Interpretation ID: 86-4.47

TYPE: INTERPRETATION-NHTSA

DATE: 08/18/86

FROM: AUTHOR UNAVAILABLE; Erika Z. Jones; NHTSA

TO: Thomas J. Flanagan

TITLE: FMVSS INTERPRETATION

TEXT:

Thomas J. Flanagan, Esq. Wiggin & Dana 195 Church Street P.O. Box 1832 New Haven, CT 06508

Dear Mr. Flanagan:

This responds to your letter to Mr. Brian McLaughlin, of our Rulemaking division, seeking an interpretation of the requirements of 49 CFR Part 541, Federal Motor Vehicle Theft Prevention Standard. You described a situation in which a client, Saab-Scania of America, imports cars subject to the theft prevention standard and uses them directly as company cars or leases them to employees for their personal use. After such use, the company sells the cars to dealers as used cars. On occasion, these vehicles may have an original equipment major part covered by the theft prevention standard that is so badly damaged during such use that the part must be replaced before the vehicle is delivered to a dealer or distributor. When this occurs, you asked whether the repair would be required to be made with a part marked with the full VIN or whether the repair could be made with a properly marked replacement part. We conclude that when a manufacturer uses a car as a company car in the manner you describe, it may make any necessary repairs to damaged major parts by installing parts marked as replacement parts. This conclusion is explained in detail below.

Section 2(7) of the Cost Savings Act (15 D.S.C. 1901(7)) defines a manufacturer as "any person engaged in the manufacturing or assembling of passenger motor vehicles or passenger motor vehicle equipment including any person importing motor vehicles or motor vehicle equipment for resale." (Emphasis added). It is clear under this statutory definition that your client is a "manufacturer" for the purposes of the theft prevention standard, since it is importing motor vehicles for resale.

Section 606(c)(1) of the Motor Vehicle Information and Cost Savings Act (15 U.S.C. 2026(c)(1)) requires vehicle manufacturers to certify that each vehicle complies with the requirements of the theft prevention standard "at the time of delivery of such vehicle". The preamble to the final rule establishing the theft prevention standard discussed this agency's conclusion that the "delivery" as used in this part of section 606(c)(1) means the delivery from the manufacturer to a dealer or distributor, and that the delivery occurs when the goods are delivered by the seller to a carrier. 50 FPR 43166, at 131B6-43187, October 24, 1985. In the next sentence, section 606(c)(1) specifies that the certification shall accompany the vehicle until delivery to the first purchaser. NHTSA believes that this statutory requirement means that each vehicle in the lines selected as high theft lines and listed in Appendix A of Part 541 must be delivered to the first purchaser with all covered major parts marked in accordance with the theft prevention standard. However, NHTSA does not interpret this statutory provision as requiring that every first purchaser be delivered a vehicle with all covered major parts marked with the VIN. Instead, the agency believes this means that the first purchaser may receive a vehicle with the undamaged covered original equipment major parts marked with the VIN, and with those covered major parts installed by a dealer or distributor to replace damaged original equipment parts marked as replacement parts.

In accordance with this interpretation, NHTSA does not believe that a manufacturer delivers a car to itself, when the car is sold to the public as a new car. However, you have noted a circumstance in which cars are bona fide used as company cars and are sold to the public as used cars, not new cars. Congress knew that used cars frequently have some replacement parts substituted for the original equipment parts. However, Title VI contains no requirement that used cars have all covered major parts marked with the VIN. In fact, Title VI presumes that when an original equipment major part is so badly damaged that it must be replaced, it will be replaced with a replacement part marked in conformity with Part 541. This reflects a legislative judgment that such replacement does not increase the opportunity for car thieves to steal the car without fear of being apprehended, or otherwise frustrate the purposes of Title VI, even though the car no longer has all major parts marked with the VIN.

On the other hand, a severe burden would be imposed on all manufacturers if they were required to deliver all bona fide company cars to distributors or dealers with all covered major parts marked with the VIN. If this were required and the company car were involved in an accident that required a covered major part to be replaced, the manufacturer would have a choice of either asking the factory to produce a replacement part with the VIN marked on the part and waiting to repair the vehicle until the part marked with the VIN arrived, or ending the vehicle's use as a company car and shipping the unrepaired vehicle to a dealer or distributor with the damaged major part marked with the VIN still on the vehicle. Nothing in the legislative history of Title VI explicitly or implicitly suggests that Congress intended such harsh treatment of company cars under the theft prevention standard.

Balancing the absence of negative policy consequences under Title VI if manufacturers are allowed to repair company cars with properly marked parts against the significant burdens that would be imposed on manufacturers if damaged major parts on company cars had to be replaced with parts marked with the full VIN, NHTSA concludes that Title VI of the Cost Savings Act permits cars damaged while in bona fide use as company cars and sold to the public as used cars, to be repaired by the manufacturer using properly marked replacement parts. This conclusion is based on NHTSA's interpretation that bona fide use of the car as a company car by the manufacturer is, for all practical and policy purposes, tantamount to a delivery of the vehicle under section 606(c)(1). The conclusion is reinforced by the fact that when a company car is later sold to the public as a used car, the consumer purchasing the company car Hill get a car with the same theft markings as any other used car.

NHTSA would like to note that this interpretation applies only to Title VI of the Cost Savings Act, and not to any other statutes administered by this agency. Those statutes may have different underlying policy considerations, which might mandate a different conclusion for cars used as company cars. Further, the agency wishes to emphasize that this interpretation applies only to bona fide company cars that are sold to the public as used cars, and not to most of the cars manufactured by the manufacturer.

Please feel free to contact me if you have any further questions about our theft prevention standard.

Sincerely,

Erika Z. Jones Chief Counsel

April 3, 1986

Mr. Brian McLaughlin Office of Market Incentives NHTSA 400 Seventh Street, SW Washington, D.C. 20530

Re: Theft Prevention Regulations

Dear Mr. McLaughlin:

As you suggested during our phone conversation on March 31, 1986, I am writing to request a more formal response to the question I asked during that conversation.

As you will recall, our client, Saab-Scania of America, Inc., uses some of the vehicles that it imports before selling these cars to dealers as used cars. The company either uses these cars directly or leases them to employees.

The question I asked was whether vehicles so employed by an importer that needed repairs before delivery to a dealer as a used car could be repaired with "R" marked parts or whether such vehicles must be repaired with parts market with the full VIN number.

My reading of the statute is that, under these circumstances, the importer itself becomes the "first purchaser" of tie vehicle thereby allowing the importer to repair the vehicle with "R" marked parts.

Please call if you require any more information to reply.

Thank you for your consideration.

Sincerely,

Thomas J. Flanagan

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