, the 32912(b) would evade the statutory
light of Congress’ requirement for 2015 Act specified that agencies ‘‘shall safeguards and limitations directly
NHTSA to continually increase fuel make the adjustment notwithstanding applicable to that penalty, in contrast to
economy standards to maximum section 553 of title 5, United States Congress’s original awareness of penalty
feasible levels.54 Rather than increase Code,’’ which contain the rate adjustments, and could result in the
the penalty each year, Congress directed Administrative Procedure Act’s imposition of a potentially massive
NHTSA to determine whether fuel requirements for rulemaking.58 increase in civil penalties, in contrast to
economy standards should be increased, Finally, before Congress passed the contemporaneous, pre-enactment
because the goal of the CAFE standards 2015 Act, the CBO provided an evidence about the effect of the 2015
is to increase fuel economy not punish assessment of the revenue that inflation Act.
manufacturers, as with other penalties adjustments pursuant to the 2015 Act NHTSA has previously sought
subject to the 2015 Act. Requiring would provide the Federal government. comment on related issues, but NHTSA
mandatory penalty inflation CBO determined that all inflation believes it is important to provide the
adjustments and continuous fuel adjustments pursuant to the 2015 Act public with an opportunity to provide
standard increases would multiply the (across every Federal agency) would additional comments in light of
amount assessed against manufacturers provide in total $1.3 billion of revenue NHTSA’s analysis. Accordingly,
in a way that does not occur with other across ten years.59 Commenters indicate NHTSA requests comments on this
types of penalties. that adjusting the civil penalty rate to analysis. For these reasons, NHTSA
Congress also recognized the need for $14 could cost up to $1 billion annually tentatively concludes that it is not
lead time in increasing the civil penalty in penalty payments.60 Across ten years, appropriate to apply the 2015 Act and
for violations of fuel economy standards the penalty payments under this is proposing to retain the $5.50 rate in
by specifying that an increase ‘‘is provision of the statute alone could the CAFE civil penalty.
effective for the model year beginning at dwarf CBO’s contemporaneous estimate
2. The Agency Tentatively Finds That
least 18 months after the regulation of the 2015 Act’s effect on revenues
Increasing the CAFE Civil Penalty Rate
stating the higher amount becomes from all civil monetary penalties across
Will Result in Negative Economic
final.’’ 55 all statutes. The drastic difference
Congress additionally recognized the Impact
between CBO’s estimate of revenue from
need for extensive input from the public all inflation adjustments across ten NHTSA is proposing to retain the
and other parts of the Government years and the potential revenue from CAFE civil penalty rate of $5.50 per
before any such increase. It required this adjustment alone further suggests tenth of a mile per gallon, even if one
that: Congress had not considered the civil were to assume that the penalties are
The Secretary shall publish in the Federal penalty rate subject to the 2015 Act’s subject to the 2015 Act, because NHTSA
Register a proposed regulation under this inflation adjustment. This is bolstered tentatively concludes that, in light of the
subsection and a statement of the basis for by the rounding rule adopted by statutory requirements in EPCA for
the regulation and provide each Congress. The 2015 Act states, ‘‘[a]ny raising the penalty rate, applying the
manufacturer of automobiles a copy of the increase determined under this increase would lead to a ‘‘negative
proposed regulation and the statement. The subsection shall be rounded to the economic impact’’ under the 2015 Act.
Secretary shall provide a period of at least 45 The 2015 Act states, ‘‘[a]ny increase
days for written public comments on the
proposed regulation. The Secretary shall 56 Id. 32912(c)(2). determined under this subsection shall
submit a copy of the proposed regulation to 57 28 U.S.C. 2461 note, Federal Civil Penalties be rounded to the nearest multiple of
the Federal Trade Commission and request Inflation Adjustment § 4(b)(1)(A). $1.’’ 62 NHTSA requests comment on
58 Id. § 4(b)(2).
the Commission to comment on the proposed whether, and if so, how, this rounding
59 See ‘‘Estimate of the Budgetary Effects of H.R.
regulation within that period. After that rule should apply if NHTSA ultimately
period, the Secretary shall give interested 1314, the Bipartisan Budget Act of 2015, as reported
by the House Committee on Rules on October 27, concludes that adjusting the $5.50 CAFE
persons and the Commission an opportunity civil penalty rate upwards would have
2015,’’ at 4, available at https://www.cbo.gov/sites/
at a public hearing to present oral default/files/114th-congress-2015-2016/ a ‘‘negative economic impact.’’
information, views, and arguments and to costestimate/hr1314.pdf. Title VII of the Bipartisan
direct questions about disputed issues of Specifically, does the 2015 Act rule
Budget Act of 2015 includes three sections and the
material fact to—(A) other interested persons revenue estimate was for title VII in its entirety. require a $5.50 civil penalty rate, if
finalized, to be rounded to $6?
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making oral presentations; (B) employees and Section 701 is the 2015 Act. The other two sections
contractors of the Government that made are the rescission of money deposited or available Commenters should consider the
written comments or an oral presentation or in two funds which CBO recognized would potential application of the rounding
participated in the development or decrease direct government spending. Therefore,
the 2015 Act is likely the only portion of title VII rule to the initial catch-up adjustment,
consideration of the proposed regulation; and
to provide revenue, and the CBO’s revenue estimate
(C) experts and consultants that provided for title VII can be understood as a revenue estimate 61 28 U.S.C. 2461 note, Federal Civil Penalties
for the 2015 Act. Inflation Adjustment § 5(a).
