government affairs blog
On Dec. 15, 2014, Aaron Lowe, senior VP, regulatory and government affairs, Auto Care Association, posted a blog entitled “My New Year’s Resolutions for the 114th Congress.” In that blog, he called on Congress to move forward with some of the association’s key legislative and regulatory priorities. It appears now, just five months in, that Congress doesn’t want to disappoint our industry with its usual accomplishment paralysis and instead is taking steps to help us realize one of our hopes – reforming chemical regulation.
The Toxic Substance Control Act (TSCA) has been in place since 1976 without any major overhauls. This has created a problem for industries like auto care who cannot work within an antiquated chemical safety review system that doesn’t keep pace with innovation; but also for states that have grown tired of looking to the Environmental Protection Agency (EPA) for guidance on this issue and getting none. Years ago, those combined pressure points drove U.S. industries, including auto care, to call for a broad modernization of TSCA. Finally, in 2015, that may happen thanks to what may be an unprecedented effort of compromise and bipartisanship from Congress (and of course our association’s efforts).
In the Senate, S. 697, the “Frank R. Lautenberg Chemical Safety for the 21st Century Act” was introduced earlier in the year by Senators David Vitter, R-La., and Tom Udall, D-Utah. It quickly became the legislation that both industry and Senators would rally behind. Over the last few months, the bill had to endure the typical slog of compromises and amendments, but is now generally considered to strike a balance between EPA capabilities, the goals of TSCA modernization for industry, and State control over protecting their residents.
S. 697 was marked up in the Environment and Public Works Committee on April 28. While it does have 40 co-sponsors spanning the far right to the far left, Oregon to Oklahoma, it won’t go any further unless it has the 60 votes that is understood to be the quid-pro-quo to getting on the Senate floor for final consideration.
While the push for 60 marches on in the Senate, the House is also doing their part to make one of our resolutions come true. By the time you read this blog, the House Energy and Commerce Committee Subcommittee on Environment and the Economy will have marked-up their draft bill, the “TSCA Modernization Act of 2015.” The House’s approach is different from the Senate in that they chose to modify existing law with a scalpel, going after just a few sections of existing law, instead of a total overhaul. However, like the Senate, the strategy of bipartisanship and compromise is being utilized in the House to move the issue forward.
The House draft, however, does have one critical section for the auto care industry that the Senate bill does not – an exemption for replacement parts. According to the bill as proposed by the subcommittee, as long as those replacement parts were designed prior to a rule on a certain product and chemical risk being published in the Federal Register, and they do not “contribute significantly” to the risk the EPA has identified, they are exempted from new safety regulations. And the auto care industry can thank the Alliance for Automobile Manufacturers for securing that language in the bill.
The next steps in the House for our association will be both to ensure the replacement parts exemption remains in the bill after a full Energy and Commerce Committee mark-up and to get it to the floor for a full vote. The Committee has a fairly aggressive timeline, wanting to complete their part by June 14, which will put a vote on track for some time in July.
So, if the Senate passes S. 697 in July, and the House passes their draft in July, Congress may be able to say they accomplished more than just getting re-elected this year. They may actually pass real, transformative legislation that moves our auto care industry, as well as other industries, into an era of chemical safety regulations that more closely match the speed of our consumer product innovations.
While it’s not a done deal until the “fat lady sings,” the association is obviously pleased with the progress Congress has made on one of our New Year’s resolutions. However, there is four more that need action if Congress really wants to make us happy next New Year’s (hint, hint)!
You may be following a story that has gone viral recently that centers around claims by the vehicle manufacturers that car owners should be prevented from working on their own vehicle. The issue in question arose when the Electronic Frontier Foundation (EFF) requested that the Copyright office approve a proposed exemption for the diagnosis and repair of motor vehicles from the Digital Millennium Copyright Act’s (DMCA) prohibition against circumvention of technological protection measures that control access to copyrighted works. According to their website, EFF “champions user privacy, free expression, and innovation through impact litigation, policy analysis, grassroots activism, and technology development.”
It’s interesting that EFF’s exemption request probably would have received little attention, but for opposition comments filed by General Motors (GM) and the Alliance of Automobile Manufacturers. As part of their comments, GM and the Alliance make the case that the car companies own the software on the vehicle and that it is licensed to the car owner. Therefore, any attempt by the car owner to circumvent the software on the car would be considered a violation of the car companies’ copyright. They also make the case that car owners working on their car could endanger the safety of the vehicle and cause the vehicle emissions system to operate out of compliance. The manufacturers state that the exemption is not necessary, pointing to the Memorandum of Understanding (MOU) signed by the Auto Care Association and Coalition for Auto Repair Equality with the car makers that says that manufacturers will make available all of the information that is necessary to repair a vehicle.
Yes, the MOU was intended to ensure that information is available to car owners and shops so that vehicles can be repaired. However, the entire concept behind Right to Repair and the MOU is that the car owner owns the vehicle when they purchase it; and that those same car owners should have the freedom to have that vehicle repaired by whomever they want, including themselves. In fact, one of the hallmarks of Americans’ love affairs with their car is the freedom that it provides, whether it is taking the car on a road trip or being able to work on it in their garage. This concept of ownership goes beyond just what repair information the car companies place on their website -- it is ownership of the entire vehicle.
There is no doubt that technology has changed how vehicles are repaired. Cars are run by computers, and therefore repairing or customizing a vehicle entails changes to the software that control the vehicle systems. However, should the computerization of vehicles change how car owners view their vehicle? We don’t think so. Clearly, car owners should not be encouraged to tamper with their vehicle’s emissions or safety systems (there are laws in place to ensure the integrity of the emissions system), but sometimes innovation that comes from outside the vehicle manufacturer can lead to better safety, improved performance and reduced pollution.
