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Petition for Approval of Alternate Odometer Disclosure Requirements

American Government Special Collections Reference Desk

American Government

Petition for Approval of Alternate Odometer Disclosure Requirements

O. Kevin Vincent
National Highway Traffic Safety Administration
August 20, 2012


[Federal Register Volume 77, Number 161 (Monday, August 20, 2012)]
[Proposed Rules]
[Pages 50071-50077]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-20381]


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DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

49 CFR Part 580

[Docket NHTSA-2012-0122; Notice 1]


Petition for Approval of Alternate Odometer Disclosure 
Requirements

AGENCY: National Highway Traffic Safety Administration (NHTSA), DOT.

ACTION: Notice of initial determination.

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SUMMARY: The State of Arizona has petitioned for approval of alternate 
requirements to certain requirements under Federal odometer law. NHTSA 
initially denies Arizona's petition. This notice is not a final agency 
action.

DATES: Comments are due no later than September 19, 2012.

ADDRESSES: You may submit comments [identified by DOT Docket ID Number 
NHTSA-2012-0122] by any of the following methods:
     Federal eRulemaking Portal: Go to http://www.regulations.gov. Follow the online instructions for submitting 
comments.
     Mail: Docket Management Facility: U.S. Department of 
Transportation, 1200 New Jersey Avenue SE., West Building Ground Floor, 
Room W12-140, Washington, DC 20590-0001.
     Hand Delivery or Courier: West Building Ground Floor, Room 
W12-140, 1200 New Jersey Avenue SE., between 9 a.m. and 5 p.m. ET, 
Monday through Friday, except Federal holidays.
     Fax: 202-493-2251.
    Instructions: For detailed instructions on submitting comments and 
additional information on the rulemaking process, see the Public 
Participation heading of the Supplementary Information section of this 
document. Note that all comments received will be posted without change 
to http://www.regulations.gov, including any personal information 
provided. Please see the Privacy Act heading below.
    Privacy Act: Anyone is able to search the electronic form of all 
comments received into any of our dockets by the name of the individual 
submitting the comment (or signing the comment, if submitted on behalf 
of an association, business, labor union, etc.). You may review DOT's 
complete Privacy Act Statement in the Federal Register published on 
April 11, 2000 (65 FR 19477-78) or you may visit http://DocketInfo.dot.gov.
    Docket: For access to the docket to read background documents or 
comments received, go to http://www.regulations.gov or the street 
address listed above. Follow the online instructions for accessing the 
dockets.

FOR FURTHER INFORMATION CONTACT: Kerry Kolodziej, Office of the Chief 
Counsel, National Highway Traffic Safety Administration, 1200 New 
Jersey Avenue SE., Washington, DC 20590 (Telephone: 202-366-5263) (Fax: 
202-366-3820).

SUPPLEMENTARY INFORMATION:

I. Introduction

    Federal odometer law, which is largely based on the Motor Vehicle 
Information and Cost Savings Act (Cost Savings Act),\1\ as amended by 
the Truth in Mileage Act of 1986 (TIMA),\2\ contains a number of 
provisions to limit odometer fraud and ensure that the buyer of a motor 
vehicle knows the true mileage of the vehicle. The Cost Savings Act 
requires the Secretary of Transportation to promulgate regulations 
requiring the transferor (seller) of a motor vehicle to provide a 
written statement of the vehicle's mileage registered on the odometer 
to the transferee (buyer) in connection with the transfer of ownership. 
This written statement is generally referred to as the odometer 
disclosure statement. Further, under TIMA, vehicle titles themselves 
must have a space for the odometer disclosure statement and States are 
prohibited from licensing vehicles unless a valid odometer disclosure 
statement on the title is signed and dated by the transferor. Federal 
law also contains document retention requirements for odometer 
disclosure statements.
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    \1\ Sec. 401-13, Public Law 92-513, 86 Stat. 961-63.
    \2\ Sec. 1-3, Public Law 99-579, 100 Stat. 3309.
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    TIMA's motor vehicle mileage disclosure requirements apply in a 
State unless the State has alternate

[[Page 50072]]

requirements approved by the Secretary. The Secretary has delegated 
administration of the odometer program to NHTSA. Therefore, a State may 
petition NHTSA for approval of such alternate odometer disclosure 
requirements. 49 CFR 580.11 governs petitions for approval of alternate 
disclosure requirements.
    Seeking to implement an electronic odometer disclosure submittal 
process for licensed dealers, the State of Arizona petitions for 
approval of alternate odometer disclosure requirements.
    As discussed below, NHTSA's initial assessment is that Arizona's 
petition does not satisfy the requirements for a petition for approval 
of alternate disclosure requirements as set forth at 49 CFR 580.11(b), 
and that Arizona's proposed alternate odometer disclosure requirements 
are not consistent with the purpose of the disclosure required by 
Federal odometer law. For these reasons, as explained below, NHTSA 
preliminarily denies Arizona's petition.

