SEMA News - December 2009
2009: The Year in Review
The laws and regulations that govern how SEMA members do business have an increased and growing impact on the way automotive specialty-equipment products are made, distributed and marketed. As the nation and our industry struggle with a balky economy, SEMA’s charge is to stay on top of every relevant state and federal matter of consequence to its membership to ensure the best possible outcome.
The following are just a few examples of critical legislative/regulatory issues that the government affairs office was involved in this year. A comprehensive review of these and other issues follows.
- Negotiated provisions to reduce the impact of “Cash for Clunkers” on the automotive aftermarket and the hobbyist community.
- Partnered with small-business coalition to seek affordable health care reform that will not impose costly employer mandates.
- Identified affordable fuel economy test procedures to allow member companies to produce data recognized by regulators, which may then provide significant marketing opportunities.
- Enacted into law SEMA-model street rod/custom vehicle/replica titling legislation in Wyoming, Utah and North Carolina, which joins 17 other states that have enacted the model.
Emissions Tests: SEMA defeated legislation that sought to require annual smog-check inspections for vehicles 15 years old and older. The bill would also have required that funds generated through the additional inspection fees be deposited into an account that could have been used to scrap older cars. Pre-’76 motor vehicles would have remained exempt under the measure.
“Gas Guzzlers”: SEMA helped defeat legislation that would have authorized the establishment of a surcharge tax for some new motor vehicles based on state calculations of carbon emissions. Funds collected under the program would have been used in part to fund rebates for vehicles, including hybrids and electric cars. SEMA opposed the bill because it would have made popular performance and luxury cars—as well as SUVs, light trucks and minivans—substantially more expensive to own without necessarily curtailing greenhouse gas emissions.
Tire-Age Notification: SEMA was successful in derailing legislation that would have required tire dealers to provide a written disclosure to customers to inform them about the risks associated with tire age. The bill had been approved by the full assembly. SEMA had asked the sponsor to adopt an amendment to exempt limited-production specialty tires from the scope of the tire-age notification requirement. This exemption is consistent with tire regulations at the federal level and California’s tire fuel-efficiency law, enacted in 2004.
Scrappage: SEMA submitted comments opposing a proposal to spend roughly $30 million annually to augment the state’s existing scrappage program. The proposal would provide incentives for vehicles not currently eligible under the Consumer Assistance Program by removing the existing requirements that vehicles be subject to and fail smog checks to participate. (The agency is targeting pre-’76 vehicles that are no longer subject to emissions inspections.) Participants would receive up to $1,500 per vehicle. The proposal would also establish a pilot voucher program in the South Coast and San Joaquin Valley air basins that targets the highest-emitting vehicles and requires their replacement with newer, cleaner vehicles. The local air districts would work with the Bureau of Automotive Repair (BAR) to determine vehicle eligibility and low-income status. Once approved, the districts would provide the applicant with a letter of eligibility from BAR and a redeemable voucher. Consumers would retire their vehicles at participating dismantlers, receiving immediate compensation for vehicle retirement. Consumers could then redeem their vouchers at participating dealerships toward the purchase of replacement vehicles. The California Air Resources Board (CARB) is proposing that the voucher compensation be $2,000 or $2,500 per vehicle, depending on income level.
Vehicle Noise: SEMA defeated legislation that would have required motor vehicles and devices to be operated, constructed and adjusted to prevent unnecessary or unusual noise. The bill did not define what constituted unnecessary or unusual noise. SEMA also defeated legislation that would have provided an incentive to localities to increase the number of citations issued for violation of vehicle noise regulations.
Tires: SEMA defeated legislation that sought to prohibit the sale of any new tire that was manufactured more than six years prior to the date of the sale of the tire. The bill may be considered again next year.
