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# COMPLIANCE WITH CALIFORNIA, MASSACHUSETTS, NEW YORK

DATE: October 10, 1996

#### TO: All Saturn Retailers

#### SUBJECT: Compliance with California, Massachusetts, New York, and Federal ---------------------------------------------------------------- Emission Requirements for 1997 Model Year Saturn Vehicles ---------------------------------------------------------

This letter contains important information on California, Massachusetts, New York, and Federal emission requirements and procedures. Specifically, this letter contains the following material:

- an overview of the vehicle emission requirements in California, Massachusetts, New York, and Federal emission states;

- a special policy announced by the Environmental Protection Agency (EPA) regarding the sale of California certified vehicles in California, Massachusetts, New York and their contiguous states;

- a discussion of the legal requirements for the sale of California certified and Federal certified vehicles;

- a list of the Saturn vehicles which are certified to meet all Federal, California, Massachusetts, and New York emission requirements (50-State Vehicles);

- an explanation of Saturn's distribution practice and related procedures for the distribution of California certified and Federal certified vehicles, including:

- a detailed explanation of how to determine the emission configuration of a new 1997 model Saturn vehicle,

- completing of Affirmation forms and other safeguards that Saturn has in place to prevent the illegal sale of vehicles;

- procedures pertaining to the sale of Emission Control Identification Labels; and

- information about the California Registration/Recall Renewal Program, and its impact on Retailers.

This letter provides only a summary of the emissions laws as understood by Saturn. It is recommended that Retailers consult with their legal counsel for specific advice regarding compliance with these vehicle emission laws.

I. Overview --------

A. Massachusetts and New York Emission Requirements

For the 1997 model year, both the states of Massachusetts and New York will again impose California emission requirements on all passenger cars.

NG1 must be used by all Retailers to order a vehicle which conforms to Massachusetts/New York emission requirements.

B. California Emission Requirements

The state of California requires that all passenger cars meet California emission requirements.

YF5 must be used by all to order a vehicle which conforms to California's emission requirements.

C. Federal Emission Requirements

For states other than California, Massachusetts and New York, the US Environmental Protection Agency (EPA) requires that all cars meet Federal emission requirements, except as explained below in Section 111. "EPA's Special 1997 Model Year Policy Regarding the Sale of California Certified Vehicles."

FE9 must be used by all Retailers to order a vehicle which conforms to Federal emission requirements.

II. EPA's Special 1997 Model Year Policy Regarding the Sale of California --------------------------------------------------------------------- Certified Vehicles ------------------

For the 1997 model year, the EPA policy allows, but does not require, Retailers in Massachusetts and New York and states that border Massachusetts and New York (i.e. Maine, New Jersey, Pennsylvania, New Hampshire, Connecticut, Rhode Island, and Vermont) to sell new passenger cars that meet California emission requirements to any purchasers, including residents of Federal emission states. Please note that EPA includes the state of Maine in their special policy even though Maine does not border a California emission state. These vehicles can be ordered with the NG1 option.

For the 1997 model year, the EPA policy allows, but does not require, Retailers in California and states that border California (i.e. Arizona, Nevada, and Oregon) to sell new motor vehicles that meet California emission requirements to any purchasers, including residents of Federal emission states. These vehicles can be ordered with the YF5 option.

For Saturn models there is an extra charge of about $75 for vehicles that meet California emission requirements (i.e. YF5 and NG1). There are no Saturn vehicles certified for 50 state emissions as defined in Attachment 1. All Retailers can sell vehicles that meet Federal emission requirements (i.e. FE9) to purchasers that will be registering such vehicles outside California, Massachusetts and New York.

III. Legal Requirements ------------------

A. California, Massachusetts, and New York

It is important that Retailers both within and outside of California, Massachusetts, and New York know that California, Massachusetts, and New York prohibit:

- the sale or offering for sale to an ultimate purchaser who is a resident of or doing business in California/Massachusetts/New York, and

- the lease, offering to lease, rent, or offering to rent in California/Massachusetts/ New York

of new 1997 model year Saturn motor vehicles intended primarily for use or registration in California/Massachusetts/New York unless the vehicles are certified as complying with California/Massachusetts/New York emission requirements. New motor vehicles are defined to include any motor vehicle, the title to which has never been transferred to an ultimate purchaser. The ultimate purchaser is defined to be the first person who in good faith purchases the vehicle for purposes other than resale. California, Massachusetts, and New York law also conclusively presumes that a vehicle with less than 7,500 miles has not been transferred to the ultimate purchaser. In other words, a vehicle with less than 7,500 miles that is resold is considered by California, Massachusetts, and New York to be a new vehicle even if it has been sold to an "ultimate purchaser."

