Interpretation ID: nht93-3.40

DATE: May 8, 1993

FROM: Daniel L. Kokal -- Champagne Importers

TO: Johnathan Womack -- Acting Chief Counsel, NHTSA

COPYEE: Joe Marino -- Champagne Imports; Clive Van Orden -- OVSC

TITLE: RE: Request for Use of Continuous Surety Bonding for Importation of Non-Conforming Vehicles Under the Registered Importer Program

ATTACHMT: Attached to letter dated 6-4-93 from John Womack to Daniel L. Kokal (A41; Part 591)

TEXT: On April 29th, 1993, Joe Marino of Champagne Imports and myself met with Clive Van Orden and Ted Bayler of OVSC, and Taylor Vinson of Chief Counsel's office, to review and discuss various aspects of the Registered Importer program as they relate to vehicle entries from Canada.

Champagne Imports is the largest Registered Importer processing entries from Canada. At the April 29th meeting, we raised the possibility of providing a continuous bond that would provide surety on the compliance obligations on these vehicles. Currently, single entry bonds are filed with each vehicle at 150% of the vehicle's declared value to ensure the vehicle meets, or will be modified to meet U.S. safety standards.

This type of bonding, currently the practice with non-conforming vehicles from Europe, is expensive for the importer, especially considering that Canadian vehicles rarely, if ever, require safety modifications to meet U.S. standards.

Continuous bonding would allow the Registered Importer to bundle a group of vehicles under a given bond and conserve costs to the importer while maintaining the SAME LEVEL OF LIABILITY for compliance to OVSC.

For example

10 vehicles at a value of $1O,000/vehicle would require 10 single entry bonds at a total bond value of $150,000 liability for compliance.

Alternatively, a continuous bond, valued at $150,000, would be posted to cover all 10 vehicles. The importer would be saved the costs of issuing 10 bonds, but the level of liability for compliance of these vehicles would remain the same. In fact, the $150,000 liability would remain until ALL vehicles are released.

It has been suggested that use of a continuous bond might create additional administrative burden on OVSC by requiring constant monitoring of the number of cars imported under a given bond. This burden can be obviated by establishing a discreet number of vehicles for each continuous bond used.

We are requesting the ability to import no more than 15 vehicles under a given continuous bond at 150% total vehicle value. These vehicles will all be imported together, and, when all vehicles are released, the bond itself is liquidated. The next 15 vehicles imported would require a new bond.

It is widely accepted that the Registered Importer requirements, as written. failed to consider the special case of Canadian vehicles. OVSC has moved to

mollify the unusual burden on Canadian vehicles by recognizing manufacturers letters of compliance as evidence of U.S. certification. As Registered Importers, we see many importers who cannot obtain these letters, yet still have vehicle that rarely, if ever, require modification, and are forced to cope with extreme bonding costs.

Fulfilling the enclosed request will enable us to lower these costs to the importer, while maintaining the same level of surety to OVSC that compliance will be demonstrated. There will be no burden on OVSC to "track" the vehicles under a given continuous bond, as each bond will hold a discreet number of vehicles (our request is 15 vehicles), after which the bond is liquidated, and a new bond is issued for subsequent vehicles.

Please review the enclosed request at your earliest convenience, and inform us as to its applicability under the Safety Act and the Registered Importer program. Comments received during the April 29th meeting seemed to indicate that there is no reason why this method could not be employed.

Cost cutting and paperwork reduction is imperative to our remaining in service as an importer of Canadian vehicles, and we believe use of continuous bonds will achieve cost reduction without limiting in any way our responsibilities as a Registered Importer.

We greatly appreciate your time and attention to this matter. Please contact me at 703-349-1166 with any questions, or to discuss this matter further.