The provisions of this section allow vessel manufacturers to produce a certain number of vessels with installed fuel tanks that do not meet the diurnal emission standards specified in §1045.112(d) and 40 CFR 1060.105. The provisions of this section do not apply for portable marine fuel tanks, personal watercraft, or outboard engines with under-cowl fuel tanks. Vessels you produce under this section are exempt from the prohibitions in 40 CFR 1068.101(a)(1) with respect to diurnal emissions, subject to the provisions of this section.

(a) General. If you are a vessel manufacturer, you may introduce into U.S. commerce limited numbers of exempted vessels under this section. You may use the exemptions in this section only if you have primary responsibility for designing and manufacturing vessels and your manufacturing procedures include installing some engines in these vessels. Consider all U.S.-directed vessel sales in showing that you meet the requirements of this section, including those from any parent or subsidiary companies and those from any other companies you license to produce vessels for you. These provisions are available for vessels you produce during the periods specified in paragraph (b) of this section.

(b) Allowances. You may choose one of the following options to produce exempted vessels under this section:

(1) Percent-of-production allowances. You may produce up to 50 percent of your vessels from July 31, 2011 through July 31, 2012 that are exempt from the diurnal emission standards. Calculate this percentage based on your total U.S.-directed production volume.

(2) Small-volume allowances. Small-volume vessel manufacturers may produce up to 1200 vessels from July 31, 2011 through July 31, 2013 that are exempt from the diurnal emission standards.

(c) Vessel labeling. You must add a permanent label, written legibly in English, to a readily visible part of each exempted vessel you produce under this section. You may combine this with the label required under 40 CFR 1060.135. This label must include at least the following items:

(1) The label heading “EMISSION CONTROL INFORMATION”.

(2) Your corporate name and trademark.

(3) The vessel's date of manufacture.

(4) The following statement: “THIS VESSEL IS EXEMPT FROM DIURNAL STANDARDS UNDER 40 CFR 1045.625.”

(d) Notification and reporting. You must notify us of your intent to use the provisions of this section and send us an annual report to verify that you are not exceeding the allowances, as follows:

(1) Before you produce vessels that are exempt under this section, send the Designated Compliance Officer a written notice of your intent with the following information:

(i) Identify your company's name and address, and your parent company's name and address, if applicable.

(ii) Identify the name, e-mail address, and phone number of a person to contact for further information.

(iii) Identify the name and address of the company you expect to produce the fuel tanks you will be using for the vessels exempted under this section.

(iv) If you qualify as a small-volume vessel manufacturer, state whether you will comply under paragraph (b)(1) or (b)(2) of this section.

(v) Include your production figures for the period from July 31, 2009 through July 31, 2010, including figures broken down by model.

(2) Send the Designated Compliance Officer a written report by December 31, 2012. If you are a small-volume manufacturer using the provisions of paragraph (b)(2) of this section to produce exempted vessels after July 31, 2012, send us a second report by December 31, 2013. These reports must include the total number of vessels and the number of exempted vessels you sold in the preceding year for each model, based on actual U.S.-directed production information. You may omit the count of compliant vessels if you include in the report a statement that you are not using the percent-of-production allowances in paragraph (b)(1) of this section. If you initially comply using the percent-of-production allowances in paragraph (b)(1) of this section, you may not use the small-volume allowances in paragraph (b)(2) of this section for later production.

(3) If you send your initial notification under paragraph (d)(1) of this section after the specified deadline, we may approve your use of allowances under this section. In your request, describe why you were unable to meet the deadline. We will not approve your request if the delay could have been avoided with reasonable care and discretion.

(e) Recordkeeping. Keep the following records of all exempted vessels you produce under this section:

(1) The model number, serial number, and the date of manufacture for each vessel.

(2) The total number or percentage of exempted vessels as described in paragraph (b) of this section and all documentation supporting your calculation.

(3) The notifications and reports we require under paragraph (d) of this section.

(f) Provisions for fuel tank manufacturers. As a fuel tank manufacturer, you may produce fuel tanks as needed for vessel manufacturers under this section without our prior approval. These fuel tanks are exempt from the diurnal emission standards. Note that this diurnal exemption does not affect the requirements related to permeation emissions specified in §1045.112. You must have written assurance from vessel manufacturers that they need a certain number of exempted fuel tanks under this section. You must keep records of the number of exempted fuel tanks you sell to each vessel manufacturer.

(g) Enforcement. Producing more exempted vessels than we allow under this section violates the prohibitions in 40 CFR 1068.101(a)(1). Vessel manufacturers and fuel tank manufacturers must keep the records we require under this section until at least December 31, 2017 and give them to us if we ask for them (see 40 CFR 1068.101(a)(2)).