54 49 U.S.C. 32902(a). 60 See, e.g., Comment ID NHTSA–2017–0059– 62 28 U.S.C. 2461 note, Federal Civil Penalties
55 Id. 32912(c)(1)(D). 0019, available at https://www.regulations.gov/. Inflation Adjustment § 5(a).
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as well as the 2017 and 2018 Accordingly, NHTSA must interpret the nature, circumstances, extent, and
adjustments and future annual Congress’ Inflation Adjustment Act in gravity of the violation.73
adjustments. Commenters should also light of the longstanding CAFE civil The principles underlying other
consider the relationship, if any, penalty structure previously enacted by traditional canons of statutory
between the rounding rule and the Congress. Interpreting the Inflation interpretation further support NHTSA’s
criteria required to be met to raise the Adjustment Act in context is proposed approach. For example,
civil penalty under EPCA. particularly important in determining statutes that relate to the same or to
the appropriate adjustment to make to similar subjects are in pari materia.
a. Negative Economic Impact
the CAFE civil penalty rate given the Such statutes should be construed
i. ‘‘Negative Economic Impact’’ Is Not unique nature of the CAFE civil together, even if they do not expressly
Defined penalties program. For example, in reference each other or were passed at
Under the 2015 Inflation Adjustment contrast to other federal civil penalty different times, unless a contrary intent
Act, NHTSA, under authority delegated programs, the CAFE statute requires a is clearly expressed by Congress. Here,
by the Secretary, may adjust the amount minimum of eighteen months’ lead time both the inflationary adjustment statute
of a civil monetary penalty by the less in advance of a model year before a and the relevant provisions of the CAFE
than the amount otherwise required for higher civil penalty amount can become statute involve civil penalties and must
the ‘‘catch-up adjustment’’ upon effective.67 Congress mandated this be read in pari materia.74 And when one
determining in a final rule, after notice- interval because ‘‘manufacturers’ of the statutes is generalized and passed
and comment, that increasing the civil product and compliance plans are later—like the Inflation Adjustment
monetary penalty by the otherwise difficult to alter significantly for years Act—it cannot be read to implicitly
required amount will have a ‘‘negative ahead of a given model year.’’ 68 Indeed, repeal an earlier, more specific statute—
economic impact,’’ or the social costs of ‘‘NHTSA believes that this approach like EPCA’s establishment of the CAFE
increasing the civil monetary penalty by facilitates continued fuel economy civil penalties structure.75 This
the otherwise required amount improvements over the longer term by approach to statutory interpretation is
outweigh the benefits.63 In either case, accounting for the fact that consistent with NHTSA’s past
the Director of the Office of manufacturers will seek to make practice.76
Management and Budget must concur improvements when and where they are The principles underlying the rule of
with the agency’s determination. lenity also substantiate interpreting the
most cost-effective.’’ 69 For similar
To determine whether increasing the Inflation Adjustment Act narrowly in
reasons, when DOT amends a fuel
CAFE civil penalty rate by the amount light of EPCA. This canon instructs that
economy standard to make it more
calculated under the inflation statutes imposing penalties should be
stringent, that new standard must be
adjustment formula would have a construed narrowly in favor of those
promulgated ‘‘at least 18 months before
‘‘negative economic impact,’’ NHTSA against whom the penalties will be
the beginning of the model year to
must first establish the meaning of imposed. Although the rule of lenity is
which the amendment applies.’’ 70
‘‘negative economic impact.’’ The
CAFE civil penalties are also atypical 73 49 U.S.C. 30165(b)–(c).
statute does not define ‘‘negative
economic impact.’’ OMB issued a in that they follow a prescribed formula 74 See Wisconsin Cent. Ltd. v. United States, 194
that can only be compromised or F. Supp. 3d 728, 738 (N.D. Ill. 2016), aff’d, 856 F.3d
memorandum providing guidance to the 490 (7th Cir. 2017) (‘‘‘[C]onceptual similarity’ . . .
heads of executive departments and remitted by NHTSA in exceptionally is precisely the point of the in pari materia canon:
agencies on how to implement the limited circumstances.71 In practice, ‘statutes addressing the same subject matter
Inflation Adjustment Act, but the therefore, any increase in the CAFE civil generally should be read as if they were one law,’
penalty rate would apply to all non- with the traditional tools of statutory interpretation
guidance does not define ‘‘negative applied accordingly. . . . [A]lthough FICA does not
economic impact’’ either.64 compliant manufacturers, regardless of by completely define the RRTA’s various contours,
the circumstances, and in turn, would examining the former to elucidate related
ii. How To Interpret ‘‘Negative likely increase the price of credits.72 provisions of the latter is an acceptable mode of
Economic Impact’’ Contrast this constrained structure with statutory interpretation given the close linkages
between the statutes.’’) (internal citation omitted)
In interpreting ‘‘negative economic NHTSA’s general civil penalty (emphasis in original); cf. Pound v. Airosol Co., 498
impact,’’ NHTSA cannot just consider authority, which allows the Secretary to F.3d 1089, 1094 n.2 (10th Cir. 2007) (‘‘The penalty
determine or compromise the amount of provisions of the CAA and the Clean Water Act
the Inflation Adjustment Act in (CWA) are virtually identical; thus, CWA cases are
isolation: statutory interpretation is not a civil penalty and delineates multiple instructive in analyzing issues arising from the
conducted in a vacuum.65 ‘‘It is a factors for the Secretary to consider in CAA’’); United States v. Dell’Aquilla, 150 F.3d 329,
fundamental canon of statutory making such a determination, including 338 n.9 (3d Cir. 1998) (‘‘[T]he Clean Water Act and
the Clean Air Act are in pari materia, and courts
construction that the words of a statute often rely upon interpretations of the Clean Water
must be read in their context and with 67 49 U.S.C. 32912(c)(1)(D). Act to assist with an analysis under the Clean Air
68 81 FR 95491 (December 28, 2016).
a view to their place in the overall Act.’’) (citations omitted).
