B-217744.2, AUG 30, 1985, OFFICE OF GENERAL COUNSEL

B-217744.2: Aug 30, 1985

Additional Materials:

Contact:

Shirley Jones
(202) 512-8156
jonessa@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

PETITION TO AMEND 1984 CORPORATE AVERAGE FUEL ECONOMY (CAFE) STANDARDS FOR LIGHT TRUCKS ON TIMELINESS GROUNDS SHOWS THAT NHTSA ACTION WAS REASONABLE IN LIGHT OF THE STATUTORY FLEXIBILITY TO SET A COMMON PERIOD OF TIME AS THE "MODEL YEAR" FOR ALL MANUFACTURERS FOR STANDARD SETTING PURPOSES. THERE IS NO SIGNIFICANT EVIDENCE THAT DEFINITION OF A MODEL YEAR AS COMMENCING IN THE FALL OF THE PREVIOUS YEAR NEEDS REVISION OR CLARIFICATION. THREE ISSUES RELATING TO THE ENVIRONMENTAL PROTECTION AGENCY'S (EPA) FUEL ECONOMY TESTING PRACTICES WERE ADDRESSED IN B-217744. WHICH WAS DEFERRED EARLIER BY AGREEMENT WITH YOUR STAFF. IS THE SUBJECT OF THIS RESPONSE. WE SHALL EXAMINE NHTSA'S DETERMINATION OF WHAT IS A "MODEL YEAR.".

B-217744.2, AUG 30, 1985, OFFICE OF GENERAL COUNSEL

TRANSPORTATION DEPARTMENT - NATIONAL HIGHWAY TRAFFIC SAFETY ADMINISTRATION - ADMINISTRATION EFFICIENCY DIGEST: INDEPENDENT REVIEW OF NATIONAL HIGHWAY TRAFFIC SAFETY ADMINISTRATION'S (NHTSA) DENIAL OF FORD MOTOR CO. PETITION TO AMEND 1984 CORPORATE AVERAGE FUEL ECONOMY (CAFE) STANDARDS FOR LIGHT TRUCKS ON TIMELINESS GROUNDS SHOWS THAT NHTSA ACTION WAS REASONABLE IN LIGHT OF THE STATUTORY FLEXIBILITY TO SET A COMMON PERIOD OF TIME AS THE "MODEL YEAR" FOR ALL MANUFACTURERS FOR STANDARD SETTING PURPOSES. THERE IS NO SIGNIFICANT EVIDENCE THAT DEFINITION OF A MODEL YEAR AS COMMENCING IN THE FALL OF THE PREVIOUS YEAR NEEDS REVISION OR CLARIFICATION.

HONORABLE JOHN D. DINGELL: CHAIRMAN, SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS ON ENERGY AND COMMERCE HOUSE OF REPRESENTATIVES

YOUR LETTER OF FEBRUARY 8, 1985, REQUESTED THAT WE EXAMINE SEVERAL MATTERS CONCERNING THE CORPORATE AVERAGE FUEL ECONOMY (CAFE) PROGRAM. THREE ISSUES RELATING TO THE ENVIRONMENTAL PROTECTION AGENCY'S (EPA) FUEL ECONOMY TESTING PRACTICES WERE ADDRESSED IN B-217744, JUNE 3, 1985. YOU ALSO ASKED US TO REVIEW THE LEGAL ANALYSIS SUPPORTING THE NATIONAL HIGHWAY TRAFFIC SAFETY ADMINISTRATION'S (NHTSA) DECISION TO DENY AS UNTIMELY FORD MOTOR COMPANY'S 1984 MID-MODEL-YEAR PETITION TO LOWER FUEL ECONOMY STANDARDS FOR LIGHT TRUCKS. THAT ISSUE, WHICH WAS DEFERRED EARLIER BY AGREEMENT WITH YOUR STAFF, IS THE SUBJECT OF THIS RESPONSE. ALSO, AT THE REQUEST OF YOUR STAFF, WE SHALL EXAMINE NHTSA'S DETERMINATION OF WHAT IS A "MODEL YEAR." BRIEFLY, OUR VIEW IS THAT THE STATUTORY LANGUAGE IS AMBIGUOUS, BUT THE LEGISLATIVE HISTORY ADEQUATELY SUPPORTS NHTSA'S DECISION ON THE FORD PETITION. WE ALSO HAVE NO OBJECTION TO NHTSA'S DECISION ON THE FORD PETITION. WE ALSO HAVE NO OBJECTION TO NHTSA'S INFORMAL DEFINITION OF "MODEL YEAR."

