Before ADAMS, GIBBONS and MAX ROSENN, Circuit Judges.
In this proceeding petitioner Wagner Electric Corporation seeks judicial review of an order dated August 28, 1971 of the National Highway Traffic Safety Administration which amended Federal Motor Vehicle Safety Standard No. 108 governing the performance of turn signal and hazard warning flashers. This court has jurisdiction by virtue of § 105(a)(1) of the National Traffic and Motor Vehicle Safety Act of 1966, 15 U.S.C. § 1394(a)(1). The amending order was adopted by the Administrator in an informal rulemaking proceeding. The petitioner concedes that informal rulemaking pursuant to Section 4 of the Administrative Procedure Act, 5 U.S.C. § 553, rather than adjudication or formal rulemaking pursuant to Sections 7 and 8 of that Act, 5 U.S.C. §§ 554, 556, 557, was permissible. See Automotive Parts & Accessories Association v. Boyd, 132 U.S.App.D.C. 200, 407 F.2d 330 (D.C.Cir. 1968); 49 C.F.R. § 553.15. Petitioner contends, however, (1) that the notice of proposed rulemaking, required by § 4(b) of the Administrative Procedure Act, 5 U.S.C. § 553(b), was materially defective and (2) that the Administrator proceeded on the basis of a fundamental misconception as to the meaning of the National Traffic and Motor Vehicle Safety Act of 1966. 15 U.S.C. § 1381 et seq.
The Administrator has filed with this court the agency record as required by 15 U.S.C. § 1394(a) and 28 U.S.C. § 2112(b). That record discloses that the initial Safety Standard No. 108, a comprehensive regulation governing lamps, reflective devices and associated equipment, was first published in the Federal Register on February 3, 1967. 32 Fed.Reg. 2408. It incorporated by reference SAE Standard J 590b, Automotive Turn Signal Flashers, and SAE Recommended Practice J 945, Vehicular Hazard Warning Signal Flashers, originally promulgated by the Lighting Committee of the Society of Automotive Engineers (SAE). These two subsections of Standard 108 governed those devices which produce the familiar on-off light cycle providing notice of impending turns or warning of a disabled vehicle. The SAE standards had been promulgated originally for industry use. Their incorporation by reference continued unchanged until the order now under review.*fn1 The SAE Standards embrace among other matters performance criteria for starting time, voltage drop, flash rate and percent of on-time, and durability. Starting time is the time within which the flasher must begin functioning after a signal is operated. Voltage drop affects the current reaching the lamps and hence the intensity of illumination. Flash rate and percent of on-time affect the eyes' perception of the signal. Durability affects the length of time the flasher is expected to operate without failure.
In addition to these performance criteria the SAE Standards include provisions defining procedures for the selection and testing of samples to determine the product's conformance to the criteria. Those procedures require the random selection of twenty sample flashers from a group of fifty flashers representative of those regularly manufactured and marketed. These twenty are tested for conformity to all performance criteria except durability. Seventeen of the twenty must pass. If seventeen of the twenty pass, another random selection of twenty is made from the remaining thirty and these are tested for certain performance requirements and also for durability. Again seventeen of the twenty must pass. If in both groups of tests permissible failure rates are not exceeded the manufacturer's flashers are considered to comply with the performance requirements.
In January 1970 a notice of proposed rulemaking was published in the Federal Register, 35 Fed.Reg. 106. This notice provides in part:
"The Federal Highway Administrator proposes amending Standard No. 108 to include additional requirements; to amend references to certain SAE Standards updated by the SAE since 1967; and to provide classification of several existing requirements. The proposed amendments are discussed below...."
Then follow paragraphs (a) through (y) in which the proposed amendments are discussed. None of these paragraphs refer to any proposed changes in the performance criteria for flashers or in the procedures for testing samples to determine a product's conformance to the criteria. Indeed the January 1970 notice specifically makes reference to SAE Standard J 590(b) and SAE Recommended Practice J 945. 35 Fed.Reg. at 109.
