SEMA News - January 2011

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 GreenhouseGases: California voters rejected Proposition 23 with a resounding 61% “no” vote. However, many proponents of the failed measure jumped ship to support its less controversial cousin, Proposition 26. Prop. 23 would have suspended implementation of California’s “Global Warming Solutions Act of 2006” until the state unemployment rate fell below 5.6%. The state would not have been able to pursue regulations intended to reduce greenhouse gas emissions, such as a cap-and-trade policy, a low carbon fuel standard, and wind and solar power mandates. Prop. 23 made no changes to California’s vehicle smog check, car scrap programs and vehicle emissions standards. Prop. 26 serves the function of delaying or preventing any new or increased fees, including but not limited to fees associated with the implementation of the law. New fees will now require approval by 2/3 of each house of the California State Legislature or 2/3 of registered voters. Measures to increase taxes or fees that passed the legislature in 2010 will be permitted to remain in effect for one year, during which time they must garner the 2/3 authorization to remain in effect. Previous to the passage of Prop. 26, lawmakers were able to balance the state budget and introduce laws that were revenue neutral—meaning that they increased the collection of funds from one source while decreasing it from another—with a simple majority. Under Prop. 26, a new super-majority of voters will be necessary for these measures.

California Smog-Check Program: Governor Arnold Schwarzenegger signed into law a bill to revamp California’s smog-check program. No earlier than January 1, 2013, smog-check stations will be required to measure the emissions of model-year ’00 and newer vehicles using onboard diagnostic testing. Current California smog-testing procedures require loaded-mode dynamometer or two-speed idle testing, depending on where the vehicle is registered. The new law also directs that a procedure be developed for testing vehicles that are not able to be tested through an onboard diagnostic computer system. Under this procedure, vehicles with prohibitive or unusual inspection circumstances must be inspected at a referee station. The visual inspection will remain a component of California smog checks. Included in the bill are provisions for greater oversight of inspection stations, including providing for increased penalty fees for violations of mandated smog- check procedures.

California Consumer Products: Legislation to place additional requirements on the manufacture, sale or distribution of certain consumer products, including automotive products used to maintain the appearance of a motor vehicle (including those for washing, waxing, polishing, cleaning or treating the interior or exterior of the vehicle), was defeated. Under the bill, a manufacturer would have been required to disclose each ingredient contained in the product on the manufacturer’s website and provide the web address and a statement on the product’s label.

California Brake Friction Materials: A coalition of industry associations helped alter legislation that would have placed restrictive limits on substances in brake friction materials. The amended bill provides for exemptions for brakes to be used on vehicles manufactured by low-volume manufacturers and those to be used on vehicles manufactured before the prohibition goes into effect in 2021. Amendments to the bill also included the creation of an advisory board with the power to grant further exemptions on a case-by-case basis. The amended bill was signed into law by Governor Schwarzenegger. 

Pennsylvania Registration Fees: SEMA is opposing legislation that threatens to increase fees for all vehicle owners. Under the bill, general passenger cars will face a $13 increase in their registration fee, while the one-time registration fee for antique, classic and collectible vehicles will go up by $27 (from $75 to $102) and the initial registration fee for street rods by $29 (from $20 to $51). Additionally, these fees would be increased again each subsequent year following enactment. The measure was introduced as the state struggles to find funding for its transportation infrastructure in the face of budget shortcomings. The bill currently awaits action in the House Appropriations Committee.

Wisconsin Imported Collector Cars: A SEMA-opposed regulation to prohibit the registration of certain imported collector vehicles has been put on hold. Members of the Senate Transportation Committee voted by ballot to send the proposed rule, Trans 123, back to the Department of Transportation for revisions due to the vocal opposition of Wisconsin enthusiast groups. Under an agreement reached with department officials, the rule will not be resubmitted but will be considered by lawmakers in the 2011 legislative session. The measure threatened to prohibit the registration of imported vehicles manufactured after 1967 that did not meet Federal Motor Vehicle Safety Standards. U.S. law specifically exempts imported vehicles that are 25 years old and older from these standards. The Wisconsin proposal would have been inconsistent with federal law and prohibited the registration of vehicles coming in from other states that have already been proven safe on U.S. roadways.

