Interpretation ID: 2779y
Industry-Government Affairs
Nissan Research and Development
Suite 902
750 17th St., N.W.
Washington, D.C. 20006
Dear Mr. Nishibori:
This responds to your letter seeking to confirm your understanding of the scope and application of the "captive import" definition set forth at 49 CFR 533.4(b)(2), and used in specifying light truck CAFE standards.
NHTSA's regulations define a "captive import" as a light truck which is "not domestically manufactured but which is imported in the 1980 model year or thereafter by a manufacturer whose principal place of business is in the United States." The agency adopted this definition beginning with the 1980 model year in order to prevent the standards from encouraging the increased importation of these vehicles and exportation of domestic jobs. See 43 FR ll996, March 23, l978.
Your letter explains that you do not believe that the light trucks manufactured in the U.S. by Nissan's U.S. manufacturing subsidiary (NMM, which is jointly-owned by the parent Nissan Motor Co. Ltd. (NML) in Japan and its wholly-owned U.S. importation and distribution subsidiary (NMC)), should be classified as captive imports. Your letter also states that light trucks imported by NMC should not be classified as captive imports. As explained below, I have concluded that neither the light trucks imported by your U.S. subsidiary, nor trucks manufactured by your U.S. manufacturing operation should be considered "captive imports."
Section 501(8) of the Motor Vehicle Information and Cost Savings Act (the Act) defines the term "manufacturer" as meaning "any person engaged in the business of manufacturing automobiles. . . ." The term "manufacture" is then defined in section 50l(9) as meaning to "produce or assemble in the customs territory of the United States, or to import."
Under these definitions, which are also used in Part 533, NMC is a manufacturer of light trucks imported for the parent company. Since NMC's principal place of business is in the U.S., one might initially conclude that all of Nissan's imported light trucks should be classified as captive imports. However, that is not a necessary conclusion since there may be more than one manufacturer of these vehicles.
NHTSA has concluded in the past that a second person may be regarded as a manufacturer of a vehicle manufactured by another person if that second person has a sufficient role in the manufacturing process that it can be deemed the "sponsor" of the vehicle. See, for example, the enclosed February 19, 1987 interpretation to a confidential addressee.
For Nissan's imported light trucks, the act of importation is the key manufacturing activity under the statute. While NMC does the actual importing, NML is responsible for the creation and production of the vehicles imported to the U.S. It designs models specifically for the U.S. market, and created NMC for the purpose of importing and marketing these vehicles. NML can be seen as "sponsoring" the importation of Nissan light trucks. Moreover, applying basic principles of the law of agency, NML, as sponsor, may be considered the principal. It is therefore our opinion that NML and NMC are both importers of the Nissan vehicles being brought into the U.S., and hence both are manufacturers under the statute. This situation is obviously distinguished from circumstances where the importer is not connected with the foreign manufacturer, e.g., so called grey market importers.
NHTSA believes it is appropriate, in determining whether the vehicles are "captive imports," to look at the totality of the circumstances surrounding the production, importation and marketing of the vehicles. In this case, NML controls all aspects of the Nissan light trucks imported into the U.S. Further, NML exercises complete control over NMC, and created NMC for the purpose of importing and marketing NML's products in the U.S. Indeed, NMC exists primarily to serve NML as a conduit into the U.S. market.
I note that this relationship is clearly distinguished from the circumstances of the typical captive import. In lieu of producing certain vehicles in this country, a domestic manufacturer imports and markets in this country vehicles (captive imports) supplied by a foreign manufacturer with which it has a special relationship. In such a case, the domestic manufacturer is not under control of the foreign company. Moreover, the domestic manufacturer does not serve primarily as a conduit to the U.S. market for the imported vehicles.
Since NML has its principal place of business in Japan, and exercises complete control over NMC, I conclude that vehicles manufactured by NML and imported into the U.S. by NMC are not captive imports. Moreover, since almost all foreign manufacturers utilize U.S. subsidiaries to import vehicles into the U.S., any other conclusion would have the effect of making virtually all imports "captive imports," a result which would clearly be inconsistent with the agency's intent in establishing the captive import category.
I also agree with the statement in your letter that light trucks manufactured in the U.S. by NMM are not captive imports. While we understand that these vehicles are not "domestically manufactured" as that term is defined in the statute, neither are they imported. The term "import" is defined in section 502(l0) of the Act as meaning "to import into the customs territory of the United States." Since these vehicles are not imported, it is impossible for them to be considered captive imports.
Your letter also enclosed a copy of a letter you sent to EPA, requesting that agency's interpretation of portions of EPA's fuel economy calculation regulations at 40 CFR Part 600. You sought clarification from EPA on the apparent inconsistency between EPA's regulations, which provide separate treatment for "domestically produced" and "not domestically produced" light trucks, and NHTSA's classification regulations, which distinguish only between "captive imports" and "others." You requested this agency's comments on the issues raised in the letter to EPA.
I am not in a position to comment on EPA's regulations, or on that agency's interpretation of its regulations. I will confirm, however, that NHTSA intended for different procedures to be applied to the determination of CAFE for light trucks than those for passenger cars. The primary distinction is that under the statute, passenger cars are divided into "domestically manufactured" and "not domestically manufactured" fleets. The statute contains no comparable distinction for light trucks. However, under NHTSA's regulations, light trucks are divided into captive imports and "others," which encompasses all light trucks which are not captive imports. This issue is discussed in some detail in the final rule establishing the captive import definition. See, 43 FR 11995, 11998-9, March 23, 1978.
I hope you have found this information helpful. Please do not hesitate to contact this office if you have any further questions.
Sincerely,
Paul Jackson Rice Chief Counsel
Enclosure ref:CSA#533 d:12/21/90