where we find that new test data demonstrate that the use of other
technologies will ensure compliance with applicable emission standards.
These designs will need to produce emission levels comfortably below
the emission standards after considering variability in emission
control performance. In addition, all aspects of these designs would
need to be publicly available and quantifiable. For instance, we would
not create a design-based certification for a material or process
without full public disclosure of all the characteristics of that
material or process relevant to its emission control characteristics.
We would also not include products whose emission control performance
is highly variable due to tolerances in materials or manufacturing
processes. For instance, barrier treatments and post-processing
coatings would generally not be eligible for design-based
certification.
    Manufacturers wanting to use designs other than those discussed
here will have to perform the applicable testing for certification.
However, once an additional technology is proven to be inherently low-
emitting such that it will without question meet emission standards, we
may consider approving its use under the regulations for design-based
certification. For example, if several manufacturers were to pool
resources to test a diurnal emission control strategy and submit the
data to us, we could consider this particular technology, with any
appropriate design specifications, as one that qualifies to be
considered compliant under design-based certification. We intend to
revise the regulations to include any additional technologies we decide
are suitable for design-based certification, but we may also approve
the use of additional design-based certification with these
technologies before changing the regulations.

(9) Coordination With Coast Guard
    As part of its compliance assurance program for safety standards,
the U.S. Coast Guard regularly visits boat builders to perform
inspections on the production of new boats. The frequency of these
inspections is such that each boat builder is visited approximately
once every two years. The U.S. Coast Guard has indicated a willingness
to consider environmental compliance assurance as part of these
inspections. For example, the inspections could include checking for
certification labels and proper installation of emission control
components. We will continue to work with the U.S. Coast Guard to
coordinate these efforts.

G. Small-Business Provisions

(1) Small Business Advocacy Review Panel
    On May 3, 2001, we convened a Small Business Advocacy Review Panel
under section 609(b) of the Regulatory Flexibility Act (RFA) as amended
by the Small Business Regulatory Enforcement Fairness Act of 1996. The
purpose of the Panel was to collect the advice and recommendations of
representatives of small entities that could be affected by the
proposal and to report on those comments and the Panel's findings and
recommendations as to issues related to the key elements of the Initial
Regulatory Flexibility Analysis under section 603 of the Regulatory
Flexibility Act. We re-convened the Panel on August 17, 2006 to update
our findings for this final rule. The Panel report has been placed in
the rulemaking record for this final rule. Section 609(b) of the
Regulatory Flexibility Act directs the Panel to report on the comments
of small entity representatives and make findings as to issues related
to certain elements of an initial regulatory flexibility analysis
(IRFA) under RFA section 603. Those elements of an IRFA are:
     A description of, and where feasible, an estimate of the
number of small entities to which the rule will apply;
     A description of projected reporting, recordkeeping, and
other compliance requirements of the rule, including an estimate of the
classes of small entities that will be subject to the requirements and
the type of professional skills necessary for preparation of the report
or record;
     An identification, to the extent practicable, of all
relevant Federal rules that may duplicate, overlap, or conflict with
the rule; and
     A description of any significant alternative to the rule
that accomplishes the stated objectives of applicable statutes and that
minimizes any significant economic impact of the rule on small
entities.
    In addition to the EPA's Small Business Advocacy Chairperson, the
Panel consisted of the Director of the Assessment and Standards
Division of the Office of Transportation and Air Quality, the
Administrator of the Office of Information and Regulatory Affairs
within the Office of Management and Budget, and the Chief Counsel for
Advocacy of the Small Business Administration.
    EPA used the size standards provided by the Small Business
Administration (SBA) at 13 CFR part 121 to identify small entities for
the purposes of its regulatory flexibility analysis. Companies that
manufacture internal-combustion engines and that employ fewer than
1,000 people are considered small businesses for the purpose of the RFA
analysis for this rule. Equipment manufacturers, boat builders, and
fuel-system component manufacturers that employ fewer than 500 people
are considered small businesses for the purpose of the RFA analysis for
this rule. Based on this information, we asked 25 companies that met
the SBA small business thresholds to serve as small entity
representatives for the duration of the Panel process. These companies
represented a cross-section of engine manufacturers, equipment
manufacturers, and fuel-system component manufacturers.
    With input from small-entity representatives, the Panel drafted a
report which provides findings and recommendations to us on how to
reduce potential burdens on small businesses that may occur as a result
of this final rule. The Panel Report is included in the rulemaking
record for this final rule. We are adopting all the recommendations as
presented in the Panel Report. The flexibility options recommended to
us by the Panel, and any updated assessments, are described below.
(2) Burden Reduction Approaches for Small Businesses Subject to the
Final Evaporative Emission Standards
    The SBAR Panel Report includes six general recommendations for
regulatory flexibility for small businesses affected by the new
evaporative emission standards. This section discusses the provisions
being established based on each of these recommendations plus one
additional provision for small-volume boat builders. In these industry
sectors, we believe the burden reduction approaches presented in the
Panel Report should be applied to all businesses with the exception of
the general economic hardship provision and the marine diurnal
allowances, both of which are described below and are designed
specifically for small businesses. The majority of fuel tanks produced
for the Small SI equipment and Marine SI vessel market are made by
small businesses or by companies producing small volumes of these
products. The purpose of these options is to reduce the potential
burden on companies for which fixed costs cannot be distributed over a
large product line. For this reason, we often also consider production
volumes when making decisions regarding provisions to reduce compliance
burden.
(a) Consideration of Appropriate Lead Time
    Small businesses commented that they would need to make significant
changes to their plastic fuel tank designs and molding practices to
meet the new fuel tank permeation standards. For blow-molded tank
designs with a molded-in permeation barrier, new blow-molding machines
would be needed that could produce multi-layer fuel tanks. One small
business commented that, due to the lead time needed to install a new
machine and to perform quality checks on the tanks, they would not be
ready to sell multi-layer blow-molded fuel tanks until 2011 for the
Small SI and Marine SI markets.
    Small businesses that make rotation-molded fuel tanks were divided
in their opinion of when they would be ready to produce low-permeation
fuel tanks. One manufacturer stated that it is already producing fuel
tanks with a low-permeation inner layer that are used in Small SI
applications. This company also sells marine fuel tanks, but not with
low-permeation technology. However, they have successfully performed
Coast Guard durability testing on a prototype 40-gallon marine tank
using their low-permeation technology. Two other small businesses that
make rotation-molded fuel tanks stated that they have not been able to
identify and demonstrate a low-permeation technology that would meet
their cost and performance needs. They commented that developing and
demonstrating low-permeation technology is especially an issue for the
marine industry because of the many different tank designs and Coast
Guard durability requirements.
    Consistent with the Panel recommendations and in response to the
above comments, we are adopting an implementation schedule that we
believe provides sufficient lead time for blow-molded and marine
rotation-molded fuel tanks. We are establishing

tank permeation implementation dates of 2011 for Class II equipment and
2012 for Class I equipment. We are implementing the permeation
standards in 2011 for portable marine fuel tanks and for personal
watercraft and in 2012 for other installed fuel tanks, which are
typically rotation-molded (see Sec.  1060.1).
    There was no disagreement on the technological feasibility of the
Marine SI diurnal emission standard EPA is considering. The marine
industry has expressed a commitment to developing consensus standards
for the installation of carbon canisters in boats. However, they have
noted that the development of these consensus standards will take time
and that time would be needed for an orderly transition to installing
the diurnal emission controls to their boat models. Therefore, as noted
earlier, we are giving an additional 18 months of lead time, compared
to the proposal, which means that the diurnal standard will apply
starting on July 31, 2011. In addition, in response to concerns that
there are many small boat builders that may need additional time to
become familiar with carbon canister technology and learn how to
install canisters in their boats, we are adopting interim allowances
that will give additional time for a limited number of new boats. Small
boat builders could choose between a percentage-based phase-in for one
year or an allowance to produce up to 1,200 vessels without diurnal
systems over the first two years. The options available to boat
builders are described in more detail in Section VI.C.3 and Section
VI.G.2.f.
    In developing the proposal, the majority of large nonhandheld
equipment manufacturers indicated that they would be using low-
permeation fuel lines in the near term as part of their current product
plans. In addition, the Panel expressed concern that small equipment
manufacturers who do not sell products in California may not
necessarily be planning on using low-permeation fuel lines in 2008.
Therefore, we proposed that the fuel line permeation standards would
take effect in 2008 for most nonhandheld equipment manufacturers and in
2009 for small-volume equipment manufacturers. Given that we are not
adopting the final rule until mid-2008, we have delayed the
implementation of the low-permeation fuel line requirement until
January 1, 2009 for nonhandheld equipment. We are keeping the 2009
implementation date for low-permeation fuel line for small businesses
producing Small SI nonhandheld equipment. We believe the 2009 date is
feasible for all equipment manufacturers, given that fuel line meeting
the low permeation standards is already widely available and
manufacturers selling most types of nonhandheld equipment in California
were required to use such fuel lines starting in 2007 or 2008.
(b) Fuel Tank ABT and Early-Incentive Program
    The Panel recommended that we propose ABT and early-allowance
programs for fuel tank permeation. We are adopting these programs in
this final rule. The provisions of the ABT and early-allowance programs
are described above in Section VI.D.
(c) Broad Definition of Emission Family
    The Panel recommended that we propose broad emission families for
fuel tank emission families similar to the existing provisions for
recreational vehicles. As described earlier in Section VI.F.3, we are
adopting provisions that allow fuel tank emission families to be based
on type of material (including additives such as pigments,
plasticizers, and UV inhibitors that are expected to affect control of
emissions), emission control strategy, and production methods. This
would allow fuel tanks of different sizes, shapes, and wall thicknesses
to be grouped into the same emission family (see Sec.  1060.230). In
addition, Small SI and Marine SI fuel tanks could be allowed in the
same emission family if the tanks meet these criteria. Manufacturers
therefore will be able to broadly group similar fuel tanks into the
same emission family and then test only the configuration most likely
to exceed the emission standard.
(d) Compliance Progress Review for Marine Fuel Tanks
    During the development of the proposed rule, we worked closely with
the recreational marine fuel tank industry to understand their
products, business practices, and production processes. Information
gathered from these interactions was used to craft the proposed
regulatory provisions related to controlling gasoline fuel tank
permeation emissions. During these discussions, important issues were
identified with respect to concerns regarding the technical feasibility
of controlling permeation emissions from rotation-molded tanks made
from cross-link polyethylene (XLPE).
    Manufacturers asserted that the availability of rotation-molded
fuel tanks is critical to the marine industry. This type of fuel tank
is installed in many recreational marine vessels powered by SD/I and
outboard engines. The rotation-molding process, which has low capital
costs relative to injection molding, facilitates the economical
production of fuel tanks in the low production volumes required by boat
builders. Furthermore, plastic fuel tanks offer advantages over metal
fuel tanks, both in terms of cost and corrosion resistance. The
advantages of XLPE over other plastics used in fuel tanks today, such
as HDPE, are its compatibility with the rotation-molding process and
the ability of XLPE fuel tanks to meet the U.S. Coast Guard safety
tests, especially the flame-resistance test. Nearly all manufacturers
of rotation-molded marine fuel tanks qualify as small businesses under
this rule.
    We have concluded that the 2012 fuel permeation standards are
technologically feasible for rotation-molded marine fuel tanks. This
conclusion is supported by data presented in the Final RIA. As can be
seen from the comments on the proposed rule and related information in
the public docket, several rotation-molded tank manufacturers support
EPA's proposed standards and implementation dates and have provided
information to support their positions. We originally proposed tank
permeation standards for these fuel tanks in 2002. Since that time,
several manufacturers have shown progress in the development of low-
permeation, rotation-molded tanks. In addition, this rule provides
about 36 months of lead time for these manufacturers to address
remaining technology issues, certify their products, and prepare for
production of certified fuel tanks.
    However, several other rotation-molded tank manufacturers are not
as far along in their technological progress toward meeting the
standards and are not certain about their ability to meet EPA
requirements in 2012. To address this situation, these manufacturers
have requested that EPA perform a technical review in 2010 to determine
whether the compliance dates should be adjusted. However, for the
reasons discussed above, we believe that the tank permeation standards
have been demonstrated to be technologically feasible in the 2012 time
frame and do not look favorably upon the request for a technology
review of the permeation standard.
    Nevertheless, we are concerned about the potential long-term
impacts on the small businesses that have not yet developed
technologies that meet the new emission standards. Although marine fuel
tanks must comply with Coast Guard safety regulations, marine fuel tank
manufacturers have never been required to certify to permeation
standards. The rotation-molded tank

