SB 173: "An Act relating to marine products and motorized recreational products; and providing for an effective date."

00 SENATE BILL NO. 173 01 "An Act relating to marine products and motorized recreational products; and 02 providing for an effective date." 03 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 04 * Section 1.AS 45.25.990(12) is amended to read: 05 (12) "motor vehicle" means a motor vehicle that is required to be 06 registered under AS 28.10, but does not include a motor home, a recreational vehicle, 07 or a motorcycle; in this paragraph, 08 (A) "all-terrain vehicle" has the meaning given in 09 AS 45.27.390; 10 (B) "recreational vehicle" includes an all-terrain vehicle 11 and a snow machine; 12 (C) "snow machine" has the meaning given in 13 AS 45.27.390; 14 * Sec. 2. AS 45 is amended by adding a new chapter to read:

01 Chapter 27. Marine Products and Motorized Recreational Products. 02 Article 1. Agreement Practices of Product Manufacturers. 03 Sec. 45.27.010. Consent to transfer of agreement. A manufacturer may not 04 unreasonably withhold consent to the sale or other transfer of a dealership agreement 05 by an authorized dealer to a transferee if the transferee 06 (1) meets the criteria generally applied by the manufacturer when 07 approving new authorized dealers; and 08 (2) agrees to be bound by all the terms and conditions of the standard 09 form of the dealership agreement. 10 Sec. 45.27.020. Cancellation or nonrenewal of agreement. (a) A 11 manufacturer may not cancel or decline to renew a dealership agreement with an 12 authorized dealer unless 13 (1) the manufacturer has 14 (A) satisfied the notice requirements of this chapter; 15 (B) shown that there is good cause for the cancellation or 16 nonrenewal of the dealership agreement, and, if the reasons underlying the 17 good cause can be corrected by the authorized dealer, the authorized dealer has 18 failed for 60 days after delivery of the notice required by AS 45.27.030 to 19 make the corrections; the circumstances identified under AS 45.27.030(a)(2), 20 for which a 15-day notice of cancellation or nonrenewal is required, do not 21 qualify as reasons for which correction is allowed under this paragraph; or 22 (2) the authorized dealer has systematically engaged in fraud 23 (A) against consumers or the manufacturer; or 24 (B) in the operation of the authorized dealer's dealership. 25 (b) Notwithstanding (a)(1) of this section, a manufacturer may not cancel or 26 decline to renew a dealership agreement with an authorized dealer because of the 27 death or incapacity of an owner if the owner is not listed in the agreement as one on 28 whose expertise and abilities the manufacturer relied in the granting of the agreement. 29 (c) In this section, "good cause" includes circumstances in which the 30 authorized dealer fails to comply with or observe a material provision of the dealership 31 agreement with the authorized dealer. For the purpose of determining good cause

01 under this subsection, reasonable sales and service performance criteria and capital 02 and facility requirements may be considered material provisions only if the criteria or 03 requirements were communicated in writing to the authorized dealer within a 04 reasonable period of not less than six months before the effective date of the 05 cancellation or nonrenewal, to afford the authorized dealer a reasonable opportunity to 06 comply with the criteria or requirements. 07 Sec. 45.27.030. Notice of cancellation or nonrenewal. (a) A manufacturer 08 shall furnish a notice of cancellation or nonrenewal of a dealership agreement with an 09 authorized dealer to an authorized dealer at least 10 (1) 90 days before the effective date of a cancellation or nonrenewal, 11 except as provided under (2) of this subsection; 12 (2) 15 days before the effective date of a cancellation or nonrenewal 13 when the authorized dealer 14 (A) is insolvent or is the subject of a bankruptcy or receivership 15 proceeding; 16 (B) is convicted of a felony involving moral turpitude or fraud 17 under the law of this state, another state, the federal government, a territory of 18 the United States, or the District of Columbia; 19 (C) has violated a term of the dealership agreement with the 20 manufacturer, the violation of which the manufacturer and the authorized 21 dealer have agreed in the dealership agreement constitutes a basis for 22 cancellation or nonrenewal. 23 (b) Notice required under (a) of this section must be in writing, shall be sent 24 by certified mail or personally delivered to the authorized dealer, and must contain 25 (1) a statement of intention to cancel or not renew the dealership 26 agreement; 27 (2) a statement of the reasons for the cancellation or nonrenewal; and 28 (3) the date on which the cancellation or nonrenewal takes effect. 29 (c) In this section, "mail" means registered or certified mail, return receipt 30 requested. 31 Sec. 45.27.040. Threat of cancellation or nonrenewal. (a) A manufacturer or

