WASHINGTON -- The Obama administration wants to increase to nine months the time allowed for crushing or shredding a traded-in vehicle under the cash-for-clunkers program, citing the burden placed on disposal facilities by the unexpected popularity of last summer's program.
Current rules give disposal sites six months to crush or shred trade-ins. That means the disposal deadline for the first vehicles sold under the program would be Feb. 1.
The U.S. Transportation Department's rule proposal, published Friday, Nov. 27, notes that almost 700,000 cars were traded in, nearly triple the 250,000 expected when the original Consumer Assistance to Recycle and Save rules were written.
The proposal also says the additional three months would give disposal facilities more time to sell used parts from the trade-ins, thus increasing their revenue and making more parts available to consumers.
“Agency officials learned that some disposal facilities were experiencing substantial difficulty processing all of the CARS trade-in vehicles that were purchased from dealers or salvage auctions,” the proposal says.
Disposal facilities also told the federal government that “the processing problems made it difficult for facilities to effectively inventory and sell parts from these vehicles,” the rule proposal says.
After a 20-day comment period, the final rule is likely to be issued by Feb. 1, the proposal says.
Dealers were allowed to file for rebates under the $3 billion cash-for-clunkers program between July 27 and Aug. 25.
In proposing an increase in the disposal period, the Transportation Department rejected a request from disposal facilities to double the interval to a year. The federal agency expressed concern that a yearlong disposal period would heighten the risk of fraud.
While rules required dealers to disable vehicles' engines within seven days of receipt of payment for the transaction, “the risk of a vehicle returning to the highway is not fully eliminated until the vehicle is crushed or shredded,” the proposal says.
Under current rules, disposal facilities also have seven days to flag trade-ins in the National Motor Vehicle Title Information System as scrap vehicles.
The department also expressed concern that allowing one-year disposal would create an additional administrative burden on the government to ensure compliance with the rules.
“The 90 additional days strikes an appropriate balance,” the proposal says.
Today the Automotive Recyclers Association agreed, despite having pushed for the one-year interval.
“While we were seeking additional time, we understand there are some other factors involved,” said Michael Wilson, executive vice president of the 4,500-member group. “We believe this is a good compromise, one that will help the vast majority of our members in processing these vehicles.”
One recycler in Los Angeles has 6,000 clunkers trade-ins on his lot, and another in Minnesota has 5,000 vehicles, Wilson said.
Recyclers and scrap processors pay dealers for trade-ins. Once the disposal facilities receive the vehicle, the six-month scrappage deadline kicks in, Wilson said.
The proposal says that if the Transportation Department were to extend the deadline before Feb. 1, all trade-ins would be subject to the same disposal period.
During the monthlong cash-for-clunkers program, dealers submitted 681,426 applications for $2.87 billion in rebates.
On Sept. 25, Transportation Secretary Ray LaHood said the department had approved all “eligible and complete” claims, leaving only 2 percent of all applications for dealers to revise and resubmit.
Department employees were going to work with dealers to help them correct and refile properly, LaHood said.
As of Nov. 2, the most recent date for which Transportation data are available, 678,024 vouchers for $2.85 billion had been paid or approved.
That leaves 3,402 dealer vouchers that have been filed but not yet paid or approved. Claims are for $3,500 or $4,500 per vehicle.