Further, technologies such as telematics systems and new entertainment features provide more opportunities for car owners to customize their driving experience. There is little doubt that the connected car will further enhance a driver’s connection with their car, unless of course the manufacturers determine to stifle innovation through their drive for profits.
The Auto Care Association feels strongly that when a consumer buys a vehicle, they purchase everything -- the body, seats, engine and yes, the software on that vehicle as well. Anything less is not in the best interest of the automotive industry or the U.S. car owner.
You can find a copy of the joint comments filed with the U.S. Copyright Office by the Auto Care Association and Automotive Parts Rebuilders Association here
Recently, several members of Congress led by Senator Ed Markey, D-Mass., have directed the public’s attention at the connected vehicle and the absence of security to protect vehicles from hacking. These allegations were clearly on the mind of attendees at a “Vehicle Cyber Security Summit” that I recently attended in Detroit. While it seemed like consultants outnumbered the vehicle manufacturers at the event, there was a substantial number of car companies and suppliers in attendance.
The overriding message at the summit was that the Control Area Network (CAN) used on vehicles today to permit internal vehicle computers to talk to each other was not designed with the connected vehicle in mind. Therefore, the interconnected vehicle systems under the CAN are extremely vulnerable to cyber-attack. Further, the growing political pressure on vehicle manufacturers is expediting action although many companies are still in the process of determining what strategies to employ in order to protect their vehicles.
Many “cyber security experts” focused on the OBD II port as a primary vulnerability for the vehicle's operating systems. Speakers pointed to the use of "aftermarket dongles" as a major concern where someone could use the dongle to send a message into the vehicle's computers that would cause the car to operate improperly. The dongles are the devices offered by insurance companies and many auto care companies that plug into the OBD II ports and are able to transmit diagnostic and driver information using cell phone technology.
The auto care industry will have to closely watch what measures that the car companies implement to protect their systems at the OBD II port. A decision to encrypt data traveling over the CAN could create major headaches for the companies that build tools for the independent auto care industry. Further, those companies that have plans to use dongles to provide telematics solutions for consumers could be left out in the cold if the car companies implement solutions that prevent these devices from working.
Clearly protecting the security of a vehicle is of prime importance to everyone in the automotive and auto care industries. However, the solutions developed to address this critical concern also need to take into account the need for consumers to obtain repairs of these vehicles, whether they perform the work themselves or use an independent service facility.
When the debate over Internet sales tax parity began, the Marketplace Fairness Act (MFA) was a simple solution for leveling the playing field between brick and mortar businesses and online retailers. However, as occurs in all things legislative, the simplest solution comes with some of the strongest objection.
The MFA as drafted would simply provide states with the ability to collect sales taxes on purchases made by people and businesses within their jurisdictions based on the tax rate applied to the buyer’s address. The benefit of such an approach, also called “destination sourcing,” is that it is simple and fair. The system under the MFA looks like this:
- The rate of tax is calculated based on the buyer’s address;
- The tax is collected by the remote seller, and remitted back to the state of the buyer’s address.
Buyers, especially those in non-sales tax states, are not required to pay a tax beyond that mandated by their legal residency. The MFA also requires that online retailers are provided free software to perform the collections, remittance and proof of sales for auditing purposes that integrates into their Internet shopping cart systems. Additionally, online retailers doing less than $1 million in remote sales do not have to comply with the online tax collection.
Seems like a fairly easy approach that eliminates the unfair pricing advantage that online retailers have over physical store fronts. Yet, legislators, for reasons not entirely clear, have objected to certain details of MFA and have drafted two new proposals that have already slowed progress of the legislation.
One concern being expressed by some legislators is that MFA provides an exemption for small sellers, but brick and mortar stores do not get exemptions from sales tax collection unless they are in a no sales tax state. So the second proposal to emerge would phase out the exemption for small sellers over three years, but keep the “destination sourcing” principle. Proposal two, would look like this:
- The rate of tax is calculated based on the buyer’s address;
- The tax is collected by the remote seller and remitted back to the state of the buyer’s address:
- In year one, all remote sellers doing less than $10 million in online sales are exempt.
- In year two, all remote sellers doing less than $5 million in online sales are exempt.
- In year three, all remote sellers doing less than $1 million in online sales are exempt.
- In year four, no remote sellers are exempt.
Only a few layers are added into what is still a fairly direct solution to the Internet sales tax issue, but those are easy enough to incorporate into the legislation. Furthermore, the software being provided has the capabilities to incorporate these requirements into their systems. So why not stop there? Or as some elected officials might prefer, why stop there?
The third legislative option being proposed is called “hybrid-origin sourcing.” And no, it does not mean only states where all residents drive hybrid vehicles can participate, but it does make it pretty difficult for states to apply the new law. The system under the third proposal would look like this:
- Online retailers are determined to have a physical presence in a state depending on a series of factors, including where the largest amount of employees exist, whether they do business in a state for more than 30 days, and others.
- Online seller pays the tax rate on purchase based on state presence of the retailer.
- Retailer sends the tax rate collected to their state tax revenue department, along with the zip code of the purchaser that is provided at the time of sale.
- If the retailer’s tax rate is higher than that of the purchaser, the balance of the revenue is kept by the retailer’s state.
- Seller’s state then sends the amount, along with the zip code, to a newly formed Internet Fairness Tax Act tax revenue board, as required by the law.
- The law only becomes effective if each state participating in the opting-in to the program develops their board within 90 days.
- All members of the board are appointed by the governor.
- The buyer’s state IFTA board then keeps a portion of the revenue while remitting the rest to the buyer’s county of jurisdiction, as determined by their zip code
- States that do not currently have sales tax laws have the option of participating in order to receive tax revenues from purchases made by out-of-state buyers.
Of course, the third option raises the question of whether its authors are attempting to move the bill forward or actually muddy up the water, creating more questions than answers and mandating additional layers of state bureaucracy that are sure to bring objections.
