SEMA News - November 2010

By Steve McDonald

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.


California Scrappage:

SEMA News-November 2010-Law and OrderSEMA submitted comments to the Bureau of Automotive Repair (BAR) in opposition to a proposed rule to increase the number of eligible vehicles for scrappage programs. The proposal would allow consumers to scrap any vehicle at any time for any reason by expanding the scope of the program, which currently only allows for the retirement of on-cycle vehicles that have failed their biennial required smog check in the year they are seeking to participate. The new rule would also provide an exception to the current prohibition on participation by unregistered vehicles, permitting their retirement if the owners can prove that the vehicles have been driven primarily in California for the previous
two years. This provision would unfairly allow owners not paying registration fees, which fund the program, to be permitted to benefit from the program. Included in the proposed rule is a new voucher program to be operated in the San Joaquin Air Pollution Control District and the South Coast Air Quality Management District. The voucher program would provide additional incentives for vehicle owners to scrap their older vehicles by providing them with funds to purchase new vehicles. BAR has stated that its intention is to provide $2,000 or $2,500 vouchers to qualifying consumers. In addition to potentially scrapping classic vehicles, the new program would also prohibit restorers from getting their hands on component parts from the vehicles. Dismantlers are not allowed to remove any parts from vehicles they have purchased through this program for resale or reuse unless specifically allowed by BAR through contract.

California Tire Pressure Checks:

Effective September 1, 2010, all California automobile service providers are required to check tire pressures for every vehicle weighing less than 10,000 lbs. being maintained or repaired at their facilities. The regulation, issued by the California Air Resources Board, applies to auto maintenance/repair providers but not to auto parts distributors/retailers, auto body/paint facilities, auto glass installers or wreckers/dismantlers. The rule is intended to reduce greenhouse gas emissions associated with under-inflated tires. Service providers are required to check and inflate the tires to the recommended tire-pressure rating. The provider must note on the invoice that the tire inflation service was completed and then keep a copy of the service invoice for at least three years.

Massachusetts Street Rods/Custom Vehicles:
SEMA News-November 2010-Law and OrderA version of SEMA-model legislation to create a vehicle registration classification for street rods, custom vehicles, replicas and specially constructed vehicles was signed into law by Massachusetts Governor Deval Patrick. The new law defines a street rod as an altered vehicle manufactured before 1949 and a custom as an altered vehicle at least 25 years old and manufactured after 1948. A replica vehicle is defined as assembled by a non-manufacturer from new or used parts that replicate an earlier year, make and model vehicle. Specially constructed vehicles are those reconstructed or assembled by a non-manufacturer from new or used parts that have an exterior that does not replicate or resemble any other manufactured vehicle. The law allows a replica vehicle to be assigned a certificate of title bearing both the year in which the vehicle was built and the make, model and year of the vehicle intended to be replicated. Under the new law, street rods and custom vehicles are exempted from emissions inspection requirements. In a compromise made with the state air-quality regulators, the measure also provides that specially constructed and replica vehicles that are registered on or before April 30, 2012, will be exempted from emissions inspection requirements. Specially constructed and replica vehicles registered after April 30, 2012, will be subject to emissions control requirements based on the model year and configuration of the engine installed, whether the engine is an original-equipment manufacturer’s production engine, a rebuilt engine or a crate engine.

North Carolina Scrappage:

SEMA News-November 2010-Law and OrderSEMA-opposed legislation that would have implemented a state vehicle scrappage program for passenger vehicles that are at least 14 years old died when the legislature adjourned for the year. Under the program, each participant would have received around $1,000–$1,500 to scrap a car and purchase a current-year vehicle under 10,000 lbs., or one from the previous three model years. The bill stipulated that the participant’s family income must be less than 300% of the current federal poverty level. All trade-in vehicles would have been subject to scrappage, regardless of their historical value or
collector interest.

Wisconsin Imported Collector Cars:

SEMA News-November 2010-Law and OrderSEMA is opposing a proposed regulation issued by the Wisconsin Department of Transportation (Chapter Trans 123) to prohibit the registration of imported vehicles manufactured after 1967 that do not meet Federal Motor Vehicle Safety Standards (FMVSS). U.S. law specifically exempts imported vehicles that are 25 years old and older from these safety standards. Trans 123 offers no such reasonable exemption. The regulation permits the continued registration of subject vehicles that are already legally registered in Wisconsin, but only until they are transferred to a new owner. The rule is currently under review by the Senate and Assembly Transportation Committees, which have until September 10, 2010, to raise an objection. 


Bank Loans and Bonus Depreciation:

The U.S. Congress is scheduled to vote on a SEMA-supported bill to provide smaller banks with access to $30 billion in funds intended to be loaned to small businesses. The legislation would also extend the bonus depreciation through 2010. In 2008 and 2009, all businesses were permitted to immediately write off 50% of the cost of new equipment (“bonus depreciation”). The Senate bill would also expand and extend the Section 179 program, allowing companies to write off up to $500,000 in capital expenditures in tax years 2010 and 2011, double the current limit for 2010. SEMA is urging Congress to eliminate a requirement that businesses issue 1099 forms to all vendors from whom they buy more than $600 of goods or services in any year.

Horizontal Mergers:

The Department of Justice and the Federal Trade Commission revised the “Horizontal Merger Guidelines” to reflect changes in the way mergers are reviewed since the guides were last revised in 1992. Horizontal mergers are defined as mergers between two or more companies with similar product lines. The guides help antitrust regulators from the Department of Justice and Federal Trade Commission evaluate the likely competitive impact of mergers, distinguishing between potentially harmful mergers versus mergers that will be competitively beneficial or will likely have no competitive impact on the marketplace. The 2010 guidelines are different from the 1992 guidelines in several important ways. For example, the guidelines clarify that merger analysis does not use a single methodology but is a fact-specific process through which the agencies use a variety of tools to analyze the evidence to determine whether a merger may substantially lessen competition. The guides also include a section on “Evidence of Adverse Competitive Effects,” which provides examples of evidence that the agencies have found informative in predicting the likely competitive effects of mergers.

Unfair Trade Practices:

The U.S. Department of Commerce unveiled 14 proposals to strengthen the enforcement of U.S. trade laws. The measures would focus on illegal import practices from non-market economies by tightening U.S. rules governing antidumping (AD) and countervailing duties (CVD). “Dumping” is when a manufacturer in one country exports a product to another country at a price that is below its production costs or the price charged in its home market. “Countervailing duties” are imposed when a foreign country is found to be subsidizing its exports and injuring the importing country’s domestic producers. Non-market economies such as China’s could face higher duties as a result of some of the Commerce Department’s proposed changes. A number of practices to calculate production costs would be tightened or clarified. Individual companies from a foreign country would not be excused from AD/CVD duties if they demonstrate that they were not dumping or receiving subsidies for three consecutive years. Rather, they would still receive a zero dumping rate but remain within the countrywide order until that is removed. Additionally, the Commerce Department would require importers to post cash deposits rather than bonds for imports that fall within the scope of an AD/CVD investigation, beginning with the issuance of a preliminary determination.  

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