II. Statutory Background and Purposes

A. Statutory Background

    NHTSA reviewed the statutory background of Federal odometer law in 
its consideration of petitions for approval of alternate odometer 
disclosure requirements by Virginia, Texas, Wisconsin, Florida, and New 
York. See 74 FR 643, Jan. 7, 2009 (granting Virginia's petition); 75 FR 
20925, Apr. 22, 2010 (granting Texas' petition); 76 FR 1367, Jan. 10, 
2011 (granting Wisconsin's petition in part); 77 FR 36935, June 20, 
2012 (granting Florida's petition in part, and denying Florida's 
petition in part); see also 76 FR 65485, Oct. 21, 2011 (initial 
determination denying New York's petition). The statutory background of 
the Cost Savings Act and TIMA, as related to odometer disclosure 
requirements, other than in the transfer of leased vehicles and 
vehicles subject to liens where a power of attorney is used, is 
discussed at length in NHTSA's final determination granting Virginia's 
petition. 74 FR 643; see also 77 FR 36935; 76 FR 48101, Aug. 8, 2011 
(addressing leased vehicles and powers of attorney).\3\ A brief summary 
of the statutory background of Federal odometer law follows.
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    \3\ Arizona's petition does not address leased vehicles or 
powers of attorney.
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    In 1972, Congress enacted the Cost Savings Act to establish 
safeguards for consumers which prohibited odometer tampering. Among 
other things, the Cost Savings Act made it unlawful to alter an 
odometer's mileage, and required written disclosure of odometer mileage 
in connection with any transfer of ownership of a motor vehicle.\4\ 
However, the Cost Savings Act had a number of shortcomings, which are 
discussed below.
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    \4\ In 1976, Congress amended the odometer disclosure provisions 
in the Cost Savings Act to provide further protections to purchasers 
from unscrupulous car dealers. See Public Law 94-364, 90 Stat. 981 
(1976).
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    In 1986, Congress enacted TIMA to address the Cost Savings Act's 
shortcomings. Congress was specifically concerned with addressing 
odometer fraud in the commercial market, and noted that used car 
auctions, distributors, wholesalers, dealers, and used car lots of new 
car dealers often may be directly involved in fraud.\5\ TIMA also added 
a provision to the Cost Savings Act, allowing States to obtain approval 
for alternate odometer disclosure requirements. Pursuant to Section 
408(f) of the Cost Savings Act, as amended by TIMA: The Secretary shall 
approve alternate motor vehicle mileage disclosure requirements 
submitted by a State unless the Secretary determines that such 
requirements are not consistent with the purpose of the disclosure 
required by subsection (d) or (e), as the case may be.
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    \5\ S. Rep. 99-47, at 2 (1985), reprinted in 1986 U.S.C.C.A.N. 
5620, 5621.
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    In 1994, in the course of the recodification of various laws 
pertaining to the Department of Transportation, the Cost Savings Act, 
as amended, was repealed, reenacted, and recodified without substantive 
change. See Public Law 103-272, 108 Stat. 745, 1048-1056, 1379, 1387 
(1994). The odometer statute is now codified at 49 U.S.C. 32701 et seq. 
Section 408(a) of the Cost Savings Act was recodified at 49 U.S.C. 
32705(a). Sections 408(d) and (e), which were added by TIMA, with 
subsequent amendments, were recodified at 49 U.S.C. 32705(b) and (c). 
The provisions pertaining to approval of State alternate motor vehicle 
mileage disclosure requirements were recodified at 49 U.S.C. 32705(d).

B. Statutory Purposes

    In our final determinations, after notice and comment, granting the 
petitions for approval of alternate odometer disclosure requirements of 
Virginia, Texas, and, in part, Wisconsin and Florida, we identified the 
statutory purposes of TIMA.\6\ 74 FR 643; 75 FR 20925; 76 FR 1367; 77 
FR 36935. These purposes are summarized below.
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    \6\ Any statements which refer to the ``purposes of TIMA'' or a 
``purpose of TIMA'' should be interpreted to refer to the purpose of 
the disclosure required by subsection (d) or (e), as the case may 
be, as stated in Section 408 of the Cost Savings Act, as amended by 
TIMA.
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    One purpose of TIMA was to ensure that the form of the odometer 
disclosure precluded odometer fraud. The Cost Savings Act did not 
require odometer disclosures to be made on a vehicle's title. This 
created a potential for odometer fraud, because a transferor could 
easily alter the odometer disclosure or provide a new statement with 
different mileage.\7\ TIMA addressed this shortcoming of the Cost 
Savings Act by requiring mileage disclosures to be on a vehicle's title 
instead of a separate document. Titles also had to contain space for 
the seller's attested mileage disclosure.
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    \7\ See S. Rep. 99-47, at 2-3 (1985), reprinted in 1986 
U.S.C.C.A.N. 5620, 5621-22; H. Rep. 99-833, at 33 (1986).
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    A second purpose of TIMA was to prevent odometer fraud by processes 
and mechanisms making the disclosure of an odometer's mileage on the 
title a condition of the application for a title, and a requirement for 
the title issued by the State.\8\ This was intended to eliminate or 
significantly reduce abuses associated with lack of control of the 
titling process.\9\ Prior to TIMA, odometer fraud was facilitated by 
the ability of transferees to apply for titles without presenting the 
transferor's title with the disclosure.
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    \8\ See S. Rep. 99-47, at 2-3 (1985), reprinted in 1986 
U.S.C.C.A.N. 5620, 5621-22; H. Rep. 99-833, at 18, 32 (1986).
    \9\ Sec. 2, Public Law 99-579, 100 Stat. 3309.
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    Third, TIMA sought to prevent alterations of disclosures on titles 
and to preclude counterfeit titles through secure processes. Prior to 
TIMA, titles could be printed through non-secure processes, and could 
be easily altered or laundered.\10\ To address this shortcoming of the 
Cost Savings Act, TIMA required titles to be printed by means of a 
secure printing process or protected by other secure processes.\11\
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    \10\ See S. Rep. 99-47, at 3 (1985), reprinted in 1986 
U.S.C.C.A.N. 5620, 5622.
    \11\ See H. Rep. 99-833, at 18, 33 (1986).
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    A fourth purpose of TIMA was to create a record of the mileage on 
vehicles and a paper trail.\12\ This would allow consumers to be better 
informed and provide a mechanism for tracing odometer tampering and 
prosecuting violators. Under the Cost Savings Act, prior to TIMA, 
odometer disclosures could be made on pieces of paper and did not have 
to be submitted with new title applications. TIMA required new 
applications for title to include the transferor's mileage disclosure 
statement on the title, creating a permanent record that could easily 
be