On some level it is heartening that the debate last year as to whether Internet sales should be taxed has now morphed into an argument this year over how that tax should be imposed. This is clearly progress. However, it is also ironic that when Congress is seriously looking at the simplification of a tax code, that proposals are being discussed that would lead to a more complicated and expensive system to implement for retailers and states. Legislators need to look beyond the smoke that is being produced during the debate and look for a workable proposal that would instill fairness in the collection of sales tax from online sales.
You may have read in this week’s Capital Report or in other industry press about a Memorandum of Understanding (MOU) that the Auto Care Association, along with other aftermarket groups and the vehicle manufacturers, signed on Jan. 21 with the Environmental Protection Agency (EPA) that would significantly reduce the content of copper in automotive brakes. The MOU is a direct result of legislation enacted in the states of Washington and California which requires that brake pad manufacturers reduce copper to no more than 5 percent per weight by 2021 and to .5 percent by 2025. Water agencies and environmental groups have been pushing for the reduction in use of copper due to concerns that the element was seeping into the rivers and streams and having a significant adverse impact on aquatic life.
The MOU is a major achievement for the motor vehicle and auto care industry for two reasons. First, it is a positive step that the industry can take to reduce the environmental impact of one of our products. Second, the MOU seeks to reduce the threat that our industry would need to comply with a myriad of different state laws and regulations that might occur if other states determine to implement their own brake pad rules. EPA gains since they will not need to go through the expensive and time-consuming process of developing a rulemaking on the subject, but will still obtain the desired copper reductions.
Of course, I don’t want to take away from the hard work that went into developing this MOU. The effort to develop consensus on the brake pad legislation in Washington and California between government, industry and environmental groups was a long and arduous process. A lot of engineers from brake pad companies, government affairs professionals from trade groups, environmental groups and government representatives worked long hours to develop the laws and regulations that are in place in both states. In fact, this is a great example of how groups could work through their differences to come up with a consensus position rather than to simply fighting each other. How rare is that?
I also don’t want to give anyone the impression that the MOU is the end of the process. It is clearly not. Engineers from many of the brake pad companies are working to develop innovative solutions to replace copper in brake pads as soon as possible. I know this is not an easy task, but I also know that some great people are working at our member companies to make this happen, and they are doing everything possible to ensure success.
For those that distribute, sell and install brake pads, the MOU also will require their efforts to ensure that only products that meet the standards set in the California and Washington state laws and the MOU are sold throughout the distribution chain (it is important to remember that there are sell through dates to help reduce the burden on distributors and retailers of the new rules). There are labels both on the boxes and on the brake pads themselves to help make that job easier, but each company in the distribution chain will need to commit to the terms of the MOU for this effort to be ultimately successful.
To help our industry in complying, the trade groups including Auto Care have created a website www.copperfreebrakes.org. At this site, you can find information on the MOU and links to some of the key state regulations on this subject. Companies should remember that some requirements of the state laws and MOU have already kicked-in so it is imperative to become familiar with new brake pad rules as soon as possible.
So congratulations to everyone involved in making the brake MOU happen and thank you in advance to everyone that is involved in helping our industry realize the important environmental gains that will come from this MOU.
I was fortunate enough to visit the Consumer Electronics Show (CES) last week in Las Vegas. This year, the show spotlight was on the connected vehicle and the benefits this technology will bring to car owners. In addition to the flashy dashboards and cool apps that will help drivers find a parking space, car companies also talked about the large amounts of data that they will be able to obtain from vehicles through these telematics systems and how this data will help them “personalize” the experience for motorists. While the car companies highlighted the number of services that will be available online for motorists, they did not talk much about how the collection of this data will allow the manufacturer to better develop a relationship with the car owner on service issues. Clearly the unspoken goal here is to retain their customers within the dealer network beyond the usual warranty period when motorist usually bolt for the independent service industry.
During the keynote address at the start of CES last week, the new CEO of Ford, Mark Fields, publicly discussed the huge amount of data available from vehicle telematics systems, talking specifically how this data would improve the ownership experience. He also made the statement as part of his flashy presentation that the car owner should own the data that comes off their vehicle. On the surface, I think that this statement is a positive development for consumers and the independent auto care industry. However, in the next sentence, Fields declared that Ford was the steward of that information and must act responsibly with how that information is shared.
Yes, it is true that Ford and all of the other car companies have a huge responsibility with the data they are collecting; however, a major problem with the current equation is that the consumer really does not own the data because they have no control on where it goes. In other words, when you purchase a vehicle with telematics systems, Ford has full control of the data and the car owner only really has a choice on whether or not that data is shared with a third party and not with which third parties that car owner shares. It’s like your spouse telling you that you have control on what you do on a Friday night, even though the choice is going to the place they want to go or staying home. What control do you really have?
So I have a challenge to Ford and the other car companies. If you really believe that your customers own the data that their vehicles are generating, then back those statements with action that actually give the car owner control of their data, whether it’s with a new car dealer or an independent service facility. While you will be allowing competitors from the service industry to obtain the same information that you receive, you also will be giving your customers choices in how they can get their vehicles maintained and serviced, thus ensuring a better ownership experience.
With a little luck, we are reaching the end of the 113th Congress. By nearly every measure, this was the most unproductive sessions in U.S. history. In fact, it really is difficult to point to any major accomplishments from this Congress over the past two years. So, if you are a glass half empty type of person, Congress has a lot of major issues that need to be addressed next year. If you are a glass half full individual then the 114th Congress, with Republican majorities in both the House and Senate, will have nowhere to go but up (or at least that is what we hope).
So, in the holiday spirit and being the positive industry lobbyists that we are, let’s take a brief look at some of the issues that Congress could take up next year for the benefit of the U.S. economy and specifically the auto care industry.