FACTUAL BACKGROUND

ON NOVEMBER 21, 1983, FORD FILED A PETITION WITH THE SECRETARY OF TRANSPORTATION REQUESTING VARIANCES FROM THE ESTABLISHED FUEL ECONOMY STANDARDS FOR ITS LIGHT TRUCKS PRODUCED IN MODEL YEARS 1984 AND 1985. BEHALF OF THE SECRETARY, NHTSA GRANTED THE PETITION FOR 1985 BUT DENIED THE 1984 PETITION AS UNTIMELY SINCE IT WAS FILED DURING THE MODEL YEAR TO WHICH IT PERTAINED. 49 FED.REG. 22576 (MAY 30, 1984). ON JULY 19, 1984, FORD REQUESTED A LEGAL OPINION SUBSTANTIATING THE DENIAL. NHTSA'S REPLY, DATED AUGUST 23, 1984, ANALYZED THE LEGISLATIVE HISTORY OF THE CAFE LAW AND CONFIRMED THE AGENCY'S EARLIER POSITION.

STATUTORY BACKGROUND

FOUR DIFFERENT STATUTORY PROVISIONS BEAR ON THE FORD PETITION AND NHTSA ACTION. MOST CENTRAL TO THE ISSUE IS THE SECRETARY'S AUTHORITY TO AMEND THE CAFE STANDARDS. THAT AUTHORITY IS FOUND AT 15 U.S.C. PARA. 2002(F) WHICH READS AS FOLLOWS:

"(1) THE SECRETARY MAY, BY RULE, FROM TIME TO TIME, AMEND ANY AVERAGE FUEL ECONOMY STANDARD PRESCRIBED UNDER SUBSECTION (A)(3), (B), OR (C) OF THIS SECTION SO LONG AS SUCH STANDARD, AS AMENDED, MEETS THE REQUIREMENTS OF SUBSECTION (A)(3), (B), OR (C) OF THIS SECTION, "AS THE CASE MAY BE.

"(2) ANY AMENDMENT PRESCRIBED UNDER THIS SECTION WHICH HAS THE EFFECT OF MAKING ANY AVERAGE FUEL ECONOMY STANDARD MORE STRINGENT SHALL BE--

"(A) PROMULGATED, AND

"(B) IF REQUIRED BY PARAGRAPH (4) OF SUBSECTION (A) OF THIS SECTION, SUBMITTED TO THE CONGRESS, AT LEAST 18 MONTHS PRIOR TO THE BEGINNING OF THE MODEL YEAR TO WHICH SUCH AMENDMENT WILL APPLY."

SUBSECTION (B) OF SECTION 2002, REFERENCED IN THE QUOTED STATUTE, IS THE SECRETARY'S AUTHORITY TO SET FUEL ECONOMY STANDARDS FOR LIGHT TRUCKS. THAT SUBSECTION REQUIRES THE SECRETARY TO SET THE STANDARDS AT THE "MAXIMUM FEASIBLE FUEL ECONOMY LEVEL."

THE STATUTE GOES ON IN SECTION 2002(E) TO PROVIDE THAT:

"FOR PURPOSES OF THIS SECTION, IN DETERMINING MAXIMUM FEASIBLE AVERAGE FUEL ECONOMY, THE SECRETARY SHALL CONSIDER--

"(1) TECHNOLOGICAL FEASIBILITY;

"(2) ECONOMIC PRACTICABILITY;

"(3) THE EFFECT OF OTHER FEDERAL MOTOR VEHICLE STANDARDS ON FUEL ECONOMY; AND

"(4) THE NEED OF THE NATION TO CONSERVE ENERGY." 15 U.S.C. SEC. 2002(E) (1982).

THE FOURTH SECTION IMPORTANT IN ANALYZING THE FORD PETITION IN THE PROVISION ALLOWING MODIFICATION OF THE CIVIL PENALTIES IMPOSED FOR EXCEEDING THE STANDARDS. ASSESSED PENALTIES:

"*** MAY BE *** COMPROMISED, MODIFIED, OR REMITTED ONLY TO THE EXTENT--

"(A) NECESSARY TO PREVENT THE INSOLVENCY OR BANKRUPTCY OF SUCH MANUFACTURER,

"(B) SUCH MANUFACTURER SHOWS THAT THE VIOLATION OF SECTION 2007(A)(1) OR (2) OF THIS TITLE RESULTED FROM AN ACT OF GOD, A STRIKE, OR A FIRE, OR

"(C) THE FEDERAL TRADE COMMISSION HAS CERTIFIED THAT MODIFICATION OF SUCH PENALTY IS NECESSARY TO PREVENT A SUBSTANTIAL LESSENING OF COMPETITION ***." 15 U.S.C. SEC. 2008(B)(3) (1982).