69 Id.
statutory scheme.’’ 66 70 49
75 See Crawford Fitting Co. v. J. T. Gibbons, Inc.,
U.S.C. 32902(a)(2). 482 U.S. 437, 445 (1987) (‘‘Where there is no clear
71 49 U.S.C. 32913 (authorizing the Secretary to intention otherwise, a specific statute will not be
63 28 U.S.C. 2461 note, Federal Civil Penalties ‘‘compromise or remit the amount of civil penalty controlled or nullified by a general one, regardless
Inflation Adjustment § 4(c)(1). imposed’’ under CAFE ‘‘only to the extent’’ (1) of the priority of enactment.’’) (cleaned up);
64 Memorandum from the Director of OMB to
necessary to prevent a manufacturer’s insolvency or Radzanower v. Touche Ross & Co., 426 U.S. 148,
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Heads of Executive Departments and Agencies, bankruptcy; (2) the manufacturer shows that the 153 (1976) (‘‘It is a basic principle of statutory
Implementation of the Federal Civil Penalties violation was caused by an act of God, a strike, or construction that a statute dealing with a narrow,
Inflation Adjustment Act Improvements Act of 2015 a fire; or (3) the Federal Trade Commission certifies precise, and specific subject is not submerged by a
(Feb. 24, 2016), available at https:// that a reduction is necessary to prevent a later enacted statute covering a more generalized
www.whitehouse.gov/sites/whitehouse.gov/files/ substantial lessening of competition). NHTSA has spectrum.’’).
omb/memoranda/2016/m-16-06.pdf. never attempted to utilize this provision to 76 See, e.g., 80 FR 40137, 40171 (Aug. 12, 2015)
65 Davis v. Michigan Dep’t of Treasury, 489 U.S. compromise or remit a CAFE civil penalty. (interpreting a term in EISA by looking to how the
803, 809 (1989). 72 See H.R. Rep. No. 95–1751, at 112 (1978) (Conf. term is defined in the Motor Vehicle Safety Act,
66 Id. (citing United States v. Morton, 467 U.S. Rep.) (‘‘[T]he higher penalty . . . will be the same ‘‘[g]iven the absence of any apparent contrary intent
822, 828 (1984)). for all manufacturers when adopted. . ..’’). on the part of Congress in EISA’’).
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![Federal Register / Vol. 83, No. 63 / Monday, April 2, 2018 / Proposed Rules 13913
traditionally applied in criminal (iii) cause a significant increase in noncompliant actors, represents a
contexts,77 the principles underlying automobile imports.80 uniform approach with how it
the rule are worth considering when Thus, to increase the civil penalty rate determines the appropriate civil penalty
there are severe punitive implications of for CAFE violations, the Secretary must level in these other, non-CAFE cases.
a broad interpretation, as is the case affirmatively determine that doing so Moreover, the Senate Conference report
here. Construing the statute strictly is ‘‘will not have a substantial deleterious on the 1975 version of EPCA directed
particularly important here because the impact on the economy of the United ‘‘the Secretary [to] weigh the benefits to
inflation adjustment essentially acts as a States, a State, or a region of a State.’’ the nation of a higher average fuel
‘‘one-way ratchet,’’ where all Critically, if she is unable to make such economy standard against the
subsequent annual adjustments will be a determination or, put another way, if difficulties of individual automobile
based off this ‘‘catch-up’’ adjustment she determines that increasing the civil manufacturers.’’ 85
with no ensuing opportunity to invoke penalty may have ‘‘a substantial Note also that ‘‘negative economic
the ‘‘negative economic impact’’ deleterious impact on the economy of impact,’’ as used in the Inflation
exception.78 the United States, a State, or a region of Adjustment Act, need not mean ‘‘net
a State,’’ she is prohibited by statute negative economic impact.’’ Congress
iii. Reading Section 32912 With the from increasing the applicable civil expressly utilized the ‘‘net’’ concept in
Inflationary Adjustment Act penalty rate.81 Therefore, in the very next provision of the statute,
Under 49 U.S.C. 32912(b), a determining whether adjusting the authorizing a lesser increase to a civil
manufacturer that violates a fuel CAFE civil penalty rate for inflation will penalty if the agency determines that
economy standard is potentially subject have a ‘‘negative economic impact,’’ it is ‘‘the social costs of increasing the civil
to a civil penalty rate for each tenth of appropriate to consider the potential monetary penalty by the otherwise
a mile per gallon that the manufacturer negative economic impact the required amount outweigh the
misses the applicable average fuel adjustment would have not just on the benefits.’’ 86 The absence of comparable
economy standard for the number of United States in general, but also, at a phrasing for the ‘‘negative economic
automobiles manufactured by the minimum, on whether such impact impact’’ provision immediately prior
manufacturer during the model year, could occur in any particular State or implies either that term is ambiguous or
unless the manufacturer is able and region of a State. that Congress intentionally omitted the
willing to apply credits or establish a NHTSA also believes it is appropriate word ‘‘net.’’ Either way, without any
plan to generate and apply credits in to consider the impact raising the CAFE express indications that Congress meant
subsequent years, as discussed above. civil penalty rate would have on ‘‘net negative economic impact,’’
NHTSA has exceptionally limited individual manufacturers who fall short NHTSA proposes that the provision
discretion in whether to impose the of fuel economy standards, and those should be interpreted without reference
penalty or the amount of the affected, such as dealers. Such a broad to any potential benefits of increasing
preliminary calculation of the penalty interpretation is consistent with how the penalty.
when it does indeed apply. other statutory provisions permitting or
requiring agencies to consider economic a. NHTSA has not Determined That an
The Secretary is required to increase Increase in the CAFE Civil Penalty Rate
the applicable civil penalty rate up to impacts have been interpreted. For
example, under the Safety Act, a Will Not Have a Substantial Deleterious
$10 per each tenth of a mile per gallon Impact on the Economy
if she decides that the increase in the discretionary factor in determining the
penalty: amount of a penalty is ‘‘the To summarize: The 2015 Act allows
(i) will result in, or substantially appropriateness of such penalty in an agency to set a lower penalty amount
further, substantial energy conservation relation to the size of the business of the than would otherwise be required if it
for automobiles in model years in which person charged, including the potential can show that raising the penalty in
the increased penalty may be imposed; for undue adverse economic accordance with the 2015 Act will lead
and impacts.’’ 82 NHTSA interpreted that to a ‘‘negative economic impact,’’ which
(ii) will not have a substantial factor in its regulation to include is not defined either in the 2015 Act or
deleterious impact on the economy of consideration of ‘‘financial factors such OMB’s implementing guidance.
