How Tier 4 Impacts Used Construction and Mining Equipment
Emission mandates from the Environmental Protection Agency (EPA) have been a major driver for construction and mining equipment manufacturers over the last 2-1/2 decades. And, while the progression from EPA Tier 1 to 4 is helping to reduce pollution, it has also created a lot of concerns for buyers and sellers of used equipment.
We wanted to take a minute to answer some of your buying and selling questions.
Which countries are impacted by Tier 4?
The EPA’s emission standards only apply to the United States. However, similar mandates are in place for Canada and most of Europe. Most experts will agree that Tier 4 affects any company working in a “developed” country. Many less developed countries do not have the government organizations to support these types of initiatives.
Keep in mind that in the U.S. each state may also have additional emission standards.
What equipment is affected by Tier 4?
All new off-highway equipment with 50-hp diesel engine or above must have a Tier 4 engine. The type of equipment doesn’t matter, which means that light towers, generators and air compressor, as well as dozers, motor graders and haul trucks are affected by the EPA’s regulations. This, of course, means you’ll be paying more for new equipment — on average 15 to 20 percent more.
Does used equipment have to comply with Tier 4?
Used equipment is grandfathered in; this means that if the machine was manufactured before Tier 4, it does not need to be brought up to current standards. However, used equipment still needs to meet the standards that were in place when the machine was manufactured.
However, if you field a fleet of equipment, there are some restrictions. You can only use remanufactured pre-Tier 4 engines if they are up to the latest Tier 4 standards, or if you are retiring a pre-Tier 4 engine and replacing it with a Tier 4 engine at the rate of 1-to-1. This means that anytime your fleet replaces a pre-Tier 4 engine with a similar engine, they have to remove another pre-Tier 4 engine and update the machine with a current, Tier 4 Final engine.
For the individual tractor owner, there’s nothing likely to happen. But for the fleet owner, they may see some or all of the following:
- Stepping up inspection and enforcement in the wake of these final regulations, so fines could be more likely to occur.
- Potential profit loss due to required downtime for a vehicle to be upgraded at the last moment.
One note of caution, some projects, typically government related, may mandate the use of Tier 4 complainant equipment only on a project, which may affect your buying options. So, if your work involves public sector work and/or jobs for universities and other large organizations that have adopted Tier 4 standards, or if you are working in a non-compliance zone which is an area that the EPA has determined has poor air quality, you should expect that the machines that you plan on using for that job will have to consist exclusively of Tier 4-compliant machines. If you currently don’t work on those type of projects, then, for the most part, you can avoid being affected by Tier 4 for the near future. In the longer term, of course, Tier 4 will affect every company that owns off-road equipment. Why is that? There will be no new machines available for sale in the United States other than Tier 4-compliant, and unlike with previous tiers, it is not possible to retrofit a Tier 3 machine to Tier 4 standards with currently available technologies.
What rules apply when importing used equipment to the states?
In order to import a unit to the U.S., the engine must have an EPA certificate, otherwise, it will not be allowed to operate. If the unit is going to be for sale instead of operating, the government will give you a special permit for up to one year, but the unit must leave the country in that time.
A machine only as to meet the EPA standards that apply for the year, make and model of that particular machine. So, for example, if you buy a machine overseas that’s a few years old, it may only have to meet Tier 3 standards.
How does this affect exporting equipment?
The EPA does not have any emissions standards for equipment leaving the country. However, the country it’s being shipped to may have its own regulations. In additions, some countries that do not have adequate diesel to support Tier 4 engines. There are kits available that will allow the after-treatment devices to be removed so this equipment can burn higher sulfur fuel and be sold in less-regulated countries. However, someone, the buyer or seller, will have to absorb the added costs.
Will this affect used equipment values?
The short answer is “Yes,” used equipment values will be affected by Tier 4 regulations. It’s still too soon to know exactly how they will be affected. However, many experts speculate that Tier 4 units will not hold their value as well as older machines because of the limited markets where they can be sold.
The Independent Equipment Dealers Association (IEDA) and its members are keeping a close eye on how Tier 4 will affect the used equipment market around the world, today and in the future.
For additional questions, please contact one of our vetted members.