SEMA News - November 2009
Developments in Key Global Markets
This is the latest periodic roundup of legislative/regulatory developments in key global markets. This edition includes updates from Europe, Australia and the global harmonization body looking at creating uniform standards for a range of products—including automotive aftermarket products—under the auspices of the United Nations. SEMA members may contact Linda Spencer for more information on any of these issues.
European Officials Send Message to National Governments: Stop Hindering Intra-European Trade of Goods
European officials have recently implemented new laws to ensure that the 27 countries comprising the European Union allow the sale and use of specialty-equipment products and other manufactured goods. If the products are legally sold in one member state, they must also be allowed to be sold within the borders of the others. EC No. 764/2008, as it is officially known, is expected to have the largest impact on countries that have the greatest government oversight over the industry, such as Germany and Spain, which require much more extensive testing, and in those countries that have outright banned many or nearly all specialty-equipment products, such as France and Italy.
The new stipulations are designed to combat the common practice of government officials banning or limiting the use of a product through national laws—or, more typically, technical guidelines or other semi-official documents—from intra-Europe trade. The regulations now clearly state that “…a member state may not prohibit the sale on its territory of products which are lawfully marketed in another member state, even where those products were manufactured in accordance with technical rules different from those to which domestic products are subject.”
In an important test case, a U.K. carbon wheel company, DYMAG, which has numerous customers in the Netherlands and the United Kingdom, sold some of its motorcycle wheels to a German consumer in Ludwigsburg, southern Germany. State officials refused to provide the consumer with a license to drive the motorcycle due to the presence of these wheels. DYMAG fought the case, and an administrative court issued a ruling on July 9 of this year in support of the consumer, noting that the state had not provided proof that the product was dangerous and thus should be banned. The court said, in part, “The long-lasting, unproblematic and accident-free use in Great Britain and the Netherlands in public road traffic and at international motorcycle racing makes such proof unlikely.” State officials are appealing the ruling.
Unfair Advantage Alleged: Aluminum Wheels From China Under Investigation in Europe
The European Commission (EC) has opened an investigation into the possible dumping of aluminum road wheels into the European market by Chinese manufacturers. The petition was brought by the Association of European Wheel Manufacturers, which claims that the wheels are being sold at below-market prices. The EC is required to make a decision with 15 months of the August publication of the start of the investigation in the Official Journal of the European Union.
Half-way There: U.K. Scrappage Program to Continue, But No Plans to Extend Beyond Original Deadline
British officials have indicated that there are no plans to extend the car-scrapping scheme that will run until early next year unless the ₤300 million ($495 million USD) that has been allocated is spent. Currently, about half of the funds have been spent, with motorists receiving ₤2,000 ($3,312 USD) to trade in cars more than 10 years old for new models.
German Scrappage Program Ends, But Not Before Costing Government Nearly $7.5 Billion USD
In Germany, the popular program in which the government provided subsidies of €2,500 ($3,590 USD) to scrap old cars to buy new vehicles has ended with a total €5 billion ($7.47 billion USD) paid out to nearly 2 million applicants, The German automobile association VDA has forecasted that new-car registrations in Germany will total more than 3.5 million units this year but decline in 2010.
European Commission Delays Tobacco-Style Labeling for Car Manufacturers
The EC has delayed—for at least a year—the development of a proposal to require that a minimum of 20% of the space for new-vehicle advertising be devoted to information on fuel economy and C02 emissions. The regulations would cover any magazine, television or billboard advertising or point-of-sale displays in showrooms. The proposal was originally planned to be considered this year, but the development of these warning labels has been pushed back until 2010.
The new requirements, mirrored after measures imposed on cigarette producers, is being pushed by the EC and a number of members of the Parliament, citing a “dissatisfaction” with car assemblers’ compliance with more general guidelines in place since 1999 that call on them to include information [regarding fuel economy and C02 emissions] that is “easily legible and no less pronounced than the main part of the advertising message” and “easily understood, even when read briefly.”
Meanwhile, the EC has urged the car industry to sign a European code of good practices on car marketing and advertising.
Don’t Tell, Don’t Ask: Chip Tuning Being Approved in Germany, But Legality Remains Murky
The legality of chip tuning remains murky in Germany following a notice by the German government that, effective immediately, they are prohibited from approving engine-management software (chip tuning) modifications. The government has cited lack of knowledge on the effects these modifications have on exhaust emissions as well as other vehicle systems, such as braking and steering. Despite this edict, engine-management systems are being approved by some technical services using the same tests that are currently used for general engine tuning (such as tests for headers, valves and engine swaps). However, other testing facilities are declining to test these products because no clear procedure has been defined for them and issued certificates might eventually end up being rescinded for that reason.
The German specialty-equipment association, VDAT, has asked the German Transport Ministry to clarify the situation and to provide the industry with the specific test requirements. They have not yet heard back from the government.
Selling Into Germany—Recyclable Packaging a Requirement
As of January 2009, all new packaging sold in Germany must be registered with an officially recognized German recycler or risk a fine of €50,000 ($77,855 USD). The obligation to enroll in a recycling system (to reclaim retail packaging) rests with the originator of the packaged merchandise (i.e., the party that first brings the merchandise-filled packaging into circulation). The government has a list of approved companies with which firms may contract. For small-volume shippers, the annual fees for so-called “dual-system” companies appear to start at about €75 ($90 USD).