1 . Retailer Liability

The importation, delivery, or acquisition of new vehicles which are intended for use, registration, sale, resale, leasing or rental in California/Massachusetts/New York and which do not comply with the California/Massachusetts/New York emission requirements, is prohibited. Under California law, penalties of up to $7,500 per vehicle may be imposed upon the Retailer for violations. Similar penalties may be imposed under Massachusetts and New York law. Therefore, all new 1997 Saturn motor vehicles which are sold, leased, rented, or offered for sale, lease or rent and are intended primarily for use, registration or titling in California/Massachusetts/New York, or for resale to a resident of California/ Massachusetts/New York, must meet California/Massachusetts/New York emission requirements, except where an exemption applies as explained below.

2. Customer Liability

In addition, the California/Massachusetts/New York law applies directly to customers. If a customer is a resident of California/Massachusetts/New York (or operates an established place of business in California/Massachusetts/New York) and purchases (or otherwise acquires) outside California/Massachusetts/New York a new motor vehicle which is intended for use or registration in California/Massachusetts/New York, and if such vehicle does not comply with California/Massachusetts/New York emission requirements, then that customer may be subject to a civil penalty and be required to dispose of the vehicle outside of California/Massachusetts/New York.

3. Exempt Vehicles

California, Massachusetts, and New York permit, under certain circumstances, the sale and registration of vehicles in California/Massachusetts/New York which do not comply with California/Massachusetts/New York emission requirements. California, Massachusetts, and New York law exempts the following: (a) an out- of-state replacement for a California, Massachusetts, or New York registered vehicle which was damaged or became inoperative beyond reasonable repair or was stolen while the resident was on a trip outside of California/Massachusetts/New York, provided that the out-of-state replacement occurs at the time the previously owned vehicle was either damaged or became inoperative or was stolen; (b) a vehicle transferred by inheritance or court decree; (c) a vehicle purchased by a California/Massachusetts/New York resident who resided in another state when the vehicle was purchased.

For California residents, Manufacturers Advisory Correspondence (MAC) 88-01, included as Attachment 2, clarifies this exemption by stating that the vehicle must have been purchased and registered in the other state before it may be registered in California. MAC 88-01 is directed at individuals who purchase a vehicle just before moving to California to take up residence there, and is intended to ensure compliance with California emission requirements.

The following exemptions only apply to California residents: (a) motor vehicles that are used by mosquito abatement, vector control or pest abatement districts or agencies; (b) any authorized emergency vehicle as that term is defined in Section 165(a) through (e) of California's Vehicle Code (shown in Attachment 3); (c) any ambulance used by a private entity under contract with a public agency.

The following exemptions only apply to Massachusetts residents: (a) motor vehicles defined as test vehicles pursuant to 310 CMR 7.00; (b) motor vehicles defined as emergency vehicles pursuant to 310 CMR 7.00; (c) motor vehicles qualifying for exemption under Section 43656 of the California Health and Safety Code.

B. Federal (U.S. EPA Emission Requirements)

Except as explained in Section II. "EPA's Special 1997 Model Year Policy Regarding the Sale of California Certified Vehicles," EPA prohibits the sale, offering for sale or delivery of new 1997 model year Saturn passenger cars intended for primary use, registration or titling outside California, Massachusetts or New York which are not certified to meet Federal emission requirements. Under Federal law a new motor vehicle is defined as any vehicle for which the equitable or legal title has never been transferred to an ultimate purchaser. An ultimate purchaser is defined as the first person who in good faith purchases any new motor vehicle for purposes other than resale. Penalties of up to $25,000 per vehicle may be imposed for violations.

IV. 50-State Certified Vehicles ---------------------------

Saturn does not have a 50-State Emission Certified vehicle for the 1997 model year.