Highway Trust Fund: There are not many people in Washington, or even around the Nation, that do not believe that the U.S. needs to come up with a dependable and adequate source of funding for transportation infrastructure. Currently, the highway trust fund is sustained by an 18.5 cent gas tax which has not been increased since 1983. Meanwhile, revenues from this tax have dwindled, due in part to the fact that today’s vehicles are more fuel efficient; while the list of transportation infrastructure needs has skyrocketed. When we can’t adequately move goods from one place to another efficiently, the entire economy suffers, including the auto care industry.
The current Highway Trust Fund authorization runs out in May, and coming up with a long term funding proposal has been stymied by political fear in Congress of raising taxes on motorists. So the question is: how does Congress find a politically acceptable way to come up with a long term solution that provides adequate funds for our transportation infrastructure? The answer probably lies somewhere between finding the political courage and coming up with a creative funding scheme. In any case, the time to act is now before U.S. infrastructure looks more like a third world country than one of the leading nations in the World.
Tax reform: Like the Highway Trust Fund, there is little disagreement that the current U.S. tax code is a mess. The extremely complicated and confusing code makes compliance difficult and expensive. Further, while the market distorting loopholes may be a boon to some, to most others, they are a burden; and oh yes, we have the highest 35 percent corporate top tax rate in the world. However, while reforming our arcane tax code may seem like a no brainer, the devil is in the details. What tax breaks could be canceled? Should reform be revenue neutral or increase revenue? And should reform be proposed for all taxes, or just corporate taxes.
Tax reform is definitely a difficult issue, but it appears that if there is anything that the new Republican majority and the President agree on, it is that reforming the tax code would make sense for the domestic and international economic benefit of U.S. businesses. In addition, there is some discussion that a long term funding source for highway infrastructure could be included in a reform measure, making this a win for everyone (ok, not everyone is going to like what comes out). So let’s see if the White House and Obama can come together to demonstrate that these warring factions can govern.
E-Fairness: How do you justify not charging state sales tax on Internet purchases when brick and mortar businesses must collect sales tax on every purchase? There are some conservatives that say that this is a new tax although it is still unclear to me how this is true since consumers are supposed to pay sales tax whether it is collected by the company or not. While it seems like the fair thing to do, passage of e-fairness legislation is not a slam dunk and we can expect the battle over this legislation to continue in the 114th Congress. However, with the strong support by the retail community, maybe Congress will finally do the right thing and level the playing field for collection of sales taxes.
Reform Chemical Regulation: Most businesses and environmentalists agree that the current system for approval and review of chemicals based on their impact on health and safety is antiquated and needs fixing. Modernization of the Toxic Substances Control Act (TSCA) which authorizes the Environmental Protection Agency (EPA) to oversee use of chemicals in products is a priority for both sides which makes it seem likely that a compromise bill could be worked out. So here is the rub, businesses want the changes to TSCA to preempt the many state laws that are popping up around the country to regulate the use of chemicals and environmentalists and state governments want state laws to continue to be in full effect, whether or not a federal law is passed.
Ok, so I understand the perception that many of these state laws, particularly the one in California are more stringent then what EPA might do, and I also understand that states regulators hate to cede power, but products containing chemicals are sold nationwide and not only in one state. Therefore, attempting to regulate state- by- state makes little sense either economically or from a regulatory point of view. This needs to be a national rule so that companies are able produce and distribute products containing chemicals around the Nation. While that standard needs to protect human health, it also should continue to permit companies to provide consumers with innovative and effective products. So here’s hoping that we can obtain some logic in the upcoming discussions on TSCA reform and that this issue can be worked out so that an effective national program for protecting the health and welfare of U.S. consumers can finally be enacted.
Trade Promotion Authority: There are two major trade agreements currently being negotiated: one in Europe through the Transatlantic Trade and Investment Partnership (TTIP) and one in Asia through the Trans Pacific Partnership (TPP). Both these agreements have the potential to increase export opportunities for U.S. auto care companies.
However, for these negotiations to ultimately result in agreements, Congress needs to provide trade promotion authority (TPA) such that any treaty will receive an up or down vote in the Senate rather than subject to amendment which would prevent any trade related treaty to move forward. TPA is important for our economy and for our industry and the time has come for Congress to act.
So that is some of my hopes for the New Year. While we wait for the 114th Congress to take their seats in January, I hope everyone has a great holiday season!
From bearings to tires to chemicals, automotive parts and products are often the subject of antidumping and countervailing duty investigations. Auto Care Association members who sell or buy imported products need to be aware of the existence of any antidumping or countervailing duty investigations or outstanding orders affecting their imported products. How do these investigations work? Who is involved? And what is the association’s role in these investigations? We provide basic guidance on these questions below.
What are Antidumping and Countervailing Duties?
Antidumping and countervailing duties are types of remedial duties used to offset the effects of two types of trade practices that are determined by U.S. federal agencies to give imports an unfair advantage over domestic U.S. competitors. The antidumping law provides for the assessment of duties on imported merchandise that is sold to purchasers in the U.S. at a price less than its fair market value. Fair market value of merchandise is the price at which it is normally sold in the foreign manufacturer’s home market. The antidumping duty is assessed in an amount equal to the amount by which the manufacturer’s home market value of the merchandise exceeds the export price to the U.S. purchaser.
The countervailing duty law provides for the assessment of countervailing duties on imported merchandise that is sold to purchasers in the U.S. if the government of a country is providing a subsidy with respect to its manufacture, production or export. The countervailing duty is assessed in an amount equal to the net countervailable subsidy.
Both laws require an agency determination that an industry in the United States is materially injured, or is threatened with material injury, by reason of imports of such merchandise.
