CARB approves out-of-state sales options to California dealers navigating Omnibus rule

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Updated Jan 5, 2024
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California truck dealers received a lifeline of sorts Wednesday, when the state's Air Resources Board (CARB) released two sets of guidance documents for OEMs and their dealer partners regarding out-of-state equipment sales under its Omnibus regulation.

The first pair of documents offer clarification regarding the ability of truck dealers in the state of California to sell equipment to customers out of the state, and the legal implications California dealers could face if selling model year 2024 internal combustion engines (ICE) that are non-compliant under the Omnibus regulation in California into other states.

The Truck and Engine Manufacturers Association (EMA) wrote to CARB on Dec. 15 asking if California dealers would be punished for selling engines that do not meet Omnibus regulations to customers who will use, register or take delivery of the equipment in another state.

Under the Omnibus mandate, manufacturers have until March 31, 2024, to use legacy model year 2023 engines in their production lines (which CARB reported directly to Trucks, Parts, Service earlier Wednesday).* Once those units are sold, OEM and their dealer partners will be required to sell only compliant low-NOx ICEs or engines receiving compliance through credits earned by manufacturers to customers within California through 2026.

[RELATED: California truck dealers stressed by state's new regulations]

The regulation has been a major sticking point for dealer operations, as OEMs have received certifications for Omnibus-compliant model year 2024 ICEs but have not yet put them into production, leaving dealers in the state without an avenue to sell new diesel equipment beginning in April.

As such, dealers throughout California had pushed their OEMs and regulators for guidance regarding out of state viability, as many dealers in California have customers who operate or are domiciled outside of the state and thus are not required to purchase Omnibus compliant ICEs in new 2024 trucks.

As recently as last month, confusion around this sales tactic still permeated the state.

“We have a large portion of customers who are engaged in interstate commerce,” Doug Howard, president at California Truck Centers, told TPS in December. “Initially, we were told those customers could buy non-California compliant engines because they will be titling them and using them elsewhere, but just in the last two weeks we’ve learned that those trucks cannot even enter the state of California to come to a dealership. Even if they’re going to be titled and sold into another state.”

According to Wednesday's guidance documents, it appears that is not true.

Howard's business and other California dealers will be able to sell non-Omnibus compliant engines into other states under the following conditions, per CARB:

  • A California dealer sells a non-California product to a customer out of state and never takes possession of the product in California;
  • A California dealer takes possession of a non-California product in California and either transports or drives it for delivery to an out of state customer (who never takes possession of it in California); and
  • A California dealer takes possession of a non-California product in California and sells it to an out of state customer who themselves takes possession of it in California and directly drives or transports it out of state. 

CARB also reported it is still evaluating the legality of a fourth option, in which a dealer takes possession of a truck in the state and sells it to an out of state customer who picks it up in the state (identical to option 3 above) but then puts the product into service in California before leaving the state.

Other second set of documents released by CARB Wednesday addressed enforcement discretion for the state's Advanced Clean Fleets and Omnibus regulations. Regarding Advanced Clean Fleets, EMA had requested discretion regarding enforcements due to provisions within the regulation that EMA stated were "holding up fleet orders since both OEMs and fleets want to know they are compliant in California when they sell and buy the engines that may travel to the state."

In reply, CARB stated it "will provide certain enforcement discretion for model years 2024 and 2025 for OEMs and their customer fleets that buy and sell engines outside California and then operate them in California. This enforcement discretion applies only to those fleets or selling OEMs in which the 2024 and 2025 engines operating in California are sold outside of California and either California-certified or 50 State certified. CARB has determined that initiating enforcement actions against an out-of-state fleet, or selling OEMs, based on non-compliance with the title 13, section 2015(r) for model years 2024 and 2025 may not be warranted based on the specific and fluctuating circumstances of engine sales."

[RELATED: Truck orders down as 2023 comes to close]

The final CARB document was in response to EMA concerns regarding the Omnibus regulation, and aforementioned dealer sales of non-compliant ICEs to customers inside and outside of the state. CARB states in the document its Omnibus regulation's legacy engine provisions will allow OEMs and their dealer partners to sell some sales flexibilities within the state, and says its regulation "'does not require [averaging, banking, trading] ABT offsets nor legacy engine sales limits for engines sold in states that have not adopted the Omnibus Regulation.'"

The document also addresses fears presented by EMA in which OEMs and their dealers could sell non-compliant engines to customers outside the state in a legal manner, only for those units to later "leak into the state" through customer usage or sales. CARB states it has created a Manufacturers Advisory Correspondence (MAC) to address compliance so OEMs can work with the state to ensure they continue to meet their regulatory requirements and not be subject to enforcement or punishment due to actions post sales. 

CARB also acknowledged the uniqueness of its new reality, requiring engines to meet or exceed standards not in use across the nation. 

"CARB recognizes that its adoption of the Omnibus regulation has resulted in the promulgation of emission standards for California medium- and heavy-duty vehicles and engines that are distinct from, and more stringent than, the corresponding federal emissions standards, which constitutes a change from the preexisting regulatory program for medium- and heavy-duty vehicles and engines, wherein California and federal heavy-duty engine and vehicle standards have been essentially aligned for over two decades, which allowed engine manufacturers to produce and sell a single engine throughout the nation. It also appears that difference between California and federal emissions standards may be contributing to the above-mentioned concerns."

As such, CARB states it has determined initiating enforcement actions to EMA and the other signatory parties to the Clean Truck Partnership agreement signed in July based on the "aforementioned scenarios affecting sales or labeling of 50-state legacy engines to customers registering those vehicles outside of California is not warranted."

The state does note, however, that pullback of enforcement will extend to only sales of model year 2024 engines.

* This article was amended on Jan. 5, 2024, to reflect the March 31 deadline for model year 2023 engines refers to their production, not retail sale. 

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