Industry Update: New regulations close emission standard loophole, create fair marketplace for OPE manufacturers

By James McNew

In 2008, the Environmental Protection Agency (EPA) introduced Phase 3 emissions regulations, which set more stringent, engine-exhaust standards for new non-road spark ignition engines found in lawn mowers, garden tractors, utility vehicles, trimmers, edgers, chain saws, snow throwers, tillers, leaf blowers and other related products. Specifically, equipment now has to achieve an additional 35-percent reduction in exhaust emissions and a 45-percent reduction in total evaporative emissions beginning in 2009 — to be fully implemented by 2015.

In the preamble to the final Phase 3 regulations, EPA noticed a surge in the number of imported, non-road, small engines that did not comply with existing EPA emission standards. This fact concerned us at the Outdoor Power Equipment Institute (OPEI) during the regulatory negotiation process, since we realized that legitimate manufacturers, with U.S. assets, were going to be faced with two vexing scenarios.

First, failure to comply with Phase 3 regulations would place U.S.-based assets at risk (cash, property, product, etc.) if a violation were to occur. Second, there would be significant market risk from non-compliant products being imported via Web sales or direct importation, primarily driven by lower costs.

In effect, U.S.-based manufacturers and legitimate product importers that had invested in the United States with assets and infrastructure would be at a disadvantage in the marketplace, competing against illegal, non-compliant, lower-cost products.

Once OPEI raised this concern, we discovered that EPA’s authority to bring action was limited to the “importer of record,” which, in many cases, was a post office box and a phone number. This means that when a violation was discovered, EPA had no asset to go after other than potentially a few products. Also, once a non-compliant product did make it past customs at the port of entry, EPA’s ability to remove the product from the market was again limited as it could not take action against the retailer.

It was clear that the Phase 3 regulations needed some additional safeguards and wording to close this loophole.  As a result, OPEI sought after, on behalf of the U.S. EPA, additional authority for enforcement. This included two main points:

The inclusion of a surety bonding requirement for importers and off-shore manufacturers to ensure an equal level of risk and reward for doing business in the United States. The surety bond, through an approved third-party provider, establishes a minimum level of risk for off-shore product to provide an asset for EPA to use as security against a non-compliance violation (to help cover the cost of recall if necessary) to remedy the violation.
Expanding the definition for “Importer of Record” to include the entity that causes the importation. This means that every entity involved in the transaction, including the final retailer, would be held in strict liability. This created the needed incentive for retailers, distributors, importers and Web retailers to ensure the products they import are compliant with the regulations.

In order to prevent imported products from evading new emission standards through claims they were built before an applicable effective date, starting on Jan. 1, 2009, regardless of the build date, new small spark ignition (SI) engines and equipment will be treated as having a model year that is at most one year earlier than, the calendar year in which the importation occurs. 

More details on the bonding requirements:

Why is EPA requiring a bond for small SI engine manufacturers?

Before a manufacturer can introduce an engine into commerce in the United States, it must first apply for a Certificate of Conformity from EPA. The certification process requires manufacturers to demonstrate that engines and equipment meet applicable emission standards. Once a manufacturer has received a certificate, several important obligations apply to the certifying manufacturer or importer. For example, EPA will require ongoing testing of production engines, as well as reporting of recurring defects. Manufacturers may need to pay penalties if there is a violation and may need to perform a recall if their products are noncompliant.

When does the bond requirement take effect?

This requirement was adopted in regulations that were published on Oct. 8, 2008, at 40 CFR 1054.690 (73 FR 59034). Starting with the 2010 model year, applications for certification must include information related to the bond, including a commitment to secure a bond if that is required for the manufacturer. As of Jan. 1, 2010, all small SI engines that are subject to the bond requirement must have the bond in place before introducing 2010 and later model year engines into U.S. commerce. U.S. Customs and Border Protection in particular will be looking for documentation related to required bonds starting this year.

Does the bond requirement apply to all manufacturers?

The bond provisions apply to all manufacturers that certify and sell small SI engines in the United States. This includes domestic and foreign producers of engines. In the case of imported products, this also includes equipment manufacturers and importers that import products containing engines certified by another manufacturer.

OPEI is pleased that we were able to balance the appropriate level of risk and reward to create a fair and open marketplace for emissions-compliant products. Closing this loophole has helped not only protect the marketplace for legitimate manufacturers, but also ensured that the millions spent by legitimate manufacturers to achieve environmental protections is not a wasted effort.

 James McNew is senior vice-president of technical and market services for the Outdoor Power Equipment Institute (OPEI). He is responsible for representing the industry interests in regulatory development, product standards, and market statistics. OPEI is an international trade association representing the $15-billion landscape, forestry, utility and lawn and garden equipment manufacturing industry. For more information, e-mail McNew at jmcnew@opei.org or visit www.opei.org or www.turfmutt.com.