The $15-million incentive to comply

How will the TREAD Act affect trailer manufacturers and suppliers of trailer components?

In a presentation at the TTMA convention in Amelia Island, Florida, Glen Darbyshire, an attorney with Inglesby, Falligant, Horne, Courington & Chisholm in Savannah, Georgia, presented an overview of the law from the perspective of trailer manufacturers and their suppliers. If a component goes on a vehicle, the manufacturer likely falls under the TREAD (Transportation Recall Enhancement, Accountability, and Documentation) Act.

“If I need to get your attention, let me put it this way: penalties of $5,000 per day, $15 million per violation, up to 15 years in jail,” Darbyshire said.

Trailer manufacturers and other producers for years have had an obligation to report safety-related defects to the National Highway Traffic Safety Administration. This requirement relied on the good faith of the manufacturer of the vehicle or component. If the manufacturer determined a safety defect existed, the company was to notify NHTSA and issue a recall.

But in the Ford-Firestone flap, neither side conceded that a defect existed. Congress got its fill of mutual finger-pointing and created the TREAD Act.

The statute, passed in 2000, mandates extensive reporting requirements. In addition to a good-faith requirement to report defects, manufacturers now are required to report a wide range of issues — from product-related deaths and injuries to customer complaints.

“There are no GVW distinctions,” Darbyshire said. “A trailer is a trailer, whether it is a small boat trailer or the size that most of you make.”

The statutes were written primarily for the automotive industry and then applied to industries such as truck trailers.

The TREAD Act enables NHTSA to create a massive database of quarter-by-quarter statistics on trailer production. Requiring manufacturers to file a one-time report of their production data covering the past 10 years will seed that database. The data is intended to help NHTSA identify potential safety problems by comparing the frequency of incidents with the number of vehicles in operation.

“If NHTSA perceives a problem in a certain area, they may come to you or your competitors for additional information and possibly initiate an investigation,” Darbyshire said.

With the database seeded, manufacturers will have to file quarterly reports to keep the information current.

In addition to the decade of production information, NHTSA is requiring three years of information regarding warranty claims and field reports.

Not everything is reportable, however.

“You have some protection in that you are not obligated to report claims and complaints where you cannot identify the make, model, or model year of the trailer,” Darbyshire said. “But you can't just close your ears and not ask about the data. If the information is available, you have to provide it.”

A code of complaints

In reporting the complaints and claims to NHTSA, manufacturers should code them according to the area in which they occurred. Darbyshire listed the following product-related codes that apply to trailer manufacturers:

02 Suspension system
03 Service brake system (hydraulic)
04 Service brake system (air)
05 Parking brake
11 Electrical system
12 Exterior lighting
16 Structure
17 Latch
19 Tires
20 Wheels
21 Trailer hitch
23 Fire

“The general rule is that if a complaint or warranty claim does not fit in a code, it is not reportable,” Darbyshire said. “The exception is when it involves death or injuries.”

NHTSA has two special codes for cases involving death or injuries. Code 98 involves a system or component not covered by categories 02-21. Claims or notices in which no system or component is specified should receive a 99.

“Structure,” one of the broadest categories, is defined as “any part of the trailer that serves to maintain the shape and the size.” It includes the frame, body, bumpers, doors, tailgate, and roof — and the associated mounting elements such as brackets and fasteners.

“If you are a rivet manufacturer, you are covered by this regulation,” Darbyshire said.

Telling all

As has been explained in previous TTMA presentations, the TREAD Act calls for two levels of reporting: one for companies manufacturing more than 500 vehicles per year, another for those falling below the 500-vehicle threshold.

Large manufacturing companies have the largest obligation under the TREAD Act. These obligations include:

  • 10 years of production data (from 1994 to March 31, 2003. These are to be reported by quarter for each make, model, and model year.

  • Three years of warranty claims and field reports. These are for trailers that fall within that 10-year period of production. A warranty claim is paid by the manufacturer, either by fixing the problem without charge to the customer or by paying a third-party to perform the requested repair.