Agencies Involved in Investigations and Enforcement
Three government agencies enforce the antidumping and countervailing duty laws. First is the International Trade Administration (ITA), an agency of the Department of Commerce. Through its Import Administration business unit, the ITA has the responsibility to investigate foreign producers and governments to determine (i) whether dumping or subsidizing has occurred and (ii) if so, the margin of dumping or amount of the subsidy.
Second, the International Trade Commission (ITC) determines whether the relevant U.S. industry is suffering material injury or the threat of material injury caused by the subject imports.
Third, U.S. Customs and Border Protection (CBP) is the enforcer. Once the ITA and the ITC have made the necessary determinations, ITA instructs CBP to assess the duties on importers. The duties are normally assessed as a percentage of the value of the imports of the dumped or subsidized product.
How Long Does it Take for Antidumping or Countervailing Duty Orders to Be Issued?
Once a petition is filed, if both the ITC and ITA make affirmative preliminary determinations (within 190 days of initiation of the antidumping investigation, or 130 days for a countervailing duty investigation), importers are required to post a bond or cash deposit to cover an estimated amount for the duties which would be collected in the event that an antidumping or countervailing duty order is issued upon the completion of the investigations. Typically, the final phases of the investigations by the ITA and ITC are completed within 12 to 18 months of initiation.
What is the Association’s Role in an AD/CVD Investigation?
Antidumping and countervailing duty investigations are legal proceedings to determine whether foreign producers and exporters are breaking U.S. law by dumping or by benefiting from illegal government subsidies. These investigations are highly fact- and data-intensive, involving several rounds of questionnaires and briefs, and focusing on confidential sales and cost data, or confidential subsidy information in the case of a countervailing duty investigation. Unlike regulatory matters, an association cannot intervene to “lobby” on behalf of an industry to make the case go away. Instead, “interested parties” (namely, foreign and domestic manufacturers, exporters and importers of subject merchandise) must present evidence to substantiate or rebut the dumping and/or subsidy allegations.
Associations sometimes get involved and testify or file briefs in these cases supporting or opposing the imposition of duties by discussing the “injury” side of the investigation, providing information on the overall health of the industry and whether or not relief is needed. However, in order to participate as an “interested party” in one of these cases, the majority of an association’s members must be producers, importers or exporters of the subject merchandise. In most cases, the Auto Care Association’s role has been to keep our members informed of developments and their options and answer any questions we can to help make sense of this complicated process.
These are very complicated and technical investigations. Auto Care Association members who may be impacted by one of these investigations should consult with experienced international trade counsel to determine their potential liability and understand their options. The ITA and ITC websites provide additional information and resources for these investigations. Be sure to also review a comprehensive list of resources for importers and exporters on the Auto Care Association’s website here.
AAPEX 2014 is almost upon us, and while there is always a focus on what is happening on the trade show floor, more and more attendees are excited about the educational sessions that will be occurring during the show. These sessions tend to reflect the issues that are hot on the minds of the industry, which helps explain why many of this year’s seminars will focus on the impact of telematics on the auto care industry. Just a few years ago, the issue barely warranted notice at the show, but now the ability of vehicles to communicate with car owners, shops and others in the distribution chain is front and center on the minds of auto care industry leaders.
Of course, a central element of this discussion is who will control the data being transmitted from a vehicle, the car owner or the vehicle manufacturer. As currently configured, the data coming off a car, which includes a lot of diagnostic, repair and personal information of the car owner, goes only to the manufacturers. Changing this scenario to providing car owner control is a major goal of the Auto Care Association.
However, this is a very complex issue with few clear answers. For example, if access to the systems was required by legislation, how would that actually occur? How would the independent auto care industry use the information being transmitted by those vehicles if our industry had access to the data being sent by it? What is the business model? Should car owners be charged or should the shop pay the cost of the system based on the benefits of obtaining access to the car owner’s data?
While there is a lot to get your arms around, fortunately, AAPEX will give you the opportunity to learn more about the issue of telematics and to begin the thought process of how it would apply to your business. There are three interesting sessions that will take place during the show, listed below, that cover the issue from different vantage points. Hopefully, you find time to get to one or more of these sessions which will take place in Marco Polo Rooms 704-705 at The Venetian. Additional information on all of the educational sessions can be found on the AAPEX website athttp://www.aapexshow.com/2014/public/enter.aspx.
The Telematics Business Model for WarehouseDistributors
Tuesday, November 4, 3:30 p.m. - 4:30 p.m.
Speaker: Jim Dykstra, Aftermarket Telematics Technologies
The independent auto care industry has learned how telematics technology has the potential to make it increasingly difficult to compete with OEs for parts sales and service and repair work. Many warehouse distributors are currently researching how they can take advantage of telematics to direct vehicle owners to their repair shop customers, but often are not sure what type of business model will work best. This session outlines what WDs need to consider when developing a telematics business model. This session is not about telematics technology, but instead the use of this technology to enhance traditional sales.
AftermarketTelematics and the Connected Car
Wednesday, Nov. 5, 2 p.m. - 3 p.m.
Speakers: Derek Kaufman, C3 Network,Inc.; Aaron Lowe, Auto Care Association
Telematics and the connected car are among the most challenging advances in vehicle technology. If vehicle manufacturers have the ability to communicate with their product wirelessly and perform remote diagnostics, how will that impact the independent auto care and service industry? The Aftermarket Telematics Task Force was formed to represent a unified industry voice in this issue and develop an open technical solution that offers consumers the right to choose where information from their vehicle is sent. Representatives of the Task Force will brief the industry on progress and recent activity.
Diagnosing the Connected Vehicle
Thursday, Nov. 6, 7:30 a.m. - 8:30 a.m.