Antiques: State hobbyist groups, working with SEMA and SEMA-member companies, reached a tentative compromise with environmental regulators on a proposal that originally sought to redefine the term “antique vehicle” in order to force more hobby cars into the emissions inspection program. Under existing law, an antique vehicle is defined as “a motor vehicle or motor scooter that is at least 25 years old.” Under the initial regulation, the definition would be revised to require that the vehicle must be at least 25 years old; registered and plated as an historic motor vehicle; driven a maximum of 3,000 miles per calendar year; and include federally required pollution-control equipment for that make and model year. Under the plan, the vehicle would be periodically forced into a vehicle emissions test site to verify that these requirements have been met. Under the compromise, these vehicles would be exempted from the mileage limit and the pollution control equipment requirement if they were insured under a collectible-vehicle automobile insurance policy.
Exhaust Noise: Montana legislation that sought to repeal a SEMA-sponsored law enacted in 2007 that permits vehicles to be modified with exhaust systems that do not emit an excess of 95 decibels died when the legislature adjourned for the year. Under the repeal legislation, Montana would have returned to subjective noise level determinations when considering whether an exhaust system is legal.
Tire Efficiency: SEMA again defeated legislation that sought to require the development of a statewide program to mandate that replacement tires for passenger cars and light trucks be as energy efficient as tires sold as original equipment. SEMA has defeated previous versions of this bill. While the measure contained a SEMA-drafted exemption for some hobbyist tires, including limited-production and off-road tires, SEMA has consistently recommended that the bill be rejected, since the replacement-tire efficiency program conflicts with federal law by regulating fuel economy, imposes substantial redesign costs on tire manufacturers, competes with federal consumer information requirements and essentially sets a 50-state standard.
Tire Dating: SEMA defeated legislation that would have prohibited the manufacture, distribution or sale of tires for passenger vehicles, multi-purpose passenger vehicles or light trucks unless a date of manufacture was clearly molded on both sides of the tire in a non-coded fashion.
Taxing “Gas Guzzlers”: SEMA defeated legislation that would have established a progressive purchase or lease surcharge for some new motor vehicles based on state calculations of carbon emissions. Depending on the vehicle purchased, this surcharge could have required owners to pay up to $2,500 more for the vehicle.
Street Rods/Customs: A version of SEMA-model legislation to create a vehicle registration classification for street rods, replicas and custom vehicles was signed into law by Governor Bev Perdue. The law retains the key components of the SEMA-model bill while relieving vehicle owners of unfair title branding and inspection concerns. The measure provides specific registration and titling classes for street rods and replicas; allows for the use of non-original materials; and creates a titling and registration criterion that assigns replica vehicles the same model-year designations as the production vehicles intended to be replicated.
Scrappage: SEMA defeated legislation that would have implemented a state vehicle scrappage program for passenger vehicles that were at least 14 years old. Participants would have received around $1,000–$1,500 to scrap their cars and purchase current-year vehicles under 10,000 lbs. or one from the previous three model years. All trade-in vehicles could have been destroyed, regardless of their historical value or collector interest. Had this effort been successful, hobbyists could have been denied the availability of vintage cars and parts for restoration projects.
Aftermarket Parts: Oregon Governor Ted Kulongoski signed into law an alternative to legislation that originally sought to prohibit the sale and distribution of aftermarket motor vehicle parts if alternatives are available that “decrease greenhouse gas emissions from motor vehicles.” Under the alternative, negotiated between SEMA and environmental regulators, the new law will only allow the state to adopt the present California certification process for aftermarket emissions-related parts, allowing parts manufacturers to meet one uniform standard rather than a patchwork of multiple state standards.
Antique Vehicles: SEMA-supported legislation to amend the state’s current law defining antique motor vehicles to also permit use of these vehicles for “selling, testing the operation of or obtaining repairs” was signed into law by Governor Phil Bredesen. The bill had originally sought use for everyday general transportation. The Tennessee law continues to allow use of antique vehicles for club activities, exhibits, tours and for general transportation on Saturday and Sunday.
Street Rods/Custom Vehicles: SEMA-model legislation to create a vehicle registration classification for street rods and custom vehicles was approved overwhelmingly by the Utah State Legislature and signed into law. 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. The law allows kit cars and replicas to be assigned certificates of title bearing the same model-year designations as the production vehicles they most closely resemble.
