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1 EQUIPMENT MANUFACTURER FLEXIBILITY TIER 4 NON-ROAD DIESEL ENGINE EMISSIONS Prepared for Association of Equipment Manufacturers Stephen Burdette October 31, 2006

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Page 1: 1 EQUIPMENT MANUFACTURER FLEXIBILITY TIER 4 NON-ROAD DIESEL ENGINE EMISSIONS

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EQUIPMENT MANUFACTURER FLEXIBILITY TIER 4 NON-ROAD DIESEL ENGINE EMISSIONS

Prepared for Association of Equipment Manufacturers

Stephen Burdette October 31, 2006

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EQUIPMENT MANUFACTURER FLEXIBILITY TIER 4 NON-ROAD DIESEL ENGINE EMISSIONS

SUMMARY TABLE OF CONTENTS SUBJECT PAGE NO. Cover Sheet 1 Table of Contents 2 Acknowledgement 3 Introduction 4 Commentary 5-9 Website 10 Application Matrix 11 1039.625 – What requirements apply under the program for equipment

manufacturer flexibility? 12-14 Small Volume Manufacturer Table 15 Small Manufacturer Description 16 Availability Date Tables 17 Manufacturer Flexibility Calculation Criteria 18 Reporting 19-20 Record Keeping 21 Technical Hardship 22 1039.626 – What special provisions apply to equipment imported

under the equipment manufacturer flexibility program? 23 Bonding 24-25 1039.627 – What are the incentives for equipment manufacturers

to use cleaner engines earlier? 26 1039.630 – What are the economic hardship provisions for

equipment manufacturers? 27 Economic Hardship 28 Appendix A – Percentage allowance calculation example[1036.625(b)(1) 29-30 Table 1 – Allowance plan for ATAAC Manufacturing during transition 30 Table 2 – Percentage calculation chart summary for ATAAC Mfg. 31 Appendix B – Small volume allowance scenario example for BGL Inc. 32-33 Table 3 – Small volume allowance plan using 1039.625(b)(2)(ii) and

1039.627(a)(9)(B) 33 Table 4 – Small volume chart summary for BGL Inc. 34 Appendix C – Technical hardship calculation example for SAFI LLC 35 Table 5 – Hardship volume chart summary for SAFI LLC using provisions

1039.625(b)(2)(ii) and 1039.625(m)(4)(iv) 36 Appendix D – Early compliance credit offset example for Acme Corporation 37 Table 6 – Early compliance credit summary chart for Acme Corporation using

Provisions 1039.625(b)(1) and 1039.627(b)(ii) 38 Appendix E – California Air Resources Board (CARB) comments to TIER 4 39

Engine Manufacturer Flexibility

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EQUIPMENT MANUFACTURER FLEXIBILITY TIER 4 NON-ROAD DIESEL ENGINE EMISSIONS

ACKNOWLEDGEMENT This is a summary work based on, but not restricted to the sources listed below: CFR TITLE 40: Chapter 1 89.1 to 89.1009 1039. 1, 1039.5, 1039.10, 1039.15 1039.101, 1039.102, 1039.104,1039.115, 1039.120, 1039.125,1039.130 1039.135, 1039.601, 1039.625, 1039.626, 1039.627, 1039.630,1039.625, 1039.655 1039.701, 1039.705, 1039.735 1068.240, 1068.245, 1068.250,1068.255 AEM Document "Equipment OEM”s TIER 4 Record Keeping and Notification Requirements”. (Original draft and revision proposal) LDJ Consulting, Inc. Stephen Burdette

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EQUIPMENT MANUFACTURER FLEXIBILITY TIER 4 NON-ROAD DIESEL ENGINE EMISSIONS

INTRODUCTION The EPA TIER 4 engine emission rule has expanded the level of compliance responsibility to include the equipment manufacturer as well as the engine manufacturer. Equipment manufacturers must now supplement the engine manufacturer to comply with the regulation with respect to equipment installation of the engine and ancillary exhaust emission compliance system(s). Equipment manufacturers will be responsible for labeling equipment so the user is fully aware of the fuel sulfur restriction for the installed engine system. The EPA has established in TIER 4 that the engine and equipment manufacturers are jointly responsible for compliance to the rule and to flexibility in the transition program. An important distinction has been identified in determining who is eligible to use the flexibility provided in the transition program. Equipment manufacturers responsible for the design and manufacture of equipment are eligible for the flexibility program provisions, not equipment importers. The intent of this document is to highlight the necessary basic information to understand equipment manufacturer flexibility, responsibilities and limitations. A table labeled “Applicability” is provided for quick determination of the applicable rules based on the type and geographic location of the equipment manufacturer. A number of summary appendices outline the salient requirements including when they can be used, how to use them, what documents are required and for how long and where additional detailed information can be found on a specific topic. LDJ Consulting, Inc. Stephen Burdette 10/31/2006

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EQUIPMENT MANUFACTURER FLEXIBILITY TIER 4 NON-ROAD DIESEL ENGINE EMISSIONS

COMMENTARY General The EPA TIER 4 Rule to Control Emissions from Non-road Diesel Engines and Diesel Fuel compliance transition provisions for equipment manufacturers and small business relief exemptions require notification to EPA prior to use by the equipment manufacturer. Equipment manufacturers were not required to notify the EPA under the current TIER 2 and TIER 3 programs. TIER 4 participation requires equipment manufacturers to notify EPA prior to using the transition provisions. The notification must be sent to the EPA before January 1 of the first calendar year in which the equipment manufacturer will use the transition provision. The TIER 4 transition program will permit the equipment manufacturer to request the engine supplier to build and sell previous tier engines needed to meet the market demand created by the equipment manufacturer flexibility program. The engine supplier is allowed to furnish the engines requested by the equipment manufacturer if the equipment manufacturer provides written assurance that the engine is requested for the equipment manufacturer flexibility program. The engine request from the procurer (equipment manufacturer) will be kept by the engine supplier at least five full years after the final year the allowances are available for each power category. Reporting Requirements will expand from the current program. Under the current program, engine manufacturers provide reports to EPA. Under TIER 4 the engine manufacturer will be required to submit a report of the number of engines produced and to whom they were provided. An equipment manufacturer using the flexibility in the transition program will be required to submit an annual written report to EPA calculating the annual number of exempted engines claimed under the transition provisions by power category in the prior year by March 31 of the current year. Equipment manufacturers choosing the Percent of Production Allowance must also calculate the percent of production the exempted engines represented for the appropriate year. Each report is required to include a cumulative calculation (total number of engines and if applicable, the percent of production) for all years the equipment manufacturer uses the transition provisions for each of the TIER 4 categories. The purpose of the dual reporting submittal is to close the loop on the commercial transactions between the supplier and user providing EPA with an audit tool to monitor compliance with the flexibility provisions. EPA has stated the intent to develop electronic means for submitting the report information to ease the reporting burden for the engine and equipment manufacturers. There has not been an announcement of an effective date to use the electronic reporting protocols nor training workshops to introduce the protocols.

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Incentives The TIER 4 regulation provides incentive credits for equipment manufacturers to introduce compliant engines before the effective date for TIER 4 compliance. Early incorporation can provide compliance credits increasing the number of exemptions above the allowance levels under Percent-of Production or Small Volume up to 18 months after the certification date of the engine. If the equipment manufacturer chooses to ignore early compliance the engine manufacturer can use the engine-offset credits (e.g., in the case of an integrated manufacturer producing both engines and equipment). Labeling Labeling has also changed from the current programs. Under current regulations the engine manufacturer is required to label their certified engines with an EPA mandated list of information, written legibly in English and permanently affixed in a visible place on the engine. TIER 4 will require the engine manufacturer to continue this practice but adds a requirement for the equipment manufacturer to provide this information on a label permanently affixed to the equipment that the engine is exempted under the TIER 4 transition program. The equipment manufacturer is a supplement to the engine manufacturer’s label and connects the equipment with the engine. The equipment label must be readily accessible and legible in English. Obscured engine labels under the current rules (40 CFR 1068) require that the equipment manufacturer make and affix duplicate labels to overcome the situation. Under TIER 4 EPA added a provision requiring that the equipment manufacturer request duplicates from the engine manufacturer and affix the duplicate to the applicable equipment. Importers The rules have changed for importers of foreign produced equipment. Under the current regulations in 40 CFR 89.2, importers are treated as equipment manufacturers and are allowed the full allowance the same as the equipment manufacturer under the transition provisions in 40 CFR 89.102(d). Hence, under current provisions, importers of equipment produced by a foreign manufacturer and the foreign manufacturer can collectively or separately import more exempt equipment than the 80 percent of production intended for marketing in the United States (i.e. more than the percent-of-production limit) or more than the small volume allowance. EPA has eliminated this double dipping loophole in TIER 4 essentially restricting importers to use equipment manufacturer allowances Foreign Manufacturers The language in the TIER 4 Rule states” You may use the exemptions in this section only if you have primary responsibility for designing and manufacturing equipment, and your manufacturing procedures include installing engines in this equipment”. Clearly, only foreign equipment manufacturers meeting the compliance related provisions would receive the same allowances as US manufacturers. Importers uninvolved in designing and manufacturing the equipment cannot use any allowances under the provisions directly. Importers must use the allowances available to foreign manufacturers to import foreign

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produced equipment into the US market. This eliminates the current windfall advantage to importers and foreign manufacturers over their US competitors. For purposes of discussion the TIER 4 Rule defines a ‘foreign equipment manufacturer’ as being any equipment manufacturer that produces equipment outside of the United States for that will be sold in the US market. All foreign non-road equipment manufacturers planning to use the transition provisions must comply with the requirements of the provision. Bond Foreign equipment manufacturers participating in the transition program are required by EPA to provide monetary bond/pledged assets for the value of engines imported into the United States in Equipment for the US market. The bond requirement serves as an enforcement tool ensuring EPA has the ability to collect any judgments assessed against a foreign equipment manufacturer for violations of the transition provisions. A foreign equipment manufacturer has two options to meet the bonding requirement;

1. Obtain a bond in the proper amount from a third party surety agent cited in the US Department of Treasury Circular 570 or,

2. Obtain a waiver from the bonding requirements if the foreign equipment Manufacturer can demonstrate US based assets equal to or exceeding the bonding requirement. This option must be requested in writing and agreement granted upon review.