DISCUSSION OF THE FORD PETITION

SUBSECTION 2002(F), THE STATUTORY PROVISION AUTHORIZING NHTSA TO AMEND STANDARDS, IS AMBIGUOUS ON THE QUESTION OF TIMING. AMENDMENTS WHICH WOULD INCREASE CAFE STRINGENCY ARE EXPRESSLY REQUIRED TO BE PROMULGATED AT LEAST 18 MONTHS IN ADVANCE OF THE MODEL YEAR. HOWEVER, THE LAW IS SILENT AS TO THE TIMING OF AMENDMENTS WHICH WOULD RELAX CAFE STANDARDS. REFERENCE TO THE LEGISLATIVE HISTORY OF THE PROVISION CLARIFIES THE CONGRESSIONAL INTENT.

THE FINAL CONFERENCE REPORT ON THE CAFE LAW EXPLAINS THE MEANING OF SUBSECTION (F) AS FOLLOWS:

"AVERAGE FUEL ECONOMY STANDARDS *** MAY BE AMENDED FROM TIME TO TIME AS LONG AS EACH SUCH AMENDMENT SATISFIES THE 18 MONTH RULE-- I.E., ANY AMENDMENT WHICH HAS THE EFFECT OF MAKING AN AVERAGE FUEL ECONOMY STANDARD MORE STRINGENT MUST BE PROMULGATED AT LEAST 18 MONTHS PRIOR TO THE BEGINNING OF THE MODEL YEAR TO WHICH SUCH AMENDMENT WILL APPLY. AMENDMENT WHICH HAS THE EFFECT OF MAKING AN AVERAGE FUEL ECONOMY STANDARD LESS STRINGENT CAN BE PROMULGATED AT ANY TIME PRIOR TO THE BEGINNING OF THE MODEL YEAR IN QUESTION." S.REP. NO. 516, 94TH CONG., 1ST SESS. 157.

THIS EXPLANATION IN THE CONFERENCE REPORT TIPS THE SCALE IN FAVOR OF NHTSA'S POSITION THAT PETITIONS TO LOWER CAFE STANDARDS MAY ONLY BE CONSIDERED BEFORE A MODEL YEAR ACTUALLY BEGINS.

FORD SUGGESTS THAT THE LAST QUOTED SENTENCE WAS SOLELY "INTENDED TO EMPHASIZE THE FACT THAT, IN CONTRAST TO THE SITUATION IN WHICH MORE STRINGENT STANDARDS ARE ESTABLISHED, THERE IS NO LEADTIME REQUIREMENT WITH RESPECT TO LESS STRINGENT STANDARDS." FORD LETTER OF JULY 19, 1984, AT 2 (EMPHASIS IN ORIGINAL). HOWEVER, THIS SUGGESTION IS CLEARLY CONTRARY TO THE ONLY POSSIBLE INTERPRETATION OF THE QUOTED SENTENCE.

IN ELABORATING ON ITS POSITION, FORD PLACES GREAT WEIGHT ON THE "MAXIMUM FEASIBLE" LEVEL OF FUEL ECONOMY. ACCORDING TO FORD, CONGRESS SPECIFIED THE MAXIMUM FEASIBLE LEVEL TO PROTECT MANUFACTURERS AGAINST THE SECRETARY SETTING UNATTAINABLE FUEL ECONOMY STANDARDS. FORD FURTHER STATES THAT SALES TRENDS PLAY A MAJOR ROLE IN ESTABLISHING THE ABILITY OF MANUFACTURERS TO MEET CAFE STANDARDS. THESE FACTS ARE UNDOUBTEDLY TRUE, BUT FORD'S CONCLUSION BASED ON THESE FACTS-- THAT NHTSA IS COMPELLED TO LOWER STANDARDS IN THE MIDDLE OF A MODEL YEAR BASED ON POOR SALES-- DOES NOT NECESSARILY FOLLOW.

