BILL ANALYSIS Ó
SENATE COMMITTEE ON TRANSPORTATION AND HOUSING
Senator Jim Beall, Chair
2015 - 2016 Regular
Bill No: AB 1178 Hearing Date: 6/30/2015
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|Author: |Achadjian |
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|Version: |6/23/2015 |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant|Randy Chinn |
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SUBJECT: Vehicles: manufacturers and distributors
DIGEST: This bill provides that an automobile manufacturer may
take an adverse action against a dealer pursuant to export
prohibitions only if the manufacturer has provided the dealer
with the export policy and a known exporter list in writing at
least 48 hours before the vehicle is sold to a known exporter.
ANALYSIS:
Many aspects of the relationship between automobile
manufacturers and dealers are regulated in state law. In 2013,
the Legislature passed SB 155 (Padilla, Chapter 512) which
revised many aspects of those regulations, including provisions
dealing with export prohibitions by dealers.
Existing law restricts an automobile manufacturer from taking
any adverse action against a dealer pursuant to export
prohibitions unless the export prohibition policy was provided
to the dealer in writing prior to the sale, and the dealer knew
or reasonably should have known of the customer's intent to
export the vehicle in violation of the prohibition. If the
dealer causes the vehicle to be registered in California or any
other state and causes to be collected any applicable sales or
use tax, a rebuttable presumption is established that the dealer
did not have reason to know of the customer's intent to export
or resell the vehicle.
This bill replaces the known or should-have-known construct with
AB 1178 (Achadjian) PageB of?
a more specific standard:
1)The manufacturer may not take an adverse action against a deal
if the dealer causes the vehicle to be registered in any state
and collects any applicable sales tax.
2)Notwithstanding the above, a manufacturer may take an adverse
action if the dealer sells the car to a known exporter, and
the manufacturer had provided to the dealer in writing its
export prohibition policies and a list of known exporters at
least five days prior to the sale.
COMMENTS:
Purpose of bill. According to the author, this bill is
necessary because an automobile manufacturer is ignoring a
recently passed law dealing with automobile exports. That law
established a rebuttable presumption that a dealer did not know
or should not have known that an automobile was being exported
if the dealer caused the vehicle to be registered and sales
taxes were paid. Effective November 2014, the policy of this
manufacturer is to punish a dealer if a specified number of its
sales are exported, a clear violation of California's law
according to the author. This bill strengthens and clarifies
California law.
Opponents' arguments. Opponents argue that this bill upends a
recent agreement which establishes a rebuttable presumption that
the sale was legitimate provided the car was registered and the
taxes paid. Only if the dealer knew or should have known that
the purchaser was planning to sell the vehicle overseas would
there be an effect on the dealer. While one automobile
manufacturer has allegedly established a new policy which is
contrary to California law, that policy has not been implemented
and is nevertheless not a reason to change a finely balanced law
which the Legislature so recently enacted.
It's still not legal. If an automobile dealer believes that a
manufacturer is violating California's automobile export law, as
California dealers believe one manufacturer is doing, the New
Motor Vehicle Board is the venue for sorting that out. Creating
a new, more stringent law may punish all manufacturers for the
(alleged) sins of one, and may simply create just another law
for the manufacturer to ignore.
AB 1178 (Achadjian) PageC of?
Good for the dealer, good for California. The state has a clear
interest in increasing in-state vehicle sales, as this generates
sales tax revenue and profits for California dealers. This may
conflict with the interests of automobile manufacturers who have
an interest in segmenting their markets and maximizing profits
in each.
Trying, and failing, to crack down. Buying luxury cars in the
United States and exporting them to countries like China can be
lucrative, as automobile manufacturers price their cars much
more expensively overseas, according to two recent articles in
Autoweek<1> and the Financial Times<2>. Some manufacturers have
responded by charging auto dealers and threatening future
vehicle allocations, according to the articles. The federal
government has also been investigating whether such exports may
be illegal, but in its first case against an alleged illegal
exporter, a judge in Ohio ruled that the federal government had
failed to make its case.<3> A more recent report notes that at
least a dozen other similar cases have been dropped by federal
authorities.<4>
Double-referral. This bill has also been referred to the Senate
Judiciary Committee.
Related Legislation:
SB 155 (Padilla, Chapter 512, Statutes of 2013) - this bill
revised many aspects of the legal framework governing the
relationship between automobile manufacturers and dealers,
including export policies.
Assembly Votes:
Floor: 80-0
Appr: 17-0
Trans: 16-0
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<1>"Exporting New Luxury Cars Is Lucrative, Legally
Questionable," Autoweek; July 22, 2014.
<2> "Carmakers Face Fresh China Import Threat," Financial Times;
January 18, 2015.
<3> "U.S. Ordered to Return Assets Held in Crackdown of Luxury
Cars Exported to China," New York Times, April 3, 2014.
<4> "Prosecutors Ease Crackdown on Buyers of China-Bound Luxury
Cars," New York Times, April 1, 2015.
AB 1178 (Achadjian) PageD of?
FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes
Local: Yes
POSITIONS: (Communicated to the committee before noon on
Wednesday,
June 24, 2015.)
SUPPORT:
California New Car Dealers Association
OPPOSITION:
Global Automakers
Honda North America, Inc.
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