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)!
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!
In early October, California Governor, Jerry Brown, finally reacted to the pressure from companies doing business in the state that were asking him to alleviate the ridiculous burden of frivolous lawsuits based on the state’s Proposition 65 (Prop 65). This seems to be a trend from certain political figures that are taking strong stances on behalf of industry in the face of several state and federal reforms of toxic substance programs.
Prop 65 was conceived in 1986 as a response to cleaning up drinking water in the state, but almost immediately created a honeypot for trial lawyers looking to catch businesses off guard. The original law required labeling notifications to employees and customers for possible exposures to chemicals named on a list created specifically for the new law. The law contained a provision that has been called the “bounty-hunter provision” which permitted private citizens to bring citizens lawsuits against companies that were alleged to have violated the law. The lawsuits are relatively inexpensive to bring by a citizens group and the law further provided that the group bringing the suit could also collect attorney’s fees. Companies were under pressure to settle the lawsuits even if they did no wrong in order to avoid a costly and publicly damaging legal battle. The citizens lawsuits were so easy and the profits to lawyers so plentiful, that the bounty provision created law firms that specialized in finding companies to target and then putting together front groups to file the lawsuit for the law firm.
For decades, businesses from across the spectrum demanded changes to the law, but no relief ever came. Suddenly in May 2013, Governor Brown issued a statement asking for many of the changes to be pushed through the California legislature this year. In essence, the changes adopted by the legislature would permit companies the chance to correct any non-compliance within 14 days and avoid any civil litigation, thus putting a damper on law firms targeting companies for quick hit lawsuits. It should be noted, that the business-friendly shift was made at lightning speed compared to the typical pace of moving a bill through any legislature indicating that even a normally liberal legislature could not tolerate the abuses that were occurring under the Prop 65 bounty provision.
While we may celebrate the major victory in the California Legislature, the industry must also be aware that there is a wave of chemical control program reform occurring around the country with some other elected officials attempting to support the interests of the business community at this same level. One of the major examples is the federal effort to reform the Toxic Substance Control Act (TSCA) overseen by the US Environmental Protection Agency (EPA).
In an effort to revamp a program that is more than 30-years old, Senator David Vitter (R-LA) has been strongly in favor of asking for confidential business information protections for chemical manufacturers and processors while also seeking a pre-emption standard that would create a uniform chemicals program, rather than a state-by-state patchwork mess. While Vitter is faced with powerful opposition from environmental groups and some colleagues in Congress, he continues to fight for a balance between the maximum public health level and healthy business-related laws and regulations.
These types of chemical program reviews are happening from California to Washington, DC and will only grow in number over the next few years. It is critical that businesses across the aftermarket remain vigilant in voicing their opinions and business needs to their elected officials in order to maintain a fair fight between us and environmental groups.
The changes to Prop 65 are a big win for chemical-intensive industries, like the automotive care and maintenance community, but that took nearly 30-years to achieve. TSCA reform and green chemistry legislation is happening now with potentially dire consequences for maintaining things like a competitive advantage through trade secrets.
An active role in the legislative and regulatory process through the AAIA is central to identifying and developing aftermarket-friendly elected officials so our industry can sustain itself through massive changes and make wins like the one on Prop 65 happen sooner rather than later.
Several resources are available through the AAIA, including personal contact with your government affairs department and the website. I encourage everyone, no matter your role in your company or your company’s position along the supply chain, to help move the entire industry forward on toxic substance legislation and other issues, by staying involved and staying active with your aftermarket trade association.
It is common in business to hear that it isn’t a matter of if you will be sued, but when. Since its passage in 1986, California’s Prop 65 has created a cottage industry of attorneys living off of that principle. Finally, in early May, California Governor Jerry Brown announced he would like to see changes to the state’s law to curb some of the financial incentives for invoking lawsuits under this premise. That announcement was a welcome sign from his office that there is finally recognition of the major problems the law has created for businesses either in California or those that sell products into the state.
Several automotive aftermarket companies have faced lawsuits over Prop 65 violations, spending hundreds of thousands of dollars in fees, only to be forced into a financial settlement. It is critical that businesses are well-informed about Prop 65, because ignorance is, unfortunately, not an acceptable defense in a California court.
Passed by voters in the ‘80s, the Safe Drinking Water and Toxic Enforcement Act of 1986 (Prop 65) established a list of chemicals known to cause cancer, birth defects or reproductive harm. The list is required to be updated by the California Office of Environmental Health Hazard Assessment (OEHHA) at least once a year and currently contains roughly 800 chemicals.
If you are a business in California or doing business in California, the OEHHA summarizes the requirements this way: “Businesses are required to provide a ‘clear and reasonable’ warning before knowingly and intentionally exposing anyone to a listed chemical.” The warning can be a label on a product, a notice in a workplace or other reasonable notifications.
Many companies run afoul of Prop 65 by not providing proper product or work place labeling, not monitoring the list updates to come into compliance, and not controlling for the discharge of listed chemicals into sources of drinking water. But other pitfalls exist.