manufacturers are generally small businesses with limited engineering
staffs and are dependent on materials suppliers for their raw
materials.
    During the next few years, EPA intends to hold periodic progress
reviews with small businesses that make rotation-molded fuel tanks. The
purpose of these progress reviews will be to monitor the progress of
individual companies towards compliance with the tank permeation
standards and to provide feedback as needed. Rather than conducting a
broad program with the entire industry, we plan to conduct separate,
voluntary reviews with each interested company. These sessions will be
instrumental to EPA in following the progress for these companies and
assessing their efforts and potential problems.
    To help address small business concerns, we are relying on the
small-volume manufacturer hardship relief provisions in 40 CFR
1068.250. These provisions are described below. In the event that a
small business is unsuccessful in the 2012 model year and seeks
hardship relief, the progress reviews described above would provide an
important foundation in determining whether a manufacturer has taken
all possible steps to comply with the permeation standards in a timely
manner.
(e) Design-Based Certification
    For recreational vehicles, manufacturers using metal fuel tanks may
certify by design to the tank permeation standards. Tanks using design-
based certification provisions are not included in the ABT program
because they are assigned a certification emission level equal to the
standard. The Panel recommended that we propose to allow design-based
certification for metal tanks and plastic fuel tanks with a continuous
EVOH barrier. The Panel also recommended that we propose design-based
certification for carbon canisters. A detailed description of the new
design-based certification options we are adopting is presented earlier
in Section VI.F.8 of this document.
    The National Marine Manufacturers Association (NMMA), the American
Boat and Yacht Council (ABYC), and the Society of Automotive Engineers
(SAE) have industry-recommended practices for boat designs that must be
met as a condition of NMMA membership. NMMA stated that they are
working to update these recommended practices to include installation
instructions for carbon canisters and design specifications for low-
permeation fuel lines. The Panel recommended that EPA accept data used
for meeting the voluntary requirements as part of the EPA
certification. We will allow this data to be used as part of EPA
certification as long as it is collected consistent with the test
procedures and other requirements described in this final rule.
(f) Marine Diurnal Allowances
    As described above, manufacturers expressed concern that many
small-volume boat builders may need additional time to develop
installation procedures and install carbon canisters in their boats. To
address this, we are establishing an interim allowance program that
will give additional time for these manufacturers for a certain number
of boats. Under this program, each small-volume boat builder will be
allowed to sell these boats without the diurnal emission controls that
would otherwise be required. These allowances are intended to help
small boat builders engage in an orderly transition to the new
standards and will only be available for boats produced in the first
two years of the program. This allowance program applies only to boats
with installed fuel tanks that are expected to use carbon canisters to
meet the diurnal emission standards. Therefore, it does not apply to
portable fuel tanks, personal watercraft, or outboard engines with
under-cowl fuel tanks. If a small-volume boat builder chooses to use
this allowance provision, then the 50 percent phase-in for the first
year, as described in Section VI.C.3, would not apply.
    Specifically, each small-volume boat builder will have a total of
1,200 allowances that may be used, at the manufacturer's discretion,
for boats produced from July 31, 2011 through July 31, 2013.\113\ For
instance, a small boat builder could produce 800 boats in the first
year and 400 in the second year without diurnal emission controls. For
most small boat builders, we expect that this allowance program will
result in an additional year, or even two years, of lead time for them
to address potential installation issues related to carbon canisters.
---------------------------------------------------------------------------

    \113\ In this context, the date of production means the date on
which the engine is installed in the vessel. In the case of boats
using outboard engines, it is the date on which the fuel tank is
installed.
---------------------------------------------------------------------------

    Under this diurnal allowance approach for small-volume boat
builders, such boat builders will only need to place a label on the
vessel with a statement acknowledging that an allowance is being used.
In addition, the small-volume boat builder must notify EPA of its
intent to use the allowances prior to producing any exempted vessels.
The small-volume boat builder must also maintain records of the number
of allowances used and submit a report to EPA showing the number of
allowances used in each year. Note that boats exempted from diurnal
requirements must still use fuel lines and fuel tanks that meet
permeation standards.
(g) Hardship Provisions
    We are adopting two types of hardship provisions consistent with
the Panel recommendations. EPA used the SBA size standards for purposes
of defining ``small businesses'' for its regulatory flexibility
analysis. The eligibility criteria for the hardship provisions
described below reflect EPA's consideration of the Panel's
recommendations and a reasonable application of existing hardship
provisions. As has been our experience with similar provisions already
adopted, we anticipate that hardship mechanisms will be used sparingly.
First, under the unusual circumstances hardship provision, any
manufacturer subject to the new standards may apply for hardship relief
if circumstances outside its control cause the failure to comply and if
failure to sell the subject engines or equipment or fuel system
component would have a major impact on the company's solvency (see
Sec.  1068.245). An example of an unusual circumstance outside a
manufacturer's control may be an ``Act of God,'' a fire at the
manufacturing plant, or the unforeseen shutdown of a supplier with no
alternative available. The terms and time frame of the relief will
depend on the specific circumstances of the company and the situation
involved. As part of its application for hardship, a company will be
required to provide a compliance plan detailing when and how it will
achieve compliance with the standards. This hardship provision will be
available to all manufacturers of engines, equipment, boats, and fuel
system components subject to the new standards, regardless of business
size.
    Second, an economic hardship provision allows small businesses
subject to the new standards to petition EPA for limited additional
lead time to comply with the standards (see Sec.  1068.250). A small
business must make the case that it has taken all possible business,
technical, and economic steps to comply, but the burden of compliance
costs would have a significant impact on the company's solvency.
Hardship relief could include requirements for interim emission
reductions and/or the purchase and use of emission credits. The length
of the

hardship relief decided during review of the hardship application will
be up to one year, with the potential to extend the relief as needed.
We anticipate that one to two years will normally be sufficient. As
part of its application for hardship, a company will be required to
provide a compliance plan detailing when and how it will achieve
compliance with the standards.
    The criteria for determining which manufacturers are eligible for
the economic hardship (as well as other small-volume manufacturer
flexibilities described in this section) are presented in Sections
III.F.2 and IV.G for Marine SI engine manufacturers; in Section V.F.2
for nonhandheld engine manufacturers; and in Section V.F.3 for
nonhandheld equipment manufacturers. For handheld equipment
manufacturers, EPA is using the existing small-volume manufacturer
criterion, which relies on a production cut-off of 25,000 pieces of
handheld equipment per year. For boat builders and fuel-system
component manufacturers, EPA is basing the determination of whether a
company is a small business eligible for the hardship provision on the
SBA size standards at 13 CFR 121. Under SBA size standards, a boat
builder or fuel-system component manufacturer is a small business if it
has 500 or fewer employees.
    The criteria for determining which manufacturers are eligible for
the economic hardship (as well as other small-volume manufacturer
flexibilities described in this section) are presented in Sections
III.F.2 and IV.G for Marine SI engine manufacturers; in Section V.F.2
for nonhandheld engine manufacturers; and in Section V.F.3 for
nonhandheld equipment manufacturers. For handheld equipment
manufacturers, EPA is using the existing small-volume manufacturer
criterion, which relies on a production cut-off of 25,000 pieces of
handheld equipment per year. For boat builders and fuel-system
component manufacturers, EPA is basing the determination of whether a
company is a small business on the SBA definition. Under SBA
regulations, a boat builder or fuel-system component manufacturer is a
small business if it has 500 or fewer employees.
    Because many boat builders, nonhandheld equipment manufacturers,
and handheld equipment manufacturers will depend on fuel tank
manufacturers and fuel line manufacturers to supply certified products
in time to produce complying vessels and equipment, we are also
establishing a hardship provision for all Marine SI vessel
manufacturers and Small SI equipment manufacturers, regardless of size.
The hardship provision allows the boat builder or equipment
manufacturer to request more time if they are unable to obtain a
certified fuel-system component and they are not at fault and would
otherwise face serious economic hardship (see Sec.  1068.255).

H. Technological Feasibility

    We believe there are several strategies that manufacturers can use
to meet the new evaporative emission standards. We have collected and
will continue to collect emission test data on a wide range of
technologies for controlling evaporative emissions. The design-based
certification levels discussed above rely on this test data and we may
amend the list of approved designs and emission levels as more data
become available.
    In the following sections we briefly describe how we selected
specific emission standards and implementation dates, followed by a
more extensive discussion of the expected emission control
technologies. A more detailed discussion of the feasibility of the new
evaporative requirements, including all the underlying test data, is
included in Chapter 5 of the Final RIA. See Table VI-1 for a summary of
the new evaporative emission standards.
(1) Level of Standards
    The fuel line and fuel tank permeation standards for Small SI
equipment and Marine SI vessels are based on the standards already
adopted for recreational vehicles. These applications use similar
technology in their fuel systems. In cases where the fuel systems
differ we have identified technological approaches that could be used
to meet these same emission levels. The control strategies are
discussed below. For fuel lines used with cold-weather equipment, we
are adopting a relaxed set of standards based on available permeation
data. In addition, we have new higher numerical standards for fuel tank
permeation for tests performed at higher temperature (40 [deg]C vs. 28
[deg]C). These higher numerical standards are based on data described
in Chapter 5 of the Final RIA.
    For fuel tanks installed in personal watercraft and for portable
marine fuel tanks, we are adopting diurnal emission standards based on
the current capabilities of these systems. We are basing the new
standard for other installed marine fuel tanks on the capabilities of
passive systems that store emitted vapors in a carbon canister. The
Final RIA describes the test results on passively purged canisters and
other technologies that led us to the level of the diurnal emission
standard.
    We measured running loss emissions and found that some Small SI
products have very high emission levels. The large variety of
manufacturers and equipment types makes it impractical to design a
measurement procedure, which means that we are unable to specify a
performance standard. We are instead adopting a design standard for
running losses from nonhandheld Small SI equipment by specifying that
manufacturers may use any of a variety of specified design solutions,
as described in Section VI.C.5. Several of these design options are
already in common use today.
    We are requiring that equipment and vessel manufacturers use good
engineering practices in their designs to minimize refueling spitback
and spillage. In general, the regulation simply requires manufacturers
to use system designs that are commonly used today. Several refueling
spitback and spillage control strategies are discussed in Chapter 5 of
the Final RIA.
(2) Implementation Dates
    Low-permeation fuel line is widely available today. Many Small SI
equipment manufacturers certifying to permeation standards in
California are selling products with low-permeation fuel line
nationwide. In addition, many boat builders have begun using low-
permeation marine fuel lines to feed fuel from the fuel tank to the
engine. For this reason, we are implementing the fuel line permeation
standards in 2009 for nonhandheld Small SI equipment and for Marine SI
vessels. The dates provide more than two years additional lead time
beyond the California requirements for Small SI equipment. For handheld
equipment, there are no fuel line permeation requirements in
California. In addition, injection molded fuel lines are common in many
applications rather than straight-run extruded fuel line. For this
reason we are delaying implementation of fuel line permeation standards
for handheld equipment until 2012 (or 2013 for small volume emission
families). Primer bulbs and many of the fuel line segments used under
the cowl of outboard marine engines are also injection molded. In
addition, these fuel lines are not subject to standards in California.
We are providing additional lead time for manufacturers to address
emissions from these fuel lines as well. The permeation standard begins
in 2011 for primer bulbs used with marine fuel lines; permeation
standards for under-cowl fuel lines phase in between 2010 and 2015.
    Similar to fuel line technology, low-permeation fuel tank
constructions are

