[Federal Register Volume 77, Number 162 (Tuesday, August 21, 2012)]
[Rules and Regulations]
[Pages 50381-50388]
[FR Doc No: 2012-20463]

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DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

49 CFR Part 580

[Docket No. NHTSA-2011-0152; Notice 2]

Petition for Approval of Alternate Odometer Requirements

AGENCY: National Highway Traffic Safety Administration (NHTSA).

ACTION: Notice of final determination.

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SUMMARY: The State of New York (``New York'') has petitioned for
approval of alternate odometer requirements. New York's petition, as
amended, is granted.

DATES: Effective Date: September 20, 2012.

ADDRESSES: New York's petition and comments are available for public
inspection at the Docket Management Facility of the U.S. Department of
Transportation, 1200 New Jersey Avenue SE., West Building Ground Floor,
Room W12-140, Washington, DC 20590-0001.

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

SUPPLEMENTARY INFORMATION: Anyone is able to search the electronic form
of all comments received into any of our dockets by the name of the
individual submitting the comment (or signing the comment, if submitted
on behalf of an association, business, labor union, etc.). You may
review DOT's complete Privacy Act Statement in the Federal Register
published on April 11, 2000 (65 FR 19477-78) or you may visit http://DocketInfo.dot.gov. For access to the docket to read background
documents or comments received, go to http://www.regulations.gov.
Follow the online instructions for accessing the dockets. You may also
review the docket at the address listed above.

I. Introduction

    Federal odometer law, which is largely based on the Motor Vehicle
Information and Cost Savings Act of 1972 (Cost Savings Act) \1\ and
Truth in Mileage Act of 1986, as amended

(TIMA),\2\ contains a number of provisions to limit odometer fraud and
ensure that the buyer of a motor vehicle knows the true mileage of the
vehicle. The Cost Savings Act requires the Secretary of Transportation
to promulgate regulations requiring the transferor (seller) of a motor
vehicle to provide a written statement of the vehicle's mileage
registered on the odometer to the transferee (buyer) in connection with
the transfer of ownership. This written statement is generally referred
to as the odometer disclosure statement. Further, under TIMA, vehicle
titles themselves must have a space for the odometer disclosure
statement and states are prohibited from licensing vehicles unless a
valid odometer disclosure statement on the title is signed and dated by
the transferor. Titles must also be printed by a secure process.
Federal law also contains document retention requirements for odometer
disclosure statements.
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    \1\ Sec. 401-413, Public Law 92-513, 86 Stat. 961-963.
    \2\ Sec. 1-3, Public Law 99-579, 100 Stat. 3309-3311.
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    TIMA's motor vehicle mileage disclosure requirements apply in a
State unless the State has alternate requirements approved by the
Secretary. The Secretary has delegated administration of the odometer
program to NHTSA. Therefore, a State may petition NHTSA for approval of
such alternate odometer disclosure requirements.
    Seeking to replace an existing system of paper records for dealer
inventories, transfers, and sales--including the transfer of titles and
odometer disclosures--with an electronic system, New York has
petitioned for approval of alternate odometer disclosure requirements.
In its initial determination, NHTSA reviewed the statutory background
and set out the agency's tentative view on applicable statutory factors
governing whether to grant a state's petition. NHTSA determined that
New York's initial petition \3\ for approval of alternate disclosure
requirements did not satisfy Federal odometer law because transfers to
out-of-state purchasers involved the issuance of non-secure paper
odometer disclosure receipts. See 76 FR 65485, Oct. 21, 2011. NHTSA
invited public comments.
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    \3\ New York's Petition for Approval of Alternate Odometer
Disclosure Requirements dated September 30, 2010 shall be referred
to as the ``initial petition.''
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    As part of its comments, New York submitted an amended petition.\4\
After careful consideration of comments, NHTSA has made a final
determination, which is set forth below.
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    \4\ New York's Amended Petition for Approval of Alternate
Odometer Disclosure Requirements dated November 8, 2011 shall be
referred to as the ``amended petition.''
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II. Statutory Background and Purposes

