Pep Boys Agrees to Pay $5 Million to Resolve Clean Air Act Violations Claims

May 10, 2010 - WASHINGTON — The Pep Boys – Manny, Moe & Jack - have agreed to pay $5 million in civil penalties and take corrective measures to settle claims that it violated the Clean Air Act by importing and selling motorcycles, recreational vehicles and generators manufactured in China that do not comply with environmental requirements, the U.S. Environmental Protection Agency (EPA) and the U.S. Justice Department announced today. Baja Inc., which supplied the non-compliant vehicles to Pep Boys, is also settling with the U.S.

"Importers of foreign made vehicles and engines must comply with the same Clean Air Act requirements that apply to those selling domestic products, and this settlement demonstrates that we will take strong action to ensure that importers comply with their obligations," said Ignacia S. Moreno, Assistant Attorney General for the Environment and Natural Resources Division. "Under this settlement Pep Boys and Baja will not only pay a civil penalty, but will offset the excess emissions from the vehicles and engines already sold and take steps that go beyond what the law requires to ensure that their future imports and sales meet Clean Air Act standards."

"Equipment imported into the United States that does not meet our pollution control rules is bad for human health and the environment, and unfair to those companies that play by the rules," said Cynthia Giles, Assistant Administrator for Enforcement and Compliance Assurance. "American consumers deserve products that meet standards and protect their health and environment."

This is the largest vehicle and engine importation case brought by the United States to date under the Clean Air Act, both in number of vehicles and engines imported and penalty paid. The complaint, filed simultaneously with the settlement in federal court in the District of Columbia, alleges that Pep Boys and Baja imported and sold at least 241,000 illegal vehicles and engines from 2004 through 2009.

The agreement requires Pep Boys to export or destroy over 1,300 non-compliant vehicles and engines, and to mitigate the adverse environmental effects of equipment already sold to consumers, estimated at 620 tons of excess hydrocarbon and nitrogen oxide emissions, and more than 6,520 tons of excess carbon monoxide emissions. Under the settlement, Pep Boys will implement projects to offset the excess emissions including offering discounted push or electric lawn mowers in exchange for older more polluting gas-powered mowers.

Motorcycles, recreational vehicles and generators emit carbon monoxide, a gas that is poisonous at high levels in the air even to healthy people and is especially dangerous to people with heart disease. These machines also emit hydrocarbons and nitrogen oxides, which contribute to the formation of ground-level ozone, or smog. Exposure to low levels of ozone can cause respiratory problems, and repeated exposure can aggravate pre-existing respiratory diseases.

The complaint alleges that at least 45 vehicle and generator models imported and sold by Pep Boys and Baja were not certified to meet federal emission standards. The complaint also alleges that Pep Boys failed to provide purchasers with the full emission-system warranty required by the Clean Air Act, and imported and sold vehicles and engines without the proper emission control information labels.

The vehicles and engines were built by more than 35 different manufacturers in China. EPA and U.S. Customs & Border Protection discovered the violations through inspections conducted at Pep Boys stores, at U.S. ports, and through a review of importation documents provided to EPA by the company.

The settlement also requires Pep Boys and Baja to offer a free extended emission warranty on certain vehicle and engine models, to reimburse consumers for emission-related repair expenses, and to implement rigorous corporate compliance plans. Baja also agreed to pay a penalty of $25,000, an amount that was reduced substantially in light of Baja’s current financial condition.

The settlement is part of an ongoing effort by EPA to ensure that all imported vehicles and engines comply with Clean Air Act requirements.

Pep Boys is a national automotive aftermarket and service chain with annual sales of $1.9 billion. The company operates more than 580 stores in 35 states and Puerto Rico. In 2008, the company, based in Philadelphia, was the third largest importer of Chinese-made all terrain vehicles (ATVs) in the United States. In 2006 and 2007, Pep Boys was the fourth largest importer of generators.

Baja, based in Phoenix, contracts with Chinese manufacturers to supply ATVs and motorcycles to Pep Boys and others. Baja also manages all after-sale functions, including servicing warranty claims and providing replacement parts for these vehicles.