“For these three years of historic reporting, you have to gather the claims, decide if the claim was paid, decide if it fits within one of the specified codes, and put a tally mark for that type of code,” Darbyshire said. “You submit the totals of those tally marks to NHTSA on a coded basis, and you are done. You don't have to give them paper or analyze anything — you just report it on an electronic template. But you have to save the paper for five years.”

A field report is communication in writing (including electronic) from the manufacturer's employee, dealer or authorized service facility, or the owner or operator of a fleet of more than 10 trailers. The communication pertains to failure, malfunction, lack of durability, or other performance problem.

Keeping current

As of April 1, large trailer manufacturers have to keep NHTSA current by electronically filing quarterly reports. These reports are to contain:

  • The number of claims/notices of deaths and injuries.
  • Property damage claims.
  • Consumer claims.
  • Warranty claims.
  • Field reports. These are written communications produced by an employee or representative of the manufacturer regarding failure, malfunction, lack of durability, or other performance problem. Unlike the one-time, three-year history, these quarterly submissions to NHTSA must include actual copies of the field reports.

“These field reports become part of a public database,” Darbyshire said.

The electronic report should include totals for each of these, coded by subject area.

Big or small, physical or psychological, injuries alleged to have been caused by a defect in the trailer are reportable, Darbyshire said. “They don't have to specify the defect. They just have to allege a defect.”

The complaint does not have to come from the injured party. It can be from an eyewitness or a friend, and it includes injuries alleged from outside the United States if the trailer involved is similar to those sold domestically.

Future quarterly reports involving claims of deaths or injuries are to include the incident date, number of deaths, number of injuries, and the state or country in which the injury occurred — for any trailer less than 10 calendar years old. The incidents must be coded (up to five codes) and submitted by VIN number and the make, model, and model year.

“The remaining reportable events for future quarterly reporting are just tally numbers, totals placed in the electronic template,” Darbyshire said.

These include claims for property damage (such as lost cargo), consumer complaints, warranty claims and extensions, and field reports.

Consumer complaints will be most difficult to track, Darbyshire said. These are any form of communication from a consumer to the manufacturer that expresses dissatisfaction with the product, including phone calls. Manufacturers will need to develop a system for tracking and coding the nature of these complaints.

As of April 1, large manufacturers also are required to submit copies of campaign documents, either paper or electronic communication on “customer satisfaction campaigns.” This is communication to more than one customer or dealer relating to the repair, replacement, or modification of a vehicle — or the manner in which the vehicle is to be maintained or operated.

The requirement does not include copies of instruction manuals and other documents that provided initial information on the use of the vehicle. Neither does NHTSA want copies of customer surveys sent out to measure attitudes or satisfaction with the product. But if the correspondence includes a change in that advice, NHTSA wants copies.

“This is not limited to a coded topic,” Darbyshire said. “It includes any repair or modification and any change in the way the vehicle is operated — regardless of whether the change is safety-related.”

Deadline: five days after the month in which the communication went out.

Smaller obligations

Small manufacturers (those producing fewer than 500 trailers per year) and all equipment manufacturers have smaller obligations under the TREAD Act. For example:

  • No historical data is required.
  • No warranty or field reports.
  • No reports on injuries.

The primary requirement for small trailer manufacturers is to submit information on fatalities involving their products. This includes lawsuits and other notices involving allegations of deaths involving a trailer and its component parts.

Like the requirements for large manufacturers, small manufacturers also are required to send NHTSA copies of campaign documents.

“Your obligation to issue recall notices existed before the TREAD Act, and it continues to exist,” Darbyshire said. “The TREAD Act is an overlay on top of that. It makes you report additional information that may or may not establish the existence of a defect. Before, you were deciding if you had a defect. With the TREAD Act, you are providing additional information that NHTSA may use to decide if you have a defect.”

Darbyshire warned manufacturers not to assume that NHTSA will now be responsible for initiating a product recall.

The authority of the TREAD Act reaches around the world. It requires manufacturers to report to NHTSA within five days if:

  • The manufacturer decides to issue a safety recall in a foreign country if what is sold internationally is substantially similar to that sold in the United States.