[[Page 50073]]

checked by subsequent owners or law enforcement officials. This record 
would provide critical snapshots of the vehicle's mileage at every 
transfer, which are fundamental links in the paper trail.
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    \12\ See H. Rep. 99-833, at 18, 33 (1986).
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    Finally, the general purpose of TIMA was to protect consumers by 
ensuring that they received valid representations of the vehicle's 
actual mileage at the time of transfer based on odometer 
disclosures.\13\ The TIMA amendments were directed at resolving 
shortcomings in the Cost Savings Act.
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    \13\ See Sec. 1-3, Public Law 99-579, 100 Stat. 3309.
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III. The Arizona Petition

    Arizona seeks to implement an electronic odometer disclosure 
submittal process for licensed motor vehicle dealers, and petitions 
NHTSA for approval of alternate odometer disclosure requirements. The 
petition requests NHTSA to allow use of alternate odometer disclosure 
procedures in two situations.
    As background, according to information posted on the Arizona 
Department of Transportation (ADOT) Web site, there are over 700 new 
motor vehicle dealers licensed in Arizona and over 1,400 used motor 
vehicle dealers licensed in Arizona.\14\ The Arizona Automobile Dealers 
Association, which represents new car and truck franchised dealers, has 
over 250 members.\15\ The Arizona Independent Automobile Dealers 
Association, which calls itself the voice of the used motor vehicle 
industry and represents non-franchised motor vehicle dealers in 
Arizona, has 215 registered dealers.\16\
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    \14\ http://www.azdot.gov/mvd/MotorVehicleDealers/LicensedDealers.asp (Arizona Licensed Motor Vehicle Dealer Listing, 
June 2012).
    \15\ http://www.aada.com/.
    \16\ See http://www.aiada.net/.
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A. Arizona Law Regarding Dealers

    Since Arizona's petition addresses the transfer of used motor 
vehicles to and from licensed Arizona dealers, we briefly describe 
certain aspects of Arizona law relevant to such transfers. Currently, 
pursuant to the Arizona Revised Statutes, a dealer shall not offer for 
sale or sell a used motor vehicle until the dealer has obtained a 
certificate of title to the motor vehicle.\17\ The Arizona 
Administrative Code further requires that the dealer's name shall be 
recorded on a title certificate as transferee or purchaser.\18\ A 
certificate of title in Arizona includes space for ownership change 
information, including an odometer mileage disclosure statement, and 
dealer reassignment information.\19\
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    \17\ Ariz. Rev. Stat. 28-4409(A)(2).
    \18\ Ariz. Admin. Code R17-5-404
    \19\ Ariz. Admin. Code R17-4-202(B).
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    Arizona's petition does not identify any proposed changes to 
applicable State law.

