SEMA News—April 2012

By Steve McDonald

Law and Order

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.

State Update

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Colorado Newer-Car Exemptions: SEMA is supporting legislation to extend the emissions inspection exemption to vehicles that have not yet reached their sixth model year. Current law exempts only vehicles that are four model years old or newer. Colorado already exempts pre-1976 collector cars, kits and street rods from emissions testing. The logic for this trend is clear: Such vehicles do not contribute in significant ways to air quality problems. This logic applies equally to newer cars.

Hawaii Exhaust Noise: For years, SEMA has beaten back legislation that would have essentially banned aftermarket exhaust systems in Hawaii, including one that would have allowed law enforcement officers to seize and impound a vehicle upon making a subjective determination that the vehicle was in violation. This year, SEMA-model legislation was introduced that would allow vehicle hobbyists to install and use aftermarket-modified exhaust systems that meet an objective noise limit. Car owners would be issued a certificate of compliance if a test of the exhaust system demonstrated that the exhaust system emitted no more than 95 decibels.

Iowa Exhaust Noise: SEMA-model legislation that would allow Iowa’s vehicle hobbyists to install and use aftermarket-modified exhaust systems that meet a 95-decibel limit was introduced in the Iowa State Senate. The bill would remove subjective provisions in the law and force compliance with an objectively measured standard, benefitting consumers, the aftermarket industry and police officers who are charged with enforcing the law.

  Aftermarket Parts Regulation, Aftermarket Parts Laws, Auto Legislation, Automotive Legislation, Federal Regulation Aftermarket Parts
Iowa Antique Registration Fee: SEMA is supporting a bill to allow any vehicle that is 25 years old or older and used only for exhibition, entertainment or educational purposes to be registered for an annual fee of $5. Under current law, the automobile may be registered as a “limited-use” vehicle for a two-year fee of $40. Alternatively, it may be registered without restriction with a regular annual vehicle registration fee.

Maryland Historic Vehicles: Identical legislation to increase the age requirement for vehicles eligible for registration as “historic motor vehicles” has been introduced in the Maryland House and Senate. Under the bill, the age requirement would be raised from 20 to at least 25 years old, and these cars would be prohibited from being used for “occasional transportation.” The measure would also require that an historic vehicle be insured by an historic-vehicle, show-vehicle or antique insurance policy. SEMA is opposing the bill but is working with sponsors to amend the measure to accommodate hobbyists and related businesses.

Maryland Tires: SEMA is opposing legislation that would require the tire industry in the state to affix a label containing the month/year of manufacture and other information on tires. SEMA believes that this legislation would place tire dealers, wholesalers and manufacturers at an unfair disadvantage by requiring additional sidewall information at no value to the motoring public. The date of a tire’s manufacture is already on the sidewall, found as part of the Tire Identification Number. SEMA contends that this legislation may serve to confuse consumers into believing that newer tires answer critical safety concerns. Consumers have greater concerns regarding tire safety, such as proper inflation levels, safe tread depth and overloading of tires/vehicles.

New York Restoration/Custom Shops: A SEMA-supported bill has been introduced in the New York Assembly to exempt restoration and custom shops from the state’s motor vehicle repair shop requirements. This exemption would relieve these shops from the obligation to provide written estimates to customers seeking restoration, rebuild or customization work on specialty motor vehicles or motor vehicles at least 25 years old. The measure would allow restoration and custom shops to accurately inform customers of actual costs and materials, removing vagueness associated with shops attempting to “guess” probable time for unique tasks and probable costs for unique and in some cases yet-to-be-fabricated parts.

  Aftermarket Parts Regulation, Aftermarket Parts Laws, Auto Legislation, Automotive Legislation, Federal Regulation Aftermarket Parts
Utah Vintage Travel Trailers: A SEMA-supported bill to create a statutory definition of a “vintage travel trailer” and provide for a one-time $40 registration fee was approved by the Utah Senate Transportation Committee and now moves to the floor of the Senate for a vote by all members. The House of Representatives has already approved the bill, under which vintage travel trailers would also be eligible for a special group license plate and would be exempted from wheel cover, mudguard, flap or splash apron requirements. The measure defines a “vintage travel trailer” as a travel trailer, camping trailer or fifth-wheel trailer that is 30 years old or older and primarily a collector’s item that is used for participation in club activities, exhibitions, tours, parades, occasional recreational or vacation use and other similar uses.

