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Lip facing out sounds right as you wouldn't want to force the seal on the shaft against the direction of the lip, right? I'm speaking generally here as a former Tech working on food equipment, dishwashers, etc. where I installed hundreds of shaft seals. Could be that the Harley seal is different but I doubt it.
says "press seal into crankcase with lip facing out (away from flywheels)"
conventional wisdom tells me to install it as pictured on the left ...flat side out...no?
I just replaced mine. The picture on the right shows the proper orientation of the sprocket shaft bearing seal when looking at it after removing the stator rotor. This is how the one I pulled out was and how I installed the new one. This is also how the manual describes it.
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