Inoperable Vehicles: Under pressure from SEMA, legislation that would have allowed the city of Newport News to adopt a more restrictive inoperable vehicle ordinance was withdrawn. Under the bill, the city could have adopted an ordinance prohibiting any person from keeping more than one inoperable motor vehicle on private property except within a fully enclosed building. Further, the bill required that the one vehicle be shielded from view by the “installation of an opaque fence.” In 2004, Virginia signed into law a SEMA-negotiated bill to exempt at least two inoperable vehicles being actively repaired or restored on private property from any local ordinance if shielded or screened from public view. The law defines “shielded or screened from view” as not visible by someone standing at ground level from outside of the property on which the inoperable vehicles are located. This measure would have changed the rules of this fairly negotiated compromise.
Scrappage: SEMA helped defeat an effort that would have implemented a vehicle scrappage program for passenger vehicles more than 15 years old. Under the bill, qualifying vehicles would have had to be registered for a 24-month period and in satisfactory operating condition. Replacement vehicles purchased under the plan would have been required to have an EPA highway gasoline mileage rating of at least 30 mpg. Participants in the program were to be granted a sales tax exemption for the first $2,000 of tax paid on the purchase price. All trade-in vehicles would have been destroyed, regardless of their historical value or collector interest.
Inoperable Vehicles: SEMA defeated legislation that sought to redefine “abandoned motor vehicles” to include vehicles or vehicle parts that are either unlicensed or inoperable, or both, are not in an enclosed building and have remained on private property for more than 30 days.
Exhaust Noise: SEMA defeated legislation that would have provided that the noise from a motor-vehicle exhaust system deemed “disturbing or unreasonably loud” constituted disturbing the peace under state law.
Street Rods/Custom Vehicles: SEMA-model legislation to create a vehicle registration classification for street rods and custom vehicles and provide for special license plates for these vehicles was approved by the Wyoming Legislature and signed into law by Governor Dave Freudenthal. 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. The law allows kit cars and replica vehicles to be assigned certificates of title bearing the same model-year designations as the production vehicles they most closely resemble.
Nova Scotia: At the request of SEMA, a regulation that would have required retailers and installers to provide proof that all suspension lift products had been approved by a certified engineer has been put on hold to allow regulatory agencies to conduct an impact study. Currently, the province has only one certified engineer available to conduct these inspections. For the time being, and absent an obvious structural deficiency in the suspension equipment, inspectors will be instructed to not pass or fail a vehicle based on the fact that it has an altered ride height.
Saskatchewan: SEMA submitted technical comments to a regulatory proposal issued by Saskatchewan to regulate raised vehicles in the province. Under the proposal, all aftermarket raised vehicles operated on Saskatchewan highways would be subject to a raised vehicle inspection after January 1, 2011. The province intends to impose tiered frame-height limits based on a vehicle’s rated operating weight. In addition, regulators are considering requiring owners to carry a letter of authorization issued by the province in order to operate a raised vehicle. The letter of authorization would signify that the vehicle has passed inspection and would be shown to law enforcement during roadside stops to demonstrate compliance with the applicable frame-height limit. The province is also considering restricting the maximum speeds of raised vehicles with tires that have a loaded rolling diameter of greater than 35 inches.
Health Care Reform: Providing access to the estimated 27 million small-business owners, employees and dependents who are now uninsured has been a SEMA priority for years. In a letter addressed to President Obama and copied to Congress, SEMA cautioned lawmakers not to ignore structural changes needed to reduce costs, increase competition and provide access to more choices. SEMA recommended that Congress allow small businesses to pool their resources when shopping for insurance, reject employer mandates under a “pay or play” system, require individuals to participate in the system if they have access to a variety of insurance options and tax incentives, and implement tort reform to eliminate billions of dollars of spending on unnecessary defensive medicine practices. SEMA worked with the National Federation of Independent Business and a coalition of other organizations to address small-business concerns within the complex legislation.
