(d) We may void your certificate if you do not keep the records we
require or do not give us information as required under this part or
the Clean Air Act.
    (e) We may void your certificate if we find that you intentionally
submitted false or incomplete information.
    (f) If we deny your application or suspend, revoke, or void your
certificate, you may ask for a hearing (see Sec.  1054.820).

Subpart D--Production-line Testing

Sec.  1054.300  Applicability.

    This subpart specifies requirements for engine manufacturers to
test their production engines for exhaust emissions to ensure that the
engines are being produced as described in the application for
certification. The production-line verification described in 40 CFR
part 1060, subpart D, applies for equipment and components for
evaporative emissions.

Sec.  1054.301  When must I test my production-line engines?

    (a) If you produce engines that are subject to the requirements of
this part, you must test them as described in this subpart, except as
follows:
    (1) Small-volume engine manufacturers may omit testing under this
subpart.
    (2) We may exempt small-volume emission families from routine
testing under this subpart. Request this exemption in your application
for certification and include your basis for projecting a production
volume below 5,000 units. We will approve your request if we agree that
you have made good-faith estimates of your production volumes. Your
exemption is approved when we grant your certificate. You must promptly
notify us if your actual production exceeds 5,000 units during the
model year. If you exceed the production limit or if there is evidence
of a nonconformity, we may require you to test production-line engines
under this subpart, or under 40 CFR part 1068, subpart E, even if we
have approved an exemption under this paragraph (a)(2).
    (b) We may suspend or revoke your certificate of conformity for
certain engine families if your production-line engines do not meet the
requirements of this part or you do not fulfill your obligations under
this subpart (see Sec. Sec.  1054.325 and 1054.340).
    (c) Other regulatory provisions authorize us to suspend, revoke, or
void your certificate of conformity, or order recalls for engine
families, without regard to whether they have passed these production-
line testing requirements. The requirements of this subpart do not
affect our ability to do selective enforcement audits, as described in
40 CFR part 1068. Individual engines in families that pass these
production-line testing requirements must also conform to all
applicable regulations of this part and 40 CFR part 1068.
    (d) You may use alternate programs for testing production-line
engines in the following circumstances:
    (1) You may use analyzers and sampling systems that meet the field-
testing requirements of 40 CFR part 1065, subpart J, but not the
otherwise applicable requirements in 40 CFR part 1065 for laboratory
testing, to demonstrate compliance with emission standards if you
double the minimum sampling rate specified in Sec.  1054.310(b). Use
measured test results to determine whether engines comply with
applicable standards without applying a measurement allowance. This
alternate program does not require prior approval but we may disallow
use of this option where we determine that use of field-grade equipment
would prevent you from being able to demonstrate that your engines are
being produced to conform to the specifications in your application for
certification.
    (2) You may ask to use another alternate program for testing
production-line engines. In your request, you must show us that the
alternate program gives equal assurance that your products meet the
requirements of this part. We may waive some or all of this subpart's
requirements if we approve your alternate approach. For example, in
certain circumstances you may be able to give us equal assurance that
your products meet the requirements of this part by using less rigorous
measurement methods if you offset that by increasing the number of test
engines.
    (e) If you certify an engine family with carryover emission data,
as described in Sec.  1054.235(d), and these equivalent engine families
consistently pass the production-line testing requirements over the
preceding two-year period, you may ask for a reduced testing rate for
further production-line testing for that family. The minimum testing
rate is one engine per engine family. If we reduce your testing rate,
we may limit our approval to any number of model years. In determining
whether to approve your request, we may consider the number of engines
that have failed the emission tests.
    (f) We may ask you to make a reasonable number of production-line
engines available for a reasonable time so we can test or inspect them
for compliance with the requirements of this part.

Sec.  1054.305  How must I prepare and test my production-line engines?

    This section describes how to prepare and test production-line
engines. You must assemble the test engine in a way that represents the
assembly procedures for other engines in the engine family. You must
ask us to approve any deviations from your normal assembly procedures
for other production engines in the engine family.
    (a) Test procedures. Test your production-line engines using the
applicable testing procedures in subpart F of this part to show you
meet the emission standards in subpart B of this part.
    (b) Modifying a test engine. Once an engine is selected for testing
(see Sec.  1054.310), you may adjust, repair, prepare, or modify it or
check its emissions only if one of the following is true:
    (1) You document the need for doing so in your procedures for
assembling and inspecting all your production engines and make the
action routine for all the engines in the engine family.
    (2) This subpart otherwise specifically allows your action.
    (3) We approve your action in advance.
    (c) Engine malfunction. If an engine malfunction prevents further
emission testing, ask us to approve your decision to either repair the
engine or delete it from the test sequence.
    (d) Setting adjustable parameters. Before any test, we may require
you to adjust any adjustable parameter to any setting within its
physically adjustable range.
    (1) [Reserved]
    (2) We may specify adjustments within the physically adjustable
range by considering their effect on emission levels. We may also
consider how likely it is that someone will make such an adjustment
with in-use equipment.
    (3) We may specify an air-fuel ratio within the adjustable range
specified in Sec.  1054.115(b).
    (e) Stabilizing emission levels. Use good engineering judgment to
operate your engines before testing such that deterioration factors can
be applied appropriately. Determine the stabilization period as
follows:
    (1) For engine families with a useful life at or below 300 hours,
operate the engine for the same number of hours before starting
emission measurements that you used for the emission-data engine,
within one hour. For example, if the emission-data engine operated for
8 hours before the low-hour emission test, operate the test engines for
7 to 9 hours before starting emission measurements.
    (2) For engine families with a useful life above 300 hours, operate
each engine for no more than the greater of two periods:
    (i) 12 hours.
    (ii) The number of hours you operated your emission-data engine for
certifying the engine family (see 40 CFR part 1065, subpart E, or the
applicable regulations governing how you should prepare your test
engine).
    (f) Damage during shipment. If shipping an engine to a remote
facility for production-line testing makes necessary an adjustment or
repair, you must wait until after the initial emission test to do this
work. We may waive this requirement if the test would be impossible or
unsafe or if it would permanently damage the engine. Report to us, in
your written report under Sec.  1054.345, all adjustments or repairs
you make on test engines before each test.
    (g) Retesting after invalid tests. You may retest an engine if you
determine an emission test is invalid under subpart F of this part.
Explain in your written report reasons for invalidating any test and
the emission results from all tests. If we determine that you
improperly invalidated a test, we may require you to ask for our
approval for future testing before substituting results of the new
tests for invalid ones.

Sec.  1054.310  How must I select engines for production-line testing?

    (a) Test engines from each engine family as described in this
section based on test periods, as follows:
    (1) For engine families with projected U.S.-directed production
volume of at least 1,600, the test periods are consecutive quarters (3
months). However, if your annual production period is less than 12
months long, you may take the following alternative approach to define
quarterly test periods:
    (i) If your annual production period is 120 days or less, the whole
model year constitutes a single test period.
    (ii) If your annual production period is 121 to 210 days, divide
the annual production period evenly into two test periods.
    (iii) If your annual production period is 211 to 300 days, divide
the annual production period evenly into three test periods.
    (iv) If your annual production period is 301 days or longer, divide
the annual production period evenly into four test periods.
    (2) For engine families with projected U.S.-directed production
volume below 1,600, the whole model year constitutes a single test
period.
    (b) Early in each test period, randomly select and test an engine
from the end of the assembly line for each engine family.
    (1) In the first test period for newly certified engines, randomly
select and test one more engine. Then, calculate the required sample
size for the model year as described in paragraph (c) of this section.
    (2) In later test periods of the same model year, combine the new
test result with all previous testing in the model year. Then,
calculate the required sample size for the model year as described in
paragraph (c) of this section.
    (3) In the first test period for engine families relying on
previously submitted test data, combine the new test result with the
last test result from the previous model year. Then, calculate the
required sample size for the model year as described in paragraph (c)
of this section. Use the last test result from the previous model year
only for this first calculation. For all subsequent calculations, use
only results from the current model year.
    (c) Calculate the required sample size for each engine family.
Separately calculate this figure for HC+NOX and CO. The
required sample size is the greater of these calculated values. Use the
following equation:
[GRAPHIC] [TIFF OMITTED] TR08OC08.095

Where:

N = Required sample size for the model year.
t95 = 95% confidence coefficient, which depends on the
number of tests completed, n, as specified in the table in paragraph
(c)(1) of this section. It defines 95% confidence intervals for a
one-tail distribution.
[sigma] = Test sample standard deviation (see paragraph (c)(2) of
this section).
x = Mean of emission test results of the sample.
STD = Emission standard (or family emission limit, if applicable).

    (1) Determine the 95% confidence coefficient, t\95\, from the
following table:

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                 n                                         t95               n               t95               n               t95
--------------------------------------------------------------------------------------------------------------------------------------------------------
 2.................................................................            6.31               12             1.80               22             1.72

 3.................................................................            2.92               13             1.78               23             1.72
 4.................................................................            2.35               14             1.77               24             1.71
 5.................................................................            2.13               15             1.76               25             1.71
 6.................................................................            2.02               16             1.75               26             1.71
 7.................................................................            1.94               17             1.75               27             1.71
 8.................................................................            1.90               18             1.74               28             1.70
 9.................................................................            1.86               19             1.73               29             1.70
10.................................................................            1.83               20             1.73               30             1.70
11.................................................................            1.81               21             1.72              31+             1.65
--------------------------------------------------------------------------------------------------------------------------------------------------------

    (2) Calculate the standard deviation, for the test sample using the
following formula:
[GRAPHIC] [TIFF OMITTED] TR08OC08.096

Where:

Xi = Emission test result for an individual engine.
n = The number of tests completed in an engine family.

    (d) Use final deteriorated test results to calculate the variables
in the equations in paragraph (c) of this section (see Sec.
1054.315(a)(2)).
    (e) After each new test, recalculate the required sample size using
the updated mean values, standard deviations, and the appropriate 95-
percent confidence coefficient.
    (f) Distribute the remaining engine tests evenly throughout the
rest of the year. You may need to adjust your schedule for selecting
engines if the required sample size changes. If your scheduled
quarterly testing for the remainder of the model year is sufficient to
meet the calculated sample size, you may wait until the next quarter to
do additional testing. Continue to randomly select engines from each
engine family.
    (g) Continue testing until one of the following things happens:
    (1) After completing the minimum number of tests required in
paragraph (b) of this section, the number of tests completed in an
engine family, n, is greater than the required sample size, N, and the
sample mean, x, is less than or equal to the emission standard. For
example, if N = 5.1 after the fifth test, the sample-size calculation
does not allow you to stop testing.
    (2) The engine family does not comply according to Sec.  1054.315.
    (3) You test 30 engines from the engine family.
    (4) You test one percent of your projected annual U.S.-directed
production volume for the engine family, rounded to the nearest whole
number. Do not count an engine under this paragraph (g)(4) if it fails
to meet an applicable emission standard.
    (5) You choose to declare that the engine family does not comply
with the requirements of this subpart.
    (h) If the sample-size calculation allows you to stop testing for
one pollutant but not another, you must continue measuring emission
levels of all pollutants for any additional tests required under this
section. However, you need not continue making the calculations
specified in this subpart for the pollutant for which testing is not
required. This paragraph (h) does not affect the number of tests
required under this section, the required calculations in Sec.
1054.315, or the remedial steps required under Sec.  1054.320.
    (i) You may elect to test more randomly chosen engines than we
require under this section. Include these engines in the sample-size
calculations.

Sec.  1054.315  How do I know when my engine family fails the
production-line testing requirements?

    This section describes the pass-fail criteria for the production-
line testing requirements. We apply these criteria on an emission-
family basis. See Sec.  1054.320 for the requirements that apply to
individual engines that fail a production-line test.
    (a) Calculate your test results as follows:
    (1) Initial and final test results. Calculate and round the test
results for each engine. If you do several tests on an engine,
calculate the initial results for each test, then add all the test
results together and divide by the number of tests. Round this final
calculated value for the final test results on that engine.
    (2) Final deteriorated test results. Apply the deterioration factor
for the engine family to the final test results (see Sec.
1054.240(c)).
    (3) Round deteriorated test results. Round the results to the
number of decimal places in the emission standard expressed to one more
decimal place.
    (b) Construct the following CumSum Equation for each engine family
for HC+NOX and CO emissions:

Ci = Max [0 or Ci-1 + Xi-(STD +
0.25 x [sigma])]

Where:

Ci = The current CumSum statistic.
Ci-1 = The previous CumSum statistic. For the first test,
the CumSum statistic is 0 (i.e., C1 = 0).
Xi = The current emission test result for an individual
engine.
STD = Emission standard (or family emission limit, if applicable).

