Truck equipment and The TREAD Act

April 1, 2004
A FEDERAL LAW passed in response to unraveling tires has entangled companies that mount truck bodies and install equipment especially distributors whose

A FEDERAL LAW passed in response to unraveling tires has entangled companies that mount truck bodies and install equipment — especially distributors whose shops equip at least 500 trucks per year.

The Transportation Recall Enhancement, Accountability, and Documentation Act has been in effect long enough to raise plenty of questions in the minds of truck equipment distributors. Erika Jones, a partner in the Washington DC law firm of Mayer, Brown, Rowe, and Maw, answered many of those questions during a special session held in conjunction with The Work Truck Show.

Based on some of the questions raised during the session, The TREAD Act remains a complex regulation that many are still learning about.

Distributors may not consider themselves manufacturers ala Ford and General Motors, but NHTSA does. And they are classified as high-volume manufacturers with the same reporting responsibility as major truck producers if they install (or alter) bodies or equipment on as few as 500 new trucks per year.

A key point is to determine whether a company is a high-volume or low-volume manufacturer for the purposes of The TREAD Act. Low-volume manufacturers place bodies and equipment on fewer than 500 chassis per year. Equipment manufacturers, if they do not complete vehicles, also have the same reporting responsibilities — regardless of how many bodies or equipment they produce. For them, they are required to report to NHTSA only when their products are involved in fatal accidents.

Distributors who cross the 500-truck threshold must also report customer complaints, property damage claims, warranty claims, and field reports.

Several trade associations, including NTEA, petitioned NHTSA to reconsider raising the threshold. However, the agency denied those petitions in January and will not reconsider raising the threshold at least until after the first two years of reporting (July 2003-July 2005).

Jones explained that companies close to the threshold should make a good faith estimate about their production.

“If you have a great fourth quarter and exceed 500 vehicles for the year, NHTSA will expect you to report for the year,” she said.

Are you high or low? Here's how to tell:

  • If a company builds 1,000 trailers and is the final-stage manufacturer of 400 trucks, the company only has to report detailed information on the trailers.

  • If a manufacturer grows to the 500-vehicle mark after 2003, he does not have to create a one-time, 10-year historic report.

  • Military vehicles are not covered unless they have a civilian counterpart.

  • Vehicles designed and built almost exclusively for off-road use (such as an airport snow-removal vehicle) do not have to be included in the total.

  • Companies with subsidiaries must aggregate the total production of those subsidiaries if those subsidiaries produce the same categories of vehicles. They should not, however, combine completely different vehicle types such as trailers and trucks.

  • Chassis, bodies, and equipment are not counted as vehicles until they are brought together as a completed truck.

  • New bodies on used chassis should not be counted, Jones said. If a truck equipment distributor mounts a new body on a used, previously certified chassis, he is not considered a manufacturer of that vehicle from the standpoint of The TREAD Act. However, he continues to have certification responsibilities as an alterer of the vehicle, Jones said.

What do you say?

Jones explained the reporting responsibilities of small and large manufacturers. Companies that are not considered large manufacturers only report fatalities under The TREAD Act. But for large manufacturers, NHTSA wants to know:

  • Injuries

    Low-volume or equipment manufacturers normally do not report them unless they are included in fatal accidents that occur in the United States. Large manufacturers are required to report them.

    “If you don't know about injuries associated with the fatal accidents, you do not have to investigate,” she said. “But if they are mentioned in police accident reports, for example, the injuries must be included.”

  • Consumer complaints

    Even the results of customer surveys are reportable under certain circumstances. Surveys conducted by the manufacturer — if they contain open-ended questions — may be reportable if the answers could be interpreted as an expression of dissatisfaction regarding the performance of any of the component systems of the vehicle addressed in The TREAD Act, Jones said. Third-party surveys (those that someone other than the manufacturer conducts) do not have to be considered as a consumer complaint. “Bubble surveys” such as those that ask customers to rate satisfaction on a scale of one to five are not considered consumer complaints.

  • Warranty claims

    Jones addressed some of the confusion about what constitutes a warranty claim. If the manufacturer pays a customer claim that is outside the scope of the warranty (a “goodwill” payment), NHTSA expects it to be treated as if it were a warranty claim. However, if the manufacturer gives dealers a general goodwill allowance for the dealer to use at his discretion, the manufacturer does not have to report it.