used today in automotive and portable fuel tank applications. This
technology has been developed for use in recreational vehicles and for
Small SI equipment sold in California. The available technology options
include surface treatment and multi-layer constructions, though
rotation-molding presents some unique design challenges. Based on
discussions with fuel tank manufacturers, and our own assessment of the
lead time necessary to change current industry practices, we believe
low-permeation fuel tank technology can be applied in the 2011-2012
model years for Small SI and Marine SI fuel tanks. We are implementing
the fuel tank permeation standards in 2011 for Class II equipment,
portable marine fuel tanks and personal watercraft. For Class I
equipment and other installed marine fuel tanks, the implementation
date is 2012. We are phasing in the handheld fuel tank standards on the
following schedule: 2009 for equipment models certifying in California,
2011 for structurally integrated nylon tanks, 2013 for small-volume
families, and 2010 for the remaining fuel tanks used with handheld
equipment. We believe this will facilitate an orderly transition from
current fuel tank designs to low-permeation fuel tanks.
    We are allowing until 2012 for large marine fuel tanks to meet
permeation standards largely due to concerns raised over the
application of low-permeation rotation-molded fuel tank technology in
marine applications. The majority of these fuel tanks are typically
rotation-molded by small businesses. Although low-permeation technology
has emerged for these applications, we believe the allotted lead time
will be necessary for all manufacturers to be ready to implement this
technology. This will give these manufacturers time to make changes to
their production processes to comply with the standards and to make any
tooling changes that may be necessary. We are similarly implementing
the fuel tank permeation standards for Class I fuel tanks installed in
Small SI equipment in 2012, mostly to align with the implementation
date for the Phase 3 exhaust emission standards. This is especially
important for Class I engines where most of the engine manufacturers
will also be responsible for meeting evaporative emission standards.
    We are implementing the running loss standards for nonhandheld
Small SI equipment in the same year as the exhaust emission standards.
We believe this is appropriate because the running loss vapor will in
some cases be routed to the intake manifold for combustion in the
engine. Manufacturers will need to account for the effect of the
additional running loss vapor in their engine calibrations.
    We are implementing the new diurnal standards for portable marine
fuel tanks on January 1, 2010 and for personal watercraft beginning
with the 2010 model year. We believe these requirements will not result
in a significant change from current practice so the dates will provide
sufficient lead time for manufacturers to comply with standards. For
other installed fuel tanks, however, we are adopting a later
implementation date beginning in mid-2011. The development of canisters
as an approach to control diurnal emissions without pressurizing the
tanks has substantially reduced the expected level of effort to
redesign and retool for making fuel tanks. However, canister technology
has not yet been applied commercially to marine applications and the
final rule includes added lead time for manufacturers to work out
various technical parameters associated with the large variety of boat
models and tanks.
(3) Technological Approaches
    We believe several emission control technologies can be used to
reduce evaporative emissions from Small SI equipment and Marine SI
vessels. These emission control strategies are discussed below. Chapter
5 of the Final RIA presents more detail on these technologies and
Chapter 6 provides information on the estimated costs.
(a) Fuel Line Permeation
    Fuel lines produced for use in Small SI equipment and Marine SI
applications are generally extruded nitrile rubber with a cover for
abrasion resistance. Fuel lines used in Small SI applications often
meet SAE J30 R7 specifications, including a permeation limit of 550 g/
m2/day at 23 [deg]C on ASTM Fuel C. Fuel lines for personal
watercraft are typically designed to meet SAE J2046, which includes a
permeation limit of 300 g/m2/day at 23 [deg]C on ASTM Fuel
C.\114\ Marine fuel lines subject to Coast Guard requirements under 33
CFR part 183 are designated as either Type A or Type B and either Class
1 or Class 2. SAE J1527 provides detail on these fuel line designs.
Type A fuel lines pass the U.S. Coast Guard fire test while Type B
designates fuel lines that have not passed this test. Class 1 fuel
lines are intended for fuel-feed lines where the fuel line is normally
in contact with liquid fuel and has a permeation limit of 100 g/
m2/day at 23 [deg]C. Class 2 fuel lines are intended for
vent lines and fuel fill necks where liquid fuel is not continuously in
contact with the fuel line; it has a permeation limit of 300 g/
m2/day at 23 [deg]C. Recently, SAE J1527 has been modified
to include a ``-15'' designation for fuel lines meeting a permeation
limit of 15 g/m2/day at 23 [deg]C on fuel CE10. In general
practice, most boat builders use Class 1 fuel lines for both vent lines
and fuel-feed lines to avoid carrying two types of fuel lines. Most
fuel fill necks, which have a much larger diameter and are constructed
differently, use materials meeting specifications for Class 2 fuel
lines.
---------------------------------------------------------------------------

    \114\ Society of Automotive Engineers Surface Vehicle Standard,
``Personal Watercraft Fuel Systems,'' SAE J2046, Issues 1993-01-19
(Docket EPA-HQ-OAR-2004-0008-0179).
---------------------------------------------------------------------------

    Low-permeability fuel lines are in production today. One fuel line
design, already used in some marine applications, uses a thermoplastic
layer between two rubber layers to control permeation. This
thermoplastic barrier may be either nylon or ethyl vinyl acetate.
Barrier approaches in automotive applications include fuel lines with
fluoroelastomers such as FKM and fluoroplastics such as Teflon and THV.
In addition to presenting data on low-permeation fuel lines, Chapter 5
of the Final RIA lists several fuel-system materials and their
permeation rates. Molded rubber fuel line components, such as
conventional primer bulbs and some handheld fuel lines, could meet the
standard by using a fluoroelastomer such as FKM. The Final RIA also
discusses low-permeation materials that retain their flexibility at low
temperatures.
    Automotive fuel lines made of low-permeation plastic tubing are
generally made from fluoroplastics. An added benefit of these low-
permeability fuel lines is that some fluoropolymers can be made to
conduct electricity and therefore prevent the buildup of static
charges. This type of fuel line can reduce permeation by more than an
order of magnitude below the level associated with barrier-type fuel
lines, but it is relatively inflexible and will need to be molded in
specific shapes for each equipment or vessel design. Manufacturers have
commented that they need flexible fuel lines to fit their many designs,
resist vibration, prevent kinking, and simplify connections and
fittings. An alternative to custom molding is to manufacture fuel lines
with a corrugated profile (like a vacuum hose). Producing flexible
fluoropolymer fuel lines is somewhat more expensive but the result is a
product that meets emission standards without compromising in-use
performance or ease of installation.

(b) Fuel Tank Permeation
    Blow-molding is widely used for the manufacture of Small SI,
portable marine, and PWC fuel tanks. Typically, blow-molding is
performed by creating a hollow tube, known as a parison, by pushing
high-density polyethylene (HDPE) through an extruder with a screw. The
parison is then pinched in a mold and inflated with an inert gas. In
highway applications, low-permeation plastic fuel tanks are produced by
blow molding a layer of ethylene vinyl alcohol (EVOH) or nylon between
two layers of polyethylene. This process is called coextrusion and
requires at least five layers: The barrier layer, adhesive layers on
either side of the barrier layer, and two outside layers of HDPE that
make up most of the thickness of the fuel tank walls. However, multi-
layer construction requires additional extruder screws, which
significantly increases the cost of the blow-molding process. One
manufacturer has developed a two-layer barrier approach using a
polyarylamide inner liner. This technology is not in production yet but
appears to be capable of permeation levels similar to the traditional
EVOH barrier designs. This approach will enable blow-molding of low-
permeation fuel tanks with only one additional extruder screw.
    Multi-layer fuel tanks can also be formed using injection molding.
In this method a low-viscosity polymer is forced into a thin mold to
create the two sides of the fuel tank (e.g., top and bottom), which are
then fused together. To add a barrier layer, a thin sheet of the
barrier material is placed inside the mold before injecting the
poleythylene. The polyethylene, which generally has a much lower
melting point than the barrier material, bonds with the barrier
material to create a shell with an inner liner.
    A less expensive alternative to coextrusion is to blend a low-
permeation resin with the HDPE and extrude it with a single screw to
create barrier platelets. The trade name typically used for this
permeation control strategy is Selar. The low-permeability resin,
typically EVOH or nylon, creates noncontinuous platelets in the HDPE
fuel tank to reduce permeation by creating long, tortuous pathways that
the hydrocarbon molecules must navigate to escape through the fuel tank
walls. Although the barrier is not continuous, this strategy can still
achieve greater than a 90 percent reduction in permeation of gasoline.
EVOH has much higher permeation resistance to alcohol than nylon so it
will likely be the preferred material for meeting the new standard
based on testing with a 10 percent ethanol fuel.
    Many fuel tanks for Small SI equipment are injection-molded out of
either HDPE or nylon. Injection-molding can be used with lower
production volumes than blow-molding due to lower tooling costs. In
this method, a low-viscosity polymer is forced into a thin mold to
create the two sides of the fuel tank; these are then fused together
using vibration, hot plate or sonic welding. A strategy such as Selar
has not been demonstrated to work with injection-molding due to high
shear forces.
    An alternative to injection-molding is thermoforming, which is also
cost-effective for lower production volumes. In this process, sheet
material is heated and then drawn into two vacuum dies. The two halves
are then fused while the plastic is still molten to form the fuel tank.
Low-permeation fuel tanks can be constructed using this process by
using multi-layer sheet material. This multi-layer sheet material can
be extruded using materials similar to those used with multi-layer
blow-molded fuel tank designs. A typical barrier construction includes
a thin EVOH barrier, adhesion layers on both sides, a layer of HDPE
regrind, and outside layers of pure virgin HDPE.
    Regardless of the molding process, another type of low-permeation
technology for HDPE fuel tanks will be to treat the surfaces with a
barrier layer. Two ways of achieving this are known as fluorination and
sulfonation. The fluorination process causes a chemical reaction where
exposed hydrogen atoms are replaced by larger fluorine atoms, which
creates a barrier on the surface of the fuel tank. In this process,
batches of fuel tanks are generally processed post-production by
stacking them in a steel container. The container is then voided of air
and flooded with fluorine gas. By pulling a vacuum in the container,
the fluorine gas is forced into every crevice in the fuel tanks.
Fluorinating with this process treats both the inside and outside
surfaces of the fuel tank, thereby improving the reliability and
durability of the permeation-resistance. As an alternative, blow-molded
fuel tanks can be fluorinated during production by exposing the inside
surface of the fuel tank to fluorine during the molding process.
However, this method may not prove as effective as post-production
fluorination.
    Sulfonation is another surface treatment technology where sulfur
trioxide is used to create the barrier by reacting with the exposed
polyethylene to form sulfonic acid groups on the surface. Current
practices for sulfonation are to place fuel tanks on a small assembly
line and expose the inner surfaces to sulfur trioxide, then rinse with
a neutralizing agent. However, sulfonation can also be performed using
a batch method. Either of these sulfonation processes can be used to
reduce gasoline permeation by more than 95 percent.
    A fourth method for molding plastic fuel tanks is called rotation-
molding. Rotation-molding is a lower-cost alternative for smaller
production volumes. In this method, a mold is filled with a powder form
of polyethylene with a catalyst material. While the mold is rotated in
an oven, the heat melts the plastic. When cross-link polyethylene
(XLPE) is used, this heat activates a catalyst in the plastic, which
causes a strong cross-link material structure to form. This method is
often used for relatively large fuel tanks in Small SI equipment and
for installed marine fuel tanks. The advantages of this method are low
tooling costs, which allows for smaller production volumes, and
increased strength and flame resistance. Flame resistance is especially
important for installed marine fuel tanks subject to 33 CFR part 183.
At this time, the barrier treatment approaches discussed above for HDPE
have not been demonstrated to be effective for XLPE.
    We have evaluated two permeation control approaches for rotation-
molded fuel tanks. The first is to form an inner layer during the
molding process. Historically, the primary approach for this is to use
a drop box that opens after the XLPE tank begins to form. However,
processes have been developed that eliminate the need for a drop box.
With this construction a low-permeation inner liner can be molded into
the fuel tank. Manufacturers are currently developing acetyl copolymer,
nylon, and polybutylene terephthalate inner liners for this
application. In fact, one fuel tank manufacturer is already selling
tanks with a nylon inner liner into Class II Small SI equipment
applications. Initial testing suggests that these barrier layers could
be used to achieve the new standards.
    The second approach to creating a barrier layer on XLPE rotation-
molded fuel tanks is to use an epoxy barrier coating. One manufacturer
has demonstrated that a low-permeation barrier coating can adhere to an
XLPE fuel tank resulting in a permeation rate below the new standard.
In this case, the manufacturer used a low level of fluorination to
increase the surface energy of the XLPE so the epoxy will adhere
properly.

