Interpretation ID: 23197rbm-2

James T. Pitts, Esq.
Winston & Strawn
1400 L Street, NW
Washington, DC 20005-3502

Dear Mr. Pitts:

This letter responds to your recent correspondence where you ask the National Highway Traffic Safety Administration (NHTSA) for clarification of the provision in Federal Motor Vehicle Safety Standard No. 208 that excludes small volume manufacturers from the phase-in of the requirements for advanced air bags. ⁽¹⁾ As noted in your letter, FMVSS No. 208 currently excludes from the phase-in vehicles manufactured by a manufacturer that produces fewer than 5,000 vehicles worldwide annually. While not subject to the phase-in requirements, small volume manufacturers are required to meet the requirements for advanced air bags effective September 1, 2006.

You queried whether a wholly-owned subsidiary of a manufacturer could qualify as a small volume manufacturer under a corporate arrangement that effectively treats the subsidiary as a totally separate corporate entity. Your letter indicated that the parent company does not manufacture vehicles for the U.S. market. You particularly emphasized the arms length relationship between the parent and the subsidiary, as well as the separate manufacturing plants, separate relationships with suppliers and sub-contractors, and the fact that the parent-subsidiary relationship would be the result of the acquisition of an existing small volume manufacturer.

Based on a review of the proposed corporate structure, we believe that the subsidiary would probably qualify as a small volume manufacturer for purposes of the relevant provision of FMVSS No. 208, even though wholly owned by a much larger vehicle manufacturer. However, we believe that the determination of whether the subsidiary is a small volume manufacturer for FMVSS No. 208 is no longer pertinent.

In our response to petitions for reconsideration of the advanced air bag final rule, published December 18, 2001 (66 FR 65376), we changed the provision so that vehicles that are manufactured by an original vehicle manufacturer that produces or assembles fewer than 5,000 vehicles annually for sale in the United States are not subject to the phase-in requirements. Again, we note that small manufacturers have always been required to meet the advanced air bag requirements after the phase-in ends on September 1, 2006. A complete explanation of the change is provided in our response to the petitions.

I hope this adequately resolves your concerns. Should you have any additional questions, please contact Rebecca MacPherson of my staff at this address or by phone at (202)366-2992.

Sincerely,

John Womack
Acting Chief Counsel

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