The foreign equipment manufacturer must meet bonding requirements annually. Bond amounts are based on the anticipated use of the allowances for that year. The bond or pledged assets will be used to satisfy judgments against the foreign manufacturer in the event violations are confirmed. EPA is concerned with compliance related to the nature (use) and tier of the engines used in transition equipment. The bond value is related to the value of the engine used in the equipment. Therefore, EPA adopted requirements that the bond is set at a level designed to represent approximately 10 percent of the cost of the engine for each piece of transition equipment produced by the foreign manufacturer for import into the United States under this program The EPA has the authority to bring enforcement action against a manufacturer for five years beyond the end of the transition program. Hence, the foreign equipment manufacturer is required to maintain the bond for five years beyond the flexibility period or five years after using all of the available flexibility, whichever occurs first. If a foreign equipment manufacturer’s bond is used to satisfy a judgment within the seven-year flexibility period, the foreign manufacturer will be required increase the bond by the judgment amount within 90 days of using the bond to satisfy the judgment. Multi National Corporations EPA specifically created the waiver option for pledged assets to address multi-national equipment manufacturers that produce equipment outside the United States that meet the requirements of the transition provisions with flexibility engines. Generally, multi-

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national companies have sufficient US assets to meet the value requirement for bonding without enduring the additional burden of a separate bond. The EPA position on US based companies that have foreign manufacturing facilities that manufacture equipment for the US market is that all companies importing equipment to the United States comply with the requirements for foreign equipment manufacturers Fuel The TIER 4 emissions standard will make it necessary for manufacturers to employ exhaust emission control devices that require very low sulfur diesel fuel (<15 PPM sulfur) to ensure proper operation. As a result the regulation lowers the upper limit for in-use non-road diesel fuel sulfur content to 500 PPM in 2007, and to 15 PPM in 2010. The manufacturer may choose to employ sulfur sensitive technology in model years prior to 2011, in which case the manufacturer must demonstrate that these applications will be operated exclusively on the 15 PPM sulfur or less fuel. Situations may arise in which non-road equipment requiring either 15 PPM or 500 PPM sulfur fuel may be accidentally or intentionally misfueled with higher sulfur content fuel. Based on current technology and foreseeable advances in technology it is likely that misfueling events with higher sulfur content fuel could cause serious performance degradation or destroy the performance capability of the sulfur sensitive exhaust emission control devices. Manufacturers will be required to notify each equipment purchaser in the equipment operating instruction manual that the non-road engine supplied with the equipment requires low sulfur fuel meeting either 15 PPM or 500 PPM sulfur specifications. A label stating the fuel sulfur content specification must also be affixed to the equipment near the fuel inlet to ensure the proper fuel is identified for the equipment. Starting with model year 2011 (calendar year), non-road diesel engines will be required to use Ultra Low Sulfur diesel fuel (less than 15 PPM sulfur). The label will state “ ULTRA LOW SULFUR FUEL ONLY”. The labeling requirement for earlier model (calendar year) TIER 4 engines are specified in 1039.104(e). Labeling requirements for earlier model year TIER 3 engines are specified in 40 CFR 89.330(e). These label requirements for earlier year fuels generally require a label consistent with the sulfur content of the test fuel used for the engine certification. Engines certified with fuel containing less than 500 PPM sulfur are considered Low Sulfur Fuels and the label will state” LOW SULFUR FUEL ONLY”. Incomplete Engine Completion EPA recognizes that it may not be practical for the engine manufacturer to ship the engine and after treatment device as an assembly. Under these circumstances the engine manufacturer is required by EPA to have a contractual agreement obligating the equipment manufacturer to complete the final assembly into the certified configuration covered by the certificate of conformity. The engine manufacturer must ship any components directly to the equipment manufacturer or arrange for these components to be shipped from the component manufacturer to the equipment manufacturer. The engine manufacturer must tag and maintain records of engines provided to the equipment

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manufacturer in this incomplete configuration. The engine manufacturer is required to obtain affidavits from each equipment manufacturer identifying the part(s) and part number(s) that the equipment manufacturer installed on each engine. The engine manufacture must also document that a limited number of audits were conducted at the equipment manufacturer facility to monitor procedures and production records for adherence to instructions provided to finish the certified assembly. If the equipment manufacture is not in the United States the engine manufacturer can conduct the audits at the US port distribution facility. Engines not installed in a certified configuration in the non-road equipment will be the responsibility of the engine manufacturer and the equipment manufacturer. Failure by the equipment manufacturer to use proper emission-control devices, to install the parts properly or install the parts furnished by the engine manufacturer is a shared failure of the process incorporating the engine manufacturer and equipment manufacturing responsibility. Replacement Engine TIER 4 rules permit a manufacture to sell a new non-compliant engine to replace an engine that failed in service. EPA plans to use the data collection provision under 40 CFR 1068(d) to ask manufacturers to report the number of engines they plan to sell under the replacement engine exemption. The requirement pertains only to the engine manufacturer, but is included here for completeness if the equipment OEM and engine manufacturer is one in the same. LDJ Consulting, Inc. Stephen Burdette

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10/31/2006 EQUIPMENT MANUFACTURER FLEXIBILTY

TIER 4 NON-ROAD DIESEL ENGINE EMISSIONS EPA WEBSITE NAVIGATION

The EPA website is large, but well organized. It is easy to navigate through the screens to get to the specific rules for non-road equipment manufacturers. Start by typing www.epa.gov on the screen and click search. The following series of actions will lead to the rules: 1. Find the line on the first screen titled US Environmental Protection Agency and click on the title.

2. You are now in the Quick Finder screen. Review the top table and find more at the bottom of the right hand column and click the word more.

3.You are now in section 2 of Quick Finder. The screen will have an extensive. list of topics arranged vertically in alphabetical order. Move down to section “C” and find the title CFR-Code of Regulations. Click on this tile for the next screen.

4.The new screen will provide CFR contents. Select CFR-40 Protection of Environment.

5.The new screen will provide 5 choices of chapters. Select Chapter 1 (Parts1-1068).

6.This is a busy screen with subchapters A-U in vertical format. Scroll down to Subchapter U Air Pollution Controls (Parts 1038-1068). 7. You can now navigate the rules regarding equipment manufacturers by selecting 1039. 8. Equipment manufacturers are covered under 1039.625, 1039.626, 1039.627 and 1039.630.

Going to the links or changing screens manually easily navigates references within the aforementioned 1039 series to other parts or subchapters. LDJ Consulting, Inc. Stephen Burdette 5/14/2006

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EQUIPMENT MANUFACTURER – TIER 4 EPA NON-ROAD DIESEL ENGINES AND DIESEL FUEL

TRANSITION PROVISIONS FOR EQUIPMENT MANUFACTURES (TPEM) APPLICABILITY

Note: The first column is applicable to the engine manufacturer, but reference is made in

TIER 4 rules for equipment manufacturers in specific texts within the references in the other columns

Stephen Burdette 10/31/2006

MANUFACTURER 1039.104 1039.625 1039.626 1039.627 1039.630 US Equipment (a) All None All All Foreign Equipment (a) All (a)(1),(a)(2)

(a)(3),(a)(4) (a)(5),(a)(6) (a)(7),(a)(8) (a)(9)

All All

Equipment Importer None All (b)(1),(b)(2) All None Low Volume/Small (a) (b)(2),(d)(4)

(e)(1) All All (b)

Engineering/Technical Hardship

(a) (m)(1),(m)(2) (m)(3),(m)(4) (m)(5)

All All (a),(b)

Equipment/Engine (a) All All All All Engine (a), (a)(1)

(a)(2),(a)(6) (c)(4)(iii), (c)(5)(iii)

(j) All (b)(2) None

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EQUIPMENT MANUFACTURER FLEXIBILITY

TIER 4 NON-ROAD DIESEL ENGINE EMISSIONS SUB PART 1039.625

What requirements apply under the program for equipment manufacturer flexibility? Purpose : Produce equipment with compression ignition engines that are subject to less stringent emission standards after TIER 4 emission standards become effective. General : Provides criteria for determining eligibility.

1. Must have primary responsibility for equipment design and engine and installation.

2. US directed equipment sales produced by subsidiary companies. 3. US directed equipment sales produced by licensee(s). 4. Count each engine on multiple engine machines. 5. Engine categories/effective dates;

Less than 19 kW 2008-2014 At 19 kW to 56 kW 2008-2014 At 56 kW to 130 kW 2012-2018 At 130 kW to 560 kW 2011-2017 Above 560 kW 2011-2017

6. Engine categories/delayed effective dates; Less than 19 kW not available At 19 kW to 56 kW 2012-2018 At 56 kW to 130 kW 2014-2020 At 130 kW to 560 kW 2014-2020 Above 560 kW 2015-2021

Allowance: Options available 1. Percent of production is calculated for US directed sales by power category

annually. The sum of the percentages for 7 years cannot exceed 80 percent. 2. Small volume producer;

May produce 700 units with exempted engines in a power category not exceeding 200 per year except in circumstances of technical/engineering hardship defined in (m) of this regulation. Exempted engines must be from a single engine family in each power category.

May use an alternate allowance for engines below 130kW in a single power category permitting a total of 525 units over 7 years with a maximum annual allowance of 150units. Engines in a single power category over 130 kW are eligible for a 7year allowance of 350 units not to exceed 100 units annually. This allowance permits engines from multiple families in a given year. Application of technical/engineering hardship defined in (m) of this regulation is an exception.

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EQUIPMENT MANUFACTURER FLEXIBILITY TIER 4 NON-ROAD DIESEL ENGINE EMISSIONS

SUB PART 1039.625

Engines not subject to TIER 4: How to incorporate into allowances 1. Exhausting existing inventory

Do not include units in annual exempted engines, but include them in the total annual US directed production for the percentage calculation for the year.