    Marine fuel tanks are sometimes also fabricated out of either metal
or fiberglass. Metal does not permeate so tanks that are constructed
and installed properly to prevent corrosion should meet the new
standards throughout their full service life. For fiberglass fuel
tanks, one manufacturer has developed a composite that has been
demonstrated to meet the new fuel tank permeation standard. Permeation
control is achieved by incorporating fillers into a resin system and
coating the assembled tank interior and exterior. This filler is made
up of nanocomposites (very small particles of treated volcanic ash)
which are dispersed into a carrier matrix. These particles act like the
barrier platelets discussed above by creating a tortuous pathway for
hydrocarbon migration through the walls of the fuel tank.
(c) Diurnal
    Portable marine fuel tanks are currently equipped with a valve that
can be closed by the user when the tank is stored to contain vapor
within the fuel tank. These fuel tanks are designed to hold the
pressure that builds up when a sealed fuel tank undergoes normal daily
warming. This valve must be opened when the engine is operating to
prevent a vacuum from forming in the fuel tank as the fuel level in the
tank decreases. A vacuum in the fuel tank could prevent fuel from being
drawn into the engine. Because the valve is user-controlled, any
emission control is dependent on user behavior. This can be corrected
by replacing the user-controlled valve with a simple one-way valve in
the fuel cap. For instance, a diaphragm valve that is common in many
automotive applications seals when under positive pressure but opens at
low-vacuum conditions.
    Personal watercraft currently use sealed systems with pressure-
relief valves that start venting vapors when pressures reach a
threshold that ranges from 0.5 to 4.0 psi. We believe the new standard
can be met through the use of a sealed fuel system with a 1.0 psi
pressure-relief valve. Personal watercraft should therefore be able to
meet the new standard with little or no change to current designs.
    For other vessels with installed fuel tanks, manufacturers have
commented that even 1.0 psi of pressure would be too high for their
applications.\115\ They expressed concern that their fuel tanks had
large, flat surfaces that would deform or leak at pressures of 0.5 psi
or higher. This concern led us to consider several technologies for
controlling diurnal emissions without pressurizing the tank, including
carbon canisters, volume-compensating air bags, and bladder fuel tanks.
---------------------------------------------------------------------------

    \115\ U.S. Coast Guard regulations in 33 CFR 183.586 require
that marine fuel tanks must be designed to withstand 25,000 pressure
cycles from 0-3 psi. Even though marine fuel tanks typically can
withstand this pressure cycling without damage to the tank, the
tanks tend to deform significantly when under pressure.
---------------------------------------------------------------------------

    The primary evaporative emission control device used in automotive
applications is a carbon canister. With this technology, vapor
generated in the tank is vented to a canister containing activated
carbon. The fuel tank must be sealed such that the only venting that
occurs is through the carbon canister. This prevents more than a
minimal amount of positive or negative pressure in the tank. The
activated carbon collects and stores the hydrocarbons. The activated
carbon bed in automotive canisters is refreshed by drawing air over the
carbon to purge the hydrocarbon vapors and route them to the engine's
air intake where they are eventually burned as fuel for the engine.
    In a marine application, routing purged vapors to the engine's
intake is not practical because of the potential complications with the
engine and tank created by the variety of manufacturers and engine/tank
configurations in the fleet each year. Therefore, canisters were not
originally considered to be a practical technology for controlling
diurnal vapor from boats. Since that time, however, we have collected
information showing that the canister is purged sufficiently during
cooling periods to substantially reduce diurnal emissions. When the
fuel in the tank cools, fresh air is drawn back through the canister
into the fuel tank. This fresh air partially purges the canister and
returns hydrocarbons to the fuel tank. This creates open sites in the
carbon so the canister can again collect vapor during the next heating
event. Test data presented in Chapter 5 of the Final RIA show that a
canister starting from empty is more than 90 percent effective until it
reaches the point of saturation. Once it reaches saturation, a canister
is still capable of reducing diurnal emissions by more than 60 percent
due to the normal airflow across the canister bed during cooling
periods. Adding active purging to route vapors to the engine's air
intake during engine operation would improve the level of control
somewhat, depending on how often the engine is operated.
    Manufacturers have raised the concern that it is common for fuel to
pass out the vent line during refueling. If there were a canister in
the vent line it would become saturated with fuel. While this would not
likely cause permanent damage to the canister, we believe marine fuel
systems should prevent liquid fuel from exiting the vent line for both
environmental and safety reasons. A float valve or small orifice in the
entrance to the vent line from the fuel tank would prevent liquid fuel
from reaching the canister or escaping from the tank. Any pressure
build-up from such a valve would cause fuel to back up the fill neck
and shut off the fuel dispensing nozzle as it now does in automotive
applications. In addition, a vapor space should be included to account
for fuel expansion. Manufacturers have also expressed concerns for
canister durability in marine applications due to vibration, shock, and
humidity. However, there are now marine grades of activated carbon that
are harder and more moisture-resistant than typical automotive carbon.
Manufacturers installed canisters equipped with the marine grade carbon
on 14 boats in a pilot program and encountered no problems. This is
discussed in more detail in Chapter 5 of the Final RIA.
    Another concept for minimizing pressure in a sealed fuel tank is
through the use of a volume-compensating air bag. The purpose of the
bag is to fill up the vapor space above the liquid fuel. By minimizing
the vapor space, the equilibrium concentration of fuel vapors occupies
a smaller volume, resulting in a smaller mass of vapors. As the
equilibrium vapor concentration increases with increasing temperature,
the vapor space expands, which forces air out of the bag through the
vent to atmosphere. Because the bag volume decreases to compensate for
the expanding vapor space, total pressure inside the fuel tank stays
very close to atmospheric pressure. Once the fuel tank cools in
response to cooling ambient temperatures the resulting vacuum in the
fuel tank would make the bag expand again by drawing air from the
surrounding environment. Our test results show that pressure could be
kept below 0.8 psi using a bag with a capacity equal to 25 percent of
the fuel tank capacity. The use of a volume-compensating air bag, in
conjunction with a pressure-relief valve, would be very effective in
controlling diurnal emissions.
    Probably the most effective technology for reducing diurnal
emissions from marine fuel tanks is through the use of a collapsible
fuel bladder. In this concept, a low-permeation bladder is installed in
the fuel tank to hold the fuel. As fuel is drawn from the bladder the
vacuum created collapses the bladder. There is, therefore, no vapor
space and no

pressure build-up from fuel heating. No vapors would be vented to the
atmosphere since the bladder is sealed. This option could also
eliminate running loss emissions and significantly reduce emissions
during refueling that would normally result from dispensed fuel
displacing vapor in the fuel tank. We have received comments that this
would be cost-prohibitive because it could increase costs from 30 to
100 percent, depending on tank size. However, bladder fuel tanks have
safety advantages and they are already sold by at least one
manufacturer to meet market demand in niche applications.
(d) Running Loss
    Running loss emissions can be controlled by sealing the fuel cap
and routing vapors from the fuel tank to the engine intake. In doing
so, vapors generated by heat from the engine will be burned in the
engine's combustion chamber. It may be necessary to use a valve or
limited-flow orifice in the purge line to prevent too much fuel vapor
from reaching the engine and to prevent liquid fuel from entering the
line if the equipment turns over. Depending on the configuration of the
fuel system and purge line, a one-way valve in the fuel cap may be
desired to prevent a vacuum in the fuel tank during engine operation.
We anticipate that a system like this will eliminate running loss
emissions. However, higher temperatures during operation and the
additional length of vapor line will slightly increase permeation.
Considering these effects, we still believe that the system described
here will reduce running losses from Small SI equipment by more than 90
percent.
    We are not adopting requirements to control running loss emissions
from marine vessels. For portable marine fuel tanks and fuel tanks
installed in vessels other than personal watercraft we expect the
significant distance from the engine and the cooling effect of
operating the vessel in water to prevent significant heating of the
fuel tanks during engine operation. For personal watercraft, fuel tanks
have a sealed system with pressure relief that should help contain
running loss emissions. For other installed fuel tanks, we expect the
system for controlling diurnal emissions will capture about half of any
running losses that would occur.
(e) Diffusion
    A secondary benefit of the running loss control described above for
Small SI equipment relates to diffusion emissions. In a system that
vents running loss vapors to the engine, venting vapors will be routed
through the vapor line to the engine intake, rather than through open
vents in the fuel cap. This approach should therefore eliminate
diffusion emissions.
    In the case of marine vessels, diffusion emissions are generally
minimal due to long vent lines on the fuel tanks or the use of sealed
fuel tanks. Further, the addition of diurnal emission controls will
effectively control diffusion emissions.
(4) Regulatory Alternatives
    We considered both less and more stringent evaporative emission
control alternatives for fuel systems used in Small SI equipment and
Marine SI vessels. Chapter 11 of the Final RIA presents details on this
analysis of regulatory alternatives. The results of this analysis are
summarized below. We believe the new permeation standards are
reflective of available technology and represent a step change in
emission performance. Therefore, we consider the same permeation
control scenario in the less stringent and more stringent regulatory
alternatives.
    For Small SI equipment, we considered a less stringent alternative
without running loss emission standards for Small SI engines. However,
we believe controlling running loss emissions from nonhandheld
equipment is feasible at a relatively low cost. Running loss emissions
can be controlled by sealing the fuel cap and routing vapors from the
fuel tank to the engine intake. Not requiring these controls is
inconsistent with section 213 of the Clean Air Act. For a more
stringent alternative, we considered applying a diurnal emission
standard for all Small SI equipment. We believe passively purging
carbon canisters could reduce diurnal emissions by 50 to 60 percent
from Small SI equipment. However, we believe there would be significant
costs to add carbon canisters to all Small SI equipment nationwide,
especially when taking packaging and vibration into account. The cost
sensitivity is especially noteworthy given the relatively low emissions
levels (on a per-equipment basis) from such small fuel tanks.
    For marine vessels, we considered a less stringent alternative,
where there would be no diurnal emission standard for vessels with
installed fuel tanks. However, installed fuel tanks on marine vessels
have much higher capacities than those used in Small SI applications.
Our analysis indicates that carbon canisters are feasible for boats at
relatively low cost. While packaging and vibration are also issues with
marine applications, we believe these issues have been addressed.
Manufacturers installed carbon canisters in fourteen boats in a pilot
program. The results demonstrated the feasibility of this technology.
The new standards are achievable through engineering design-based
certification with canisters that are much smaller than the fuel tanks.
In addition, sealed systems, with pressure-control strategies will be
accepted under the provisions for design-based certification. For a
more stringent scenario, we considered a standard that would require
boat builders to use an actively purged carbon canister. This means
that the engine would draw air through the canister during operation to
purge the canister of stored hydrocarbons. However, we rejected this
option because marine engines operate too infrequently to consistently
purge the canister to allow for increased storage of further vapor
loading from the fuel tank. The gain in overall efficiency would be
quite small relative to the complexity of integrating engine purge
strategies and hardware into a vessel-based control strategy. The
additional benefit of an actively purged diurnal control system is
small in comparison to its cost and complexity.
(5) Our Conclusions
    We believe the new evaporative emission standards reflect what
manufacturers can achieve through the application of available
technology. We believe the lead time is necessary and adequate for fuel
tank manufacturers, fuel line manufacturers, engine manufacturers,
equipment manufacturers, and boat builders to select, design, and
produce evaporative emission control strategies that will work best for
their product lines. We expect that meeting these requirements will
pose a challenge, but one that is feasible when taking into
consideration the availability and cost of technology, lead time,
noise, energy, and safety. The role of these factors is presented in
detail in Chapters 5 and 6 of the Final RIA. As discussed in Section
VII, we do not believe the new standards will have negative effects on
energy, noise, or safety and may lead to some positive effects.

