Part I Navigating NHTSA: What Automotive Leaders Need to Know

Before the Recall: Defect Determinations and NHTSA Investigations

Alert

Over the past three years, the National Highway Traffic Safety Administration (“NHTSA”) has received thousands of recalls. In 2024 alone, more that 27 million vehicles were recalled.  Yet the vast majority of these recalls were initiated with little to no involvement from NHTSA. So how do so many recalls end up before the government agency? And what leads to a recall in the first instance? 

Before a recall filing occurs, the first step in the process is typically a determination by a manufacturer that a defect or noncompliance exists in vehicles or equipment they produced. In other instances, a recall occurs after NHTSA has opened an investigation, but in most cases manufacturers determine on their own that a defect or noncompliance exists such that a recall is necessary.

To that end, the National Traffic and Motor Vehicle Safety Act (the “Safety Act”) places an affirmative duty on vehicle manufacturers and manufacturers of tires, child seats, motorcycle helmets, and other aftermarket equipment to make decisions on whether their products contain a safety related defect or noncompliance based on available information. The best practice is to employ a process for screening relevant data such as warranty claims, consumer complaints, and field reports to determine whether further internal investigation is warranted. Under the Safety Act, a defect in original equipment is deemed a defect in the vehicle in which it was installed requiring a recall by the vehicle manufacturer. If the manufacturer is aware that a defect or noncompliance exists and does not file a recall, the manufacturer could be liable for civil penalties. 

NHTSA’s regulations require manufacturers to file a recall within five business days of when the manufacturer knew or should have known about the defect or noncompliance.  In practice, this means that a manufacturer has five business days to file a recall with NHTSA after the decisionmakers for the manufacturer decide that a defect or noncompliance exists.  Once available information suggests that a defect or noncompliance exists, however, a manufacturer cannot decline to make a defect or noncompliance determination

What is a defect under the Safety Act?

Manufacturers are only required to file a recall with NHTSA for defects that are safety-related. A defect is safety-related if it leads to an unreasonable risk of accidents occurring because of the design, construction, or performance of a motor vehicle or an unreasonable risk of death or injury in an accident. Defects include the non-operational safety of motor vehicles and equipment.  NHTSA will sometimes look to peer vehicles (either vehicles of the same manufacturer or vehicles of the same type from a competing manufacturer) to determine whether the issue is occurring at a higher than normal frequency thus exhibiting a defect trend. There is no threshold number of incidents for a performance or manufacturing issue to be considered a defect, but an issue occurring at a de minimus frequency is not considered a defect. Issues with more severe safety consequences require fewer occurrences in the field to be considered a defect. Conversely, issues for which the safety consequence is less severe might occur at a higher frequency without being considered a defect.

How and when do defect and compliance determinations occur?

In short, it depends. Were there changes in the manufacturing process because of problems during production of a vehicle or item of equipment? Is the manufacturer receiving a higher-than-normal number of warranty claims or customer complaints regarding a particular product? Was a particular component in the vehicle not manufactured to the correct specifications? Were there failures during lot acceptance testing? These are all situations that could trigger a manufacturer to review and investigate whether a defect or noncompliance exists.

When does NHTSA open an investigation?

NHTSA reviews consumer complaints, manufacturer communications, death and injury claims, aggregate data on property damage claims, and warranty claims submitted by manufacturers, manufacturer field reports, recalls in foreign countries, and other information such as media reports when identifying data trends. NHTSA scores potential defects based on the frequency, severity, and detectability of the issue using the Agency’s internal risk matrices when determining whether to open an investigation. NHTSA has developed separate risk matrices to address specific types of safety risks or specific components. When NHTSA decides to open an investigation, it will publish a document called an “opening resume” that briefly describes the issue under investigation and the data on which NHTSA relied in opening the investigation. 

As part of NHTSA’s compliance program, the agency conducts compliance tests on vehicles and equipment designed to cover a comprehensive segment of the market. If a compliance test results in a failure that NHTSA believes indicates a broader noncompliance, the agency may open an investigation. Unlike defect investigations, compliance investigations typically are not made public.

Is there a time limit on the requirement to conduct a recall?

No, there is no statute of limitations regarding the requirement to notify NHTSA and consumers of a defect or noncompliance. However, there are certain circumstances under which NHTSA may decline to investigate failures in older vehicles or equipment. For equipment labeled with an expiration date, the expiration date does not legally excuse the manufacturer from conducting the recall, but it may be grounds for NHTSA to decline to investigate any issues that arise after the product expires. And issues appearing late in the life of vehicles, such as corrosion, that are attributed to aging and wear and tear are not considered defects. 

In Part II of our Client Alert series on NHTSA’s recall process, we will discuss recall filing and customer notifications.

If you have questions about the recall process or how it applies to your business, please contact Tom Healy or another member of Honigman’s Regulatory Practice Group. Learn more about Honigman's Automotive Regulatory & Compliance Services here.