B. Arizona's Proposed Projects

    Arizona proposes that licensed dealers meeting specified technical 
requirements would electronically scan and upload documents to ADOT, 
including documents used to make odometer disclosures, rather than 
mailing or hand-carrying the documents to ADOT. Based on this 
description, it is our understanding that Arizona's proposals would 
only apply to vehicles acquired by licensed Arizona dealers and sold to 
in-state buyers.
    According to the petition, dealers would scan documents using a 
specified format and resolution, and would encrypt the scanned images. 
Dealers would transmit the images to ADOT through a secure system using 
account codes, user/group profiles, and passwords.\20\ ADOT would have 
the ability to sanction participating dealers, including revoking their 
ability to electronically submit documents to ADOT. ADOT would retain 
electronic files in a document management system, and dealers would be 
required to retain hard copies of the documents submitted in accordance 
with retention periods specified by Federal and Arizona law.
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    \20\ The petition does not describe whether employees of a 
dealer would share information to access the ADOT system or whether 
each employee of a dealer would have unique access information, so 
that a submission could be traced to a specific individual.
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    Both of Arizona's proposed projects would utilize odometer 
disclosures made on a form described in the petition as a Secure 
Odometer Disclosure.\21\ An example of a completed Secure Odometer 
Disclosure form is attached to Arizona's petition. The example form 
includes ADOT identifying information in the upper left-hand corner and 
indicates that it is void if altered or erased. Arizona's petition 
describes the form as using a watermark displaying the word VOID when 
scanned. This feature is visible on the example provided; the word VOID 
appears repeatedly across the entire form. The form does not have any 
unique identifier, such as a serial number.
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    \21\ We note that, based on the example form, a Secure Odometer 
Disclosure would be used solely for the purpose of making an 
odometer disclosure. It would not transfer ownership of a vehicle.
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    The top section of the proposed Secure Odometer Disclosure form 
includes spaces for Vehicle Identification Number (VIN), Year, Make, 
Body Style, Buyer Name, and Title Number. The form also appears to 
include a space for Sale Date; however, the example attached to 
Arizona's petition is completed with the sale state (AZ) in that space.
    The next section of the Secure Odometer Disclosure form includes 
the following statement: ``Federal and State law require that the 
seller states the mileage in connection with the transfer of ownership. 
Failure to complete the odometer statement, or providing a false 
statement, may result in fines and/or imprisonment.'' Below that 
statement is a space for Odometer Reading and boxes to check to 
indicate whether the odometer reading is in miles or kilometers. There 
is also a box to check to indicate ``Mileage in excess of odometer 
mechanical limits,'' and a box to check to indicate ``NOT Actual 
Mileage, WARNING--ODOMETER DISCREPANCY.'' Below, the form states: ``I 
certify to the best of my knowledge that the odometer reading is the 
actual mileage unless one of the boxes above is checked.''
    The following section of the Secure Odometer Disclosure form 
includes spaces for Seller/Dealership name (printed), Dealer Number, 
Street Address, City, State, Zip, Agent Name, and Seller/Agent 
Signature.
    At the bottom of the Secure Odometer Disclosure form is the 
following statement: ``I am aware of the above odometer certification 
made by the seller.'' This statement is followed by spaces for Buyer 
Name (printed) and Buyer Signature.
    The Secure Odometer Disclosure form would be completed and signed 
by hand. A licensed automobile dealer would scan and electronically 
submit the completed Secure Odometer Disclosure form, along with other 
documents as described below, to ADOT.
1. Project One
    For purposes of the first project addressed by the petition 
(Project One), Arizona seeks to institute alternate odometer disclosure 
requirements for a trade in or sale of a used vehicle to a licensed 
dealer when there is no paper title \22\ and the vehicle is subject to 
electronic lien(s).
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    \22\ It appears that there is an electronic title. The petition 
describes Arizona as having state laws designed to facilitate a 
nearly paperless vehicle title system, but does not provide copies 
of, cite to, or otherwise describe those laws.
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    According to the petition, the transferor would make an odometer 
disclosure to the dealer on a Secure Odometer Disclosure form, signed 
by both parties. The dealer would then

[[Page 50074]]

apply for a title in its own name by scanning and electronically 
submitting a title application, Secure Odometer Disclosure form, and 
other supporting documents to ADOT.
    The petition specifies that the dealer would make an odometer 
disclosure on the title at the time it resells the vehicle. Petition at 
p. 2. While this indicates that ADOT would send the dealer a new paper 
title after the transfer of the vehicle to the dealer is complete, 
another portion of the petition describing the process states that the 
selling dealer would make an odometer disclosure on a Secure Odometer 
Disclosure form. Petition at p. 3. According to this portion of the 
petition, the dealer would then scan and electronically submit the 
completed Secure Odometer Disclosure form and other supporting 
documents to ADOT.\23\ The petition appears to propose that the dealer 
would scan and electronically submit a Secure Odometer Disclosure, but 
not the title, to ADOT following the dealer's sale of the vehicle.\24\
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    \23\ The purpose of this submission is not clear from the 
petition. Unlike the submission following the initial transaction in 
Project One (the transfer of a vehicle to the dealer), the petition 
does not specify that the dealer would submit a title application 
along with the Secure Odometer Disclosure form.
    \24\ This is unlike the petition's description of the dealer's 
electronic submission to ADOT for purposes of Project Two, discussed 
below.
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    The dealer would retain the original Secure Odometer Disclosure 
forms for the retention periods specified by Federal and Arizona law.
2. Project Two
    Arizona's petition also describes a second project (Project Two), 
for which it seeks alternate odometer disclosure requirements. Project 
Two would apply to a licensed dealer's sale of a used motor vehicle 
that had a paper title at the time it was transferred (traded in or 
sold) to a licensed dealer.
    The petition states that the vehicle would be resold by a dealer 
using the paper title from the transferor. It appears, based on this 
description and the requirements of Arizona law that a dealer's name 
shall be recorded on a title certificate as transferee or purchaser and 
that a title include space for dealer reassignment information, that 
the dealer would make an odometer disclosure on the paper title at the 
time it resells the vehicle.\25\ However, the petition also specifies 
that if the dealer applies for a new title in the name of the vehicle 
purchaser, the dealer and purchaser would complete a Secure Odometer 
Disclosure form. The dealer would then scan and electronically submit a 
title application, the paper title,\26\ the Secure Odometer Disclosure 
form, and supporting documents to ADOT. The dealer would retain the 
original documents (including the original paper title) for the 
retention periods specified by Federal and Arizona law. According to 
the petition, a new title would be sent to the buyer if there is no 
lien on the vehicle. If there is a lien, both the lien and the title 
would be maintained as electronic records by ADOT.
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    \25\ Arizona's petition is not detailed and at points is not 
clear. To the extent our reading of the petition is inconsistent 
with Arizona's intent, we invite Arizona to clarify its proposals in 
comments.
    \26\ It appears that the dealer would be required to submit 
scans of both the front and back of the paper title.
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C. Arizona's Position on Meeting the Statutory Purposes

