|
|
EPA Increasing Regulation of Vehicle and Engine Importations |
by Lenny Feldman
The Environmental Protection Agency , in conjunction with U.S. Customs and Border Protection, has been tightening its enforcement of regulations that impose strict standards on imports of vehicles, engines and related goods. This article, adapted from a recent ST&R seminar, explains some of the requirements of the EPA’s regulations and the penalties that can result from violating those rules.
Clean Air Act. The Clean Air Act requires all new vehicles and engines to be certified annually to comply with federal emissions standards prior to being imported into the U.S. The CAA, and the EPA regulations implementing this law, regulate on-road as well as off-road vehicles and engines, whether they are stationary or mobile.
The EPA takes enforcement of the CAA extremely seriously and can prohibit violative goods from entering the U.S. The agency prefers to see self-compliance with the certification requirement, but it routinely conducts inspections and audits, issues penalties and seizes merchandise as necessary.
Declarations Required at Entry. Imports of on-road vehicles and engines, including cars and light trucks, highway motorcycles and heavy-duty highway engines (trucks and buses) must be accompanied by an EPA Form 3520-1 as well as a form HS-7 from the Department of Transportation at the time of entry. Imports of non-road engines, equipment and vehicles, including compression ignition engines (farming, construction, mining, etc.), small spark ignition engines (lawn mowers, leaf blowers, chainsaws, etc.), large spark ignition engines (forklifts, generators, etc.), marine diesel engines (commercial ships, recreational diesel, etc.), marine spark ignition engines (boats, personal watercraft, etc.), recreational vehicles (snowmobiles, dirt bikes, all-terrain vehicles, etc.), locomotives, and aviation goods (aircraft, ground support equipment, etc.) must be accompanied by an EPA Form 3520-21 at the time of entry.
In either case, it is imperative that the importer, through its broker, provide the appropriate information on the declaration. Many importers fail to properly identify the vehicle or engine type, often identifying it as conforming or identical while not possessing the necessary certificate of conformity or letter indicating that the vehicle is identical to a U.S. certified model. In other cases, importers indicate that the vehicle or engine is exempted or excluded from standards but cannot support these claims.
Independent Commercial Importers. In the 1970s and throughout most of the 1980s importers were permitted to import uncertified vehicles under bond in order to bring them into compliance by modification and testing. This required extensive and expensive work and/or the cooperation of the original equipment manufacturer, which was hard to obtain. EPA found that many importers were abusing its policy of allowing first time importers to enter non-compliant vehicles up to five years old for personal use.
Accordingly, in 1987 the EPA adopted a stricter program to address the widespread importation of dirty vehicles. This program established independent commercial importers who could import non-conforming vehicles and engines and modify them to meet U.S. standards. ICI-imported vehicles and engines may meet the emission standards in effect when the vehicle or engine was originally produced, subject to certain ceilings. In addition, ICIs can modify, without limit, such vehicles and engines to the current year’s standards. As certificate holders, ICIs have the same basic requirements as OEMs or small-volume manufacturers.
At present there are only seven ICIs operating throughout the country. Together, these ICIs have imported and modified fewer than several hundred non-certified foreign vehicles over the last several years. It is imperative that all owners of foreign vehicles understand the role an ICI plays in importing and modifying such vehicles prior to shipment to the U.S. to avoid seizures and penalties.
Labeling Requirements. Specific labeling requirements exist for non-road engines, including compression ignition (diesel) enginesand spark ignition (gas) engines. There are also general non-road compliance provisions for enumerated engines as well as on-road vehicles, including motor vehicles and motorcycles. While there are some differences between the requirements, all labels must meet essentially the same fundamental standards. In general, the emission control label must:
• be attached so that it cannot be removed without destroying or defacing the label;
• be durable and readable for the entire engine life;
• be secured to an engine part necessary for normal engine operation and not normally requiring replacement during engine life;
• be written in English; and
• be located so that it is readily visible to the average person after the engine is installed in the equipment.
For non-road engines, a supplemental label may be attached to a location other than the engine if the required label would be obscured after the engine is installed. This could be the case, for example, where an engine is manufactured by one producer and then the chassis or housing is manufactured by another producer.
In general, the label itself must contain the following information.
• heading “important engine information”
• corporate name and trademark of manufacturer
• EPA standardized engine family designation
• engine displacement
• advertised power
• tune-up specifications and adjustments
• fuel requirements
• engine lubricant requirements
• date of manufacture
• family emission limits, if applicable
• engine family designation
• useful life category
• other information regarding maintenance, compliance or non-compliance
• exhaust emission control system (including specified abbreviations for motorcycle items).
