EPA Continues Enforcement Initiative on Imports of Recreational Vehicles
In the last 18 months, the U.S. Environmental Protection Agency (EPA) has posted for comment two dozen consent decrees, consent agreements, and administrative settlements of enforcement actions against manufacturers and importers of a wide range of nonroad equipment and engines. Several of the largest cases relate to imported recreational vehicles from China.1 Most recently, EPA announced In re: Geason Enterprises, LLC, et al. It covers an American company that is the importer of record for recreational vehicles and a Chinese affiliate company that manufactured the vehicles in China.2
Foreign manufacturers and importers of recreational vehicles and other nonroad equipment should be aware that EPA continues to take Clean Air Act (CAA) violations regarding nonroad equipment and engines seriously.3
Many of the alleged violations were likely identified at the border by Customs officials working in coordination with EPA. Penalties have ranged widely, but settlements have sometimes cost relatively small companies several hundreds of thousands of dollars. In addition, EPA has the authority to suspend or revoke the certificate of conformity for violating engines altogether, making it illegal to import or sell those engines or equipment containing those engines in the United States in the future.4
The basis for many alleged violations is an inconsistency between the information provided to EPA that supports the legal importation and sale of engines/equipment in the United States and the actual characteristics of the engines/equipment once they reach the border. This inconsistency may be identified by reviewing the certificate of conformity (COC) for the engines/equipment and the information contained in the application for the COC and comparing them against the characteristics of the products as they are actually imported. Below is a summary of the COC regulations and major issues with recreational vehicle COCs that EPA has identified in recent CAA enforcement actions.
Recreational Vehicle Engine Certificate of Conformity Basics
Under 40 C.F.R. § 1068.101, which is the general compliance provision for all nonroad engines and equipment, including ATVs and other recreational vehicles regulated under 40 C.F.R. Part 1051, no person may introduce an engine into commerce in the United States unless it is covered by a valid COC or else is covered by an exemption.5 EPA reviews COC applications submitted by manufacturers to ensure that engines meet the relevant emission standards and contain sufficient information for EPA to determine that the engine family covered by the COC will meet those standards under normal operating conditions. Manufacturers must submit several pieces of information regarding emissions control systems and any other operating parameters or characteristics of the engine that may have an effect on regulated emissions. In addition, the application must indicate who manufactures the engines, and it must list all of the engine models to which the application applies.6
Once approved by EPA, the COC establishes the conditions under which an engine may be operated. Only those operating conditions described in the application and approved by EPA in the COC are allowed in order for the COC to be valid. EPA defines a “valid” COC as “one that applies for the same model year as the model year of the equipment..., covers the appropriate category of engines/equipment..., and conforms to all requirements specified” for that particular type of equipment.7 EPA regulations state further that
“[e]ngines/equipment are considered not covered by a certificate unless they are in a configuration described in the application for certification.”8 If any of the information contained in the application for the COC changes after EPA has issued the COC, manufacturers are required promptly to provide EPA with the updated information.
What EPA’s COC regulations mean in practice is that manufacturers need to ensure that whatever information they submitted to EPA in support of their application for a COC is accurate and correct in every relevant particular at the time they sell or import the engine/equipment into the United States. Any variation from the information submitted may provide the basis for an enforcement action by the Agency.
Recent COC Enforcement Trends for Imported Recreational Vehicles
Recent CAFOs for recreational vehicles, including the Geason CAFO, have tended to focus on four main problems with the imported equipment.
1. Engine configuration different than in COC. Variations in the operating parameters and in the types of emissions control system configurations in the engines from those indicated in the COC were the source of many recent alleged violations. If an engine contains an adjustable operating parameter, for example (e.g., injection timing or fuel rate), then the manufacturer must show that the engine meets emissions standards throughout the entire range of operation that is controlled by the adjustable parameter. Similarly, the composition, size, and configuration of emissions control devices, such as catalysts, must be identical to what is specified in the COC. Any variation in these devices could have a significant effect on the emissions profile of the engine and render the COC invalid.
