Lincoln Plaza
Auditorium, First Floor
400 "P" Street
Sacramento, CA

May 13, 1988
9:00 a.m.



88-7-1 Status Report on Transit Bus Smoke Inspections 001

88-7-2 Consideration of a Petition to Amend the Recall 046
Bond and Insurance Requirements of the New Direct
Import Vehicle Certification Regulations.

88-7-3 Appointment of Members to Fill Vacancies on Research
Screening Committee.

Other Business

a. Closed Session
Personnel (as authorized by State Agency Open Meeting Act,
Govt. Code Sec. 11126(a).)
b. Research Proposals
c. Delegations to Executive Officer

ITEM NO. 88-7-2

Public Hearing to Consider Petition to Amend Regulations
Regarding the Recall Bond and Insurance Requirements of the
Certification Procedures for New Direct Import Vehicles.


K&E International Auto Consultants has petitioned the Board to
end the recall bond and insurance requirements of the
certification procedures for new direct import vehicles. The
certification procedures require that the modifier post a $1,000
surety bond or deposit for each certified vehicle prior to sale
in California. In lieu of the bond or deposit, the modifier can
demonstrate that it has obtained recall liability insurance. The
petitioner requests that the certification procedures be amended
on an emergency basis to decrease the minimum amount of recall
insurance which must be obtained for each certified vehicle to be
exempt from the recall bond or deposit requirement. Currently
the regulations require a minimum of $3,000 of recall liability
insurance per vehicle. The petitioner requests that this be
decreased to $1,000. The petitioner also generally requests that
the recall bond and insurance requirements be modified to reflect
the current bond and insurance markets.

The liability limit for the optional recall insurance was
established based on the cost of a worst-case recall. Thus, any
decrease in the amount of recall insurance would significantly
limit the scope of a recall for a modifier without substantial
financial reserves.

Staff does not believe emergency regulations are appropriate or
necessary. K&E has a viable means of complying with the current
regulations by making a deposit of $1,000 per certified vehicle.
If the Board adopts amendments to the recall bond and insurance
requirements at some later date, petitioner can substitute bonds
or insurance for the deposits, as appropriate, and the deposits
would be refunded.

Staff has been working with K&E and the Department of Insurance
to identify acceptable alternatives. If and when acceptable
alternatives are identified, staff will propose regulatory action
to implement alternatives for consideration by the Board.


Staff recommends that the Board deny the petition. However, with
respect to K&E's more general request to amend the specifications
for recall bonds or insurance be consistent with what is
available on the market, staff suggests that additional
investigation is necessary to identify commercially available
alternatives which will provide a level of protection equivalent
to that expected from the existing regulations.