government affairs blog
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.
Studious readers of AAIA’s weekly Capital Report may recall a story or two about a “simple” regulatory change by the New York Department of Environmental Conservation (NYDEC). In August 2012, the government affairs team was approached by several manufacturers of aftermarket catalytic converters (ACCs). They were concerned about NYDEC’s impending regulatory change that would adopt the California Air Resources Board (CARB) standards and approval process for certification of ACCs. The NYDEC had set an implementation date of June 1, 2013, for the new regulation, and the manufacturers’ experience in their current dealings with CARB and the California market had them worried about several practical matters, including availability of product, messaging to distributors, repair shops and consumers (significant increase in pricing), and the ability of CARB to adjust accordingly to the new demand for certification.
It should be noted here that the CARB certification process is extremely convoluted and involves assigning test vehicles for pre-determined applications, and is based not only on make, model and engine size, but also engine family designation. Once the precious metal loading in that ACC has been satisfactorily tested and approved, CARB grants an Executive Order (EO) for that particular application. Finally, the EO number must then appear on a metal plate attached to the body of the catalytic converter, available for verification (more on that later).
From the beginning, neither AAIA nor any of the manufacturers opposed the promulgation of new more effective ACC certification standards, but were concerned about the June 1 implementation date. Following a series of conference calls and meetings with the ACC manufacturers, the Retail Council of New York and the NYDEC, the state granted a delay, by means of issuing a letter that stated the regulation adopting the CARB standards for ACCs would not be enforced until Jan. 1, 2014.
As far outcomes go, this had to be considered very favorable, as the extra six months was, and continues to be, crucial to manufacturer inventory adjustments and communication with their distribution network. Additionally, the NYDEC agreed to the creation of a stake-holders workgroup to address messaging and outreach. However, real-world concerns about enforcement and the availability of CARB certified converters remain for the manufacturers, and the severity and complexity of the regulation’s impact on the installers and consumers will only be known as the date draws nearer.
But this issue does not begin and end with New York state. What is also of major concern to ACC manufacturers, and will be for many distributors and installers, is the reality that Massachusetts and Maine had previously adopted the CARB ACC standards, but have thankfully delayed implementation, with Maine declaring Jan. 1, 2015, as their new implementation date. AAIA is also aware of several other state environmental agencies that have acknowledged similar plans.
The reasons for all this regulatory activity around ACCs can be placed right at the door of the U.S. Environmental Protection Agency (EPA), as they have not promulgated new ACC standards since the regulation’s introduction in 1986. As most of you know, vehicle emissions technology has made tremendous progress since that time; and states attempting to reduce emissions in order to meet federal air quality standards have simply become frustrated with EPA’s lack of progress.
EPA claims that they lack the resources to adopt a new ACC certification standard, claiming that regulatory efforts to promulgate a Tier III Fuel Standards has demanded the attention of their now limited staff (sequestration, anyone?).
An adoption by states of a new federal standard that is more practical than the CARB program (which will be left in place for California) would still result in more effective emissions reductions, but would also streamline the certification requirements for ACCs, increasing the availability to consumers of lower cost converters to consumers, many of whom now are forced to purchase expensive OE catalytic converters when a CARB-certified ACC converter is unavailable.
AAIA has already formally written several states and EPA, explaining our position that this new standard would be the best possible path forward for our industry. We have also written and met with the Ozone Transport Commission (OTC), an organization of East Coast and Mid-Atlantic states created under the Clean Air Act, to advise EPA on development and implementation of regional solutions to ground-level ozone pollution.
Finally, AAIA’s government affairs staff has begun lobbying members of Congress, asking them to assist us in persuading the EPA to begin this initiative. As always, members of Congress like hearing from their constituents on any given issue, and if aftermarket catalytic converters are part of your business, please feel free to call or email us at AAIA and we’ll help you contact your representative.
The AAIA letters to the OTC and the EPA can be viewed here:
On Aug. 15, the National Association of Manufacturers (NAM), AAIA and 11 other organizations moved to intervene in a suit brought by the Sierra Club against the U.S. Environmental Protection Agency (EPA). The Sierra Club and other environmental groups are attempting to force EPA to complete its review and revision of the national ambient air quality standard (NAAQS) for ozone. The agency had tightened the standard to 75 parts per billion in March 2008 and the Sierra Club wants EPA to further lower the standard by September 2014. It is expected that EPA will attempt to reduce the standard to between 60 and 70 ppm as part of its next rulemaking. This reduction would come just as EPA is in the process of implementing the 2008 standard.
AAIA and NAM are intervening to prevent EPA from issuing a more stringent ozone standard without a thoughtful and thorough review of the evidence. As NAM stated when the motion was filed: “Forcing EPA to act hurriedly would frustrate the development of sound scientific support on the need for NAAQS revisions. The truncated timetable would further reduce the time that industry and the public will have to weigh-in on the new standard.”
The revision of the NAAQS is a big deal for our industry. Under the Clean Air Act, EPA must establish a standard for ozone and other pollutants that provides protection for public health. EPA is further required to review the standard every five years. However, enforcement of the NAAQS is up to the states, which are required to develop and obtain approval from EPA for State Implementation Plans (SIP). SIPs establish which measures a state will adopt in order to meet the NAAQS. The development and EPA approval process is extremely complex; in a nutshell, an area that fails to meet the NAAQS is deemed in non-attainment and must implement SIP-specified air pollution measures approved by EPA as sufficient for the area to achieve attainment. Therefore, if the NAAQS for ozone is lowered, it means that additional localities around the country could be put into non-attainment and forced to adopt control strategies that will result in a reduction of the emissions of pollutants that create ozone. Further, areas that are already in non-attainment could be forced to further regulate sources of emissions in order to meet the seemingly impossible task of an area achieving attainment of a lower standard.
The bottom line is that the new standard will force additional and costly control measures on industry. These control measures could mandate huge investments by companies in pollution abatement, as well as additional restrictions on automotive chemicals and appearance products that contain volatile organic compounds (VOC), which cause ozone.
The lawsuit by the environmental groups was filed in the U.S. District Court for Northern California, which will now rule on whether to permit us to intervene in the case, which is by no means a slam dunk. In addition, it is likely that EPA and the environmental groups will attempt to settle the lawsuit. Such settlement talks would occur behind closed doors and could establish a timetable for a NAAQS rulemaking that could have serious impacts on industry. If the court permits us to intervene, it will mean that industry will have a seat at the table for these negotiations.
Clearly, there is a lot riding on EPA’s NAAQS rulemaking and AAIA feels that it is critical that the process be transparent, and permit sufficient time for all of the pertinent data to be reviewed before a decision is made on a standard that could impose severe economic costs on our industry, as well as the U.S. economy.
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.