Vehicle Scrappage: After months of contentious debate, lawmakers enacted a $3 billion “Cash for Clunkers” bill that paid consumers to scrap cars and trucks getting 18 miles per gallon or less in exchange for a cash voucher to buy a new car. Consumers received a $3,500 or $4,500 credit, depending on the fuel-economy improvement of the new vehicle. The program generated nearly 700,000 new-car sales. Sales dropped precipitously when the program ended. SEMA convinced lawmakers to exclude vehicles that were 25 years old or older from being scrapped. The provision served to safeguard vehicles that may possess unique historic or aesthetic value and are irreplaceable to hobbyists as a source of restoration parts. The program also allowed all parts, except the engine, to be recycled. During the scrappage debate, SEMA argued that a better environmental approach would have been to support vehicle repairs, installation of specialty equipment to reduce emissions and increase fuel economy, and engine recycling.
Car Collector Appreciation Day: Senator Jon Tester introduced Senate Resolution 97, which designated June 1, 2009 to be “Collector Car Appreciation Day.” The resolution recognized the value in collecting and restoring historic and classic cars. It also acknowledged this as a contribution toward preserving America’s technological achievements and cultural heritage. SEMA will work with the Senator to seek its reintroduction in 2010.
Fuel Economy and CO2 Emissions: The EPA and National Highway Traffic Safety Administration (NHTSA) are drafting regulations to implement new fuel-economy standards for model-year 2012–2016 cars/trucks and simultaneously reduce carbon dioxide (CO2) emissions through a national standard. The Obama administration announced this approach last spring as a mechanism to end years of debate between California, the federal government and the automakers over who can regulate CO2 emissions. The average Corporate Average Fuel Economy (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 will set a CO2 emissions standard of 250 grams per mile for vehicles sold in 2016, roughly equivalent to 35.5 mpg.
Greenhouse Gases: The House of Representatives passed a bill to establish national limits on greenhouse gases and authorize an emissions credit trading system. The legislation would require a 17% reduction in CO2 emissions by 2020 and 80% by 2050, based on 2005 levels. The primary targets are large stationary source emitters, such as powerplants, factories and refineries. A similar bill was introduced in the Senate. The Congressional leadership is seeking to enact a measure into law by 2010. In the absence of a law, the EPA may assert its own authority to regulate CO2 emissions from stationary sources. It has already moved to regulate auto tailpipe emissions.
Ethanol-15: SEMA submitted comments to the EPA opposing a request to allow the ethanol content of gasoline to increase to 15% (from 10%). SEMA cited concerns that the additional content could harm automobile parts of all ages, including special-interest collector and historic vehicles. A number of other organizations expressed similar concerns. Tests using ethanol concentrations of up to 20% have shown a notable increase in wear on vehicle fuel systems produced through model-year ’95 and especially for pre-’90 vehicles. Fuel pumps, tanks, seals, hoses and other rubber components are particularly subject to failures. The EPA is expected to rule on the issue in late 2009.
Federal Lighting Standard: The NHTSA’s revised lighting equipment standard is scheduled to take effect in December 2009. The NHTSA reorganized and attempted to simplify the complex standard by incorporating performance and test requirements previously referenced in about 35 standards adopted by the Society of Automotive Engineers (SAE). The revision also incorporates NHTSA policies outlined over the past several decades through letters of interpretation. The NHTSA also denied a five-year-old petition to harmonize the headlamp lighting standards for Europe and the United States by allowing manufacturers to certify compliance based on the upper- and lower-beam headlamp patterns under Europe’s ECE R112. In addition, the agency denied a longstanding petition by General Motors to mandate the installation of daytime running lamps (DRLs) on all new light-duty vehicles. The NHTSA will continue to allow manufacturers to voluntarily install DRLs.
Tire Fuel Efficiency: The NHTSA is developing a program for mass-produced replacement tires, whereby tire manufacturers would be required to rate the tires for fuel efficiency, safety and durability based on performance tests established by the NHTSA. The program is required under a 2007 law that included 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 specialty tires at issue are mostly produced for classic and antique cars and for some off-highway vehicles. SEMA urged the NHTSA not to impose any unnecessary reporting requirements on the limited-production tires for which manufacturers had claimed the low-volume exemption. The NHTSA may finalize the program by early 2010.
