Chinese ATVs Are Being Scrutizined By U.S. Government

Cindy Skrzycki
New Import Woe for China? All-Terrain Vehicles: Cindy Skrzycki

By Cindy Skrzycki

July 10 (Bloomberg) -- China's exporters, whose shipments of everything from toothpaste to tires have come under fire in the U.S. because of safety concerns, are fending off attacks on yet another product: all-terrain vehicles.

American Honda Motor Co. and other big makers of ATVs are asking Congress to legislate mandatory safety standards, aimed at curtailing a surge of cheaper Chinese models into the U.S. The call by the industry is notable because it has spent two decades trying to avoid mandatory federal regulation.

Some 22 million riders in the U.S. use the four-wheel, low- slung, off-road vehicles for recreation and work. ATVs have long been criticized as unsafe, especially for children, and U.S. regulators had to sue manufacturers before getting even voluntary compliance with standards. Now, in the face of the growing sales of the Chinese vehicles, the makers want Congress to intervene, saying it can move faster than the regulators.

``The Chinese are not subject to the voluntary standards, they do not offer free training, and no one will take ownership of these vehicles in the event they are recalled,'' said Edward Cohen, vice president of government and industry relations for Torrance, California-based Honda North America, a unit of Honda Motor Co. of Japan. He said Honda was the largest manufacturer of ATVs in the U.S.

Consumer advocates, who have tried to ban ATV use by those under 16, say the industry's change in strategy is more about lost market share than safety.

No Surge of Recalls

``The data does not show that there has been a surge of (Chinese) recalls or adverse incidents,'' said Rachel Weintraub, director of product safety and senior counsel for the Consumer Federation of America. ``An ATV-import bill alone does not deal with these broader safety problems.''

Traditional makers of ATVs, such as Honda, American Suzuki Motor Corp., Arctic Cat Inc. and Yamaha Motor Corp. U.S.A., dominated the market until the flood of Chinese imports began in 2004.

Since then, the sale of Chinese models -- which can cost one-third as much as those of its competitors -- has tripled. They reached about 400,000 last year, according to Power Products Marketing, a research firm in Minneapolis that tracks the industry. The rest of the industry suffered a 30,000 drop in sales last year, selling 750,000 ATVs.

``Penetration is huge, and it is targeted to the youth market,'' David Murray, outside counsel for Cypress, California- based Yamaha Motor, said of the Chinese invasion. ``Now they are introducing larger adult-size units that can be purchased over the Internet and delivered to your house.''

Made in U.S.

Except for the Chinese models, Murray said, ATVs are largely manufactured and assembled in the U.S. The industry rang up an estimated $5 billion in sales last year -- based on an average retail price of $5,700 -- according to the Special Vehicle Institute of America, an Irvine, California-based trade group.

Murray said that over the past five years, the industry has done extensive investigative work and given it to the Consumer Product Safety Commission, which issued a recall and a warning in the past two months.

In May, Stateside Powersports, of Bluffton, Indiana, voluntarily recalled about 100 Long Chang Lion ATVs with 90cc engines. Currently, adult models are 90cc and up.

On June 5, the commission warned consumers to stop using the Kazuma Meerkat 50 Youth All-Terrain Vehicle because it lacks front brakes, a parking brake, and an indicator light and can be started in gear.

750 Deaths a Year

The ATVs, designed for children ages 6 to 11, were imported by Kazuma Pacific Inc. of Stafford, Texas, which continues to sell the product, according to the CPSC.

An employee of Stateside Powersports, who would not identify himself, said the company had no comment because the owner was out of town. Kazuma Pacific didn't respond to calls and e-mails seeking comment.

The CPSC said there are an estimated 750 deaths and 136,000 injuries from ATV-related accidents each year. Over the Memorial Day weekend, 18 deaths were reported, including five children under 16.

The traditional makers of ATVs operate under a voluntary design and manufacturing standard that grew out of safety concerns that emerged after the vehicles started becoming popular in the early 1980s.

In 1987, the CPSC sued the five ATV companies in business at the time, alleging the product was hazardous. The next year, the companies signed a consent decree that stopped distribution of three-wheel ATVs that were popular. It also restricted marketing and sales to children under 16, and provided for labeling, rider training and development of the voluntary standard.

Skirting the Standards

When the consent decrees expired in 1998, each of the companies agreed to continue following the voluntary safety provisions. ``New entrant'' importers don't have to follow the same standards.

Last year, the agency proposed a rule that it says is ``more robust'' than the package the industry is shopping around Congress. It includes making the voluntary standards mandatory, as well as establishing new speed limits on youth-model ATVs. It would also require safety warnings and free training by manufacturers, which most companies now offer with monetary incentives attached.

ATV manufacturers say the CPSC takes too long to act, even when it has all three members. Now it has only two and thus lacks a quorum to vote on regulations.

Industry officials said they hope to get legislation introduced in the Senate before the August recess to require all manufacturers to comply with the voluntary standards. They say they have been working with Democratic Senator Mark Pryor of Arkansas and Republican Ted Stevens of Alaska, and are looking for sponsors in the House.

Overplaying China Card

The consumer federation's Weintraub said the industry is overplaying the China card because serious safety issues existed long before imports were a concern. There have been plenty of voluntary recalls by non-Chinese companies, she said, as well as accidents due to the bigger, faster, less stable vehicles on the market.

Weintraub said the standards being pushed by the CPSC and the industry are inadequate because they would still allow children on ATVs that are dangerous because of their size and speed.

``Imagine a 6-year-old operating a vehicle that goes up to 10 miles per hour,'' said Weintraub.

(Cindy Skrzycki is a regulatory columnist for Bloomberg News. She can reached at [email protected] .)

To contact the writer of this column: Cindy Skrzycki at [email protected] .