Living in California I was concerned about potential problems registering the van as a diesel. The law says that you may install a diesel engine into a vehicle as long as:
  • the diesel engine was available for sale in California, i.e., it was not a 49 state diesel.
  • the diesel engine is at least as new as the car itself
More complete guidelines for California owners are here.

There is a form (REG-256) that one fills out and submits to the DMV stating that you have done an engine swap. In Section E you state that the motive power was changed from gas to diesel. You bring the car to the DMV, they come look at the car. They need to find the VIN number (in two places). In my case I started up the van; it was obviously a diesel. I showed the DMV rep the emissions information that I had swapped over from the 96 Passat (that showed it was a 96 year diesel) and that was all I needed. She took about 5 seconds looking at the engine and then signed off on the paperwork.

Because the engine was from a 1996 vehicle it falls outside the regular emissions testing requirements in California so it never needs to be smogged. If the engine is from a 98 or newer it must be smogged first. This entails taking it to a certified smog shop and having them do three things:
  • hook it up to their machine and confirm that the engine is 'ready' to be tested. This means there are no CELs and that the engine has gone through its prerequisites to make sure it is ready to be tested. You can check for 'readiness' in VAG-COM.
  • the engine has all its emissions stuff (EGR, catalytic converter, etc.) in good order
  • the engine passes a 'smoke test' - at idle and I think at 2000 rpm it cannot smoke excessively.

Assuming it passes all of those tests they send the information electronically to the DMV and when you register the vehicle that information should be present to the DMV official (or you can bring in the paperwork they give you).