A. Statutory Background

    NHTSA reviewed the statutory background of Federal odometer law in
its consideration of petitions for approval of alternate odometer
disclosure requirements by Virginia, Texas, Wisconsin, Florida, and New
York. See 74 FR 643, Jan. 7, 2009 (granting Virginia's petition); 75 FR
20925, Apr. 22, 2010 (granting Texas' petition); 76 FR 1367, Jan. 10,
2011 (granting Wisconsin's petition in part); 77 FR 36935, June 20,
2012 (granting Florida's petition in part, and denying Florida's
petition in part); see also 76 FR 65485, Oct. 21, 2011 (initial
determination denying New York's petition). The statutory background of
the Cost Savings Act and TIMA, as related to odometer disclosure
requirements, other than in the transfer of leased vehicles and
vehicles subject to liens where a power of attorney is used, is
discussed at length in NHTSA's final determination granting Virginia's
petition. 74 FR 643; see also 77 FR 36935; 76 FR 48101, Aug. 8, 2011
(addressing leased vehicles and powers of attorney).\5\ A brief summary
of the statutory background of Federal odometer law follows.
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    \5\ New York's petition does not address leased vehicles or
powers of attorney.
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    In 1972, Congress enacted the Cost Savings Act to establish
safeguards for consumers which prohibited odometer tampering. Among
other things, the Cost Savings Act made it unlawful to alter an
odometer's mileage, and required written disclosure of odometer mileage
in connection with any transfer of ownership of a motor vehicle.\6\
However, the Cost Savings Act had a number of shortcomings, which are
discussed below.
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    \6\ In 1976, Congress amended the odometer disclosure provisions
in the Cost Savings Act to provide further protections to purchasers
from unscrupulous car dealers. See Public Law 94-364, 90 Stat. 981
(1976).
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    In 1986, Congress enacted TIMA to address the Cost Savings Act's
shortcomings. Congress was specifically concerned with addressing
odometer fraud in the commercial market, and noted that used car
auctions, distributors, wholesales, dealers, and used car lots of new
car dealers often may be directly involved in fraud.\7\ TIMA also added
a provision to the Cost Savings Act, allowing States to obtain approval
for alternate odometer disclosure requirements. Pursuant to Section
408(f) of the Cost Savings Act, as amended by TIMA: The Secretary shall
approve alternate motor vehicle mileage disclosure requirements
submitted by a State unless the Secretary determines that such
requirements are not consistent with the purpose of the disclosure
required by subsection (d) or (e), as the case may be.
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    \7\ S. Rep. No. 99-47, at 2 (1985), reprinted in 1986
U.S.C.C.A.N. 5620, 5621.
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    In 1994, in the course of the recodification of various laws
pertaining to the Department of Transportation, the Cost Savings Act,
as amended, was repealed, reenacted, and recodified without substantive
change. See Public Law 103-272, 108 Stat. 745, 1048-1056, 1379, 1387
(1994). The odometer statute is now codified at 49 U.S.C. 32701 et seq.
Section 408(a) of the Cost Savings Act was recodified at 49 U.S.C.
32705(a). Sections 408(d) and (e), which were added by TIMA, with
subsequent amendments, were recodified at 49 U.S.C. 32705(b) and (c).
The provisions pertaining to approval of State alternate motor vehicle
mileage disclosure requirements were recodified at 49 U.S.C. 32705(d).

B. Statutory Purposes

    In our final determinations, after notice and comment, granting the
petitions for approval of alternate odometer disclosure requirements of
Virginia, Texas, and, in part, Wisconsin and Florida, we identified the
statutory purposes of TIMA.\8\ 74 FR 643; 75 FR 20925; 76 FR 1367; 77
FR 36935. These purposes are summarized below.\9\
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    \8\ Any statements which refer to the ``purposes of TIMA'' or a
``purpose of TIMA'' should be interpreted to refer to the purpose of
the disclosure required by subsection (d) or (e), as the case may
be, as stated in Section 408 of the Cost Savings Act, as amended by
TIMA.
    \9\ New York's amended petition does not pertain to leased
vehicles or powers of attorney. Accordingly, the purposes of TIMA
addressed below do not address these matters.
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    One purpose of TIMA was to ensure that the form of the odometer
disclosure precluded odometer fraud. The Cost Savings Act did not
require odometer disclosures to be made on a vehicle's title. This
created a potential for odometer fraud, because a transferor could
easily alter the odometer disclosure or provide a new statement with
different mileage.\10\ TIMA addressed this shortcoming of the Cost
Savings Act by requiring mileage disclosures to be on a vehicle's title
instead of a separate document. Titles

also had to contain space for the seller's attested mileage disclosure.
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    \10\ See S. Rep. No. 99-47, at 2-3 (1985), reprinted in 1986
U.S.C.C.A.N. 5620, 5621-22; H. Rep. No. 99-833, at 33 (1986).
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    A second purpose of TIMA was to prevent odometer fraud by processes
and mechanisms making the disclosure of an odometer's mileage on the
title a condition of the application for a title, and a requirement for
the title to be issued by the State.\11\ This was intended to eliminate
or significantly reduce abuses associated with lack of control of the
titling process.\12\ Prior to TIMA, odometer fraud was facilitated by
the ability of transferees to apply for titles without presenting the
transferor's title with the disclosure.
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    \11\ See S. Rep. No. 99-47, at 2-3 (1985), reprinted in 1986
U.S.C.C.A.N. 5620, 5621-22; H. Rep. No. 99-833, at 18, 32 (1986).
    \12\ See S. Rep. No. 99-47, at 2-3 (1985), reprinted in 1986
U.S.C.C.A.N. 5620, 5621-22; Sec. 2, Public Law 99-579, 100 Stat.
3309.
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    Third, TIMA sought to prevent alterations of disclosures on titles
and to preclude counterfeit titles through secure processes. Prior to
TIMA, titles could be printed through non-secure processes, and could
be easily altered or laundered.\13\ To address this shortcoming of the
Cost Savings Act, TIMA required titles to be printed by means of a
secure printing process or protected by other secure processes.\14\
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    \13\ See S. Rep. No. 99-47, at 3 (1985), reprinted in 1986
U.S.C.C.A.N. 5620, 5622.
    \14\ See H. Rep. No. 99-833, at 18, 33 (1986).
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    A fourth purpose of TIMA was to create a record of the mileage on
vehicles and a paper trail.\15\ This would allow consumers to be better
informed and provide a mechanism for tracing odometer tampering and
prosecuting violators. Under the Cost Savings Act, prior to TIMA,
odometer disclosures could be made on pieces of paper and did not have
to be submitted with new title applications. TIMA required new
applications for title to include the transferor's mileage disclosure
statement on the title, creating a permanent record that could easily
be checked by subsequent owners or law enforcement officials. This
record would provide critical snapshots of the vehicle's mileage at
every transfer, which are fundamental links in the paper trail.
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    \15\ See H. Rep. No. 99-833, at 18, 33 (1986).
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    Finally, the general purpose of TIMA was to protect consumers by
ensuring that they received valid representations of the vehicle's
actual mileage at the time of transfer based on odometer
disclosures.\16\ The TIMA amendments were directed at resolving
shortcomings in the Cost Savings Act.
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    \16\ See Preamble, Public Law 99-579, 100 Stat. 3309.
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III. New York's Program

