Changes to Transport Canada Notice Requirements for Defects and Non-Compliance: You Will Want to “Recall” These At Some Point

On July 10, 2019, the Government of Canada’s most recent amendments to the Motor Vehicle Safety Regulations (“MVSR”) were published in the Canada Gazette Part II, Vol. 153, No. 14 and came into force by virtue of their publication (“Amendments”). A copy of the Amendments may also be found here.

The Amendments primarily update the notice of defect (i.e., recall) and notice of non-compliance provisions, providing greater clarity and relevant details in the notices. As well, they augment companies’ reporting obligations associated with notices of defect or non-compliance.

According to the Government of Canada, the Amendments are intended to:

  • improve the alignment of motor vehicle defect and non-compliance requirements with those of the National Highway Traffic Safety Administration (NHTSA) in the United States;
  • improve motor vehicle safety by making enhanced vehicle safety information available to the federal Minister of Transport (“Minister”), and to vehicle or equipment owners and retailers; and
  • improve departmental oversight of safety defects and of instances of non-compliance with the Regulations.

So, what has changed exactly?

We have briefly set out some, but not all, of the changes and clarifications contained in the Amendments.

Prescribed Person: It’s Not a Retail Consumer

In addition to the Minister and current owners, companies have historically been required to provide notice to “prescribed persons,” each defined as “the person who obtained the vehicle from the company.” Given that some manufacturers own retail dealerships, the “prescribed person” notice requirement invited some ambiguity as to whether original consumer purchasers (in addition to current owners) had to be notified.

The amended MVSR has clarified matters and now expressly notes that the “prescribed person” is a “person, other than the first retail purchaser, who obtained a vehicle from a company.” (Our emphasis.)

Notices of Defect: The Devil is in the Details

Companies must now include additional detailed information in notices of defect sent to the Minister, current owners, and prescribed persons impacted by any safety defect.

Under s. 15 of the amended MVSR, notices of defect must now include more information about the defect itself (including its causes, the systems or components affected, the operating conditions or other factors that may cause a malfunction, any warning signs that could arise from the defect, precautions to take, etc.), a description that the defect could cause a crash (if applicable), and a more detailed description of the corrective measures to be taken.

Notices of Defect sent to current owners must now include, verbatim, statutorily prescribed statements such as “This is to inform you that your vehicle may contain a defect that could affect the safety of a person.”

While companies may now send notices of defect to current owners and prescribed persons electronically (rather than in hard copy), both paper and electronic notices must include the words “SAFETY”, “RECALL”, “RAPPEL”, and “SÉCURITÉ”, either on the envelope used for the notice or in the subject line of any electronic transmission.

As before, companies must inform current owners and prescribed persons of the safety defect as soon as feasible, but no later than 60 days after notifying the Minister. Certain exceptions allow for information to be given when it becomes available – one example being a description of corrective measures to be taken in order to remedy the defect, where such information is not yet available – to allow for initial notices to go out to impacted persons while the safety defect is investigated further.

Notices of Non-Compliance: Going Solo

Prior to the amendments, the MVSR did not contemplate a separate notice process/format for notices in respect of the non-compliance of vehicles or equipment with MVSR requirements. The amended MVSR now contain entirely new notice of non-compliance requirements that are largely similar to notice of defect.

Unlike notices of defect, a company may be exempt from notifying persons other than the Minister if, following a request by the company, the Minister determines that the non-compliance is inconsequential to safety.

Reporting: Keeping Transport Canada in the Loop

Companies were previously expected to provide an initial report to the Minister within 60 days of first notifying the Minister of a safety defect and to provide the Minister with quarterly reports on the status of, among other things, the number of current owners notified and the status of corrective measures.

While companies are still expected to do this, there are a few minor changes:

  • The initial report to the Minister is to be sent within five working days after the company starts sending notices of defect or non-compliance (as applicable) to current owners and prescribed persons;
  • The content of the initial report has been slightly varied, reflecting the Amendments’ changes to the MVSR such that more detail is now contained in notices of defect;
  • Companies must now, for a period of five years commencing 60 days after a company first gives notice to the Minister, provide the Minister with copies of any subsequent communications sent to more than one current owner or prescribed person; and
  • Companies’ quarterly reports to the Minister are now on a prescribed schedule (i.e., before April 30th for Q1 (January to March), July 30th for Q2 (April to June), October 30th for Q3 (July to September), and January 30th for Q4 (October to December).

In addition to their direct reporting obligations to the Minister, companies must now include in each vehicle’s owner’s manual instructions information on how the owner can contact Transport Canada in order to report a safety concern relating to the vehicle.

Existing Recalls: To Comply or Not to Comply?

It is not entirely clear how the Amendments might impact pre-existing and ongoing recalls that pre-date their coming into force, and the Amendments do not include transitional provisions or other guidance to that effect. An assessment of the retrospectivity of the Amendments falls outside of the scope of this post, and companies may wish to contact Transport Canada for guidance on current enforcement practice with respect to the Amendments.

McCarthy Tétrault’s Transportation and Logistics group has extensive experience assisting Canadian and global clients with issues regarding automotive regulatory compliance, including audits and safety recalls. For more information, please contact Kosta Kalogiros or Brian Lipson.

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