    Arizona's petition asserts that its proposals are consistent with 
the purposes of Federal odometer law and regulations.\27\ Arizona 
identifies the purposes of Chapter 327 of Title 49 as a whole. 
Specifically, those purposes are to prohibit tampering with motor 
vehicle odometers, and to provide safeguards to protect purchasers in 
the sale of motor vehicles with altered or reset odometers. 49 U.S.C. 
32701(b). Arizona also identifies the purposes of Federal regulations 
pertaining to odometer disclosure requirements, as set forth at 49 CFR 
580.2. Those purposes, other than for leased vehicles, are to provide 
purchasers of motor vehicles with odometer information to assist them 
in determining a vehicle's condition and value by making the disclosure 
of a vehicle's mileage a condition of title, and to preserve records 
that are needed for the proper investigation of possible violations of 
the Cost Savings Act and any subsequent prosecutorial, adjudicative, or 
other action.
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    \27\ As discussed above, pursuant to Section 408 of the Cost 
Savings Act, as amended by TIMA: The Secretary shall approve 
alternate motor vehicle mileage disclosure requirements submitted by 
a State unless the Secretary determines that such requirements are 
not consistent with the purpose of the disclosure required by 
subsection (d) or (e), as the case may be.
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    Arizona asserts that its proposed projects support the enforcement 
of Federal odometer law by ensuring that a Secure Odometer Disclosure 
form is submitted and transmitted electronically by a dealer to a 
certified ADOT processor. Arizona also states that a watermark 
displaying the word VOID across the Secure Odometer Disclosure form 
when scanned will serve as a secure measure to submission of a 
fraudulent form. Arizona also asserts that the processes it proposes 
will offer greater protections against potential odometer fraud than 
does 49 CFR part 580.

IV. Analysis

A. Requirements for a Petition Under 49 CFR 580.11(b)

    As a preliminary matter, NHTSA's initial determination is that 
Arizona's petition does not satisfy the requirements for a petition for 
approval of alternate disclosure requirements, set forth in 49 CFR 
580.11(b).
    First, the petition does not set forth the motor vehicle disclosure 
requirements in effect in the State, including a copy of the applicable 
State law or regulation, as required by 49 CFR 580.11(b)(3). We 
reviewed Arizona law and discussed relevant provisions above.\28\ The 
petition states that Arizona is requesting to change the manner in 
which documents are submitted to and maintained by the State, and not 
the manner in which odometer disclosures are made.\29\ However, we 
found no reference to a Secure Odometer Disclosure in the Arizona 
Revised Statutes or Arizona Administrative Code.
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    \28\ To the extent Arizona believes additional provisions 
(including any proposed new provisions) are relevant, we invite 
Arizona to set forth and include a copy of such provisions in 
comments.
    \29\ The petition asserts that, under both of the proposed 
projects, all required odometer disclosures will continue to be made 
in the manner required by 49 CFR part 580. We note that this 
assertion is illogical; if all required odometer disclosures will be 
made in the manner required by 49 CFR PART 580 then Arizona has no 
need to petition for approval of alternate disclosure requirements.
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    Second, Arizona's petition does not adequately demonstrate that the 
State motor vehicle requirements are consistent with the purposes of 
the Motor Vehicle Information and Cost Savings Act. See 49 CFR 
580.11(b)(4). As noted above, Section 408(f) of the Cost Savings Act, 
as added by TIMA, states in pertinent part that the Secretary shall 
approve alternate motor vehicle mileage disclosure requirements 
submitted by a State unless the Secretary determines that such 
requirements are not consistent with the purpose of the disclosure 
required by subsection (d) or (e), as the case may be.\30\ The petition 
includes a very

[[Page 50075]]

limited discussion of how, according to Arizona, its proposals are 
consistent with the statutory purposes of Section 408(d).\31\ The 
petition specifically describes the proposed method of electronically 
submitting a Secure Odometer Disclosure form to ADOT and the use of a 
watermark as supporting the purposes of the law. However, Arizona's 
petition does not specifically address the purposes of Section 408(d) 
of the Cost Savings Act, even though NHTSA had specifically addressed 
this in prior Federal Register notices. Arizona also does not explain 
how use of a Secure Odometer Disclosure form to make an odometer 
disclosure is consistent with the relevant purposes.
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    \30\ We note that the statute predicates approval of alternate 
motor vehicle mileage disclosure requirements submitted by a State 
on their consistency with the purpose of the statutory disclosure 
requirements. Most States that have petitioned for approval of 
alternate odometer disclosure requirement have specifically 
addressed the purposes of TIMA related to the disclosure 
requirements, as set forth above. See 76 FR 1367; 76 FR 65485; 77 FR 
36935. Instead of addressing the purpose of the statutory disclosure 
requirements, Arizona instead addressed the broader, overall 
purposes of Federal odometer law (which originate from Section 401 
of the 1972 law) and the purposes of Federal odometer regulations.
    \31\ We do not address Section 408(e), which concerned leased 
motor vehicles, because Arizona's petition does not address leased 
motor vehicles.
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B. Arizona's Proposal in Light of TIMA's Purposes