    New York, which is in the process of implementing an Electronic
Vehicle Inventory and Transfer System (System), petitions for approval
of alternate odometer disclosure requirements. New York requests
alternate disclosure requirements for transfers of motor vehicles in
transactions to, from, and among licensed New York dealers.

A. Overview of Current New York Transfer/Odometer Disclosure System

    In New York, odometer disclosures are currently made on securely
printed documents produced by NYSDMV. A Certificate of Title (MV-999),
Retail Certificate of Sale (MV-50) (Dealers Re-assignment Form), and/or
Wholesale Certificate of Sale (MV-50W) may be used depending on the
circumstances of the transfer. In order to comply with Federal odometer
disclosure requirements, all three documents include built-in security
features including unique numbers, along with an area to disclose the
odometer reading. The MV-999 has space for one odometer disclosure
statement and is used where title is held by the transferor. If this
space has been filled by an odometer disclosure statement in a prior
transaction, New York dealers must use either the MV-50 or MV-50W
reassignment document, as appropriate, to make the required odometer
disclosure statement and transfer vehicle title. See 15 NYCRR section
78.10.
    Currently, in New York, dealers are required by NYSDMV to keep a
paper inventory (Book of Registry) in which dealers record identifying
information about vehicles they purchase and sell. NYS Vehicle and
Traffic Law section 415(15); 15 NYCRR section 78.25. When a New York
dealer sells a vehicle to another New York dealer, the purchasing
dealer is required to enter the vehicle identifying information
including the odometer disclosure statement in its Book of Registry. A
dealer's Book of Registry is subject to review during on-site audits by
NYSDMV.
    When a New York dealer sells a vehicle to a purchaser, an MV-50/MV-
50W is filled out with the vehicle identifying information, the name
and address of the dealer, and the name and address of the purchaser.
The dealer fills in the odometer disclosure statement found on the MV-
50/MV-50W and then both the dealer and purchaser sign the statement.
Odometer readings are recorded in the selling dealer's Book of
Registry, the purchasing dealer's Book of Registry (if the purchaser is
a New York dealer), and the MV-50, all of which are subject to audit by
NYSDMV. In cases where the purchaser is not another New York dealer,
the purchaser must take a copy of the MV-50, along with other ownership
documentation provided by the dealer (e.g. original title, prior MV-50/
MV-50Ws), and a completed Vehicle Registration/Title Application (MV-
82) to a NYSDMV office to apply for a new title.

B. New York's Proposed Electronic Vehicle Inventory and Transfer System

1. Accessing the Proposed System
    According to New York's initial petition, the System would control
access to MV-50 processing. New York dealerships would access the
System to enter inventory and record vehicle sales transactions,
including making the odometer disclosure statements required under
TIMA. Dealers would be required to join the System when they were due
for business license renewal. Each licensed New York dealer would be
required to renew its business license every two years.
    To join the System, a dealer first would request access to the
system from NYSDMV. NYSDMV would register the dealership as a group and
designate a System administrator for that dealership (a dealership
employee chosen by the dealer) to be responsible for assigning System
accounts to employees (users) within the dealership.\17\ The number of
users and the level of access for each user would be determined and
controlled by the administrator. User accounts created by the
dealership's administrator would be subject to review during onsite
audits by NYSDMV and enforcement staff.
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    \17\ Each user would be prompted at first sign-on to the System
to change his or her password. Every 90 days, the user would need to
change his or her password. The new password would have to be
different than the last three passwords. Passwords would be stored
in the System and encrypted.
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    Each year, the administrator would be prompted by the System to re-
certify the facility on the System with the NYSDMV. If the
administrator did not comply with the System recertification prompt,
dealership access to the System would be turned off, preventing the
dealership from completing any sales transactions. An entire dealership
or an individual working at a dealership could be denied access to the
System any time NYSDMV deemed it necessary. The System would be limited
to New York dealer transactions, as others except for NYSDMV would not
have access to it.