    (c) Use final deteriorated test results to calculate the variables
in the equation in paragraph (b) of this section (see Sec.
1054.315(a)).
    (d) After each new test, recalculate the CumSum statistic.
    (e) If you test more than the required number of engines, include
the results from these additional tests in the CumSum Equation.
    (f) After each test, compare the current CumSum statistic,
Ci, to the recalculated Action Limit, H, defined as H = 5.0
x [sigma].
    (g) If the CumSum statistic exceeds the Action Limit in two
consecutive tests, the engine family fails the production-line testing
requirements of this subpart. Tell us within ten working days if this
happens. You may request to amend the application for certification to
raise the FEL of the entire engine family as described in Sec.
1054.225(f).
    (h) If you amend the application for certification for an engine
family under Sec.  1054.225, do not change any previous calculations of
sample size or CumSum statistics for the model year.

Sec.  1054.320  What happens if one of my production-line engines fails
to meet emission standards?

    (a) If you have a production-line engine with final deteriorated
test results exceeding one or more emission standards (see Sec.
1054.315(a)), the certificate of conformity is automatically suspended
for that failing engine. You must take the following actions before
your certificate of conformity can cover that engine:
    (1) Correct the problem and retest the engine to show it complies
with all emission standards.
    (2) Include the test results and describe the remedy for each
engine in

the written report required under Sec.  1054.345.
    (b) You may request to amend the application for certification to
raise the FEL of the entire engine family at this point (see Sec.
1054.225).

Sec.  1054.325  What happens if an engine family fails the production-
line testing requirements?

    (a) We may suspend your certificate of conformity for an engine
family if it fails under Sec.  1054.315. The suspension may apply to
all facilities producing engines from an engine family even if you find
noncompliant engines only at one facility.
    (b) We will tell you in writing if we suspend your certificate in
whole or in part. We will not suspend a certificate until at least 15
days after the engine family fails. The suspension is effective when
you receive our notice.
    (c) Up to 15 days after we suspend the certificate for an engine
family, you may ask for a hearing (see Sec.  1054.820). If we agree
before a hearing occurs that we used erroneous information in deciding
to suspend the certificate, we will reinstate the certificate.
    (d) Section 1054.335 specifies steps you must take to remedy the
cause of the engine family's production-line failure. All the engines
you have produced since the end of the last test period are presumed
noncompliant and should be addressed in your proposed remedy. We may
require you to apply the remedy to engines produced earlier if we
determine that the cause of the failure is likely to have affected the
earlier engines.
    (e) You may request to amend the application for certification to
raise the FEL of the engine family before or after we suspend your
certificate as described in Sec.  1054.225(f). We will approve your
request if the failure is not caused by a defect and it is clear that
you used good engineering judgment in establishing the original FEL.

Sec.  1054.330  May I sell engines from an engine family with a
suspended certificate of conformity?

    You may sell engines that you produce after we suspend the engine
family's certificate of conformity under Sec.  1054.315 only if one of
the following occurs:
    (a) You test each engine you produce and show it complies with
emission standards that apply.
    (b) We conditionally reinstate the certificate for the engine
family. We may do so if you agree to recall all the affected engines
and remedy any noncompliance at no expense to the owner if later
testing shows that the engine family still does not comply.

Sec.  1054.335  How do I ask EPA to reinstate my suspended certificate?

    (a) Send us a written report asking us to reinstate your suspended
certificate. In your report, identify the reason for noncompliance,
propose a remedy for the engine family, and commit to a date for
carrying it out. In your proposed remedy include any quality control
measures you propose to keep the problem from happening again.
    (b) Give us data from production-line testing that shows the
remedied engine family complies with all the emission standards that
apply.

Sec.  1054.340  When may EPA revoke my certificate under this subpart
and how may I sell these engines again?

    (a) We may revoke your certificate for an engine family in the
following cases:
    (1) You do not meet the reporting requirements.
    (2) Your engine family fails to comply with the requirements of
this subpart and your proposed remedy to address a suspended
certificate under Sec.  1054.335 is inadequate to solve the problem or
requires you to change the engine's design or emission control system.
    (b) To sell engines from an engine family with a revoked
certificate of conformity, you must modify the engine family and then
show it complies with the requirements of this part.
    (1) If we determine your proposed design change may not control
emissions for the engine's full useful life, we will tell you within
five working days after receiving your report. In this case we will
decide whether production-line testing will be enough for us to
evaluate the change or whether you need to do more testing.
    (2) Unless we require more testing, you may show compliance by
testing production-line engines as described in this subpart.
    (3) We will issue a new or updated certificate of conformity when
you have met these requirements.

Sec.  1054.345  What production-line testing records must I send to
EPA?

    (a) Within 45 days of the end of each test period, send us a report
with the following information:
    (1) Describe any facility used to test production-line engines and
state its location.
    (2) State the total U.S.-directed production volume and number of
tests for each engine family.
    (3) Describe how you randomly selected engines.
    (4) Describe each test engine, including the engine family's
identification and the engine's model year, build date, model number,
identification number, and number of hours of operation before testing.
    (5) Identify how you accumulated hours of operation on the engines
and describe the procedure and schedule you used.
    (6) Provide the test number; the date, time and duration of
testing; test procedure; all initial test results; final test results;
and final deteriorated test results for all tests. Provide the emission
results for all measured pollutants. Include information for both valid
and invalid tests and the reason for any invalidation.
    (7) Describe completely and justify any nonroutine adjustment,
modification, repair, preparation, maintenance, or test for the test
engine if you did not report it separately under this subpart. Include
the results of any emission measurements, regardless of the procedure
or type of engine.
    (8) Provide the CumSum analysis required in Sec.  1054.315 and the
sample-size calculation required in Sec.  1054.310 for each engine
family.
    (9) Report on each failed engine as described in Sec.  1054.320.
    (10) State the date the test period ended for each engine family.
    (b) We may ask you to add information to your written report so we
can determine whether your new engines conform with the requirements of
this subpart. We may also ask you to send less information.
    (c) An authorized representative of your company must sign the
following statement:

    We submit this report under sections 208 and 213 of the Clean
Air Act. Our production-line testing conformed completely with the
requirements of 40 CFR part 1054. We have not changed production
processes or quality-control procedures for test engines in a way
that might affect emission controls. All the information in this
report is true and accurate to the best of my knowledge. I know of
the penalties for violating the Clean Air Act and the regulations.
(Authorized Company Representative)

    (d) Send electronic reports of production-line testing to the
Designated Compliance Officer using an approved information format. If
you want to use a different format, send us a written request with
justification for a waiver.
    (e) We will send copies of your reports to anyone from the public
who asks for them. Section 1054.815 describes how we treat information
you consider confidential.

Sec.  1054.350  What records must I keep?

    (a) Organize and maintain your records as described in this
section. We may review your records at any time.

    (b) Keep paper or electronic records of your production-line
testing for eight years after you complete all the testing required for
an engine family in a model year.
    (c) Keep a copy of the written reports described in Sec.  1054.345.
    (d) Keep the following additional records:
    (1) A description of all test equipment for each test cell that you
can use to test production-line engines.
    (2) The names of supervisors involved in each test.
    (3) The name of anyone who authorizes adjusting, repairing,
preparing, or modifying a test engine and the names of all supervisors
who oversee this work.
    (4) If you shipped the engine for testing, the date you shipped it,
the associated storage or port facility, and the date the engine
arrived at the testing facility.
    (5) Any records related to your production-line tests that are not
in the written report.
    (6) A brief description of any significant events during testing
not otherwise described in the written report or in this section.
    (7) Any information specified in Sec.  1054.345 that you do not
include in your written reports.
    (e) If we ask, you must give us a more detailed description of
projected or actual production figures for an engine family. We may ask
you to divide your production figures by maximum engine power,
displacement, fuel type, or assembly plant (if you produce engines at
more than one plant).
    (f) Keep records of the engine identification number for each
engine you produce under each certificate of conformity. You may
identify these numbers as a range. Give us these records within 30 days
if we ask for them.
    (g) We may ask you to keep or send other information necessary to
implement this subpart.

Subpart E--In-use Testing

Sec.  1054.401  General provisions.

    We may perform in-use testing of any engines or equipment subject
to the standards of this part. We will consult with you as needed for
information or special equipment related to testing your engines.

Subpart F--Test Procedures

Sec.  1054.501  How do I run a valid emission test?

    (a) Applicability. This subpart is addressed to you as a
manufacturer but it applies equally to anyone who does testing for you,
and to us when we perform testing to determine if your engines or
equipment meet emission standards.
    (b) General requirements. Use the equipment and procedures for
spark-ignition engines in 40 CFR part 1065 to determine whether engines
meet the exhaust emission standards, as follows:
    (1) Measure the emissions of all regulated pollutants as specified
in Sec.  1054.505 and 40 CFR part 1065. See Sec.  1054.650 for special
provisions that apply for variable-speed engines (including engines
shipped without governors).
    (2) Use the fuels and lubricants specified in 40 CFR part 1065,
subpart H, for all the testing we require in this part. Except as
specified in paragraph (d) of this section, use gasoline meeting the
specifications described in 40 CFR 1065.710 for general testing. For
service accumulation, use the test fuel or any commercially available
fuel that is representative of the fuel that in-use engines will use.
You may alternatively use gasoline blended with ethanol as follows:
    (i) For handheld engines, you may use the ethanol-blended fuel for
certifying engines under this part without our advance approval. If you
use the blended fuel for certifying a given engine family, you may also
use it for production-line testing or any other testing you perform for
that engine family under this part. If you use the blended fuel for
certifying a given engine family, we may use the blended fuel or the
specified gasoline test fuel with that engine family.
    (ii) For nonhandheld engines, you may use the blended fuel for
certifying engines under this part without our advance approval. If you
use the blended fuel for certifying a given engine family, you must
also use it for production-line testing or any other testing you
perform for that engine family under this part. If the certification of
all your Class I (or Class II) engine families in a given model year is
based on test data collected using the blended fuel, we will also use
the blended fuel for testing your Class I (or Class II) engines. If the
certification of some but not all of your Class I (or Class II) engine
families in a given model year is based on test data collected using
the blended fuel, we may use the blended fuel or the specified gasoline
test fuel for testing any of your Class I (or Class II) engines.
    (iii) The blended fuel must consist of a mix of gasoline meeting
the specifications described in 40 CFR 1065.710 for general testing and
fuel-grade ethanol meeting the specifications described in 40 CFR
1060.501(c) such that the blended fuel has 10.01.0 percent
ethanol by volume. You may also use ethanol with a higher or lower
purity if you show us that it will not affect your ability to
demonstrate compliance with the applicable emission standards. You do
not need to measure the ethanol concentration of such blended fuels and
may instead calculate the blended composition by assuming that the
ethanol is pure and mixes perfectly with the base fuel.
    (iv) You may ask to use the provisions of this paragraph (b)(2) for
a blended test fuel containing less than 10 percent ethanol if your
engine is subject to emission standards from other organizations that
specify testing with that fuel. If we approve testing with such a fuel,
we may test your engines with that test fuel, with gasoline, or with a
10-percent ethanol blend.
    (3) Ambient conditions for duty-cycle testing must be within ranges
specified in 40 CFR 1065.520, subject to the provisions of Sec.
1054.115(c).
    (i) Corrections. Emissions may not be corrected for the effects of
test temperature or pressure. You may correct emissions for humidity as
specified in 40 CFR 1065.670.
    (ii) Intake air temperature. Measure engine intake air temperature
as described in 40 CFR 1065.125, and control it if necessary,
consistent with good engineering judgment. For example, since the
purpose of this requirement is to ensure that the measured air
temperature is consistent with the intake air temperature that would
occur during in-use operation at the same ambient temperature, do not
cool the intake air and do not measure air temperature at a point where
engine heat affects the temperature measurement.
    (4) The provisions of 40 CFR 1065.405 describes how to prepare an
engine for testing. However, you may consider emission levels stable
without measurement after 12 hours of engine operation, except for the
following special provisions that apply for engine families with a
useful life of 300 hours or less:
    (i) We will not approve a stabilization period longer than 12 hours
even if you show that emissions are not yet stabilized.
    (ii) Identify the number of hours you use to stabilize engines for
low-hour emission measurements. You may consider emissions stable at
any point less than 12 hours. For example, you may choose a point at
which emission levels reach a low value before the effects of
deterioration are established.

