Early Warning Reporting: What Every Manufacturer Needs to Know

“The Early Warning Reporting basically gives insight as to what those potential problems could be. NHTSA is trying to say, ‘OK, did you send out a technical service bulletin and did it identify a defect? And if it did, is that going to be a safety defect down the road where you’re going to have to do a recall that might cause an accident?’ NHTSA is turning up the heat on this. They want to look at this and get this information early enough before it becomes a monumental problem.”

That’s why K&L Gates, in conjunction with NATM, has developed “A Guide to NHTSA Early Warning Reporting and Safety Recalls.”

In recent enforcement actions:

•  A manufacturer was subject to a $9 million fine ($1 million payment, $5 million deferred penalty held in abeyance pending completion of obligations, and $3 million for use in completing obligations). The manufacturer failed to submit technical service bulletins (TSBs) to NHTSA over a 10-year period. After being contacted by NHTSA, the manufacturer produced over 240 TSBs to NHTSA and, after reviewing the TSBs, NHTSA concluded that at least six of the TSBs should have resulted in safety recalls.

•  A manufacturer was subject to a civil penalty of up to $35 million (with a $5 million lump-sum payment) and retention of an independent monitor. The manufacturer failed to satisfy EWR obligations by: failing to report accurate information on deaths and injuries, property damage claims, consumer complaints, and field reports; failing to report foreign country safety campaigns and to file quarterly recall response rate reports; and failing to timely implement safety recalls.

Lawton said there are reporting requirements applicable to all trailer manufacturers, regardless of size:

• Copies of external campaign communications.

“This involves notices, bulletins, and other communications regarding any defect (safety or non-safety) sent to more than one manufacturer, distributor, dealer, lessee, lessor, owner, or purchaser of a trailer in the US. Defect notices, bulletins, and TSBs must be furnished to NHTSA. This would be notices that discuss a defect, safety or non-safety, in trailers or equipment. TSBs focus on non-safety-related defects that might affect performance or longevity, such as parts that fail prematurely or do not operate as intended.

“With non-defect notices/bulletins, there is no obligation to furnish them to NHTSA. For example, a bulletin discussing proper hitch attachment procedures to follow to avoid disengagement.

“Customer satisfaction campaigns, consumer advisories, or other communications regarding repair or replacement sent to more than one US dealer, distributor, manufacturer, owner, or purchaser might be offers to repair, adjust, upgrade, or replace a trailer or equipment that is not a safety recall. This is intended to address relatively minor, annoying issues affecting comfort or appearance—things that are not safety-related, like replacement of floor mats that did not perform as expected. Copies of such communications must be submitted to NHTSA within five business days after the month issued.”

• Foreign recalls and other safety campaigns.

“You must report to NHTSA any order or decision to conduct a safety recall or campaign in a foreign country. The obligation applies only if the foreign recall or campaign covers a trailer or item of equipment identical or substantially similar to a trailer or item of equipment sold in the US. You must report within five working days after the determination or order to conduct the foreign recall or campaign.

• Annual list of substantially similar trailers.

“This applies only if the manufacturer sells trailers in the US and foreign countries. You must report to NHTSA each model of trailer that the manufacturer sells or plans to sell in a foreign country that is identical or substantially similar to a US model. The annual list is due no later than November 1 of each year.”

• Claims and notices of death.

“The manufacturer must report each incident of death, based on manufacturer’s receipt of: a formal written claim/demand for compensation; or a written notice alleging that death resulted from a possible trailer defect involving a trailer less than 10 years old. The reporting requirement applies only to trailers manufactured during the current model year and the nine prior model years. Reports must be submitted quarterly, within 60 days after end of relevant period.

There are additional EWR reports for manufacturers of 5000 or more trailers. A manufacturer includes: manufacturer; parent corporation; subsidiary or affiliate; and subsidiary or affiliate of the parent. All must be combined. A manufacturer is subject to the 5000-trailer reporting requirements if it sells or offers for sale 5000 or more trailers during any calendar year for a rolling three-year period. Example: A manufacturer that produces 4500 in 2013, 4750 in 2014, 5100 in 2015, and 4900 in 2016 is required to submit reports starting in 2015, and is still required to report in 2016 and 2017.