V. Distribution Practice and Related Procedures --------------------------------------------

A. Distribution Practice

To assist Retailers in providing service to customers, Saturn will ship vehicles with either California certified, or Federal certified configurations to Retailers anywhere in the United States. However, for this practice to remain in effect, Retailers who choose to order vehicles not eligible for use in the state or county where the Retailer is located must obtain from the customer a representation that such vehicles will be used, registered, or titled only in the appropriate location. Failure to adhere to the procedures provided could lead to penalties for the Retailer, Saturn, or both, and reversal of this practice.

B. Procedures

1 . Verification of Appropriate Certification

All sales personnel should be instructed to inform customers that only vehicles meeting California emission requirements may be sold or offered for sale to California residents, or primarily used or registered in California. The following 1997 model year Saturn vehicles meet California emission requirements:

- Any vehicle ordered with the YF5 CALIFORNIA EMISSIONS option;

- Any vehicle ordered with the NG1 MASSACHUSETTS/NEW YORK EMISSIONS option; and

Similarly, all sales personnel should be instructed to inform customers that only vehicles meeting Massachusetts/New York emission requirements may be sold or offered for sale to Massachusetts/New York residents, or primarily used or registered in Massachusetts/New York. The following 1997 model year Saturn vehicles meet Massachusetts/New York emission requirements:

- Any vehicle ordered with the NG1 MASSACHUSETTS/NEW YORK EMISSIONS option;

- Any vehicle ordered with the YF5 CALEFORNIA EMISSIONS option;

Also, except as explained in Section H "EPA's Special 1997 Model Year Policy Regarding the Sale of California Certified Vehicles," all sales personnel should be instructed to inform customers that only vehicles meeting Federal emission requirements may be sold or offered for sale to residents outside Massachusetts, New York and California, or primarily used or registered outside Massachusetts, New York and California. The following 1997 model year Saturn vehicles meet Federal emission requirements:

- Any vehicle ordered with FE9 FEDERAL EMISSIONS;

To aid the Retailer and purchasers in determining that all vehicles sold are eligible for use and registration in the state or county where the customer will register, title or use the vehicle, Saturn has placed identification on several labels on the vehicle as well as on the associated vehicle paper work. The Retailer should verify the vehicle's emission system in at least one of the following ways:

a) One of the following statements will appear on the Manufacturer's Suggested Retail Price (MSRP) label:

- CALIFORNIA EMISSIONS

- MASSACHUSETTS/NEW YORK EMISSIONS

See Attachment 4 for a sample MSRP label with an emission statement.

b) The Consumer Information Label (CIL) which appears in the window area near the MSRP contains an Emissions Statement. The statement contains two pieces of information; 1) how the vehicle is certified, and 2) where the vehicle can be primarily used and registered. See Attachment 5 for a sample CIL with an emission statement.

c) The under hood emission control system information label (tune-up label) contains an emission conformity statement. See Attachments 6 and 7 for a sample label and correct conformity statements.

d) The Service Parts Identification (SPI) label will have either YF5, NG1, or FE9, printed on it. The SPI can be found in the on the spare tire cover. See Attachment 8 for a sample SPI label.

e) The same statements listed above for the MSRP will also appear on the Retailer invoice. Saturn Retailer Accounting uses an on-line Vehicle Invoicing System. The Saturn Vehicle Invoice will contain information regarding the emission content on the on-line invoice in the Factory Options area. See Attachment 9 for a sample Retailer invoice.

f) The Manufacturers Statement of Origin (MSO), also known as the Certificate of Origin for a vehicle, contains one of the following Emission Statements:

- CALIFORNIA EMISSIONS

- FEDERAL EMISSIONS

See Attachment 10 for a sample MSO and emission statement.

2. Emission Overrides (NB8 and NC7)

Since there are many reasons for a Retailer to order a vehicle which does not conform to the emission requirements of their state of business, Saturn will allow shipment of these vehicles if the Retailer causes an emission override RPO to be applied to the vehicle order (As explained in last paragraph of this section). Ordering the override RPO is a conscious effort on the part of the Retailer to receive a vehicle which does not conform to the requirements of their state of business. Retailers who cause an override RPO to be applied to an order take full responsibility to assure that the vehicle will ultimately be primarily used and registered in compliance with the law. Saturn recommends that appropriate measures be developed and enforced at the Retailer to assure compliance with all applicable emission requirements. The Affirmation Form which is described in Section V.B.3 must be used in these situations.

