SEMA News—December 2019

LEGISLATIVE AND TECHNICAL AFFAIRS

By Stuart Gosswein

Outdoor Recreation: For the second consecutive year, federal government statistics demonstrated that outdoor recreation is a key driver of the national economy and communities around the country. A U.S. Bureau of Economic Analysis report found that outdoor recreation in 2017 supported 5.2 million jobs and accounted for $778 billion in annual economic impact, which represents 2.2% of the country’s gross domestic product. Some of the largest outdoor recreation activities include motorized recreation, boating and fishing, RVing, biking, hunting, camping and skiing. Courtesy Shutterstock.com

2019: The Year in Review

The laws and regulations that govern how SEMA members do business have a continuous impact on the way automotive specialty-equipment products are made, distributed and marketed. The charge of the SEMA government affairs office is to stay on top of all relevant state and federal legislation and regulations and advocate for industry positions to ensure the best possible outcome for SEMA’s membership. The following are a few examples of critical legislative/regulatory issues addressed by the SEMA government affairs team over the past year.

FEDERAL UPDATE

Collector Car Appreciation Day: The 10th annual Collector Car Appreciation Day (CCAD) took place on Friday, July 12, 2019. Both the U.S. Senate and the House of Representatives introduced resolutions (H. Res. 108/S. Res. 271) to focus attention on the vital role automotive restoration and collection plays in American society. Thousands of Americans gathered at car cruises, parades and other events to celebrate the nation’s automotive heritage. The day is also international in scope, as many Canadian Provinces passed resolutions and hosted events. The next CCAD is set for July 10, 2020.

RPM Act: The Recognizing the Protection of Motorsports (RPM) Act is being considered by the U.S. Congress. The bill clarifies that the Clean Air Act allows motor vehicles to be converted into dedicated race cars and that it is legal to produce, sell and install race parts for those vehicles. Passage of the RPM Act will protect sales beyond emissions-related parts, including racing tires, wheels, brakes, suspension equipment and rollcages. Customers won’t be buying and installing those products if a car or motorcycle cannot be converted into a dedicated race vehicle. The bill has been subject to previous Congressional hearings, and SEMA is working with lawmakers to approve the legislation in the current Congress. To contact your lawmakers, visit www.sema.org/rpm.

Tariffs: SEMA is working with several coalitions of industry associations to oppose the imposition of tariffs on a variety of worldwide products and materials. While SEMA supports the Trump administration’s efforts to create fair and reciprocal trade and to protect intellectual property rights, the association remains concerned that tariffs are not accomplishing that shared objective.

• Steel/Aluminum: The U.S. government has imposed global tariffs on steel (25%) and aluminum (10%). Most of the tariffs began on June 1, 2018, with Argentina, Australia, Brazil and South Korea being exempted based on trade agreements. Mexico and Canada were exempted on May 20, 2019. The tariffs apply to processed raw materials (steel/aluminum plate, sheets, bars, etc.) but not finished products (e.g., wheels, exhaust systems, etc.). U.S.-based companies are eligible for one-year tariff exclusions if they can demonstrate that the foreign-produced material is not made in the United States in reasonably available quantity or satisfactory quality. More than 120,000 company exclusion requests have been received to date.
• Chinese Products: The United States has imposed tariffs on nearly all products from China. The imposition has been staggered with an intent to remove the tariffs if a trade agreement is secured. Trade negotiations are still ongoing.

• $34 billion: July 6, 2018: 25% tariffs imposed on 818 Harmonized Tariff Code (HTC) listings, including miscellaneous metal and rubber parts for auto equipment. Tariffs raised to 30% on October 15, 2019.
• $16 billion: August 23, 2018: 25% tariffs imposed on 279 HTC listings, including many types of plastics. Tariffs raised to 30% on October 15, 2019.
• $200 billion: September 24, 2018: 10% tariffs imposed on 5,745 HTC listings, including most auto parts. Tariffs raised to 25% on May 10, 2019. Tariffs raised to 30% on October 15, 2019.
• $300 billion: September 1, 2019: 15% tariffs imposed on more than 3,000 HTC listings. December 15, 2019: 15% tariffs on virtually all other Chinese products, including cell phones, computer monitors and clothing.

