Taotao U.S. Inc. v. United States Envtl. Prot. Agency

• Decision Date: 31 March 2022
• Docket Number: Civil Action 20-cv-915 (BAH)
• Parties: TAOTAO USA, INC., et al., Plaintiffs, v. UNITED STATES ENVIRONMENTAL PROTECTION AGENCY, et al., Defendants.
• Court: U.S. District Court — District of Columbia

TAOTAO USA, INC., et al., Plaintiffs,
v.
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY, et al., Defendants.

Civil Action No. 20-cv-915 (BAH)

United States District Court, District of Columbia

March 31, 2022

MEMORANDUM OPINION

BERYL A. HOWELL, Chief Judge

Plaintiffs Taotao USA, Inc. (“Taotao USA”), Taotao Group Co., Ltd. (“Taotao China”), and Jinyun County Xiangyuan Industry Co., Ltd. (“Jinyun”) bring this action against the United States Environmental Protection Agency (“EPA”) and a Director of EPA's Office of Enforcement, seeking review of a decision by EPA's Environmental Appeals Board (“EAB”) under the Administrative Procedure Act (“APA”), 5 U.S.C. §§ 701-706, and section 205(c)(5) of the Clean Air Act (“CAA”), 42 U.S.C. § 7524(c)(5). Compl. ¶ 1, ECF No. 1. The challenged EAB decision, issued on March 5, 2020, affirmed an Administrative Law Judge (“ALJ”) decision holding plaintiffs jointly and severally liable for the manufacture and importation into the United States of 109, 964 highway motorcycles and recreational vehicles, in violation of CAA sections 203(a) and 213(d), and assessing a civil penalty totaling $1, 601, 149.95. See EAB Final Decision and Order (Mar. 5, 2020) (“EAB Final Decision”) at 42-43, J.A. at 4-5, ECF No. 30-6.^[1] The EAB Final

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Decision turned on a critical finding that plaintiffs' vehicles contained catalytic converters that did not conform to the design specifications described in their applications for certificates of conformity, rendering the vehicles not in conformity, in all material respects, to the information provided in their applications, with the result that the vehicles were not covered by a valid certificate of conformity (“COC”) authorizing their importation into the United States. Id. at 56- 57.

Pending before the Court are the parties' cross-motions for summary judgment. See Pls.' Mot. Summ. J. (“Pls.' Mot.”), ECF No. 23; Defs.' Cross-Mot. Summ. J (“Defs.' Mot.”), ECF No. 24. For the reasons set out below, defendants' cross-motion is granted, and plaintiffs' motion is denied.

I. BACKGROUND

Following review of the applicable statutory and regulatory framework under the CAA, the relevant factual and procedural background is summarized below.

A. Statutory and Regulatory Framework

Congress enacted the Clean Air Act, 42 U.S.C. § 7401 et seq., “to protect and enhance the quality of the Nation's air resources so as to promote the public health and welfare and the productive capacity of its population, ” id. § 7401(b)(1). The CAA was motivated by “mounting dangers to the public health and welfare” caused by “air pollution brought about by urbanization, industrial development, and the increasing use of motor vehicles.” Id. § 7401(a)(2).

In Title II of the CAA, Congress addressed pollution problems caused by vehicle emissions by regulating emission standards for new vehicles or new vehicle engines. Specifically, the CAA requires the EPA Administrator to prescribe standards for emissions of air pollutants from new

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vehicles and engines, “which may reasonably be anticipated to endanger public health or welfare.” Id. § 7521(a)(1). Motor vehicles and engines, as well as nonroad vehicles and engines are two of the many types of emission sources regulated under the Act. See Id. §§ 7521, 7547.^[2]

To ensure compliance with these standards, the CAA and its regulations establish a mandatory pre-market testing and certification program through which EPA confirms that motor vehicles and their engines and nonroad vehicles and their engines conform to the applicable emission standards set forth in the regulations. Id. §§ 7525(a)(1), 7547(d); 40 C.F.R. §§ 86.407-78, 86.437-78 (covering highway motorcycles); 40 C.F.R. §§ 1051.101, 1068.101(a)(1) (covering recreational vehicles). New motor vehicles and engines and nonroad vehicles and engines may not be sold, offered for sale, introduced or delivered for introduction into commerce, or imported into the United States, unless they are covered by a COC. 42 U.S.C. § 7522(a)(1); 40 C.F.R. § 1068.101(a)(1). COCs represent the Administrator's finding that a particular class and model year of motor vehicles or engines or nonroad vehicles or engines conforms with all of the requirements established by the applicable regulations. 42 U.S.C. § 7525(a); 40 C.F.R. § 1068.101(a)(1)(i). A COC is, essentially, “a license that allows an automobile manufacturer to sell vehicles to the public.” United States v. Chrysler Corp., 591 F.2d 958, 960 (D.C. Cir. 1979); see also 42 U.S.C. § 7521.