Engines in units that have a permanent label describing the exemption (engine manufacturer hardship) are not included in the exempted units, but are included in the total Us directed production calculation for the year.

Do not include engines from model year 2008 and 2009 certified under provisions of 1039.101(c) in the exempt engines, but they are included in the annual US directed production for the percentage calculation.

Early allowance engines can be incorporated into the exempt engines in the percentage calculation as long as the TIER 2 and TIER3 exemptions have expired. The maximum number of cumulative early exemptions is limited to 10 percent under the percentage calculation or 100 units using the small volume allowance. These engines must meet emission standards described in 1039.625(e). A table of early allowance dates is provided in a table of dates in 1039.625

Standards: Exempted engine requirements. 1. Early allowance users must adhere to the emission standards described in

89.112. 2. Delayed allowance users must adhere to standards and regulations for the

Model years in the delayed date tables in 10339.525. 3. All cases must meet the following requirements;

At or above 37 kW and at or below 56 kW must meet appropriate TIER 3 standards described in 89.112.

Below 37 kW and above 560 kW the engines must meet standards described in 89.112.TIER 2

Labeling: Compliance requirements. 1. A permanent label, written legibly in English must be attached to the engine

or readily visible part of the equipment produced with exempted engines this is a supplemental label to the engine manufacturer label and provides this information; Label heading “EMISSION CONTROL INFORMATION” Calendar year of equipment manufacture Name, e-mail address and phone number of contact person for

additional information. 2. The following statement;

THIS EQUIPMENT HAS AN ENGINE THAT MEETS U.S.EPA EMISSION STANDARDS UNDER 40 CFR

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EQUIPMENT MANUFACTURER FLEXIBILITY TIER 4 NON-ROAD DIESEL ENGINE EMISSIONS

SUB PART 1039.625 Notification: Required annually. See separate heading in text REPORTING Reporting: Throughout the period of use/eligibility. See separate heading REPORTING in text.

1. Before January 1 of the first year of use-required information. 2. Each year thereafter when provisions are used send previous year

information before the subsequent March 31 date. 3. Sending instructions.

Records; The equipment manufacturer must keep records for all equipment with exempted engines 5 years after the final year allowances are available in each category. See separate heading in text RECORD KEEPING.

Enforcement: Failure to comply with rule violates 40CFR 1068.10(a)(1) and equipment manufacturers are required to promptly furnish all records on request.

Engine mfr: Obligations. 1. Require equipment manufacturer letter of assurance. 2. Annual report of engine produced on basis of assurance. 3. Sufficient credits report 4. Provide the correct engine emission label on the engine 5. Calculate additional credits and add text to label on engine.

Other exemptions: Based on hardship for equipment manufacturers and secondary engine manufacturers (Reference 40CFR 1068.255).

Additional exemptions: Based on technical or engineering hardship. See separate heading in text TECHNICAL/ENGINEERING HARDSHIP

1. Equipment manufacturer or affiliate cannot manufacture the engine. 2. Equipment manufacturer must request before committing violation 3. Obligation to provide information. 4. Definition of small equipment manufacturer.

LDJ Consulting, Inc. Stephen Burdette 11/1/2006

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EQUIPMENT MANUFACTURER FLEXIBILITY TIER 4 NON-ROAD DIESEL ENGINE EMISSIONS

SMALL-VOLUME MANUFACTURER ALLOWANCES Engine Family Affectivity-Years Maximum Annual

Number of Units Maximum Provision Number of Units

Single 7 200 700 Multiple (Below 130 kW)

7 150 525

Multiple 130 kW or more

7

100

350

LDJ Consulting, Inc. Stephen Burdette May 29, 2006

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EQUIPMENT MANUFACTURER FLEXIBILITY TIER 4 NON-ROAD DIESEL ENGINE EMISSIONS

SMALL MANUFACTURER QUALIFICATION Manufacturer and all subsidiary companies:

1. Used no more than 3000 non-road diesel engines in equipment during 2002 and prior calendar years.

2. Does not employ more than 750 people. 3. Does not employ more than 500 people and is not engaged in the manufacture of

construction or forklift equipment.

LDJ Consulting, Inc. Stephen Burdette 10/31/2006

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EQUIPMENT MANUFACTURER FLEXIBILITY TIER 4 NON-ROAD DIESEL ENGINE EMISSIONS

DATES

General Availability Power Category Calendar Year Less than 19 kW 2008 - 2014 19 kW to less than 56 kW 2008 - 2014 56 kW to less than 130 kW 2010 - 2018 130 kW to less than 560 kW 2011 - 2017 560 kW or more 2011 - 2017

Delayed Allowance Availability Power Category Calendar Year Less than 19 kW - 19 kW to less than 56 kW 2012 - 2018 56 kW to less than 130 kW 2014 - 2020 130 kW to less than 560 kW 2014 - 2020 560 kW or more 2015 – 2021

Early Allowance Availability Power Category Calendar Year Less than 19 kW 2007 19 kW to less than 37 kW 2006 - 2011 37 kW to less than 56 kW 2011 56 kW to less than 75 kW 2011 75 kW to less than 130 kW 2010 - 2011 130 kW to less than 225 kW 2010 225 kW to less than 450 kW 2008 - 2010 450 kW to less than 560kW 2009 - 2010 560 kW or more -

Applicable Model Standards – Delayed Allowance Power Category Model Year 19 kW to less than 56 kW 2008 56 kW to less than 130 kW 2012 130 kW to less than 560 kW 2011 560 kW or more 2011 LDJ Consulting, Inc. Stephen Burdette May 20, 2006

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EQUIPMENT MANUFACTURER FLEXIBILITY

TIER 4 NON-ROAD DIESEL ENGINE EMISSIONS EXEMPTED ENGINE CALCULATION

Calculating the calendar year percentage of equipment with exempted engines from US – directed production within a power category is not as straight forward as it seems in part (b) of the rule. It is necessary that the equipment manufacturer understand what engines are to be counted in the allowance and what engines are to be counted in the total US – directed production. Each calculation must be made by individual power categories. The following chart has three columns identify the specific engine exemption, status of incorporation into the US-directed production allowance and incorporation in the total US-directed production. This chart provides the sums in the numerator and denominator of the percentage equation: Engine Exemption Engine Total Allowance Engines Exhausting inventory of non-Tier 4 Engines No Yes [1068.105 (a)] Permanent label engines with Tier 4 exemption No Yes (Engine Manufacturer Hardship) Engines certified under model year 2008/2009 No Yes [1039.101 (c)] Engines not yet subject to Tier 4 requirements Yes Yes (Seven-year allowance for Tier2/3 expired) (Early allowance) The maximum percentage of early allowances is restricted to 10 per cent of the US-directed allowance and must be subtracted from the seven-year sum. Small volume manufacturers are permitted up to 100 units of early allowances. LDJ Consulting, Inc. Stephen Burdette 10/31/2006

EQUIPMENT MANUFACTURER FLEXIBILITY

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TIER 4 NON-ROAD DIESEL ENGINE EMISSIONS REPORTING

All Manufacturers:

1. Inform the Designated Compliance Officer and Designated Enforcement Officer in writing prior to January 1 of the first year of the intended use of the provisions in 1039.625 with the following information; Company name and address Parent company name and address Name the company contact person/specific contact information Anticipated calendar years of usage Engine supplier name and address Estimated number of units by power category

-Percent of production allowance or, -Small volume allowance

Number of units of equipment sold by power category in the previous calendar years under CFR 89.102 (d) previous emission tiers

2. Send the Designated compliance officer and Designated enforcement Officer a written report by March 31 of the past years production by power categories; Total number of engines sold by power category in the preceding year

based of US directed production. Identify the percentages of US directed market production

corresponding to the number of equipment units in each power category.

The cumulative numbers and percentages of US directed market production sold by power category

If the percentage of production allowance was not used for US directed market production the manufacturer may omit percentage figures from the report.

3. Inform the engine manufacturer in writing of the required number of exempted engines needed for US directed market production by power category. This is considered a letter of assurance from the equipment manufacturer to the engine manufacturer for the engine manufacturer’s file

Offshore Manufacturing

1. Provide English translations for all correspondence and reports 2. The company president is required to sign declarations related to intent,

commitment to comply and obligations

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Importers (No design or manufacturing responsibility) 1. Inform the Designated Compliance Officer and the Designated Enforcement

Enforcement Officer by written notice of intent to use delay provisions before January 1 of the first year of intended use; Company address and name Parent company address and name Name and address of companies producing the equipment and engines

intended for importation Estimate of the number of equipment units to be imported

-By power category -By equipment manufacturer -By calendar year

Actual number of equipment units imported in the previous calendar years under 89.102 (d) previous year tiers. -By power category

Send the Designated Compliance Officer and Designated Enforcement Officer a written report by March 31 of the following year that the provisions were used with the following information;

- Total number of imported engines - Name of the engine manufacturers - Name of the equipment manufacturer

2. English language/translation required for all reports LDJ Consulting, Inc. Stephen Burdette 11/2/2006

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EQUIPMENT MANUFACTURER FLEXIBILTY TIER 4 NON-ROAD DIESEL ENGINE EMISSIONS

RECORD KEEPING US Equipment Manufacturer (US directed equipment sales)

1. Keep records for at least 5years: - of all equipment produced with exempted engines. - for all power categories used. - after the final year that allowances are available for each category.

2. Keep records of the following information: - model number, serial number and date of manufacture for each engine

and piece of equipment. - maximum power of each engine. - total number or percentage of the equipment with exempted engines

and supporting calculations; by percent-of-production allowance or, by small-volume allowance.

- notifications and reports for each year that the provisions were used, estimates and actual production volumes.

Foreign Manufacturer/Importer (US directed equipment sales)

1. Same records required from US Equipment Manufacturers. 2. Produced or translated into English if requested for review. 3. Maintain estimated and actual bond records by year or, 4. Maintain a record of waivers of bond requirement based on US assets.