As a basic rule, anyone introducing packaging materials to be discarded by the end user will be required to participate. The importer, not the manufacturer, is generally responsible for meeting the recycling and packaging requirements. Yet U.S. companies will likely face a new hurdle in selling into the market, as importers will be liable for all products they carry. Importers of overseas products are typically offering to register the packaging, though the cost of that registration is typically passed onto the manufacturer.
Italian Companies Seek Allowance of German-Approved Products
Italy currently bans all specialty-equipment products unless an EU-wide or global harmonized standard exists for the product. So-called harmonized or common laws exist for a limited number of products, including exhaust systems, trailer couplings, lighting devices, automotive-related electronic products, brake linings, mirrors and bull bars, but no such multilateral regulations or laws govern the vast majority of optical and performance-enhancing products. The only other exception is if the product has been approved by the vehicle manufacturers. The industry in Italy has appealed to the government to allow aftermarket products and has offered to support legislation that allows products that have German approval to be allowed into Italy. As Italy does not have a domestic network of testing agencies, the industry is urging the government to allow consumers to obtain approvals according to German regulations from German testing agencies located throughout the world, including in Italy. The government is requiring a product-by-product phase-in, with wheels being among the first products that are likely to be approved through the system before the end of this year.
French Insurance Inspectors the New Specialty-Equipment Experts?
A new national law in France, entitled Procédure Véhicule Endommagé, authorized insurance industry personnel to conduct inspections to determine whether vehicles that have been involved in an accident are still road-worthy. Buried in this law was language that the insurance industry should also note the presence of aftermarket specialty products and whether the products conform with relevant laws. The local specialty-equipment association, FICAT, protested this provision, noting that these private-sector employees are not equipped to judge the legality of specialty products and might simply declare them banned. The government has tentatively agreed to remove specialty products from the scope of the law, but the industry remains vigilant until the changes are made official.
Dollars/Euros/Pounds But No Sense: Proposal Being Discussed to Extend Coverage of UNECE Harmonized Wheel Standard to Cover Specialty Wheels
UNECE 90 spells out the proposed standards for brakes to be applicable throughout Europe and for all other countries that have agreed to abide by the rules of this global body (including South Korea, Japan and Australia). The regulation deals only with replacement brakes and is silent on specialty brakes.
A Break for Specialty Brakes: ETO-Sponsored Clarification on UNECE Harmonized Rules on Brakes Moving Forward
NECE 90 spells out the proposed standards for brakes to be applicable throughout Europe and for all other countries that have agreed to abide by the rules of this global body (including South Korea, Japan and Australia). The regulation deals only with replacement brakes and is silent on specialty brakes. The European Tuning Organization (ETO) has sought to clarify that specialty brakes, though not mentioned in this regulation, are still permitted in Europe. This step was necessary as many European countries are apt to consider the lack of a specific measure on specialty brakes within this document as the equivalent of a ban on such products. The panel appears favorable to supporting the pan-European association, of which SEMA is a member.
The Hoon Squad: New South Wales Suspension Restrictions Narrowly Averted
Proposed suspension restrictions in the Australian state of New South Wales (NSW) have been put on hold at least temporarily thanks to a vigorous campaign mounted by the Australian Automotive Aftermarket Association (AAAA) and local industry. In July, NSW Transport Minister for Roads Michael Daley had proposed a maximum height change—raising or lowering modifications—to 5 centimeters (2 inches) and require these changes to undergo an “engineering inspection.” Local industry protested, led by AAAA, and the minister has now agreed to convene an advisory group (including industry) that can formulate some recommendations.
A press release from Daley’s office announced the proposed new restrictions on July 16, 2009, noting that the changes were being made to deter “car hoons.” Hoon is a local derogatory term used in Australia to refer to young people who drive “loud” cars and are “prone to street racing.” In the press release, entitled “Tough New Rules for Car Hoons,” the Minister stated: “I don’t want to see young hoons putting their lives or the lives of others at risk just because they think their car looks better 15 centimeters closer to the ground. These hoons may think their car looks cool, but as far as I’m concerned, anything more than a 5-centimeter change in a car’s suspension is dangerous and doesn’t belong on our roads.”
The AAAA is seeking “self certification” of suspension modifications of +/-5 centimeters without the need for an authorized engineer to sign off on such vehicles. Currently, throughout most of Australia, vehicles can be raised or lowered by up to 5 centimeters (2 inches) without approval and by up to 15 centimeters (5.9 inches) with authorized engineering approval. This would be similar to laws that exist elsewhere in Australia.
Lack of Testing Facilities and Vague Regulations Put Following Industry Complaints on Hold
The Australian state of Western Australia (WA) proposed new oversight over vehicles with engine modifications. With no input from industry, the WA Department of Transport introduced a regulation (Bulletin IB-124A) requiring special emissions testing for all vehicles that have been “significantly modified.” No definition of “significantly modified” was provided in the regulation.
The Australian Automotive Aftermarket Association has been at the forefront of industry efforts to seek a halt to these new regulations, which were drafted without the benefit of input from the industry. In the latest developments, the government has called for a delay in order to convene a panel that includes industry experts to acknowledge that the new requirements were not well thought-out and, in any case, that they did not have a structure in place. It turns out that there is currently only one testing facility in the entire state accredited to carrying out IM240 testing.