WASHINGTON—The new year promises to be an intense one in legislation and rulemaking for all stakeholders in the tire industry. 2015 also will usher in a new Congress in which the Republicans will be in firm control of both the U.S. Senate and the House of Representatives. However, how much correlation there will be between those two facts is debatable.
Political commentators—in the industry and elsewhere—expect at best only a slight loosening of Congress' legislative logjam this year. They also expect President Barack Obama, for the first time in his presidency, to start wielding his veto power against bills dear to the GOP. For the tire industry, there will be plenty of issues to address both in and out of Congress. The following is a look at what issues should draw increased attention in 2015.
The issue that promises to be the most contentious arose in the last month of 2014. On Dec. 9-10, the National Transportation Safety Board (NTSB) hosted a symposium in Washington on passenger tire safety. At that meeting, the Rubber Manufacturers Association (RMA) proposed an end to the voluntary tire registration rule approved by Congress in 1982 and a return to the mandatory system begun in the 1970s.
This recommendation was opposed by the Tire Industry Association (TIA), whose predecessor organization, the National Tire Dealers & Retreaders Association, fought a hard battle to end mandatory registration in the first place.
At a time when the NTSB is investigating fatal accidents involving recalled tires that somehow stayed on the road, strong measures are needed, according to Dan Zielinski, RMA senior vice president of public affairs. “After more than 30 years of experience with voluntary tire registration, the difference in registration rates between independent retailers and company-owned stores is stark,” Mr. Zielinski told Tire Business. “The system has not worked.”
But while TIA favors stronger measures to register tires, it cannot support a registration system that places all the burdens and penalties solely on retailers, according to TIA Executive Vice President Roy Littlefield. “I can't think of any other product safety registration system in which the retailer is held responsible,” Mr. Littlefield said. “If a child safety seat is recalled and can't be recovered, Wal-Mart doesn't get fined.”
According to TIA, fines for failing to register tires can total up to $16 million per retailer. TIA is doing everything it can to inform tire retailers and consumers about their responsibilities under the tire registration law, according to Roy Littlefield IV, TIA government affairs manager. Soon it will issue a video, “Tire Safety Begins with Tire Registration,” which retailers can download free and play in their showrooms, he said.
Tire registration also will be a major part of TIA's Lobby Day, scheduled for Feb. 5, according to Messrs. Littlefield. During Lobby Day, TIA members will have a chance to meet with key legislators and congressional staff members to discuss the issues most crucial to tire retailers. RMA President Charles Cannon said that responsibility for tire registration properly belongs at the point of sale.
But he also said his association is more than willing to work with TIA to create workable alternatives to the current system. “What we're suggesting is finding the best way to collect information if we're going to conduct a reasonable tire recall,” Mr. Cannon said.
The RMA told TIA in advance that it would recommend a return to mandatory registration at the NTSB symposium and looks forward to working with TIA to find mutually acceptable solutions, he said. Mr. Littlefield, however, said TIA felt blindsided by the RMA's actions.
“It's so unfortunate the way things happened,” he said. Mr. Littlefield said on Dec. 15 that he looked forward to discussing alternatives with the RMA, but also said he was still waiting for Mr. Cannon's call. Changing the current tire registration law would take an act of Congress.
The NTSB report on tire safety is expected to be issued this summer. The NTSB has no legislative power, but if it recommends a return to mandatory registration, that recommendation would have considerable persuasive force.
On the same day the NTSB symposium began, Transportation Secretary Anthony Foxx held a press conference at the White House to announce a new series of initiatives by the Obama administration designed to inform consumers on buying fuel-efficient tires and making sure their tires offer them maximum safety, fuel efficiency and service life.
Among other things, Mr. Foxx announced the release of a “Be TireWise” guide to tire safety and fuel efficiency; a “Drive for Safety” initiative with NASCAR during the 2015 racing season; and the designation of Dec. 9-Jan. 9 as “Tire Safety Awareness Month.” All of the RMA's tire manufacturing members pledged to support the administration's efforts, as did a number of major tire retailers. During the press conference, Mr. Foxx said that the long-planned tire fuel-efficiency labeling system would be released in 2017.
Whereas tire manufacturers have been waiting for the labeling final rule since March 2010, Mr. Cannon said the RMA is not unduly upset about the further wait.
“The administration sent all the right messages that day,” he said. “This has certainly been a very long process, but when the White House sends a message saying that something is going to be done, we are confident it will be.” Mr. Littlefield was less pleased, however, because this means the consumer education portion of the tire fuel efficiency rule also will have to wait at least that long to be issued. “We're disappointed that this is taking so long,” he said.