    (5) Prepare your engines for testing by installing a governor that
you normally use on production engines, consistent with Sec. Sec.
1054.235(b) and 1054.505.
    (6) During testing, supply the engine with fuel in a manner
consistent with how it will be supplied with fuel in use. If you sell
engines with complete fuel systems and your production engines will be
equipped with a vapor line that routes running loss vapors into the
engine's intake system, measure exhaust emissions using a complete fuel
system representing a production configuration that sends fuel vapors
to the test engine's intake system in a way that represents the
expected in-use operation. You may alternatively demonstrate by
engineering analysis that your engines will continue to meet emission
standards for any amount of running loss vapor that can reasonably be
expected during in-use operation.
    (7) Determine the carbon mass fraction of fuel, wc, using a
calculation based on measured fuel properties as described in 40 CFR
1065.655(d)(1). You may not use the default values specified in 40 CFR
1065.655(d)(2).
    (c) Special and alternate procedures. You may use special or
alternate procedures to the extent we allow them under 40 CFR 1065.10.
The following additional provisions apply:
    (1) If you are unable to run the test cycle specified in this part
for your engine, use an alternate test cycle that will result in a
cycle-weighted emission measurement equivalent to the expected average
in-use emissions. This cycle must be approved under 40 CFR 1065.10.
    (2) Describe in your application for certification any specially
designed fixtures or other hardware if they are needed for proper
testing of your engines. (Note: You do not need to specify the size or
performance characteristics of engine dynamometers.) You must send us
these fixtures or other hardware if we ask for them. We may waive the
requirement of Sec.  1054.205(aa) to identify a test facility in the
United States for such engine families as long as the projected U.S.-
directed production volume of all your engine families using the
provisions of this paragraph (c)(2) is less than 5 percent of your
total production volume from all engine families certified under this
part 1054.
    (d) Wintertime engines. You may test wintertime engines at the
ambient temperatures specified in 40 CFR 1065.520, even though this
does not represent in-use operation for these engines (40 CFR
1065.10(c)(1)). In this case, you may use good engineering judgment to
modify the test engine as needed to achieve intake temperatures that
are analogous to in-use conditions. You may also test wintertime
engines at reduced ambient temperatures as specified in 40 CFR
1051.505. Use the gasoline specified for low-temperature testing only
if you test your engines at ambient temperatures below 20 [deg]C.

Sec.  1054.505  How do I test engines?

    (a) This section describes how to test engines under steady-state
conditions. For handheld engines you must perform tests with discrete-
mode sampling. For nonhandheld engines we allow you to perform tests
with either discrete-mode or ramped-modal testing methods. You must use
the same modal testing method for certification and all other testing
you perform for an engine family. If we test your engines to confirm
that they meet emission standards, we will use the modal testing method
you select for your own testing. If you submit certification test data
collected with both discrete-mode and ramped-modal testing (either in
your original application or in an amendment to your application),
either method may be used for subsequent testing. We may also perform
other testing as allowed by the Clean Air Act. Conduct duty-cycle
testing as follows:
    (1) For discrete-mode testing, sample emissions separately for each
mode, then calculate an average emission level for the whole cycle
using the weighting factors specified for each mode. In each mode,
operate the engine for at least 5 minutes, then sample emissions for at
least 1 minute. Control engine speed as specified in this section. Use
one of the following methods for confirming torque values for
nonhandheld engines:
    (i) Calculate torque-related cycle statistics and compare with the
established criteria as specified in 40 CFR 1065.514 to confirm that
the test is valid.
    (ii) Evaluate each mode separately to validate the duty cycle. All
torque feedback values recorded during non-idle sampling periods must
be within 2 percent of the reference value or within 0.27 N[middot]m of the reference value, whichever is greater.
Also, the mean torque value during non-idle sampling periods must be
within 1 percent of the reference value or 0.12
N[middot]m of the reference value, whichever is greater. Control torque
during idle as specified in paragraph (c) of this section.
    (2) For ramped-modal testing, start sampling at the beginning of
the first mode and continue sampling until the end of the last mode.
Calculate emissions and cycle statistics the same as for transient
testing as specified in 40 CFR part 1065. Unless we specify otherwise,
you may simulate the governor for ramped-modal testing consistent with
good engineering judgment.
    (b) Measure emissions by testing the engine on a dynamometer with
the test procedures for constant-speed engines in 40 CFR part 1065
while using one of the steady-state duty cycles identified in this
paragraph (b) to determine whether it meets the exhaust emission
standards specified in Sec.  1054.101(a). This requirement applies for
all engines, including those not meeting the definition of ``constant-
speed engine'' in 40 CFR 1065.1001.
    (1) For handheld engines, use the two-mode duty cycle described in
paragraph (a) of Appendix II of this part. Establish an engine's rated
speed as follows:
    (i) For ungoverned handheld engines used in fixed-speed
applications all having approximately the same nominal in-use operating
speed, hold engine speed within 350 rpm of the nominal speed for
testing. We may allow you to include in your engine family without
additional testing a small number engines that will be installed such
that they have a different nominal speed. If your engine family
includes a majority of engines with approximately the same nominal in-
use operating speed and a substantial number of engines with different
nominal speeds, you must test engines as specified in this paragraph
(b)(1)(i) and paragraph (b)(1)(ii) of this section.
    (ii) For ungoverned handheld engines for which there is not a
dominant value for nominal in-use operating speeds, hold engine speed
within 350 rpm of the point at which the engine generates maximum
power.
    (iii) For governed handheld engines, hold engine speed at maximum
test speed, as defined in 40 CFR 1065.1001.
    (2) For nonhandheld engines, use the six-mode duty cycle or the
corresponding ramped-modal cycle described in paragraph (b) of Appendix
II of this part. Control engine speeds and torques during idle mode as
specified in paragraph (c) of this section and during full-load
operating modes as specified in paragraph (d) of this section. For all
other modes, control torque as needed to meet the cycle-validation
criteria in 40 CFR 1065.514; control the engine speed to within 5
percent of the nominal speed specified in paragraph (d) of this section
or let the installed governor (in the production configuration) control
engine speed. The governor may be adjusted before emission sampling to
target the nominal speed identified in paragraph (d) of this section,
but the installed governor must control engine speed throughout the

emission-sampling period whether the governor is adjusted or not. Note
that ramped-modal testing involves continuous sampling, so governor
adjustments may not occur during such a test. Note also that our
testing may involve running the engine with the governor in the
standard configuration even if you adjust the governor as described in
this paragraph (a)(2) for certification or production-line testing.
    (c) During idle mode for nonhandheld engines, operate the engine
with the following parameters:
    (1) Allow the engine to operate at the idle speed determined by the
installed governor. If any production engines from the engine family
have a user-selectable idle speed, operate the engine with an installed
governor that controls engine speed to the lowest available speed
setting.
    (2) Keep engine torque under 5 percent of the nominal torque value
for Mode 1.
    (3) You must conduct testing at the idle mode even if the allowable
torque values overlap with those for another specified mode.
    (d) During full-load operation for nonhandheld engines, operate the
engine with the following parameters:
    (1) In normal circumstances, select a test speed of either 3060 rpm
or 3600 rpm that is most appropriate for the engine family. If all the
engines in the engine family are used in intermediate-speed equipment,
select a test speed of 3060 rpm. The test associated with intermediate-
speed operation is referred to as the A Cycle. If all the engines in
the engine family are used in rated-speed equipment, select a test
speed of 3600 rpm. The test associated with rated-speed operation is
referred to as the B Cycle. If an engine family includes engines used
in both intermediate-speed equipment and rated-speed equipment, select
the test speed for emission-data engines that will result in worst-case
emissions. In unusual circumstances, you may ask to use a test speed
different than that specified in this paragraph (d)(1) if it better
represents in-use operation.
    (2) Operate the engine ungoverned at wide-open throttle at the test
speed established in paragraph (d)(1) of this section until the engine
reaches thermal stability as described in 40 CFR 1065.530(a)(2)(ii).
Record the torque value after stabilization. Use this value for the
full-load torque setting and for denormalizing the rest of the duty
cycle.
    (3) Control engine speed during emission sampling to stay within 5
percent of the nominal speed identified in paragraph (d)(1) of this
section.
    (4) The provisions of this paragraph (d) apply instead of the
engine mapping procedures in 40 CFR 1065.510.
    (e) See 40 CFR part 1065 for detailed specifications of tolerances
and calculations.

Sec.  1054.520  What testing must I perform to establish deterioration
factors?

    Sections 1054.240 and 1054.245 describe the required methods for
testing to establish deterioration factors for an emission family.

Subpart G--Special Compliance Provisions

Sec.  1054.601  What compliance provisions apply to these engines?

    (a) Engine and equipment manufacturers, as well as owners,
operators, and rebuilders of engines subject to the requirements of
this part, and all other persons, must observe the provisions of this
part, the requirements and prohibitions in 40 CFR part 1068, and the
provisions of the Clean Air Act.
    (b) Note that the provisions of 40 CFR 1068.103(f) prohibit engine
manufacturers from deviating from normal production and inventory
practices to stockpile engines with a date of manufacture before new or
changed emission standards take effect. If your normal practice for
producing engines subject to this part 1054 includes maintaining
engines in inventory for some engine families for more than 12 months,
you must get our prior approval to continue this practice for model
years in which emission standards change. Include in your request
information showing that this is necessary and it is consistent with
your normal business practice. Unless we specify otherwise, include
relevant inventory and production records from the preceding eight
years. Note that 40 CFR 1068.103(f) applies to any engines inventoried
beyond your normal practice and authorizes us to review your records to
verify your normal practices, whether or not you maintain the engines
in inventory for more than 12 months.

Sec.  1054.610  What is the exemption for delegated final assembly?

    The provisions of 40 CFR 1068.261 related to delegated final
assembly do not apply for handheld engines certified under this part
1054. The provisions of 40 CFR 1068.261 apply for nonhandheld engines,
with the following exceptions and clarifications:
    (a) Through the 2014 model year, you may use the provisions of this
section for engines you sell to a distributor, where you establish a
contractual arrangement in which you designate the distributor to be
your agent in all matters related to compliance with the requirements
of this section. Identify each of the distributors you intend to
designate as your agent under this paragraph (a) in your application
for certification. You may continue to use the provisions of this
paragraph (a) this for later model years for specific distributors if
we approve it based on your clear and convincing demonstration that
each distributor can be expected to comply fully with the requirements
of this section and 40 CFR 1068.261. We may set additional conditions
beyond the provisions specified in this section to ensure that all
engines will be in a certified configuration when installed by the
equipment manufacturer.
    (b) If you identify distributors as your agents under paragraph (a)
of this section, you must perform or arrange for audits of all
participating distributors and equipment manufacturers based on the
following auditing rate instead of the provisions specified in 40 CFR
1068.261(d)(3)(i) and (ii):
    (1) If you sell engines to 48 or more equipment manufacturers under
the provisions of this section, you must annually perform or arrange
for audits of twelve equipment manufacturers to whom you sell engines
under this section. To select individual equipment manufacturers,
divide all the affected equipment manufacturers into quartiles based on
the number of engines they buy from you; select equal numbers of
equipment manufacturers from each quartile each model year as much as
possible. Vary the equipment manufacturers selected for auditing from
year to year, though audits may be repeated in later model years if you
find or suspect that a particular equipment manufacturer is not
properly installing aftertreatment devices.
    (2) If you sell engines to fewer than 48 equipment manufacturers
under the provisions of this section, set up a plan to perform or
arrange for audits of each equipment manufacturer on average once every
four model years.

