TREAD Act Pitfalls Real But Avoidable for Companies in Automotive Industry, Butzel Long Expert Says

DETROIT, Sept. 4 -- More than 23,000 automotive manufacturers and suppliers are facing a December 1, 2003 Early Warning Reporting deadline for the TREAD Act. While all of the future implications of the Transportation Recall Enhancement Accountability and Documentation (TREAD) Act are still unclear, its impact cannot be underestimated, according to Daniel P. Malone, shareholder and co-chair of one of the litigation practice groups at Butzel Long, a Detroit-based law firm. The required financial, information technology, and Human Resources preparation is considerable, and the potential consequences for failure to prepare, including civil and criminal penalties, are real.

The TREAD Act requires both domestic and foreign companies to report certain information to the National Highway Traffic Safety Administration (NHTSA). Many companies are struggling with short-term solutions, and they are facing long-term challenges as well. "The reportable information varies depending upon the type of manufacturer," said Malone. "Moreover, different reporting deadlines exist for different types of reportable information."

The types of TREAD Act reporting include:

* Quarterly Early Warning Reporting (Rule 579.21-.27). NHTSA initially announced that its first Early Warning Reporting quarter would run from April 1, 2003 to June 30, 2003, and that manufacturers who had anything to report needed to file reports to NHTSA's ARTEMIS system no later than September 1, 2003. On June 11, 2003, however, NHTSA issued a notice that the manufacturers' first Early Warning Reporting quarter was moved to July 1, 2003 - September 30, 2003. Reports for that quarter are due December 1, 2003.

Accordingly, Group 1 manufacturers (i.e. vehicle manufacturers who sell or lease more than 500 vehicles in a category annually, and all manufacturers of tires and of child restraint systems) manufacturers must report information set forth in the sub-section that applies to their particular industry (579.21 -.26). Group 1 manufacturers only also have a three year EWR historic report due on December 31, 2003.

Group 2 manufacturers (i.e. vehicle manufacturers who sell or lease less than 500 vehicles in a category annually, plus all manufacturers of vehicle equipment -- original and replacement -- other than tires and child restraint systems) must report on the more limited information set forth in 579.27, if any. Group 2 manufacturers need not submit an EWR quarterly report to indicate that it has nothing to report for that quarter.

For purposes of EWR only, Group 1 and Group 2 manufacturers must obtain passwords and manufacturer IDs from NHTSA at least thirty days before its first EWR quarterly report is due (579.29(a)).

* Reports on foreign recalls and other (foreign) safety campaigns (Rule 579.11-.12). This rule requires both Group 1 and Group 2 manufacturers to submit reports to NHTSA within five working days of when a manufacturer determines (or when a foreign government sends written notification to the manufacturer of its determination) to conduct a foreign safety recall or other foreign safety campaign of a vehicle or vehicle equipment that is identical to or substantially similar to what it sells in the United States. That requirement is already in effect.

* Monthly reporting (Rule 579.5). After the end of each month that a Group 1 or Group 2 manufacturer sends certain notices, bulletins, customer satisfaction campaigns, consumer advisories and other communications regarding any defect, repair, or replacement of a motor vehicle or motor vehicle equipment to more than one manufacturer in the United States, it must send a copy to NHTSA within five working days. That requirement is also already in effect.

NHTSA has the power to amend these deadlines and requirements. In addition to NHTSA's June 11, 2003 notice regarding Early Warning Reporting, on July 28, 2003, NHTSA also amended its regulation on protecting confidential business information by simplifying and updating it to address application of the regulation to TREAD Act Early Warning Reporting. Federal courts can also order that NHTSA amend TREAD regulations. On August 6, 2003, for example, a federal appeals court ordered NHTSA to rewrite its TREAD Act final regulation regarding tire pressure warning devices.

"These are examples of several recent changes that affect TREAD Act reporting," added Malone. "Companies in the industry need to be aware of these developments. Perhaps more importantly, companies need to, among other things, familiarize themselves and prepare for what TREAD and NHTSA's final rules provide. One thing is certain: Manufacturers that remain uninformed and unprepared for TREAD are unnecessarily vulnerable to sanctions and other potential legal problems."

Butzel Long has helped several domestic and foreign-based companies in the automotive industry prepare for TREAD. This has included drafting TREAD Act compliance policies, TREAD Act procedures, and perhaps most importantly, providing TREAD Act educational orientations for key personnel.

Butzel Long would welcome the opportunity to help your company in its TREAD Act preparation. To learn more about what Butzel Long can do for your company in this regard, please feel free to contact Daniel P. Malone at (313) 225-7000, malone@butzel.com .

Butzel Long was established in 1854 and is headquartered in Detroit. Butzel Long is one of Michigan's oldest and largest law firms, with more than 200 attorneys and offices in Detroit, Bloomfield Hills, Lansing, Ann Arbor, and Holland, Mich., Naples and Boca Raton, Fla., as well as Alliance offices in Beijing and Shanghai, China. The firm represents clients from diverse industries on a regional, national and multi-national level and is the sole Michigan member of Lex Mundi, a global association of 160 independent law firms. Visit the Butzel Long website at www.butzel.com .