• Imported Autos/Auto Parts: President Trump directed the U.S. Department of Commerce (DOC) to investigate whether to impose tariffs on imported automobiles and auto parts if it is found that they pose a threat to America’s national security (manufacturing base). The DOC completed its report last February, but President Trump has postponed a decision on whether to pursue tariffs until at least November. The DOC report notes concerns about increases in the volume of automobile and auto part imports over the past three decades, along with unease about foreign markets such as the E.U. and Japan that have imposed significant barriers to U.S. automotive exports. A focus of concern is innovations in engine and powertrain technology, electrification, lighter-weight materials, advanced connectivity and autonomous driving. In response to threatened tariffs, SEMA and seven other major trade associations representing the broad scope of the auto industry formed the Driving American Jobs Coalition. The coalition opposes the tariffs as being counterproductive and threatening American companies, workers and consumers.

NAFTA/USMCA: Ratification of the United States-Mexico-Canada Agreement (USMCA) to replace NAFTA is pending before the U.S. Congress. Major provisions include a requirement that vehicles have at least 75% North American content, compared with 62.5% currently. At least 40%–45% of the vehicle content must be made by workers earning at least $16 an hour, which will lead to higher wages in Mexico.

Replica Vehicle Law: A SEMA-supported law enacted in 2015 will allow small auto manufacturers to sell completed replica cars. Those vehicles resemble cars manufactured at least 25 years ago. Companies will be able to produce up to 325 turnkey replica vehicles (per company) in the United States and 5,000 worldwide under a simplified regulatory system. Until now, the federal government’s regulatory system did not differentiate between a company producing millions of vehicles and a business producing a few custom cars. The National Highway Traffic Safety Administration (NHTSA) has yet to take regulatory action to implement the law. The industry is calling on NHTSA to allow production to commence in 2020.

Internet Sales Tax: In 2018, the U.S. Supreme Court issued a decision allowing states to require internet retailers to collect sales taxes even when they have no physical presence in the state. The court overturned the 1992 Quill decision, which required physical presence (nexus) in a state before a retailer could be forced to collect taxes. The state of South Dakota successfully argued that the 1992 decision was obsolete in the e-commerce era. The court upheld a South Dakota law that requires an out-of-state retailer to collect sales taxes if it has an economic presence of $100,000 or more in annual sales or 200 or more transactions. Nearly all other states that collect sales tax now require collection. They have adopted the $100,000 threshold or set higher limits.

E15 Gasoline: The U.S. Environmental Protection Agency (EPA) issued a rule to allow gas stations around the country to sell E15 (gasoline that’s 15% ethanol) year-round. Previously, the EPA prohibited the sale of E15 between June 1 and September 15 due to fuel-volatility concerns that higher blends of ethanol combined with warmer temperatures may lead to increased ground-level ozone formation and smog. SEMA opposes an expansion of E15 sales, which the EPA is pursuing in order to achieve the Renewable Fuel Standard’s artificial mandates to blend large volumes of ethanol into gasoline sold in the United States. Ethanol, especially in higher concentrations such as E15, can cause damage to high-performance parts and vehicles manufactured prior to 2001.

Greenhouse Gases: The EPA is seeking to revoke a waiver issued previously to California to set greenhouse gas emission rules that are tougher than federal standards. The EPA action is being challenged in court, a battle that could last beyond the 2020 elections. The EPA has issued many Clean Air Act waivers over decades, but this will be the first time it has rescinded a waiver. The EPA’s greenhouse gas rule is tied to NHTSA’s Corporate Average Fuel Economy (CAFE) standards, since both rules are based on the amount of carbon emitted as fuel is burned. The Trump administration is arguing that the law governing the CAFE standards does not authorize issuance of a waiver to California. The administration wants to freeze the CAFE standards at 2020 levels (around 37 mpg) rather than reaching the current federally mandated level of 54.5 mpg by model year ’25. Some car companies have signed an agreement with California for a reduced standard of 50 mpg by model-year ’26.

