The ATGATT Rat: February 2009

Dear Honda Dealer:

On August 14, 2008, Congress enacted the Consumer Product Safety Improvement Act of 2008 (CPSIA or Act). The Act was primarily in reaction to the recent influx of lead-tainted toys that resulted in numerous recalls and significant public outcry for more stringent government standards.

The CPSIA requires manufacturers of “Children’s Products,” defined as those products designed or intended primarily for children 12 years of age or younger, to meet increasingly stringent lead paint and lead content standards and to certify, based on third party testing, that the products meet the Act’s requirements. Products that fail to comply with the prescribed lead limits are considered a “banned hazardous substance” and cannot be sold or offered for sale. Violation of the prescribed limits (initial limits detailed below) can result in severe civil and criminal penalties.

Ban of lead in paint over 600ppm (parts per million)

Honda’s paint contains little or no lead and easily complies with even the most stringent requirement.

Ban of lead in substrate material over 600ppm

Honda is still in process of completing tests on all of the materials used in our small ATV’s and motorcycles; however, some alloy materials commonly used to manufacture motor vehicles may inherently contain levels of lead that are (or ultimately will be) above the current, or future more aggressive, limits set forth in the Act.

Honda and other members of the Motorcycle Industry Council and Specialty Vehicle Institute of America, which face the same issues as Honda, are actively working to exempt the alloy parts for small motorcycles and ATVs from the terms of the Act. The lead embedded in the alloys used in these products is not transferred through typical use of these products. Our shared belief is that Congress never intended the lead content provisions of the Act, which originally were aimed at toys that can be mouthed by children, to be applicable to small ATVs and motorcycles.

Even more concerning is that the Consumer Product Safety Commission (CPSC), the agency charged with enforcing the Act, recently ruled that Congress intended the lead content regulations to be retroactive. This means that, regardless of its date of manufacture or the fact that it complied with all applicable laws and regulations at the date of manufacture, any children’s product manufactured with even a single component part containing lead in excess of the limits will no longer be legal for sale as of February 10, 2009. The economic impact of the CPSC’s ruling will be substantial for both dealers and manufacturers in an already weakened economy.

What all of this means to you is that – without Congressional or CPSC action -- you will not be able to sell new or used TRX 90, CRF 50F, CRF 70F, or CRF 80F models after February 10, 2009, stranding your investment in your new and used inventory. In fact, under the terms of the Act you cannot even display these models on your showroom floor, distribute brochures, or advertise them on your website.

**REVIEW IMMEDIATELY**

As Honda and others continue to work towards a satisfactory resolution to this dilemma, we urge you to support an industry effort by contacting your Congressional delegation and Senators and urging them to ensure that small motorcycles and ATVs are exempted from the lead-content provisions of the Act. Copies of letters already sent by the MIC and SVIA to various members of Congress are attached for your reference.

We ask for your patience and understanding as we work through this unfortunate process together. You may continue to sell these models lawfully and with all existing Honda retail support through February 9th, 2009. We will advise you if the industry is able to obtain an exemption from the lead content regulation. In the interim, we will keep you posted on developments and business actions necessary from February 10th forward to comply with this Act.

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