Vermont Exhaust Noise: SEMA is opposing legislation to ban motor-vehicle exhaust systems that increase the noise level above the level emitted by the originally installed system. Under the bill, violators would not pass the state’s required inspection. The bill does not provide an opportunity for vehicle hobbyists to install and use aftermarket-modified exhaust systems that meet an objective 95-decibel limit under a fair and predictable test. In addition, the measure does not supply inspectors with an enforcement standard, allowing them to make subjective judgments on whether an exhaust system increases “the noise emitted by the motor vehicle above the level emitted by the exhaust system as originally installed.”

Virginia Restoration Projects: The House of Delegates approved legislation that originally threatened to provide localities with the authority to raise the amount charged from $100 to $500 for an annual license tax for vehicles that do not display current license plates. Working with Virginia hobbyist groups, SEMA negotiated amendments with the bill’s sponsor to 1) totally exempt from the license tax all vehicles 25 years old and older that are undergoing restoration or repair and 2) extend the exemption to all other vehicles (including parts cars) undergoing restoration or repair that are stored on private property for fewer than 60 days. Vehicles stored within a structure would remain exempted from the tax. Under current law, all vehicles—even those 25 years old and older—are subject to the license tax. The bill now moves to the Virginia Senate for consideration.

Washington Restoration/Custom Shops: A SEMA-supported bill to exempt restoration and custom shops from the requirement that they provide written estimates for the repair of any vehicle that qualifies for a “horseless carriage” or “collector vehicle” license plate or is a “parts car,” “street rod” or “custom vehicle” was approved by the Washington State Senate, clearing its way for consideration by the House of Representatives. Under a SEMA-drafted amendment, the bill would allow restoration and custom shops to bill at least every two weeks on a time-and-materials basis. Shops would be able to accurately inform customers of actual costs and materials, removing vagueness associated with shops attempting to “guess” probable time for unique tasks and probable costs for unique and in some cases yet-to-be-fabricated parts.

Washington Inoperable Vehicles: SEMA-model legislation to prohibit cities or towns from enforcing an ordinance, development regulation, zoning regulation or administrative practice that prevents legitimate automobile collectors from pursuing their hobby was approved by the Senate Government Operations Committee but not considered by the full Senate before it died in the legislative session. Under the bill, a limited number of junked, wrecked or inoperable vehicles, including parts cars, stored on private property, would have required only screening from public view if required by local law. The bill will be reintroduced next year.

West Virginia Ethanol: The House of Delegates has introduced a concurrent resolution urging the Environmental Protection Agency (EPA) to revoke its decision to allow the sale of gasoline with 15% ethanol (E15) until there is clear and convincing scientific evidence that El5 does not pose a risk to any gasoline-powered vehicle or equipment. SEMA is supporting the resolution.

West Virginia Exhaust Noise: The House Transportation Committee passed SEMA-model legislation that would allow West Virginia’s vehicle hobbyists to install and use aftermarket-modified exhaust systems that meet a 95-decibel limit. The bill must now be approved by the Judiciary Committee before moving to the House floor for a vote by all members. Current West Virginia law allows only a muffler originally installed by the manufacturer or an equivalent. The bill would remove subjective provisions in the law and force compliance with an objectively measured standard.

West Virginia Property Tax: SEMA is supporting legislation to provide owners of antique motor vehicles with a cap on property taxes paid on antique motor vehicles. The bill was approved by the House Transportation Committee and will now be considered by the Finance Committee. West Virginia law defines an “antique motor vehicle” as any motor vehicle that is more than 25 years old and is owned solely as a collector’s item. The bill would assess antique motor vehicles for property taxes at their salvage value. That value could not exceed $500. At the most costly rate in West Virginia (approximately 3%), the actual property tax paid by antique motor vehicle owners at the maximum salvage value would be only about $15 per year.

