Agreeing To Disagree, Harley And EPA Reach $15 Million Settlement

In a motorcycle case of agreeing to disagree, Harley-Davidson has reached a settlement with the U.S. Environmental Protection Agency (EPA) over a disputed aftermarket tuning product.

The news comes as Harley-Davidson and other motorcycle manufacturers face a challenging market concerning models with engines 900cc and larger. Aside from bikers using the disputed products, this settlement is of most interest to Wall Street as well as those watching the American motorcycle manufacturer’s financial performance as there is a $12 million penalty, a further $3 million in ‘project fees’ as well as the costs involved with the recall.

At the heart of the news-breaking settlement agreement, the federal agency felt the sale of an aftermarket tuning product used to calibrate motorcycles intended for off-road and closed-course competition could also be used on street bikes. As part of the settlement agreement, the company will no longer sell its competition-only tuner in the U.S. The suit also claims Harley-Davidson manufactured and sold more than 12,000 motorcycles that EPA alleges did not undergo proper EPA certification to ensure they meet federal clean air standards.

The EPA alleged that by selling its Pro Super Tuner through its U.S. dealer network, Harley-Davidson enabled dealers and customers to tamper with motorcycles used on public roads. Obviously, Harley-Davidson disagrees with the EPA's position, noting that the tuner was designed and sold as an after-market, competition-only product used to adapt engine parameters for use with Harley-Davidson after-market equipment.

"This settlement is not an admission of liability but instead represents a good faith compromise with the EPA on areas of law we interpret differently, particularly EPA's assertion that it is illegal for anyone to modify a certified vehicle even if it will be used solely for off-road/closed-course competition," said Ed Moreland, Harley-Davidson's Government Affairs Director. "For more than two decades, we have sold this product under an accepted regulatory approach that permitted the sale of competition-only parts. In our view, it is and was legal to use in race conditions in the U.S."

The American motorcycle manufacturer notes Harley-Davidson is one of many suppliers in the aftermarket performance parts industry which have safeguards in place to educate dealers and customers on the implications of installing Harley-Davidson performance products on their Harley-Davidson motorcycles. This includes clear product labeling of competition-only products and detail on what performance enhancements are considered street legal and for competition-use only, the legal consequences of tampering with emission controls and components, and what enhancements would void the vehicle warranty.

"Concern for our U.S. customers and dealers weighed heavily in reaching this compromise with the EPA," said Moreland. "By settling this matter, we can focus our future attention and resources on product innovation rather than a prolonged legal battle with the EPA."

The settlement of the suit requires Harley-Davidson to stop selling and to buy back and destroy illegal tuning devices that increase air pollution from their motorcycles, and to sell only tuning devices that are certified to meet Clean Air Act emissions standards.  Harley-Davidson will also pay a $12 million civil penalty and spend $3 million on a project to mitigate air pollution through a project to replace conventional woodstoves with cleaner-burning stoves in local communities. 

Harley-Davidson has also agreed to obtain certification from the California Air Resources Board for any tuners it sells in the future.

‘These certifications will demonstrate that new tuners do not cause their motorcycles to exceed their certified emissions limits,’ notes the EPA, ‘Harley-Davidson will also conduct tests on tuner-equipped motorcycles and provide the results to EPA to guarantee that their motorcycles remain in compliance with EPA certification requirements for emissions.’

In response to the above, Harley-Davidson states in a press release, ‘it is and has been committed to meeting or exceeding all emissions requirements for its motorcycles in every market it serves. It will continue to offer a broad range of industry-leading, compliant performance products that enable customization and performance enhancements that meet all emissions requirements and maintain the company's vehicle warranty’.

To this point, Harley-Davidson will continue to sell a performance tuner designed to ensure Harley-Davidson motorcycles retain 50-state and EPA on-road emissions compliance with the settlement having no impact on the company's other performance product offerings.

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