Interpretation ID: nht91-3.35

DATE: May 1, 1991

FROM: Paul Jackson Rice -- Chief Counsel, NHTSA

TO: Julia D. Darlow -- Dickinson, Wright, Moon, Van Dusen & Freeman

TITLE: None

ATTACHMT: Attached to letter dated 4-10-91 from Julia D. Darlow to Paul Jackson Rice (OCC 5941)

TEXT:

This responds to your letter of April 10, 1991, with respect to the acceptability of a proposed course of conduct under 15 U.S.C. 1397.

As your letter states, and as related to Taylor Vinson of this Office, your client imports certain "automotive after-market equipment" that does not meet all applicable Federal motor vehicle safety standards. The equipment is warehoused in the U.S. but not sold here, and is subsequently exported to Canada. A customer of your client wishes to purchase the equipment from your client and itself export the equipment to Canada, and is willing to stipulate in the sales contract that it is purchasing the equipment only for export to Canada. The equipment and its containers will be labeled for export, in accordance with 15 U.S.C. 1397(b)(5). The customer will provide written proof of export to your client. You believe that this arrangement will not be in violation of 15 U.S.C. 1397(a)(1)(A), and ask for a written confirmation.

Section 1397(a)(1)(A) prohibits the manufacture for sale, sale, offer for sale, introduction or delivery for introduction in interstate commerce, or importation into the United States of any equipment item unless it is in conformity with all applicable Federal motor vehicle safety standards, and is covered by a certification of compliance. However, section 1397(b)(3) (as redesignated by P.L. 100-562 (1988) states that the prohibitions shall not apply to equipment intended solely for export, and so labeled or tagged on the equipment, and on the outside of the container, if any, which is exported.

It is clear that your client's importation of nonconforming equipment for subsequent shipment to Canada is an importation "solely for export" within the meaning of section 1397(b)(3), and that therefore the prohibition of section 1397(a)(1)(A) against importation of nonconforming equipment does not apply. The question is whether an otherwise prohibited sale of nonconforming equipment is also permitted under 1397(a)(1)(A) as modified by section 1397(b)(3), or whether the word "solely" is interpreted as barring any action other than transshipment for export.

Although the prohibitions and exception were enacted in 1966, only rarely has the agency been asked for interpretations of them, and no situation such as you posit has ever been brought to our attention. However, in 1975 we advised a tire manufacturer that the importation of nonconforming equipment for delivery to a truck manufacturer for installation on nonconforming vehicles intended for export would be permissible under section 1397(b)(3). Under this interpretation, we concluded that the importation of nonconforming equipment for delivery to a truck manufacturer for installation on a motor vehicle before its eventual

export as part of that vehicle was an importation "solely for export" for the purposes of section 1397(b)(3). By analogy, the importation of nonconforming equipment clearly marked in accordance with section 1397(b)(3) and its subsequent sale by the importer before its eventual export by another person would appear to be an importation "solely for export" within the meaning of that section. Thus, we concur with your interpretation.

We would, of course, be concerned if that purchaser failed to export the nonconforming equipment, and sold it in the United States. In that situation, the purchaser would appear to be in violation of section 1397(a)(1)(A), and subject to civil penalties. Although under section 1397(b)(1), the prohibitions of section 1397(a)(1)(A) do not apply to equipment "after the first purchase of it in good faith for purposes other than resale", it seems clear from your letter that such a "first purchase" would only occur after the equipment had been exported to Canada.