California, Massachusetts, or New York Retailers may order FE9 vehicles (Federal emissions). The NB8 emission override will be systematically applied to these orders to acknowledge that the Retailer intended to order a vehicle which may not comply with their state's emission requirements.

California Retailers should be aware that the California Air Resources Board (CARB) receives a quarterly report from GM which summarizes all vehicles equipped with Federal emissions equipment sold/delivered to California Retailers. The CARB will use the information provided in these reports to periodically check with the California Department of Motor Vehicles (DMV) and/or the California Retailer to determine that these vehicles are not ultimately registered in California.

Retailers residing in a state other than California, Massachusetts, or New York may order YF5 vehicles (California emissions) or NG1 vehicles (Massachusetts/New York emissions). The NC7 emission override will be systematically applied to these orders to acknowledge that the Retailer intended to order a vehicle which may not comply with their state's emission requirements.

*IMPORTANT ORDERING INFORMATION

Retailer cannot select (order) NB8/NC7 emission overrides. Emissions are assigned to each generated order (that is, "generated by Saturn") based on the default ship-to facility code for the marketing area. In order to change emissions on an order, the Retailer must "blank out" the "X" in the field for the emission already on the order, and then type "X" in the field for the new emission desired. Since this requires a two step process Saturn assumes a conscious decision on the part of the Retailer and applies the appropriate override (NB8/NC7) on the order systematically. Said assignment is transparent to the Retailer. If this practice proves to be a problem to either the Retailer or Saturn, then Saturn will discontinue the systematic application of the override. This means the Retailer would have to select the appropriate override as well as deleting and adding an emission system.

3. Completion of Affirmation Forms

ATTACHMENT 11 IS AN AFFIRMATION FORM WHICH MUST BE COMIPLETED BY CUSTOMERS WHO CHOOSE TO PURCHASE VEHICLES WHICH ARE NOT ELIGIBLE FOR USE AND REGISTRATION IN THE STATE OR COUNTY IN WHICH THE RETAILER IS LOCATED. THIS FORM MUST BE COMPLETED AND SIGNED AT THE TIME OF SALE OF EACH SUCH NEW VEHICLE. RETAILERS SHOULD RETAIN THE ORIGINAL SIGNED FORM IN THEIR FILES FOR INSPECTION AND MUST SEND A COPY TO THEIR SATURN REGIONAL OFFICE. COMPLETION OF THESE FORM MAY BE USED BY THE RETAILER AND SATURN IN THE EVENT A GOVERNMENT AGENCY CHALLENGES THE SALE OF THIS VEHICLE.

Under the authority of the Clean Air Act (CAA), the EPA may inspect a manufacturer's sales and warranty records to determine compliance with high- altitude requirements. Furthermore, the CAA provides a penalty of up to $25,000 per vehicle for violations of these requirements.

In addition to the signed affirmation form, Retailers who sell vehicles not eligible for use or registration in the state or county where the Retailer is located should maintain full and complete records. The records must indicate that the buyer of such vehicle will use, register or title the vehicle in a state or county for which the vehicle is certified as meeting its emission requirements.

FAILURE TO COMPLETE THESE FORMS MAY RESULT IN REVOCATION OF THE DISTRIBUTION PRACTICE DESCRIBED IN PART V. A. and PART V. B. 2 ABOVE FOR THE PARTICULAR RETAILER INVOLVED. Saturn maintains detailed order histories and copies of Retailer order confirmations for all vehicles equipped with Federal emissions which are shipped to California/Massachusetts/New York Retailers and vice-versa. These records can and will be used to show how the Retailer ordered such vehicles in the event that the appropriate governmental agency conducts an investigation. All concerned Retailer personnel should be advised of this practice by Saturn as well as the following points:

- if the vehicle order has California or Massachusetts/New York emission equipment indicated, then the order confirmation will contain the YF5 or NG1 emission RPO, respectively; and

- if the vehicle order has Federal emissions equipment indicated, then the order confirmation will contain the FE9 emission RPO; and

- the Retailer should check at least one of the following vehicle labels or documents (as discussed previously) for each vehicle that the Retailer receives to confirm that the intended emission equipment was ordered.

* MSRP Label, C]IL, SPI Label, the under hood Tune-Up Label, MSO or Invoice

If any labels or documentation are inconsistent with one another, Saturn should be contacted immediately and the vehicle should not be sold until Saturn has contacted the Retailer with appropriate instructions.