    In view of the initial, non-final, nature of our assessment of 
whether Arizona's petition meets the requirements for a petition, we 
now proceed to our initial assessment of whether Arizona's proposed 
projects satisfy TIMA's purposes. We address Arizona's two proposed 
projects in turn.
1. Project One
    NHTSA has initially determined that Project One would not satisfy 
the first purpose of TIMA, to ensure that the form of the odometer 
disclosure precludes odometer fraud. TIMA addressed the potential for 
fraud by requiring mileage disclosures to be on a vehicle's title 
instead of a separate document. Project One is inconsistent with this 
purpose because it proposes using a Secure Odometer Disclosure form, 
separate \32\ from the vehicle's title, to make an odometer disclosure. 
First, a transferor would use a Secure Odometer Disclosure form to make 
an odometer disclosure upon trading in or selling the vehicle to a 
dealer.\33\ Second, a dealer, who had obtained title in its own name 
for the vehicle, would apparently make an odometer disclosure on a 
Secure Odometer Disclosure at the time it resells the vehicle.\34\ An 
unscrupulous person could discard a Secure Odometer Disclosure form 
signed by both parties and create another Secure Odometer Disclosure 
form bearing an inaccurate odometer disclosure prior to submitting it 
to ADOT.
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    \32\ NHTSA has approved petitions establishing a process for an 
odometer disclosure to be directly linked to a vehicle's title using 
a secure process involving both parties. See 74 FR 643; 75 FR 20925; 
76 FR 1367; 77 FR 36935. In such cases, the odometer disclosure is 
not separate from the title.
    \33\ We note that Project One addresses vehicles subject to 
liens. In amendments to TIMA pertaining to titles in the possession 
of a lienholder when the transferor transfers ownership of the 
vehicles, Congress maintained the requirement that the disclosure be 
on the title itself. It did provide for the use of a secure power of 
attorney under restrictive conditions, as an exception to the 
prohibition that a person may not sign an odometer disclosure 
statement as both the transferor and transferee.
    \34\ The petition also specifies that the dealer would make an 
odometer disclosure on the title. Arizona does not explain why the 
dealer also apparently would make an odometer disclosure on a 
separate Secure Odometer Disclosure form.
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    NHTSA has also initially determined that Project One does not 
satisfy the second purpose of TIMA, to prevent odometer fraud by 
processes and mechanisms making the disclosure of an odometer's mileage 
on the title a condition of the application for a title and a 
requirement for the title issued by the State. There is no such 
requirement in Project One. Instead, Project One would allow a dealer 
to apply for and obtain a title in its own name by electronically 
transmitting a Secure Odometer Disclosure form, separate from the 
vehicle's title, to ADOT.\35\
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    \35\ Project One also proposes that a dealer would 
electronically submit a Secure Odometer Disclosure to ADOT following 
its subsequent resale of the vehicle, but it is unclear from the 
petition whether this submission is for the purpose of a title 
application.
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    NHTSA has also initially determined that Project One also does not 
satisfy the third purpose of TIMA, which is to prevent alterations of 
odometer disclosures on titles and to preclude counterfeit titles 
through secure processes. Project One would make odometer disclosures 
on Secure Odometer Disclosure forms, which are susceptible to 
substitutions, alterations, and/or forgery. Arizona's petition states 
that the use of a watermark on the Secure Odometer Disclosure form and 
security features in dealers' electronic submissions to ADOT provide 
sufficient levels of security. However, Arizona has not shown how the 
watermark would prevent submission of a fraudulent form, as the 
petition claims. According to the petition, the word VOID is displayed 
after the form is scanned. Since, in proposed Project One, a dealer is 
required to scan the form to submit it to ADOT, Secure Odometer 
Disclosure forms received by ADOT would appear as VOID. Arizona has not 
explained how ADOT would distinguish between an altered form that read 
VOID prior to being scanned, and a legitimate form that read VOID after 
being scanned.\36\ Moreover, dealers would have access to blank forms 
bearing the watermark, which could be used by an unscrupulous person to 
create a new, fraudulent form prior to submitting it to ADOT, as 
discussed above.
---------------------------------------------------------------------------

    \36\ The placement of the word VOID repeatedly across the Secure 
Odometer Disclosure form also obscures the writing on the form, and 
may make the disclosure difficult to read once scanned.
---------------------------------------------------------------------------

    NHTSA has initially determined that Project One also does not 
satisfy the fourth purpose of TIMA, to create a record of the mileage 
on vehicles and a paper trail. Project One would not create a scheme of 
records equivalent to the paper trail required by law. The mileage 
recorded in an odometer disclosure establishes a critical benchmark for 
evaluating the remaining mileage declarations that will follow. NHTSA 
has initially determined that Project One's proposed use of a Secure 
Odometer Disclosure form would not create records and a paper trail 
consistent with this purpose of TIMA because the form is separate from 
the vehicle's title and, as discussed above, a person could create and 
submit a fraudulent form. ADOT has no means of ensuring that the form 
submitted was actually signed by the seller and the buyer.\37\ Thus, 
the benchmark for evaluating mileage declarations that follow would be 
lacking, and there would not be a clear record and paper trail as 
contemplated by TIMA.
---------------------------------------------------------------------------

    \37\ A further concern is that a scan could be digitally 
altered. This issue is discussed in further detail below, with 
respect to Project Two. Unlike other petitions approved by NHTSA, 
under Arizona's proposal, only one party involved in the vehicle 
transfer would transmit information regarding the odometer 
disclosure to the State. See 74 FR 643; 75 FR 20925; 76 FR 1367; 77 
FR 36935.
---------------------------------------------------------------------------