VII. Energy, Noise, and Safety

    Section 213 of the Clean Air Act directs us to consider the
potential impacts on safety, noise, and energy when establishing the
feasibility of emission standards for nonroad engines. Furthermore,
section 205 of EPA's 2006 Appropriations Act requires us to assess
potential safety issues, including the risk of fire and burn to
consumers in use, associated with the new emission

standards for nonroad spark-ignition engines below 50 horsepower.\116\
As detailed in the following sections, we expect that the new exhaust
and evaporative emission standards will either have no adverse affect
on safety, noise, and energy or will improve certain aspects of these
important characteristics. A more in-depth discussion of these topics
relative to the new exhaust and evaporative emission standards is
contained in Chapters 4 and 5 of the Final RIA, respectively. Also, our
conclusions relative to safety are fully documented in our
comprehensive safety study which is discussed in the next section.
---------------------------------------------------------------------------

    \116\ Department of the Interior, Environment, and Related
Agencies Appropriations Act, 2006, Pub. L. No. 109-54, Title II,
sec. 205, 119 Stat. 499, 532 (August 2, 2005).
---------------------------------------------------------------------------

A. Safety

    We conducted a comprehensive, multi-year safety study of spark-
ignition engines that focused on the four areas where we are adopting
new emission standards.\117\ These areas are:
---------------------------------------------------------------------------

    \117\ ``EPA Technical Study on the Safety of Emission Controls
for Nonroad Spark-Ignition Engines < 50 Horsepower,'' Office of
Transportation and Air Quality, U.S. Environmental Protection
Agency, Washington, DC, EPA420-R-06-006, March 2006. This document
is available in Docket EPA-HQ-OAR-2004-0008. This report was also
subject to peer review, as described in a peer review report that is
also available in the docket.
---------------------------------------------------------------------------

     New catalyst-based HC+NOX exhaust emission
standards for Class I and Class II nonhandheld spark-ignition engines;
     New fuel evaporative emission standards for nonhandheld
and handheld equipment;
     New HC+NOX exhaust emission standards for
outboard and personal watercraft engines and vessels, and a new CO
exhaust emission standard for nonhandheld engines used in marine
auxiliary applications; and
     New fuel evaporative emission standards for outboard and
personal watercraft engines and vessels.
    Each of these four areas is discussed in greater detail in the next
sections.
(1) Exhaust Emission Standards for Small Spark-Ignition Engines
    The technology approaches that we assessed for achieving the new
Small SI engine standards included exhaust catalyst aftertreatment and
improvements to engine and fuel system designs. In addition to our own
testing and development effort, we also met with engine and equipment
manufacturers to better understand their designs and technology and to
determine the state of technological progress beyond EPA's Phase 2
emission standards.
    The scope of our safety study included Class I and Class II engine
systems that are used in residential walk-behind and ride-on lawn mower
applications, respectively. Residential lawn mower equipment was chosen
for the following reasons.
     Lawn mowers and the closely-related category of lawn
tractors overwhelmingly represent the largest categories of equipment
using Class I and Class II engines.
     Consumer Product Safety Commission (CPSC) data indicate
that more thermal burn injuries are associated with lawn mowers than
occur with other nonhandheld equipment; lawn mowers therefore represent
the largest thermal burn risk for these classes of engines.
     General findings regarding advanced emission control
technologies for residential lawn and garden equipment carry over to
commercial lawn and turf care equipment as well as to other nonhandheld
equipment using Class I and Class II engines.
    We conducted the technical study of the incremental risk on several
fronts. First, working with CPSC, we evaluated their reports and
databases and other outside sources to identify those in-use situations
which create fire and burn risk for consumers. The outside sources
included meetings, workshops, and discussions with engine and equipment
manufacturers. From this information, we identified ten scenarios for
evaluation that covered a comprehensive variety of in-use conditions or
circumstances which potentially could lead to an increased risk in
burns or fires.
    Second, we conducted extensive laboratory and field testing of both
current technology (Phase 2) and prototype catalyst-equipped advanced-
technology engines and equipment (Phase 3) to assess the emission
control performance and thermal characteristics of the engines and
equipment. This testing included a comparison of exhaust system,
engine, and equipment surface temperatures using still and full motion
video thermal imaging equipment.
    Third, we conducted a design and process Failure Mode and Effects
Analyses (FMEA) comparing current Phase 2 and Phase 3 compliant engines
and equipment to evaluate incremental changes in risk probability as a
way of evaluating the incremental risk of upgrading Phase 2 engines to
meet Phase 3 emission standards.\118\ This is an engineering analysis
tool to help engineers and other professional staff to identify and
manage risk. In an FMEA, potential failure modes, causes of failure,
and failure effects are identified and a resulting risk probability is
calculated from these results. This risk probability is used by the
FMEA team to rank problems for potential action to reduce or eliminate
the causal factors. Identifying these causal factors is important
because they are the elements that a manufacturer can consider to
reduce the adverse effects that might result from a particular failure
mode.
---------------------------------------------------------------------------

    \118\ ``EPA Technical Study on the Safety of Emission Controls
for Nonroad Spark-Ignition Engines < 50 Horsepower,'' Office of
Transportation and Air Quality, U.S. Environmental Protection
Agency, Washington, DC, EPA420-R-06-006, March 2006. This document
is available in Docket EPA-HQ-OAR-2004-0008.
---------------------------------------------------------------------------

    Our technical work and subsequent analysis of all the data and
information strongly indicate that effective catalyst-based standards
can be implemented without an incremental increase in the risk of fire
or burn to the consumer either during or after using the equipment.
Similarly, we did not find any increase in the risk of fire during
refueling or in storage near typical combustible materials. For
example, our testing program demonstrated that properly designed
catalyst-mufflers could, in some cases, actually result in systems that
were significantly cooler than many current original equipment
mufflers. A number of design elements appear useful to properly
managing heat loads including: (1) The use of catalyst designs that
minimize CO oxidation through careful selection of catalyst size,
washcoat composition, and precious metal loading; (2) positioning the
catalyst within the cooling air flow of the engine fan or redirecting
some cooling air over the catalyst area with a steel shroud; (3)
redirecting exhaust flow through multiple chambers or baffles within
the catalyst-muffler; and (4) larger catalyst-muffler volumes than the
original equipment muffler.
(2) Fuel Evaporative Emission Standards for Nonhandheld and Handheld
Engines and Equipment
    We reviewed the fuel line and fuel tank characteristics for
nonhandheld and handheld equipment and evaluated control technology
which could be used to reduce evaporative emissions from these two
subcategories. The available technology is capable of achieving
reductions in fuel tank and fuel line permeation without an adverse
incremental impact on safety. For fuel lines and fuel tanks, the
applicable consensus safety standards, manufacturer specific test
procedures and EPA requirements are sufficient to

ensure that there will be no increase in the types of fuel leaks that
lead to fire and burn risk during in-use operation. Instead, these
standards will reduce vapor emissions both during operation and in
storage. That reduction, coupled with some expected equipment redesign,
is expected to lead to reductions in the risk of fire or burn without
affecting component durability.
    The Failure Mode and Effects Analyses, which was described in the
previous section, also evaluated permeation and running loss controls
on nonhandheld engines. We found that these controls will not increase
the probability of fire and burn risk from those expected with current
fuel systems, but could in fact lead to directionally improved systems
from a safety perspective. Finally, the running loss control program
being promulgated for nonhandheld equipment will lead to changes that
are expected to reduce risk of fire during in-use operation. Moving
fuel tanks away from heat sources, improving cap designs to limit
leakage on tip over, and requiring a tethered cap will all help to
eliminate conditions which lead to in-use problems related to fuel
leaks and spillage. Therefore, we believe the application of emission
control technology to reduce evaporative emissions from these fuel
lines and fuel tanks will not lead to an increase in incremental risk
of fires or burns and in some cases is likely to at least directionally
reduce such risks.
(3) Exhaust Emission Standards for Outboard and Personal Watercraft
Marine Engines and Vessels and Marine Auxiliary Engines
    Our analysis of exhaust emission standards for OB/PWC engines and
marine auxiliary engines found that the U.S. Coast Guard (USCG) has
comprehensive safety standards that apply to engines and fuel systems
used in these vessels. Additionally, organizations such as the Society
of Automotive Engineers, Underwriters Laboratories, and the American
Boat and Yacht Council (ABYC) also have safety standards that apply in
this area. We also found that the four-stroke and two-stroke direct
injection engine technologies which are likely to be used to meet the
exhaust emission standards contemplated for OB/PWC engines are in
widespread use in the vessel fleet today. These more sophisticated
engine technologies are replacing the traditional two-stroke carbureted
engines. The four-stroke and two-stroke direct injection engines meet
applicable USCG and ABYC safety standards and future products will do
so as well. The new emission standards must be complementary to
existing safety standards and our analysis indicates that this will be
the case. There are no known safety issues with the advanced
technologies compared with two-stroke carbureted engines. The newer-
technology engines arguably provide safety benefits due to improved
engine reliability and range in-use. Based on the applicability of USCG
and ABYC safety standards and the good in-use experience with advanced-
technology engines in the current vessel fleet, we believe new emission
standards will not create an incremental increase in the risk of fire
or burn to the consumer.
(4) Fuel Evaporative Emission Standards for Outboard and Personal
Watercraft Engines and Vessels
    We reviewed the fuel line and fuel tank characteristics for marine
vessels and evaluated control technology which could be used to reduce
evaporative emissions from boats. With regard to fuel lines, fuel
tanks, and diurnal controls, there are rigorous USCG, ABYC, United
Laboratories, and Society of Automotive Engineers standards which
manufacturers will continue to meet for fuel system components. All
these standards are designed to address the in-use performance of fuel
systems, with the goal of eliminating fuel leaks. The low-permeation
fuel lines and tanks needed to meet the Phase 3 requirements will need
to pass these standards and every indication is that they will
pass.\119\
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    \119\ ``EPA Technical Study on the Safety of Emission Controls
for Nonroad Spark-Ignition Engines < 50 Horsepower,'' Office of
Transportation and Air Quality, U.S. Environmental Protection
Agency, Washington, DC, EPA420-R-06-006, March 2006. This document
is available in Docket EPA-HQ-OAR-2004-0008.
---------------------------------------------------------------------------

    Furthermore, the EPA permeation certification requirements related
to emissions durability will add an additional layer of assurance. Low-
permeation fuel lines are used safely today in many marine vessels.
Low-permeation fuel tanks and diurnal emission controls have been
demonstrated in various applications for many years without an increase
in safety risk. Furthermore, a properly designed fuel system with fuel
tank and fuel line permeation controls and diurnal emission controls
will reduce the fuel vapor in the boat, thereby reducing the
opportunities for fuel related fires. In addition, using improved low-
permeation materials coupled with designs meeting USCG and ABYC
requirements should reduce the risk of fuel leaks into the vessel. We
believe the application of emission control technologies on marine
engines and vessels for meeting the new fuel evaporative emission
standards will not lead to an increase in incremental risk of fires or
burns, and in many cases may incrementally decrease safety risk in
certain situations.

B. Noise

    As automotive technology demonstrates, achieving low emissions from
spark-ignition engines can correspond with greatly reduced noise
levels. Direct-injection two-stroke and four-stroke OB/PWC have been
reported to be much quieter than traditional carbureted two-stroke
engines. Catalysts in the exhaust act as mufflers which can reduce
noise. Additionally, adding a properly designed catalyst to the
existing muffler found on all Small SI engines can offer the
opportunity to incrementally reduce noise.

C. Energy

(1) Exhaust Emission Standards
    Adopting new technologies for controlling fuel metering and air-
fuel mixing, particularly the conversion of some carbureted engines to
advanced fuel injection technologies, will lead to improvements in fuel
consumption. This is especially true for OB/PWC engines where we expect
the new standards to result in the replacement of old technology
carbureted two-stroke engines with more fuel-efficient technologies
such as two-stroke direct injection or four-stroke engines. Carbureted
crankcase-scavenged two-stroke engines are inefficient in that 25
percent or more of the fuel entering the engine may leave the engine
unburned. EPA estimates that conversion to more fuel efficient
recreational marine engines will save 61 million gallons of gasoline
per year in 2030. The conversion of some carbureted Small SI engines to
fuel injection technologies is also expected to improve fuel economy.
We estimate approximately 18 percent of the Class II engines will be
converted to fuel injection and that this will result in a fuel savings
of about 10 percent for each converted engine. This translates to a
fuel savings of about 56 million gallons of gasoline in 2030 when all
the Class II engines used in the U.S. will comply with the Phase 3
standards. By contrast, the use of catalyst-based control systems on
Small SI engines is not expected to change their fuel consumption
characteristics.
(2) Fuel Evaporative Emission Standards
    We anticipate that the new fuel evaporative emission standards will
have a positive impact on energy. By capturing or preventing the loss
of fuel

due to evaporation, we estimate that the lifetime average fuel savings
will be about 1.6 gallons for an average piece of Small SI equipment
and 32 gallons for an average boat. This translates to a fuel savings
of about 41 million gallons for Small SI equipment and 30 million
gallons for Marine SI vessels in 2030 when most of the affected
equipment used in the U.S. will be expected to have evaporative
emission controls.