SUBSECTION 2002(E) (QUOTED ABOVE) SETS FORTH THE FACTORS TO BE APPLIED IN DETERMINING THE "MAXIMUM FEASIBLE FUEL ECONOMY LEVEL." SALES EFFECTIVENESS, CONSUMER PREFERENCE, AND MARKET TRENDS ARE NOT AMONG THE FACTORS TO BE CONSIDERED. ADDITIONALLY, THE STATUTORY PROVISION REGARDING AMENDMENTS IS STRICTLY PERMISSIVE. AMENDMENTS "MAY" BE MADE "FROM TIME TO TIME." THERE IS NO BASIS THAT WE CAN SEE TO COMPEL AMENDMENTS, EITHER UPWARD OR DOWNWARD, IN THE CAFE STANDARDS.

FURTHERMORE, A MID-YEAR PETITION TO LOWER STANDARDS IS ESSENTIALLY NO DIFFERENT THAN A REQUEST TO MODIFY PENALTIES. IT IS AN ANTICIPATORY REQUEST FOR RELIEF FROM THE EXPECTED EXPENDITURE OF CREDITS OR THE ASSESSMENT OF MONETARY PENALTIES. THE CONFERENCE REPORT MENTIONED ABOVE SHOWS THAT THE SENATE VERSION OF THE CAFE LAW WOULD HAVE ALLOWED PENALTIES TO BE WAIVED ON THE BASIS OF UNANTICIPATED SALES TRENDS RESULTING IN FAILURE TO MEET THE CAFE AVERAGE. THIS IS EXACTLY THE REASONING THAT FORD IS ADVANCING TO SUPPORT MID-YEAR AMENDMENT OF THE STANDARDS. S.REP. NO. 515, 94TH CONG., 1ST SESS. 152. SEE ALSO, 121 CONG.REC. 30606 (1975), REPRODUCING THE ORIGINAL SENATE LANGUAGE. SINCE THIS LANGUAGE WAS ELIMINATED FROM THE FINAL VERSION BY THE CONFERENCE AMENDMENT OF THE CAFE LAW, WE ASSUME THAT THE CONGRESS INTENDED THAT SALES DATA NOT BE TAKEN INTO ACCOUNT TO EXCUSE CAFE SHORTFALLS. WE THINK THIS AMENDMENT STRONGLY SUPPORTS THE CONCLUSION THAT A MID-YEAR LOWERING OF STANDARDS (TO COMPENSATE FOR UNBALANCED SALES FIGURES AND AVOID FUTURE PENALTIES) WOULD ALSO BE IMPROPER.

DEFINITION OF "MODEL YEAR"

THERE IS A STATUTORY DEFINITION OF A "MODEL YEAR" IN 15 U.S.C. SEC. 2001(12). IT DOES NOT APPEAR TO BE TIED TO ANY OTHER SECTION SPECIFICALLY. INSTEAD, IT APPEARS TO BE APPLICABLE IN ALL CONTEXTS IN WHICH THE TERM "MODEL YEAR" IS USED. THE DEFINITION READS AS FOLLOWS:

"THE TERM "MODEL YEAR', WITH REFERENCE TO ANY SPECIFIC CALENDAR YEAR, MEANS A MANUFACTURER'S ANNUAL PRODUCTION PERIOD (AS DETERMINED BY THE EPA ADMINISTRATOR) WHICH INCLUDES JANUARY 1 OF SUCH CALENDAR YEAR. IF A MANUFACTURER HAS NO ANNUAL PRODUCTION PERIOD, THE TERM "MODEL YEAR' MEANS THE CALENDAR YEAR."

WHILE THE EXISTENCE OF A STATUTORY DEFINITION WOULD ORDINARILY SETTLE ANY QUESTION ABOUT THE MEANING OF THE TERM "MODEL YEAR," THE DEFINITION DOES NOT ESTABLISH A STARTING DATE FOR THE MODEL YEAR. IT ALLOWS THE "MODEL YEAR" TO BE TAILORED TO EACH MANUFACTURER'S ANNUAL PRODUCTION PERIOD OR TO A COMMON PRODUCTION PERIOD, IN THE JUDGMENT OF THE EPA ADMINISTRATOR. FURTHER, THERE IS NO REQUIREMENT THAT THE EPA ADMINISTRATOR ADOPT THE SAME TIME PERIOD FOR EVERY PURPOSE. AS A PRACTICAL MATTER, THERE ARE AT LEAST THREE OTHER WORKING DEFINITIONS OF A MODEL YEAR-- ONE FOR THE PURPOSE OF MANUFACTURER REPORTING, A SECOND FOR THE PURPOSE OF STANDARD SETTING, AND A THIRD FOR USE IN CAFE TESTING AND LABELING.