EPA regulations establish similar methods and procedures for the issuance of COCs for both highway motorcycles and recreational vehicles. EPA's decision to issue a COC is based on

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the manufacturer's application for a COC, which application contains all the information needed to ensure that a vehicle meets the required emission standards and any other requirement set out in the applicable regulations. 40 C.F.R. §§ 86.407-78, 86.416-80(a) (highway motorcycles); id. §§ 1051.201(a)-(b), 1051.205 (recreational vehicles). Each application covers distinct engine families, i.e., “groupings [of vehicles] whose engines are expected to have similar emission characteristics throughout their useful life.” Id. § 86.420-78(a) (highway motorcycles); id. § 1051.230(a) (recreational vehicles). Vehicles in the same engine family must share certain characteristics, including the number, location, volume, and composition of any catalytic converters within their engines. Id. § 86.420-78(b) (highway motorcycles); id. § 1051.230(b) (recreational vehicles). Accordingly, each application must include a description of the vehicles covered by the application as well as descriptions of their engine, emission control system, and fuel system components. Id. § 86.416-80(a)(2)(i) (highway motorcycles); id. § 1051.205(a) (recreational vehicles). The application also consists of emissions and other test data gathered from a test vehicle selected to represent the engine family seeking certification. See Id. §§ 86.421-78, 86.423-78, 86.431-78, 86.436-78 (highway motorcycles); id. § 1051.235 (recreational vehicles).

Upon review of all the test reports, data, and other pertinent information submitted by the manufacturer, if the EPA Administrator “determines that a test vehicle(s) meets the requirements of the [CAA] and [the regulations governing highway motorcycles], ” the Administrator will issue a COC covering all vehicles represented by the test vehicle “upon such terms as [the Administrator] may deem necessary to assure that any new motorcycle covered by the certificate will meet the requirements of the act and [the applicable regulations].” Id. § 86.437-78(a)(2). Similarly, for recreational vehicles, if the EPA Administrator determines that “an application is

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complete and shows that the engine family meets all the requirements of [the applicable regulations] and the Act, [the Administrator] will issue a certificate of conformity for the engine family” subject to any additional conditions set by the Administrator. Id. § 1051.255(a).

Notably, the regulations governing recreational vehicles specifically warn manufacturers that “[e]ngines/equipment are considered not covered by a certificate unless they are in a configuration described in the application for certification.” Id. § 1068.101(a)(1)(i); see also Id. § 1068.103(a) (“Engines/equipment covered by a certificate of conformity are limited to those that . . . conform to the specifications described in the certificate and the associated application for certification.”). Additionally, for both highway motorcycles and recreational vehicles, the COC only covers vehicles manufactured during the time period specified in the certificate. Id. § 86.437-78(a)(2)(ii) (highway motorcycles); id. § 1068.103(a) (recreational vehicles).

The CAA provides EPA with various mechanisms to enforce this complex regulatory regime. For example, EPA may test engines or vehicles previously issued a COC to determine if they “in fact conform with the regulations with respect to which the certificate of conformity was issued, ” and may suspend or revoke such COC in whole or in part or as it applies to the noncompliant engines or vehicles. 42 U.S.C. §§ 7525(b)(1)-(2). EPA may also, for purposes of enforcement, “enter, at reasonable times, any plant or other establishment of [a] manufacturer, for the purpose of conducting tests of vehicles or engines in the hands of the manufacturer[] or . . . inspect, at reasonable times, records, files, papers, processes, controls, and facilities used by [a] manufacturer.” Id. § 7525(c). When a manufacturer sells, offers for sale, introduces or delivers into commerce, or imports into the United States a new engine or vehicle that is not covered by a valid COC, or causes such acts to occur, EPA may commence a civil action to assess and recover

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civil penalties up to $25, 000 per noncompliant vehicle or engine. Id. §§ 7524(a)-(b).^[3] “In lieu of commencing a civil action, ” EPA may assess civil penalties for noncompliant vehicles or engines, though it may not seek penalties exceeding $200, 000 per violator “unless the Administrator and the Attorney General jointly determine that a matter involving a larger penalty amount is appropriate for administrative penalty assessment.” Id. § 7524(c)(1). Such determinations to seek a larger penalty by the Administrator and the Attorney General are not subject to judicial review. Id.

B. Plaintiffs' Applications for Certificates of Conformity and EPA's Investigation

Taotao China, a corporation organized under the laws of the People's Republic of China, manufactures a variety of products, including ATVs and highway motorcycles. EAB Final Decision at 46-47. Jinyun, a subsidiary corporation of Taotao China also organized under the laws of the People's Republic of China, manufactures nonroad recreational vehicles. Id. at 47. Taotao USA, a corporation...