  • Property damage claims

    These apply to requests for compensation for losses other than the component that is alleged to be defective. If brakes fail and cause the vehicle to crash through a garage door, only the repair of the garage door is a property damage claim. Even if the manufacturer denies the claim, it must be reported. The only type of claim that does not need to be reported if denied is a warranty claim. Warranty claims are reportable only when they are paid.

  • Field reports

    These are reportable if the manufacturer's representative goes out to investigate issues with a vehicle that relate to the categories covered by The TREAD Act reporting rules. However, field reports relating to a vehicle that is still in the control of the manufacturer do not have to be reported. If the manufacturer sends an inspector to investigate whether a complaint is covered by warranty, NHTSA does not consider this to be a field report.

  • Updated information

    NHTSA normally does not require manufacturers to update incidents that already have been reported. This includes notifying NHTSA if a person dies who had been reported as injured. The exception is if the manufacturer did not know the vehicle identification number at the time he submitted the report or if he did not know the specific system code and reported it as 99 (all other).

    NHTSA has agreed that the updating requirement only lasts five years.

    “You will not find this in the rules, but you will find it in a recent interpretation,” Jones said.

What about tires?

The TREAD Act has specific requirements about tires. According to Jones:

  • Tire manufacturers — not final-stage manufacturers — are required to count warranty adjustments that relate to tires.

  • The TREAD Act does not specifically address the issue of final-stage manufacturers who replace OEM tires. However, final-stage manufacturers do have to comply with FMVSS 110.

    “Until it was modified last year, FMVSS applied only to passenger cars, and FMVSS 120 applied to all other vehicles,” Jones said. “Now most light-duty vehicles, including trucks, are regulated under S.120. Only medium and heavy-duty trucks are under FMVSS 110. Manufacturers who are exchanging tires and wheels must be sure the new tires and wheels are appropriate for the truck.”

  • Starting September 1, 2004, there will be a new labeling requirement for vehicles with gross vehicle weight ratings of 10,000 pounds or less. It will require much more specific labeling for the tires that go on that vehicle.

    “While not part of The TREAD Act, final-stage manufacturers are required to record for five years the name and address of the person who bought the vehicle,” Jones said.

Key dates coming

Jones recapped some of the key dates for those companies affected by The TREAD Act.

March 1, 2004

This is the most recent deadline for quarterly reporting. The report should include data from October 1, 2003 to December 31, 2003.

May 31, 2004

This is the deadline for the report covering the first three months of 2004.

July 30, 2004

Data is due for the April 1-June 30 period.

“You will see that the dates accelerate,” Jones said. “The first three quarters, NHTSA gave 60 days to report. Then the reporting dates accelerate to 30 days after the end of the quarter. And these first quarters do not have to be accompanied with field reports. That will start July 1 for the April-June 2004 quarter, and NHTSA will accept hard-copy field reports a month after the early-warning reports are due. There always will be a 30-day lag between the early-warning reports and the hard-copy field reports.”

November 1

Vehicle manufacturers must file their list of substantially similar vehicles that are sold in countries outside the United States. “This applies to low-volume and high-volume manufacturers,” Jones said. “There is no volume exception for this list. However, there is no requirement for those who only are equipment manufacturers.”

Maintaining confidentiality

When The TREAD Act was first proposed, manufacturers expressed concern that sensitive company information would be made available to the general public. Subsequently, however, NHTSA has provided details about the information it will keep confidential. According to Jones, NHTSA will protect:

  • Production numbers
  • Warranty claim counts
  • Customer complaint counts
  • Field reports

“All of these are to be withheld from the public, even if a Freedom of Information Act request is filed,” Jones said.

Information on fatalities, injuries, and property damage claim counts, however, are expected to be public. NHTSA has not yet said how this information will be made public.

Companies that consider themselves in unusual circumstances can petition NHTSA to keep their fatality, injury, and property claim information confidential.

The NHTSA Web site has additional information, including explanations of vehicle coding, electronic submission, application to get a manufacturer identification number, and links to the various interpretations to which Jones referred.