    The information disclosed in a proposed Secure Odometer Disclosure 
form also creates an inadequate paper trail. Based on the example 
provided by Arizona, as described in detail above, the Secure Odometer 
Disclosure form does not require disclosure of the transferee's 
address. Arizona offers no explanation for this omission, which could 
make tracing and prosecuting fraud more difficult.\38\
---------------------------------------------------------------------------

    \38\ Contrary to Arizona's representation that its proposals are 
in compliance with Federal odometer regulations, a Secure Odometer 
Disclosure form would not require disclosure of a transferee's 
current address, as required by 49 CFR 580.5(c)(4), and vehicle 
model, as required by 49 CFR 580.5(c)(5). We also note that, based 
on the completed example form provided by Arizona, the date of 
transfer is not disclosed, as is required by 49 CFR 580.5(c)(2). 
Although the form does appear to include a space for sale date, the 
completed example indicates AZ (i.e. sale state) in that space. The 
Secure Odometer Disclosure form also does not explicitly warn a 
customer not to rely on the odometer reading if the odometer 
disclosure is marked to indicate that it does not reflect the actual 
mileage of the vehicle, as required by 49 CFR 580.5(e)(3). The form 
does include a warning notice to alert the transferee that a 
discrepancy exists between the odometer reading and the actual 
mileage, as is also required by 49 CFR 580.5(e)(3).

---------------------------------------------------------------------------

[[Page 50076]]

    Arizona's proposed use of a Secure Odometer Disclosure form could 
also result in an inadequate paper trail when used for the initial 
transfer (the transfer of a vehicle to a dealer). One section of the 
form includes spaces for Seller/Dealership Name (printed), Dealer 
Number, Street Address, City, State, Zip, Agent Name, and Seller/Agent 
Signature. When the seller is not a dealer, it is unclear which party 
should complete this section. If the transferee dealer's agent fills in 
this section of the form, there would be no spaces on the form for the 
transferor to disclose his or her name and address. There also would be 
no space for the transferor to sign, which is of crucial importance 
since the transferor must certify the odometer disclosure. Even if the 
dealer completed only the ``Buyer'' portions of the form, the form 
appears inadequate. Since there are only spaces for Buyer Name and 
Buyer Signature, the form may lack either the dealership name or name 
of the dealer's agent who completed the form.
    NHTSA has also initially determined that Project One does not 
satisfy the general purpose of TIMA, of protecting consumers by 
ensuring that they receive valid representations of the vehicle's 
actual mileage at the time of transfer based on odometer disclosures. 
First, Arizona's proposed Project One relies on odometer disclosures 
made on Secure Odometer Disclosure forms, which is problematic, as is 
described above, because a person can create and submit a fraudulent 
form, and because ADOT has no means to verify whether a submitted form 
is authentic. If a fraudulent Secure Odometer Disclosure form was 
submitted to ADOT, it would lead to subsequent owners of a vehicle 
receiving inaccurate representations of the vehicle's actual mileage. 
Second, Arizona's proposal apparently would require a dealer make two 
separate disclosures (one on the title, and another on a Secure 
Odometer Disclosure form) at the time it resells the vehicle. This 
creates the potential that a buyer would receive inconsistent odometer 
disclosures.
2. Project Two
    NHTSA has initially determined that Arizona's proposed Project Two 
would not satisfy the first purpose of TIMA, to ensure that the form of 
the odometer disclosure precludes odometer fraud. As discussed above, 
TIMA addressed the potential for fraud by requiring mileage disclosures 
to be on a vehicle's title instead of a separate document. Project Two 
is inconsistent with this purpose because it proposes the use of a 
Secure Odometer Disclosure form, separate from the vehicle's title, to 
make an odometer disclosure. As discussed with Project One, an 
unscrupulous person could create and submit a fraudulent form to ADOT.
    NHTSA has also initially determined that Project Two does not 
satisfy the second purpose of TIMA, to prevent odometer fraud by 
processes and mechanisms making the disclosure of an odometer's mileage 
on the title a condition of the application for a title and a 
requirement for the title issued by the State. As described above, it 
appears from Arizona's petition that a dealer would make an odometer 
disclosure both on the vehicle's title and on a Secure Odometer 
Disclosure form at the time it resells the vehicle.\39\ The dealer 
would electronically submit both documents to ADOT for purposes of 
obtaining a new title for the vehicle's purchaser. Since it is not 
clear which odometer disclosure (if any) ADOT would consider valid in 
the event the two disclosures were inconsistent, there is the potential 
that an odometer disclosure on the title would not be considered the 
required element for the title issued by the State.\40\
---------------------------------------------------------------------------

    \39\ Arizona does not explain why two separate odometer 
disclosures would be made for the purpose of a single transaction.
    \40\ The petition states that a Motor Vehicle Certified 
Processor (which we understand to be a person, rather than an 
automated program) makes a visual comparison between the record for 
the vehicle, Secure Odometer Disclosure, and other documents 
submitted. The petition does not specify the process if a 
discrepancy in the documents is found.
---------------------------------------------------------------------------