01 manufacturer's representative may not coerce or attempt to coerce an authorized dealer 02 to enter into a dealership agreement with the manufacturer or a subsidiary of the 03 manufacturer, or to perform any other act unfair to the authorized dealer, by 04 threatening to terminate a dealership agreement between the manufacturer or 05 subsidiary of the manufacturer and the authorized dealer. 06 (b) This section does not prohibit a voluntary agreement between a 07 manufacturer and an authorized dealer to settle legitimate disputes. 08 (c) In this section, "manufacturer's representative" means an employee or 09 agent of a manufacturer who engages in the business of contacting a manufacturer's 10 authorized dealer for the purpose of making or promoting the sale of the 11 manufacturer's products or product parts. 12 Sec. 45.27.050. Repurchase obligations on cancellation or nonrenewal. (a) 13 On the cancellation or nonrenewal of a dealership agreement by a manufacturer, the 14 manufacturer shall repurchase from the authorized dealer's inventory 15 (1) each new and unused product of the manufacturer that is a current 16 product model, or a product model from the previous two years; and 17 (2) each product part that 18 (A) was purchased from the manufacturer by the authorized 19 dealer; 20 (B) is listed in the manufacturer's parts price books in the 21 previous two years; and 22 (C) has not been damaged or substantially altered to the 23 prejudice of the manufacturer while in the possession of the authorized dealer. 24 (b) Within 90 days after the effective date of the cancellation or nonrenewal, 25 the authorized dealer shall return the property required by (a) of this section to be 26 repurchased to the manufacturer at the manufacturer's expense. The manufacturer shall 27 pay the compensation for the property within 60 days after the tender of inventory and 28 other items if the authorized dealer has clear title to the property and is in a position to 29 convey that title to the manufacturer. If the property is subject to a security interest, 30 the manufacturer may make the payments jointly to the authorized dealer and the 31 holder of the security interest, and the manufacturer may offset the payment.

01 (c) The amount of a repurchase required by (a) of this section must be based 02 on the authorized dealer's landed cost at the authorized dealer's facility, subject to 03 adjustments to landed costs for quarterly or annual purchase rebates and credits given 04 to the authorized dealer on the products or product parts. 05 Article 2. Product Warranties. 06 Sec. 45.27.100. Warranty provided. A manufacturer shall provide, through 07 the authorized dealer, to the product's ultimate purchaser from an authorized dealer the 08 manufacturer's standard written warranty, if any, that is in effect at the time of delivery 09 of the product to the authorized dealer. 10 Sec. 45.27.110. Defective products. (a) A manufacturer of a defective product 11 shall, during the original warranty period, pay an authorized dealer to complete 12 factory-recommended warranty repairs, solutions, and procedures to cure factory 13 warranty problems with a defective product. The manufacturer shall make the 14 payment in accordance with the standard warranty service claim procedures and 15 methods of the industry and with AS 45.27.100 - 45.27.170. 16 (b) A manufacturer shall, within 60 days after an authorized dealer's request, 17 provide the authorized dealer with the original factory parts required to perform 18 warranty service on a defective product. If a manufacturer is unable to supply original 19 factory parts needed to complete the warranty repairs for a defective product within 60 20 days, the authorized dealer may return the defective product and receive full credit for 21 the authorized dealer's landed cost of the product, plus 100 percent of the freight 22 charges to return the product. 23 (c) In this section, "defective product" means a product that is defective in 24 manufacture, including design, assembly, engineering, or manufacturing. 25 Sec. 45.27.120. Authorized dealer warranty representations. An authorized 26 dealer may not make a representation about the warranty that is not made by the 27 manufacturer in the written warranty. An authorized dealer shall deliver the manuals 28 on the operation and maintenance of a product to an ultimate purchaser and make the 29 manufacturer's warranty known to the ultimate purchaser, including all disclaimers 30 and limitations. 31 Sec. 45.27.130. Warranty service and claims. (a) An authorized dealer shall

