Double Trouble for Vehicle and Equipment Imports: EPA and Customs Continue Vigorous Port Inspection and Enforcement Program

Manufacturers, distributors, and retailers of recreational vehicles and lawn and garden equipment subject to EPA regulations should take no comfort in rumors of EPA’s reduced enforcement activity under the Trump administration.  EPA, in conjunction with U.S. Customs and Border Protection is continuing its vigorous inspection and enforcement program, including at southern California ports, where almost half of containerized goods come into the U.S.  Joint inspection and enforcement operations have been going strong for the last five years, resulting in hundreds of enforcement cases, and millions in fines, not to mention the untold costs (storage, shipping, legal, etc.) associated with dealing with goods denied entry into the U.S.

Just last week, EPA issued a press release touting its recent enforcement actions that have recently yielded over $500,000 in fines involving 10,000 engines and vehicles denied entry into the U.S.  EPA’s Pacific Southwest Regional Administrator, Mike Stoker, confirmed “oversight of foreign-made engines imported through southern California ports is a priority.”  The press release highlighted five enforcement actions involving highway and off-highway motorcycles and ATVs imported from China involving over $300,000 in fines and thousands of products required to be shipped out of the U.S.  EPA highlights another 19 cases involving recreational vehicles, as well as scooters, marine engines, generators, and jackhammers denied entry, resulting in significant penalties.

Many of these cases involve EPA’s inspection of the catalysts used to control engine exhaust emissions.  A recurring pattern of violation is EPA’s finding that the ratio of precious metals in the tested catalyst sample differs significantly from the certified design, thus supporting a finding that the product is uncertified.  Inspections and enforcement actions focusing on catalyst loading are especially expensive for the importer (and other potentially liable parties), because the catalyst testing process takes weeks to months for EPA to complete, and during this time the products offered for import are typically required to be stored in a bonded warehouse, which is extremely expensive.  The storage charges can quickly eclipse the value of the stored merchandise while EPA’s investigation drags on.

On the other hand, EPA seems to be offering more and more often an “expedited settlement agreement” that is designed to avoid the cost and delays associated with protracted settlement negotiations and the negotiation of a consent agreement or a consent decree (i.e., judicially approved, and reserved for the larger enforcement cases exceeding EPA’s administrative settlement authority).  Expedited settlements are only offered to companies that have not previously violated EPA’s mobile source regulations, and the penalty amount and conditions are offered as non-negotiable, presenting the difficult choice for liable parties of either paying EPA’s unilateral penalty amount, and sending the units out of the U.S., or paying the warehouse storage and other charges while attempting to avoid liability or negotiate a more favorable settlement.

The best option, of course (short of being lucky enough to avoid inspections altogether) is to offer for entry only compliant engines and vehicles.  Potentially liable parties (manufacturers, importers, distributors and retailers) can minimize their risk of becoming another EPA enforcement story by conducting their own inspections.  This is best done before the product is shipped from China (or wherever the manufacturing location is).  Implementing overseas compliance programs can be challenging considering language barriers, costs and different cultural approaches to government compliance.  However, given the likelihood of EPA’s ongoing enforcement activities, and the difficulty often encountered in enforcing contractual remedies against foreign manufacturers, a compliance program involving pre-shipment inspections may be the best way for companies involved in the recreational vehicle and powered lawn and garden equipment business to minimize the liability of risks associated with importing EPA-regulated engines and vehicles.

We have assisted importers, manufacturers, distributors and retailers of recreational vehicles and regulated lawn and garden equipment in dealing with import-related inspections and enforcement actions, as well as developing and implementing compliance programs.  Please do not hesitate to contact the author should you have any questions.