The additional EWR reports for 5000-plus include: production information; claims of death and injury; the number of property damage claims; the number of warranty claims; the number of consumer complaints; the number of field reports; and copies of field reports. Reports are due within 60 days after the end of the preceding reporting quarter; copies of field reports are due within 30 days.

•  Production information. This involves production numbers for each reporting quarter by make, model, and model year (calendar year); cumulative calendar-year production figures through end of each reporting period; and production numbers for nine prior model years (including discontinued models). The time period: trailers manufactured during the model year covered by the quarterly reporting period and the previous nine model years.

•  Claims of death and injury. You must report each incident of death or injury involving trailers, based on receipt of: a written claim/demand for compensation; or written notice alleging death or injury resulted from a possible trailer defect involving a trailer fewer than 10 years old. Report the trailer’s make, model, model year, and the date when and the state where the incident/accident occurred. The time period: Trailers manufactured during model years covered by the quarterly reporting period and the previous nine model years.

•  The number of property damage claims. Report the number of property damage claims/demands for compensation for accidents involving property damage to a trailer or other property. There is no duty to report if: the accident does not involve one of the components or systems listed in NHTSA regulations; damage was only to trailer component covered by a warranty; the accident resulted in injury or death (already reported). The time period: claims attributable to trailers produced during current and past nine model years.

•  The number of warranty claims. Report the number of warranty claims if claims are presented and paid pursuant to: a warranty program or extended warranty program; or manufacturer’s “good will,” such as a warranty claim paid outside a warranty program. There is no duty to report the following: lawsuits alleging breach of warranty; repairs or replacements under a recall; or warranty claims to non-coded component or system. The time period: claims attributable to trailers produced during current and past nine model years.

•  The number of consumer complaints. Report the number of consumer complaints about one of the trailer components or systems listed in NHTSA regulations. The complaint is electronic or written communication: expressing dissatisfaction with the trailer; describing an unsatisfactory performance; or potential defect in a component or system. The complaint may be oral but only if the manufacturer makes and keeps a written record in the normal course of business. The complaint must be from the consumer to the manufacturer, addressed to the manufacturer, officer, website/email, or designated office. The time period: complaints attributable to trailers produced during current and past nine model years.

•  The number of field reports. To be reportable, the field report must: be a written or electronic communication; and about a component’s alleged failure, malfunction, lack of durability, or other performance problem. There is no obligation to report: a document contained in a litigation file; or reports relating to consumer complaints, sales, marketing, etc. The time period: field reports attributable to trailers produced during current and past nine model years.

•  Copies of field reports. In addition to reporting the number of field reports, you must provide copies of field reports that satisfy the following criteria: received from the manufacturer’s employees or representatives; regarding a problem or dissatisfaction with a trailer or component or system, and assessing the alleged failure, malfunction, lack of durability or performance problem. The time period: field reports attributable to trailers produced during current and past nine model years.

Penalties for failing to comply with EWR obligations:

•  Civil penalties. Failure to submit copies of external campaign communications, including TSBs, has a penalty up to $7000 per day for each violation; failure to submit reports (or copies of field reports) has a penalty up to $7000 per day. Maximum cumulative penalty of $17,350,000.

•  Criminal penalties. Making a false report to NHTSA—potential penalties are a criminal fine, up to five years imprisonment for individuals, or both. If done with intent to deceive with respect to safety-related defect that results in death or injury, criminal fine, up to 15 years imprisonment for individuals, or both.

Examples:

•  A manufacturer produces 1500 trailers per year. During a quality-control review, it determines that a particular weld is not holding properly, concludes that this is a non-safety defect, and issues a TSB. This triggers a duty to report, including a copy of TSB.

•  A manufacturer produces 3000 trailers per year. Eight years after the sale of a trailer, the manufacturer receives a written notice alleging that the trailer caused a death. The manufacturer must file a report with NHTSA.