Sec.  1054.612  What special provisions apply for equipment
manufacturers modifying certified nonhandheld engines?

    The provisions of this section apply for all emission families
through the 2014 model year; starting with the 2015 model year, these
provisions are limited to small-volume emission families.
    (a) General provisions. If you buy certified nonhandheld engines
for installation in equipment you produce, but you install the engines
such that they use intake or exhaust systems that are not part of the
originally certified

configuration, you become the engine manufacturer for those engines and
must certify that they will meet emission standards. We will allow you
to utilize the provisions for simplified certification specified in
paragraph (b) of this section, as long as your design stays within the
overall specifications from the original engine manufacturer (such as
exhaust backpressure) and you use a catalyst as described in the
original engine manufacturer's application for certification.
    (b) Simplified certification. You must perform testing with an
emission-data engine to show that you meet exhaust emission standards;
however, you may use the deterioration factor from the original engine
manufacturer. The production-line testing requirements in subpart D of
this part do not apply for engines certified under this section. You
must meet all the other requirements that apply to engine manufacturers
for engines subject to standards under this part. The engine family
must have the same useful life value specified by the original engine
manufacturer for that engine. In your application for certification
describe any differences between the original engine manufacturer's
design and yours and explain why the deterioration data generated by
the original engine manufacturer is appropriate for your configuration.
    (c) Engine exemption. As an engine manufacturer, you may produce
nonconforming engines for equipment manufacturers as allowed under this
section. You do not have to request this exemption for your engines,
but you must have written assurance from equipment manufacturers that
they need a certain number of exempted engines under this section. Add
a removable label to the engines as described in 40 CFR 1068.262.

Sec.  1054.615  What is the exemption for engines certified to
standards for Large SI engines?

    (a) An engine is exempt from the requirements of this part if it is
in an emission family that has a valid certificate of conformity
showing that it meets emission standards and other requirements under
40 CFR part 1048 for the appropriate model year.
    (b) The only requirements or prohibitions from this part that apply
to an engine that is exempt under this section are in this section.
    (c) If your engines do not have the certificate required in
paragraph (a) of this section, they will be subject to the provisions
of this part. Introducing these engines into U.S. commerce without a
valid exemption or certificate of conformity violates the prohibitions
in 40 CFR 1068.101(a).
    (d) Engines exempted under this section are subject to all the
requirements affecting engines under 40 CFR part 1048, including
evaporative emission standards. The requirements and restrictions of 40
CFR part 1048 apply to anyone manufacturing these engines, anyone
manufacturing equipment that uses these engines, and all other persons
in the same manner as if these were nonroad spark-ignition engines
above 19 kW.
    (e) Engines exempted under this section may not generate or use
emission credits under this part 1054.

Sec.  1054.620  What are the provisions for exempting engines used
solely for competition?

    The provisions of this section apply for new engines and equipment
built on or after January 1, 2010.
    (a) We may grant you an exemption from the standards and
requirements of this part for a new engine on the grounds that it is to
be used solely for competition. The requirements of this part, other
than those in this section, do not apply to engines that we exempt for
use solely for competition.
    (b) We will exempt engines that we determine will be used solely
for competition. The basis of our determination is described in
paragraphs (c) and (d) of this section. Exemptions granted under this
section are good for only one model year and you must request renewal
for each subsequent model year. We will not approve your renewal
request if we determine the engine will not be used solely for
competition.
    (c) Engines meeting all the following criteria are considered to be
used solely for competition:
    (1) Neither the engine nor any equipment containing the engine may
be displayed for sale in any public dealership or otherwise offered for
sale to the general public. Note that this does not preclude display of
these engines as long as they are not available for sale to the general
public.
    (2) Sale of the equipment in which the engine is installed must be
limited to professional competition teams, professional competitors, or
other qualified competitors. For replacement engines, the sale of the
engine itself must be limited to professional racing teams,
professional racers, other qualified racers, or to the original
equipment manufacturer.
    (3) The engine and the equipment in which it is installed must have
performance characteristics that are substantially superior to
noncompetitive models.
    (4) The engines are intended for use only as specified in paragraph
(e) of this section.
    (d) You may ask us to approve an exemption for engines not meeting
the criteria listed in paragraph (c) of this section as long as you
have clear and convincing evidence that the engines will be used solely
for competition.
    (e) Engines are considered to be used solely for competition only
if their use is limited to competition events sanctioned by a state or
federal government agency or another widely recognized public
organization with authorizing permits for participating competitors.
Operation of such engines may include only racing events, trials to
qualify for racing events, and practice associated with racing events.
Authorized attempts to set speed records are also considered racing
events. Engines will not be considered to be used solely for
competition if they are ever used for any recreational or other
noncompetitive purpose. Any use of exempt engines in recreational
events is a violation of 40 CFR 1068.101(b)(4).
    (f) You must permanently label engines exempted under this section
to clearly indicate that they are to be used only for competition.
Failure to properly label an engine will void the exemption for that
engine.
    (g) If we request it, you must provide us any information we need
to determine whether the engines are used solely for competition. This
would generally include documentation regarding the number of engines
and the ultimate purchaser of each engine as well as any documentation
showing an equipment manufacturer's request for an exempted engine.
Keep these records for five years.

Sec.  1054.625  What requirements apply under the Transition Program
for Equipment Manufacturers?

    The provisions of this section allow equipment manufacturers to
produce equipment with Class II engines that are subject to less
stringent exhaust emission standards after the Phase 3 emission
standards begin to apply. To be eligible to use these provisions, you
must follow all the instructions in this section. See Sec.  1054.626
for requirements that apply specifically to companies that manufacture
equipment outside the United States and to companies that import such
equipment without manufacturing it. Engines and equipment you produce
under this section are exempt from the prohibitions in 40 CFR
1068.101(a)(1) with respect to exhaust emissions,

[[Continued on page 59283]]

]

[[pp. 59283-59332]] Control of Emissions From Nonroad Spark-Ignition Engines and
Equipment

[[Continued from page 59282]]

subject to the provisions of this section. Except as specified in
paragraph (e) of this section, equipment exempted under this section
must meet all applicable requirements related to evaporative emissions.
    (a) General. If you are an equipment manufacturer, you may
introduce into U.S. commerce limited numbers of nonroad equipment with
Class II engines exempted under this section. You may use the
exemptions in this section only if you have primary responsibility for
designing and manufacturing equipment and your manufacturing procedures
include installing some engines in this equipment. Consider all U.S.-
directed equipment production in showing that you meet the requirements
of this section, including those from any parent or subsidiary
companies and those from any other companies you license to produce
equipment for you. If you produce a type of equipment that has more
than one engine, count each engine separately. These provisions are
available during the first four model years that the Phase 3 exhaust
emission standards apply.
    (b) Allowances. Calculate how many pieces of equipment with
exempted engines you may produce under this section by determining your
U.S.-directed production volume of equipment with Class II engines from
January 1, 2007 through December 31, 2009, calculating your annual
average production for this period, and multiplying the average value
by 0.3. The same calculation applies for small-volume equipment
manufacturers, except that average annual production is multiplied by
2.0. For companies with no eligible production in a given year,
calculate annual average production based only on those years in which
you produce equipment during the specified period with Class II engines
for sale in the United States. Use these allowances for equipment using
model year 2011 and later Class II engines. You may use these
allowances for equipment you produce before December 31, 2014.
    (c) Access to exempted engines. You may use one of the following
approaches to get exempted engines under this section:
    (1) Request a certain number of exempted Class II engines from the
engine manufacturer as described in paragraph (j)(1) of this section.
    (2) You may make arrangements with the engine manufacturer to
receive an engine without an exhaust system and install exhaust systems
without aftertreatment that would otherwise be required to meet Phase 3
standards, as described in paragraph (j)(2) of this section. You must
follow the engine manufacturer's instructions for installing
noncatalyzed mufflers. You must keep records to show which engines you
modify as described in this paragraph (c)(2) and make them available to
the engine manufacturer for any auditing under the provisions of Sec.
1054.610. If you do not place the label we specify in paragraph (f) of
this section adjacent to the engine manufacturer's emission control
information label, you must place an additional permanent label as
close as possible to the engine's emission control information label
where it will be readily visible in the final installation with at
least the following items:
    (i) Your corporate name and trademark.
    (ii) The following statement: ``THIS ENGINE MEETS PHASE 2 STANDARDS
UNDER Sec.  1054.625(c)(2).''
    (d) Inclusion of engines not subject to Phase 3 standards. The
following provisions apply to engines that are not subject to Phase 3
standards:
    (1) If you use the provisions of 40 CFR 1068.105(a) to use up your
inventories of engines not certified to new emission standards, do not
include these units in your count of equipment with exempted engines
under paragraph (g)(2) of this section.
    (2) If you install engines that are exempted from the Phase 3
standards for any reason, other than for equipment-manufacturer
allowances under this section, do not include these units in your count
of equipment with exempted engines under paragraph (g)(2) of this
section. For example, if we grant a hardship exemption for the engine
manufacturer, you may count these as compliant engines under this
section. This paragraph (d)(2) applies only if the engine has a
permanent label describing why it is exempted from the Phase 3
standards.
    (e) Standards. If you produce equipment with exempted engines under
this section, the engines must meet the Phase 2 emission standards
specified in 40 CFR part 90. Any equipment using exempted engines under
this section is also exempt from the running loss standard specified in
Sec.  1054.112.
    (f) Equipment labeling. You must add a permanent label, written
legibly in English, to the engine or another readily visible part of
each piece of equipment with exempted engines you produce under this
section. This label, which supplements the engine manufacturer's
emission control information label, must include at least the following
items:
    (1) The label heading ``EMISSION CONTROL INFORMATION''.
    (2) Your corporate name and trademark.
    (3) The calendar year in which the equipment is manufactured.
    (4) An e-mail address and phone number to contact for further
information, or a Web site that includes this contact information.
    (5) The following statement: THIS EQUIPMENT [or identify the type
of equipment] HAS AN ENGINE THAT MEETS U.S. EPA EMISSION STANDARDS
UNDER 40 CFR 1054.625.
    (g) Notification and reporting. You must notify us of your intent
to produce equipment under the provisions of this section and send us
an annual report to verify that you are not exceeding the production
limits for equipment with exempted engines, as follows:
    (1) Send the Designated Compliance Officer a written notice of your
intent before you use the provisions of this section including all the
following:
    (i) Your company's name and address, and your parent company's name
and address, if applicable. Also identify the names of any other
companies operating under the same parent company.
    (ii) The name, phone number and e-mail address of a person to
contact for more information.
    (iii) The calendar years in which you expect to use the exemption
provisions of this section.
    (iv) The name and address of each company you expect to produce
engines for the equipment you manufacture under this section.
    (v) How many pieces of equipment with exempted engines you may sell
under this section, as described in paragraph (b) of this section.
Include your production figures for the period from January 1, 2007
through December 31, 2009, including figures broken down by equipment
model and calendar year. You may send corrected figures with lower
production volumes anytime after your initial notification. To make a
correction for higher production volumes, send us the corrected figures
by September 30, 2010. We may ask you to give us additional information
to confirm your production figures.
    (2) For each year that you use the provisions of this section, send
the Designated Compliance Officer a written report by March 31 of the
following year. Identify the following things in your report:
    (i) The total count of equipment with exempted engines you sold in
the preceding year, based on actual U.S.-directed production
information. If you produce equipment in the 2010 calendar year with
exempted engines from the