Electronic Tire IDs: NHTSA has concluded that it is technologically possible to provide tire identification number (TIN) data in an electronic format for all tires. The TIN contains information about the tire, including the plant where the tire was manufactured, the tire size and the week/year of manufacture. The electronic data would be a marking or tag within or on the tire sidewall that could be read with a handheld scanning tool. The two electronic TIN candidates are radio frequency identification tags and two-dimensional barcodes. Electronic technology could provide the industry with an easier and more accurate method to scan data as tires are sold rather than relying on paper registrations. The TIN could then be linked to the vehicle identification number, making it a more reliable way to contact the current registered owner in case of a recall. There is no timeframe for pursuing the technology.

Warranty Restrictions: The Federal Trade Commission (FTC) held a one-day workshop to examine ways in which manufacturers may limit third-party automotive replacement and repairs, including limitations on consumer rights under the Magnuson-Moss Warranty Act. Issues covered included the current prevalence of repair restrictions, reasons provided by manufacturers for such restrictions, and whether consumers are aware of their right to install aftermarket products. The workshop also explored the technological and financial impact repair restrictions have on small businesses and consumers. The workshop was a fact-finding effort as the FTC seeks to better understand challenges faced in enforcing the law.

Retirement Plan Legislation: The U.S. House of Representatives passed a bipartisan bill to expand retirement savings programs. The bill would make it easier for small businesses to join multiple employer plans by not requiring businesses to be affiliated. It also increases tax credits for small businesses adopting retirement plans and permits part-time employees to enroll in 401(k) plans. The U.S. Senate is considering a similar bill.

Overtime Pay: The U.S. Department of Labor issued a final rule to raise the cap from $23,660 to $35,568 a year ($455 to $684 a week) for management, administrative and professional employees who are exempt from receiving overtime pay when they work more than 40 hours a week. The pay threshold is frequently called the Fair Labor Standards Act’s “white collar” exemption. In 2016, the Obama administration raised the cap to $47,476 per year, but it was struck down by a federal court. The new rule takes effect on January 1, 2020.

Public Lands Bill: President Trump signed into law a massive public lands bill. It included elements supported by SEMA, such as the California Desert Protection and Recreation Act co-authored by Rep. Paul Cook (R-CA) and Sen. Dianne Feinstein (D-CA) to permanently designate six existing OHV areas. Those areas include Johnson Valley (expanded by 11,000 acres), Spangler Hills, El Mirage, Rasor, Dumont Dunes and Stoddard Valley. The bill also included a provision to permanently designate federal lands within Emery County, Utah. While the provision protects most existing OHV routes within the San Raphael Swell, several trails were lost.

Bonneville Salt Flats: Utah lawmakers have appropriated $5 million toward a program to restore the Bonneville Salt Flats, contingent upon securing federal funds. The monies will be used to create a 10-year, $50 million program to dramatically increase the amount of salt pumped onto Bonneville. The bulk of the monies will come from the federal government, with contributions as well from the motorsports community. Beginning in the ’60s, the salt crust diminished due to historic and current potash mining activities under existing leases from the U.S. Bureau of Land Management. The mine owner has been pumping salt since 1997, but infrastructure renovation and upgrades would increase the volume. As a result, the racing venue should gradually expand from its current 8-mi. length, with a goal of reaching the original 13-mi. length. SEMA, along with other organizations and companies comprising the Save the Salt Coalition, is working with state and federal officials to implement the program.

STATE UPDATE

Arizona—Emissions Exemption: A SEMA-supported law to exempt qualified collectible vehicles from the state’s emissions inspection and maintenance program went into effect June 1. While the bill was signed into law in 2005, the state’s regulatory process delayed implementation. In order to qualify, a vehicle must be either 15 model years old or older or a unique or rare design of limited production and an object of curiosity. In addition, the vehicle must be maintained primarily for use in car club activities, exhibitions, parades or other functions of public interest, or for a private collection and used infrequently. Additionally, the vehicle must have collectible or classic automobile insurance coverage that restricts the vehicle’s mileage or use, or both, and requires the owner to have another vehicle for personal use. The current exemptions for pre-’67 vehicles also remain in effect.