2. Using the Proposed System
    Under New York's proposal, if a vehicle were transferred to a
dealership, the vehicle's identifying information would be entered into
the System using a standardized template through a user's account. The
vehicle identification number (VIN) would automatically be verified by
the System using the appropriate Vehicle Identification Number Analysis
(VINA) file. (VINA is a system used to verify and decode information
contained in vehicle identification numbers.) If the vehicle were sold
to another New York dealer, the purchasing dealer's System template for
that vehicle would pre-fill with the vehicle's identification
information from the System. During sales/transfer transactions, the
seller would electronically disclose vehicle information including the
current mileage and would be issued a unique transaction number.
    Because it relies on dealers making entries into the system, New
York's proposed Electronic Vehicle Inventory and Transfer System
encompasses only transactions involving dealers.
a. Transactions to and Between New York Dealers
    NYSDMV's proposed process for handling vehicle transfers to and
between licensed New York dealers would be as follows. When a dealer
receives a vehicle (whether from a manufacturer, a customer, or another
dealer) and vehicle ownership documentation, an authorized dealership
user would sign on to the System and enter the vehicle's identifying
information. The vehicle's odometer reading, disclosed on the title in
the case of a consumer trading in or selling a vehicle to the dealer,
would be recorded in the System by the dealer.
    If a dealer sold a vehicle to another licensed New York dealer, the
selling dealer would sign on to the System using its unique sign on and
password and would access the vehicle's identifying information on the
System. The selling dealer would enter current vehicle information
including the current odometer reading and enter seller and purchaser
information on the System. The System would then generate a transaction
number. The purchasing dealer would sign on to the System using its
unique sign on and password and would access the vehicle's identifying
information on the System using the transaction number. The purchasing
dealer would then review the vehicle's identifying information,
including the odometer disclosure statement made by the selling
dealer,\18\ and would accept or reject the transaction. If the
purchasing dealer accepted the transaction it would be considered
complete. The original pre-dealer ownership document (still in the
prior owner's name) would be surrendered to the purchasing dealer at
the time of sale.
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    \18\ The System would automatically check the odometer
disclosure statement entered by the seller against the odometer
disclosure statement previously recorded on the System for that
vehicle. If the odometer reading entered by the seller was lower
than what was previously recorded, the transaction would not be
processed without a proper notation explaining the odometer
discrepancy. According to the NYSDMV, this notation could be either
``true mileage unknown'' or ``exceeds mechanical limits'', as
indicated in a check-box in the System. This notation would remain
in the vehicle's history through all subsequent transactions.
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    If, during the purchasing dealer user's review of the vehicle's
identifying information on the System, the user did not agree with all
of the information, the user could reject the transaction. Subsequent
transfers between licensed New York dealers would be recorded in the
same manner. It is the Agency's understanding that the entire history
of the vehicle's identifying information entered into the System at
each transfer would be maintained indefinitely on the System.
b. Transactions Between New York Dealers and Non-New York Dealer
Purchasers, Both In-State and Out-of-State
    If a vehicle owned by a New York dealer were sold to an in-state or
out-of-state retail purchaser, salvage dealer, auction house, or other
non-dealer purchaser, an authorized user at the selling dealer would
sign on to the System and access the vehicle information on the System.
The selling dealer would enter current vehicle information including
the current odometer reading, and would enter seller and purchaser
information on the System.
    Under the initial proposal (which New York later amended), a two-
part sales receipt/odometer statement would be created on the System.
The purchaser would then review the information, including the odometer
statement, on a draft receipt displayed on the computer screen. If the
purchaser agreed with the odometer statement and other information, the
authorized dealer representative would save the data in the System and
then print a two-part sales receipt. Both parties would then sign the
odometer disclosure statement printed on each of the two parts of the
receipt. The dealer would retain the dealer part of the receipt for its
files. The purchaser would be given the purchaser's copy of the receipt
along with the original title. If the purchaser did not agree with any
of the information displayed on the dealer's computer screen,\19\ the
purchaser could reject the transaction. In that case, the dealer would
have to cancel the transaction in the System and resubmit it using the
correct information.
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    \19\ As with transfers between licensed New York dealers
described above, the System would automatically check the odometer
disclosure statement entered by the seller against the odometer
disclosure statement previously recorded on the System for that
vehicle. If the odometer reading entered by the seller were lower
than what was previously recorded, the transaction would be
cancelled.
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    New York's initial petition stated that during vehicle registration
by a New York purchaser, NYSDMV staff would review the vehicle's data
and odometer disclosures on New York's System. NYSDMV staff would
compare the information in the System to the information on the paper
ownership documents and the purchaser's copy of the aforementioned two-
part receipt. This would verify the mileage reported on the paper
documents. If a vehicle had gone in and out of New York State multiple
times, New York's initial petition stated that the proposed system
would show the New York State history for the vehicle, which would help
to identify gaps in mileage and ownership.

IV. NHTSA's Initial Determination

    In its initial determination, NHTSA restated the statutory purposes
of the disclosure required by TIMA as amended. 76 FR 65487. NHTSA
discussed New York's petition (Id. at 65487-65490) and analyzed whether
it was consistent with the statutory purposes (Id. at 65490-65492).
NHTSA preliminarily denied New York's petition because it was not
consistent with certain purposes of the disclosure required by TIMA.
Our concerns centered on sales to out-of-state purchasers.
    NHTSA stated that New York's alternate disclosure requirements did
not meet the third purpose of preventing alternations of disclosure on
titles and precluding counterfeit titles through secure processes,
because the odometer disclosure statement printed by a New York dealer
as part of a sale to a non-New York dealer would not be made by a
secure process. Id. at 65491. In particular, the receipt that New York
proposed using in transactions between New York dealers and out-of
state-buyers would be susceptible to alteration and counterfeiting. Id.
    NHTSA further stated that New York's proposed program would not be

