On October 14, 2020, the California Air Resources Board (ARB) issued an enforcement alert entitled “Self-Disclosure of Non-Compliance Software and Other Violations by December 31, 2020.” The alert states that ARB will provide up to a 75% reduction in penalties for timely self-disclosed violations where the company “expeditiously” settles the matter.

Background:  ARB is responsible for administration and enforcement of mobile source emission standards throughout the state.  Unlike stationary sources, where the bulk of regulation and enforcement is conducted by local air districts, the regulation of mobile sources necessarily is statewide.  After all, cars and trucks move through the various air districts so local regulation would not make sense.  Also, California was given by Congress an exemption from nationwide preemption for regulation of cars and light-duty trucks if certain conditions are met and have historically been granted waivers for criteria pollutant emissions based on EPA determinations that it met those conditions for preemption waiver.

Great progress has been made in achieving the national ambient air quality standards that the state, and in particular the Los Angeles basin, struggled with since the 1970s.  Even with increasing stringency of the ambient standards (based on determinations that health effects required more stringent ambient standards to be set), the state has done very well in achieving the standards.

With the advancements in engine technologies over the years, the role of software in achieving emission reductions from engines has increased substantially.  In effect, software controls the engine, and changes to the software can affect emissions.

Who is targeted by the enforcement alert?  ARB’s new alert has broad reach, being addressed to all manufacturers of the following vehicles and equipment that are certified under ARB standards:

• Passenger Cars

• Light-Duty Trucks

• Medium-Duty Vehicles And Engines Used In Such Vehicles

• Heavy-Duty Vehicles And Engines Used In Such Vehicles

• On-Road Motorcycles

• Off-Highway Recreational Vehicles

• Off-Road Small Spark-Ignition Engines

• Off-Road Small Spark-Ignition Equipment

• Off-Road Large Spark-Ignition Engines

• Off-Road Large Spark-Ignition Equipment

• Off-Road Spark-Ignition Marine Engines

• Off-Road Spark-Ignition Marine Watercraft

• Off-Road Compression-Ignition Engines

• Aftermarket Parts

• Diesel Emission Control Strategies

Why is ARB issuing this now?  Five years ago, ARB sent a letter to manufacturers warning them to properly disclose auxiliary emission control devices (AECDs) at the time of certification.  Despite the warning of potential enforcement for failures to disclose, very few companies came forward.  Indeed, ARB states:  “While a handful of manufacturers stepped forward over the last five years, the vast majority did not.”  Thus, ARB has moved forward with expanded testing programs and a suite of newly developed techniques to detect unauthorized AECDs and defeat devices in diesel engines.  According to the alert, ARB will “inevitably” detect violations and thus encourages voluntary disclosure.

What kinds of violations are being targeted by ARB?  The alert provides a listing of 9 “systemic” violation types ARB believes are occurring and that it is actively investigating.

1. Undisclosed Auxiliary Emissions Control Devices (AECDs)

AECDs are elements of design that sense temperature, vehicle speed, engine RPM, transmission gear, manifold vacuum, or any other parameter for the purpose of activating, modulating, delaying, or deactivating the operation of any part of the emission control system.

2. Defeat Devices

A defeat device is an AECD that reduces the effectiveness of the emission control system under conditions which may reasonably be expected to be encountered in normal vehicle operation and use.  As a general rule AECDs are defeat devices unless they meet specific criteria, such as (1) being included in federal test procedures; (2) being necessary to protect the vehicle against damage or accident; (3) being limited to requirements for engine starting; or (4) being present only as needed for emergency vehicles.

3. Unapproved Running Changes and Field Fixes

When a certificate of conformity is issued, the vehicle or engine is supposed to be operated and maintained in conformance with the terms of the certificate to remain in compliance and “covered” by the certificate.  After introduction into commerce, however, sometimes changes are needed based on operating experience or to address issues that may be encountered.  Any changes to emissions-related hardware and software, including changes to the on-board diagnostic (OBD) system that cause a difference from what was described in the certificate have to be reported to ARB.  Otherwise, this is considered tampering.  Thus, even though a change may be permissible and approvable, if a running change or field fix is not reported, that can lead to a claim of violation by ARB.

4. Failure to Report or Address Warranty Claims

Emissions warranty information reports and field information reports are required to be filed with ARB when claims meet or exceed specified thresholds.  Also, corrective action is required for failing parts above certain thresholds.

5. Manufacturer In-Use Compliance Testing and Manufacturer’s Self-Testing (MST)

The ARB program is predicated on MST, so if companies do not complete the MST or change-out parts before the MST is completed, the effectiveness of the program and compliance cannot be determined.  ARB is also concerned that manufacturers are not properly and timely completing required in-use testing.

6. Failure to Report Corrective Actions that Should be Under a CARB Approved Recall Plan.

In certain circumstances of defective equipment, a recall plan must be submitted, reviewed, and approved by ARB.

7. Submission of False Data or Non-Compliance with Regulatory Test Requirements Certification

ARB is concerned that some manufacturers may be falsifying data or test results.

8. Failure to Meet OBD Requirements

The OBD systems are intended to alert the operator to potential problems with the emissions system.  ARB is concerned that companies are not completing testing properly and that diagnostics are being calibrated so as to pass during an official test but not to detect problems during normal operation of the equipment.

9. Failure to Disclose Adjustable Parameters that May Affect Emissions

The certificate of conformity for a vehicle/engine needs to disclose adjustable parameters that affect emissions, which may include settings that alter air/fuel ratios (e.g., idle air-fuel ratio adjustment screw), turbochargers, threaded adjustments, and special transmission modes.  ARB is concerned that manufacturers have not included these parameters in their certificates, even though users can adjust them.

What should companies consider in light of the alert?  Companies should consider undertaking a near-term evaluation of their compliance programs to discern any potential violations to determine if the company would like to utilize the self-disclosure policy before the end of the year.  The evaluation of whether a violation has occurred and whether invoking the new policy is beneficial to the company should be undertaken pursuant to attorney-client privilege.  In this manner, the results can be privileged as the company determines the best way to document and, as needed, disclose to ARB.  The time to obtain favorable treatment for voluntary disclosure is relatively short and therefore companies should consider beginning their evaluations soon to meet the end-of-year deadline.  Privileged audits can be structured in a tiered manner to minimize the burden of the audit.  For example, a high-level sampling could be undertaken at first and, if that indicates potential systemic issues, a more detailed evaluation can be initiated.  By beginning the process now, companies can structure their audit in a way that minimizes burden but is designed to uncover situations that could take advantage of the ARB enforcement relief being offered in the October 14^th alert.