Speaker: Ben Johnson, Mitchell1
This presentation describes the changing role of the diagnostician and how to most effectively utilize all information resources available to technicians for efficient and accurate diagnosis of the vehicle. The session will focus on analytic and diagnostic strategies when incorporating OE information as well as vehicle data and industry experience. The diagnostic process changes from the point of vehicle arrival practiced today to the point of vehicle symptom detection using telematics will be discussed and how telematics will enable the technician to work more effectively.
Having lived in and around major cities my entire life, I was never able to fully grasp the scope and true impact of our industry. Even after I started working at the Auto Care Association, it wasn’t until I began to visit members and travel on my own time to the rural areas and small towns where our members operate, that I came to the realization that our industry’s shops, stores, factories and warehouses could be found in nearly every town, county and district, no matter how isolated. Plus, in many cases, the auto care industry offered some of the best jobs in town and those working these jobs tended to be very much in tune with the happenings of their small communities.
Sure, the national industry stats — the 4.2 million jobs, $318 billion in sales, 2.2 percent of U.S. GDP, etc. — effectively illustrate our industry’s immense size and huge positive impact on the U.S. economy. However, one of our real strengths, from a political influence perspective, is that you’d be hard-pressed to find a federal or state legislative district that does not have an auto care business within its borders. Locating and fully harnessing these potential grassroots resources has always been our most difficult task, but one that is critical to the future success of the association’s government affairs agenda.
As you might have guessed, political advocacy in this country, similar to merchandising and distribution, has reached a point where data drives everything. It separates the most effective association government affairs programs from the least effective. Last summer, we began talking to a small segment of our most active members to get a sense of whether they could provide value to our grassroots program beyond what they had already offered. We attempted to gauge to what extent they were (1) politically active and (2) had relationships with federal or state elected officials. What we found was that even the members we worked with on a regular basis were more politically active in their communities than we previously thought or had relationships with key legislators that we had no idea existed. Our goal from there was to try to expand our efforts to survey a larger segment of our membership and provide an easy, quick medium for anyone to share this valuable information with us.
Therefore, this week, we will be deploying a new survey, which will serve to provide us with more information on our members than ever before. The survey, which will be sent out to the entire Auto Care Association membership, will ask very straightforward, non-intrusive questions including:
- Which issue do you think is currently the most important facing the auto care industry?
- How active have you been in federal, state or local politics?
- List any officials with whom you have a relationship, either directly or through their staff.
Our goal is to ask these important questions so that when an issue arises and we find that we need to get in touch with a particular elected official, we are immediately aware of an individual from our industry who either knows that official personally or who is simply a passionate, well-connected constituent who wants to help. Please remember that all information provided through the survey will not be used in any way other than to assist in the Auto Care Association’s advocacy efforts on Capitol Hill and in the states. We will not leverage your relationship with a particular legislator beyond a simple reference without first contacting you.
The survey is 18 questions and is comprised of mostly simple multiple choice questions. Please contact us at email@example.com or 240-333-1028 if you have any questions, or if you prefer to provide us with this information over email or phone.
Thank you in advance for your participation.
It’s certainly hard to keep up with latest developments surrounding the employer mandate provision in the Affordable Care Act (ACA). This provision states that certain employers with 50 or more “full-time equivalent” employees (FTEs) who do not provide affordable health care coverage may be assessed a penalty if at least one full-time employee qualifies for a premium tax credit and uses it to purchase coverage in the health insurance exchange. Additionally, the law requires employers to provide prescribed health coverage while, at the same time, penalizing some employers who may fail to offer what is defined by the law as “affordable” coverage.
It is generally acknowledged that the Obama administration delayed the employer mandate for the second time earlier this year because of the complexity of the provision. (If most businesses took one look at the regulation and knew instinctively that it appeared “unworkable,” why didn’t the bureaucrats?) The Treasury Department’s IRS division, tasked with enforcing the provision, has struggled mightily with developing a rulemaking that isn’t so complex as to be unenforceable.
Through all of this, the Republicans (and the business community) have not let up in their criticism of the ACA in general, and the employer mandate in particular. It now appears that there may have been some surprising folks listening. In a recent Health Affairs blog post, Timothy Jost, a professor at Washington and Lee University School of Law and a long-time advocate of the ACA, wrote that, “Repeal of the employer mandate might, in fact, not be such a bad idea, as long as the current mandate was replaced with a better alternative.”
In a similar vein, the president of the Commonwealth Fund, a liberal foundation promoting better healthcare access, posted his own blog, also questioning whether the employer mandate is “Essential or Dispensable?” He noted that. “…modeling… suggests that when fully implemented in 2016, the employer provisions will increase the number of insured Americans by only a few hundred thousand. The overwhelming proportion of U.S. employers already provides insurance to their employees, and would continue to do so without the penalties in the ACA, the analysts contend.”
This movement may have been kick-started by a research paper titled, “Why Not Just Eliminate the Employer Mandate?” that came out in May of this year from the Urban Institute, a non-partisan, social policy think tank. In the paper’s overview, the authors stated their research found that “… eliminating the employer mandate will not reduce insurance coverage significantly, contrary to its supporters’ expectations. Eliminating it will remove labor market distortions that have troubled employer groups and which would harm some workers. However, new revenue sources will be required to replace that anticipated to be raised by the employer mandate.”
And now, just as support for the employer mandate appears to be wavering, Speaker of the House John Boehner, R-Ohio, announced last week that it is his intent to sue President Obama over his delay of the employer mandate. The claim is that the president had no legal right to change the law by delaying the mandate.
Early rumors about a lawsuit against the president were betting on immigration enforcement as the target, but that may have been too risky politically. So, the speaker released a statement on July 10, saying, “…this isn't about Republicans versus Democrats; it’s about the Legislative Branch versus the Executive Branch, and above all protecting the Constitution.” All of this begs the question, where would it leave the business community if the speaker won the lawsuit?