01 provide warranty service in accordance with the manufacturer's applicable warranty on 02 all of the manufacturer's products sold by the authorized dealer. 03 (b) An authorized dealer shall make all claims for warranty reimbursement in 04 the manner established by the manufacturer. 05 Sec. 45.27.140. Warranty restrictions. A manufacturer may not, by 06 dealership agreement, by restrictions on reimbursement, or by another method, restrict 07 the nature or extent of product parts provided or labor performed by an authorized 08 dealer if the restriction impairs the authorized dealer's ability to satisfy a warranty 09 created by the manufacturer in accordance with generally accepted standards. 10 Sec. 45.27.150. Basis for reimbursements. (a) A manufacturer shall use the 11 criteria established in this section to reimburse an authorized dealer for all approved 12 warranty service work performed by the authorized dealer. 13 (b) A manufacturer shall pay to a servicing authorized dealer warranty work 14 labor rates that 15 (1) are not less than the highest of the following: 16 (A) the rate the authorized dealer customarily charges to a 17 customer for nonwarranty service work; 18 (B) the manufacturer's printed flat rate; or 19 (C) the rate established by a flat rate manual for dealers, if the 20 manual is produced for dealers by a nationally respected industry consultant; 21 and 22 (2) include time for clean-up, preparation, diagnosis, disassembly, 23 repair, assembly, testing, and final cleaning as needed to provide a quality result and 24 customer satisfaction. 25 (c) In addition to the payment under (b) of this section, the manufacturer shall 26 reimburse an authorized dealer a minimum of one hour at the authorized dealer's shop 27 standard labor rate for the administration of each warranty claim. 28 (d) A manufacturer shall reimburse the authorized dealer for product parts at 29 the current manufacturer's full suggested retail price and shall ship each part to the 30 authorized dealer without cost for freight or handling. 31 Sec. 45.27.160. Timely reimbursement for claims. A manufacturer shall pay

01 a properly submitted warranty claim within 30 days after receiving the claim from an 02 authorized dealer. Unless a manufacturer issues a written notice of disapproval under 03 AS 45.27.170 within the 30 days, if a manufacturer fails to pay a claim within 30 days 04 after receipt, the failure is considered an acceptance of the claim as submitted, and the 05 manufacturer shall pay the authorized dealer interest at the rate of 1.5 percent a month 06 on the claim. 07 Sec. 45.27.170. Warranty claim disapproval. If a manufacturer does not 08 approve a claim, the manufacturer shall issue a written notice of disapproval to the 09 authorized dealer within 30 days after the manufacturer receives the claim. The notice 10 must contain the specific reasons for the disapproval. 11 Article 3. Miscellaneous Business Practices. 12 Sec. 45.27.200. Required posting. (a) An authorized dealer shall post a notice 13 of the authorized dealer's retail labor rate in a place conspicuous to service customers. 14 If the authorized dealer uses a factory-certified or factory-trained technician to 15 perform warranty service work, the notice must also contain a statement that warranty 16 service work completed by the authorized dealer is performed by a factory-certified or 17 factory-trained technician. 18 (b) If an authorized dealer's service operations employees receive a 19 commission for the amount of work they perform, the authorized dealer shall post a 20 conspicuous sign that is visible to service customers that the authorized dealer's 21 service operations employees work on commission. 22 Sec. 45.27.210. Written estimates for repairs not covered by warranty. (a) 23 Before beginning repair work on a product for a customer, an authorized dealer shall 24 provide to the customer a written estimate listing the specific parts, labor, and cost of 25 the repairs. 26 (b) If additional repairs are determined to be necessary after the service 27 employees begin repairing the product, the authorized dealer shall contact the 28 customer and receive permission to do additional repairs not covered in the written 29 estimate. 30 (c) An authorized dealer shall post in a conspicuous place for service 31 customers to view all charges for diagnostics, storage, and other incidentals not

01 associated with the actual repair of a product. 02 Sec. 45.27.220. Content of factory recall notices. A manufacturer shall 03 include in a written factory recall notice to ultimate purchasers and authorized dealers 04 the date by which the manufacturer expects that necessary parts and equipment will be 05 available to the authorized dealer for the correction of the defect that is the subject of 06 the recall. 07 Sec. 45.27.230. Replacement of product. The manufacturer of a product that 08 is sold to an ultimate purchaser in the state, that is not more than a year old, and that is 09 still under warranty shall replace the product without charge or refund the full 10 purchase price, minus a reasonable amount for mileage, if 11 (1) the authorized dealer is unable to fix a serious defect after 12 attempting to fix the defect four times; or 13 (2) the product has a defect that prevents the ultimate purchaser from 14 using the product for 30 or more consecutive or inconsecutive days. 15 Article 4. Miscellaneous Provisions. 16 Sec. 45.27.250. Unenforceable provisions. If a provision in a dealership 17 agreement violates this chapter, the provision is not enforceable. 18 Sec. 45.27.260. Cumulative provisions. The remedies under this chapter are 19 in addition to any other legal or equitable remedy available under law or under a 20 dealership agreement between an authorized dealer and a manufacturer. 21 Article 6. General Provisions. 22 Sec. 45.27.390. Definitions. In this chapter, unless the context indicates 23 otherwise, 24 (1) "authorized dealer" means a person who has entered into a 25 dealership agreement with a manufacturer of products; 26 (2) "boat" means a marine product that is not equipped with a motor; 27 (3) "dealership agreement" means an agreement between a person and 28 a manufacturer of products for the person to sell or service the manufacturer's 29 products; 30 (4) "landed cost" means the total cost of a product delivered at a given 31 location, including the initial authorized dealer invoice price and any freight,