On October 31, 1970 the Administrator published in the Federal Register a series of amendments to Standard 108 based upon the January 1970 notice of proposed rulemaking. 35 Fed.Reg. 16840. See 5 U.S.C. § 553(e). Among those amendments is the following:
"(n) Combination turn signals and hazard warning signal flashers will meet the requirements applicable to each, when tested in sequence. Manufacturers of turn signals and hazard warning signal flashers have commented that economic factors and the current state of the art in manufacturing lamps preclude a quality level that would totally eliminate occasional random failures. This condition is reflected in the language in Standard No. 108 that lighting equipment 'shall be designed to conform' to the stated requirements. The SAE recognizes the problem by specifying an allowable percentage of failures in SAE Standards J 590b, 'Automotive Turn Signal Flasher,' and J 945 'Vehicular Hazard Warning Signal Flasher.' Such a provision is inappropriate, however, for regulatory purposes. It is doubtful that specific failure allowance in a standard would correspond with the statutory mandate that 'No person shall manufacture for sale... any motor vehicle or item of motor vehicle equipment... unless it is in conformity with [any applicable] standard.' (15 U.S.C. § 1397(a)(1)). From a practical standpoint, such a provision would tend to make the requirement unenforceable except in extreme cases, since failures within a single lot are statistically inconclusive in determining the extent of failures in overall production. Therefore the sampling provisions of the two SAE Standards, orginally incorporated by reference in Standard 108, are expressly omitted from the standard in this issuance. The omission should not cause hardship, since the 'designed to conform' language has been retained." (emphasis supplied, bracketed material in original).
The effect of this rulemaking was to retain the SAE performance criteria but to omit the sampling provisions and substitute a requirement of 100 percent compliance. The Administrator's statutory reference, 15 U.S.C. § 1397(a)(1), provides:
(1) manufacture for sale... any... item of motor vehicle equipment manufactured on or after the date any applicable Federal motor vehicle safety standard takes effect under this subchapter unless it is conformity with such standard...."
The petitioner objected to the change on the ground that the notice of proposed rulemaking published in January 1970 contained no reference to omitting the sampling procedures of the SAE standards. It requested that the quoted amendment to Standard 108 be withdrawn and a new rulemaking proceeding be commenced on proper notice. In response the Administrator on February 3, 1971 published an order, 36 Fed.Reg. 1896, which in relevant part provided:
"Standard 108 was amended without notice to omit sampling provisions in order to bring the standard into conformity with the National Traffic and Motor Vehicle Safety Act of 1966, which requires that all items conform to applicable standards. Therefore the safety standards should not specify sampling provisions or failure rates. It is the manufacturer's responsibility to institute a test program that is sufficient to legally constitute due care, on a continuing basis, to insure that all products manufactured after the effective date of a standard meet the applicable requirements. However, in response to the procedural objection that the change is important enough to merit notice and opportunity to comment, Wagner's petition is granted and paragraphs S 4.4.2 and Tables I and III are being amended to strike the language precluding sampling provisions. At the same time, this agency is publishing today a notice... proposing omission of sampling provisions as of January 1, 1972, the date when this omission would otherwise have been effective."
The notice, published the same day, 36 Fed.Reg. 1913, states that in response to an objection by an interested manufacturer the amendment which omitted the sampling and permissible failure rates was not included in the notice and that the amendment was withdrawn and a new notice published. The new notice proposes that Standard 108 be amended to incorporate by reference SAE J 590(b) and J 945, "omitting sampling provisions." The new notice makes no reference to any other change; in particular it makes no reference to a change in the performance criteria for flashers. Possibly as an intimation of things to come the notice states:
"The agency does not, however, accept the proposition that every change in detail made from a notice of proposed rule making must be resubmitted as a proposal before a final rule may be issued. In this area of complex technical rule making, such a practice would greatly increase the number of notices that would have to be issued, without corresponding public benefit. It does not appear to be mandated by the Administrative Procedure Act's provision (5 U.S.C. § 553) that notices of proposed rule making shall include 'either the terms of [sic] substance of the proposed rule or a description of the subjects and issues involved.'"
In response to the new notice the agency received comments from many segments of the industry: automobile manufacturers, original equipment manufacturers, and replacement parts manufacturers. Roughly these comments break down into those few suggesting that elimination of the permissible failure rate testing was feasible if flasher equipment other than the thermal type now in use were adopted, those suggesting that the SAE specification, including the permissible failure rate, was satisfactory, and those approving the deletion of the permissible failure rate but only if the performance criteria were substantially downgraded. Some comments suggest that transistorized flasher units could be substituted for the thermal flashers generally in use, but at an increased cost to the consumer and with a substantial manufacturing start up delay.
On April 2, 1971 the petitioner responded to the new notice, pointing out that the SAE specifications had been developed as an integrated whole. It urged that the elimination of the sampling procedures should not be undertaken without a reconsideration of the performance and durability criteria which were fixed with the sampling procedures in mind. It urged that if the agency insisted upon elimination of the sampling procedures it issue a new notice of proposed rulemaking appropriately enlarging the scope of the proceeding so that all relevant matters could be considered, including changes in the performance criteria.
The agency did not issue a new notice. It did, however, submit the February 3, 1971 notice to its own Office of Operating Systems. On June 7, 1971 the Director of that Office returned the amendment to the ...