Federal Update

Ethanol Content in Gasoline: The U.S. Environmental Protection Agency (EPA) ruled that gasoline for ’07 and newer vehicles may contain up to 15% ethanol (E15) rather than 10% ethanol (E10). The decision has been challenged in court. The EPA confirmed that there is insufficient test data to permit E15 to be used in model-year ’00 and older vehicles, and the agency is still gathering data for ’01–’06 vehicles. SEMA has consistently voiced concern that ethanol increases water formation, which can then create formic acid and corrode metals, plastics and rubber. SEMA will continue to oppose E15 until there are conclusive scientific findings that demonstrate that it will not harm automobiles of any age as a result of corrosion or other chemical incompatibilities. Even if sales are permitted by the courts, consumers will not see E15 at the pump any time soon. The EPA must first approve regulations on how gas stations will label their pumps to avoid consumer misfueling. Furthermore, gasoline retailers will be under no obligation to market the fuel. In fact, some retailers oppose the fuel over concern that they could be held liable if E15 damages a vehicle. Gas stations and distributors may also need to invest in new storage tanks, hoses and other equipment.

“Green” Advertising Claims: The Federal Trade Commission (FTC) is updating its “Green Guides,” which are intended to help marketers avoid misleading environmental claims. The guides were first issued in 1992 but have not been revised since 1998. The guides cover general principles that apply to all environmental marketing claims; consumer perception of claims and marketing substantiation of claims; and avoiding consumer deception. A recent consumer marketing study found that most people thought a “green” product was recyclable, biodegradable, made from recycled materials or made with renewable materials. Since very few products, if any, have all of these attributes, the FTC’s guide revisions are intended to clarify and limit the claims. The proposed revisions would require companies to provide more specific information about claims and also qualify third-party endorsements with language that is clear, prominent and specific. The FTC is expected to finalize the updates in 2011.

Fuel-Efficiency Standards for Trucks and Buses: For the first time, the U.S. government is establishing standards for fuel efficiency and greenhouse gas emissions for large trucks and buses. The National Highway Traffic Safety Administration (NHTSA) and EPA have proposed 20% cuts in fuel use by 2018. The standards would apply to model-year ’14–’18 buses along with three separate truck classes: combination tractors that typically pull trailers; heavy-duty pickups and delivery vans; and “vocational” trucks, such as utility vehicles, fire and garbage trucks. The new standards would also reduce emissions of nitrogen oxides, methane, particulate matter and other pollutants. The EPA and NHTSA estimate that achieving the standards could cost the truck manufacturing and trucking industry $7.7 billion invested in four technological areas: engines, aerodynamics, tires, and reduced engine idling.

OSHA Noise Standards: The Occupational Safety and Health Administration (OSHA) is proposing to interpret its industry noise exposure standards as requiring employers to implement “feasible administrative” or “engineering controls to reduce noise to acceptable standards.” OSHA is clarifying that personal protective equipment, such as ear plugs and ear muffs, could only be used as supplements when administrative or engineering controls are not completely effective. OSHA notes that the term “feasible” would have an ordinary meaning of “achievable” or “capable of being done.” In its proposed enforcement of the standard, OSHA would consider administrative or engineering controls to be economically feasible if they do not threaten the employer’s ability to remain in business or if the threat to viability results from the employers having failed to keep up with industry and health standards.

Health Care Cost Reporting: The Internal Revenue Service (IRS) has provided companies with a one-year delay before they are required to report the dollar amount of the health insurance premiums paid for each employee on their W-2s. The amount will be listed as a nontaxable employer fringe benefit. Under the health care law, the reporting requirement was to take effect in 2011. It is now optional for next year but required in 2012. The IRS wants to make sure employers have enough time to adjust their payroll systems. A main purpose of the reporting requirement is to make workers more aware of health care costs and to identify high-value insurance plans (coverage above $10,200 per individual; $27,500 per family) that will be subject to tax as of 2018. 

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