Pep Boys and Baja imported at least 241,000 illegal vehicles and engines.

Manny, Moe & Jack – the Pep Boys – have agreed to take corrective measures and pay $5 million in civil penalties to settle claims that it violated the Clean Air Act.

The auto discount chain that “Does Everything for Less” was importing and selling motorcycles, recreational vehicles and generators manufactured in China that do not comply with environmental requirements, the U.S. Environmental Protection Agency (EPA) and the U.S. Justice Department said.

Baja, Inc., which supplied the non-compliant vehicles to Pep Boys, is also settling with the U.S.

Equipment imported into the United States that does not meet U.S. pollution control rules is illegal, and bad for human health and the environment. In addition, it hurts U.S. companies that comply with U.S. law.

Critics say that this just the latest example of how illegal Chinese goods continue to come into the country due to the ineffectiveness and lax enforcement by U.S. Government agencies.

“Importers of foreign made vehicles and engines must comply with the same Clean Air Act requirements that apply to those selling domestic products, and this settlement demonstrates that we will take strong action to ensure that importers comply with their obligations,” said Ignacia S. Moreno, Assistant Attorney General for the Environment and Natural Resources Division.

“Under this settlement Pep Boys and Baja will not only pay a civil penalty, but will offset the excess emissions from the vehicles and engines already sold and take steps that go beyond what the law requires to ensure that their future imports and sales meet Clean Air Act standards,” said Moreno.

EPA said this is the largest vehicle and engine importation case brought by the United States to date under the Clean Air Act, both in number of vehicles and engines imported and penalty paid. The complaint, filed simultaneously with the settlement in federal court in the District of Columbia, alleges that Pep Boys and Baja imported and sold at least 241,000 illegal vehicles and engines from 2004 through 2009.

“Pep Boys strives to be a good corporate citizen,” said General Counsel, Brian Zuckerman. “Unfortunately, in this circumstance, we relied upon our vendors to ensure that their products were compliant. We now take it upon ourselves to ensure that all of our small-engine merchandise fully complies with the Clean Air Act.”

The agreement requires Pep Boys to export or destroy over 1,300 non-compliant vehicles and engines, and to mitigate the adverse environmental effects of equipment already sold to consumers, estimated at 620 tons of excess hydrocarbon and nitrogen oxide emissions, and more than 6,520 tons of excess carbon monoxide emissions. Under the settlement, Pep Boys will implement projects to offset the excess emissions including offering discounted push or electric lawn mowers in exchange for older, more polluting gas-powered mowers.

Motorcycles, recreational vehicles, and generators emit carbon monoxide, a gas that is poisonous at high levels in the air even to healthy people and is especially dangerous to people with heart disease. These machines also emit hydrocarbons and nitrogen oxides, which contribute to the formation of ground-level ozone, or smog. Exposure to even low levels of ozone can cause respiratory problems, and repeated exposure can aggravate pre-existing respiratory diseases.

The complaint alleges that at least 45 vehicle and generator models imported and sold by Pep Boys and Baja were not certified to meet federal emission standards. The complaint also alleges that Pep Boys failed to provide purchasers with the full emission-system warranty required by the Clean Air Act, and imported and sold vehicles and engines without the proper emission control information labels.

More than 35 different manufacturers in China built the vehicles and engines. EPA and U.S. Customs & Border Protection officials discovered the violations through inspections conducted at Pep Boys stores, at U.S. ports, and through a review of importation documents provided to EPA by the company.

The settlement also requires Pep Boys and Baja to offer a free extended emission warranty on certain vehicle and engine models, to reimburse consumers for emission-related repair expenses, and to implement rigorous corporate compliance plans. Baja also agreed to pay a penalty of $25,000, an amount that was reduced substantially in light of Baja’s current financial condition.

The settlement is part of an ongoing effort by EPA to ensure that all imported vehicles and engines comply with Clean Air Act requirements.

Pep Boys is a national automotive aftermarket and service chain with annual sales of $1.9 billion. The company operates more than 580 stores in 35 states and Puerto Rico. In 2008, the company, based in Philadelphia, was the third largest importer of Chinese-made all terrain vehicles (ATVs) in the United States. In 2006 and 2007, Pep Boys was the fourth largest importer of generators.

Baja, based in Phoenix, contracts with Chinese manufacturers to supply ATVs and motorcycles to Pep Boys and others. Baja also manages all after-sale functions, including servicing warranty claims and providing replacement parts for these vehicles.

The settlement, lodged today in the U.S. District Court for the District of Columbia, is subject to a 30-day public comment period and approval by the federal court.

Citizens who want to report environmental violations should go to http://www.epa.gov/tips.