In the meantime, a close reading of the posts above will tell you that a repeal of the mandate won’t likely come about without some form of a “fix” to replace it. This is, of course, the complicating factor that could ultimately determine how far this initiative may be taken. Although on Capitol Hill there is also an undercurrent of Democrat rumblings that accept the notion that the ACA is flawed and needs work, at this point, nothing we have witnessed in the current political environment leads us to believe a compromise “repeal and replace” for the employer mandate would garner the necessary votes for passage.
A major earthquake hit the House of Representatives last week when House Majority Leader, Rep. Eric Cantor, R-Va. lost his primary to Dave Bratt a Tea Party challenger. Rep. Cantor has decided to resign his leadership position at the end of July, so now the House will be holding an election to replace him. Right now Kevin McCarthy, a Republican from Bakersfield, who is the current House Majority Whip, is the favorite to take his spot. Of course, nothing is that easy anymore in Congress as Idaho Rep. Raul Labrador, R-Idaho, a tea party candidate, late last week threw his hat into the ring for consideration. While it is unlikely that Rep. Labrador can defeat the establishment candidate, McCarthy, the vote is symbolic of the problems burdening the House Republicans in running the House of Representatives where a move cannot be made without creating division in the party between establishment and tea party legislators.
Probably what is most troubling about the Cantor defeat is that it was almost totally unexpected. Like many things, not knowing why the primary defeat of Rep. Cantor occurred is creating more concern than the actual event itself. Polls showed Cantor with a major lead over Bratt, and Cantor was viewed by many in the party as the successor to Boehner should he step down from his speaker post. Everybody in Washington is attempting to analyze whether the defeat was because Cantor had upset his constituents or whether the tea party is more powerful than it appeared. Making matters more unclear, the tea party had very few victories to point to in primaries where they had targeted establishment Republicans. One other exception is the Senate battle in Mississippi, where Senator Thad Cochran (R) is in a difficult fight with Chris McDaniel for the Republican nomination.
While determining why a well-respected establishment Republican lost is important to the party, the leaders of the party now must do what they were elected to do -- which is lead. While attention is quickly turning to the upcoming mid-term election, there still are some critical issues on the table in House that need to be addressed before Congress adjourns for the year, including appropriations measures and a funding source for the highway trust fund. Other issues such as extending expired tax breaks might not be “do or die,” but they are critical to many U.S. small businesses.
The loss by Rep. Cantor in the primary could move House Republicans in one of two directions. It could help coalesce the party, bringing together its central core to support solutions to issues that are pending for the 113th Congress; or alternatively, it could make leaders in the party more afraid to take positions that could anger its more conservative membership. Establishing a path forward after the Cantor primary is clearly going to take some courage. However, sometimes in the worst circumstances, an opportunity arises that might not have been there before. Everybody in Washington is watching to see what House leaders are going to do, take on the opposition or regroup. The results have implications not only in the present, but the long-term governing of the House.
Consumer Reports (CR) recently published a blog that appeared on several prominent websites, including Yahoo, warning motorists against using non-original equipment oil filters on Kia produced vehicles. In the posting, CR cites a technical service bulletin (TSB) issued by Kia that states: “Customer concerns as a result of incorrect oil viscosity or use of aftermarket oil filter should not be treated as a warranty repair and any related damage is not warrantable, nor is changing engine oil and filter to isolate this condition.” CR recommends to its readers that:
- When dropping your car off for service, make sure you don't authorize the dealer to perform repairs without speaking with you first. This way you won’t get a surprise bill for an oil and filter change.
- If your Kia is still under the powertrain warranty, considering taking it to the dealer for oil changes. Yes, it probably costs more than the quick-lube store, but you’ll avoid any potential problems with oil- and filter-related warranty claims.
- Consider buying Kia-approved oil filters and either using them when you do your own oil changes, or have your mechanic or quick-lube store use the Kia filter and not their own.
Lost in the Consumer Reports article or the Kia TSB is the fact that the Magnuson-Moss Warranty Act specifically prohibits the conditioning of a new car warranty on the use of an original equipment part or service. Put another way, the use of a non-original equipment part on a vehicle cannot by itself be used by the car company or dealer to deny warranty coverage. Further, the act places the onus on the vehicle manufacturer not the consumer, to demonstrate why the use of the non-OE part caused the problem which resulted in the need for a warranty repair.
Kia’s directives circumvent this process entirely: the mere presence of an aftermarket oil filter automatically voids warranty coverage for the oil change parts and services, as well as any damage Kia says “relates” to oil filter function. Making matters worse, Consumer Reports jumped on the bandwagon, urging consumers to adhere to the anti-consumer and anti-competitive TSB from Kia.
The Auto Care Association along with the Automotive Oil Change Association, Tire Industry Association and Service Station Dealers of America sent a letter in May to the FTC urging them to force Kia to withdraw the TSB and to issue a statement that use of aftermarket filters will not void a new car warranty. The groups further have called on CR to issue a correction to its readers on this issue. You can find copies of the letters on the Auto Care Association website.
Of course, Kia is not the only vehicle manufacturer to issue statements which mislead or scare consumers into thinking that use of a non-original equipment part or service will violate their new car warranty. Further, we constantly receive phone calls from repair shops and even consumers from time to time complaining that a dealer refused warranty coverage for a vehicle issue simply because the car owner patronized a non-dealer for maintenance. In most cases, the car owner gets caught in the middle between the dealer or manufacturer and the independent service shop. Often the independent takes the hit and pays for the repair fearing they will lose the business of their customer.
The auto care industry must take action to understand the current law and to educate their customers that car companies and their authorized dealers on the Magnuson-Moss Warranty Act and car owner’s warranty rights under the law. A great resource for both industry and consumers can be found on the FTC website: http://www.consumer.ftc.gov/articles/0138-auto-warranties-routine-maintenance. The industry also should let us know if you or your customers are subject to misinformation or warranty threats by the dealer or vehicle manufacturer. Please email information on any warranty related issues to Aaron Lowe at firstname.lastname@example.org.