Roof Crush Test: The NHTSA strengthened the vehicle roof crush rule by requiring manufacturers to design roofs that withstand at least three times the weight of a light-duty vehicle (up to 6,000 lbs.) during a two-sided roof strength test. The current standard, which had remained unchanged since 1971, requires the roof to support at least 1.5 times the vehicle weight when tested on one side only. The tests are conducted by pressing a metal plate down on the roof over the driver’s seat, then the passenger’s seat. The requirements will be phased in between 2012 and 2016. Responding to SEMA’s comments, the NHTSA does not believe that the revised standard will have any detrimental impact on the industry’s ability to accessorize vehicles with a sunroof or other item of equipment that interacts with the roof crush standard.
Rearward-Viewing Cameras/Sensors: Under a law passed in 2008, the NHTSA has until early 2011 to implement a regulation requiring that all new passenger cars be equipped with a means for alerting the driver if a child is behind the vehicle when it is being backed up. The NHTSA began the process by requesting public input on the effectiveness of various rear-visibility systems. The NHTSA also wants guidance on developing tests to evaluate the performance of four countermeasures—direct view, rear-mounted convex mirrors, rear-object detection sensors (such as ultrasonic or radar-based devices) and rearview video systems. The specialty-equipment market has been at the forefront of offering cameras and sensors to address the issue.
Economic Stimulus Tax Breaks: The $787 billion stimulus bill that President Obama signed into law contained several provisions of direct benefit to SEMA members. Highlights included a bonus depreciation permitting businesses to immediately write off 50% of the cost of new equipment purchased in 2009 and to expense up to $250,000 in capital expenditures rather than recovering the costs over time through depreciation. Small businesses with gross receipts of $15 million or less can carry back net operating losses for five years instead of two years. The Obama administration also initiated programs to make capital available through low-interest and interest-free loans backed by the Small Business Administration.
Estate Tax: SEMA joined with a number of other associations in the Permanent Estate Tax Relief NOW Coalition to seek passage of legislation to establish a permanent level for the estate tax before it reverts to a 55% tax rate in 2011. The coalition supports a compromise level at the current rate of $3.5 million/individual ($7 million couple), with additional monies being taxed at 45%. Small-business owners should then be able to maintain family-run businesses without being forced to sell the company to pay estate taxes.
Research and Development Tax Credit: SEMA joined a number of other associations and companies in urging lawmakers to extend the credit for one more year, make permanent a simpler alternative for calculating the credit and increase the credit from 14% to 20%. The Research and Development tax credit is currently funded through 2009. While President Obama supports a permanent tax credit rather than yearly extensions, this has proven to be an elusive goal because lawmakers are then required to budget for 10 year’s worth of credits.
Labor Legislation: President Obama signed into law the Ledbetter Fair Pay Act, which overturns a 2007 Supreme Court ruling that enforced a 180-day statute of limitations for filing a pay discrimination complaint. At issue was whether an employee could pursue an allegation of pay discrimination beyond a 180-day filing deadline. The new law relaxes the statute of limitations and clarifies that discrimination can be alleged each time a paycheck is issued. SEMA joined the National Association of Manufacturers and the U.S. Chamber of Commerce in opposing the bill, since it could open the door to frivolous litigation and open-ended lawsuits without time limits.
Wilderness Legislation: President Obama signed into law a bill that adds more than 2 million acres to the National Wilderness Preservation System. The wilderness designation is consequential since no mechanized activity is permitted on lands so designated. The issue is of keen interest to off-roaders and the SEMA-member companies that market off-road equipment. The new wilderness areas span nine states, including areas in Joshua Tree National Park, the eastern Sierras, Mt. Hood and Zion National Park. Lawmakers held hearings on two other wilderness bills. SEMA submitted comments in opposition to The Northern Rockies Ecosystem Protection Act. The bill would set a precedent by using the term “bioregion” as justification for converting 24 million acres in Idaho, Montana, Wyoming, Oregon and Washington into wilderness. SEMA noted that there are a myriad of bioregions across America, and it is too simplistic to create one massive ecosystem devoid of motorized activities. SEMA also opposed an over-reaching bill to designate 9.4 million acres of land in Utah as “red rock” wilderness.