    It is NHTSA's initial determination that Project Two also does not 
satisfy the third purpose of TIMA, to prevent alterations of 
disclosures on titles and to preclude counterfeit titles through secure 
processes. Project Two proposes using Secure Odometer Disclosure forms 
to make odometer disclosures, but such forms are susceptible to 
substitutions, alterations, and/or forgery, as discussed above with 
respect to Project One. In addition, Project Two specifies that a 
dealer would submit scans of a paper title to ADOT in support of a new 
buyer's application for a title. The original paper title would not be 
sent to the State; the dealer would retain it. A sophisticated person 
may be able to submit to ADOT a scanned image that does not state the 
authentic disclosed mileage. The petition addresses some technical 
requirements for scanning and transmitting documents, but does not 
specifically address security measures that would prevent tampering or 
allow detection of a scanned image that contains an alteration.
    NHTSA has also initially determined that Project Two does not 
satisfy the fourth purpose of TIMA, to create a record of the mileage 
on vehicles and a paper trail. As discussed above with respect to 
Project One, the use of a Secure Odometer Disclosure form to make an 
odometer disclosure would not create records and a paper trail 
consistent with this purpose of TIMA because it is separate from the 
vehicle's title, there is the potential for a person to create and 
submit a fraudulent form, and ADOT has no means of ensuring that a form 
submitted is an authentic form signed by both parties. Additionally, 
Project Two relies on dealers to submit scans of documents to ADOT. As 
discussed above, such scans are susceptible to alterations. The 
information disclosed in a Secure Odometer Disclosure form also creates 
an inadequate paper trail, as addressed by our discussion of Project 
One above. Specifically, the form does not include space for the 
transferee's address, or adequate space for disclosure of the name of a 
dealership and its agent's name in the case of a buyer that is a 
dealer.
    NHTSA has initially determined that Project Two also does not 
satisfy the general purpose of TIMA, to protect consumers by ensuring 
that they receive valid representations of the vehicle's actual mileage 
at the time of transfer based on odometer disclosures. NHTSA's 
rationale regarding this general purpose is the same as discussed above 
with respect to Project One. Specifically, a fraudulent Secure Odometer 
Disclosure form may be submitted to ADOT, which has no means to verify 
the authenticity of the form. Additionally, Project Two involves scans 
of titles, which are susceptible to alterations, as described above. If 
a fraudulent disclosure was submitted to ADOT, subsequent owners would 
receive inaccurate representations of the vehicle's actual mileage. 
Like Project One, Project Two also creates the potential for 
inconsistent odometer disclosures because of the apparent requirement 
that a dealer make an odometer disclosure both on a paper title and a 
Secure Odometer Disclosure at the time it resells the vehicle.

V. NHTSA's Initial Determination

    For the foregoing reasons, NHTSA preliminarily denies Arizona's 
petition regarding proposed alternate disclosure requirements.

[[Page 50077]]

    This is not a final agency action. NHTSA invites comments within 
the scope of this notice from the public, including Arizona.

Request for Comments

How do I prepare and submit comments?

    Your comments must be written and in English. To ensure that your 
comments are filed correctly in the Docket, please include the docket 
number of this document in your comments.
    Your comments must not be more than 15 pages long (see 49 CFR 
553.21). We established this limit to encourage you to write your 
primary comments in a concise fashion. However, you may attach 
necessary additional documents to your comments. There is no limit on 
the length of the attachments.
    Please submit two copies of your comments, including the 
attachments, to Docket Management at the address given under ADDRESSES.
    You may also submit your comments to the docket electronically by 
logging onto the Dockets Management System Web site at http://dms.dot.gov. Click on ``Help & Information,'' or ``Help/Info'' to 
obtain instructions for filing the document electronically.

How can I be sure that my comments were received?

    If you wish Docket Management to notify you upon its receipt of 
your comments, enclose a self-addressed, stamped postcard in the 
envelope containing your comments. Upon receiving your comments, Docket 
Management will return the postcard by mail.

How do I submit confidential business information?

    If you wish to submit any information under a claim of 
confidentiality, you should submit three copies of your complete 
submission, including the information you claim to be confidential 
business information, to the Chief Counsel, NHTSA, at the address given 
above under FOR FURTHER INFORMATION CONTACT. In addition, you should 
submit two copies, from which you have deleted the claimed confidential 
business information, to Docket Management at the address given above 
under ADDRESSES. When you send a comment containing information claimed 
to be confidential business information, you should include a cover 
letter setting forth the information specified in our confidential 
business information regulation (49 CFR part 512).

Will the Agency consider late comments?

    We will consider all comments that Docket Management receives 
before the close of business on the comment closing date indicated 
above under DATES. To the extent possible, we also will consider 
comments that Docket Management receives after that date. If Docket 
Management receives a comment too late for us to consider it in 
developing the final rule, we will consider that comment as an informal 
suggestion for future rulemaking action.

How can I read the comments submitted by other people?

    You may read the comments received by Docket Management at the 
address given under ADDRESSES. The hours of the Docket are indicated 
above in the same location.
    You also may see the comments on the Internet. To read the comments 
on the Internet, go to http://www.regulations.gov, and follow the 
instructions for accessing the Docket.
    Please note that even after the comment closing date, we will 
continue to file relevant information in the Docket as it becomes 
available. Further, some people may submit late comments. Accordingly, 
we recommend that you periodically check the Docket for new material.

    Issued on: August 14, 2012.
O. Kevin Vincent,
Chief Counsel.
[FR Doc. 2012-20381 Filed 8-17-12; 8:45 am]
BILLING CODE 4910-59-P



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