LDJ Consulting, Inc. Stephen Burdette May 29, 2006

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EQUIPMENT MANUFACTURER FLEXIBILITY TIER 4 NON-ROAD DIESEL ENGINE EMISSIONS

TECHNICAL/ENGINEERING HARDSHIP Paragraph (m) of 1039.625 provides guidance for application for additional exemptions for technical or engineering hardships. Manufacturers qualifying under (b)(1) of 1039.625 for the 19-560 kW power categories, or small volume manufacturers under (b)(2) for engines at or above and below 37 kW may apply for extra allowances due to technical/engineering hardship if the company or an affiliate company do not produce the engine. Approval of additional exemptions will be based on proof that in spite of prudent planning, circumstances beyond the manufacturer’s control could not be avoided and prevent compliance with the rule. Apply for this additional exemption to the Designated Compliance Officer and Designated Enforcement Officer in writing before the manufacturer is in violation with the following information:

1. Describe the design process. 2. Describe normal cooperative or concurrent design process with the engine

manufacture. 3. Describe the technical/engineering problem(s) and explain why they are

unsolved at the time of application. Describe and explain the unavoidable extreme and unusual circumstances causing the need for additional exemptions.

4. Describe the information and products supplied to date by the engine supplier. Include specifications, performance data or prototype engines and the date the information was received.

5. Compare the design of the model(s) needing additional exemptions with models manufactured by the company that do not need additional exemptions. Explain the technical differences supporting the request.

6. Describe efforts to find an alternative compliant engine(s), or explain why no alternative engine is available.

7. Describe the action taken to minimize the scope of the request. 8. Submit other relevant information upon request. 9. Estimate the increased percent of production needed for each model

Limitations of additional exemptions under (b)(1): 1. Additional allowances will not exceed 70 percent for each power category 2. Use all allowances under (b)(1) before using additional allowances 3. Allowances expire 24 months after provisions start for a given power category

Limitations for additional exemptions under (b)(2): 1. Must be eligible as a small equipment manufacturer (19-56 kW power

Category 2. Use all allowances under (b)(2) before using additional allowances 3. Base request only on equipment at or above 19 kW and below 37 kW 4. Total additional allowances are limited to 1100 units 5. Allowances expire 36 months after provisions start for this power category. 6. Additional allowances are not subject to annual limits specified in (b)(2)

Stephen Burdette 10/31/2006

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EQUIPMENT MANUFACTURER FLEXIBILITY TIER 4 NON-ROAD DIESEL ENGINE EMISSIONS

SUB PART 1039.626 What special provisions apply to equipment imported under the equipment- manufacturer flexibility program? Purpose: The requirements for equipment produced outside the United States to apply provisions of 1039.625 to this equipment. Manufacturer: Responsible for equipment design and manufacture including engine

installation. 1. Inspection access 2. Name agent in the District of Columbia for legal service/process 3. Enforcement action governed by the Clean Air Act 4. US law prevails in enforcement 5. Commitment notification must be signed by company owner or

President 6. No threats tolerated toward inspector(s) 7. Submitted intent notification is consent to abide by enforcement

provisions of 28 U.S.C. 1605 (a)(2), 18 U.S.C. 1001, 42 U.S.C. 7413 (c)(2) or other applicable provisions of the Clean Air Act

8. Reports must be furnished in English, or translated in English 9. Bonds must be posted in advance of exemption use annually

Importers: Are not responsible for the design, manufacture or engine installation in equipment.

1. Must use the manufacturer allowance. 2. Report intent before January 1of the first year provision will be used. 3. Send prior year allowance report before March 31 of the following

year. 4. Report the total number of engines imported the preceding calendar

year by engine manufacturer and equipment manufacturer. LDJ Consulting, Inc. Stephen Burdette

10/31/2006 EQUIPMENT MANUFACTURER FLEXIBILITY TIER 4 NON-ROAD DIESEL ENGINE EMISSIONS

BOND Manufacturers with non-US production facilities must meet Bond requirements before the offshore produced machines can be sold in the US domestic market. Requirements

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1. The foreign site manufacturer is required to post a bond prior to selling offshore produced equipment to cover any future potential future enforcement action by the following methods;

- Calculate the total bond amount using the table values by power category for single year volume

- Monitor actual production regularly to determine if actual production Volumes are exceeding the estimated value reported by January 1 prior to that year of production

- If actual production exceeds the estimated volume it is necessary to increase the bond by the increased volume within 90 days of the increase

- Bonds must be increased to comply with provisions, but bonds can not Reduced if estimated volumes are not achieved in actual production for the given year

2. Bonding requirements can be met by either of the following methods; - Obtain a bond from a third party surety cited in US Department of

Treasury Circular 570 (companies holding certificates of authority as acceptable sureties on federal bonds and as acceptable reinsurance companies). Bonds must be maintained 5 years after the applicable allowance period expires or, after exhausting available allowances whichever occurs first.

- Demonstrate to the Designated Enforcement officer appropriate US owned liquid assets to meet the bonding requirements and request a bond waiver

3. Bond forfeiture - If a forfeiture occurs due to enforcement action the manufacturer must

replenish the deficit within 90 days of forfeiture to continue sale of equipment in the US domestic market

- Forfeiture criteria; Violation of 1039.626 Violation of 18 U.S.C. 1001 Violation of 42 U.S.C. 7413 (c) (2) Violation of any other applicable provision of the Clean Air

Act

Foreign Manufacturer Bond Value Power Category US Dollar Value Per Engine Less than 19 kW 150 19kw to less than 56 kW 300 56 kW to less than130 kW 500 130 kW to less than 225 kW 1000 225 kW to less than 450 kW 3000 More than 450 kW 8000

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A manufacture required to post a bond would use the values for each engine in each power category to calculate the bond based on estimated and actual allowance usage by year. Assume an example where an offshore manufacturing site is responsible for the design and production of equipment and has anticipated producing the following quantities by power category for the forthcoming year. Less than 19 kW (20 engines) 19 kW to less than 56 kW (40 engines) 56 kW to less than 130 kW (100 engines) The bond is calculated as follows; 20 engines multiplied by US$150 --------------------------US$3000 40 engines multiplied by US$300 -------------------------US$12000 100 engines multiplied by US$500 -----------------------US$50000 Total bond ----------------------------------------------------US$65000 If the manufacturer determines that production of the less than 19 kW engines will actually be 50 engines it will be necessary to increase the bond by 50 less 20 engines multiplied by US$150 yielding US$4500. The manufacturer must increase the original US$65000 bond by US$4500 to meet the bonding requirements of the provision. If the manufacturer ends the year selling fewer engines in each or all categories the posted bond cannot be reduced for the enforcement period. LDJ Consulting, Inc. Stephen Burdette May 21, 2006

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EQUIPMENT MANUFACTURER FLEXIBILITY TIER 4 NON-ROAD DIESEL ENGINE EMISSIONS

SUB PART 1039.627 Purpose : Promote early incorporation of TIER 4 engines. Offset: General provisions.

1. Additional allowances are available under 1339.625 for engines at or above 19 kW meeting the following conditions: The engine manufacturer engines must comply with 1039.104 (a)(1). Engines must be installed in equipment by December 31of the years

specified in 1039.104. 2. For offset allowance determination refer to table (a)(3) of 1039.627.

Offset: Generating additional allowances under 1039.625. 1. One for one gain during allowable provision years. 2. Transfer can be used across power categories from 56-560 kW power

categories 3. Calculating offset across the power categories is based on power. Example;

75 offset engines of 500 kW generates 37,500 weighted allowances which enables application to 375 engines with a power rating of 100 kW.

Limitations: Engines above 560 kW. 1. Offsets for generator sets can only be applied to generator sets. 2. All other installations can be used for other installations, not generator sets.

Reporting: Additional to 1039.625(g) 1. Name each engine family involved. 2. Number of engines in each power category. 3. Maximum power of each engine 4. Identify engines above 560 kW used in generator sets.

Fuel: Ultra low-sulfur requirement. If the engine manufacturer certifies using ultra low-sulfur diesel fuel the equipment manufacturer must ensure that in-use fuel will not exceed 15 ppm sulfur concentration. The equipment manufacturer is tasked with taking the necessary steps to commit the user to using the ultra low sulfur fuel.

LDJ Consulting, Inc. Stephen Burdette 1 0/31/2006

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EQUIPMENT MANUFACTURER FLEXIBILITY TIER 4 NON-ROAD DIESEL ENGINE EMISSIONS

SUB PART 1039.630 Purpose : Supplement to 40CFR 1068.255. General : Allowances.

1. Exhausted allowances per 1039.625. 2. Small equipment manufacturer (24 months). 3. All other equipment manufacturers (12 months).

LDJ Consulting, Inc. Stephen Burdette 5/10/2006

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EQUIPMENT MANUFACTURER FLEXIBILIY TIER 4 NON-ROAD DIESEL ENGINE EMISSIONS

ECONOMIC HARDSHIP Applicability

1. Generally available to the equipment manufacturer the first year (12 months) that the new or revised rule is in effect.

2. Generally available to the small-volume equipment manufacturer the first 24 months that the new or revised rule is in effect.