VIII. Requirements Affecting Other Engine and Vehicle Categories

    We are making several regulatory changes that will affect other
engines, equipment, vehicles, and vessels in our nonroad and highway
programs. These changes are described in the following subsections. As
noted in these subsections, those changes that were not proposed are
being made in response to the comments we received.

A. State Preemption

    Section 209(e) of the Clean Air Act prohibits states and their
political subdivisions from adopting or enforcing standards and other
requirements relating to the control of emissions from nonroad engines
or vehicles. Section 209(e) authorizes EPA to waive this preemption for
California for standards and other requirements for nonroad engines and
vehicles, excluding new engines that are smaller than 175 horsepower
used in farm or construction equipment or vehicles and new locomotives
or new engines used in locomotives. States other than California may
adopt and enforce standards identical to California standards
authorized by EPA.
    EPA promulgated regulations implementing section 209(e) on July 20,
1994 (59 FR 36987). EPA subsequently promulgated revised regulations
implementing section 209(e) on December 30, 1997 (62 FR 67733). See 40
CFR part 85, subpart Q. As proposed, we are creating a new part 1074
that describes the federal preemption of state and local emission
requirements. This is being done as part of EPA's ongoing effort to
write its regulations in plain language format in subchapter U of title
40 of the CFR. The final regulations are based directly on the existing
regulations in 40 CFR part 85, subpart Q. With the exception of the
specific changes described in this section, we are not changing the
meaning of these regulations.
    Pursuant to section 428 of the 2004 Consolidated Appropriations
Act, we are adding regulatory language to implement the legislative
restriction on states other than California adopting, after September
1, 2003, standards or other requirements applicable to spark-ignition
engines smaller than 50 horsepower. We are also adding, pursuant to
that legislation, criteria for EPA's consideration in authorizing
California to adopt and enforce standards applicable to such
engines.\120\
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    \120\ See section 428 of the Appropriations Act for 2004.
---------------------------------------------------------------------------

    In addition, on July 12, 2002, the American Road and Transportation
Builders Association (ARTBA) petitioned EPA to amend EPA's rules
implementing section 209(e) of the Act.\121\ In particular, ARTBA
petitioned EPA to amend its regulations and interpretive rule regarding
preemption of state and local requirements ``that impose in-use and
operational controls or fleet-wide purchase, sale or use standards on
nonroad engines.'' \122\ ARTBA believes such controls should be
preempted.
---------------------------------------------------------------------------

    \121\ ``Petition to Amend Rules Implementing Clean Air Act
section 209(e),'' American Road and Transportation Builders
Association (ARTBA), July 12, 2002. Also, EPA received an additional
communication from ARTBA urging EPA to grant the petition after the
decision of the U.S. Supreme Court in EMA v. SCAQMD, 541 U.S. 246
(2004). See ``ARTBA Petition,'' L. Joseph, ARTBA, to D. Dickinson &
R. Doyle, EPA, April 30, 2004. These documents are available in
Docket EPA-HQ-OAR-2004-0008.
    \122\ In 1994, EPA promulgated an interpretive rule at Appendix
A to subpart A of 40 CFR part 89. This interpretive rule was amended
as part of the rule promulgated on December 30, 1997 (62 FR 67733).
The appendix provides, among other things, that state restrictions
on the use and operation of nonroad engines are not preempted under
section 209.
---------------------------------------------------------------------------

    As we were already planning to revise the preemption provisions to
a certain extent in this rule, we determined that it was appropriate to
respond to ARTBA's petition in the context of this rule, and noticed
our review in the proposal for this rule, giving the public the ability
to respond to provide comments regarding ARTBA's petition. After
reviewing ARTBA's petition and the comments received regarding the
petition, EPA is not adopting the changes requested by ARTBA in its
petition. While EPA is in agreement with ARTBA regarding some of the
observations it makes in the petition regarding preemption of state
standards, particularly state fleet average standards, we believe the
current regulatory language is sufficient regarding preemption of such
standards. In addition, we believe that it would be inappropriate to
grant ARTBA's request that we amend the existing regulations to find
that restrictions on the use and operation of nonroad engines are
preempted under section 209(e) of the Act. For a full discussion and
response to ARTBA's petition and the comments we received on the
petition, please review ``Response to the Petition of American Road and
Transportation Builders Association to Amend Regulations Regarding the
Preemption of State Standards Regulating Emissions from Nonroad
Engines,'' which has been placed in the docket for this rulemaking.

B. Certification Fees

    Under our current certification program, manufacturers pay a fee to
cover the costs associated with various certification and other
compliance activities associated with an EPA issued certificate of
conformity. These fees are based on the actual and/or projected cost to
EPA per emission family. We are establishing a new fees category for
certification related to the new evaporative emission standards.
Sections III and VI describe how the fees apply to sterndrive/inboard
marine engines and equipment and vessels subject to evaporative
emission standards since manufacturers are not currently required to
pay certification fees for these products.
    In addition, as proposed, we are creating a new part 1027 in title
40 that incorporates the new and existing fee requirements under a
single part in the regulations. This is being done as part of EPA's
ongoing effort to write its regulations in plain language format in
subchapter U of title 40 of the CFR. The final regulations are based
directly on the existing regulations in 40 CFR part 85, subpart Y.
Aside from a variety of specific changes, moving this language to part
1027 is not intended to affect the substance of the existing fee
provisions. We are making the following adjustments and clarifications
to the existing regulations:
     Establishing a new fees category for new evaporative
emission standards.
     Eliminating one of the paths for applying for a reduced
fee. The existing regulations specify that applications covering fewer
than six vehicles or engines, each with an estimated retail sales price
below $75,000, shall receive a certificate for five vehicles or
engines. Holders of these certificates are required to submit an annual
model year reduced fee payment report adjusting the fees paid. We are
eliminating this pathway and the associated report, as they are complex
and have been rarely used.
     Clarifying the obligation to make additional payment on a
reduced fee certificate if the actual final sales price is more than
the projected retail sales price for a reduced fee vehicle or engine.
As before, the final fee payment must also reflect the actual number of
vehicles.
     Applying the calculated fee changes for later years, which
are based on the

Consumer Price Index and the total number of certificates, only after
the change in the fee's value since the last reported change has
reached $50. The fee change for the ``Other'' category for calendar
year 2005 to 2006 changed from $826 to $839 and for non-road
compression-ignition engines from $1822 to $1831. Under the final rule,
the fee will not change until such time as the fee increase will be
$50.00 or greater. This might not occur after one year, but after two
or more years the calculated increase in a fee based on the change in
the Consumer Price Index might be more than $50.00. The same applies if
the price goes up or down. For example, if the fee published in EPA
guidance for a category of engine was $1,000 in 2011 and the calculated
fee for 2012 is $990 and in 2013 is $1040, the fee in 2013 will remain
at $1,000 since the change from the 2011 fee is only $40. This will
minimize confusion related to changing fees where the calculated fee is
very close to that already established for the previous year. It will
also lessen paperwork and administrative burdens for manufacturers and
EPA in making adjustments for small fees changes for applications that
are completed around the change in a calendar year. The number of
certificates may go up or down in any given year, while the Consumer
Price Index will generally increase annually. As a result, this change
will be revenue-neutral or will perhaps slightly decrease overall
revenues.
     Clarifying that all fee-related records need to be kept,
not just those related to the ``final reduced fee calculation and
adjustment.''
     Adding www.Pay.gov or other methods specified in guidance
as acceptable alternative methods for payment and filing of fee forms.
     Establishing a single deadline for all types of refunds:
Total, partial for reduced fees, and partial for corrections. In all
cases, refund requests must be received within six months of the end of
the model year. A common type of request is due to an error in the fee
amount paid as a result of changed fees for a new calendar year. We
frequently apply these overpayments to other pending certification
applications. This is less burdensome than applying for a simple
refund, both for EPA and for most manufacturers. Applications to apply
such refunds to other certification applications must also be received
within six months of the end of the model year of the original engine
family or test group.
     Emphasizing with additional cross references that the same
reduced fee provisions that apply to Independent Commercial Importers
also apply to modification and test vehicle certificates under 40 CFR
85.1509 and 89.609: The number of vehicles covered is listed on the
certificate, a revision of the certificate must be applied for and
additional reduced fee payments made if additional vehicles are to be
covered, and the certificate must be revised to show the new total
number of vehicles to be covered.
    We are making one additional change in the regulations based on
comments regarding the limits on fees that apply for locomotive and
marine diesel remanufacturing systems or kits. We are specifying that
certified remanufacturing systems or kits under these programs are
eligible for reduced fees based on the value of the remanufacturing
system or kit rather than the value of the whole locomotive or vessel.
This is analogous to existing provisions for fuel-conversion kits in
which the regulation specifies that the basis for evaluating the one-
percent threshold is the value of the kit alone. We are therefore
modifying the regulation to allow for reduced fees where the assessed
fee is more than one percent of the value of the remanufacturing system
or kit. This applies equally to locomotives and marine diesel engines,
which are now also subject to remanufacturing certification provisions.

C. Amendments to General Compliance Provisions in 40 CFR Part 1068

    We have adopted final rules to apply the provisions of part 1068
for locomotives regulated under part 1033, nonroad diesel engines
regulated under 40 CFR part 1039, marine diesel engines regulated under
40 CFR part 1042, Large SI engines regulated under 40 CFR part 1048,
and recreational vehicles regulated under 40 CFR part 1051. In this
final rule we are applying these provisions for Small SI and Marine SI
engines, equipment, and vessels. Any changes we make to part 1068 will
apply equally for these other types of engines and vehicles.
    The following paragraphs describe several amendments we are making
to part 1068, including several changes and clarifications subsequent
to the proposed rule. We summarize several of the most important
changes since the proposal in Section X.
(3) Partially Complete Engines
    We proposed to revise our definition of ``engine'' to be clear that
it includes those engines that are only partially complete. We received
many comments regarding the impact of this clarification. The final
approach described in this subsection includes revisions from the
proposal to address these comments.
    We are aware that in some cases manufacturers produce nonroad
engines by starting with a complete or partially complete engine from
another manufacturer and modify it as needed for the particular
application. This is especially common for Marine SI and Large SI
engines and equipment, but it may also occur for other types of nonroad
engines and equipment. We are aware that an interpretation of the
prohibited acts in Sec.  1068.101 would disallow this practice because
the original engine manufacturer is arguably selling an engine that is
not covered by a certificate of conformity even though emission
standards apply. We are also concerned that some manufacturers might
choose to exploit this ambiguity by importing partially complete
engines, contending that these are not subject to standards, where the
company receiving the shipment would assemble the engines and sell them
without going through the certification process. It would be very
difficult to monitor or enforce requirements with this kind of business
activity.
    We are addressing this first by defining ``engine'' for the
purposes of the regulations (see Sec.  1068.30). To do this, we
differentiate between complete engines and partially complete engines,
both of which need to be covered by a valid certificate or an
exemption. An engine block becomes an ``engine'' subject to standards
when a crankshaft is installed. This represents a substantial step in
the manufacturing process. Selecting a later point in the assembly
process would only create the potential for loopholes for companies
wanting to sell products that fall just short of what it would take to
be subject to standards.
    Partially complete engines include any engine that has not been
fully assembled or is not yet in its final configuration. This might
include short blocks that are shipped to another location for final
assembly. It might also include full assembled engines that will be
installed in all-terrain vehicles (which are subject to equipment-based
standards). Even though these engines are still subject to further
assembly or modification, they are subject to standards and
certification requirements and therefore may not be introduced into
U.S. commerce without an exemption. We are adopting provisions to
accommodate various assembly paths reflecting current business
practices. For example, we are specifying that manufacturers may ship
partially