consistent with the fourth purpose of creating a record of mileage on
vehicles and a paper trail in cases where a vehicle would be titled in
a state other than New York. Id. Unlike the current MV-50 form printed
on secure paper with a control number, the receipt that New York
proposed using to title vehicles out-of-state would not be printed on
secure paper, and could be easily substituted with another document.
Id. NHTSA stated that the resolution of whether New York's proposed
program satisfied the purpose of creating a paper trial turned on the
security of the final reassignment document used to obtain title. Id.
    NHTSA discussed TIMA's overall purpose of protecting consumers by
ensuring that they receive valid odometer disclosures representing a
vehicle's actual mileage at the time of transfer. NHTSA stated that
other than the portions of New York's proposed program related to the
security of the odometer disclosure statement in the sale of a vehicle
from a licensed New York dealer to an out-of-state buyer, New York's
proposal likely would provide more protection for consumers than the
current procedure. Id. at 65492.

V. Summary of Public Comments

    NHTSA received two comments. The first was from the New York
Division of Motorist Services (New York).\20\ In its comment, New York
amends its petition. For transfers to out-of-state buyers, New York
states that it will use a secure MV-50 form instead of the two-part
paper receipt it initially proposed. The second comment was from the
National Auto Auction Association (NAAA).\21\ NAAA's comments are
largely based on portions of New York's initial petition which New York
amended.
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    \20\ Letter from Ida L. Traschen, First Assistant Counsel, State
of New York Department of Motor Vehicles, to O. Kevin Vincent, Chief
Counsel, National Highway Traffic Safety Administration (``New
York's Comment'') (Nov. 8, 2011).
    \21\ Letter from Bertha M. Phelps, Chair, Legislative and
Government Relations Committee, National Auto Auction Association,
to O. Kevin Vincent, Chief Counsel, National Highway Traffic Safety
Administration (``NAAA's Comment'') (Nov. 21, 2011).
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A. New York's Comment Amending Its Petition

    In its comment, New York first identifies portions of NHTSA's
initial determination where NHTSA indicated that New York's program was
not consistent with the third, fourth, and overall purposes of the
disclosure required by TIMA. New York then amends its petition in a
manner which it believes addresses NHTSA's concerns.\22\ New York's
amendments primarily address transactions between New York dealers and
out-of-state purchasers.
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    \22\ New York attached an Amended Petition for Approval of
Alternate Odometer Disclosure Requirements to its comment.
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1. Transactions Between New York Dealers and Out-of State Purchasers
    Initially, New York proposed using the same procedure for out-of-
state transfers as in-state transfers. This proposal involved the
issuance of a non-secure paper receipt, which would be used to title
vehicles outside of New York. As explained in NHTSA's initial decision,
the non-secure receipt is problematic. New York amended its petition.
    Under New York's amended petition, the first stage of the
transaction, where the dealer enters the vehicle's information into the
system, is identical to the procedure described in New York's initial
petition. However, in a sale of a vehicle to an out-of-state purchaser,
the second stage of the transaction is different. New York now proposes
that instead of using a two-part paper receipt, the selling dealer
would use a secure paper MV-50 (Retail Certificate of Sale) to document
the transaction. The dealer would indicate the mileage of the vehicle
in the System and also indicate which uniquely numbered MV-50 was used
for the transfer. Both parties would sign the MV-50. The dealer would
retain one copy of the MV-50, and the purchaser would retain another
copy. If the buyer went to title the vehicle outside of New York, the
out-of-state department of motor vehicles could use the Polk Motor
Vehicle Registration Manual and/or a web application to identify that
the MV-50 was authentic. A web application would be available to both
in-state and out-of-state purchasers, allowing them to verify basic New
York State odometer history by entering a vehicle's VIN.
2. Transactions Between New York Dealers and Non-Dealer, In-State
Purchasers
    New York amends its proposal with respect to transactions between
New York purchasers and in-state, non-dealer purchasers only slightly.
New York would continue using the two-part sales receipt, but amends
its petition to require the two-part sales receipt to contain a
statement advising purchasers that the receipt may only be used to
register the vehicle in New York State.\23\ If the purchaser intended
to register the vehicle outside of New York, the dealer would be
required to issue a secure paper MV-50 instead of the non-secure two-
part receipt.
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    \23\ We expect that the sales receipt, along with the
information the dealer enters into the System, to contain all of the
information required by 49 CFR 580.5.
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B. The National Auto Auction Association's Comment

    NAAA represents hundreds of auto auctions. NAAA's comments are
based on New York's initial petition.
    NAAA comments that New York's proposed system creates a potential
for odometer fraud and unnecessarily complicates the transfer of
vehicles across state lines. NAAA states that the non-secure paper
receipt, which is not generated by a secure process and is separate
from the original title document, could be altered or counterfeited by
an out-of-state buyer. NAAA also argues that the information gaps
created by maintaining odometer information in two separate locations
(electronically for New York dealers and on paper for everyone else)
are a cause for concern. NAAA states that without a complete history of
odometer information in one location, it will be difficult for out-of-
state purchasers to identify potential odometer fraud. If title
information is altered after a purchase is made from a New York dealer,
a subsequent purchaser will not be able to ascertain the vehicle's
odometer history without both the paper title and access to New York's
System. NAAA states that this would be at odds with the purposes of
TIMA, and that it could negatively affect interstate commerce and the
value of vehicles titled in New York. Finally, NAAA states that New
York's proposed system's susceptibility to odometer fraud, the
existence of two separate titling processes, and the absence of a
complete odometer history once a New York dealer vehicle is sold to a
non-New York dealer may dissuade bidders from purchasing New York
vehicles at auction. NAAA concludes that New York's system, as
proposed, does not adequately address the issues created by the
transfer of vehicles to non-New York dealers.