2011 model year, include these units in your March 31, 2012 report.
    (ii) Cumulative figures describing how many pieces of equipment
with exempted engines you have produced for all the years you used the
provisions of this section.
    (iii) The manufacturer of the engine installed in the equipment you
produce under this section, if this is different than you specified
under paragraph (g)(1)(iv) of this section.
    (3) If you send your initial notification under paragraph (g)(1) of
this section after the specified deadline, we may approve your use of
allowances under this section. In your request, describe why you were
unable to meet the deadline.
    (h) Recordkeeping. Keep the following records of all equipment with
exempted engines you produce under this section until at least December
31, 2019:
    (1) The model number for each piece of equipment.
    (2) Detailed figures for determining how many pieces of equipment
with exempted engines you may produce under this section, as described
in paragraph (b) of this section.
    (3) The notifications and reports we require under paragraph (g) of
this section.
    (i) Enforcement. Producing more exempted engines or equipment than
we allow under this section or installing engines that do not meet the
emission standards of paragraph (e) of this section violates the
prohibitions in 40 CFR 1068.101(a)(1). You must give us the records we
require under this section if we ask for them (see 40 CFR
1068.101(a)(2)).
    (j) Provisions for engine manufacturers. As an engine manufacturer,
use one of the following approaches to produce exempted engines under
this section:
    (1) The provisions of this paragraph (j)(1) apply if you do not use
the delegated-assembly provisions of Sec.  1054.610 for any of the
engines in an engine family. You must have written assurance from
equipment manufacturers or your authorized distributors that they need
a certain number of exempted engines under this section. Keep these
records for at least five years after you stop producing engines under
this section. You must also send us an annual report of the engines you
produce under this section, as described under Sec.  1054.250(a). The
engines must meet the emission standards in paragraph (e) of this
section and you must meet all the requirements of 40 CFR 1068.265. You
must meet the labeling requirements in 40 CFR 90.114, but add the
following statement instead of the compliance statement in 40 CFR
90.114(b)(7): THIS ENGINE MEETS U.S. EPA EMISSION STANDARDS UNDER 40
CFR 1054.625 AND MUST BE USED ONLY UNDER THOSE FLEXIBILITY PROVISIONS.
    (2) The following provisions apply if you notify us that you plan
to use the delegated-assembly provisions of Sec.  1054.610 for one or
more equipment manufacturers for an engine family:
    (i) Include test data in your application for certification showing
that your engines will meet the standards specified in paragraph (e) of
this section if they have a noncatalyzed muffler in place of the
aftertreatment that is part of the certified configuration. Use good
engineering judgment for these measurements, which may involve sampling
exhaust upstream of the catalyst or operating the engine with a
noncatalyzed muffler. This may be based on emission measurements from
previous model years if the data is still appropriate for the current
engine configuration.
    (ii) Produce all your engines with the emission control information
label we specify in Sec.  1054.135. The engines must also be labeled as
specified in 40 CFR 1068.261.
    (iii) Include in the installation instructions required under Sec.
1054.610 any appropriate instructions or limitations on installing
noncatalyzed mufflers to ensure that the fully assembled engine will
meet the emission standards specified in paragraph (e) of this section.
You may identify an appropriate range of backpressures, but this may
not involve any instructions related to changing the fuel system for
different fueling rates.
    (iv) Use one of the following approaches to properly account for
emission credits if your engine family generates exhaust emission
credits under subpart H of this part:
    (A) Multiply the credits calculated under Sec.  1054.705 by 0.9.
This is based on the expectation that equipment manufacturers will
modify 10 percent of the engines to no longer meet Phase 3 standards.
    (B) Include in your emission-credit calculations only those engines
for which you can establish that the equipment manufacturer did not use
the provisions of this section. This would involve an evaluation for
each affected equipment manufacturer. For example, under this provision
you may count emission credits for engines that you sell to equipment
manufacturers with which you have no contract for delegated assembly.
You may also count emission credits for engines that you sell to
equipment manufacturers with which you have a delegated-assembly
relationship if you confirm that the equipment manufacturer did not use
the provisions of this section for those engines.
    (k) Additional exemptions for mid-sized companies. If your annual
production of equipment with Class II engines in 2007, 2008, and 2009
is between 5,000 and 50,000 units, you may request additional engine
allowances under this section. To do this, notify us by January 31,
2010 if you believe the provisions of this section will not allow you
to sell certain equipment models starting in the 2011 model year. In
your notification, show us that you will be able to produce a number of
Class II equipment models representing at least half your total U.S.-
directed production volume in the 2011 model year that will be
compliant with all Phase 3 exhaust and evaporative emission standards.
Also describe why you need more allowances under this section to
accommodate anticipated changes in engine designs resulting from engine
manufacturers' compliance with changing exhaust emission standards.
Include a proposal for the number of additional allowances you would
need, with supporting rationale. We may approve allowances up to a
total of 100 percent of the average annual U.S.-directed production
volume you report under paragraph (b) of this section (in place of the
30 percent that is otherwise allowed).

Sec.  1054.626  What special provisions apply to equipment imported
under the Transition Program for Equipment Manufacturers?

    This section describes requirements that apply to equipment
manufacturers using the provisions of Sec.  1054.625 for equipment
produced outside the United States. Note that Sec.  1054.625 limits
these provisions to equipment manufacturers that install some engines
and have primary responsibility for designing and manufacturing
equipment. Companies that import equipment into the United States
without meeting these criteria are not eligible for allowances under
Sec.  1054.625. Such importers may import equipment with exempted
engines only as described in paragraph (b) of this section.
    (a) You or someone else may import your equipment with exempted
engines under this section if you comply with the provisions in Sec.
1054.625 and commit to the following:
    (1) Give any EPA inspector or auditor complete and immediate access
to inspect and audit, as follows:
    (i) Inspections and audits may be announced or unannounced.

    (ii) Inspections and audits may be performed by EPA employees or
EPA contractors.
    (iii) You must provide access to any location where--
    (A) Any nonroad engine, equipment, or vehicle is produced or
stored.
    (B) Documents related to manufacturer operations are kept.
    (C) Equipment, engines, or vehicles are tested or stored for
testing.
    (iv) You must provide any documents requested by an EPA inspector
or auditor that are related to matters covered by the inspections or
audit.
    (v) EPA inspections and audits may include review and copying of
any documents related to demonstrating compliance with the exemptions
in Sec.  1054.625.
    (vi) EPA inspections and audits may include inspection and
evaluation of complete or incomplete equipment, engines, or vehicles,
and interviewing employees.
    (vii) You must make any of your employees available for interview
by the EPA inspector or auditor, on request, within a reasonable time
period.
    (viii) You must provide English language translations of any
documents to an EPA inspector or auditor, on request, within 10 working
days.
    (ix) You must provide English-language interpreters to accompany
EPA inspectors and auditors, on request.
    (2) Name an agent for service located in the United States. Service
on this agent constitutes service on you or any of your officers or
employees for any action by EPA or otherwise by the United States
related to the requirements of this part.
    (3) The forum for any civil or criminal enforcement action related
to the provisions of this section for violations of the Clean Air Act
or regulations promulgated thereunder shall be governed by the Clean
Air Act.
    (4) The substantive and procedural laws of the United States shall
apply to any civil or criminal enforcement action against you or any of
your officers or employees related to the provisions of this section.
    (5) Provide the notification required by Sec.  1054.625(g). Include
in the notice of intent in Sec.  1054.625(g)(1) a commitment to comply
with the requirements and obligations of Sec.  1054.625 and this
section. This commitment must be signed by the owner or president.
    (6) You, your agents, officers, and employees must not seek to
detain or to impose civil or criminal remedies against EPA inspectors
or auditors, whether EPA employees or EPA contractors, for actions
performed within the scope of EPA employment related to the provisions
of this section.
    (7) By submitting notification of your intent to use the provisions
of Sec.  1054.625, producing and exporting for resale to the United
States nonroad equipment under this section, or taking other actions to
comply with the requirements of this part, you, your agents, officers,
and employees, without exception, become subject to the full operation
of the administrative and judicial enforcement powers and provisions of
the United States as described in 28 U.S.C. 1605(a)(2), without
limitation based on sovereign immunity, for conduct that violates the
requirements applicable to you under this part 1054--including such
conduct that violates 18 U.S.C. 1001, 42 U.S.C. 7413(c)(2), or other
applicable provisions of the Clean Air Act--with respect to actions
instituted against you and your agents, officers, and employees in any
court or other tribunal in the United States.
    (8) Any report or other document you submit to us must be in the
English language or include a complete translation in English.
    (9) You may be required to post a bond to cover any potential
enforcement actions under the Clean Air Act before you or anyone else
imports your equipment with exempted engines under this section, as
specified in Sec.  1054.690. Use the bond amount specified in Sec.
1054.690 without adjusting for inflation. Note that you may post a
single bond to meet the requirements of this section and Sec.  1054.690
together.
    (b) The provisions of this paragraph (b) apply to importers that do
not install engines into equipment and do not have primary
responsibility for designing and manufacturing equipment. Such
importers may import equipment with engines exempted under Sec.
1054.625 only if each engine is exempted under an allowance provided to
an equipment manufacturer meeting the requirements of Sec.  1054.625
and this section. You must notify us of your intent to use the
provisions of this section and send us an annual report, as follows:
    (1) Notify the Designated Compliance Officer in writing before you
use the provisions of Sec.  1054.625. Include the following
information:
    (i) Your company's name and address, and your parent company's name
and address, if applicable.
    (ii) The name and address of the companies that produce the
equipment and engines you will be importing under this section.
    (iii) Your best estimate of the number of units you will import
under this section in the upcoming calendar year, broken down by
equipment manufacturer.
    (2) For each year that you use the provisions of this section, send
the Designated Compliance Officer a written report by March 31 of the
following year. Include in your report the total number of engines you
imported under this section in the preceding calendar year, broken down
by engine manufacturer and by equipment manufacturer.

Sec.  1054.630  What provisions apply for importation of individual
items for personal use?

    (a) Any individual may import previously used nonconforming engines
for purposes other than resale, but no more than once in any five-year
period. This may include up to three nonconforming engines imported at
the same time. To import engines under this section, provide to the
Customs official the following information:
    (1) Identify your name, address, and telephone number.
    (2) If you are importing engines under this section on behalf of
another person, identify the ultimate engine owner's name, address, and
telephone number.
    (3) Identify the total number of engines you are importing and
specify the make, model, identification number, and original production
year of each engine.
    (4) State: ``I am importing these previously used engines for
personal use. I have not imported any engines under the provisions of
40 CFR 1054.630 within the previous five years. I am not importing
these engines for purpose of resale. I authorize EPA enforcement
officers to inspect my engines and my facilities as permitted by the
Clean Air Act.''
    (b) We may require you to send us additional information but you do
not need written approval from us to import engines under this section.
We will also not require a U.S. Customs Service bond for engines you
import under this section.
    (c) The provisions of this section may not be used to circumvent
emission standards that apply to new engines under this part. For
example, you may not purchase new engines and use them in a trivial
manner outside of the United States to qualify for importation under
this section.
    (d) If you violate the provisions of this section, or submit false
information to obtain this exemption, you will be subject to civil
penalties as specified in 40 CFR 1068.101(a)(2) and (b)(5).

Sec.  1054.635  What special provisions apply for small-volume engine
and equipment manufacturers?

