How to make TREAD Act work for you

BY now, most of the venomous comments have dissipated in relation to the TREAD Act's Early Warning Reporting requirements. Most companies just want to make sure they comply.

So as Marianne Grant stood in front of the audience at the National Association of Trailer Manufacturers Convention earlier this year in Las Vegas, she presented the perspective of someone who has worked with hundreds of companies, including some trailer manufacturers.

“The good news is that it's bad for everybody,” said Grant, director and industry subject matter expert of Syncata Corp, “and the bad news is that it's bad for everybody. This is a tough law.

“But the bright side is that it's your data, your information, and you're going to get good value out of it. You will find interesting information there. It has the potential to help your business in improved customer service and greater visibility into problems. TREAD will work because you look at the data, not because NHTSA will.”

She started her TREAD Act Compliance Workshop with one warning: The session was not designed to offer legal advice.

“If you have corporate lawyers or people you use on a contract basis to give you legal advice, and you're asking them about TREAD, make sure that person understands the law,” she said. “It's a very, very tricky law. It has a lot of places to fall down into holes. If you get a bad answer, that can really hurt you.”

Grant said the Foreign Recall Rule — which details requirements for organizations that sell products outside the US — is an important facet.

“It goes something like this,” she said. “NHTSA says you need to do a recall and asks how long it will take. You say, ‘Six months.’ They go, ‘Oh, no, that's too long. You've got to do it in three.’ ‘I can't do it in three. I can't get the parts.’ ‘Well, find another supplier.’ ‘I can't find another one.’ ‘Well, maybe we'll try to find one. And if we can't, we'll shut down that line of production.’

“It's a big deal for you as a manufacturer of trailers. But it's also a big deal for equipment suppliers who couldn't supply you. This has some ramifications down the line.”

Requirements

The EWR rule requires that:

  • Manufacturers of 500 or more trailers per year submit reports to NHTSA every quarter.

  • Manufacturers of 499 or fewer trailers per year and all equipment manufacturers submit reports in any quarter when they have qualifying information to communicate.

  • All manufacturers notify NHTSA about safety- and non-safety-related defects and about certain communications sent or made available to entities inside and outside the US.

Grant said NHTSA is doing basic reporting analysis.

“They're looking at spikes,” she said. “They're looking at numbers. They're comparing this year with the last few years of your history. It doesn't sound like they're going to be doing anything really fancy with the data yet. But as time goes on, they will. We know that from the budget that has been assigned for the system.”

She said even if companies are late, they still must report and “catch up” on late reports. Companies should apply for an ID and password as soon as possible using the form provided by NHTSA. She said companies should go forward by determining what they need to do — instead of compounding the problem.

“NHTSA is being quite nice right now, quite lenient,” she said. “They're saying, ‘We know a lot of people haven't reported. We know a lot of people have just heard about it.’ They're not going to come down with a ton of bricks yet. But they will at some point.”

The consequences of non-compliance go far beyond the monetary damage: civil penalties of $5,000 per violation per day, up to $15 million; and criminal penalties of imprisonment up to 15 years.

“The damage to your brand is much bigger than money penalties and going to prison,” she said. “If we think about the Ford/Firestone story and what we thought about those companies at the time, it was pretty bad. If you're a small manufacturer, you don't want that for you.”

Put together a team

Grant recommended that companies form a qualified task team — including an IT person to handle possible questions NHTSA has about the electronic transmission of data, and a senior executive.

“The reason is that if they come with a question and it's about the data, you want to make sure that the person the question comes to is somebody who can answer it,” she said. “You don't want just any person.”

She suggested that companies look forward by making sure they are now capturing the data: production volumes, warranty (paid claims), consumer complaints gathered in the “normal course of business”; property damage (written notices and claims received in writing); field reports (technical assessments); death and injury (notices and claims received in writing); and backup and supporting documents (photographs, letters, etc).

She said decisions need to be made about how much data a company has to deal with, how it will gather and manage the data, how it will code and/or map the data, and how it will create the NHTSA summaries. But the critical question — one she said should be underlined and put in bold letters — a company should ask itself is this: How will we ensure that we can get back to the data months or years after submitting a report?

“NHTSA might pick up the phone or send you a letter a short while after you send a report to ask you a quick thing, but the odds are that if they ask you anything big or complicated, it's going to happen months or maybe years after you sent in a report,” she said. “It's going to be a very detailed question. You don't want to be thinking, in two years' time, ‘What in the world did I send to them in the 2003 report? Where did I put those photographs?’ You want to have everything organized in a way you can get back to it. It should be frozen in time: ‘This is what we looked like when we sent the report to NHTSA.’”

She said that after the report is sent to NHTSA: the format of the report and the data will be validated; if there are any issues with the transmission, the company will receive some fairly descriptive e-mail messages; assuming the format is correct and the arrival is normal, “no news is good news” and the data will be pulled into the database; if there is any incident of death or injury, it will be investigated first; the staff of the Office of Defects Investigation will look at the numbers (on their own and in comparison with those from similar companies); if ODI has any questions, it will first communicate with the primary contact named on the EWR registration form; investigations at this stage are not “NHTSA inquiries” but could lead to an inquiry if sufficiently important.

In talking about avoiding pitfalls, Grant said it is critical that a company increase collaboration with its suppliers because it is reporting on their behalf, and they also are reporting.

“You are reporting to NHTSA about what your equipment suppliers made,” she said. “You're sending in warranty claims, which are about the brakes or axles you bought from them. So it kind of behooves them to talk to you and you to them. In doing so, you hopefully are improving quality. They should be concerned about the fact you are sending in information. So they should want to talk to you and improve communication.”

She listed these resources: the NATM Web site (www.NATM.com), NHTSA's Web site (http://www.NHTSA.gov), the TREAD Act, Final Rule, and other Federal Register documents; NHTSA's Docket Management System (http://dms.dot.gov), industry associations, seminars and educational events, and in-house and external legal counsel.

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