The RMA scored a coup in the summer of 2014, when it won passage in Colorado of a bill designed simultaneously to clean up the state's 60-million-plus scrap tire monofill and ban “unsafe” used tires from its roads. The details of the used tire portion of the Colorado bill are still being worked out, according to Mr. Zielinski.
However, he said, the provisions would be simple enough: Any tire that a professional technician would remove from service—whether because of sidewall bulges, improper repairs, insufficient tread or visible damage—would be illegal under the Colorado bill. The RMA will be particularly active in Florida, Georgia, South Carolina and Texas in seeking passage of used tire bills this year, while other states are “bubbling,” Mr. Zielinski said.
Scrap tire laws in other states seem to be working as they should, according to Mr. Zielinski. However, the RMA needs to be vigilant to make sure cash-strapped state legislatures don't start diverting scrap tire abatement funds to their states' general funds.
“It's difficult for states when there's a downturn,” he said. “But when the economy improves, they don't always send the money back.”
Scrap tire markets also were rattled in 2014 by an NBC News story about soccer players on crumb rubber-enhanced athletic fields who were diagnosed with blood cancers. The RMA was quick to point out all the extant studies that show no correlation between rubber athletic turf and human disease.
“To be fair to NBC, they found no technical basis for that claim,” Mr. Zielinski said. Tire aging has been an issue since 2003, when the first news reports about it appeared, according to the RMA. The association expects to see more state legislatures consider bills this year to ban tires older than a certain age, despite the May 2014 report from the National Highway Traffic Safety Administration (NHTSA).
In that report, the agency said that stringent new tire safety standards and improved tire technology made tire-aging rulemaking unnecessary. “People often intermingle tire aging and tire age,” Mr. Zielinski said. Tire aging—based far more on inflation, maintenance and storage than on the date of manufacture—determines a tire's service life, he said.
TIA expects to see a lot of state bills on the tire-aging issue. A way out of the tire-aging controversy, according to Mr. Littlefield III, might be the public safety standards developed in Europe and now adopted in 31 countries. “It's an uphill battle, but it's the right battle,” he said.
The United Steelworkers (USW) union filed petitions with the International Trade Commission (ITC) in June 2014 for countervailing and antidumping duties against Chinese passenger and light truck tires. In its petitions, the USW complained that Chinese imports had soared since the end of Section 421 tariffs in September 2012.
The Commerce Department made a preliminary determination Dec. 1 finding material injury in the countervailing duty case, and is scheduled to make its preliminary determination in the antidumping duty case Jan. 21. TIA remains opposed to duties on passenger and light truck tires, although it sees them as likely. “When you look at the issue, Obama's on safe ground,” Roy Littlefield III said. “He can do a favor for the unions while saying he's protecting American jobs.”
TIA, however, sees the issue as skewing free trade and tire distribution without any real benefit to the economy. “The average retailer carries seven or eight brands of tires, and there are reasons for that,” he said. “One of those reasons is cost.” TIA plans to meet with Commerce officials before the January antidumping ruling, according to Mr. Littlefield. However, the association has not taken any position on duties against Chinese off-the-road tires, although Mr. Littlefield said he is puzzled by the change at the Commerce Department in determining antidumping duties.
“It used to be that the petitioner had to prove that the tire was being sold at less than fair value,” he said. “Now, Commerce can justify a 105-percent duty against Double Coin by determining a percentage of ownership.” Along with tire registration, legislation to fund the nation's transportation infrastructure—and what it might contain—will be the focus of TIA's Federal Lobby Day, according to Mr. Littlefield. “Don't Let the Highway Bill Jeopardize Your Business” is the headline for the first of TIA's Federal Lobby Day fliers.
The current stopgap measure signed by President Barack Obama last August lasts only until May 2015, and its successor, TIA said, could contain many things detrimental to tire retailers and retreaders. These include:
- An increase in the motor fuel tax of anywhere from 15 cents to $2 per gallon;
- Reinstatement of the federal excise tax (FET) on passenger tires;
- A 10-percent increase of the truck tire FET;
- Reinstatement of a tax on tread rubber of 5 to 15 cents per pound; and
- A 10-percent increase of the FET on trucks and truck parts.
“Our infrastructure's falling apart, and we have to fix it if we want a sound economy,” Mr. Littlefield said. “The question is how you're going to pay for it.” With both houses of Congress in Republican control, legislation to repeal or revamp the Affordable Care Act seems virtually certain. Meanwhile small businesses must cope with some difficult provisions in the health care law, Mr. Littlefield said. “It's very unfortunate how the Affordable Care Act is playing out in the workforce,” Mr. Littlefield said.
