NHTSA Extends Deadline to Dispose of Vehicles from Cash for Clunkers Program

Agency moves deadline to 270 days.

December 2, 2009
Auto Shredding

The National Highway and Traffic Safety Administration (NHTSA) has extended the deadline for companies to crush vehicles generated through the Consumer Assistance to Recycle and Save programs (“Cash for Clunkers”) from 180 days to 270 days.

The rule amends regulations that were implemented when the program was introduced on July 29, 2009. In extending the deadline by 90 days, the NHTSA says it decided the extra time would allow the public to benefit from the availability of lower-cost used vehicle parts from vehicles traded in under the CARS program and would provide disposal facilities with an opportunity to derive more revenue from those vehicles prior to crushing or shredding.
In its initial meeting with representatives of disposal facilities, the NHTSA determined that 180 days was an appropriate amount of time to allow a disposal facility to possess a car prior to crushing or shredding. The allowed time period was determined based upon an estimate that 250,000 vehicles would be traded in under the CARS program and that the program’s duration would be four months.

In light of the popularity of the CARS program, the initial $1 billion in available funds were quickly depleted and Congress provided the CARS program with an additional $2 billion. By the end of August, the agency stopped accepting new submissions because the additional funds also were depleted. By that time, nearly 700,000 new vehicles had been sold under the program.

Shortly after new CARS program transactions ceased and the majority of the dealers’ transactions were reimbursed by NHTSA, a representative of disposal facilities requested a meeting with NHTSA officials to discuss the possibility of extending the 180-day time period for crushing or shredding a trade-in vehicle. Although disposal facilities initially expected to receive 250,000 CARS trade-in vehicles spread out over four months, disposal facilities actually received nearly 700,000 CARS trade-in vehicles. Further, the majority of the CARS trade-in vehicles were received within less than one month.

At a Sept. 29, 2009, meeting with disposal facility representatives, agency officials learned that some disposal facilities were experiencing substantial difficulty processing all of the CARS trade-in vehicles that were purchased from dealers or salvage auctions and that many disposal facilities anticipated significant difficulty in meeting the 180-day deadline to crush and shred these vehicles. The representatives also noted that the processing problems made it difficult for facilities to effectively inventory and sell parts from these vehicles, as authorized by the CARS Act.

The disposal facilities suggested that, if they were able to hold a vehicle for more than 180 days prior to crushing or shredding, then consumers would have the benefit of cheaper used vehicle parts. The disposal facility representatives suggested that one year would be a suitable time to ensure that the public received the maximum benefit from used vehicle parts while simultaneously ensuring that the vehicles are crushed or shredded within a reasonable time frame.

In extending the deadline, the NHTSA noted that the agency needed to balance the concerns of the disposal facilities and the public’s interest in having access to cheaper used vehicle parts with two considerations that weigh against allowing more time to crush or shred trade-in vehicles.

First, and most importantly, the agency is concerned about possible fraud. The CARS Act contains an explicit Congressional instruction to take measures to prevent fraud and the statute’s clear environmental objective is to ensure that the fuel inefficient trade-in vehicles are never again used on the highway. The risk of fraud related to extending the deadline for crushing or shredding vehicles is mitigated substantially by the fact that dealers are required to disable the vehicles’ engines within seven days after receipt of payment for the transaction and that vehicles must be flagged by disposal facilities in the National Motor Vehicle Title Information System as scrap vehicles within seven days of receipt. Nevertheless, the risk of a vehicle returning to the highway is not fully eliminated until the vehicle is crushed or shredded.

The agency is also concerned about the additional administrative burden caused by extending the deadline for crushing or shredding vehicles. The agency is committed to enforcing the requirements of the CARS program, including the requirements that vehicles are not transferred prior to crushing or shredding, vehicles’ engine blocks are not sold, and vehicles are crushed or shredded on site. The longer that disposal facilities are allowed to keep vehicles on their lots prior to crushing, the longer the agency must devote resources to ensuring that disposal facilities comply with the requirements of the CARS program.

Automotive Recyclers Association Executive Vice President Michael E. Wilson states, “This extra processing time would expand benefits from the ‘Cash for Clunkers’ program by providing additional consumer access to economical “green” recycled automotive parts harvested from vehicles traded in under the program.”  Wilson adds, “We are appreciative of the Agency’s acknowledgement of the additional consumer benefits that can be garnered by granting an acceptable extension.”