Following her presentation, Jones fielded questions from the audience.

Question: We already have begun installing bodies on 2005 model chassis. Should we report them as 2005 or for 2004?

Jones: You can choose. You do not have to follow the chassis manufacturer's model year, but you do must be consistent. You can consider this a 2004 model, but it probably is easier to follow the model year that is in the VIN.

Question: What does NHTSA mean by an equipment manufacturer?

Jones: They are talking about a company that puts together and offers for sale an item for installation on a motor vehicle equipment. It could be a body, a spark plug, or a tire. It's anything that is installed in or on a motor vehicle, either when it is new or used. Motor vehicle equipment is a broad subject that even covers things that are not operational. If you install a body onto a chassis, and you put a final-stage certification label on that vehicle, you are a vehicle manufacturer. If you assemble the body from raw materials, and you sell that body to someone else for installation, you are considered an equipment manufacturer. But if you merely install readily attachable components, NHTSA has said that that is not enough to make you a vehicle manufacturer. For example, if Ford sends a vehicle to its local dealer, and the dealer has to install the mirrors, installing readily attachable components such as mirrors does not make the dealer a manufacturer.

Question: If we install bodies on 400 chassis, but we also mount snowplows on 300 pickup trucks, what is our status?

Jones: That's a good question, because NHTSA has gone back and forth about whether alterers are manufacturers. The agency generally considers them to be manufacturers. I think NHTSA would classify you as a large-volume manufacturer for TREAD Act purposes, but I am not certain.

Steve Spata, NTEA technical services manager: NHTSA has told us that if you are required to put a certification label of any form, you are either a final-stage manufacturer or a vehicle alterer. Either way, it counts.

Question: If I am a small manufacturer, do I need to give NHTSA a copy of my notices when I have a defect?

Jones: This is a law that has been on the books for years. If you send a technical service bulletin or a letter of any kind to more than one dealer, distributor, customer, or anyone else outside your company, you must give NHTSA a copy if it relates to any defect. That includes defects such as paint problems that are not safety-related. The reason is that NHTSA wants to second-guess you about whether or not the defect is related to safety. The safety-related communication requirement is new, but the defect communication rule has been on the books for more than 25 years. The rule requires that you send in these communications within five days following the end of the month in which they were sent out. And they do get reviewed. NHTSA has a staff that looks for issues that should be addressed with a recall, and there are 25-30 recalls per year that are generated strictly by these types of communication. They are public documents. If you want to read your competitor's technical bulletins, you can go to the NHTSA Web site and do that.

Question: That means that if I am sued, the plaintiff's attorney can go to the NHTSA site and read them.

Jones: Yes, but the attorney does not need to bother. He can simply serve you with discovery and get this information directly from you. And while the technical bulletins of the major automotive manufacturers are on the NHTSA site, they have not been posting much from your sector of the industry — at least not yet.

Question: What if I don't send that report in?

Jones: If you are sued, the first thing the plaintiff's lawyer will do is tell the jury you violated federal reporting rules. A common plaintiff's lawyer technique is to find some rule that you have violated — especially if he can't find anything particularly wrong with your product. He will want to paint you as someone who does not know your obligations. And if NHTSA finds out that you have not been providing the information to them, they will ask for civil penalties. Volvo paid $15,000 for forgetting to provide their technical service bulletins. The fines have gone way up. It now can cost $5,000 per day per bulletin. It is not worth violating this particular reporting rule.

Question: Does NHTSA prefer receiving external communications in hard copy or electronically?

Jones: Hard copy. The agency is not yet prepared to deal with these reports electronically. They will accept the report in electronic form, but they will ask you for hard copy anyway. That may change in the future, but don't bother with the electronic reports for now.

Question: We convert retired road tractors into wreckers. What are my responsibilities?

Jones: NHTSA has guidelines regarding the amount of rehab you can do before you are considered to have made a new vehicle. It is too fact-specific to give you a rule, but if NHTSA regulations require a new VIN, you essentially are starting over.

Question: What should we review to be sure that we are doing things right?

Jones: If you go to the main NHTSA Web site, the agency's legal database contains approximately a dozen different interpretations on the subject of remanufacturing.