The month of May is widely celebrated across the United States as “World Trade Month.” It is appropriate then that as you read this post the Auto Care Association is participating in Trade Winds – the Americas Business Development Conference and Trade Mission, sponsored by the U.S. Department of Commerce. The 2014 Trade Winds program includes an Americas-focused business forum consisting of regional and industry specific conference sessions as well as pre-arranged consultations with U.S. Foreign Commercial Service Senior Officers representing commercial markets throughout the region. Auto Care Association executives are participating in mission stops to Panama and Colombia.
The Auto Care Association’s Executive Committee has identified Latin America as a priority export region for its membership. By participating in this trade mission, Auto Care Association executives will:
- Network with the regions’ leading industry and government officials and experienced U.S. and global companies;
- Learn how to help Auto Care Association members overcome barriers in the Americas; and,
- Meet one-on-one with top business experts from the U.S. Embassies and Consulates to educate them about our industry and work with them to identify opportunities and market entry strategies.
With an increasing number of Free Trade Agreements having entered into force between the United States and Central/South American countries in the past few years, trade between the U.S. and Latin America is booming. Latin American countries now constitute some of the largest markets for U.S. exports. For example, in 2012, Colombia was the third largest market in Latin America and 22nd largest market globally. Additionally, the five countries being visited during the Trade Winds mission (Colombia, Peru, Chile, Panama and Ecuador) account for approximately U.S. $60 billion worth of exports of a wide range of products from the United States. These are also strong export markets when looking exclusively at auto parts, with Chile alone accounting for U.S. $280 million in exports in 2013.
Colombia, Peru and Chile are some of the fastest growing economies in the region, integrating well within the global economy by opening up their markets to many countries and maintaining a stable political and business environment. U.S. products enjoy a high level of acceptance in these countries and the U.S. has the dominant share of imports. According to projections, continued growth and investment in these countries is unlimited.
We want to position Auto Care Association members to fully maximize their advantages and identify opportunities in this promising region. This is why, in addition to participating in Trade Winds, we have organized an Auto Care Pavilion to the upcoming Latin Auto Parts Expo, July 9-11, 2014, in Panama City, Panama. Forty members will exhibit in our pavilion and participate in networking and education sessions with key automotive contacts from throughout the region.
Members interested in learning more about the association’s international initiatives or the Latin Expo should contact Andres Castrillon at email@example.com or by phone at 301-654-6664.
In late April, the Senate Transportation Committee in California voted not to approve legislation that sought to provide consumers with clear notice that their vehicle had an embedded telematics system and that it was transmitting information to the vehicle manufacturer. The bill further sought to provide car owners with the ability to direct information transmitted by the telematics system to entities other than the vehicle manufacturer. The vote in the committee (three yes, one no and seven not voting) reflects not so much opposition to the issue of car owner privacy or competition in the auto care industry, but more to the fact that few legislators really understand the issue. Unfortunately, the absence of awareness of the impact of telematics both on car owners and competition is not confined to just legislators. Most car owners and likely even many in the auto care industry are unaware that vehicles are increasingly becoming equipped with telematics systems and what kind of information is actually transmitted to the vehicle manufacturers through these systems.
The ability for car companies to constantly tap into the vehicle’s on-board computers will provide a treasure trove of information regarding how a vehicle is driven, mileage, location, diagnostic fault codes and if it has been in an accident -- all in real time. Armed with this information, the car company and their franchised dealers will have the ability to develop more accurate models that predict possible component failures, improve and expand customer services, implement more targeted marketing campaigns, develop more efficient supply chain systems and more quickly respond to roadside emergencies, to name just a few. While independent auto care facilities could also benefit from access to this data, currently the car companies control access to the embedded telematics system, meaning they have a significant amount of power to determine who benefits and who does not benefit from telematics.
Some vehicle manufacturers realize that the more service they can provide to their customers will make their vehicle more desirable to potential customers. These manufacturers have provided “kits” to companies looking to build an “app” for the vehicle. The kits provide information on the vehicle’s telematics system such that an independent company could integrate their app into the embedded telematics system. This initiative is pretty smart for those manufacturers, but it is important to remember that the car company still maintains control of who can obtain the kit and who is approved to provide an app for their vehicles.
The bottom line in this debate is control -- should it be the car company or the car owner? In my opinion and that of the Auto Care Association, it is the car owner that should decide where their data is sent. However, this is easier said than done. At the current time there is really no technical method for a car owner to determine where data off their system can be sent. Working with a task force that is comprised of a host of trade groups and companies, the Auto Care Association is attempting to address the technical barriers to open access to embedded telematics. However, this is not easy task and there are some significant challenges including how to protect certain safety-related vehicle systems that, if hacked, could pose a danger to the motorist. Further, once a standardized interface is developed, the car companies are going to need to adopt the standard in order for it to be effective. It is unclear at the present time how likely it will be that car companies will cede full control of their systems.
This all brings me back to the vote in California. While the effort by AAA of northern and southern California has certain raised the profile of this issue, more needs to be done to educate car owners and legislators on this important issue. Second, it is important that the industry, hopefully that includes the car companies and the auto care industry, cooperatively develops a standard by which non-car company entities can obtain access to a vehicle’s embedded telematics system with the permission of the car owner. Once this standard is developed then it will be up to the car companies as to whether they will adopt the standard. While it is possible that control of access to data sent via telematics systems will become a legislative issue, pitting consumers and the auto care industry against the car companies and the dealers (sound familiar?), I hope that the car companies will see the writing on the wall and work toward ensuring that their customers have control of the data being sent by their system and the right to determine if and where that data is sent.