complete engines between two of their facilities (see Sec.  1068.260).
We would require manufacturers to notify us that this practice is
occurring and get our approval, but they would not need to take any
additional steps.
    We have greater concerns about ensuring that engines always reach
their certified configuration when engines are shipped from one company
to another, or anytime a company that is not a certificate holder is
introducing partially complete engines into U.S. commerce. To address
this, we are adopting detailed provisions in Sec.  1068.262. These
provisions clarify and expand on the provisions adopted earlier in
Sec.  1068.330 for imported engines. The original engine manufacturer
needs a written request from a secondary engine manufacturer who
already holds a valid certificate of conformity for the engine based on
its final configuration and application. The request from the secondary
engine manufacturer would also identify an engine family name. This
engine family name could be any valid family name for that engine model
and would not necessarily need to be the actual family name for that
engine in its final configuration. For example, a secondary engine
manufacturer might sell a single engine model into stationary, marine,
and industrial applications, each of which might have a different
engine family name. As long as there is a valid family name, the
original engine manufacturer could be confident that the secondary
engine manufacturer will be modifying the engine to be in a certified
configuration. The original engine manufacturer would apply a removable
label identifying their corporate name and stating that the engines are
exempt under these provisions for partially complete engines. The label
or the accompanying bill of lading would also name the secondary engine
manufacturer as the certificate-holder and identify the destination for
the engines being shipped. The labels may be applied to individual
engines or they may be applied to the packaging for engines that are
shipped together.
    We are accommodating the need to start assembling products while
the application for certification is pending. We would treat these
shipments the same as we would treat early production for a
manufacturer building its own engine blocks, as described in Section
VIII.C.2.
    There are also situations in which a secondary manufacturer would
build engines that will continue to be exempt after the point of final
assembly. For example, some engines may be intended only for export,
for national security, or for developmental or testing purposes. In
these cases where the secondary engine manufacturer is unable to
identify a valid family name, they would simply inform the original
manufacturer of the regulatory cite that allows them to produce
exempted engines. Note that this process is generally permitted only in
the case where the original engine manufacturer and the secondary
engine manufacturer are certificate holders, which means that they have
at least one certificate of conformity with EPA (even if that is for a
different type of engine).
    The regulation includes language to clarify that the original
manufacturer is liable for shipment of properly labeled engines to a
manufacturer who has applied for or received a valid certificate of
conformity or who has an exemption for the engines being shipped. The
original engine manufacturer would be in violation if (1) the engines
and their labels are separated before reaching the secondary engine
manufacturer, (2) if the engines are shipped to the wrong destination,
or (3) if the secondary engine manufacturer does not in fact have the
certification or exemption in place as prescribed. We expect original
engine manufacturers to have a clear relationship with their associated
secondary engine manufacturers so they can readily verify the status of
any particular certification or exemption; due diligence on the part of
the original engine manufacturer should allow for a high degree of
confidence that all the applicable conditions are met.
    Another situation involving partially complete engines involves the
engine block as a replacement part where, for example, the original
engine had major structural damage. In this case the engine
manufacturer will typically sell an engine block with piston,
crankshaft, and other internal components to allow the user to repower
with many of the components from the original engine. Under the new
definitions, these short blocks or three-quarter blocks are considered
new engines subject to emission standards. We have addressed this
situation in the regulations with the replacement engine provisions in
Sec.  1068.240. This may involve one of two basic situations. In cases
where the short block is no different than what is being produced for
complete, certified engines in the current model year, there is no need
for demonstrations or approval for an exemption from emission
standards. We are adding clarifying language that these partially
complete engines may be sold to repower failed engines without
restriction. We do, however, require that these engines be labeled to
prevent someone from circumventing the regulations by using these short
blocks to build new noncompliant engines. These labels would serve as a
preventive measure and make it easier for EPA inspectors to detect a
violation. In cases where the short block is from a previous model year
when less stringent emission standards apply, we would want to treat
this under the same replacement-engine provisions that apply to
complete engines. Section VIII.C.5 describes these provisions related
to replacement engines in greater detail.
    We are also further clarifying the requirement for engine
manufacturers to sell engines in their certified configuration (see
Sec.  1068.260). The existing provisions in part 1068 describe how
manufacturers may use delegated assembly to arrange for equipment
manufacturers to separately source aftertreatment components for
engines that depend on aftertreatment to meet emission standards. We
are including language to clarify that we will consider an engine to be
in its certified configuration in certain circumstances even if
emission-related components are not assembled to the engine. This is
intended to reflect common practice that has developed over the years.
We are also clarifying that engines may be shipped without radiators or
other components that are unrelated to emission controls, and that we
may approve requests to ship engines without emission-related
components in some circumstances. This will generally be limited to
equipment-related components such as vehicle-speed sensors. We may
specify conditions that we determine are needed to ensure that shipping
the engine without such components will not result in the engine being
operated outside of its certified configuration.
(4) Provisions Related to Model Year and Date of Manufacture
    We proposed definitions of ``model year'' and ``date of
manufacture'' in conjunction with our proposed definition of
``engine''. We received a number of comments regarding these
definitions. As a result of these comments, we are finalizing the
approach described below.
    Until now, the regulations have not specified the point in the
assembly or procurement process that should serve as the basis for
establishing an engine's date of manufacture for purposes of deciding
which standards apply. For the large majority of engines, this is not
an issue, since total assembly time from start to finish is measured in
hours or

[[Continued on page 59133]]

]

[[pp. 59133-59182]] Control of Emissions From Nonroad Spark-Ignition Engines and
Equipment

[[Continued from page 59132]]

perhaps days. As a result, it is relatively uncommon for there to be
any uncertainty regarding an engine's date of manufacture.
Nevertheless, we have learned that there are widely diverging practices
for establishing an engine's date of manufacture in several special
situations, which means there is a different effective date of new
emission standards for different manufacturers. This is especially of
interest for larger engines, which are more likely to have longer
assembly times and to be assembled in multiple stages at different
facilities. We believe it is important to establish a clear requirement
in this regard to avoid ambiguity and different interpretations. A
consistent approach preserves a level playing field and may prevent
some manufacturers from manipulating their build dates to circumvent
the regulations.
    We expected that the proposed definition of ``date of
manufacture,'' based on reaching a final, running configuration, was
the most straightforward and logical interpretation. The comments
received and the ensuing discussions made clear that this
interpretation was not universally held. The diversity of views
underscores the need for the regulations to establish a clear and
uniform requirement.
    We recognize the concern that manufacturers need a high degree of
certainty regarding applicable emission standards when they initiate
assembly of an engine. Any number of variables in the production
process could affect how long it takes to finish building an engine. We
therefore believe it is most appropriate to match up the definitions
for ``date of manufacture'' and ``engine'' by specifying that an
engine's date of manufacture should be based on the date that the
crankshaft is installed in the engine. This provides manufacturers with
the control they need to determine which emission standards apply when
they start to build the engine.
    We are aware that secondary engine manufacturers may have inventory
and assembly procedures that are not tied to the actual date of
crankshaft installation by the original engine manufacturer. We are
therefore specifying for this situation that the date of manufacture is
generally the date the secondary engine manufacturer receives shipment
of the partially complete engine. Alternatively, where the manufacturer
knows the date the crankshaft was actually installed in the engine and
receives the engine within 30 days of that date, it may use the actual
date of crankshaft installation as the date of manufacture. This puts
the secondary engine manufacturer in a similar position relative to
companies with sole responsibility for assembling complete engines,
without placing unreasonable expectations on secondary engine
manufacturers to know how engines were assembled by their supplier.
    Some manufacturers may want to name a date of manufacture that is
later than we specify in the regulation. This may be for marketing
purposes, managing inventories of engine components, or for other
recordkeeping or product-development reasons. There is no risk of
manufacturers gaining an advantage of being subject to less stringent
standards by delaying the date of manufacture for an engine, so we
would have no objection to that. However, we limit the selection of
date of manufacture to a later point in the assembly process. Selecting
a date of manufacture after the end of the assembly process for an
engine would raise concerns about the risk for manipulating emission
credits for a given model year and about ensuring that engine assembly
and dates of manufacture are always within the production period
established for a given engine family, as described in the certificate
of conformity or the manufacturer's records. We see no legitimate
reason to select a date of manufacture after completing assembly for an
engine. Note that since the entire assembly process is complete within
no more than a few days for most engines, we would expect this
allowance to rarely affect the date of manufacture significantly.
    This approach to defining ``date of manufacture'' addresses
manufacturers' concerns for knowing which standards apply to an engine,
but we are also concerned that manufacturers could ramp up production
of engine blocks with installed crankshafts as a method to delay
compliance with new emission standards. EPA regulations have always
included provisions describing limits on inventory and stockpiling
practices for nonroad equipment manufacturers. The regulations until
now do not clearly address issues related to stockpiling for engine
manufacturers. We agree with the suggestion from commenters that anti-
stockpiling provisions that are specific to engine manufacturers would
be appropriate. The Clean Air Act contemplates the need for such
provisions in section 202(b)(3), where there is direction for EPA to
consider establishing a definition of model year that prevents
stockpiling. At the same time, we received other comments related to
production periods and model year, leading us to adopt a collection of
related provisions in Sec.  1068.103.
    The new text in Sec.  1068.103 includes three main provisions that
are already in place for motor vehicles and heavy-duty highway engines
in Sec. Sec.  85.2304 and 85.2305. First, we are clarifying that the
scope of a certificate of conformity may be limited to established
engine models, production periods, or production facilities. Any such
limits would be included in the manufacturer's application for
certification or in the certificate of conformity. Second, we are
defining the limits on selecting production periods for purposes of
establishing the model year. Third, we are clarifying that engine
manufacturers may start producing engines after they submit an
application for certification and before the certification is approved.
This includes provisions to address the manufacturers' responsibility
to ensure (1) that engines are not introduced into U.S. commerce until
the certification is approved; (2) that all engines are assembled
consistent with the certification, including any changes that may come
from the certification review process; and (3) that manufacturers make
these early-production engines available for production-line testing or
selective enforcement audits, as appropriate.
    In addition, we are adding provisions to establish limits on
stockpiling for engine manufacturers. We are doing this by stating that
manufacturers must use their normal inventory and assembly processes
for initiating assembly of their engines. We include a clarifying
expectation that we would expect normal assembly processes to involve
no more than one week to complete engine assembly once the crankshaft
is installed. We understand that assembly processes in some special
cases are more complicated, and that engine manufacturers may be unable
to complete engine assembly in some cases based on delivery of certain
components or other extenuating factors. To put some boundaries on
these exceptional situations, the regulation specifies a presumption
that the engine manufacturer has violated the stockpiling prohibition
if engine assembly is complete more than 30 days after the end of the
model. This presumption date is 60 days after the end of the model year
for engines with per-cylinder displacement above 2.5 liters. This
generally distinguishes engines that may have relatively high sales
volumes (including heavy-duty highway engines) from bigger engines that
are sold in much lower sales volumes.
    Note that the potential burden and disruption related to these
provisions is limited in two important ways. First, the