Federal Update

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Ethanol Fuel: The U.S. House Science Committee approved a SEMA-supported bill that directs the National Academy of Sciences to conduct a study on how gasoline blended with 15% to 20% ethanol (E15 and E20) may impact gas-powered vehicles. The analysis would consider a variety of issues, including tailpipe emissions, materials compatibility and fuel efficiency. The House bill would prevent the EPA from introducing E15 into the marketplace until the report has been submitted to the House Science Committee. The bill will now be considered by the full House of Representatives. Ethanol increases water formation in the gas tank, which can then produce formic acid and corrode certain metal, plastic and rubber parts. Last year, the EPA approved the sale of E15 for model-year 2001 and later vehicles. The EPA agreed with SEMA’s concerns that ethanol poses a threat to older vehicles and made it “illegal” to fuel pre-2001 vehicles with E15. However, SEMA contends that a gas-pump warning label will not protect consumers from accidentally misfueling these vehicles. E15 has not yet been marketed. It is still the subject of several lawsuits and legislation to block its sale.

Bonus Depreciation: SEMA joined with the National Association of Manufacturers and a number of other organizations in urging the U.S. Congress to extend the 100% bonus depreciation through 2012. The depreciation had been at 100% since 2010 but dropped to 50% on January 1, 2012. Lawmakers are considering whether to include the extension within a larger bill to extend the payroll tax cuts for the rest of the year. The depreciation provision would allow businesses to write off 100% of the cost of new equipment in the first year rather than depreciating the cost over multiple years. SEMA contends that the bonus depreciation encourages companies to invest in newer, more efficient equipment and spurs sales and creates jobs.

Merging Federal Agencies: President Obama wants Congress to grant him authority to reorganize the federal government, as was permitted for more than 50 years from the Hoover through Reagan administrations. Congress would have an up-or-down vote on each proposed change. The intent is to consolidate functions and reduce duplication in the federal workforce. To start, the White House has proposed merging the Commerce Department and five agencies tied to the business community: the Small Business Administration (SBA), the Office of the U.S. Trade Representative, the Export-Import Bank, the Overseas Private Investment Corp. and the Trade and Development Agency. The new department would oversee trade, investment, business/economic development, technology and economic statistics and be led by a cabinet-level secretary. While Congress considers the issue, President Obama intends to elevate the current SBA Administrator position to a cabinet-level post, at least until the new department is organized.

Tire Fuel Efficiency: The National Highway Traffic Safety Administration (NHTSA) held a public workshop in February to gather additional information on how to implement a tire fuel efficiency consumer information program. The program is required under a 2007 law. In 2010, NHTSA established the test procedures to be used by tire manufacturers when rating the fuel economy, safety and durability characteristics of replacement tires. However, the agency is still debating how to convey the information to consumers at the point of sale and online. NHTSA is also interested in reviewing the experiences other countries have had in pursuing similar programs. The premise for the 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 (tread-wear life). The 2007 law included a SEMA provision exempting 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.

Design Patents: A bill has been introduced in the U.S. House of Representatives that would allow companies to market collision repair parts without infringing a design patent after a vehicle has been marketed for two and a half years. Under current law, a design patent covers the ornamental design for an object having practical utility for a 14-year term. At issue is the recent practice of many automakers to obtain design patents for individual vehicle parts associated with collision repairs, such as fenders, lamps, hoods, bumpers and grilles. Historically, the companies have received design patents for the car’s overall design rather than individual parts. The design patent allows a company exclusive rights to exclude others from copying the product or to license the rights. SEMA is reviewing the legislation. A House committee held a hearing two years ago on a previous version of the bill that would have provided a total exclusion for replacement parts. The auto companies noted that they had invested enormous amounts of money in developing the part designs only to have them copied in a matter of hours and were seeking to protect that investment through rights available under current law. Opponents countered that auto companies were seeking to eliminate competition and that the design patents raise prices for consumers in repair costs and insurance premiums. The current bill seeks to craft a compromise approach.

Counterfeit Products: U.S. Customs and Border Protection and U.S. Immigration and Customs Enforcement seized nearly 25,000 counterfeit and pirated goods in fiscal year 2011, a 24% increase from the previous year. The value of the seizures actually decreased by 5%, totaling $179 million for FY 2011. The high-volume/lower-value differential was attributed to an increase in express courier and consolidated shipments and the growth of websites selling counterfeit goods directly to consumers. The top 10 categories of counterfeit products seized were consumer electronics, footwear, pharmaceuticals, optical media, apparel, perfume/cologne, watches, cigarettes, toys/electronic games, auto parts and all other commodities. China continues to be the primary-source country for counterfeit and pirated goods seized, accounting for 62% or $125 million of the total domestic value of seizures.

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