Daniel P. Malone Director Global Automotive Practice Butzel Long - Detroit TREAD Act – 5 Years...

Daniel P. Malone

Director

Global Automotive Practice

Butzel Long - Detroit

TREAD Act – 5 Years AfterAre We There Yet?

Korean International Trade Association Seoul, South Korea

October 25, 2005

© 2005 Butzel Long 2

Anyong Hasayo!


KITA/Butzel Long

• Thank you to KITA.

• Goal: Keep KITA’s automotive members apprised of developments of interest on select U.S. laws that apply to their company.

• Seventh presentation since 1999.

• Educational information - Not legal advice.


1. TREAD Act – What? Why? How?

2. Rule 579 (Emphasis on Suppliers)

3. ERW Reporting (Status)

4. Current Major Issues

• Funding Renewal• Rule 512• TPMS

6. Strategies

6. Where to go from here?

• Q & A

Presentation Overview


What does TREAD have to do with Korea?

• TREAD has applicability to foreign-based companies, too.

• Any supplier of vehicles or components (OE and after market) to the U.S. market may have TREAD Act reporting obligations.

• TREAD has very substantial penalty provisions for non-compliance.

a) Civil – up to $15,000,000 for related series of violations, 5(a)

b) Criminal – a person may face up to 15 years imprisonment for among other things, falsifying or withholding information,

5(b)

• Foreign recalls may be reportable to NHTSA.


I. TREAD - Historic OverviewVehicle Safety Act of 1966

• Report safety related defect or non-compliance with FMVSS

• 1966 – 2000

• 7200 vehicle recalls• 259,500 million vehicles• Nearly all voluntary

• MY 2000

• 17.4 million vehicles sold in U.S.• 22.8 recalled for safety-related defects or failure to meet FMVSS

• MY 2004

• 30.4 million vehicles recalled

Kevin McDonald, Esq.Volkswagen of America49 Buffalo L. Rev. 1174


TREAD Historic Overview

What happened?

Ford Explorer / Firestone Tire - September 2000 Hearings

-Reported data insufficient

-NHTSA’s failure to detect alarming trend

-Concern over overseas events


Five Congressional Concerns

1. Ineffectiveness and inefficiency of NHTSA’s process of gathering and analyzing data.

2. NHTSA’s failure to update the Federal motor vehicle safety standards.

3. Absence of a federal law requiring manufacturers to notify NHTSA of recalls or safety-related actions taken in foreign countries.

4. Absence of a routine “early warning” reporting system. 5. Need to increase civil penalties and enact criminal

sanctions.

TREAD Historic Overview


TREAD ACT - PurposesTREAD amended the Vehicle Safety Act of 1966, 49 USC § 30101 to provide early warning reporting requirements for manufacturers of motor vehicles and motor vehicle equipment.

TREAD requires reporting information and submitting documents that may help identify:

a) Defects related to motor vehicle safety; or

b) Non-compliance with (U.S.) FMVSS

TREAD required NHTSA to implement TREAD regulations within two years (by November 2002) through rulemaking, 5 USC § 101, et. seq.


TREAD ACT – Intended Outcomes

• Reporting intended to provide NHTSA with information with vehicle to identify trends at an early stage.

• TREAD reporting intended to address five concerns from September 2000 hearings.


TREAD ACT – Important Distinction

Congress distinguished between EWR data (TREAD), which is not indicative of a defect or non-compliance, and defects and non-compliance data (e.g. Rule 573)


TREAD ACT - Data

TREAD Act data must include:

(1) claims data submitted to manufacturers regarding serious injury and death;

(2) aggregate statistical data on property damage from alleged defects;

(3) Information on manufacturers’ customer satisfaction complaints consumer advised, recalled, and other repair or replacement

programs for defective equipment; and

(4) any other data that NHTSA required to assist it in detecting auto safety defects.

TREAD Act § 3; 49 U.S.C. § 30166(m)(3).


