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Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations
2012 of the Economic Census of Industry by the U.S. Census Bureau.17
DOE did not receive comments on the cost analysis presented in the April 2020 NOPD. Accordingly, using the same methodology presented in the April 2020 NOPD, in this final determination DOE updated the material and labor costs to be representative of the market in 2019$.
5. Scaling Relationships
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In analyzing the equipment classes, DOE developed a systematic approach to scaling efficiency across horsepower ratings and pole configurations, while retaining reasonable levels of accuracy, in a manner similar to the March 2010
Final Rule. DOEs current energy conservation standards for SEMs found at 10 CFR 431.446 list minimum required efficiencies over a range of horsepower and pole configurations, providing a basis for scaling efficiency across horsepower and pole configurations for polyphase and singlephase motors. The efficiency relationships in the established standards are based on a combination of NEMA recommended efficiency standards, NEMA premium designations, catalog data, and test data for individual manufacturer motor product lines.
In the April 2020 NOPD, DOE
proposed to apply the same scaling methodologies used to support the March 2010 Final Rule to the engineering analysis. This includes scaling to two additional representative units needed in the energy use and lifecycle cost analyses to separately analyze consumers of integral i.e., with horsepower greater than or equal to 1
hp single-phase CSCR SEMs and fractional i.e., with horsepower less than 1 hp polyphase SEMs. This scaling approach has been presented previously to stakeholders and has been updated based on stakeholder input.
Additionally, the approach has the added advantage of reducing the analytical complexity associated with conducting a detailed engineering analysis of the cost-efficiency relationship on all 62 equipment classes. 75 FR 10874, 1089410895.
17 U.S. Census Bureau, 2012 Economic Census of Industry Series Reports for Industry, U.S.
Department of Commerce, 2012; NAICS code 3353121 Fractional Horsepower Motors Production workers hours and wages. Although some summary statistics of the 2017 Economic Census for Manufacturing is currently available, the detailed statistics for the U.S. is estimated to be released in the time frame of November 2020September 2021. https www.census.gov/programssurveys/economic-census/about/releaseschedules.html.

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NEMA commented that the previously developed scaling methodologies remain effective and appropriate. NEMA, No. 22 at p. 3
DOE did not receive any other comments on the scaling analysis methodology proposed in the April 2020 NOPD. DOE continues to apply the scaling analysis methodology from the April 2020 NOPD in this final determination. Chapter 5 of the TSD
provides details on the DOEs engineering analysis for SEMs.
D. Markups Analysis To account for manufacturers nonproduction costs and profit margin, DOE
applies a non-production cost multiplier the manufacturer markup to the MPC.
The resulting manufacturer selling price MSP is the price at which the manufacturer distributes a unit into commerce. DOE developed an average manufacturer markup by examining the annual Securities and Exchange Commission 10K reports filed by publicly-traded manufacturers primarily engaged in appliance manufacturing and whose combined product range includes SEM.
The markups analysis develops appropriate markups e.g., retailer markups, distributor markups, contractor markups in the distribution chain to convert the MSP estimates derived in the engineering analysis to consumer prices, which are then used in the LCC and PBP analysis. At each step in the distribution channel, companies mark up the price of the equipment to cover business costs and profit margin.
For SEMs, the main parties in the distribution chain are manufacturers, distributors, contractors or installers, OEMs of equipment incorporating SEMs, and consumers.
DOE relied on estimates provided by NEMA during the March 2010 Final Rule to establish the proportion of shipments through each distribution channel.18 In response to the April 2020
NOPD, DOE did not receive any comments or data to support alternative distribution channels for SEMs. In this final determination, DOE relied on the same distributions of shipments by distribution channels as in the April 2020 NOPD. Further, DOE did not receive any comments on the approach used to develop markups. DOE
continued to rely on the same methodology for developing markups and updated relevant data sources to the most recent information available in 18 For more details see chapter 7 of the 2010 small electric motors final rule TSD, at https
www.regulations.gov/document?D=EERE-2007-BTSTD-0007-0036.

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preparation of this final determination.
DOE used data from the U.S. Census Bureau and US Economic Census 19 and the Sales Tax Clearinghouse 20 to develop distribution channel markups and sales tax estimates.
DOE used the same approach as in the April 2020 NOPD and developed baseline and incremental markups for each actor in the distribution chain.
Baseline markups are applied to the price of equipment with baseline efficiency, while incremental markups are applied to the difference in price between baseline and higher-efficiency models the incremental cost increase.
The incremental markup is typically less than the baseline markup and is designed to maintain similar per-unit operating profit before and after new or amended standards.21 DOE relied on economic data from the U.S. Census Bureau to estimate average baseline and incremental markups.
Further, in the space-constrained scenario, DOE developed a modified OEM markup to account for the costs faced by those OEMs of equipment incorporating SEMs needing to redesign their products in order to incorporate SEMs of different, including larger, sizes. Nationally, businesses spend about 2.7 percent of U.S. gross domestic product on research and development R&D.22 DOE estimates that R&D by equipment OEMs, including the design of new products, approximately represents at most 2.7 percent of company revenue. DOE followed the same approach used in the March 2010
19 U.S. Census Bureau. 2017 Annual Wholesale Trade Report. 2017. Washington, DC Last accessed June 19, 2019. https www.census.gov/wholesale/
index.html; U.S. Census Bureau. 2017 Annual Retail Trade Survey, 2017. Last accessed June 19, 2019. https www.census.gov/programs-surveys/
arts/data/tables.2017.html.; 2017 Economic Census:
Manufacturing: Summary Statistics for the U.S., States, and Selected Geographies: 2017. 2020. U.S.
Census Bureau. Last accessed October 21, 2020.
https www.census.gov/data/tables/2017/econ/
economic-census/naics-sector-31-33.html.
20 Sales Tax Clearinghouse Inc. State Sales Tax Rates Along with Combined Average City and County Rates. October 21, 2020. Last accessed October 21, 2020. http thestc.com/STrates.stm.
21 Because the projected price of standardscompliant products and equipment is typically higher than the price of baseline products and equipment, using the same markup for the incremental cost and the baseline cost would result in higher per-unit operating profit. While such an outcome is possible, DOE maintains that in markets that are reasonably competitive it is unlikely that imposing more stringent standards would lead to a sustainable increase in profitability in the long run.
22 National Science Board. January 15, 2020.
Science and Engineering Indicators 2020. Research and Development: U.S Trends and International Comparisons. Figure 43, Ratio of U.S. R&D to gross domestic product, by roles of federal, business, and other nonfederal funding for R&D: 19532017. 2020.
National Science Board: Arlington, VA: National Science Foundation NSB20203.

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