VI. Statutory Purposes

    The Cost Savings Act, as amended by TIMA in 1986, contains a
specific provision on approval of State alternative odometer disclosure
programs. Subsection 408(f)(2) of the Cost Savings Act as amended by
TIMA (now recodified at 49 U.S.C. 32705(d)) provides that NHTSA shall
approve alternate motor vehicle mileage disclosure requirements
submitted by a

State unless NHTSA determines that such requirements are not consistent
with the purpose of the disclosure required by subsection (d) or (e) as
the case may be. (Subsections 408(d), (e) of the Costs Savings Act,
which were amended by TIMA and subsequently amended, were recodified to
49 U.S.C. 32705(b) and (c)).
    Neither New York's nor NAAA's comments dispute the relevant Cost
Savings Act purposes set forth in NHTSA's initial determination. New
York restates and applies the purposes of TIMA to its Amended Petition
for Approval of Alternate Odometer Disclosure Requirements. NAAA does
not challenge NHTSA's analysis of statutory purposes in the initial
determination in its comment.
    After careful consideration of the comments, as part of the
agency's final determination, we adopt the purposes stated in the
initial determination of New York's petition. 76 FR 65487.

VII. NHTSA's Final Determination

    Section 408(f)(2) of the Cost Savings Act sets forth the legal
standard for approval of state alternate vehicle mileage disclosure
requirements: NHTSA ``shall'' approve alternate motor vehicle mileage
disclosure requirements submitted by a State unless NHTSA determines
that such requirements are not consistent with the purpose of the
disclosure required by subsection (d) or (e) of section 408, as the
case may be. In this section, we consider New York's program in light
of the purposes of the disclosure required by subsection (d) of section
408,\24\ and address New York's and NAAA's comments.
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    \24\ Subsection (3) of section 408 involves leased motor
vehicles which are not at issue here.
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    One purpose is to ensure that the form of the odometer disclosure
precludes odometer fraud. When title is held by the transferor, the
disclosure must be contained on the title provided to the transferee
and not on a separate document. In the case of a transferor of a
vehicle in whose name the vehicle is not titled (e.g., the transferor
of the vehicle is the transferee on the title) the odometer disclosure
statement may be made on a secure reassignment document if the title
does not have sufficient space for recording the additional disclosure.
    New York's proposed alternate disclosure requirements satisfy this
purpose. Under New York's amended petition, when an owner transfers
ownership of a vehicle to a dealer, the odometer disclosure statement
would be on the paper title. The dealer would input the vehicle's
identifying information and odometer disclosure into the Electronic
Vehicle Inventory and Transfer System. The odometer disclosure,
including the names of the transferor and transferee, would be
required. Thereafter the odometer disclosure statement would reside as
an electronic record within the System that would be linked to the
vehicle by the vehicle's VIN.
    If a dealer transfers a vehicle to another licensed New York
dealer, the selling dealer would sign on to the System using its unique
sign on and password and would access the vehicle's identifying
information on the System. The selling dealer would enter current
vehicle information including the current odometer reading and would
enter seller and purchaser information on the System. The System would
then generate a transaction number. The purchasing dealer would use the
transaction number to access the vehicle's information on the System,
review the information, including the selling dealer's odometer
disclosure statement, and accept or reject the transaction. If the
transaction is accepted, the sale is completed and the odometer
disclosure is recorded in the System. In essence, this is an electronic
reassignment from one licensed dealer to another licensed dealer, using
a transaction based approach in a secure computer system in which both
the selling dealer and purchasing dealer sign off on the odometer
disclosure.
    When the vehicle is sold from a licensed New York dealer to a
person or entity other than a licensed New York dealer, the dealer/
seller enters the purchaser's identifying information and the odometer
disclosure statement into the System. If the buyer agrees that the
odometer disclosure in the System is accurate, the System creates a two
part receipt that is signed by the selling dealer and purchaser. The
paper title and one part of the receipt must be presented to a State
motor vehicle titling and registration agency when the purchaser
applies to title and register the vehicle.
    New York's proposal meets the TIMA purpose of ensuring that the
form of the odometer disclosure precludes odometer fraud. We note that
New York's proposal involves a proper odometer disclosure on the title
itself when the seller is the person in whose name the vehicle is
titled. Following transfer of a vehicle to a New York dealer, when the
vehicle is not re-titled in the name of the dealer, the proposed New
York system would provide for odometer disclosures to be made
electronically in a secure electronic system with sign offs by the
seller and buyer instead of on the paper reassignment documents
currently being used. In addition, the paper title with an odometer
disclosure would be transferred to the transferee/purchasing dealer.
This is comparable to paper reassignments employing a paper State title
and paper State reassignment form. Ultimately, for sales from New York
dealers to consumers and other non-dealer buyers, the odometer
disclosure would be recorded in the State's electronic system and on a
two-part receipt or MV-50 signed by both buyer and seller. The receipt
or MV-50--a form of paper reassignment document--memorializes the
electronic disclosure. This would accompany the initial title with an
odometer disclosure.
    A second purpose of TIMA is to prevent odometer fraud by processes
and mechanisms making the disclosure of an odometer mileage on the
title both a condition for the application for a title and a
requirement for the title issued by the State. New York's proposed
process satisfies this purpose. New York's proposed transfer process
requires disclosure of odometer information on the paper title, at
first sale from a titled owner to a New York licensed dealer, and
electronically within the System in transfers between New York licensed
dealers before the transaction can be completed. In addition, in sales
from New York licensed dealers to non-dealer purchasers, the purchaser
must present the prior paper title from the initial sale to the first
dealer and the receipt of purchase with a mileage disclosure from the
last dealer when applying for a vehicle title and registration. New
York's proposal requires that the vehicle title from the initial owner
in the process to the first dealer--with the odometer disclosure--be
provided to the person purchasing the vehicle from the last dealer in
the dealer chain. This original title--with an odometer disclosure--
along with the buyer's part of the proposed two-part paper receipt and
mileage disclosure must both be presented to state titling officials in
order for the buyer to obtain a new title.
    A third purpose of TIMA is to prevent alterations of disclosures on
titles and to preclude counterfeit titles through secure processes. The
agency initially determined that New York's alternate disclosure
requirements did not satisfy this purpose. However, in its comment, New
York amended its petition. New York's proposal as amended is consistent
with the third purpose of the disclosure required by TIMA.
    When a vehicle is first transferred to a dealer, the transfer and
required odometer disclosure statement are made using the vehicle's
secure paper title