Criteria for qualification

1. The equipment manufacturer must exhaust the allowance exemptions from 1039.625 before gaining eligibility.

2. Cannot also be the engine manufacturer. 3. Equipment manufacturer restricted to power categories from19kW upward. 4. Small volume equipment manufacturer restricted to power category 19kW to

37kW. 5. In eligible for the allowance if a suitable compliant is available from another

source. 6. Relevant factors in determining approval:

- Number of engines requested for exemption - Size of company and the ability to endure hardship - Time required to redesign equipment to incorporate a compliant

engine - Breach of contract by current engine supplier - Potential for market disruption

LDJ Consulting, Inc. Stephen Burdette May 29, 2006

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APPENDIX A EQUIPMENT-MANUFACTURER FLEXIBILITY

TIER 4 ENGINE EMISSIONS – PERCENTAGE ALLOWANCE CALCULATION This is an example of the decisions by a hypothetical company to use the equipment manufacture flexibility available for the transition to TIER 4 rules under 40CFR of the US Federal Government. The example demonstrates the method to calculate the percentage of product allowance during the applicable time frame by engine categories provided in Table 1 of 1039.625(a)(1). The most important decision was to proactively understand the rule and apply it to strategic long term product planning and create tactical procedures to employ the rule successfully. Early planning resolutions became the driving force for implementing flexibility allowances. These resolutions were;

- to utilize flexibility in all model lines (IB, NTB and BM). - stagger development and major upgrades to coincide with TIER 4

implementation. - to use the percentage calculation model since the annual US directed

production exceeded the 3000 annual limitation for small equipment manufacturers.

- to not engage in foreign manufacture or importation of any models for US directed sales.

- to purchase all engines. - to recognize special customer needs that can be addressed through flexibility

allowance providing additional time to adjust to the technology and cost of TIER 4 compliant machines.

The hypothetical company is named ATAAC and it has three viable/ successful product lines; IB models (19>56 kW), NTB models (56>130 kW) and BM models (130>560 kW). The IB models serve a broad base of contractors engaged in commercial construction. It is a consumable product with an average life of 8 years. Once depleted through use it is not economic to rebuild and use as a production tool. The NTB model is popular with municipalities and useful life is typically 10 years. Often times the machines are retired to a less strenuous task and spend an additional 5 years in this capacity. There is a small constant niche market for independent contractors working with small municipalities that cannot justify the capital expense of owning the equipment not to mention the salary and benefits of skilled operators. BM models are large machines that require significant options for customers. It is a profitable model with low production volumes when compared with other ATAAC models. The market does not demand short model cycles, but does demand proven technology improvements. These machines will typically operate 10000 hours without problems other than routine maintenance. Based on annual average usage the machines will operate 8 years before rebuild. The design is robust and can be rebuilt 3 times economically. End of life is usually due to loss of tax depletion or new technology essential to the user to optimize usage. Used machines are popular with municipalities since restoration costs are reasonable and performance is restored to original specifications. The following timeline was devised for the plan to permit the

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organization to define develop plans, estimate costs and plan cash flow in the business during transition to full TIER 4 compliance;

Table 1 Allowance Plan

YEAR IB Model NTB Model BM Model

2008 X 2009 X X 2010 X X 2011 X X 2012 X X X 2013 X X X 2014 X X X 2015 X X 2016 X X 2017 X X 2018 X

This timeline combined with annual US direct volumes will be the basis for planning the annual allowances. Because annual volume plans can fluctuate it is important to constantly manage the US annual directed volumes to not exceed the total 7-year requirement. It is significant to look at each power category separately to meet the intent of the rule 1039.625(b)(1). The percentage calculation must be made for each power category and the sum of the percentages for 7 years can not exceed 80 percent for the IB and NTB models since there will be no extenuating circumstances such as inventory depletion, hardship and early allowances. The calculation for percentage is as follows:

(Estimated US directed production) x (Percentage) = Exempt allowance 100 The BM model will use early allowances and is eligible for both 2009 and 2010. Using both years at the maximum allowance will reduce the 7-year allowance by the 10 per cent mandated in 1039.625(d)(4). Therefore the calculation will be the same as the aforementioned models, but be comprised in total of two independent calculations:

(Estimated early US directed production) x (Percentage) = Exempt allowances 100 (Estimated US directed production) x (Percentage) = Exempt allowances 100

Table 2 provides the plan to utilize the TIER 4 transition flexibility exemptions. The estimate will be managed and adjusted as the estimates become actual time data.

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Table 2TIER 4 manufacturer Flexibility Transition Exemption allowances for ATAAC Manufacturing

Power Category 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Total

IB Models (19>56 kW) US directed production 3000 2500 2800 3000 2800 2000 2800 3200 3500 3500 4000 33100 Percentage exemption 12 12 12 12 12 10 10 NA NA NA NA 80 General availability exemption 360 300 336 360 336 200 280 NA NA NA NA 2172

NTB Models (56>130 kW) US directed production 1500 1400 1600 1500 1500 1400 1600 1300 1400 1600 1500 16300 Percentage exemption NA NA NU NU 12 12 12 12 12 10 10 80 General availability exemption NA NA NA NA 180 168 192 156 168 192 180 1236 Early availability allowance NA NA NU NU NA NA NA NA NA NA NA

BM Models (130 to 560 kW) US directed production 500 500 500 500 450 450 500 500 550 600 650 5700 Percentage exemption NA NA NA 10 10 10 10 10 10 10 NA 70 General availability exemption NA NA NA 50 45 45 50 50 55 60 NA 355 Early availability percentage NA 5 5 NA NA NA NA NA NA NA NA 10 Early availability exemption NA 25 25 NA NA NA NA NA NA N NA 50

Note; NA = Not AvailableNote: NU = Not Used

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APPENDIX B EQUIPMENT MANUFACTURER FLEXIBILITY

TIER 4 ENGINE EMISSIONS – SMALL VOLUME ALLOWANCE This is an example of the decisions a small company made following the rules for equipment manufacturer flexibility available for transition to TIER 4 engine emission compliance under Federal rules in 40CFR. The planning decisions are driven by the rules in 1039.625(a)(1) and 1039.625(b)(2)(ii). The volumes of annual US directed production are low. A tactical move to start marketing a foreign produced product that is not designed nor manufactured by the company means that the company must also adhere to the provision is 1039.626 covering imported equipment and bonding. A proactive strategy for marketing was married to the TIER 4 rules in order to develop tactics utilizing available allowances during the transition period available for the planned engine power categories and engine families. Key drivers of the plan are;

- to utilize the most advantageous availability schemes available as a small company with 283 employees and produced only 674 machines in 2002.

- to use a single engine family for the US produced and directed sales volume - to use an imported machine to increase market penetration that is designed

and built by an unrelated foreign source. The foreign source is also importing machines into the US through independent distributors. Negotiations will be necessary to balance the use of the foreign manufacturers availability between competing US directed marketing organizations.

- the company has enough assets to offset the need to purchase bonds for the foreign sourced machines.

- to not attempt to use early availability exemptions. BGL Inc. is a small volume producer of highly specialized mobile equipment for the off highway construction industry. The model line in 2002 consisted of three models; GG (24kW), ND (38kW) and LH (54kW). This is a solid lineup, but annual volume is fixed in terms of demand. The market has been dominated by BGL for 28 years due to the lack of sales growth potential that attracts larger producers. A foreign manufactured has launched a large machine as a niche player to serve the market in that region of the world. Customers have been surveyed for interest in a larger machine. The interest is not sufficient to finance a development program and production launch. However, the foreign machine has potential to meet the needs. The foreign producer has no near term resources to launch a US marketing organization and has tried with little success to enter the market through independent distributors. BGL will provide advise on proper safety labels and regulatory requirements. ISO global standards apply in both countries so there is no need to highly modify the proposed FGS model for differences. The volumes are too low to benefit from using the percentage calculation method. To softened the economic impact of launching compliant machines the GG model will be launched with a compliant engine for the 2008 model year. The ND model will be delayed for production until mid year with a compliant engine. There are not enough resources in the company to make all change s simultaneously but the company’s sound financial position did not qualify for a

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hardship allowance. The technical hardship allowance under 1039.625(m) was denied because the company could not show cause because the engine installation in the GG and ND models was identical. Changing the LH model was delayed using the allowances to cover anticipated production until launch can be achieved in the first quarter of 2011. The foreign supplier cannot meet the 2011 compliance date, but will complete launch for BGL by 2013. Table 3 provides the years of availability to BGL, but BGL has elected to use the allowances up front to soften the launch

Table 3 Allowance Plan

YEAR GG Model ND Model LH Model FGS Model

2008 X 2009 X 2010 X 2011 X X 2012 X 2013 X 2014 2015 2016 2017

Clause 1039.625(b)(2)(ii) permits using 525 exempt engines under 130kW over 7 years starting with 2008. This part of (2)(ii) is applicable to US directed sales of models GG, ND and LH. BGL will share the foreign manufacturer allowance on the FGS model with the other distributors using US directed sales volume. This will become clear in Table 4. Financial responsibility for foreign manufacturers can be achieved by purchasing a bond or provide proof of adequate asset liquidity in the US to cover the bonding requirement based on the provisions specified in Table I of 1039.626(9). A separate line item illustrating the bonding responsibility will be provided in Table 4. BGL has determined that they have adequate liquid assets to meet the provisions for banding and therefore will prepare the information for a waiver from the Designated Enforcement Officer in the United States before using the allowances on the FGS model. BGL negotiated 75 machines for flexibility allowances in years 2011,2012 and 2013 as the US launch began all machines in this model range were not TIER 4 compliant until 2013. During that same period the supplier furnished 50 machines in 2011 to the other distributor and 25 each in 2012 and 2013 when all production of the FGS model were made compliant.

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Table 4TIER 4 Manufacturer Flexibility Transition Exemption Allowances for BGL Inc.

Power Category 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Total19>56 kW US directed production GG model 350 375 325 375 360 350 330 380 320 345 3510 ND model 250 250 200 275 255 275 260 290 250 265 2570 LH model 150 150 150 125 155 140 160 170 145 160 1505 Allowance use 200 150 150 25 E E E NA NA NA 525

130 to 560 kW US directed production (BGL) FSG model NA NA NA 75 75 75 90 100 95 110 620 Allowance use (BGL) NA NA NA 75 75 75 E E E E 225 Distributor model NA NA NA 25 25 50 45 40 35 25 245 Allowance use (distributor) NA NA NA 25 25 50 E E E E 100

Note: NA = Not AvailableNote: E = Exhausted allowanceNote: The distributor data is provided in the table to demonstrate sharing the foreign US directed production allowance between the distributor and BGL. The actualallowances were assigned in proportion to the distributor and BGL by the manufacturer.