TREAD Highlights – Rule 579

Currently, manufacturers have

three types of TREAD Act reporting

with three distinct deadlines


TREAD Highlights

1. RULE 579.5 – All companies

U.S. Notices, Bulletins and Other Communications (whether safety related or not) and Customer Satisfaction Campaign (49 CFR 573.8)

• TREAD regulations expand U.S. reporting (49 CFR 573.8)

• (Within 5 working days after the end of month it

was sent, issues, or made available)


TREAD Highlights – 579.5Reportable communications include:

• Notices,

• Bulletins,

• Customer satisfaction campaigns,

• Consumer advisories,

• Communiqués including those transmitted by computer, telefax, or other electronic means and including warranty and policy extension communiqués and product improvement bulletins, or

• Recalls or other safety activities involving the repair or replacement of motor vehicles or motor vehicle equipment.


TREAD Highlights – 579.5

That are:

• Sent to more than one manufacturer, dealer, distributor, lessee, lessor or purchaser in the United States, or

• Issued or made available to more than one manufacturer, dealer, distributor, lessee, lessor or purchaser in the United States.


TREAD Highlights – 579.5

That refer to:

• Any defect,

• Any failure or malfunction beyond normal deterioration in use,

• Any failure of performance, or

• Any flaw or unintended deviation from design specifications, regardless of whether there are safety implications.


TREAD Highlights

2. Foreign Recalls & Other Safety Campaigns (49 CFR 579.11-.12)

(Historic Report – December 12, 2002)

A. Who Must Report: All manufacturers of motor vehicle equipment having identical or substantially similar products in foreign countries.

B. What to Report: Safety recalls and other safety campaigns conducted in foreign countries.

Manufacturers must report to NHTSA within five (5) working days of any order or decision to conduct a safety recall or other safety campaign in a foreign country that covers an item of motor vehicle equipment that is identical or substantially similar to an item of motor vehicle equipment sold or offered for sale in the United States.


TREAD HIGHLIGHTS

3. Early Warning Reporting (EWR) Rules 579.21 - .27

NHTSA established different types of EWR requirements

Group 1 - Manufacturers of 500 or more vehicles per

year.

a) light vehicles, 579.21;

b) medium heavy vehicles and buses 579.22;

c) motorcycles, 579.23; or

d) trailers, 579.24.


TREAD HIGHLIGHTS

Must report “historically” and, starting July 1, 2003, quarterly for the current year and previous nine years:

a) Production numbers;

b) Reports on incidents of inquiry or death in the U.S. alleged to have involved safety defects, specifying whether each incident was a fire or rollover and which of numerous coded component systems were involved;

c) Number of property damage claims, consumer complaints, warranty claims and field reports implicating each coded system; and

d) Copies of field reports, other than dealer reports, that implicate a potential safety defect in any coded system.


TREAD HIGHLIGHTS

Group 1 - Manufacturers of Child Restraint Systems

Must also report this information, but only for current year plus

four previous years, 579.25


TREAD HIGHLIGHTS

Group 1 - Tire Manufacturers

Must provided data for the previous four years on production numbers, death and injuries, and warranty claims.

a) lists of common green tires (tires produced to same specifications different external characteristics and sold

under different names).

b) Not required to submit data on consumer complaints or field reports.

579.26


TREAD HIGHLIGHTS

Group 2 – Rule 579.27 (Suppliers/Small Volume Vehicle Manufacturers)

Manufacturers of fewer than 500 vehicles, manufacturers or original and/or replacement equipment (other than child restraint systems and tires).

Must report on claims or notices (U.S.) or claims (foreign) of:

deaths; and

identify the system involved in each incident


Primary Difference?

• Pre-TREAD Act – NHTSA requested information

• TREAD – Industry to report certain information as prescribed


Actual EWR ReportingHow do I apply for an EWR account?

• To apply for an EWR account, you have to fill out an EWR Manufacturer Account application and submit it to the Office of Defects Investigation either via FAX (202-366-7882) or email ([email protected]).

• This is available on the NHTSA ODI website (http://www-odi.nhtsa.dot.gov) and from NHTSA ODI (202) 366-0699 or you can email [email protected].


Actual ReportingWhere do I go to get EWR templates?

• Access the NHTSA ODI web site (URL:http://www-odi.nhtsa.dot.gov), and click on EWR Information. The Early Warning Reporting (EWR) Downloads page appears. There are Microsoft® Excel templates and eXtensibleMarkupLanguage (XML) schema and instance files available for downloading to your local machine.

• These templates, schema, and instance files are updated from time to time. You should check the following pages on the web site periodically to see if any information has changed.