the United States, a State, or a region of as liquidity, solvency, and However, the statute specifically related
a State.79 profitability.’’ 83 Other federal statutes to penalties for violations of NHTSA’s
The Secretary can only decide that the likewise contemplate consideration of fuel economy standards has a provision
increase ‘‘will not have a substantial negative economic impacts on allowing for an increase in the penalty
deleterious impact on the economy’’ if individual actors in determining an rate only if the agency can determine
she decides that it is likely that the appropriate civil penalty.84 NHTSA’s that increasing the rate will not have a
increase in the penalty will not: proposal, which includes consideration ‘‘substantial deleterious impact on the
(i) Cause a significant increase in of the ‘‘negative economic impact’’ the economy.’’ To read these two provisions
unemployment in a State or a region of level would have on individual together harmoniously, NHTSA
a State; interprets the statutes to mean that the
80 49 U.S.C. 32912(c)(1)(C).
(ii) adversely affect competition; or agency must be able to affirmatively
81 Inaddition to the substantive findings that show that increasing the penalty as
must be made before the civil penalty rate can be
77 Some courts have applied the rule of lenity in increased, Section 32912 also imposes procedural would be required by the 2015 Act will
not have the adverse economic effects
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civil and administrative contexts as well. See, e.g., requirements. For instance, the Secretary must hold
United States v. Thompson/Ctr. Arms Co., 504 U.S. a public hearing during which interested persons identified in the definition of
505, 518 (1992); Rand v. C.I.R., 141 T.C. 376, 393 and the Federal Trade Commission be allowed to ‘‘substantial deleterious impact.’’ Since
(2013), overturned on other grounds due to make presentations. 49 U.S.C. 32912(c)(2).
legislative action. 82 49 U.S.C. 30165(c)(7) (emphasis added).
the agency cannot make those
78 This ‘‘one-way ratchet’’ constraint is also 83 49 CFR 578.8. affirmative findings, discussed further
imposed by EPCA. H.R. Rep. No. 95–1751, at 113 84 See 15 U.S.C. 2069(b), (c) (Consumer Product
(1978) (Conf. Rep.) (‘‘No provision [in EPCA] is Safety Commission); 33 U.S.C. 1232(a)(1) (Coast 85 S. Rep. No. 94–516, at 155 (1975) (Conf. Rep.).
made for lowering the penalty.’’). Guard); 33 U.S.C. 1319(d), 1321(b)(8) 86 28 U.S.C. 2461 note, Federal Civil Penalties
79 49 U.S.C. 32912(c)(1)(A)–(B). (Environmental Protection Agency). Inflation Adjustment § 4(c)(1)(B) (emphasis added).
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below, it is therefore prohibited from manufacturers who have historically It is always possible that higher levels of fuel
raising the penalty rate because doing so paid civil penalties in lieu of economy could be achieved by the domestic
would have a ‘‘negative economic compliance have automobile assembly manufacturers if they were to restrict
severely their product offerings. For example,
impact.’’ and parts manufacturing plants located sales of particular larger light truck models
Since NHTSA does not have sufficient in the Midwest and Southeastern U.S. and larger displacement engines could be
evidence to make the requisite finding These plants employing thousands of limited or eliminated entirely. As discussed
under EPCA that an increase in the people could be most adversely by the October 1984 notice, Ford submitted
CAFE penalty rate will not have a impacted by a civil penalty increase an analysis of the potential effects of
substantial deleterious impact on the resulting in employment losses. In restricting product offerings in this manner.
economy, NHTSA is proposing to retain response to substantial increases in This analysis showed that to achieve a 1.5
the $5.50 penalty rate pursuant to the mpg average fuel economy benefit through
potential penalties, some manufacturers
negative economic impact exception to such restrictions, sales reductions of 100,000
could plausibly lose sales due to to 180,000 units at Ford could occur, with
inflationary adjustments. NHTSA resulting higher prices, which may resulting employment losses of 12,000 to
invites comments on whether this is the result in reduced employment at 23,000 positions at Ford, its dealers and
appropriate penalty level, and if not, facilities currently producing vehicles suppliers. The agency believes this analysis
requests data or other evidence that and engines. to be a reasonable projection of the impacts
would support the findings necessary Fewer new vehicle sales attributable of restricting the availability of larger light
under EPCA that would allow for such trucks in the current market.
to price increases resulting from Impacts of this magnitude go beyond the
an increase. increased penalty payments and/or
The comments should take into realm of ‘‘economic practicability’’ as
compliance costs could also plausibly contemplated in the Act. This is particularly
account that the factors are probabilistic result in fewer jobs within new motor true since it is likely that a standard set at
and prospective, that is, to increase the vehicle dealerships franchised to sell a level resulting in impacts of this magnitude
penalty rate, the Secretary must vehicles manufactured or distributed by would result in little or no net fuel economy
determine that doing so likely would manufacturers subject to penalties and/ benefit. This is because consumers could
not have the statutorily-enumerated or increased compliance costs. A meet their demand for larger light trucks by
effects in the future. merely shifting their purchases to other
manufacturer’s decision to change manufacturers which continue to offer such
The comments should also reflect the
allocation of vehicles distributed to trucks. The other manufacturers could
considerable burdens that must be
overcome to make the findings needed dealers to address increased penalties increase sales of these vehicles without
to increase the civil penalty under and/or compliance costs could also risking noncompliance with the standards.