01 transportation, flooring expense, interest expense, authorized dealer preparation cost, 02 assembly cost, and reasonable handling cost; 03 (5) "manufacturer" means a person who 04 (A) fabricates, manufactures, or assembles products; 05 "manufacturer" includes a manufacturer branch and a manufacturer sales 06 representative, but does not include a person who converts, modifies, or 07 otherwise alters a product fabricated, manufactured, or assembled by another 08 person; or 09 (B) is a distribution entity that is 10 (i) owned or controlled by a person described under (A) 11 of this paragraph; and 12 (ii) separate from a person described under (A) of this 13 paragraph; 14 (6) "marine product" means a new watercraft, boat, or motor designed 15 for recreational or commercial use on water; "marine product" includes an outboard 16 motor or boat with an attached motor, but does not include a watercraft designed or 17 adapted to be powered only by an occupant's energy; 18 (7) "motorized recreational product" means an all-terrain vehicle, a 19 marine motor, a boat, a boat package, a marine product, and a snow machine; in this 20 paragraph, 21 (A) "all-terrain vehicle" means a vehicle with three or more 22 low-pressure, flotation-type tires, as designed by the manufacturer or altered, 23 to be used as an off-road recreational vehicle; 24 (B) "boat package" means a boat that is equipped and sold with 25 a motor or another form of motorized propulsion; 26 (C) "snow machine" means a motorized vehicle with a gross 27 vehicle weight under 1,300 pounds propelled by a track system designed to 28 move a person over snow or ice, and includes a snowmobile; 29 (8) "part" includes an accessory; 30 (9) "product" means a marine product or a motorized recreational 31 product;

01 (10) "ultimate purchaser" means the first person, other than an 02 authorized dealer purchasing in the authorized dealer's capacity as an authorized 03 dealer, who, in good faith, purchases a new product for a purpose other than resale. 04 Sec. 45.27.395. Short title. This chapter may be cited as the Alaska Marine 05 Product and Motorized Recreational Product Act. 06 * Sec. 3. AS 45.45.770(a) is amended to read: 07 (a) AS 45.45.700 - 45.45.790 do not apply to 08 (1) a distributorship agreement that would be considered a franchise 09 regulated by 15 U.S.C. 2801 - 2841 (Petroleum Marketing Practices Act); 10 (2) a situation regulated by AS 45.50.800 - 45.50.850; 11 (3) a distributorship agreement, including a franchise agreement, for 12 the sale, repair, or servicing of motor vehicles that are required to be registered under 13 AS 28.10; 14 (4) an activity or agreement by a person licensed under AS 04 if the 15 activity or agreement is within the scope of the license or is incidental to the activity 16 or agreement that is within the scope of the license; 17 (5) a distributorship agreement or another contract between a person 18 licensed under AS 04 and a distributor, manufacturer, importer, supplier, or wholesaler 19 of alcoholic beverages who is not located in this state if the subject of the agreement 20 or contract is the distribution of alcoholic beverages to the licensed person by the 21 distributor, manufacturer, importer, supplier, or wholesaler; 22 (6) a distributor, manufacturer, importer, supplier, or wholesaler of 23 alcoholic beverages; 24 (7) a distributorship agreement for the sale or distribution of, or other 25 transaction involving, cigarettes, food, drink, or a component of food or drink; in this 26 paragraph, "cigarette" has the meaning given in AS 43.50.170; [OR] 27 (8) a manufacturer with 50 or fewer employees; or 28 (9) a marine product or motorized recreational product agreement 29 under AS 45.27. 30 * Sec. 4. AS 45.50.471(b) is amended by adding a new paragraph to read: 31 (56) violating AS 45.27 (marine products and motorized recreational

01 products). 02 * Sec. 5. The uncodified law of the State of Alaska is amended by adding a new section to 03 read: 04 APPLICABILITY. This Act does not apply to a dealership agreement that is entered 05 into before the effective date of this Act. In this section, "dealership agreement" has the 06 meaning given in AS 45.27.390, enacted by sec. 2 of this Act. 07 * Sec. 6. This Act takes effect immediately under AS 01.10.070(c).