document (MV-999). Subsequent transfers between licensed New York
dealers are processed electronically--the selling dealer submits the
vehicle's identifying information into the System, including the
odometer disclosure statement; the purchasing dealer then verifies the
information on the System, including the odometer disclosure statement
made by the selling dealer, and either accepts or rejects the
transaction electronically.
    Upon final retail sale of a vehicle to an in-state consumer or
other non-New York dealer entity, the odometer disclosure statement
would be made electronically and on a two part paper receipt, one part
of which is given to the new owner to use in obtaining a title. More
particularly, the selling dealer would access the Electronic Vehicle
Inventory and Transfer System and enter the odometer disclosure and the
dealer's and buyer's information into the system. If the odometer
reading entered was not lower than a prior entry, a two-part odometer
statement and receipt would be created electronically. The purchaser
would review the information on the receipt prior to the receipt being
printed and verify the odometer disclosure statement on the receipt. If
the purchaser accepted the information, then the two-part sales receipt
would be printed and both parties would sign the odometer disclosure
statement printed on each part of the receipt. The dealer would retain
the dealer part of the receipt for its files and the purchaser would be
given the purchaser part of the receipt along with the original
ownership document. Prior to registering and titling the vehicle in the
new purchaser's name, NYSDMV's System, which would have the odometer
reading, would check the information on the paperwork submitted by the
purchaser (i.e. the paper receipt and title) against the information in
the System.
    Sales to out-of-state purchasers would mirror sales to in-state
purchasers up to the point of printing a two-part sales receipt.
Instead of a two-part sales receipt, the dealer would use a secure MV-
50 form to document the transaction. The MV-50 form is printed using a
secure printing process, and each MV-50 form bears a unique
identification number. When transferring a vehicle, a dealer would
indicate which uniquely numbered MV-50 form was being used for the
transfer in the system. Both parties would complete and sign the MV-50,
and the dealer and purchaser would each retain a copy of the MV-50. New
York controls the distribution and use of MV-50 forms and requires
dealers to account for every MV-50 they receive. 15 NYCRR Sec.  78.10.
We are satisfied that New York's proposal, as amended, is consistent
with the purpose of preventing alterations of disclosures on titles and
precluding counterfeit titles through secure processes. New York's
amendment of its program from a non-secure paper receipt to the secure
MV-50 also addresses concerns raised in NAAA's comment that the paper
receipt could be altered or counterfeited by an out-of-state buyer.
    A fourth purpose of TIMA is to create a record of the mileage on
vehicles and a paper trail. The underlying purposes of this record and
paper trail are to enable consumers to be better informed and provide a
mechanism through which odometer tampering can be traced and violators
prosecuted. We initially determined that New York's alternate
disclosure requirements did not satisfy this purpose. In response, New
York amended its petition.
    Under New York's proposal, creation of a paper trail starts with
the requirement that the initial transfer to a dealer is processed on
the vehicle's secure paper title, including the odometer disclosure
statement. Each subsequent dealer-to-dealer transfer is processed
electronically, with the selling dealer inputting the vehicle's
identifying information into the System, and the purchasing dealer
verifying and certifying this information to complete the transfer.
Under New York's proposed program, the most recent vehicle odometer
disclosure would be available for public view via an online
application. A dealer selling a vehicle to a non-dealer would record
the odometer statement in the System at the time of sale. A selling
dealer would also be required to transfer the paper title obtained from
the first seller to the purchasing dealer or retail and/or out of state
buyer.
    For ultimate sales to New Yorkers, the final retail purchaser would
be required to present paperwork (including the title containing an
executed odometer disclosure statement used to transfer title of the
vehicle from the initial owner to a New York dealer and, if
appropriate, one copy of the receipt generated by the System when the
dealer transferred the vehicle to the purchaser) to the NYSDMV when
applying to register and title the vehicle in the purchaser's name. The
NYSDMV would use this paperwork in conjunction with the vehicle's
identifying information available on the System to verify the trail of
ownership and odometer disclosure statements for the vehicle through
the final retail sale. The paper title used to transfer the vehicle to
the dealer would be retained by the NYSDMV in a file associated with
the vehicle's VIN for at least ten years, and it would be available to
dealers, NYSDMV, and enforcement staff. The System would maintain the
vehicle identifying information, including odometer disclosure,
indefinitely. The NYSDMV could track the odometer disclosure statements
through the System. The System would not allow a transfer to be
completed in which the disclosed odometer reading was lower than a
prior odometer disclosure statement. In addition, New York's petition
states that it would not issue a title to the buyer unless the
disclosures on the foregoing paper documents matched those found in the
System.
    In those cases in which a New York dealer sells a vehicle to a
person who would title and register it out-of-state, as described in
the amended petition, the buyer would be provided with the title used
to transfer it initially to a dealer and a MV-50 containing the
odometer disclosure. A dealer would be required to annotate the unique
MV-50 number from the MV-50 being used for the transaction in New
York's System. This would create a paper trail linking the electronic
records to the paper MV-50 given to the out-of-state buyer. Both
parties would receive a copy of the MV-50, which could be authenticated
outside of New York by using a Polk Motor Vehicle Registration Manual
and/or Web application. Additionally, as described in New York's
initial proposal, a Web application would allow both in-state and out-
of-state purchasers to verify basic New York State odometer history by
entering the vehicle's VIN.
    In NHTSA's view, New York's proposed program, as amended, would
create a scheme of records equivalent to the current ``paper trail''
that assists law enforcement in identifying and prosecuting odometer
fraud. Use of a secure MV-50 form whose unique identification number is
recorded in the System adds a level of security that was lacking in New
York's initial proposal, as it would be executed in out-of-state
transfers. New York could use the MV-50 form to document in-state
transfers in lieu of the non-secure paper receipt as well. Accordingly,
New York's program as amended is consistent with the fourth purpose of
the disclosure required by TIMA.\25\
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    \25\ NAAA commented that New York's proposal would create
information gaps because odometer information would be maintained in
two separate locations--electronically for New York dealers and on
paper for everyone else. We do not believe this is a reason to
disapprove New York's program. Odometer information is currently
maintained in many locations in New York. Each New York dealer keeps
records of odometer mileage in vehicles the dealership has
transferred in a paper Book of Registry. The proposed changes to New
York's program consolidate the Books of Registry maintained by each
individual dealer into a single electronic system.