restrictions related to date of manufacture and model year in Sec.
1068.103(f) apply only when there is a change in emission standards for
the coming model year. We would still expect manufacturers to take this
approach in years when there is no change in emission standards, but
these requirements would not strictly apply. We are also including
hardship provisions to allow manufacturers to request approval to
extend the final assembly deadline for their engines if circumstances
outside their control prevent them from completing engine assembly in
time. We would approve such a request only if the manufacturer could
not have avoided the situation and took all possible steps to minimize
the extent of the delay.
(5) Restrictions on Naming Model Years Relative to Calendar Year
    We proposed restrictions to naming model years for Small SI
engines. In response to the comments we received, we are finalizing
these restrictions for all engines subject to 40 CFR part 1068.
    Exhaust emission standards apply based on the date of engine
assembly. We similarly require that equipment manufacturers use engines
meeting emission standards in the same model year as equipment based on
the equipment assembly date. For example, starting January 1, 2009, an
equipment manufacturer must generally use a 2009 model year engine.
However, we allow equipment manufacturers to deplete their normal
inventories of engines from the previous model year as long as there is
no stockpiling of those earlier engines. Note that this restriction
does not apply if emission standards are unchanged for the current
model year. We have found many instances where companies will import
new engines usually installed in equipment and claim that the engine
was built before emission standards took effect, even if the start date
for emission standards was several years earlier. We believe many of
these engines were in fact built later than the named model year, but
it is difficult to prove the date of manufacture, which then makes it
difficult to properly enforce these requirements. Now that emission
standards have been in place for most engines for several years, we
believe it is appropriate to implement a provision that prevents new
engines manufactured several years previously to be imported when more
recent emission standards have been adopted. This will prevent
companies from importing noncompliant products by inappropriately
declaring a manufacture date that precedes the point at which the
current standards started to apply. This also puts a time limit on our
existing provisions that allow for normal inventory management to use
the supply of engines from previous model years when there has been a
change in standards.
    We are specifying that engines and equipment will be treated as
having a model year at most one year earlier than the calendar year in
which the importation occurs when there is a change in emission
standards (see Sec.  90.615 and Sec.  1068.360). This requirement will
start January 1, 2009 for Small SI engines and it will start
immediately when the final rule becomes effective for engines/equipment
subject to part 1068. For example, for new standards starting in the
2009 or earlier model years, beginning January 1, 2010, all imported
new engines will be considered to have a model year of 2009 or later
and will need to comply with new 2009 standards, regardless of the
actual build date of the engines or equipment. (Engines or equipment
will be considered new unless the importer demonstrates that the engine
or equipment had already been placed into service, as described below.)
This will allow a minimum of twelve months for manufactured engines to
be shipped to equipment manufacturers, installed in equipment and
imported into the United States. This time interval will be
substantially longer for most engines because the engine manufacturer's
model year typically ends well before the end of the calendar year.
Also, engines produced earlier in the model year will have that much
more time to be shipped, installed, and imported.
    Manufacturers have expressed concern that the one-year limitation
on imported products may be too short since there are often delays
related to shipping, inventory, and perhaps most significantly,
unpredictable fluctuations in actual sales volumes. We do not believe
it is appropriate to maintain long-term inventories of these products
outside the United States for eventual importation when it is clear
ahead of time that the new standards are scheduled to take effect.
Companies may be able to import these products shortly after
manufacturing and keep their inventories in a U.S. distribution network
to avoid the situation of being unable to sell these products in the
United States.
    In years where the standards do not change, this provision will
have no practical effect because, for example, a 2004 model year engine
meets the 2006 model year standards. We will treat such an engine as
compliant based on its 2004 emission label, any emission credit
calculations for the 2004 model year, and so on. These engines can
therefore be imported anytime until the end of the calendar year in
which new standards take effect.
    We do not intend for these provisions to delay the introduction of
the new emission standards by one year. It is still a violation to
produce an engine in the 2011 calendar year and call it a 2010 model
year engine to avoid being subject to 2011 standards.
    Importation of equipment that is not new is handled differently.
These products will not be required to be upgraded to meet new emission
standards that started to apply after the engine and equipment were
manufactured. However, to avoid the situation where companies simply
declare that they are importing used equipment to avoid new standards,
we are requiring that they provide clear and convincing evidence that
such engines have been placed into service prior to importation. Such
evidence will generally include documentary evidence of purchase and
maintenance history and visible wear that is consistent with the
reported manufacture date. Importing products for resale or importing
more than one engine or piece of equipment at a time will generally
call for closer evaluation to determine that this degree of evidence
has been met. Note that the regulations generally treat engines
converted to a different category as new engines, even if they have
already been placed into service. For example, if a motor vehicle is
modified such that it no longer fits under the definition of motor
vehicle, its engine generally becomes a new nonroad engine and is
subject to emission standards and other requirements based on its model
year as specified in the regulation.
(6) Liability for Causing Violations
    In the last few years, there has been a surge in the number of
illegal nonroad engines, vehicles and equipment, such as tractors, lawn
mowers, generators and all-terrain vehicles, imported into the United
States. A significant number of the imported nonroad engines, vehicles
and equipment fail to meet EPA requirements and standards under the
Clean Air Act. The manufacturers of these illegal goods often are out
of the effective reach of United States jurisdiction and enforcement.
In 2007, the recall of lead-contaminated toys and more than 5,300
melamine-laced pet food products resulted in heightened interest in
what the U.S. government is doing to safeguard the health of its

citizens with regard to imported consumer products.
    In July 2007, President Bush signed Executive Order 13439
establishing an Interagency Working Group on Import Safety. This
Working Group consists of over ten government agencies including EPA
and the Departments of Health and Human Services, Homeland Security,
State, Treasury, Justice, Agriculture, and Transportation. The wide
range of agencies involved in this Working Group illustrates the
breadth of import issues.
    One of the recommendations of the Interagency Working Group on
Import Safety was to consider a strategic focus or initiative, using
existing statutory and regulatory authorities, and, based upon Agency
priorities, increase enforcement actions against foreign and domestic
manufacturers, as well as importers, brokers, distributors, and
retailers who introduce illegal goods into the stream of commerce. This
rulemaking will help clarify for all regulated parties, including
retailers, that liability for the importation of nonroad vehicles,
engines and equipment in violation of the Clean Air Act and/or its
implementing regulations extends beyond the manufacturer and direct
importer of the product.
    We requested comments regarding revisions to Sec.  1068.101 to
clarify the types of actions for which EPA may pursue enforcement
proceedings. In this rule we are finalizing such clarifying provisions
in Sec.  1068.101. Section 203 of the Act states that performing
certain acts, ``and the causing thereof,'' constitutes a prohibited
act. We are adding a new paragraph (c) in Sec.  1068.101 to
specifically include this prohibition on the ``causing'' of any of the
prohibited acts listed in the statute and the regulations. Adding this
clarification will help people who are subject to the regulations to
more fully understand what actions are prohibited and may potentially
subject them to enforcement proceedings under the Act. The revisions
themselves do not add new enforcement authorities beyond what is
already specified in the statute.
    Since we consider it a violation to cause someone to commit a
specified prohibited act, persons causing any such prohibited act would
also be subject to the full administrative and judicial enforcement
actions allowable under the Act and the regulations. The prohibition on
``causing'' a prohibited act would apply to all persons and would not
be limited to manufacturers or importers of regulated engines or
equipment.
    EPA interprets the ``causation'' aspect of section 203 broadly. In
assessing whether a person has caused a prohibited act, EPA will
evaluate the totality of the circumstances. For example, in certain
circumstances EPA believes that a retailer may be responsible for
causing the importation of engines or equipment not covered by a valid
certificate of conformity or otherwise in violation of our regulations,
such as the emission labeling requirements. In addition to the
prohibitions that apply to manufacturers and importers under section
203, EPA will also consider many factors in assessing whether a
manufacturer, importer, retailer, distributor or other person has
caused a prohibited act. For example, contractual (or otherwise
established) business relationships of those persons involved in
producing and/or selling new engines and equipment could be evidence of
the ability of the person to cause a violation. In addition, we would
consider the particular efforts or influence of the alleged violator
contributing to, leading to, or resulting in the prohibited act. On the
other hand, we would also consider a person's efforts to prevent such a
violation as evidence that they did not cause the violation.
    EPA will evaluate the entire circumstances in determining whether a
person caused another person to commit a prohibited act such as
importing engines or equipment in violation of our regulations.
    To assist importers, distributors, retailers, and the general
public to determine whether the products they are buying or selling
comply with EPA regulations, EPA is expanding its compliance assistance
efforts. Imports compliance assistance information is available at
http://www.epa.gov/otaq/imports/index.htm and http://
www.bordercenter.org/chem/vehicles.htm. Additionally, general
certification information may also be found at http://www.epa.gov/otaq/
nonroad.
(7) Engine rebuilding and replacement engines
    We are finalizing the proposed changes to Sec.  1068.240. In
addition, we are also making other changes to that section to address
manufacturers' concerns for producing short blocks from previous-tier
engines as replacement components for engines needing service in the
field. (See Section VIII.C.1 for additional discussion.) The current
provisions for the replacement-engine exemption in Sec.  1068.240
require that manufacturers take possession of the old engine (or
confirm that it has been destroyed) and take steps to confirm that the
exemption is needed for each new replacement engine. We acknowledge
that these requirements could limit the manufacturers' ability in some
cases to respond quickly for operators that would depend on minimizing
their downtime.
    The most significant change being made in response to the
manufacturers comments is the allowance for limited use of partially
complete engines as replacement components without the administrative
requirements and oversight provisions that currently apply under Sec.
1068.240. We have created a streamlined approach for manufacturers to
produce and sell a certain number of replacement engines, including
partially complete engines, based on production volumes from preceding
years. We are adopting a threshold of 1.0 percent of annual production
through 2013 and 0.5 percent for 2014 and later. To calculate the
number of engines under this provision, manufacturers would first
determine their U.S.-directed production volumes of certified engines
each year. This information is generally submitted as part of the
reporting for production-line testing or in separate annual reports.
The manufacturer would consider the preceding three model years to
select the highest total production volume of certified engines across
all their models in a given year. Multiplying this production volume by
0.01 (or 0.005 starting in 2014) would give the number of engines that
the manufacturer could produce without triggering the administrative
requirements currently specified in Sec.  1068.240. (We may approve the
use of calculations based on earlier model years in unusual
circumstances, such as the case where a manufacturer opts out of a
broad category of engine production but continues to supply service
parts for those models.) These threshold values should allow
manufacturers the flexibility to meet the demand for partially complete
replacement engines, but at production levels that clearly will not
undermine the expected benefits of the emission standards that
otherwise apply to new engines. For any number of noncompliant
replacement engines exceeding the specified threshold, manufacturers
would need to meet all the requirements that currently apply under
Sec.  1068.240.
    The engine grouping includes fairly broad aggregation of products
to keep similar engines together. For example, all outboard engines,
all snowmobiles, and all handheld engines would be counted together as
separate groups. Diesel engines are generally sold to distributors in a
configuration that

could be adapted for use in nonroad applications, either land-based or
marine, or in stationary applications. Engine manufacturers should
therefore aggregate their sales of these engines without regard to
their eventual deployment in any of these applications. However, we are
aware that the very wide range in sizes and sales volumes makes it
necessary to prevent aggregating large and small engines. Without this,
the high sales volumes associated with small engines could allow for
unlimited production of high-power replacement engines. Since it is not
possible to establish a power rating for a partially complete engine,
it is necessary instead to rely on engine displacement to differentiate
these products. The selected per-cylinder cutpoints reflect existing
regulatory requirements and production and marketing characteristics
related to current engine offerings. The situation is similar for
spark-ignition engines that may be used in stationary or nonroad
applications (including marine), except that there is a much less
pronounced range in engine sizes. The engine groupings for calculating
allowable numbers of engines under this approach are shown in Table
VIII.C-1.
    We are also applying the replacement-engine exemption provisions to
heavy-duty highway engines. There have been no such exemption
provisions in the past; however, we are expecting engine technologies
to change significantly in the coming years such that vehicle owners
may be unable to replace engines that fail prematurely without being
able to access replacement engines that are specifically built to match
the earlier configuration. We believe these engines can be accounted
for separately from nonroad and stationary engines with respect to
production volumes, but we are otherwise applying all the provisions of
Sec.  1068.240 equally to heavy-duty highway engines.

   Table VIII.C-1--Aggregating Sets for Streamlined Replacement-Engine
                               Provisions
------------------------------------------------------------------------
                                   Standard-setting         Engine
         Engine category                 part            subcategories
------------------------------------------------------------------------
Highway CI......................  40 CFR part 86....   disp. < 0.6 L/cyl
                                                      0.6 <= disp. < 1.2
                                                       L/cyl
Nonroad CI, Stationary CI, and    40 CFR part 1039    disp. >= 1.2 L/cyl
 Marine CI.                        or 40 CFR part     disp. < 0.6 L/cyl
                                   1042.              0.6 <= disp. < 1.2
                                                       L/cyl
                                                      1.2 <= disp. < 2.5
                                                       L/cyl
                                                      2.5 <= disp. < 7.0
                                                       L/cyl