SEMA News—August 2019

LEGISLATIVE AND TECHNICAL AFFAIRS

By Stuart Gosswein

FEDERAL UPDATE

As of press time, U.S. and Chinese officials were seeking to reach agreement on trade talks that would result in lowering the U.S./China trade deficit and deterring cyber theft of intellectual property by the Chinese government and companies.

Tariffs—Automobiles and Auto Parts: The U.S. Department of Commerce (DOC) sent President Trump the results of its investigation on whether imported automobiles and auto parts pose a threat to U.S. national security. A decision on whether to impose tariffs, originally due in May, was postponed until November. President Trump wanted to give U.S. negotiators six months to reach new trade agreements with the European Union and Japan.

The administration’s options include imposing global tariffs of as much as 25%, limiting the tariffs to certain countries and products, or no tariffs. The DOC investigation applies to all types of cars and parts, including new cars, classic cars, OEM parts and specialty auto parts.

In delaying the tariffs, President Trump cited findings from the DOC report, which has not been made public. The report notes concerns about increases in the volume of automobile and auto parts imports over the past three decades along with unease about foreign markets such as the European Union (EU) and Japan that have imposed significant barriers to U.S. automotive exports. The report found that a continued contraction of the “American-owned automotive industry…will significantly impede the United States’ ability to develop technologically advanced products that are essential to our ability to maintain technological superiority to meet defense requirements.” Examples provided include research and development on engine and powertrain technology and light-weight material advancements.

SEMA is part of the Driving American Jobs Coalition, a group representing the entire scope of the auto industry, including OEMs, dealers, suppliers and the aftermarket. While the coalition supports the Trump Administration’s efforts to create fair trade, it has stated that the investigation has resulted in prolonged uncertainty for the 10 million Americans whose livelihoods depend on the U.S. auto industry. The coalition noted that the additional six-month delay only increases uncertainty as businesses contend with higher production costs, lower sales and profit margins, and retaliatory actions by U.S. trading partners.

Tariffs—China: As of press time, U.S. and Chinese officials were seeking to reach agreement on trade talks that would result in lowering the U.S./China trade deficit and deterring cyber theft of intellectual property by the Chinese government and companies. In May, the Trump Administration raised tariffs from 10%–25% imposed on $200 billion worth of Chinese imports. The so-called List 3 group of Chinese imports includes hundreds of auto part categories.

The Trump Administration had already imposed 25% tariffs on $50 billion worth of Chinese imports in July and August 2018. List 1 and List 2 goods include some miscellaneous metal and rubber parts for auto equipment, machinery, tools and measurement devices. In turn, China imposed retaliatory tariffs on $60 billion worth of U.S. goods, mostly agriculture but including some vehicle parts. If talks are unsuccessful, President Trump has threatened to impose 25% tariffs on any Chinese products not already subject to the surcharge.

Tariffs—Steel and Aluminum: The United States reached agreement with Canada and Mexico to exempt those countries from global steel and aluminum tariffs as of mid-May. The United States imposed tariffs on steel (25%) and aluminum (10%) in June 2018, citing national security concerns. Argentina, Australia, Brazil and South Korea were exempt under trade agreements. The tariffs apply to processed raw materials (steel/aluminum plate, sheets, bars, etc.) but not finished products (e.g., wheels, exhausts, etc.).

An investigation conducted by the DOC found that U.S. dependence on foreign steel and aluminum posed a threat to national security. The DOC cited excess global production, especially in China, which had reduced prices and resulted in the closure of many U.S. factories.

The agreement to exempt Canada and Mexico from the metal tariffs will boost prospects for the U.S. Congress to ratify the U.S.-Mexico-Canada Agreement (USMCA), which would replace the North American Free Trade Agreement. The United States may reimpose tariffs on steel or aluminum if there is a meaningful surge in imports from Canada or Mexico.

Record Retention—Vehicle and Tire Manufacturers: The National Highway Traffic Safety Administration is proposing to require manufacturers of motor vehicles, tires and child-restraint systems to retain records for 10 years rather than five. Information covered includes warranty claims, consumer complaints, field reports, and other records concerning alleged and proven motor vehicle or motor vehicle equipment defects and malfunctions that may be related to motor vehicle safety. There is no change in the record retention requirements for motor vehicle equipment manufacturers, who must retain for five years the underlying “early-warning reporting” records of a claim or notice involving a death. Equipment manufacturers must also retain records for customer satisfaction campaigns, consumer advisories, recalls or other activities involving the repair or replacement of vehicles or equipment.

STATE UPDATE

Delaware—Street Rods: The Delaware legislature passed a bill easing the process for registering a street rod in the state. The bill now goes to Governor John Carney for approval. The legislation changes the definition of a street rod from a vehicle manufactured before ’70 to a vehicle 25 years old or older. The bill also removes the requirement that a street rod’s tires be covered by fenders.

Hawaii—Military Vehicles: The Hawaii legislature passed a bill allowing for the titling and registration of former military vehicles. The bill now goes to Governor David Ige for enactment into law. Currently, former military vehicles are not allowed to be registered or titled for on-road use in the state.

Hawaii—Motorsports: Companion resolutions offered in Hawaii advocating for the construction of a new racetrack on the island of Oahu failed to pass before Hawaii’s legislature adjourned for 2019. The Hawaiian racing community lost motorsports facilities on Oahu more than a decade ago.

Texas—Assembled Vehicles: Governor Greg Abbott signed into law legislation to create a specific registration and titling class for assembled vehicles, including kit cars, dune buggies and former military vehicles. The law will provide guidance to the Texas Department of Motor Vehicles on how to treat assembled vehicles. Before passage, there was no specific registration and titling class for certain assembled vehicles such as dune buggies.

Iowa—License Plates: Several bills introduced in 2019 failed to pass both chambers of the Iowa legislature prior to the adjournment of the session. The Senate Transportation Committee failed to consider a bill allowing for the display of a single license plate on the rear of a vehicle. Similarly, an amended version of a bill allowing vehicles 25 years old and older to display a single license was passed by the Senate but failed to be approved by the House.

Maine—Ethanol: Maine Governor Janet Mills signed a bill into law allowing the sale of ethanol-free gasoline statewide. Governor Mills vetoed legislation prohibiting the sale of motor fuel containing greater than 10% ethanol.

Nevada—Military Vehicles: Legislation allowing for the titling and registration of retired military vehicles passed out of committee in the Nevada Assembly. Currently, retired military vehicles are not allowed to be registered or titled for use on highways in the state. The bill will now be up for a final vote on the assembly floor.

Tennessee—Antique Vehicles: Legislation to allow antique vehicles to be driven up to 5,000 mi. per year for general transportation failed to pass before the Tennessee legislature adjourned for 2019. Under current law, antique vehicles may be driven to and from club activities, exhibits, tours and parades; for the purpose of testing the operation of and obtaining repairs; and for general transportation only on Saturday and Sunday. The bills are eligible to be reconsidered during next year’s legislative session.