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

    TIMA's overall purpose is to protect consumers by ensuring that
they receive valid odometer disclosures representing a vehicle's actual
mileage at the time of transfer. New York's proposed alternate
disclosure requirements, as amended are consistent with this purpose.
New York's proposed alternate disclosure requirements include
characteristics that would ensure that representations of a vehicle's
actual mileage would be as valid as those found in current paper title
transfers and reassignments. Transfers of vehicles between licensed New
York dealers, including the required odometer disclosure statements,
would be processed and the records maintained electronically in the
System. Transfer records would be maintained on the System. The paper
title used for the initial transfer to a licensed New York dealer would
follow the vehicle and would be required when applying for registration
and titling of the vehicle in the final purchaser's (not a licensed New
York dealer's) name. Potential buyers could examine the most recent
odometer disclosure statement online before purchasing the vehicle.
Mileage disclosures made on paper receipts for in-state transfers would
be checked against information in the System. Out-of-state transfers
would be documented on a secure MV-50 form, which could be verified
outside New York, and which would be linked to a particular transaction
by a unique MV-50 identification number.
    NAAA commented that New York's proposal was susceptible to fraud
and that the absence of a complete odometer history would dissuade
bidders from purchasing New York vehicles at auction. We note that New
York stated in its initial petition that it would make a Web
application available to in-state and out-of-state purchasers, which
would allow purchasers to verify New York State odometer history by
entering a vehicle's VIN.

VIII. Conclusion

    For the foregoing reasons, and upon review of the entire record,
the agency concludes that New York's proposed alternate disclosure
requirements, as amended, are consistent with the purposes of the
disclosure required by TIMA and its amendments. NHTSA hereby issues a
final determination granting New York's amended petition for
requirements that apply in lieu of the federal requirements adopted
under section 408(d) of the Cost Savings Act. Other requirements of the
Cost Savings Act continue to apply in New York. NHTSA reserves the
right to rescind this grant in the event that information acquired
after this grant indicates that, in operation, New York's alternate
requirements do not satisfy one or more applicable requirements.

    Authority:  49 U.S.C. 32705; delegation of authority at 49 CFR
1.50 and 501.8.

    Issued on: August 14, 2012.
David Strickland,
Administrator.
[FR Doc. 2012-20463 Filed 8-20-12; 8:45 am]
BILLING CODE 4910-59-P