    This section describes how we apply the special provisions in this
part for small-volume engine and equipment manufacturers.
    (a) If you qualify under paragraph (1) or (2) of the definition of
small-volume engine manufacturer or under paragraph (1) or (2) of the
definition of small-volume equipment manufacturer in Sec.  1054.801,
the small-volume provisions apply as specified in this part.
    (b) If you are a small business (as defined by the Small Business
Administration at 13 CFR 121.201) that manufactures nonroad spark-
ignition engines or equipment, but you do not qualify under paragraph
(1) or (2) of the definition of small-volume engine manufacturer or
under paragraph (1) or (2) of the definition of small-volume equipment
manufacturer in Sec.  1054.801, you may ask us to designate you to be a
small-volume engine or equipment manufacturer. You may do this whether
you began manufacturing engines before, during, or after 2007. We may
set other reasonable conditions that are consistent with the intent of
this section and the Clean Air Act.
    (c) Special provisions apply for small-volume engine and equipment
manufacturers, as illustrated by the following examples:
    (1) Additional lead time and other provisions related to the
transition to new emission standards. See Sec.  1054.145.
    (2) More flexible arrangements for creating engine families. See
Sec.  1054.230.
    (3) Assigned deterioration factors. See Sec.  1054.240.
    (4) Waived requirements for production-line testing. See Sec.
1054.301.
    (5) Streamlined certification provisions for equipment
manufacturers relying on engine manufacturer's design parameters. See
Sec.  1054.612.
    (6) Additional allowances under the Transition Program for
Equipment Manufacturers. See Sec.  1054.625.
    (7) Additional special provisions apply for small-volume engine and
equipment manufacturers under 40 CFR part 1068. For example, see 40 CFR
1068.250.
    (d) Small-volume engine and equipment manufacturers may ask us to
waive or modify the requirements of Sec.  1054.690 if this would cause
a serious economic hardship, as long as you demonstrate to us in some
other way that you will meet any potential compliance-or enforcement-
related obligations. In evaluating such a request, we would consider
the extent to which there is a risk of noncompliance or nonconformity
and the extent to which the manufacturer could be expected to fulfill
future regulatory obligations and administrative judgments. We may also
consider how many years the manufacturer has certified engines without
a violation or a finding of noncompliance to determine whether to
adjust applicable asset thresholds or to reduce the minimum bond value.
We may set other reasonable conditions to ensure that the manufacturer
will meet applicable requirements.
    (e) If you use any of the provisions of this part that apply
specifically to small-volume manufacturers and we find that you exceed
the production limits or otherwise do not qualify as a small-volume
manufacturer, we may consider you to be in violation of the
requirements that apply for companies that are not small-volume
manufacturers for those engines produced in excess of the specified
production limits. If you no longer qualify as a small-volume engine
manufacturer (based on increased production volumes or other factors),
we will work with you to determine a reasonable schedule for complying
with additional requirements that apply. For example, if you no longer
qualify as a small-volume engine manufacturer shortly before you
certify your engines for the next model year, we might allow you to use
assigned deterioration factors for one more model year.

Sec.  1054.640  What special provisions apply to branded engines?

    The following provisions apply if you identify the name and
trademark of another company instead of your own on your emission
control information label, as provided by Sec.  1054.135(c)(2):
    (a) You must have a contractual agreement with the other company
that obligates that company to take the following steps:
    (1) Meet the emission warranty requirements that apply under Sec.
1054.120. This may involve a separate agreement involving reimbursement
of warranty-related expenses.
    (2) Report all warranty-related information to the certificate
holder.
    (b) In your application for certification, identify the company
whose trademark you will use.
    (c) You remain responsible for meeting all the requirements of this
chapter, including warranty and defect-reporting provisions.

Sec.  1054.645  What special provisions apply for converting an engine
to use an alternate fuel?

    A certificate of conformity is no longer valid for an engine if the
engine is modified such that it is not in a configuration covered by
the certificate. This section applies if such modifications are done to
convert the engine to run on a different fuel type. Such engines may
need to be recertified as specified in this section if the certificate
is no longer valid for that engine.
    (a) Converting a certified new engine to run on a different fuel
type violates 40 CFR 1068.101(a)(1) if the modified engine is not
covered by a certificate of conformity.
    (b) Converting a certified engine that is not new to run on a
different fuel type violates 40 CFR 1068.101(b)(1) if the modified
engine is not covered by a certificate of conformity. We may specify
alternate certification provisions consistent with the requirements of
this part. For example, you may certify the modified engine for a
partial useful life. For example, if the engine is modified halfway
through its original useful life period, you may generally certify the
engine based on completing the original useful life period; or if the
engine is modified after the original useful life period is past, you
may generally certify the engine based on testing that does not involve
further durability demonstration.
    (c) Engines may be certified using the certification procedures for
new engines as specified in this part or using the certification
procedures for aftermarket parts as specified in 40 CFR part 85,
subpart V. Unless the original engine manufacturer continues to be
responsible for the engine as specified in paragraph (d) of this
section, you must remove the original engine manufacturer's emission
control information label if you recertify the engine.
    (d) The original engine manufacturer is not responsible for
operation of modified engines in configurations resulting from
modifications performed by others. In cases where the modification
allows an engine to be operated in either its original configuration or
a modified configuration, the original engine manufacturer remains
responsible for operation of the modified engine in its original
configuration.
    (e) Entities producing conversion kits may obtain certificates of
conformity for the converted engines. Such entities are engine
manufacturers for purposes of this part.

Sec.  1054.650  What special provisions apply for adding or changing
governors?

    The special provisions in this section apply for engines that will
not be governed to control engine speeds

consistent with the constant-speed operation reflected by the duty
cycles specified in Sec.  1054.505. We refer to these as constant-speed
governors in this section. Paragraph (a) of this section also applies
for any engines shipped without installed governors.
    (a) The representative-testing requirements of 40 CFR 1065.10(c)(1)
related to in-use duty cycles do not apply to engines you produce and
ship without constant-speed governors if you comply with all the
following requirements:
    (1) You must have test data showing that the effectiveness of the
engine's emission controls over the expected range of in-use operation
will be similar to that measured over the specified duty cycle.
Alternatively, if your emission controls depend on maintaining a
consistent air-fuel ratio, you may demonstrate that the engine is
calibrated to maintain a consistent air-fuel ratio over the expected
range of in-use operation.
    (2) Describe in your application for certification the data and
analysis that supports your conclusion.
    (b) It is a violation of the tampering provisions in 40 CFR
1068.101(b)(1) to remove a governor from a certified engine unless you
recertify the engine in the modified configuration.

Sec.  1054.655  What special provisions apply for installing and
removing altitude kits?

    An action for the purpose of installing or modifying altitude kits
and performing other changes to compensate for changing altitude is not
considered a prohibited act under 40 CFR 1068.101(b) as long as as it
is done consistent with the manufacturer's instructions.

Sec.  1054.660  What are the provisions for exempting emergency rescue
equipment?

    The provisions of this section apply for new equipment built on or
after January 1, 2010.
    (a) Equipment manufacturers may introduce into U.S. commerce
equipment that is not certified to current emission standards under the
following conditions if the equipment will be used solely in emergency
rescue situations:
    (1) You must determine annually that no engines certified to
current emission standards are available to power the equipment safely
and practically. We may review your records supporting this
determination at any time.
    (2) You may not use exempted engines for the following equipment
used to provide remote power to a rescue tool: generators, alternators,
compressors, or pumps.
    (3) If engines that meet less stringent emission standards are
capable of powering your equipment safely and practically, you must use
them as a condition of this exemption. You must use available engines
meeting the most stringent standards feasible.
    (4) You must send the engine manufacturer a written request for
each exempted equipment model.
    (5) You must notify the Designated Compliance Officer of your
intent to use the provisions of this section. We may require you to
notify us annually or to send us annual reports describing how you meet
the conditions of this section.
    (b) For the purposes of this section, ``emergency rescue
situations'' means firefighting or other situations in which a person
is retrieved from imminent danger.
    (c) As an engine manufacturer, you may produce exempt engines under
this section without our prior approval if you have a written request
for an exempted engine for use in emergency rescue equipment from the
equipment manufacturer. You must permanently label engines with the
following statement: ``EMERGENCY RESCUE EQUIPMENT--EXEMPT FROM EMISSION
STANDARDS UNDER 40 CFR 1054.660.'' Failure to properly label an engine
will void the exemption.
    (d) We may discontinue an exemption under this section if we find
that engines are not used solely for emergency rescue equipment or if
we find that a certified engine is available to power the equipment
safely and practically.

Sec.  1054.690  What bond requirements apply for certified engines?

    (a) Before introducing certified engines into U.S. commerce, you
must post a bond to cover any potential compliance or enforcement
actions under the Clean Air Act unless you demonstrate to us in your
application for certification that you are able to meet any potential
compliance-or enforcement-related obligations, as described in this
section. See paragraph (i) of this section for the requirements related
to importing engines that have been certified by someone else. Note
that you might also post bond under this section to meet your
obligations under Sec.  1054.120.
    (b) The bonding requirements apply if you do not have long-term
assets in the United States meeting any of the following thresholds:
    (1) A threshold of $3 million applies if you have been a
certificate holder in each of the preceding ten years without failing a
test conducted by EPA officials or having been found by EPA to be
noncompliant under applicable regulations.
    (2) A threshold of $6 million applies if you are a secondary engine
manufacturer.
    (3) A threshold of $10 million applies if you do not qualify for
the smaller bond thresholds in paragraph (b)(1) or (2) of this section.
    (c) For the purpose of establishing your level of long-term assets
under paragraph (b) of this section, include the values from your most
recent balance sheet for buildings, land, and fixed equipment, but
subtract depreciation and related long-term liabilities (such as a
mortgage). If you have sufficient long-term assets to avoid bond
payments under this section, you must identify the location of these
assets in your application for certification.
    (d) The minimum value of the bond is $500,000. A higher bond value
may apply based on the per-engine bond values shown in Table 1 to this
section and on the U.S.-directed production volume from each
displacement grouping for the calendar year. For example, if you have
projected U.S.-directed production volumes of 10,000 engines with 180
cc displacement and 10,000 engines with 400 cc displacement in 2013,
the appropriate bond amount is $750,000. Adjust the value of the bond
as follows:
    (1) If your estimated or actual U.S.-directed production volume in
any later calendar year increases beyond the level appropriate for your
current bond payment, you must post additional bond to reflect the
increased volume within 90 days after you change your estimate or
determine the actual production volume. You may not decrease your bond.
    (2) If you sell engines without aftertreatment components under the
provisions of Sec.  1054.610, you must increase the per-engine bond
values for the current year by 20 percent. Round calculated values to
the nearest dollar.

           Table 1 to Sec.   1054.690--Per-Engine Bond Values
------------------------------------------------------------------------
                                                             The per-
 For engines with displacement falling in the following     engine bond
                      ranges . . .                        value is . . .
------------------------------------------------------------------------
Disp. < 225 cc..........................................             $25
225 <= Disp. < 740 cc...................................              50
740 <= Disp. <= 1,000 cc................................             100
Disp. > 1,000 cc........................................             200
------------------------------------------------------------------------

    (e) The threshold identified in paragraph (b) of this section and
the bond values identified in paragraph (d) of this section are in 2008
dollars. Adjust these values in 2010 and later calendar years by
comparing the

Consumer Price Index values published by the Bureau of Labor Statistics
for the preceding June and June 2008 (see ftp://ftp.bls.gov/pub/
special.requests/cpi/cpiai.txt). Round calculated values for the
thresholds and for total bond obligations to the nearest thousand
dollars.
    (f) You may meet the bond requirements of this section by obtaining
a bond from a third-party surety that is cited in the U.S. Department
of Treasury Circular 570, ``Companies Holding Certificates of Authority
as Acceptable Sureties on Federal Bonds and as Acceptable Reinsuring
Companies'' (http://www.fms.treas.gov/c570/c570.html#certified). You
must maintain this bond for every year in which you sell certified
engines and for five years after you no longer hold a certificate of
conformity.
    (g) If you forfeit some or all of your bond in an enforcement
action, you must post any appropriate bond for continuing sale within
90 days after you forfeit the bond amount.
    (h) You will forfeit the proceeds of the bond posted under this
section if you need to satisfy any United States administrative
settlement agreement, administrative final order, or judicial judgment
against you arising from your violation of this chapter, or violation
of 18 U.S.C. 1001, 42 U.S.C. 7413(c)(2), or other applicable provisions
of the Clean Air Act.
    (i) If you are required to post a bond under this section, you must
note that in your application for certification as described in Sec.
1054.205. Your certification is conditioned on your compliance with
this section. Your certificate is automatically suspended if you fail
to comply with the requirements of this section. We may also revoke
your certificate.
    (j) The following provisions apply if you import engines for resale
when those engines have been certified by someone else (or equipment
containing such engines):
    (1) You and the certificate holder are each responsible for
compliance with the requirements of this part and the Clean Air Act.
For example, we may require you to comply with the warranty
requirements in the standard-setting part.
    (2) You do not need to post bond if the certificate holder complies
with the bond requirements of this section. You also do not need to
post bond if the certificate holder complies with the asset
requirements of this section and the repair-network provisions of Sec.
1054.120(f)(4).

Subpart H--Averaging, Banking, and Trading for Certification

Sec.  1054.701  General provisions.