Actual Reporting - Sample


Interpretations

How do I find information regarding Interpretations of the “Early Warning Reporting” Final Rule (49 CFR Part 579 Subpart C)?

Interpretations of the “Early Warning Reporting” Final Rule (49 CFR Part 579 Subpart C) can be found on the NHTSA ODI web site. Click on the EWR Information link in the menu to access the Early Warning Reporting Downloads page.


Early Warning Reporting


Three Current Major Issues


Financial Review of TREAD (January 2006 – Why?)

Current Major Issue 1

Arguments:

“Not ONE new ODI file opened from TREAD reporting vs. “More voluntary recalls in 2004 than ever before!”

Is TREAD working?

New system – imperfect Not unduly burdensome at this point

Estimated 24,000 Companies - only 500 – 900 (why?) have reported

• A manufacturer may choose to obtain more than one ID and password

• NO reported sanctions

Threshold consideration

“Tinker”; or Wholesale Re-do


Rule 512 – Confidential Business Information


Before TREAD NHTSA had a Confidential Business Information (CBI) rule that established procedures and standards for determining whether data submitted to NHTSA should be treated as confidential pursuant to FOIA § USC § 552(b), 49 CFR 512.


This type of information, if disclosed, would reveal to competitors a manufacturer’s production and marketing strategies, and future product design plans, among other things.

Rule 512 – Why?


Rule 512 - Challenges

April 30, 2002 – NPRM (how to apply Rule 512 to TREAD?)

Public comment

Revisions

July 28, 2003 NHTSA issues final Rule 512.

“class determinations” of confidentiality for production numbers, common green tire data,

and warranty adjustments (FOIA Exemption 4).

Other information, case-by-case.


For other reasons, NHTSA afforded automatic confidential status to the following categories of information:

1. Reports and data relating to warranty claim information;

2. Reports and data relating to field reports, including dealer reports and hard copy reports; and

3. Reports and data relating to consumer complaints.

Rule 512


Rule 512 - Expansion

NHTSA extended automatic confidential status protection to reports of production numbers for child restraint systems, tires, and vehicles other than light vehicles.


Rule 512 - Developments

• March 22, 2004 Public Citizen files lawsuit. Why?

• RMA and Automotive Alliance intervene in May and June 2004, respectfully.

• October 1, 2004 – NHTSA grants administrative stay.

• Respective Positions

Public Citizen

RMA

Alliance

• Ford Roof Crush - Example


Tire Pressure Monitoring Systems


• Chronology

• NPRM• Final Rule – June 5, 2002 (Direct & Indirect Systems)• Court Reversal – (New York)• New NPRM• Final Rule – April 8, 2005• Petition to Reverse – June 6, 2005 (Washington, D.C.)• Stay Tuned!


TREAD - Strategies

5. Strategies

A. NHTSA Strangely Quiet – Why?

B. What we know –

1. No Reported 579 sanctions

2. NO ODI investigations

3. Personnel considerations

4. Financial review – January ’06

5. Needle in Haystack

6. ODI – 2005- Recall Investigations LOW

7. “Belts and Booze”


TREAD - Strategies

C. Practical Suggestions

1. Organization / Training / Preparation

2. Adopt a TREAD policy

3. Establish a TREAD program

4. Designate TREAD Coordinators

5. Have a Rapid Response Plan in place

6. Consider virtual “Crisis Rooms” (e.g. secured internet

system to allow exchange of real time information)

7. Have a clear and clearly communicated, understood

Crisis Management Plan.


D. View As Multi-Faceted Legal, but also

Educational training “chain link”

Technical (Global Compatibility)

Business Organization Policy Accountability

Continued Improvements (KIA Motors)

E. Stay Low!


6. Are We There Yet? Where Do We Go From Here?

• TREAD NOT GOING AWAY

• Prediction (s)?

Modest changes Keep Group 1 intact

Tighten definitions (e.g. field reports, brakes)

• January 2006 Financial Review – Stay tuned!

• Add to E-mail list?


Kamsahapnida!


Questions and Answers

Daniel P. MaloneButzel Long

150 West Jefferson Suite 100Detroit, MI 48226

Office 313 225 7032Fax 313 225-7080

[email protected]

Daniel P. Malone Director Global Automotive Practice Butzel Long - Detroit TREAD Act – 5 Years...

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