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Federal Register / Vol. 86, No. 127 / Wednesday, July 7, 2021 / Proposed Rules
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physical teardowns is to support the costing analysis; however, it serves other purposes as well. The teardown process provides information on the range of design options used to improve energy efficiency and informs the technology assessment.
Performance testing and teardowns are used to define the baseline, against which incremental energy savings and incremental costs are compared. Teardowns are also used to identify technology options for consideration in the screening analysis and design paths for the Engineering Analysis.
2 Catalog teardowns: The Department will often complement physical teardowns with catalogue a.k.a., virtual teardowns, thereby allowing the analysis to capture a broader range of capacities and other features within a product family. In lieu of physically deconstructing the product/equipment, the Department will identify each component using parts diagrams available from manufacturer websites or appliance repair websites, for example to develop the bill of materials for the product/equipment. An analysis comprised of only virtual teardowns is also possible for product categories where features are well-documented.
3 Price surveys: If neither a physical nor catalog teardown is feasible, or if they would be cost-prohibitive or otherwise impractical, the Department will conduct price surveys using publicly-available pricing data published on major online retailer websites and/or by soliciting prices from distributors and other commercial channels.
13. Principles for the Analysis of Impacts on Manufacturers a Purpose. The purpose of the manufacturer impact analysis MIA is to identify and quantify the impacts of any new or amended energy conservation standards on manufacturers. The MIA will have both quantitative and qualitative aspects, and it will include the analyses of projected industry cash flows, the industry net present value, conversion costs, and direct employment. Additionally, the MIA will seek to describe how new or amended energy conservation standards might affect manufacturing capacity and competition, as well as how standards contribute to overall regulatory burden. Finally, the MIA will seek to identify any disproportionate impacts on manufacturer subgroups, including small business manufacturers. The Department will analyze the impact of standards on manufacturers with substantial input from manufacturers and other interested parties.
This section describes the principles that will be used in conducting future manufacturing impact analyses.
b Issue identification. Prior to publishing a NOPR, the Department will identify issues that will require greater consideration in the detailed manufacturer impact analysis.
Possible issues may include identification of specific types or subgroups of manufacturers and concerns over access to technology.
Specialized contractor expertise and empirical data requirements, and analytic tools required to perform the manufacturer impact analysis also would be identified at this stage.
c Industry characterization. Prior to publishing a NOPR, the Department will
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prepare an industry profile based on the market and technology assessment and other publicly available information. DOE will use public sources of information e.g., company financial reports to derive preliminary financial inputs for the industry cash flow analysis. DOE will describe the present and past industry structure and market characteristics.
d Interview Process. DOE will seek to conduct structured, detailed interviews with manufacturers. During these interviews, DOE
will discuss engineering, manufacturing, procurement, and financial topics in order to develop and validate key financial inputs, including product and capital conversion costs, and to gather additional information on the anticipated effects of energy conservation standards on revenues, direct employment, capital assets, industry competition, and subgroup impacts.
e Industry Cash Flow Analysis. The quantitative part of the MIA will rely primarily on the Government Regulatory Impact Model GRIM, an industry cash flow model with inputs specific to each rulemaking. The Department will develop critical GRIM inputs using a number of sources, including publicly-available data, results of the other rulemaking analyses, and information gathered from industry stakeholders during the course of manufacturer interviews. To capture the uncertainty relating to manufacturer cost impacts and impacts on product/equipment sales, features, and prices following amended standards, the Department will use the GRIM
to estimate a range of possible impacts under different scenarios.
f Cost impacts on manufacturers. The Department will seek input from interested parties on the treatment of cost issues.
Manufacturers will be encouraged to offer suggestions and feedback on sources of data and DOE cost estimates. Costing issues to be addressed include:
1 Product/equipment-specific costs associated with direct material, labor, and factory overhead based on cost impacts estimated for the engineering analysis;
2 Product conversion costs, which are investments in research, development, testing, marketing, and other non-capitalized costs necessary to make product designs comply with new or amended energy conservation standards; and 3 Capital conversion costs, which are investments in property, plants, and equipment necessary to adapt or change production facilities such that new, compliant product designs can be fabricated and assembled.
g Disproportional impacts on manufacturer subgroups. DOE will evaluate subgroups of manufacturers that may be disproportionately impacted by standards or that may not be accurately represented by the average cost assumptions used to develop the industry cash flow analysis. Such manufacturer subgroups may include small business manufacturers, niche players, and/
or manufacturers exhibiting a cost structure that largely differs from the industry average.
The subgroup analysis will include qualitative descriptions and, where sufficient non-proprietary data are available, quantitative estimates.

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h Impacts on product/equipment sales, features, and prices. The GRIM estimates manufacturer revenues based on total unit shipment projections and the distribution of those shipments by efficiency level. For this analysis, the GRIM uses the NIAs annual shipment projections derived from the shipments analysis.
i Measures of impact. The Department will use the GRIM to calculate cash flows using standard accounting principles and changes in industry net present value INPV
between the no-new-standards case and each standards case. The difference in INPV
between the no-new-standards case and a standards case represents the financial impact of the new or amended energy conservation standard on manufacturers.
Computations will be performed for the industry as a whole and, as appropriate, for manufacturer subgroups. Impacts to be analyzed include:
1 Industry net present value and change in INPV relative to the no-new-standards case industry value. The Department will perform sensitivity/scenario analyses for parameters where significant uncertainty was identified and/or for which DOE received significant comment. An uncertainty analysis could include inputs such as production costs, conversion costs, manufacturer mark-ups, and shipment projections.
2 Industry annual cash flows and percent change relative to the no-new-standards cash flow levels. The Department will analyze the impact of the new or amended standard on industry annual free cash flow as an indicator of potential financial constraints in the industry.
3 Other measures of impact are described in paragraphs j through m of this section and will also be evaluated in the MIA.
j Cumulative Impacts of Other Federal Regulatory Actions.
1 The Department will recognize and consider the overlapping effects on manufacturers of new or revised DOE
standards and other Federal regulatory actions affecting the same products or equipment.
2 If the Department determines that a proposed standard would impose a significant impact on product or equipment manufacturers within approximately three years of the compliance date of another DOE
standard that imposes significant impacts on the same manufacturers or divisions thereof, as appropriate, the Department will, to the extent possible, evaluate the impact on manufacturers of the proposed standard and assess the joint impacts of both standards on manufacturers as described in paragraph j4 of this section.
3 If the Department is directed to establish or revise standards for products/
equipment that are components of other products/equipment subject to standards, the Department will consider the interaction between such standards in assessing manufacturer impacts of a particular standard as described in paragraph j4 of this section.
4 The Department will seek to assess regulations that affect the same product and same revenue streams in an appropriately coordinated or integrated analysis. Where
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