2. Engine manufactured by different entity than in COC. Regardless of whether the engines are identical in all particulars to the configuration specified in the COC, it is a violation of the Part 1051 and Part 1068 regulations to use a different manufacturer than the one specified in the COC. Equipment manufacturers may want to rely on different engine manufacturers for a variety of commercial reasons, but any change must be communicated to EPA prior to the engines being introduced into commerce so that the certificate of conformity can be changed and, if necessary, the emissions profile of the engine updated to reflect the change.
3. Model names and numbers different than in COC.COCs are issued for broad engine “families,” which may best be understood as a collection of engines that have very similar emissions profiles and operating characteristics but that need not be identical in every aspect. EPA regulations require manufacturers to specify which engine/equipment models are covered by the engine families that are included under the COC. Even if an engine/equipment model is identical in all particulars to the one listed on the COC, it is a violation if it is has a different model name when it is actually introduced into commerce.
4. Importation into the United States before or after the effective date of the COC. EPA issues COCs for a single model year. A “model year” for a new recreational vehicle engine is ordinarily defined as the calendar year.9 This means that no matter when EPA actually issues a COC in response to an approved application, the engines/equipment covered by that COC may not be sold or imported prior to that date, even if their emissions profile is less polluting than the emissions standards of the earlier model year. In addition, the engines/equipment cannot be manufactured after the end of the model year (usually December 31) for which the certificate of conformity was issued.
Do Not Forget About the Labels
In addition alleging that engines did not conform to the configuration specified in the COC application, EPA alleged in Geason and other recent settlementsthat engine emissions labels could be removed with “minimal effort” and thus did not meet the requirement that the labels be “permanent” and not removable without being destroyed or defaced.10 Problems with labels can often provide a hook for EPA and U.S. Customs to investigate shipments further to determine if there are other violations that are not readily apparent from visual inspection.
Foreign manufacturers of recreational and other non-road engines and equipment – and their U.S. counterparts responsible for importing the vehicles into the United States – need to be vigilant and ensure that all of the information they submit to EPA for a COC is in fact accurate at the time they import the machines. Problems with engine component suppliers, or the desire to change operating components or parameters for the purpose of manufacturing convenience or commercial advantage, can subject manufacturers to significant enforcement headache if they do not update or amend their COCs to reflect their products’ true characteristics at the border.
1 See 2014 Clean Air Act Vehicle and Engine Enforcement Cases and Resolutions, available at http://www2.epa.gov/enforcement/2014-clean-air-act-vehicle-and-engine-enforcement-case-resolutions; 2015 Clean Air Act Vehicle and Engine Enforcement Cases and Resolutions, available at http://www2.epa.gov/enforcement/2015-clean-air-act-vehicle-and-engine-enforcement-case-resolutions.
2 See Consent Agreement and Final Order and Complaint for Hammerhead, available at http://www2.epa.gov/enforcement/consent-agreement-and-final-order-and-complaint-hammerhead. Under the Clean Air Act (CAA), both manufacturers and importers of record are considered to be “manufacturers” subject to enforcement for noncompliance. See 42 U.S.C. § 7550(1); 40 C.F.R. § 1051.801.
3 General non-road equipment and engine requirements are in 40 C.F.R. Part 1068, and the emissions standard-setting, testing, and recordkeeping regulations for recreational vehicle engines are in 40 C.F.R. Part 1051.
4 See 40 C.F.R. § 1051.255.
5 See id. § 1068.101(a)(1)(i). Among others, exemptions include those for engines/equipment intended solely for export to countries with emission standards different than those in the United States or those intended solely for testing or display. See 40 C.F.R. Part 1068, Subpart C.
6 See, e.g., 40 C.F.R. § 1051.205 (information requirements for recreational vehicle engine COC applications).
7 40 C.F.R. § 1068.101(a)(1)(i).
9 See id. § 1051.801.
10 See id. § 1068.45(a)(1).