Table 5TIER 4 Manufacturer Flexibility Transition Bonding Obligation Computation for BGL Inc.

Power Category 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Total130 to 560 kW Us directed productionfrom a foreign source NA 0 0 75 75 75 NA NA NA NA 225Per engine bond value in US$ (275kW) NA 3000 3000 3000 3000 3000 NA NA NA NATotal annual bond value obligation NA 0 0 225000 225000 225000 NA NA NA NA 675000

Note: BGL was eligible for early allowance,but did not launch the product in time to use the allowances on the imported machine. BGL has trhe option to post a bond annually in the calculated amount or request a waiver from the Designated Enforcement Officer by demonstrating that BGL has matching liquid assets in the USin lieu of purchasing a bond. In either case BGL must monitor estimated and actual bonded machine volumes and make adjustments upward to match any increasesin the the year in progress. The responsibility for the obligation extends 5 years beyond using the allowance or 5 years after using all of the available allowances.

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APPENDIX C EQUIPMENT MANUFACTURER FLEXIBILTY

TIER 4 ENGINE EMISSIONS – TECHNICAL HARDSHIP SAFI LLC is a manufacturer of machines used globally. Total annual global volume was 2400 machines in 2006. The company experienced rapid growth since 2004 when annual production was 1146 machines. Introduction of the SG model was the right product at the right time. Contractors were continuing to adapt existing machines to accomplish subterranean communication cable replacement. There was still no competitive answer to challenge the SG model. A very large BG model was used to bury large power cables and enjoyed a solid performance reputation particularly in third world development nations. Due to rapid expansion the company was leveraged, but solvent. The major challenge was to expand the technical and technical support side of the business. There were very few experienced engineers because the technology was new within the last generation of the SG model. SAFI had planned to transition into TIER 4 engine emission compliance using the flexibility allowance available to manufacturers. Volumes permitted the company to use the small volume allowances under 1039.625(b)(2)(ii). Since there was no requirement for US TIER 4 compliant engines in markets in the Pacific Rim, Eastern Asia and Africa it was decided to continue manufacturing the previous engine models to avoid raising prices 14% to offshore customers. To ease the cost of gradual compliance the available allowances for exemptions to US directed production would be used. There is no incentive to launch compliant engines early. Unfortunately, the engine supplier for the SG model (35 kW) was purchased by a competitor. The new owner realized that the engine for the SG product was an orphan in the model line. A decision was made to substitute a different engine from the purchasing company engine family. The substitute engine will not be available in TIER 4 specification to permit continued manufacture of the SG. This is an offshore supplier model that is at capacity in its current production facility. Complete realignment of engine families will be spread over 8 years with the 75 kW engine being the last to receive design consideration for the US engine emission rules. SAFI must find a solution to reduce the risk of lost production in the US market. Other engines are available, but it will require 3years with the design and production engineering staff available to work with TIER 4 compliant engine suppliers to launch a compliant engine. It is decided to submit the technical hardship plan to the Designated Compliance Officer seeking relief under 1039.625(m)(4)(iv) whereby a small manufacturer can be granted additional allowances to the (b)(2) provisions of 110 units for as long as 36 months. The detailed engineering plan was submitted along with the following amended allowance data chart in Table 6.

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Table 6TIER 4 Manufacturing Flexibility Transition Exemption Allowances for SAFI LLC

Power Category 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Total19>56 kW (SG model) US directed sales 150 150 150 650 700 700 800 800 800 850 900 6650 Allowance usage (b)(2)(ii) 150 150 150 75 E E NA NA NA NA NA 525

130 to 560 kW (BB model) US directed sales NA NU NU 50 50 50 50 50 50 25 NA 325 Allowance usage (b)(2)(ii) NA NU NU 50 50 50 50 50 50 25 NA 325

19>56 kW (SG model revised) US directed sales 100 550 600 650 700 700 800 800 850 850 900 7500 Allowance usage (b)(2)(ii) 100 150 150 125 E E NA NA NA NA NA 525 Hardship allowance (m)(4)(iv) NN 400 450 250 E E NA NA NA NA NA 1100

Note; E = ExhaustedNote: NA = Not availableNote: NN = Not neededNote: NU = Not usedNote: The initial SAFI strategy was to reduce US directed sales the first 3 years of production under the available allowances from 1039.625 Table 1. During 2008the strategy worked as planned and engineering started the conversion to compliant engine installation. SAFI experienced a 33 percent decline in US directed sales of the SG model. A sudden announcement by the new engine supplier company to stop development of a compliant version of the engine since there was a more advanced version of a different engine family nearing certification from the purchaser of the former supplier. The old engine would continue as a price leader in foreignmarkets until it was no longer viable and sustainable. The offered engine would not fit in the machine and required extensive design revisions for drivetrain adaptation.A detailed plan was prepared along with economic consequence scenarios for the Designated Compliance Officer. Economic hardship was denied because revenue from foreign sales as well as a healthy balance sheet failed to meet economic hardship qualifications. However, the circumstances and detailed plan was enough to meet requirements for taechnical hardship. Therefore, SAFI staff revised there tactics to use the old engine until a compliant engine could be introduced in th secondquarter of 2011. Before supply interuption SAFI planned to have parallel paths from 2008 into 2011. Hardship allowances permitted continued production on virtuallythe same schedule as before without serious impacts on cash flow.Note: The top chart for 19>56 kW model SG was replaced by the bottom chart to reflect the approved use of hardship in conjunction the small volume allowance.

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APPENDIX D EQUIPMENT MANUFACTURER FLEXIBILITY

TIER 4 ENGINE EMISSIONS – EARLY COMPLIANCE OFFSET CREDIT Acme Corporation is a company with two product lines for earthmoving applications. Model K is powered with a 120 kW diesel engine. A larger model M is powered with a180 kW diesel engine. Preparing for compliance with US TIER 4 diesel engine emissions for off highway machinery revealed that compliance separation was only one year. Introducing two compliant engines that close was not attractive due to the impact on cash flow and engineering advised that the changes made to accommodate TIER 3 were not satisfactory to accept the TIER 4 engine package. In essence both product lines would need major revision. Marketing was looking for a new large model anticipating that competitors might use the TIER 4 requirements as a means to launch new machines with more technology and features to disguise the price increase of the engine to the customers. A machine with more perceived value would command a higher price and competitors would also increase prices to cover the TIER 4 engine installation. The smaller model could undergo minor revisions. The length of time to complete the program on the larger machine was 3 years. The smaller machine could be completed in 14 months. The options of transition availability, technical hardship and economic hardship were all carefully studied. By all measures Acme did not want to end up with their back against the wall and the financial position of the company would be a hard sell to the Designated Enforcement Officer Working with their engine supplier it was determined that the engine for the model M would be available in final TIER 4 compliance certification in time for the 2011 year. Careful examination of 1039.625 and 1039.627 revealed that early incentives were available for compliant engines. Early allowances available under 1039.625(d)(4) was not enough to spread the engineering load in the company using two steps to reach final compliance. However, offsets for early compliance on the 180 kW engine in 2011 based on converting to the new model in 2011 with a fully complaint engine (PM and NOx) would provide offsets for the K model revamp in 2012 and 2013. Based on projected US directed sales the offset strategy of taking a 1 for 2 credits on the large engine would provide a credit of 250 engines in future years. The volume offset can be used in another eligible power category yielding additional exempt engines. In this situation the tables from 1039.627(a)(3)(iii) confirmed that Acme could use ½ the 2011 US directed sales. Using the provisions for offset in 1039.627(b)(ii) the product of 250 engines at 240 horsepower yields 60000 horsepower. Dividing 60000 horsepower by 160 horsepower yields a credit of 375 engines in the 56>130 kW power category. The engine manufacturer and Acme move forward at the end of 2007 to meet the 2011 model year for model M. After the launch of the 2011 model M Acme personnel were in a position to change the model K in an orderly time frame. Acme used the percent allowance calculation to provide the necessary additional allowances for model K as provided in 1039.625(b)(1). Table 7 illustrates the example.

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Table 6TIER 4 Manufacturing Flexibility Transition Exemption Alowances for Acme Corporation

Power Category 2011 2012 2013 2014 2015 2016 2017 2018 Total

Model K (56>130 kW) US directed sales NA 900 1000 1000 1100 1200 1250 1325 7775 Offset from model K NA 360 15 NU NU NU NU NU 375 Percentage exemption NA 60 20 NA NA NA NA NA 80 General availability exemption NA 540 200 NA NA NA NA NA 740

Model M (130 to 560 kW) US directed sales 1000 1000 1000 1050 1100 1200 1150 1200 8700 Offset 1039.627(a)(3)(iii) 500 0 0 0 0 0 0 0 500 Percentage exemption NA NU NU NU NU NU NU NU General availability exemption NA NU NU NU NU NU NU NU

Note: NA = Not available/not applicableNote: NU = Not used

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APPENDIX E TIER 4 EQUIPMENT MANUFACTURER FLEXIBILITY

CALIFORNIA AIR RESOURCES BOARD (CARB) COMMENTS TO 40CFR June 29, 2004

The EPA detailed the TIER 4 final ruling for non-road diesel engine emissions and fuel in the Federal Register dated June 29, 2004, Part II. Within this 300-page publication the section for equipment manufacturers in “III” had 3 comments raised by CARB. Page 39001, III, A, 2 CARB supported the EPA proposed discount of 20 percent NMHC + NOx credits

used for NOx compliance in opposition to the Engine Manufacturers Association recommendation to eliminate the discount. Two reasons were cited by EPA to support discounting:

First, NMHC reductions can provide substantial NMHC + NOx credits

which are treated as NOx credits. Manufacturers could then use the undiscounted NMHC + NOx derived credits to offset NOx emissions, which can make a large difference in facilitating the design of engines, particularly phase-in engines. Such credits are “windfalls” (68FR28469, May 23, 2003). Second, discounting provides a smaller net environmental benefit from the ABT program. In fact, the 20 percent discount is a misnomer. The discount factor is the NMHC fraction of the reduction.