Because of the clause exempting small businesses from providing health care benefits to employees working less than 30 hours a week, small businesses are cutting hours for formerly full-time employees to avoid dealing with the law, he said. “This was an unintended effect of the law, and it's bad for everyone,” he said. The 113th Congress ended late on Dec. 16 with passage of a bill temporarily extending various tax breaks for individuals and businesses, including several popular with small business.
These include expedited expensing of capital investments and the Work Opportunity Tax Credit, which allows small businesses to deduct a portion of the first-year wages of disadvantaged workers. One tax break TIA and other small business associations advocate is repeal of the estate tax, which they have advocated for many years. “I think we'll get a bill through Congress for the first time in years,” Mr. Littlefield said.
“But it will be more symbolic than anything,” he said, since President Obama has promised to veto any bill repealing the estate tax. Even more worrisome to TIA than the estate tax is the potential repeal of LIFO, the “last in, first out” accounting system that assumes that assets produced or acquired last are the ones sold, used or discarded first.
If LIFO is repealed, it would cost small business an estimated $80 billion in the first year alone, according to Mr. Littlefield.
“We're lobbying a lot right now to save LIFO,” he said. “Many members of Congress are sympathetic to LIFO, but they don't want to go public. LIFO repeal could go into a tax package, and they don't want to go back on their promise to raise revenue without raising taxes.” Many initiatives at the Environmental Protection Agency (EPA) affect the tire industry either directly or indirectly, according to Tracey Norberg, RMA senior vice president and general counsel.
The RMA participates in many coalitions following broad EPA actions, such as one monitoring the pending National Ambient Air Quality Standard for ozone, she said. One EPA action affecting the tire industry directly is its request for comments on the use of biomass as an energy feedstock, according to Ms. Norberg. “Scrap tires are being treated favorably because of their natural rubber content,” she said. “This is a real opportunity to promote an end-use for tires as fuel.”
The automotive aftermarket won a double victory early in 2014 in its advocacy of the Motor Vehicle Owners' Right to Repair Act. The Right to Repair Act requires auto makers to provide to independent auto repair shops—at a reasonable price and in an accessible manner—the same repair and diagnostic information and tools they give their franchised dealers.
In January 2014, the Massachusetts legislature gave final approval to its version of the Right to Repair Act. Shortly thereafter, auto makers signed a memorandum of understanding (MOU) with aftermarket associations to provide diagnostic tools and information to independent garages.
Mr. Littlefield said he anticipated no legislative action on Right to Repair. “From what we're hearing from New England, we're happy and optimistic that the information will be distributed,” he said. “We're more concerned about the cost than anything else.”
The Automotive Service Association (ASA), which negotiated its own information agreement with auto makers in 2002 and opposed Right to Repair legislation, said it is happy with the current state of affairs. “As long as we're getting the information, we're good to go,” said Robert L. Redding, ASA Washington representative.
“The MOU is a good thing. Right to Repair bills have dropped off, and they were a major distraction. We had to use our very limited resources to fight them, not just staff members but volunteers, and shop owners had to take time off from their businesses to tell state legislatures that they were satisfied with the information they were getting.” It is very difficult to predict from the Massachusetts law which informational tools auto makers will include in their offerings to independent garages, Mr. Redding said.
This is particularly problematic in relation to telematics, the technology of transmitting vehicle information via telecommunications, he added. Ensuring the rights of motorists and shop owners to telematics-related information will be a major focus for the ASA in 2015, he said. The association had a telematics seminar at its annual NACE/CARS event in Detroit in 2014, and plans to do the same in 2015, he said.
Only 17 states have some sort of periodic vehicle inspection laws on their books, Mr. Redding said. Now, however, the ASA and its allies may have a chance to increase that number.
“We're at a point where there's a lot of buzz and a lot of interest about vehicle safety,” he said. “But there's no road map for that effort to move forward.” In collaboration with the Motor & Equipment Manufacturers Association, the Automotive Aftermarket Suppliers Association and the American Maintenance & Repair Association, the ASA hosted a vehicle safety meeting in Pennsylvania in November to promote vehicle safety inspections, according to Mr. Redding.
The associations were very pleased with the result, with attendees including government administrators, policy makers, aftermarket manufacturers and auto repair professionals, he said. “We'll do it again in 2015, and we plan to take it on the road,” he said.
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