Delegated assembly for emissions compliance expands in North America

By Mike Kastner, NTEA Managing Director

This article was published in the July 2018 edition of NTEA News.

The Government of Canada recently issued its version of Phase 2 for heavy-duty vehicle and engine greenhouse gas (GHG) emission standards in Canada Gazette (similar to the U.S. Federal Register). As part of this publication, it confirmed the delegated assembly compliance provisions proposed by NTEA and adopted by the U.S. Environmental Protection Agency (EPA) could be used for compliance purposes in Canada.

Delegated assembly is a concept introduced by NTEA in EPA’s Phase 2 regulations that allows an emission certificate holder (typically an OEM) to contract with a subsequent stage manufacturer (such as an NTEA member company) to add components or technology that will help the certificate-holder meet the standards.

While the emission standards in Canada will be comparable to those in the U.S., the process by which compliance is demonstrated differs. As a result, NTEA’s delegated assembly concept as adopted by EPA would not fit directly into the Canadian process.

NTEA worked closely with Environment and Climate Change Canada (ECCC), discussing the benefits delegated assembly could bring to both the work truck industry and environment. ECCC recognized the potential value of a delegated assembly process and worked with NTEA to secure its viability in Canada.

In the following explanatory note to the regulation, ECCC expressly recognizes a compliance strategy based on voluntary contractual collaboration between an OEM and a final-stage manufacturer/upfitter is acceptable.

NTEA was recently referenced in Canada Gazette:

Comment: One vehicle equipment manufacturer association commented that, in the final U.S. Phase 2 rule, there are “delegated assembly” provisions which were not part of the proposed Amendments. These provisions allow a secondary manufacturer that modifies a vehicle to improve its GHG emission performance to enter into a contractual agreement with the primary manufacturer, in order to allow the primary manufacturer to generate CO2 emission credits for the work performed by the secondary manufacturer. The stakeholders requested that such delegated assembly be permitted in Canada by incorporating additional provisions into the Regulations.

Response: The Regulations do not contain provisions within the regulatory text to allow for contractual agreements between regulated parties. Nevertheless, the Regulations do not prohibit commercial arrangements or agreements between persons or companies. Any person or company authorized to act on behalf of a regulated party must be identified as responsible for compliance and that person or company must produce and maintain proper evidence of conformity.

Effective dates
As indicated, the new Canadian regulations establish stricter limits on GHG emissions from heavy-duty pickup trucks and vans, vocational vehicles, transport tractors, and heavy-duty engines of the 2021 model year. They increase in stringency for most vehicle and engine types with model years 2024 and 2027 in alignment with final U.S. Phase 2 standards, and as of Jan. 1, 2020, introduce limits on GHG emissions from the operation of trailers used with transport tractors and increasing in stringency for most trailer types with model years 2021, 2024 and 2027, in alignment with final U.S. Phase 2 standards. Note, in the U.S., there is a current court challenge to the trailer regulations, and they are on hold.

Payback period
While the standards will be similar in both countries, based on current data, it’s estimated the new Canadian regulations will provide for cost recovery of the stricter emissions limits to occur in year three of ownership for heavy-duty pickup trucks and vans and vocational vehicles, and in year four of ownership for tractor-trailers. EPA cited slightly different payback periods based on older data. When issued in 2016, it estimated Phase 2 regulations at full implementation by 2027 would result in a 24 percent fuel use reduction for vocational trucks with cost recovery occurring in the fourth year of ownership.

Glider kits
Canada addresses glider kits in a manner similar to the U.S. However, EPA indicated it is considering a repeal of the new glider kit regulations.

In the Canadian regulations, vocational vehicles and tractors made up of new body parts, which include the chassis structure, frame, front axle and brakes, but powered by engines previously sold to a first retail purchaser (glider vehicles) may be equipped with an engine that meets the emission standards applicable to a model year different from the model year of that vocational vehicle or tractor, provided the engine has previously been sold to a first retail purchaser and one of the following conditions is satisfied:

  1. The engine has not reached the end of its useful life since its original date of manufacture;
  2. The engine has accumulated less than 160,935 kilometres (100,000 miles) of operation since its original date of manufacture;
  3. Less than three years have passed since the original date of manufacture of the engine; or
  4. The engine is of the 2010 model year or a subsequent model year.

NTEA will continue to monitor and report on any developments concerning trailers and glider kits in the U.S. and Canada.

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