Attachment 12 is a certification form which must be signed by purchasers of vehicles which are exempt from the California emission requirements (see previous discussion of the categories of vehicles exempt from the California emission requirements). This certification form should be completed and signed at the time of sale of each such new vehicle. Retailers should retain the original signed form in their files and send a copy to the Saturn Regional Office.

In lieu of a completed certification form, Retailers may accept a bid specification from the purchaser which contains (1) a statement that the vehicle is to be used for one of the purposes described in the first paragraph of the California Emission Exemption section of this letter, and (2) a statement that the purchaser will indemnify Saturn for any losses sustained by it as a result of a claim or lawsuit in which it is alleged that Saturn has violated any California law or regulation in failing to equip the purchased vehicle with California emissions. Retailers should retain the bid specification in their files and send a copy of it to the Saturn Regional Office.

#### Procedures for the sale of Emission Control Identification (Tune-UP) Labels

The California DMV has implemented a $300 Smog Impact Fee which is required to be paid at the time of initial registration of any vehicle not certified to California emission requirements. The new fee has created a demand for California emission (tune-up) labels by persons who hope to avoid payment of the fee by placing labels on vehicles not certified to California emission requirements.

The CARB conducted a survey which indicated that many Retailers willingly sell California tune-up labels over the parts counter without verifying that such labels are being used appropriately.

California law states that no person other than the manufacturer, or a person authorized by the manufacturer, shall install a vehicle emission control label on any motor vehicle. Persons found in violation of this provision are subject to a fine up to $5,000 and/or imprisonment for up to a year.

The CARB is seeking manufacturer and Retailer assistance in preventing illegal applications of California tune-up labels. Retailers should determine that labels sold over the counter are being used to replace original labels that are defaced or damaged and are being installed only on vehicles certified to California emission requirements. The following procedure must be followed by the Retailer:

1) Check the Service Parts Identification Label referred to previously and shown in Attachment 8 to confirm that the vehicle was certified to California emission requirements. If so, the label will list either YF5, NB7, or NG1 for 1997.

2) Inspect the vehicle to ensure that the old label requires replacement.

3) Sell the label with the requirement that it be installed by the Retailer and that such label is, in fact, installed by the Retailer.

It has been reported that the CARB intends to initiate vigorous enforcement against any Retailer found to be engaging in inappropriate activities involving tune-up labels.

VII. California Registration/Recall Renewal Program ----------------------------------------------

The CARB and California DMV have implemented a Registration/Recall Renewal program which will enable a vehicle owner to renew their vehicle registration only after any pending emission recalls have been performed. In the event that an emissions recall is performed on any Saturn vehicle by your service department, a Proof of Correction form should be completed and presented to the vehicle owner. Extra Proof of Correction forms are available from your Saturn Regional office. The completed form will enable the vehicle owner to register their vehicle when the DMV's computer database issues a "stop" for he registration renewal of their vehicle identification number. All concerned Retailer personnel should be made aware of this program.

VIII. Conclusion ----------

This information has been communicated in the interest of assisting Retailers and customers. Should Saturn become aware that a Retailer or Retailers are not adhering to these practices, Saturn will, consistent with its responsibility to comply with California, Massachusetts, New York and Federal laws, reimpose its former distribution practice whereby vehicles are distributed only to Retailers in a location for which the vehicle is eligible for use or registration.

Questions regarding any of the above information should be directed to the Saturn Regional Office.

Section 27156.3 provides:

"Not withstanding any other provision of law, any motor vehicle of mosquito abatement, vector control, or pest abatement districts or agencies, any authorized emergency vehicle as defined in Section 165, except subdivision (f) thereof, any ambulance used by a private entity under contract with a public agency, is exempt from requirements imposed pursuant to California law and the regulations adopted pursuant thereto for motor vehicle pollution control devices.

General Motors bulletins are intended for use by professional technicians, not a "do-it-yourselfer". They are written to inform those technicians of conditions that may occur on some vehicles, or to provide information that could assist in the proper service of a vehicle. Properly trained technicians have the equipment, tools, safety instructions and know-how to do a job properly and safely. If a condition is described, do not assume that the bulletin applies to your vehicle, or that your vehicle will have that condition. See a General Motors dealer servicing your brand of General Motors vehicle for information on whether your vehicle may benefit from the information.