  • A foreign government notifies the manufacturer that a safety recall must be conducted.

International obligations under the TREAD Act also require the submission of historical data. In addition, not later than November 1 of each year, manufacturers are to tell NHTSA the types of vehicles they sell in foreign countries that are substantially similar to those sold in the United States.

Beating the deadlines

Here are key deadlines for the TREAD Act:

  • Dec 12, 2002

    Historical foreign recall/campaign report is due. This applies only to manufacturers doing business internationally. Updates to this historical data are due within five working days after the determination that a recall is necessary.

  • Feb 27, 2003

    List of trailers sold internationally (that are substantially similar to those sold in the United States) is due. This also applies to trailers that the manufacturer plans to sell in a foreign country.

  • April 5, 2003

    The first monthly submission of any recall campaign documents. Subsequent updates of recall campaigns are due five working days after the need for one has been determined.

  • Aug 1, 2003

    By this date, manufacturers should have contacted NHTSA for the following reasons: to designate the name of the person who will serve as the manufacturer's TREAD Act representative, to request an ID number and password, and to obtain approval of graphic compression protocol if applicable.

  • Aug 31, 2003

    The first of the quarterly Early Warning Reports (EWR) is due. It covers activity for the second quarter of 2003 (April 1-June 30). The deadline for this and subsequent reports for 2003 production will be 60 days after the end of the quarter.

  • Sept 30, 2003

    Historical EWR data is due. This includes the quarterly production data for the past 10 years and the three years of warranty claims and field reports.

  • Nov 1, 2003

    Manufacturers selling trailers internationally must file a list of models (similar to those sold in the United States) that they either sell or plan to sell in a foreign country in 2004.

  • Dec 1, 2003

    The EWR for the third quarter of 2003 is due (60 days after the end of the reporting period).

  • Feb 29, 2004

    The fourth quarter of 2003 EWR is due (60 days after the end of the reporting period).

  • April 30, 2004

    The EWR for the first quarter of 2004 is due. The deadline for subsequent quarterly reports will be 30 days after the reporting period, beginning with the first quarter of 2004.

Making it work

Darbyshire offered several suggestions for complying with the TREAD Act.

Selection of the manufacturer's TREAD Act contact is important. The person or persons should be familiar with the computer system that will be used and be knowledgeable enough about the company's products to be able to correctly code the entries.

“That person should be prepared to testify in court,” Darbyshire said. “Claimants in personal injury lawsuits will ask how you gathered the data, why some cases were entered and others left out — all with the intent to show that your company is not a good corporate citizen.”

It is also important to develop a system to track, code, and record telephoned complaints and other informal communication. It will be possible for a plaintiff attorney or consumer advocacy group to phone in a complaint and later check to see if that complaint is in the database. Failing to do so could weaken the manufacturer's position in the event of a product liability suit.

Lost but not forgotten

The TREAD Act does not make manufacturers produce documents that they do not have, however.

“Historical data, warranty data — if you don't have them, you don't need to get them.” Darbyshire said. “That's one benefit that you have under the TREAD Act. But you can't throw the documents away if you have them.”

Confidentially of data has been a concern for trailer manufacturers since details of the TREAD Act became known two years ago.

“The statute said that none of the information collected shall be disclosed unless the U S Secretary of Transportation determines that it should be,” Darbyshire said. “The regulation says that NHTSA will maintain the confidentiality only if requested and if it is determined by the chief counsel of NHTSA that the information should be kept confidential.”

NHTSA has said that certain information will not be made public. This includes:

  • Proprietary drawings
  • Plans for future models
  • Projected sales figures

Information that NHTSA has said it will make public includes:

  • Consumer complaints
  • Warranty claims
  • Property damage claims
  • Test procedures for compliance with safety standards

NHTSA has not yet said whether field reports or production data will be publicly available. Rulemaking in this area is still pending, Darbyshire said. However, manufacturers may submit to the office of chief counsel a request for confidentiality as part of filing their reports.

NHTSA's TREAD Act regulations are published at 49 CFR Part 579.

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