Interpretation ID: nht95-1.58

TYPE: INTERPRETATION-NHTSA

DATE: February 10, 1995

FROM: Philip R. Recht -- Chief Counsel, NHTSA

TO: Gary Shultz -- Vice President, General Counsel and General Manager -- Public Relations, Diamond Star Motors

TITLE: None

ATTACHMT: ATTACHED TO 1/20/95 LETTER FROM GARY SHULTZ TO EDWARD GLANCY

TEXT: Dear Mr. Shultz:

This responds to your letter asking about Part 583, Automobile Parts Content Labeling. You noted that section 583.6 specifies that manufacturers are to determine the percentage U.S./Canadian Parts Content for each carline on a model year basis, before t he beginning of each model year. You stated, however, that the regulation does not indicate what should be done when there is a change of plans in the source of production for a particular carline in the middle of the model year. According to your lett er, one of your carlines currently in production will now be manufactured in both the U.S. and Japan, which may significantly affect the carline's current calculation for content as well as the final assembly point.

You requested confirmation whether the label should be changed to reflect the change in domestic/foreign content in the middle of the model year or whether section 583.6 should be relied on as the authority for determining a carline's content only on a o ne-time model year basis. You also requested confirmation as to whether the label should be changed to reflect the final assembly point in accordance with section 583.5(e). Your questions are addressed below.

By way of background information, section 583.5(a) requires manufacturers to provide five basic items of information on the label: (1) U.S./Canadian parts content; (2) Major sources of foreign parts content; (3) Final assembly point; (4) Country of origi n for the engine; and (5) Country of origin for the transmission. The first two items are determined on a "carline" basis; the last three items are determined with respect to individual vehicles.

Both Part 583 and the American Automobile Labeling Act (now codified at 49 U.S.C. 32304) contemplate that U.S./Canadian parts content and Major sources of foreign parts content are determined on a once-a-model-year basis for a particular carline. In par ticular, section 32304(b)(2) reads as follows:

At the beginning of each model year, each manufacturer shall establish the percentages required for each carline to be indicated on the label . . . . Those percentages are applicable to that carline for the entire model year . . . .

We believe that Congress included this provision to reduce unnecessary manufacturer costs, and was seeking to make it clear that the manufacturers could not be required to revise their calculations during the model year. The specified percentages are es timates by nature, and the assumptions underlying them are subject to change during the model year. It would be very burdensome to manufacturers to be required to constantly recalculate the estimated percentages throughout the model year.

Your letter raises the issue, however, of whether a manufacturer is permitted to revise the carline percentages in the event of a major change in source of production during a model year. It is our opinion that a manufacturer may revise the percentages in such circumstances, at its option. Such revision would be analogous to correcting an error and would prevent the possibility of misleading consumers. If you do make such a revision, however, the revised estimates should reflect the model year as a w hole and not just the balance of the model year. In addition, the label should include a note indicating that the carline percentages have been revised during the model year. This is necessary to prevent confusion when consumers compare the labels of v ehicles within the same carline manufactured at different times.

You also asked whether the label should be changed to reflect the final assembly point in accordance with section 583.5(e). Since final assembly point is determined for individual vehicles rather than carlines, the label must be changed to indicate the actual final assembly point of the vehicle. See section 583.5(a)(3).

The section which you cited, i.e., section 583.5(e), permits manufacturers to provide additional information for carlines assembled in the U.S./Canada and in one or more other countries. Since your carline would now be assembled in the U.S./Canada and J apan, your company may avail itself of this option. I note that section 583.5(e)(3) provides that a manufacturer selecting this option for a particular carline must provide the specified additional information on the labels of all vehicles within the ca rline. In your situation, you would need to provide the additional information on the labels of all vehicles within the carline, beginning from the time the vehicles were manufactured in both places.

I hope this information is helpful.