    (a) You may average, bank, and trade (ABT) emission credits for
purposes of certification as described in this subpart to show
compliance with the standards of this part. This applies for engines
with respect to exhaust emissions and for equipment with respect to
evaporative emissions. Participation in this program is voluntary.
    (b) The definitions of subpart I of this part apply to this
subpart. The following definitions also apply:
    (1) Actual emission credits means emission credits you have
generated that we have verified by reviewing your final report.
    (2) Averaging set means a set of engines (or equipment) in which
emission credits may be exchanged only with other engines (or
equipment) in the same averaging set.
    (3) Broker means any entity that facilitates a trade of emission
credits between a buyer and seller.
    (4) Buyer means the entity that receives emission credits as a
result of a trade.
    (5) Family means engine family for exhaust credits or emission
family for evaporative credits.
    (6) Reserved emission credits means emission credits you have
generated that we have not yet verified by reviewing your final report.
    (7) Seller means the entity that provides emission credits during a
trade.
    (8) Standard means the emission standard that applies under subpart
B of this part for engines or fuel-system components not participating
in the ABT program of this subpart.
    (9) Trade means to exchange emission credits, either as a buyer or
seller.
    (c) The use of emission credits is limited to averaging sets, as
follows:
    (1) You may not average or exchange exhaust credits with
evaporative credits, or vice versa.
    (2) Handheld engines and nonhandheld engines are in separate
averaging sets with respect to exhaust emissions except as specified in
Sec.  1054.740(e). You may use emission credits generated under 40 CFR
part 90 for handheld engines subject to the standards in Sec.  1054.103
only if you can demonstrate that those credits were generated by
handheld engines, except as specified in Sec.  1054.740(e). You may use
emission credits generated under 40 CFR part 90 for nonhandheld engines
only if you can demonstrate that those credits were generated by
nonhandheld engines, subject to the provisions of Sec.  1054.740.
    (3) Equipment using handheld engines and equipment using
nonhandheld engines are in separate averaging sets with respect to
evaporative emissions. You may not average or exchange evaporative
credits between either of these averaging sets.
    (4) For purposes of calculating emission credits under this
subpart, engines with displacement at or below 80 cc are presumed to be
handheld engines. You may treat these as nonhandheld engines for
calculating exhaust or evaporative emission credits only for those
engines you can demonstrate will be installed in nonhandheld equipment.
For example, if 50 percent of engines in a family will be used in
nonhandheld equipment, you may calculate the emission credits for 50
percent of the engines to be nonhandheld credits. Use the specified
calculation methods for handheld engines to quantify positive or
negative exhaust emission credits for all engines at or below 80 cc.
    (d) You may not generate evaporative credits based on permeation
measurements from metal fuel tanks.
    (e) You may not use emission credits generated under this subpart
to offset any emissions that exceed an FEL or standard. This applies
for all testing, including certification testing, in-use testing,
selective enforcement audits, and other production-line testing.
However, if exhaust emissions from an engine exceed an exhaust FEL or
standard (for example, during a selective enforcement audit), you may
use emission credits to recertify the family with a higher FEL that
applies only to future production.
    (f) Emission credits may be used in the model year they are
generated (averaging) and in future model years (banking). Emission
credits may not be used for past model years.
    (g) You may increase or decrease an exhaust FEL during the model
year by amending your application for certification under Sec.
1054.225. See 40 CFR 1060.225 for provisions related to changing an FEL
for fuel tank permeation.
    (h) Engine and equipment manufacturers certifying with respect to
evaporative emissions may use emission credits to demonstrate
compliance under this subpart. Component manufacturers may establish
FELs for their certified products, but they may not generate or use
emission credits under this subpart.
    (i) In your application for certification, base your showing of
compliance on projected production

volumes for engines or equipment intended for sale in the United
States. As described in Sec.  1054.730, compliance with the
requirements of this subpart is determined at the end of the model year
based on actual production volumes for engines or equipment intended
for sale in the United States. Do not include any of the following
engines or equipment to calculate emission credits:
    (1) Engines or equipment exempted under subpart G of this part or
under 40 CFR part 1068.
    (2) Engines or equipment intended for export.
    (3) Engines or equipment that are subject to state emission
standards for that model year. However, this restriction does not apply
if we determine that the state standards and requirements are
equivalent to those of this part and that products sold in such a state
will not generate credits under the state program. For example, you may
not include engines or equipment certified for California if California
has more stringent emission standards for these products or if your
products generate or use emission credits under the California program.
    (4) Engines or equipment not subject to the requirements of this
part, such as those excluded under Sec.  1054.5.
    (5) Any other engines or equipment where we indicate elsewhere in
this part 1054 that they are not to be included in the calculations of
this subpart.

Sec.  1054.705  How do I generate and calculate exhaust emission
credits?

    The provisions of this section apply for calculating exhaust
emission credits. You may generate exhaust emission credits only if you
are a certifying engine manufacturer.
    (a) For each participating family, calculate positive or negative
emission credits relative to the otherwise applicable emission
standard. Calculate positive emission credits for a family that has an
FEL below the standard. Calculate negative emission credits for a
family that has an FEL above the standard. Sum your positive and
negative credits for the model year before rounding. Round the sum of
emission credits to the nearest kilogram (kg) using consistent units
throughout the following equation:

Emission credits (kg) = (STD - FEL) x (Volume) x (Power) x (UL) x (LF)
x (10-3)

Where:
STD = the emission standard, in g/kW-hr.
FEL = the family emission limit for the family, in g/kW-hr.
Volume = the number of engines eligible to participate in the
averaging, banking, and trading program within the given family
during the model year, as described in Sec.  1054.701(i).
Power = the maximum modal power of the emission-data engine as
calculated from the applicable test procedure described in subpart F
of this part, in kilowatts.
UL = the useful life for the given family, in hours.
LF = load factor. Use 0.47 for nonhandheld engines and 0.85 for
handheld engines. We may specify a different load factor if we
approve the use of special test procedures for a family under 40 CFR
1065.10(c)(2), consistent with good engineering judgment.

    (b) [Reserved]

Sec.  1054.706  How do I generate and calculate evaporative emission
credits?

    The provisions of this section apply for calculating evaporative
emission credits related to fuel tank permeation. You may generate
credits only if you are a certifying equipment manufacturer. This may
include engine manufacturers that make engines with complete fuel
systems as described in Sec.  1054.2.
    (a) For each participating family, calculate positive or negative
emission credits relative to the otherwise applicable emission
standard. Calculate positive emission credits for a family that has an
FEL below the standard. Calculate negative emission credits for a
family that has an FEL above the standard. Sum your positive and
negative credits for the model year before rounding. Round the sum of
emission credits to the nearest kilogram (kg) using consistent units
throughout the following equation:

Emission credits (kg) = (STD-FEL) x (Total Area) x (UL) x (AF) x (365)
x (10-3)

Where:STD = the emission standard, in g/m2/day.
FEL = the family emission limit for the family, in g/m2/
day, as described in paragraph (b) of this section.
Total Area = The combined internal surface area of all fuel tanks in
the family, taking production volume into account, in m2.
UL = 5 years, which represents the useful life for the given family.
AF= adjustment factor. Use 1.0 for testing at 28 [deg]C; use 0.60
for testing at 40 [deg]C.

    (b) For calculating credits under paragraph (a) of this section,
the emission standard and FEL must both be based on test measurements
at the same temperature (28 [deg] or 40 [deg]C). Determine the FEL for
calculating emission credits relative to testing at 28 [deg]C as
described in paragraphs (b)(1) and (2) of this section. Determine the
FEL for calculating emission credits relative to testing at 40 [deg]C
as described in paragraph (b)(3) of this section.
    (1) To use an FEL below 5.0 g/m2/day, it must be based
on emission measurements.
    (2) The provisions of this paragraph (b)(2) apply for all emission
families with FELs at or above 5.0 g/m2/day. To calculate
emission credits for such emission families, you must choose from one
of the following options and apply it to all your emission families
with FELs at or above 5.0 g/m2/day:
    (i) Option 1: Establish all your FELs based on emission
measurements. This may include measurements from a certifying fuel tank
manufacturer.
    (ii) Option 2: Use an assigned FEL of 10.4 g/m2/day.
This would apply without regard to whether any of these emission
families have measured emission levels below 10.4 g/m2/day.
If any of your fuel tanks were otherwise certified (by you or the fuel
tank manufacturer) with an FEL at or above 5.0 g/m2/day, the
assigned FEL of 10.4 g/m2/day applies only for emission
credit calculations.
    (3) Determine the FEL for calculating emission credits relative to
testing at 40 [deg]C as described in paragraph (b)(1) and (2) of this
section, but use 8.3 g/m2/day instead of 5.0 g/
m2/day and use 17.3 g/m2/day instead of 10.4 g/
m2/day.

Sec.  1054.710  How do I average emission credits?

    (a) Averaging is the exchange of emission credits among your
families. You may average emission credits only within the same
averaging set.
    (b) You may certify one or more families to an FEL above the
emission standard, subject to the FEL caps and other provisions in
subpart B of this part, if you show in your application for
certification that your projected balance of all emission-credit
transactions in that model year is greater than or equal to zero.
    (c) If you certify a family to an FEL that exceeds the otherwise
applicable standard, you must obtain enough emission credits to offset
the family's deficit by the due date for the final report required in
Sec.  1054.730. The emission credits used to address the deficit may
come from your other families that generate emission credits in the
same model year, from emission credits you have banked, or from
emission credits you obtain through trading.

Sec.  1054.715  How do I bank emission credits?

    (a) Banking is the retention of emission credits by the
manufacturer generating the emission credits for use in future model
years for averaging or trading. You may use banked emission credits
only within the averaging set in which they were generated, except as
described in this subpart.

    (b) You may designate any emission credits you plan to bank in the
reports you submit under Sec.  1054.730. During the model year and
before the due date for the final report, you may designate your
reserved emission credits for averaging or trading.
    (c) Reserved credits become actual emission credits when you submit
your final report. However, we may revoke these emission credits if we
are unable to verify them after reviewing your reports or auditing your
records.

Sec.  1054.720  How do I trade emission credits?

    (a) Trading is the exchange of emission credits between
manufacturers. You may use traded emission credits for averaging,
banking, or further trading transactions. Traded emission credits may
be used only within the averaging set in which they were generated,
except as described in this subpart.
    (b) You may trade actual emission credits as described in this
subpart. You may also trade reserved emission credits, but we may
revoke these emission credits based on our review of your records or
reports or those of the company with which you traded emission credits.
You may trade banked credits within an averaging set to any certifying
engine or equipment manufacturer.
    (c) If a negative emission credit balance results from a
transaction, both the buyer and seller are liable, except in cases we
deem to involve fraud. See Sec.  1054.255(e) for cases involving fraud.
We may void the certificates of all families participating in a trade
that results in a manufacturer having a negative balance of emission
credits. See Sec.  1054.745.

Sec.  1054.725  What must I include in my application for
certification?

    (a) You must declare in your application for certification your
intent to use the provisions of this subpart for each family that will
be certified using the ABT program. You must also declare the FELs you
select for the family for each pollutant for which you are using the
ABT program. Your FELs must comply with the specifications of subpart B
of this part, including the FEL caps. FELs must be expressed to the
same number of decimal places as the emission standard.
    (b) Include the following in your application for certification:
    (1) A statement that, to the best of your belief, you will not have
a negative balance of emission credits for any averaging set when all
emission credits are calculated at the end of the year.
    (2) Detailed calculations of projected emission credits (positive
or negative) based on projected production volumes. We may require you
to include similar calculations from your other engine families to
demonstrate that you will be able to avoid a negative credit balance
for the model year. If you project negative emission credits for a
family, state the source of positive emission credits you expect to use
to offset the negative emission credits.

Sec.  1054.730  What ABT reports must I send to EPA?