California—Exhaust Noise: California Governor Gavin Newsom signed into law SEMA-supported legislation that immediately restored fix-it tickets for cars suspected of violating the state’s exhaust noise limit. The bill amended a 2018 law, which removed fix-it tickets for such violations and which generated significant concern within the specialty automotive aftermarket industry and enthusiast community. Since 2003, exhaust systems installed on motor vehicles in California with a manufacturer’s gross vehicle weight rating of less than 6,000 lbs., other than motorcycles, may not exceed a sound level of 95 dB when tested under a Society of Automotive Engineers (SAE) procedure.

California—OHV Access: The California Coastal Commission voted to continue permitting off-highway vehicle (OHV) use at the Oceano Dunes State Vehicular Recreation Area (SVRA). During its July 11 meeting in San Luis Obispo, the Commission rejected staff recommendations to further restrict motorized recreational access, with the eventual goal of prohibiting OHV and motorized vehicles at Oceano Dunes SVRA.

Delaware—Street Rods: Delaware Governor John Carney signed into law a bill easing the process of registering a street rod, by favorably changing the existing age and equipment requirements. The new law amends the definition of street rod from a vehicle manufactured before 1970 to one 25 years old or older. The law also removes the requirement that a street rod’s tires be covered by fenders.

Maine—Ethanol: Maine Governor Janet Mills signed a bill into law allowing the sale of ethanol-free gasoline statewide. Previously, only the counties of York, Sagadahoc, Androscoggin, Kennebec, Knox and Lincoln banned the sale of ethanol-free gasoline.

Nebraska—Military Vehicles: Nebraska Governor Pete Ricketts signed into law legislation allowing for the titling and registration of former military vehicles. The new law defines a former military vehicle as “a vehicle that was manufactured for use in any country’s military forces and is maintained to accurately represent its military design and markings, regardless of its size or weight, but is no longer used, or never was used by a military force.” Previously, those vehicles were not allowed to be titled or registered for on-road use in the state.

Nevada—Military Vehicles: Nevada Governor Steve Sisolak signed into law legislation that allows for the titling and registration of retired military vehicles. The new law also authorizes the design and production of a specialty plate for those vehicles. Previously, such vehicles could not be titled or registered for use on highways in the state.

New Brunswick—License Plates: Beginning July 15, 2019, motorists in New Brunswick were no longer required to display a front license plate on passenger vehicles and light trucks. The change removed the requirement to display two license plates on vehicles weighing less than 4,500 kg.

New Mexico—License Plates: Legislation to require registration plates on the front and back of all motor vehicles died when the legislature adjourned. Under current law, all motor vehicles in the state are issued only a single plate. Because of strong opposition, the bill failed to receive a vote on the House floor.

Ohio—License Plates: Ohio Governor Mike DeWine signed into law legislation to allow for the issuance of a single, rear-mounted license plate for motor vehicles. Previously, Ohio required vehicles to display two plates.

Rhode Island—License Plates: Legislation to allow vehicles with “year of manufacture” (YOM) tags to display a single license plate on the rear of the vehicle, passed the deadline for the governor’s signature or veto and thus became law without being signed. All motor vehicles 25 model years old and older, are currently eligible for courtesy YOM plates in Rhode Island. Previously, those vehicles were required to display both front and rear YOM plates.

Tennessee—Military Vehicles: Tennessee Governor Bill Lee, signed into law legislation that exempts historic military vehicles from the requirement to display license plates. An historic military vehicle is currently defined as being 25 years old or older, manufactured for use in any country’s military, and maintained to represent the vehicle’s military design and markings.

Texas—Assembled Vehicles: Texas Governor Greg Abbott signed into law SEMA-supported legislation creating a specific registration and titling class for former military vehicles and assembled vehicles, including kit cars and dune buggies. The new law provides guidance to the Texas Department of Motor Vehicles on how to treat such vehicles. Previously, there was no specific registration and titling class for certain assembled vehicles, such as
dune buggies.

West Virginia—Motorsports Committee: Governor Jim Justice signed into law legislation to create the West Virginia Motorsports Committee. The committee is tasked with aiding in the development of racing events and facilities throughout the state. The committee will also seek opportunities to promote economic growth and manufacturing jobs related to motorsports.