Page 39005, III, B, 2 CARB recommended elimination or reduction of flexibility for diesel engines under 19 kW (25 horsepower) because the TIER 4 engines are not after treatment based. EPA rejected the recommendation on the basis of demonstrated technical progress in emission reduction. Page 39009, III, B, 2, d CARB stated the early use of TIER 4 flexibilities should be discounted to discourage manufacturer abuse by requiring more than one flexibility after TIER 4 begins for every flexibility used prior to TIER 4. CARB did not recommend a revised discount number from the proposed level from EPA. EPA dismissed the request stating that early use of flexibility will allow manufacturers to exhaust small quantities of TIER 2/TIER 3 inventories at the end of the 7 year period. Without requiring a significant redesign in a short period of time to meet TIER 4 compliance. The amount (10 percent or small volume allowance of 100 units) is small enough to prevent manufacturers from abusing the early allowances.

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17th JTLM -- Regensburg, Germany

California In-Use Off-Road Vehicle Regulation

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In-Use Off-Road Diesel Vehicle Emission Scope

• Applies to commercial mobile-powered off-road diesel vehicles equipped with engines 25 HP or greater

• Does not apply to vehicles used primarily for agricultural applications– Only includes up to point of first processing– Forestry would be included in this exemption– Does not include vehicles used for personal use such

as home-owner-with-acreage • Originally only addressed diesel PM but recently

broadened to also address NOx.

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In-Use Off-Road Diesel Vehicle Emission Regulation Overview

• Meet NOx and PM fleet average targets– Fleet average targets become more strict over time

or• Meet Best Available Control Technology (BACT)

requirements– NOx – Turn over engines at rate of 8% of total fleet

HP per year until 2015 and then at rate of 10% per year

– PM – Apply PM retrofits at rate of 20% of total fleet HP per year

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In-Use Off-Road Diesel Vehicle Emission Regulation Overview

• Idling limits placed on fleets of no more than 5 minutes – Unless necessary for the proper or safe operation

of the vehicle• Annual reporting by fleet beginning 2009• Requirements vary by fleet size

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In-Use Off-Road Diesel Vehicle Emissions Exemptions from NOx Engine Turnover Reqts.

• All vehicles in small fleets • Vehicles less than 10 years old• Specialty vehicles for which no used

equipment or repowers are available• Vehicles retrofit with best available verified

diesel emission control device (VDECS) in the past 6 years

• Tier 4 and interim Tier 4 engines

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In-Use Off-Road Diesel Vehicle Emissions Exemptions from PM Retrofit Reqts.

• Engines in vehicles less than 5 years old• Engines for which there is no retrofit

available cannot be safely installed• New engines that come with a diesel

particulate filter• Engines already retrofit with the BACT at

the time of installation– Must be either a Level 2 or 3 VDECS

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In-Use Off-Road Diesel Vehicle Emission Vehicle Labeling

• All vehicles must be labeled– ARB assigns vehicle number after initial

reporting• Permanently affix or paint on left side of

vehicle– Approximately 5 feet above the ground

• Vehicle number stays with the vehicle over its lifetime

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In-Use Off-Road Diesel Vehicle Emission Exemptions

• Exempt from all but record keeping / reporting– Low-use vehicles

• Operated for less than 100 hours per year– Emergency vehicles– Dedicated snow removal vehicles– Machines brought in from outside of California

that operate in California for less than 100 hours

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AEM/CECE/CEMA/KOCEMA Joint Technical Liaison Meeting Regensburg, Germany April 26-28, 2007

AGENDA ITEM: 16.1.2 Preparation date: 2007-04-09 By: Steve Neva for AEM Page 1 of 1

Title/issue: Engine Emissions – California In-Use Off-Road Vehicle

Emissions Proposed Regulation Background: The U.S. Federal Clean Air Act preempts California or any other state from adopting or attempting to enforce any standard or other requirement relating to the control of emissions from new engines which are used in construction equipment or vehicles or used in farm equipment or vehicles and which are smaller than 175 horsepower. California ARB is now regulating or preparing regulations for equipment once it is sold in California as it would no longer be considered new. California Air Resources Board (ARB) is in the final stages of developing a rule to regulate diesel exhaust emissions from in-use off-road vehicles.

Current status: A series of workgroup meetings and workshops have been held with stakeholders over the last two years. This proposed regulation was originally intended to address only PM reduction but as of December 2006, proposed regulation changed to also address NOx to help California meet their federally mandated PM2.5 and ozone attainment standards. AEM members have been attending these meetings and providing input into the proposed regulation. This proposed regulation will be presented to California ARB Board for consideration at the May 24-25 meeting in San Diego, CA. Actions to be taken: Continue following of proposed rule including attending the California ARB Board meeting. Annexes/attachments:

Board Meeting Notice Off Road Staff Report

Technical Support Document

Action Information X

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AEM/CECE/CEMA/KOCEMA Joint Technical Liaison Meeting Regensburg, Germany April 26-28, 2007

AGENDA ITEM: Preparation date: 05/04/2007 By: Tom Haley Page 1 of 1

Title/issue: Engine Emissions-US EPA Small Spark Ignition Engine Emission Standards Background:

Current status:

Actions to be taken: Annexes/attachments:

C: Documents and \Settings trh6623 Desktop Joint Technical Committee Germany 2007 2007 JTLM Agenda Item EPA SI Emissions.ppt\ \ \ \

Action Information

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Agenda Item 16.1.3

Engine Emissions-US EPA Small Spark Ignition Engine Emission Standards

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AEM/CECE/CEMA/KOCEMA Joint Technical Liaison Meeting Regensburg, Germany April 26-28, 2007

AGENDA ITEM: Preparation date: 2007.04.10 By: Frederic de THEUX Page 1 of 2

Title/Issue: Tech Review of EU Exhaust Emission & Low Sulphur Fuel Background: 2004/26/EC Directive for NRMM was published in April 2004 with 3 Stages of regulation:

Stage IIIA starting in 2006 with 40% NOx reduction by “In-engine “ modifications

Stage IIIB starting in 2011 with 80% Particulates reduction by appropriate after-treatment

Stage IV starting in 2015 with 90% NOx reduction by appropriate after-treatment

A 2006-2007 technical review conducted by EU Commission has to confirm dates and

content of Stage IIIB and IV

In 2003, to enable Stage IIIB application, Commission promised to amend the 2003/17/EC

Fuel Directive for NRMM as soon as the dates and limits of NRMM Exhaust Emission

regulation are definitively approved and voted .

In 2006 : Fuel Directive - CECE organized a survey to better understand the fuel situation by

the manufacturers of NRMM (OEM). A Position paper has been sent to the DG Environment

to request the need to get a 10 ppm S Fuel by end of Dec 2009.

Current status: 1. Fuel quality : DG Environment preliminary announcement is saying that :

o 10 ppm S Fuel will be introduced by latest 31 Dec 2009 for all land NRMM applications

o 300 ppm S Fuel will be introduced by latest 31 Dec 2009 for inland water way vessel

o There is no reference to EN 590.

2. EU Flexibility

o Current situation is still 20 % of the last 5 year production by engine category.

o Considering the technical challenge to match the requirements of Stage III B and Stage IV, CECE/CEMA jointly request now to increase this Flexibility quota from 20 to 50 %.

o EU Commission - DG Enterprise does support the industry.

o EU parliament and Council might not be in favor of this increasing.

o List of approval authorities still to be updated.

Action Information

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AEM/CECE/CEMA/KOCEMA Joint Technical Liaison Meeting Regensburg, Germany April 26-28, 2007

AGENDA ITEM: Preparation date: 2007.04.10 By: Frederic de THEUX Page 2 of 2

3.

Actions to be taken: 1. Fuel quality :

· EN 590 : Since this has not been mentioned in the DG Environment announcement, this has to be handled via the International Standards procedure.

· Low sulfure : No action 2. EU Flexibility

· CECE/CEMA is preparing a detailed argumentation with MS’s authorities to push Commission to act much faster

· Lobbying action has been initiated with MS’s authorities and National Associations to develop “political” arguments(Number of SME, turnover, employees, and number of SME potentially deleted from the current product line)

· Lobbying action has to be done to influence both EU Parliament and EU Council.

Annexes/attachments:

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AEM/CECE/CEMA/KOCEMA Joint Technical Liaison Meeting Regensburg, Germany April 26-28, 2007

AGENDA ITEM: Preparation date: 2007.04.10 By: Frederic de THEUX Page 1 of 1

Title/issue: EU Exhaust Emission (Retrofit) Background: This concerns the adaptation of emissions reduction technologies to existing engines and machines in order to reduce their emissions output.

Current status:

· In US, Both EPA and EMA do support the Retrofit programs

· In general, the industry does support the Retrofit programs as well

· In EU, Local legislations are popping up almost everywhere to have more stringent emission regulations (Austria, Germany - in some areas, Switzerland, PRECIS, etc, etc..)

· Meetings a continuously growing regional legislation on NRMM retrofit, we stressed the importance of developing a guideline paper.

Actions to be taken: · A joint CECE-CEMA –Euromot guideline will be made. · Action was asked by the “CEMA engine team” against a German retrofit proposal. · Lobbying action with the National Associations (to be sure they understand the position) · Meeting ministery. · Currently discussed at the Euromot ITF meeting Annexes/attachments: .ppt Presentation

Action Information

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AEM/CECE/CEMA/KOCEMA Joint Technical Liaison Meeting Regensburg, Germany April 26-28, 2007

AGENDA ITEM: Preparation date: 2007.04.10 By: Frederic de THEUX Page 1 of 1

Title/issue: CECE Exhaust Emission – ODB (On Board Diagnostic) Background:

· New Device…for NRMM (not for Highway system)

· The new Non Road Tier 4 and Stage IV regulations will result in the introduction of advanced emisions control system.