result in job losses within the franchised An additional possible negative economic
EPCA, in part reflected in the statute’s consequence would be reduced competition
repeated use of ‘‘substantial’’ and dealer network. For example, one might
expect that increased CAFE penalties in the market for larger light trucks. Given
‘‘significant.’’ Indeed, the burden is so the small number of manufacturers
great that NHTSA has been unable to could lead to a decrease in the number
producing larger light trucks, a decision by
make all of the determinations of vehicles with powerful engines being Ford (or GM or [Chrysler]) to significantly
necessary since the provisions were produced or sold. Dealers in States or reduce its role in this market could have
added in 1978. intra-State regions where these types of serious consequences for competition.88
The comments should also address vehicles are more popular would be NHTSA continues to believe that, in the
the impact of increasingly stringent fuel affected disproportionately. context of CAFE rulemakings, an
economy standards established in c. NHTSA Has Not Determined That an analysis of the effects of a regulation on
existing statute and NHTSA regulation, Increase in the CAFE Civil Penalty Rate competition should be undertaken in a
and whether this increasing stringency Will Not Adversely Affect Competition broad manner, similar to the analysis
has a relationship to a ‘‘negative traditionally used in establishing CAFE
economic impact’’ or ‘‘substantial Notably, unlike the other two factors, stringency requirements, and seeks
deleterious impact determination.’’ this factor does not require a finding of comments on this approach.
a ‘‘significant’’ effect. The absence of NHTSA tentatively concludes that it
b. NHTSA has not Determined That an this modifier implies that even a modest is reasonable to believe that an increase
Increase in the CAFE Civil Penalty Rate adverse effect on competition would in the CAFE penalty rate could distort
Will Not Cause a Significant Increase in suffice to block a civil penalty increase. the normal market competition that
Unemployment in a State or Region of This phrasing similarly contrasts with would be expected in a free market by
a State the provision in the next section of the favoring one group of manufacturers
NHTSA tentatively concludes that an Code, describing the compromising or over another. This could adversely
increase in the CAFE penalty rate could remitting the amount of a CAFE civil impact the affected manufacturers
plausibly cause a significant increase in penalty. That provision requires the through higher prices for their products
unemployment in a State or a region of Federal Trade Commission to certify (without corresponding benefits to
a State. For instance, vehicle price that a reduction in the penalty is consumers), restricted product offerings,
increases—resulting from increased ‘‘necessary to prevent a substantial and reduced profitability. An increased
penalty payments or compliance costs lessening of competition.’’ 87 CAFE penalty benefits fleets of already-
passed through to customers—could In establishing CAFE stringency compliant fuel efficient vehicles over
result in customers keeping their requirements, NHTSA has consistently fleets of less fuel-efficient vehicles. A
current vehicles longer or shifting evaluated risks to competition, manufacturer who is already generating
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purchases towards less expensive new including the potential effects on or possesses over-compliance credits
vehicles or toward the used vehicle individual automakers. For instance, in will find itself with much more valuable
market. Either outcome could lead to the 1985 rulemaking, NHTSA analyzed credits to sell and may use this
fewer jobs with vehicle manufacturers. the potential effect of a 1.5 mpg fuel additional capital to invest more heavily
Losses may be concentrated in economy improvement on the domestic in research and development,
particular States and regions within auto industry, stating: marketing, add other features to its
those States where automobile
manufacturing plants are located. Some 87 49 U.S.C. 32913(a)(3). 88 50 FR 40398, 40400–40401 (Oct. 3, 1985).
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position that raising the penalty amount be passed along to consumers. left in place when Congress amended
would have a positive or neutral impact Considering the agency’s past analyses the civil penalty provision in 2007.96
on the economy. Ultimately, NHTSA of CAFE’s impact on vehicle costs, The 2015 Act requires adjustments of
‘‘defer[red] consideration of this issue NHTSA tentatively concludes that the ‘‘civil monetary penalties,’’ which must
for purposes of this rulemaking.’’ 93 estimate provided by industry showing
In 2012, NHTSA again solicited be penalties that are ‘‘assessed or
annual costs of at least one billion
comments on how raising or not raising enforced by an agency pursuant to
dollars is a reasonable estimate of this
the penalty amount under EPCA would Federal law.’’ 97 NHTSA believes that
impact. NHTSA requests comments,
impact the economy. This time, ‘‘no including any substantive analysis, on the $10 cap is not the maximum amount
comments specific to this issue were this issue. The agency further believes of a penalty that is ‘‘assessed or
received,’’ so NHTSA declared it would that an increase in costs of this enforced.’’ Rather, it is a limit on the
‘‘continue to attempt to evaluate this significant magnitude exceeds the range amount NHTSA can set for the CAFE
issue on its own.’’ 94 of adjustments Congress intended to civil penalty rate if the required
The public has had multiple cover when it enacted the 2015 Act, as determinations are made. NHTSA
opportunities to comment on the EPCA described above. cannot assess or enforce the $10 cap
civil penalty provisions and now the If NHTSA determines that raising the against anyone. In contrast, other
Inflation Adjustment Act. NHTSA has CAFE civil penalty rate to $14 would penalties in EPCA have a maximum
considered all the comments it received have a ‘‘negative economic impact,’’ it is amount that can be ‘‘assessed or
in generating this proposed rule. permitted to adjust the rate by less than enforced.’’ One example of such a
Based on the findings discussed penalty is the ‘‘general penalty’’ in
the otherwise required amount. Without
above, NHTSA has tentatively made a EPCA for violations of 49 U.S.C.
any statutory direction or OMB
determination that negative economic
guidance on how much to adjust the 32911(a). That ‘‘general penalty’’ is ‘‘a
impact will result if the CAFE civil
rate, if at all, it falls to NHTSA to civil penalty of not more than $10,000
penalty rate is increased. For this
determine the appropriate adjustment— for each violation.’’ NHTSA has the
reason, NHTSA is proposing to retain
and NHTSA has wide discretion in authority, without any additional
the existing CAFE civil penalty rate of
making this determination.95 rulemakings, to subject the entity
$5.50 per .1 of a mile per gallon.