•  A manufacturer produces 1200 trailers per year. The manufacturer receives a notice alleging that one of its trailers caused an injury to a person. The manufacturer is not required to file a report with NHTSA.

He said a manufacturer has a duty to initiate a safety recall if: it determines that a trailer or trailer component contains a defect and decides that defect is related to vehicle safety; or determines that a trailer does not comply with Federal Motor Vehicle Safety Standards (FMVSS) which set minimum performance standards for parts of trailers that most affect safe operation, such as brakes, tires, lighting, and chassis.

Examples of defects considered safety-related:

•  Critical vehicle components that break, fall apart, or separate from the vehicle, causing potential loss of control.

•  Wheels that crack or break.

•  Rivets that shear or pull out under load.

•  Trailer tongue hardware with inadequate fatigue strength.

•  Cracks in suspension components that cause axle and suspension assembly to fall out from under trailer.

•  Latches on fold flat ramp that become disengaged as a result of vibration during towing.

•  Wiring system problems that result in fire or loss of lighting.

A manufacturer of a trailer or item of equipment must notify NHTSA of the safety defect. There are two variations to the general requirement: with multi-stage trailers (trailers with more than one manufacturer), notification by either is sufficient; with a defect in original equipment, notification by either the equipment or trailer manufacturer is sufficient. The trailer manufacturer and equipment manufacturer must coordinate a communication plan.

“Trailer manufacturers are responsible for their trailers and all original equipment installed on them, meaning a trailer manufacturer is responsible even if the safety defect is an item of equipment on the trailer that the trailer manufacturer did not manufacture,” Lawton said. “The trailer manufacturer and equipment manufacturer may coordinate recall and remedy obligations. The ultimate responsibility remains with the trailer manufacturer.

“An example: XYZ Corp manufactures lights for a trailer manufacturer. XYZ notifies the trailer manufacturer of a safety defect in lights that were installed on the trailer as original equipment. The next step: coordinating a communication plan to NHTSA. Notification obligations can be satisfied by either, but one of the parties must timely report to NHTSA.

“You must report a safety defect to NHTSA within five working days after determining a defect exists. There is no need to identify the cause of the defect to provide this initial report. You just need sufficient information to conclude that the defect is related to the safety of the trailer.”

He said the defect and non-compliance report must include: the identification of the manufacturer; identification of the recall population (make, model, year); total number of trailers/equipment potentially containing the safety defect; the percentage estimated to actually contain the defect; a description of the safety defect and chronology of events; a description of the defect remedy program; the recall schedule.

“You must provide a free remedy for the safety defect, with the exception of a trailer or equipment purchased by the first purchaser more than 10 years—or for a tire, five years—before the notice of defect is given,” he said. “Ways to remedy for the trailer: repair the trailer; replace the trailer with an identical or equivalent trailer; or refund the purchase price. Ways to remedy for the equipment: repair the equipment; or replace the equipment with identical or equivalent equipment. This must be done in a reasonable amount of time—less than 60 days.”

In terms of public notification requirements, the general rule is that you must notify owners, purchasers, dealers, and distributors of the defect.

The notification to owners and purchasers must be a letter with specific requirements: the safety recall notice on the envelope; on the top of the letter, IMPORTANT SAFETY RECALL; a clear description of the safety defect or non-compliance; evaluation of the risk to safety related to the defect; and a statement of measures to be taken to remedy the defect; a statement that the remedy will be without charge. It must be sent by first class mail to each registered owner no later than 60 days after the defect report was filed.

The notification to dealers and distributors must be a letter with specific requirements: a clear statement that notice is a safety recall notice; identification of the recalled product; a description of the defect or non-compliance; evaluation of the risk to safety from that defect or non-compliance; a description of the remedy; the estimated date on which the remedy will be available; and a reminder warning that it’s a violation of law to sell the product subject to recall. It must be sent by certified mail or other verifiable means to all dealers and distributors known to the manufacturer in a reasonable time after determining a defect exists. ♦