IN 1977, NHTSA AND EPA AGREED TO SET THE CALENDAR YEAR AS THE "MODEL YEAR" FOR MANUFACTURERS' SEMIANNUAL REPORTS. 42 FED.REG. 62374, 63276. UNDER THIS VERSION OF A MODEL YEAR, THE "PREMODEL YEAR" REPORT IS DUE IN DECEMBER OF THE PRIOR CALENDAR YEAR. 49 C.F.R. PT. 537 (1984).

FOR THE PURPOSE OF STANDARD SETTING, NHTSA ADOPTED ANOTHER "MODEL YEAR." BY ISSUING MORE STRINGENT STANDARDS (REQUIRING 18 MONTHS LEAD TIME) ON MARCH 27, 1980, NHTSA INDIRECTLY ESTABLISHED A STARTING DATE FOR THE 1982 MODEL YEAR ABOUT OCTOBER 1, 1981. THIS MODEL YEAR APPEARS TO BE MORE CLOSELY RELATED TO THE MARKETING PERIOD, RATHER THAN THE PRODUCTION PERIOD, AND IT SETS AN INDUSTRY-WIDE MODEL YEAR STARTING DATE, EVEN THOUGH MANUFACTURERS' ACTUAL MARKETING PERIODS DIFFER. DESPITE THIS APPARENT CONFLICT WITH THE STATUTORY DEFINITION, WE CANNOT FIND THAT THE OCTOBER 1 DATE FOR THE SETTING OF STANDARDS IS UNREASONABLE.

THE FACT THAT NHTSA AND EPA AGREED TO SET A DIFFERENT MODEL YEAR FOR REPORTING INDICATES THAT THE TWO COGNIZANT REGULATORS FOUND CONSIDERABLE FLEXIBILITY IN THE STATUTORY DEFINITION. ALSO AT THE TIME THE MARCH 1980 REGULATION WAS PUBLISHED, THERE WAS NO LEGAL CHALLENGE TO THE OCTOBER 1 STARTING DATE BASED ON INSUFFICIENT LEAD TIME. MOREOVER, AN "AUTUMN" DATE FOR THE START OF THE MODEL YEAR IS TRADITIONAL AND HAS BEEN NOTED WITH APPROVAL IN CENTER FOR AUTO SAFETY V. NHTSA, 710 F.2D 842, 847 (D.C. CIR. 1983).

FOR THE PURPOSE OF PROMULGATING STANDARDS, IT WAS NECESSARY TO CHOOSE ONE DATE AS THE START OF THE MODEL YEAR, DESPITE INDIVIDUAL MANUFACTURERS' DIFFERENT PRODUCTION AND MARKETING PRACTICES. WE SEE NO PROBLEM WITH CHOOSING OCTOBER 1 BECAUSE IT IS THE LONGSTANDING SALES PRACTICE TO INTRODUCE NEW MODEL CARS IN THE FALL OF THE YEAR. EVEN THOSE MANUFACTURERS WHOSE MODEL YEARS ACTUALLY START AT OTHER TIMES WOULD BE AWARE OF THE PREVAILING INDUSTRY PRACTICE.

MOREOVER, IT IS CLEAR THAT ANY DISCREPANCIES BETWEEN A PARTICULAR MANUFACTURER'S ACTUAL PRODUCTION OR MARKETING PRACTICES AND THE INDUSTRY- WIDE MODEL YEAR FOR THE PURPOSE OF SETTING STANDARDS CAN BE ACCOUNTED FOR WHEN EPA CALCULATES CAFE RESULTS USING STILL A THIRD MODEL YEAR CONCEPT. APPLYING THE STATUTORY DEFINITION, EPA WOULD TAILOR THE COMPUTATION TO EACH MANUFACTURER'S ACTUAL ANNUAL PRODUCTION OF CARS.

CONCLUSION

IN SUMMARY, WE THINK THAT THERE IS SUFFICIENT FLEXIBILITY IN THE STATUTORY DEFINITION OF THE TERM "MODEL YEAR" TO SUPPORT NHTSA'S POSITION THAT MID-YEAR AMENDMENTS TO CAFE STANDARDS ARE UNTIMELY UNDER ITS INDUSTRY -WIDE DEFINITION. WE ALSO THINK FORD'S RELIANCE ON THE STATUTE'S "MAXIMUM FEASIBLE" LANGUAGE IS MISPLACED, AND THAT THE DEFINITION OF A "MODEL YEAR" IS NOT SERIOUSLY IN QUESTION.

WE TRUST THIS OPINION IS USEFUL TO YOU. UNLESS AGREED OTHERWISE, IT WILL BE AVAILABLE TO THE PUBLIC 30 DAYS AFTER ISSUANCE.