NHTSA also seeks comment on whether In light of the regulatory concerns committing a violation to the maximum
a modest increase in the CAFE civil described above, and in consideration of amount—$10,000—for that violation, or
penalty rate, less than the amount that the unique regulatory structure with a lower amount, in its discretion. By
would otherwise be required if the 2015 non-discretionary penalties tied to contrast NHTSA has no discretion to
Act applies, would ‘‘result in, or standards that increase over time, enforce anything other than the result of
substantially further, substantial energy NHTSA is proposing to keep the CAFE the CAFE formula against a
conservation for automobiles in model civil penalty rate at $5.50 because it manufacturer, which includes the
years in which the increased penalty tentatively concludes that retaining the current $5.50 multiplier. The $10 figure
may be imposed,’’ as expected by EPCA. $5.50 rate would avoid the ‘‘negative is not part of that formula and could
economic impact’’ caused by any only become so after further rulemaking.
3. Increasing the CAFE Civil Penalty adjustment upwards.
Rate to $14 Would Have a ‘‘Negative Although NHTSA has previously Accordingly, NHTSA is tentatively
Economic Impact,’’ Even If The EPCA sought comment on these issues, proposing in the alternative that any
Factors Were Not Mandatory NHTSA believes it is important to potential adjustment NHTSA makes to
Even if NHTSA was not required to provide the public with an opportunity the CAFE civil penalty rate be capped
apply the EPCA factors, NHTSA has to provide additional information in at $10 and seeks comment on this
tentatively determined that raising the light of NHTSA’s analysis. Therefore, proposal. Commenters should consider
CAFE civil penalty rate to $14 would NHTSA requests comment on whether whether the $10 limit is itself a ‘‘civil
have a ‘‘negative economic impact.’’ increasing the CAFE civil penalty rate to monetary penalty’’ that must be
NHTSA believes that the economic $14 would have a ‘‘negative economic adjusted under the 2015 Act, keeping in
consequences described above are a impact,’’ and if so, to what level the rate mind that the level was kept the same
reasonable estimate of what would should be raised, if at all. when the previous adjustment was
occur if the CAFE civil penalty rate was made in 1997. Commenters should also
4. The CAFE Civil Penalty Rate is
increased 150 percent, regardless of any consider the effect of the 2007
Capped At $10
effect from EPCA. That is, increasing the amendments in ratifying the $10 level
penalty rate to $14 would lead to Under 49 U.S.C. 32912(c)(1)(B), if the and whether the market-based
significantly greater costs than the CAFE civil penalty rate is increased, the complexities established by those
agency had anticipated when it set the rate at which it is set ‘‘may not be more amendments bear on what Congress
CAFE standards because manufacturers than $10 for each .1 of a mile a gallon.’’ meant subsequently by ‘‘civil monetary
who had planned to use penalties as one This upper limit has been in effect since penalty’’ in the 2015 Act.
way to make up their shortfall would EPCA was amended in 1978 and was
now need to pay increased penalty
amounts, purchase additional credits at 95 Nat’l Shooting Sports Found., Inc. v. Jones, 716 96 In the interim final rule required by the 2015
likely higher prices, or make F.3d 200, 214–15 (D.C. Cir. 2013) (‘‘An agency has Act, NHTSA announced that the adjusted
daltland on DSKBBV9HB2PROD with PROPOSALS
‘wide discretion’ in making line-drawing decisions maximum civil penalty would be increased from
modifications to their vehicles outside and ‘[t]he relevant question is whether the agency’s $10 to $25. 82 FR 32139 (July 12, 2017). However,
of their ordinary redesign cycles. numbers are within a zone of reasonableness, not this change was never formally codified in the Code
NHTSA believes all of these options whether its numbers are precisely right.’ . . . An of Federal Regulations nor adopted by Congress.
would increase manufacturers’ agency ‘is not required to identify the optimal
Even if the adjustment is considered to have been
threshold with pinpoint precision. It is only
compliance costs, many of which would required to identify the standard and explain its adopted, however, NHTSA is now reconsidering
relationship to the underlying regulatory that decision for the reasons explained above.
93 75 FR 25323, 25666–67 (May 7, 2010). 97 28 U.S.C. 2461 note, Federal Civil Penalties
concerns.’’’) (quoting WorldCom, Inc. v. FCC, 238
94 77 FR 62623, 63131 (Oct. 15, 2012). F.3d 449, 461–62 (D.C. Cir. 2001)). Inflation Adjustment § 3(2)(B), (C).
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![Federal Register / Vol. 83, No. 63 / Monday, April 2, 2018 / Proposed Rules 13917
F. Rulemaking Analyses and Notices 336211 ‘‘Motor Vehicle Body levels of government, as specified in
1. Executive Order 12866, Executive Manufacturing’’ applied a small Executive Order 13132.
business size standard of 1,000 The reason is that this rule will
Order 13563, and DOT Regulatory
employees or fewer. SBA now uses size generally apply to motor vehicle
Policies and Procedures
standards based on the North American manufacturers. Thus, the requirements
NHTSA has considered the impact of Industry Classification System of Section 6 of the Executive Order do
this rulemaking action under Executive (‘‘NAICS’’), Subsector 336— not apply.
