SEMA News - June 2010
Law and Order is an update of some of the most recent federal and state legislative and regulatory issues that could potentially impact the automotive specialty-equipment industry. These include issues affecting small-business owners and their employees.
Specially Constructed Vehicles:
Legislation to increase the allowable number of exempted specially constructed vehicle registrations from 500 to 750 vehicles per year was approved by the Assembly Transportation Committee. Current law provides for emissions-system certification and a model-year designation for specially constructed vehicles, including kit cars. Under the law, vehicle owners choose whether a smog-test referee certifies the engine model year or the vehicle model year. To determine model year, inspectors compare the vehicle to those of the era that the vehicle most closely resembles. If there is no close match, it is classified as a ’60 vehicle. Only those emissions controls applicable to the model year and that can be reasonably accommodated by the vehicle are required. The Department of Motor Vehicles provides a new registration to the first 500 specially constructed vehicles per year that meet the criteria.
SEMA is opposing legislation to raise the registration fee on antiques, street rods and special-interest vehicles. The bill has already passed the House. The Senate substituted the House bill with all-new language to increase the state’s revenue. One section of the substituted bill increases the registration fee for all passenger vehicles, while two separate sections were inserted to specifically target antiques and street rods/special-interest vehicles. Under the substituted bill, each of the registration fees would increase by $10 on January 1, 2013, and by another $10 on January 1, 2014.
A bill targeted for defeat by SEMA to ban the “use and sale of any exhaust pipe that increases the sound emissions of any vehicle, including motorcycles,” was set aside for study by the legislature. This action means that the measure is unlikely to be considered by the legislature this year. Among other things, the measure ignored the fact that aftermarket exhaust systems are designed to make vehicles run more efficiently without increasing emissions and did not supply law enforcement with a clear standard to enforce, allowing officers to make subjective judgments on whether or not a modified exhaust system is in violation. Legislation to require the incorporation of noise-level testing into the vehicle inspection process was also set aside. The bill did not define a noise-level limit, but allowed it to be determined by the regulators.
A SEMA-opposed bill to provide that the noise from a motor-vehicle exhaust system that has been deemed “disturbing or unreasonably loud” constitutes the crime of disturbing the peace is dead for the year. Under the bill, violators could have been fined up to $1,000 per occurrence, jailed for six months or both. Among other things, the bill did not supply law enforcement with an enforcement standard, allowing officers to make subjective judgments on whether an exhaust system is “disturbing or unreasonably loud;” failed to recognize that a better way to address this issue is by establishing a fair and reasonable exhaust-noise decibel limit; ignored the fact that aftermarket exhaust systems are designed to make vehicles run more efficiently without increasing emissions; and would make it difficult for hobbyists to replace factory exhaust systems with more durable, better-performing options.
Fuel Economy and CO2 Emissions:
The National Highway Traffic Safety Administration (NHTSA) finalized the Corporate Average Fuel Economy (CAFE) standards for model-year 2012–2016 cars and trucks, and the U.S. Environmental Protection Agency (EPA) established corresponding standards for CO2 emissions. The two issues are related since CO2 is released in direct proportion to the amount of carbon-based fuel that is burned. The combined actions match CO2 emissions standards previously adopted by California and 13 other states. The average CAFE rating will be 35.5 mpg in 2016, based on a combined 39-mpg rating for passenger cars and 30 mpg for light trucks. The EPA’s CO2 emissions standard is 250 grams per mile for vehicles sold in 2016, roughly the equivalent of 35.5 mpg. The automakers participated in formulating the regulations since it provides a national approach to regulating CO2 emissions rather than a patchwork of state rules. The NHTSA will use an attribute-based system that sets CAFE standards for individual fleets of vehicles based on size, taking into account the differences between cars and light trucks (SUVs, pickups and vans). Individual car companies will have flexibility on how to achieve the rules. The automakers will likely rely on more-fuel-efficient tires, turbochargers, low-friction lubricants, six-speed automatic transmissions and similar technological means.
Fuel-Efficient Replacement Tires:
The NHTSA moved closer to establishing a consumer information system to rate the fuel economy, safety and durability characteristics of most replacement tires. The agency issued a final rule to establish test procedures to be used by tire manufacturers in determining tire ratings. However, it has not yet finalized a program on how the information will be conveyed to consumers at the point of sale and online. The program is required under a 2007 law that contains a SEMA provision exempting from the rating system those tires that have been produced or imported in annual units of less than 15,000 and do not exceed 35,000 tires in total brand-name production. The premise for the new program is to allow consumers to compare ratings for different replacement tires and determine the effect of tire choices on fuel economy or the potential tradeoffs between tire fuel efficiency (rolling resistance), safety (wet traction) and durability (treadwear life). The consumer information may be conveyed in the form of a one-to-five-star rating system or some similar approach and included on a label affixed to each tire. The NHTSA agreed with a SEMA recommendation that tire manufacturers claiming the low-volume exemption only needed to provide a one-time list of their tire models/sizes, along with a statement that the tire models/sizes are excluded from the applicability of
Preventing Vehicle Rollaways:
New cars with automatic transmissions must now be equipped with an interlock device that requires the brake pedal to be pressed before the driver can shift the transmission out of “park.” The new NHTSA rule takes effect on September 1,
2010, and is intended to protect children from vehicle rollaways in which a car is inadvertently shifted into neutral or another gear.
The U.S. Senate passed a SEMA-supported bill to extend various expiring tax credits and deductions, including the research and development tax credit. The House of Representatives passed a different version of the bill last year. The legislation must now be reconciled into a single bill. The R&D tax credit lapsed last December, marking the 14th time it had expired since being enacted into law in 1981. SEMA joined more than 100 associations and companies within the R&D Credit Coalition urging Congress to make the credit permanent. The credit offsets costs for companies investing time and money in new technologies and is applicable to both in-house and outside research. The legislation would renew the credit for one year, retroactive to January 1, 2010.
The Senate Judiciary Committee approved a bill to reinstate the doctrine that treats minimum resale price agreements as automatically illegal under the Sherman Antitrust Act. Minimum price agreements allow manufacturers to establish a set pricing system with distributors and retailers in exchange for the rights to market their products. In 2007, the Supreme Court overturned a precedent dating back to 1911 that outlawed “vertical price fixing.” The Court found that minimum-pricing requirements by manufacturers no longer constitute an automatic violation of federal law. Rather, such agreements will now be considered on a case-by-case basis according to a “rule of reason” to determine whether they interfere with market competition. (Since the Court ruling is not a “green light” to set prices, businesses considering establishing resale price policies or agreements should proceed with caution and consult with antitrust counsel.) It is unclear if the bill has the support of a super-majority of Senators to allow passage in the Senate. The House Judiciary Committee has already approved similar legislation.
The House Resources Committee held a hearing on the “Colorado Wilderness Act,” a bill to designate 850,000 acres in 34 separate areas as wilderness. No motorized activity is permitted in such designated lands. The areas include lands around Redcloud Peak, Dolores River Canyons, the Palisade, Bull Gulch and Browns Canyon. Most of the land is managed by the U.S. Bureau of Land Management and the U.S. Forest Service. Representatives for both federal agencies testified that the legislation is too sweeping and should exclude certain areas where motorized recreation, mining, timber harvest and other activities currently exist. SEMA supports land-use decisions that are reasonable and enjoy local community support. However, SEMA opposes legislation such as the current bill, which threatens to prohibit recreation without sufficient public consensus.