· Therefore, having OBD systems and OBD regulations for NRMM diesel engines seems to be a natural progression from the proposed requirements for heavy-duty highway engines.

Current status: · There is currently no worldwide regulation up to now.

· Pollution emitted by Diesel NRMM contributes to the air quality problems.

· Exhaust Emission regulations will become more and more stringent (Stage III B in 2011, Stage IV in 2014, and…???)

· The new nonroad Tier 4 and Stage IV regulations will result in the introduction of advanced control systems on NRMM

· US : Required for US heavy-duty on-highway vehicles …starting in 2010

· Similarities but also Differences between On-Highway trucks and NRMM engines

· What’s the appropriate level of OBD monitoring for NRMM ? Sophisticated for Highway !

· MIL (Malfunction Indicator Light)

Actions to be taken:

· Lobbying activities with Engine and Equipment Manufacturers from a technical standpoint. · Lobbying actions with National Associations from a Standardization standpoint (Functionality,

Connecting, Components (Sensors, actuators, etc..), Monitoring…) · World Wide Harmonization (WWHOBD) is needed · Euromot-CECE-CEMA are seriously considering the urgency of the situation.

Annexes/attachments:

Action Information

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AEM/CECE/CEMA/KOCEMA Joint Technical Liaison Meeting Regensburg, Germany April 26-28, 2007

AGENDA ITEM: 16.1.5 Preparation date: 9 Apr 2007 By: Yoshihiro Hoshino Page 1 of 1

Title: Trends in Japanese exhaust emission regulations. Background: Japan’s first legislation dealing with off-road vehicle exhaust emissions (the “Off-road Law”) was promulgated in April 2006 and regulated engine emissions of vehicles rated 130-560 kW from October the same year. Regulations will be applied to other engine output groupings in line with the prescribed schedule. Meanwhile, the Ministry of the Environment (MOE) began examining the next phase of exhaust emission regulation in 2006 and aims to announce its conclusions late this year. CEMA has been submitting the views of the industry to MOE and monitoring developments.

Current status: MOE’s examination of next-phase exhaust emission regulation focuses on two issues: new testing methods and standard values. Concerning testing methods, MOE is gathering data to consider whether the NRTC test can be introduced to Japan. As for standard values, it plans to seek the views of the industry and manufacturers.

CEMA has chiefly made the following three requests in respect of next-phase exhaust emission regulation.

(1) International consistency with EU Directives and early decision-making In contrast to the comparatively simple provisions established by the EU with regard to standard values and date of application, the EPA provides a variety of options grading up to formal Tier 4 status. Considered in terms of Japan’s existing system, it seems easier to achieve consistency with the EU approach.

(2) Legislative measures regarding use of appropriate fuel (diesel)

(3) Setting of realistic grace periods for application of regulations While circumstances and systems differ from one country to another, CEMA especially stresses the necessity for international regulatory consistency.

Actions to be taken: As well as monitoring developments at MOE, CEMA will gather information and make active approaches to relevant government agencies and other industry associations whenever necessary.

Annexes/attachments:

Action Information X

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AEM/CECE/CEMA/KOCEMA Joint Technical Liaison Meeting Regensburg, Germany April 26-28, 2007

AGENDA ITEM: 16.1.6 Preparation date: 9 Apr 2007 By: K.Takami Page 1 of 1

Title: Black smoke for next step emission regulation in Japan Background: In order to confirm the emission performance for in-use on-road vehicle, the black smoke has been measured by Free Acceleration in Japan. The definition of “On-road vehicle” includes the construction machine, industrial machine, agricultural machine which can be driven on the road and have the license plate. So, the method which is adopted for On-road vehicle also be adopted for Off-road vehicle as to confirm the emission performance on in-use vehicle.

The legal automobile inspection system so called “Shaken” has long been fixed in Japan. And the emission performance of the in-use On-road vehicle has been confirmed periodically.

Japanese diet decided that the regulation of “Off-road” and “On-road” should be the same. So, we have to watch the direction of On-road regulation.

Current status: In 6th report which the Central Environmental Council (CEC) reported on 2003, the emission regulation that should be met around 2010 for the special vehicle which includes On-road and Off-road vehicle would be reviewed. So, the black smoke regulation may also be reviewed.

If the black smoke regulation was reviewed, the measurement method includes the equipment should be needed to review. The adoption of opacity meter has been announced for On-road vehicle except special vehicle.

In the submission by CEC announced on 23rd Feb. 2007, it has been mentioned that NOx confirmation is needed for in-use emission confirmation.

It is supposed that the in-use emission confirmation for Off-road shall be modified as follows.

1) To use opacity meter with current test cycle, or

2) To use opacity meter with new test cycle , or

3) To use opacity meter and to confirm emission level like NOx.

Actions to be taken: PWRI will take the action items as follows.

1) To study whether there is any special problem when opacity meter is used for Off-road vehicle.

2) To study how to measure the emission other than black smoke on in-use Off-road vehicle.

3) To watch the direction of On-road emission regulation.

Action Information X

More severe case

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16.1.4. Black smoke for next step emission regulation in Japan

Researcher Kei Takami

Advanced Technology Research TeamConstruction Technology Research Department

Incorporated Administrative AgencyPublic Works Research Institute

Joint Technical Liaison Meeting April 2007

AGENDA ITEM: 16.1.6

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ContentsContents• Association chart for emission regulation• Vehicle definition• Free acceleration (test cycle)• Black smoke correspondence between

smoke meter and opacity meter• Supposed issue for in-use emission in Japan• Action item by PWRI

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1. Association chart for emission regulation

METI

MLIT

MOE

Central Environmental Council

Road Transport Bureau (On-road)

Policy Bureau

JAMA

JCMA

CEMA, LEMA etc

CMI

PWRIJARI

NTSEL

PAJJPEC

Submission

Cooperation

Construction Planning Division (Off-road)

NEDO

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2. Vehicle definition

*1 *2Japan -USA On-road

Europe On-road

Table1. The definition of vehicle in each region

AutomobileSpecial vehicle Off road

vehicleMarine,

LocomotiveOn-road Off-road

Non-roadNon-road

*1 *2Can the vehicle be drivenon the public road?Does the vehicle havenumber plate?Does user have to takeautomobile inspectionregularly?

Table2. The vehicle difference in Japan

AutomobileSpecial vehicle Off road

vehicle

Yes No

Yes No

Yes No

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3.Free Acceleration (test cycle)

2sec 2sec 2secmax.speed

enginespeed

meas.start

measurement(3times)

15sec 15se 15se

idling 5-6sec

idling

load freeacceleration2-3 times

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4. Black smoke correspondence between smoke meter and opacity meter

Smoke meter Opacity meter50% 70%40% 50%25% 29%

Smoke meter Opacity meter19 ≦ P < 37 40% ??37 ≦ P < 56 35% ??56 ≦ P < 75 30% ??75 ≦ P < 560 25% ??

Table 3. Black smoke correspondence betweensmoke meter and opacity meter

Rated power (kW)1997

Regulation yearbefore 1993

1993

Specialvehicle

Automobile ⇒

Note1) We can see the opacity meter number on the web sight of MLIT “http://www.mlit.go.jp/pubcom/06/pubcomt143/01.pdf”

2) There are no correlation between the measurement results of the smoke meter and the opacity meter.

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5. Supposed issue for in-use emission in Japan

1) To use opacity meter with current test cycle, or2) To use opacity meter with new test cycle , or3) To use opacity meter and to confirm emission

number like NOx. More severe case

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6. Action item by PWRI

1)To study whether there is any special problem when opacity meter is used for Off-road vehicle.

2) To study how to measure the emission other than black smoke on in-use Off-road vehicle.

3) To watch the direction of On-road emission regulation.

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Back up

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Association about emission regulation in JapanAssociation Name Acronym

Ministry of the Environment MOECentral Environmental Council -

Ministry of Economy,Trade and Industry METINew Energy and Industrial Technology Development Organization NEDOJapan Construction Equipment Manufacturers Association CEMAJapan Land Engine Manufacturers Association LEMAPetroleum Association of Japan PAJJapan Petroleum Energy Center JPEC

Ministry of Land, Infrastructure and Transport Government of Japan MLITRoad Transport Bureau -Policy Bureau -Construction Planning Division -Japan Automobile Manufacturers Association, Inc. JAMAIndependent Administrative Institution National Traffic Safety andEnvironment Laboratory

NTSEL

Japan Automobile Research Institute JARIJapan Construction Mechanization Association JCMAJapan Construction Method and Machinery Research Institute CMIIncorporated Administrative Agency Public Works Research Institute PWRI

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AEM/CECE/CEMA/KOCEMA Joint Technical Liaison Meeting Regensburg, Germany April 26-28, 2007

AGENDA ITEM: Preparation date: 2007.04.10 By: Frederic de THEUX Page 1 of 1

Title/issue: CECE Exhaust Emission - Bio Fuel Background: · The current production of liquid Biofuel in EU is about 2 Mto, which is less than 1 % of the market.

· EU is below the target… which is 18 Mto for 2010…!!!

· But the potential does exist ; 4 – 13 % of agricultural land would be need.

· EU does confirm a long term commitment to renewable energy beyond 2010

Current status: · EU Commission : there is a binding target of 20 % share of renewable energies in overall (Bldg

heating, A.C., Electricity, Transport, etc..) EU consumption by 2020.

· EU Cion : binding target of 10 % to be achieved by all the Member States for the share of Bio Fuels in overall EU transport petrol and Diesel consumption b 2020.

· EU Coucil did accept this target of 10 %.

· EU-produced “1st generation” biofuels can deliver GHG savings of 40-50 % compared to Petrol and Diesel.

· ..”2nd generation” (BTL = Bio Mass to Liquid) should deliver 90 % GHG saving…..when technically available (expensive). Brazilian can be considered as a Pioneer !

· To be introduced in a cost-efficient way ( Bio Fuel costs more than other forms of renewable energy)

Actions to be taken: · From CECE stdpoint (Emission PT) : Nothing yet ! Annexes/attachments:

Action Information