One potential for being sued over a Prop 65 violation can occur due to the small company exemption provided in current law. If your company employs less than 10 people, no labeling is required. However, if your company purchases products from a small manufacturer that is not required to label, but then incorporates them into another product or repurposes and rebrands it for sale in California, and your company does not meet the exemption, then you must label that product with the Prop 65 warning.
It’s violations of the warning requirements and “catch 22’s” that have created an industry of law firms dedicated to seeking out and suing companies over Prop 65. Current law allows the majority of funds determined in a settlement to go to the plaintiff, rather than to the state for public health programs. This creates a major financial incentive to sue and environmental groups have been more than happy to help lawyers grow this problem.
Governor Brown acknowledged this issue by proposing changes that would cut this incentive. According to the first press release, he would like to see his administration, industry and lawmakers discuss the following options:
- Cap or limit attorney’s fees in Proposition 65 cases.
- Require stronger demonstration by plaintiffs that they have information to support claims before litigation begins.
- Require greater disclosure of plaintiff’s information.
- Set limits on the amount of money in an enforcement case that can go into settlement funds in lieu of penalties.
These kinds of reforms will no doubt face strong opposition from the legal community and environmental and public health groups profiting off of the current statutory language.
The OEHHA has committed to discussing potential reforms, however, and is beginning with a public workshop on addressing the need to reform warning labels. For businesses interested in getting involved in the revision of Prop 65 or that want to monitor potential changes on the horizon, the first workshop will be held July 30and public comments and attendance are welcome.
While these workshops will not create policy changes on-site, they will have significant influence over the regulatory changes that come in the future.
As mentioned, the issue of financial incentive changes will face significant objection from those involved in perpetuating the harm currently being done to businesses, and the most likely reason why a workshop on that topic is not the OEHHA’s preferred starting point.
Regardless of the topic for reform, it is critical that aftermarket organizations are involved as these workshops arise. Providing comments to the OEHHA, attending in-person or watching these workshops onlineare the first steps in the industry gaining reforms to the law that could help end the daily threat of egregious Prop 65 lawsuits.
AAIA encourages all companies in California or doing business in California to stay up on Prop 65 and will continue to inform members of updates on this issue as they come along.
I am always asked, “How bad are things in Washington?” It’s a relevant question, considering the number of scandals emerging from the White House and the acrimony between Democrats and Republicans in Congress. If you read the papers or watch the 24-hour news channels (not recommended for those with high blood pressure), the image of a city that is in constant gridlock emerges and there appears to be nothing on the horizon that will change the situation, at least anytime soon.
In my opinion, the image is largely accurate. However, in the middle of the mess we call our nation’s capital, over the last couple of weeks, there have been a few glimmers of hope that elected officials are in small ways breaking the gridlock.
The first major development was the passage by the Senate Judiciary Committee of immigration reform legislation. Controversial, yes, but the passage was the result of a bi-partisan team of senators that worked a bill through a committee mark-up session (that is the process when a bill is debated and amended before passage) that was fraught with peril. The senators worked together to accept amendments that should help when the bill is considered in the full Senate, but no changes were accepted that would have killed its main intent which is to provide a path to citizenship for illegal aliens. Whether we agree or disagree with the goal of the bill, it was clearly a case where both sides worked together to achieve a result.
The second development was the joint introduction by Senators David Vitter, R-La., and Frank Lautenberg, D-N.J., along with eight Republicans and eight Democrats, of legislation to modernize how chemicals are reviewed and approved by the Environmental Protection Agency. Both sides of this issue agreed that the current system of regulating use of toxic chemicals is unworkable, but up until last week, there was no agreement as to how to correct the problems. In fact, Senator Lautenberg had introduced legislation that was strongly opposed by business groups and which was considered dead on arrival in the Senate. However, his willingness to compromise with Republicans on key issues involving how chemicals are reviewed by the Environmental Protection Agency and state preemption now provides new hope that this issue could move forward.
Of course, both these bills face very difficult prospects for enactment. The immigration reform bill will certainly face a difficult battle ahead and it is unclear whether a bill can pass without support from many conservatives that are strongly opposed to immigration reform.
While the Toxic Substances Control Act (TSCA) agreement has been widely praised by many, some environmental groups have indicated that they do not think that the compromise provides adequate protections for human health and there will be significant attempts to amend the bill as it moves through Congress. Like immigration, it will be up to the sponsors to carefully guide the bill through what will be a difficult debate in the Senate, while at the same time ensuring that the main goal of the bill is preserved. Additionally, it is unclear how the recent passing of Senator Lautenberg will impact the prospects for the legislation since he had been the champion for TSCA reform in the Senate over the past several sessions and it is unclear who will take on his leadership role.
So, a long way to go in both instances, but in Washington progress is often measured by inches and not miles. It’s only after baby steps are taken that we look back and see how big the small steps really turned into, or not. Further, there are major issues that the Congress will need to address, including a long term solution to our growing deficit, where no solution appears in sight. They require huge amounts of compromise from both sides and at this point no one appears ready to give in. In any case, it will be worth watching these two pieces of legislation as they are debated for any signs that the body is finding a way to legislate; or whether political considerations will doom this Congress to more gridlock in the months to come.