Order 12866, Executive Order 13563, Transportation Equipment
and the Department of Transportation’s 4. Unfunded Mandates Reform Act of
Manufacturing. This action is expected 1995
regulatory policies and procedures. This to affect manufacturers of motor
rulemaking document has been vehicles. Specifically, this action affects The Unfunded Mandates Reform Act
considered a ‘‘significant regulatory manufacturers from NAICS codes of 1995, Public Law 104–4, requires
action’’ under Executive Order 12866. 336111—Automobile Manufacturing, agencies to prepare a written assessment
At this stage, NHTSA believes that this and 336112—Light Truck and Utility of the cost, benefits and other effects of
rulemaking could also be ‘‘economically Vehicle Manufacturing, which both proposed or final rules that include a
significant,’’ but cannot definitively have a small business size standard Federal mandate likely to result in the
make that determination until the final threshold of 1,500 employees. expenditure by State, local, or tribal
rule stage, as it depends entirely on the Though civil penalties collected governments, in the aggregate, or by the
civil penalty rate established in the final under 49 CFR 578.6(h)(1) and 49 CFR private sector, of more than $100
rule. 578.6(h)(2) apply to some small million annually. Because this rule is
2. Regulatory Flexibility Act manufacturers, low volume not expected to include a Federal
manufacturers can petition for an mandate, no Unfunded Mandates
Pursuant to the Regulatory Flexibility exemption from the Corporate Average assessment will be prepared.
Act (5 U.S.C. 601 et seq., as amended by Fuel Economy standards under 49 CFR
the Small Business Regulatory 5. National Environmental Policy Act
part 525. This would lessen the impacts
Enforcement Fairness Act (SBREFA) of of this rulemaking on small business by The National Environmental Policy
1996), whenever an agency is required allowing them to avoid liability for Act of 1969 (NEPA) (42 U.S.C. 4321–
to publish a notice of proposed penalties under 49 CFR 578.6(h)(2). 4347) requires Federal agencies to
rulemaking or final rule, it must prepare Small organizations and governmental analyze the environmental impacts of
and make available for public comment jurisdictions will not be significantly proposed major Federal actions
a regulatory flexibility analysis that affected as the price of motor vehicles significantly affecting the quality of the
describes the effect of the rule on small and equipment ought not change as the human environment, as well as the
entities (i.e., small businesses, small result of this rule. impacts of alternatives to the proposed
organizations, and small governmental action. 42 U.S.C. 4332(2)(C). When a
jurisdictions). No regulatory flexibility 3. Executive Order 13132 (Federalism) Federal agency prepares an
analysis is required if the head of an Executive Order 13132 requires environmental assessment, the Council
agency certifies the proposal will not NHTSA to develop an accountable on Environmental Quality (CEQ) NEPA
have a significant economic impact on process to ensure ‘‘meaningful and implementing regulations (40 CFR parts
a substantial number of small entities. timely input by State and local officials 1500–1508) require it to ‘‘include brief
SBREFA amended the Regulatory in the development of regulatory discussions of the need for the proposal,
Flexibility Act to require Federal policies that have federalism of alternatives [. . .], of the
agencies to provide a statement of the implications.’’ ‘‘Policies that have environmental impacts of the proposed
factual basis for certifying that a federalism implications’’ is defined in action and alternatives, and a listing of
proposal will not have a significant the Executive Order to include agencies and persons consulted.’’ 40
economic impact on a substantial regulations that have ‘‘substantial direct CFR 1508.9(b). This section serves as
number of small entities. effects on the States, on the relationship the agency’s Draft Environmental
NHTSA has considered the impacts of between the national government and Assessment (Draft EA). NHTSA invites
this notice of proposed rulemaking the States, or on the distribution of public comments on the contents and
under the Regulatory Flexibility Act and power and responsibilities among the tentative conclusions of this Draft EA.
certifies that this rule would not have a various levels of government.’’ Under
significant economic impact on a Executive Order 13132, the agency may i. Purpose and Need
substantial number of small entities. not issue a regulation with Federalism This notice of proposed rulemaking
The following provides the factual basis implications, that imposes substantial sets forth the purpose of and need for
for this certification under 5 U.S.C. direct compliance costs, and that is not this action. NHTSA is required to
605(b). required by statute, unless the Federal consider whether it is appropriate,
The Small Business Administration’s government provides the funds pursuant to the Inflation Adjustment
(SBA) regulations define a small necessary to pay the direct compliance Act, to make an initial ‘‘catch-up’’
business in part as a ‘‘business entity costs incurred by State and local adjustment to the civil monetary
organized for profit, with a place of governments, the agency consults with penalties it administers for the CAFE
business located in the United States, State and local governments, or the program. Further, if the agency
and which operates primarily within the agency consults with State and local determines that the Inflation
daltland on DSKBBV9HB2PROD with PROPOSALS
United States or which makes a officials early in the process of Adjustment Act applies, it must
significant contribution to the U.S. developing the proposed regulation. consider the appropriate approach to
economy through payment of taxes or This rule will not have substantial undertake pursuant to the legislation.
use of American products, materials or direct effects on the States, on the The purpose of this notice of proposed
labor.’’ 13 CFR 121.105(a). SBA’s size relationship between the national rulemaking is to consider the
standards were previously organized government and the States, or on the applicability of the Inflation Adjustment
according to Standard Industrial distribution of power and Act and to propose adjustments
Classification (‘‘SIC’’) Codes. SIC Code responsibilities among the various pursuant to the Act, consistent with its
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![Federal Register / Vol. 83, No. 63 / Monday, April 2, 2018 / Proposed Rules 13919
Inflation Adjustment Act. This increase 8. Privacy Act manufactured by the manufacturer
is not anticipated to have impacts on the Please note that anyone is able to during the model year;
quality of the human environment. The search the electronic form of all (ii) Multiplied by the number of those
‘‘general penalty’’ is applicable to other comments received into any of DOT’s automobiles; and
violations, such as a manufacturer’s dockets by the name of the individual (iii) Reduced by the credits available
failure to submit pre-model year and submitting the comment (or signing the to the manufacturer under 49 U.S.C.
mid-model year reports to NHTSA on comment, if submitted on behalf of an 32903 for the model year.
whether they will comply with the association, business, labor union, etc.). * * * * *
average fuel economy standards. These You may review DOT’s complete Issued in Washington, DC, under authority
violations are not directly related to on- Privacy Act Statement in the Federal delegated in 49 CFR 1.81, 1.95, and 501.5
road fuel economy, and therefore the Register published on April 11, 2000 Heidi R. King,
penalties are not anticipated to directly (Volume 65, Number 70; Pages 19477– Deputy Administrator.
or indirectly affect fuel use or 78), or you may visit http://dms.dot.gov. [FR Doc. 2018–06550 Filed 3–30–18; 8:45 am]
emissions.