Non-conforming Labels. CBP, in conjunction with the EPA, has found many vehicle and engine labels to be non-compliant, resulting in CBP detentions and seizures of numerous vehicles and engines as prohibited merchandise. Initially the EPA instructed CBP to require the export of merchandise bearing non-compliant labels, but more recently it has allowed reconditioning in certain cases. It is therefore imperative to ensure full and complete compliance with all label requirements pertaining to a particular importation. In the event of a detention, the importer must proactively and cooperatively work with the EPA and CBP to bring labels into compliance.
New Bonding Requirements. As of Jan. 1, 2010, EPA regulations require all imports of small non-road spark ignition engines to be secured by at least a $500,000 bond prior to entry into the commerce of the U.S. EPA imposed this requirement due toits difficulty enforcing regulatory requirements and insisting on compliance by manufacturers without staff or assets in the U.S.
The new bond requirement pertains to domestic and foreign engine producers, equipment manufacturers and importers but may be waived based on the “fixed asset” and “repair network” tests. The former requires $3 million to $10 million in fixed assets in the U.S., depending on whether the party is a secondary manufacturer and on its compliance history. The latter test requires at least 100 authorized repair facilities in the U.S. or at least one such facility for each 5,000 engines sold in the U.S., whichever is smaller.
Common Causes of Penalties and Seizures. EPA’s most typical enforcement cases arise from companies that obtain certificates but do not fulfil their certification obligations. The most common examples of non-compliance include:
• labels that do not contain the EPA engine family or manufacturer name;
• certification applications that do not include the model;
• missing or deficient catalysts;
• the importation of disassembled vehicles or motorcycles as parts;
• labels that can be removed without being destroyed or defaced; and
• problems with emission label contents.
Although the EPA has dealt with compliance issues regarding vehicles and engines produced around the world, it has been particularly working with China to stem the flow of illegal merchandise.
Recent Enforcement Priorities. More recently, the EPA and CBP have focused their attention on non-compliant imports of Japanese on-road trucks and micro-vans. These vehicles cannot be legally imported as motor vehicles because as such they would not pass applicable U.S. emissions standards. To be allowed entry into the U.S., then they must be physically modified in a permanent and tamper-proof manner so that they are considered non-road vehicles Such modifications typically include a speed governor or transmission modification to ensure a maximum speed of 25 mph and limitations to first gear and reverse.
Penalty Calculation. The EPA’s penalty calculation is extremely complex. It begins with a preliminary deterrence amount where the EPA considers the economic benefit (delayed and avoided costs by non-compliance, profits from illegal transactions, engine size, etc.) and a gravity component (actual/potential environmental harm, importance to the EPA’s regulatory program, business size, etc.). Next the agency sets an initial target figure, taking into account the degree of willfulness and/or negligence, the degree of cooperation or non-cooperation, and any history of non-compliance. The EPA also considers the company’s ability to pay, litigation risk and other unique factors.
Mitigating Factors. The EPA encourages a prompt disclosure within 21 days of discovering a violation to reduce penalties. In granting disclosure or at least mitigation benefits, the EPA will consider whether (a) the violation was discovered systemically, voluntarily and independently, (b) the violator corrected and remediated the violation to prevent a recurrence, (c) the incident is a repeat violation (within three years), (d) there was any serious actual harm or imminent and substantial endangerment, and (e) there was cooperation by the violator.
Settling Penalties and Releasing Goods. The process for settling penalties and obtaining release of the goods is a very long one, ranging anywhere from four months to over one year depending on whether it is a first or repeat violation as well as the severity of the infraction. Typical case processing is follows.
• CBP issues a detention notice to the importer as a result of inspection
• EPA obtains information from CBP and issues a determination
• CBP issues a seizure notice
• Importer submits mitigation petition to CBP and mitigation letter to EPA
• CBP and EPA confer regarding disposition and penalty amount
• EPA issues Administrative Settlement Agreement
• Importer signs ASA and, once EPA approves, tenders payment
• CBP issues seizure petition decision
• Importer pays mitigated penalty amount to CBP
• Importer provides proof of export or reconditioning to CBP and EPA
• Importer submits compliance plan to EPA
Conclusion. Importers must really do their homework before purchasing EPA-regulated merchandise for sale in the U.S. Imported vehicles and engines must be certified to the standards of the current model year and must conform exactly to the criteria approved in the certificate of conformity. Labels must not only be durable and affixed to the engine but also contain all engine details required by law. EPA and CBP officials often find that vehicles or engines with a faulty label also do not meet certification requirements.
Prior to importing, compliance procedures are highly recommended, including obtaining copies of labels and certificates to identify compliance risks early on. If CBP detains your merchandise, it is necessary to act swiftly to identify problems on current and future shipments and demonstrate a willingness to cooperate and address all compliance issues. The EPA takes environmental harm very seriously, and it wants to be assured that, as an importer, so do you. |
|
|