    (a) If any of your families are certified using the ABT provisions
of this subpart, you must send an end-of-year report within 90 days
after the end of the model year and a final report within 270 days
after the end of the model year. We may waive the requirement to send
the end-of-year report as long as you send the final report on time.
    (b) Your end-of-year and final reports must include the following
information for each family participating in the ABT program:
    (1) Family designation.
    (2) The emission standards that would otherwise apply to the
family.
    (3) The FEL for each pollutant. If you change the FEL after the
start of production, identify the date that you started using the new
FEL and/or give the engine identification number for the first engine
covered by the new FEL. In this case, identify each applicable FEL and
calculate the positive or negative emission credits under each FEL.
    (4) The projected and actual production volumes for the model year
with a point of retail sale in the United States, as described in Sec.
1054.701(i). For fuel tanks, state the production volume in terms of
surface area and production volume for each fuel tank configuration and
state the total surface area for the emission family. If you changed an
FEL during the model year, identify the actual production volume
associated with each FEL.
    (5) The maximum modal power of the emission-data engine or the
appropriate internal surface area of the fuel tank.
    (6) Useful life.
    (7) Calculated positive or negative emission credits for the whole
family. Identify any emission credits that you traded, as described in
paragraph (d)(1) of this section.
    (c) Your end-of-year and final reports must include the following
additional information:
    (1) Show that your net balance of emission credits from all your
participating families in each averaging set in the applicable model
year is not negative.
    (2) State whether you will retain any emission credits for banking.
    (3) State that the report's contents are accurate.
    (d) If you trade emission credits, you must send us a report within
90 days after the transaction, as follows:
    (1) As the seller, you must include the following information in
your report:
    (i) The corporate names of the buyer and any brokers.
    (ii) A copy of any contracts related to the trade.
    (iii) The families that generated emission credits for the trade,
including the number of emission credits from each family.
    (2) As the buyer, you must include the following information in
your report:
    (i) The corporate names of the seller and any brokers.
    (ii) A copy of any contracts related to the trade.
    (iii) How you intend to use the emission credits, including the
number of emission credits you intend to apply to each family (if
known).
    (e) Send your reports electronically to the Designated Compliance
Officer using an approved information format. If you want to use a
different format, send us a written request with justification for a
waiver.
    (f) Correct errors in your end-of-year report or final report as
follows:
    (1) You may correct any errors in your end-of-year report when you
prepare the final report as long as you send us the final report by the
time it is due.
    (2) If you or we determine within 270 days after the end of the
model year that errors mistakenly decreased your balance of emission
credits, you may correct the errors and recalculate the balance of
emission credits. You may not make these corrections for errors that
are determined more than 270 days after the end of the model year. If
you report a negative balance of emission credits, we may disallow
corrections under this paragraph (f)(2).
    (3) If you or we determine anytime that errors mistakenly increased
your balance of emission credits, you must correct the errors and
recalculate the balance of emission credits.

Sec.  1054.735  What records must I keep?

    (a) You must organize and maintain your records as described in
this section. We may review your records at any time.
    (b) Keep the records required by this section for at least eight
years after the due date for the end-of-year report. You may not use
emission credits for any engines or equipment if you do not keep all
the records required under this section. You must therefore keep these

records to continue to bank valid credits. Store these records in any
format and on any media as long as you can promptly send us organized,
written records in English if we ask for them. You must keep these
records readily available. We may review them at any time.
    (c) Keep a copy of the reports we require in Sec.  1054.730.
    (d) Keep records of the engine identification number for each
engine or piece of equipment you produce that generates or uses
emission credits under the ABT program. You may identify these numbers
as a range. If you change the FEL after the start of production,
identify the date you started using each FEL and the range of engine
identification numbers associated with each FEL.
    (e) We may require you to keep additional records or to send us
relevant information not required by this section in accordance with
the Clean Air Act.

Sec.  1054.740  What special provisions apply for generating and using
emission credits?

    (a) You may generate Phase 3 emission credits from 2008 through
2011 model year Class I engines if you voluntarily meet the Phase 3
exhaust emission standards specified in Sec.  1054.105. Divide these
into transitional and enduring emission credits as follows:
    (1) Transitional credits are based on reducing emissions from Phase
2 levels down to Phase 3 levels. Calculate the value of transitional
emission credits as described in Sec.  1054.705, based on setting STD
equal to 15.0 g/kW-hr and FEL equal to 10.0 g/kW-hr. You may use these
transitional credits only for Class I engines in 2012 through 2014
model years. You may not use these transitional credits for Class II
engines.
    (2) Enduring credits are based on reducing emissions below Phase 3
levels. Calculate the value of enduring credits as described in Sec.
1054.705, based on setting STD equal to 10.0 g/kW-hr and FEL to the
value of the family emission limit you select for the family. You may
use these enduring credits for any nonhandheld engines certified to the
Phase 3 standards under this part, except as specified in paragraph (d)
of this section.
    (b) You may generate Phase 3 emission credits from 2008 through
2010 model year Class II engines if you voluntarily meet the Phase 3
exhaust emission standards specified in Sec.  1054.105. Divide these
into transitional and enduring emission credits as follows:
    (1) Transitional credits are based on reducing emissions from Phase
2 levels down to Phase 3 levels. Calculate the value of transitional
emission credits as described in Sec.  1054.705, based on setting STD
equal to 11.0 g/kW-hr and FEL equal to 8.0 g/kW-hr. You may use these
transitional credits only for Class II engines in 2011 through 2013
model years. You may not use these transitional credits for Class I
engines.
    (2) Enduring credits are based on reducing emissions below Phase 3
levels. Calculate the value of enduring credits as described in Sec.
1054.705, based on setting STD equal to 8.0 g/kW-hr and FEL to the
value of the family emission limit you select for the family. You may
use these enduring credits for any nonhandheld engines certified to the
Phase 3 standards under this part, except as specified in paragraph (d)
of this section.
    (c) You may use emission credits generated by Class I and Class II
engines subject to Phase 2 emission standards under 40 CFR part 90 to
demonstrate compliance with the Phase 3 exhaust emission standards, but
only after you have exhausted all transitional credits from engines
meeting Phase 3 standards, subject to the conditions of paragraph (d)
of this section. You may use these Phase 2 emission credits only in the
2012 and 2013 model years for Class I engines and only in the 2011
through 2013 model years for Class II engines. Determine a maximum
number of Phase 2 emission credits for demonstrating compliance with
the Phase 3 standards for a given engine class (Class I or Class II) as
follows:
    (1) Calculate a Phase 2 credit allowance for each engine class
based on production information for model years 2007, 2008, and 2009
using the following equation:

Credit allowance (kg) = (Emissions Delta) x (Volume) x (Avg. Power) x
(Avg. UL) x (LF) x(10-3)

Where:

Emissions Delta = 1.6 g/kW-hr for Class I and 2.1 g/kW-hr for Class
II.
Volume = the number of your engines eligible to participate in the
averaging, banking, and trading program, as described in Sec.
1054.701(i), based on actual U.S.-directed production volumes.
Avg. Power = the production-weighted average value of the maximum
modal power for all your engine families in the engine class, as
described in Sec.  1054.705(a), in kilowatts.
Avg. UL = the production-weighted average value of the useful life
for all your engine families in the engine class, in hours.
LF = load factor. Use 0.47.

    (2) Do not include wintertime engines in the calculation of credit
allowances unless they are certified to meet the otherwise applicable
HC+NOX emission standard.
    (3) Calculate the average annual Phase 2 credit allowance for each
engine class over three model years as specified in paragraph (c)(1) of
this section. The resulting average value is the maximum number of
Phase 2 emission credits you may use under this paragraph (c) for each
engine class.
    (4) For 2013 and earlier model years, include in the reports
described in Sec.  1054.730 the total allowable number of Phase 2
emission credits and your cumulative totals of Phase 2 credits you have
used to comply with the requirements of this part for each engine
class.
    (d) If you generate enduring emission credits from Class I engines
under paragraph (a) of this section, you may not use these for Class II
engines in the 2011 or 2012 model year. Similarly, if you generate
enduring emission credits from Class II engines under paragraph (b) of
this section, you may not use these for Class I engines in the 2012
model year. These restrictions also apply for emission credits you
generate for engines subject to the standards of this part in the 2011
or 2012 model year.
    (e) You may use Phase 2 or Phase 3 emission credits from
nonhandheld engines to demonstrate compliance with the Phase 3
standards for handheld engines subject to the following restrictions:
    (1) The handheld family must be certified in 2008 and all later
model years using carryover of emission data from an engine family that
was most recently certified with new emission data in 2007 or an
earlier model year.
    (2) The handheld family's FEL may not increase above the level
selected for the 2007 model year in later years unless such an increase
is based on emission data from production engines.
    (3) Your total production of handheld engines certified under this
paragraph (e) may not exceed 30,000 in any model year.

Sec.  1054.745  What can happen if I do not comply with the provisions
of this subpart?

    (a) For each family participating in the ABT program, the
certificate of conformity is conditional upon full compliance with the
provisions of this subpart during and after the model year. You are
responsible to establish to our satisfaction that you fully comply with
applicable requirements. We may void the certificate of conformity for
a family if you fail to comply with any provisions of this subpart.
    (b) You may certify your family to an FEL above an emission
standard based on a projection that you will have

enough emission credits to offset the deficit for the family. However,
we may void the certificate of conformity if you cannot show in your
final report that you have enough actual emission credits to offset a
deficit for any pollutant in a family.
    (c) We may void the certificate of conformity for a family if you
fail to keep records, send reports, or give us information we request.
    (d) You may ask for a hearing if we void your certificate under
this section (see Sec.  1054.820).

Subpart I--Definitions and Other Reference Information

Sec.  1054.801  What definitions apply to this part?

    The following definitions apply to this part. The definitions apply
to all subparts unless we note otherwise. All undefined terms have the
meaning the Clean Air Act gives to them. The definitions follow:
    Adjustable parameter means any device, system, or element of design
that someone can adjust (including those which are difficult to access)
and that, if adjusted, may affect emissions or engine performance
during emission testing or normal in-use operation. This includes, but
is not limited to, parameters related to injection timing and fueling
rate. You may ask us to exclude a parameter that is difficult to access
if it cannot be adjusted to affect emissions without significantly
degrading engine performance, or if you otherwise show us that it will
not be adjusted in a way that affects emissions during in-use
operation.
    Aftertreatment means relating to a catalytic converter, particulate
filter, thermal reactor, or any other system, component, or technology
mounted downstream of the exhaust valve (or exhaust port) whose design
function is to decrease emissions in the engine exhaust before it is
exhausted to the environment. Exhaust-gas recirculation (EGR),
turbochargers, and oxygen sensors are not aftertreatment.
    Alcohol-fueled engine means an engine that is designed to run using
an alcohol fuel. For purposes of this definition, alcohol fuels do not
include fuels with a nominal alcohol content below 25 percent by
volume.
    Amphibious vehicle means a vehicle with wheels or tracks that is
designed primarily for operation on land and secondarily for operation
in water.
    Applicable emission standard or applicable standard means an
emission standard to which an engine (or equipment) is subject.
Additionally, if an engine (or equipment) has been or is being
certified to another standard or FEL, applicable emission standard
means the FEL or other standard to which the engine (or equipment) has
been or is being certified. This definition does not apply to subpart H
of this part.
    Auxiliary emission control device means any element of design that
senses temperature, motive speed, engine RPM, transmission gear, or any
other parameter for the purpose of activating, modulating, delaying, or
deactivating the operation of any part of the emission control system.
    Brake power means the usable power output of the engine, not
including power required to fuel, lubricate, or heat the engine,
circulate coolant to the engine, or to operate aftertreatment devices.
    Calibration means the set of specifications and tolerances specific
to a particular design, version, or application of a component or
assembly capable of functionally describing its operation over its
working range.
    Carryover means relating to certification based on emission data
generated from an earlier model year as described in Sec.  1054.235(d).
    Certification means relating to the process of obtaining a
certificate of conformity for an emission family that complies with the
emission standards and requirements in this part.
    Certified emission level means the highest deteriorated emission
level in an emission family for a given pollutant from either transient
or steady-state testing.
    Class I means relating to nonhandheld engines with total
displacement below 225 cc. See Sec.  1054.101 for special provisions
that apply for engines with total displacement at or below 80 cc.
    Class II means relating to nonhandheld engines with total
displacement at or above 225 cc.
    Class III means relating to handheld engines with total
displacement below 20 cc.
    Class IV means relating to handheld engines with total displacement
at or above 20 cc but below 50 cc.