9. Executive Order 13771 BILLING CODE 4910–59–P
iv. Agencies and Persons Consulted
This proposed rule is expected to be
NHTSA and DOT have consulted with a deregulatory action under Executive
Order 13771, although NHTSA, at this DEPARTMENT OF THE INTERIOR
OMB as described earlier in this
proposal. NHTSA and DOT have not point, has not been able to quantify Fish and Wildlife Service
consulted with any other agencies in the potential cost savings.
development of this proposal. Proposed Regulatory Text 50 CFR Part 17
v. Conclusion List of Subjects in 49 CFR Part 578 [Docket No. FWS–R1–ES–2017–0050;
FXES11130900000C6–189–FF09E42000]
NHTSA has reviewed the information Imports, Motor vehicle safety, Motor
presented in this Draft EA and vehicles, Rubber and rubber products, RIN 1018–BC10
concludes that the proposed action and Tires, Penalties.
In consideration of the foregoing, 49 Endangered and Threatened Wildlife
alternatives would have no impact or a
CFR part 578 is proposed to be amended and Plants; Reclassifying the Hawaiian
small positive impact on the quality of
as set forth below. Goose From Endangered to
the human environment. The preferred Threatened With a 4(d) Rule
alternative is anticipated to have no
PART 578—CIVIL AND CRIMINAL
impact on the quality of the human AGENCY: Fish and Wildlife Service,
PENALTIES
environment, as it would result in no Interior.
change, as compared to current law, to ■ 1. The authority citation for 49 CFR ACTION: Proposed rule.
the civil penalty amount for failure to part 578 is revised to read as follows:
meet fuel economy targets. Further, the SUMMARY: Under the authority of the
Authority: Pub. L. 101–410, Pub. L. 104– Endangered Species Act of 1973, as
proposed change to the ‘‘general 134, Pub. L. 109–59, Pub. L. 114–74, Pub. L.
penalty’’ is not anticipated to affect on- amended (Act), we, the U.S. Fish and
114–94, 49 U.S.C. 30165, 30170, 30505,
road emissions. Any of the impacts 32308, 32309, 32507, 32709, 32710, 32902, Wildlife Service (Service), propose to
anticipated to result from the 32912, and 33115; delegation of authority at reclassify the Hawaiian goose (nene)
alternatives under consideration are not 49 CFR 1.81, 1.95. (Branta (=Nesochen) sandvicensis) from
expected to rise to a level of significance endangered to threatened, and we
■ 2. Amend § 578.6 by revising propose a rule under section 4(d) of the
that necessitates the preparation of an paragraph (h) to read as follows:
Environmental Impact Statement. Based Act to enhance conservation of the
on the information in this Draft EA and § 578.6 Civil penalties for violations of species through range expansion and
assuming no additional information or specified provisions of Title 49 of the United management flexibility. This proposal is
changed circumstances, NHTSA expects States Code. based on a thorough review of the best
to issue a Finding of No Significant * * * * * available scientific data, which indicate
Impact (FONSI). Such a finding will not (h) Automobile fuel economy. (1) A that the species’ status has improved
be made before careful review of all person that violates 49 U.S.C. 32911(a) such that it is not currently in danger of
public comments received. A Final EA is liable to the United States extinction throughout all or a significant
Government for a civil penalty of not portion of its range. We also propose to
and a FONSI, if appropriate, will be
more than $41,484 for each violation. A correct the Federal List of Endangered
issued as part of the final rule.
separate violation occurs for each day and Threatened Wildlife to reflect that
6. Executive Order 12778 (Civil Justice the violation continues. Nesochen is not currently a
Reform) (2) Except as provided in 49 U.S.C. scientifically accepted generic name for
32912(c), a manufacturer that violates a this species, and to acknowledge the
This rule does not have a retroactive standard prescribed for a model year Hawaiian name ‘‘nene’’ as an alternative
or preemptive effect. Judicial review of under 49 U.S.C. 32902 is liable to the common name. We seek information,
a rule based on this proposal may be United States Government for a civil data, and comments from the public on
daltland on DSKBBV9HB2PROD with PROPOSALS
obtained pursuant to 5 U.S.C. 702. penalty of $5.50 multiplied by each .1 this proposal.
7. Paperwork Reduction Act of a mile a gallon by which the DATES: We will accept comments
applicable average fuel economy received or postmarked on or before
In accordance with the Paperwork standard under that section exceeds the June 1, 2018. Please note that if you are
Reduction Act of 1980, NHTSA states average fuel economy— using the Federal eRulemaking Portal
that there are no requirements for (i) Calculated under 49 U.S.C. (see ADDRESSES), the deadline for
information collection associated with 32904(a)(1)(A) or (B) for automobiles to submitting an electronic comment is
this rulemaking action. which the standard applies 11:59 p.m. Eastern Time on this date.
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Document Created: 2018-11-01 09:09:15
Document Modified: 2018-11-01 09:09:15
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Proposed Rules | |
| Action | Notice of proposed rulemaking. | |
| Dates | Comments: Comments must be received by May 2, 2018. | |
| Contact | Kerry Kolodziej, Office of Chief Counsel, NHTSA, telephone (202) 366-2992, facsimile (202) 366-3820, 1200 New Jersey Ave, SE, Washington, DC 20590. | |
| FR Citation | 83 FR 13904 | |
| RIN Number | 2127-AL94 | |
| CFR Associated | Imports; Motor Vehicle Safety; Motor Vehicles; Rubber and Rubber Products; Tires and Penalties |
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