Legislature(2003 - 2004)

05/14/2003 08:04 AM STA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HB 272-MOTOR VEHICLE DEALERS                                                                                                  
                                                                                                                                
CHAIR WEYHRAUCH  announced that  the next  order of  business was                                                               
HOUSE BILL NO.  272, "An Act relating to  motor vehicle dealers."                                                               
[Before the committee was CSHB 272(L&C).]                                                                                       
                                                                                                                                
Number 0708                                                                                                                     
                                                                                                                                
JOHN LYBERGER, Lyberger's Car &  Truck Sales, LLC ("Lyberger's"),                                                               
began by  saying he has never  been sued or sued  anyone, and has                                                               
tried to  live a  life that  considers his  fellow man  and helps                                                               
people.  He expressed his belief  that HB 272 will hurt consumers                                                               
while making a  few people wealthy or wealthier.   He also voiced                                                               
concern  for  his  40-some employees,  cited  examples  of  their                                                               
generosity,  and  mentioned  thank-you  letters,  postcards,  and                                                               
gifts from grateful  customers.  Speaking against  Section 1, Mr.                                                               
Lyberger emphasized  that competition  is what the  United States                                                               
of America is all about.  Noting  that just a short time ago many                                                               
people bought  cars in the Lower  48 to drive or  ship to Alaska,                                                               
he said  if customers  are treated well,  they'll buy  in Alaska.                                                               
He told members  that he wants to be not  just a little different                                                               
from other  dealers, but  as opposite as  possible, and  he wants                                                               
people to  be 100 percent  happy with the vehicles  they purchase                                                               
from  Lyberger's;  if someone  isn't  happy  with  a deal  or  an                                                               
automobile,  he said  he  wishes to  return  that person's  money                                                               
immediately.                                                                                                                    
                                                                                                                                
Number 1024                                                                                                                     
                                                                                                                                
REPRESENTATIVE  LYNN  recalled  coming onto  Lyberger's  lot  the                                                               
previous autumn  and seeing  vehicles he was  interested in.   He                                                               
reported that  a young man  [who worked there], when  asked, said                                                               
they were new cars.                                                                                                             
                                                                                                                                
MR. LYBERGER  expressed concern  and said, "He  cannot be  on the                                                               
premises."                                                                                                                      
                                                                                                                                
REPRESENTATIVE  LYNN further  reported  that  this person  hadn't                                                               
said a word  about the vehicles' being manufactured  in Canada or                                                               
that  there  was   no  [factory]  warranty,  for   example.    He                                                               
acknowledged  that he  hadn't gotten  to the  point of  making an                                                               
offer  or  going through  the  paperwork,  but said  until  these                                                               
hearings began  on [HB 272] he'd  believed that what  appeared to                                                               
be new  cars [at Lyberger's]  were new.  He  said he is  a little                                                               
upset about it.                                                                                                                 
                                                                                                                                
MR. LYBERGER  responded that  whether it has  20 miles  or 20,000                                                               
miles  on it,  every  vehicle  off Lyberger's  lot  is used,  and                                                               
almost all are imported from Canada.   Saying every vehicle has a                                                               
"100 percent warranty," he explained:                                                                                           
                                                                                                                                
     If the  factory takes  care of  it, fine.   If  it does                                                                    
     not, ... there's a ...  Heritage Warranty is what I put                                                                    
     on every  vehicle if the  factory warranty is  not [in]                                                                    
     effect on  any given vehicle.   ...  I do not  want any                                                                    
     [customer] spending ... one dollar,  one penny.  ... It                                                                    
     comes from  Lyberger's pocket.   I don't  want anyone's                                                                    
     [warranty] to be better than  Lyberger's.  I don't want                                                                    
     any to be as fine ... as mine.                                                                                             
                                                                                                                                
Number 1270                                                                                                                     
                                                                                                                                
REPRESENTATIVE HOLM  asked what  percentage of  cars sold  in the                                                               
United States  are made in Canada,  and whether this is  a common                                                               
practice.                                                                                                                       
                                                                                                                                
MR. LYBERGER  spoke about  many [vehicles]  coming into  the U.S.                                                               
for  auctions  and so  forth.    He  said  many cars  at  new-car                                                               
dealerships in the U.S., Mexico, and Canada are made in Canada.                                                                 
                                                                                                                                
Number 1333                                                                                                                     
                                                                                                                                
REPRESENTATIVE HOLM asked whether there  is a fairly open border,                                                               
with few restrictions with regard  to automobiles.  He also asked                                                               
about the role of the exchange rate.                                                                                            
                                                                                                                                
MR.  LYBERGER mentioned  that it  is possibly  less expensive  to                                                               
purchase vehicles in  the Lower 48 and bring them  to Alaska, and                                                               
indicated  it  is  because  of  the exchange  rate  [that  it  is                                                               
profitable  to purchase  cars from  Canada].   He also  indicated                                                               
vehicles  from Canada,  the U.S.,  or Mexico  will be  identical.                                                               
Saying  Canada  was  the  first  to  have  lights  that  come  on                                                               
automatically  when  the  car starts,  he  cited  General  Motors                                                               
[vehicles] as  an example,  noting that there  are fines  in some                                                               
places if people don't drive with headlights on at all times.                                                                   
                                                                                                                                
Number 1530                                                                                                                     
                                                                                                                                
STEVE  ALLWINE,   Secretary,  Alaska  Auto   Dealers  Association                                                               
(AADA), testified  on behalf  of AADA  in support  of HB  272, as                                                               
written [CSHB  272(L&C)].   He noted  that he  is also  the past-                                                               
president of AADA.  He  stated that the attorney general's office                                                               
and  AADA  share   the  goal  of  providing   clear  and  concise                                                               
corrections   to  previous   legislation,  while   retaining  the                                                               
legislative  intent.   He stated  it is  his belief  and that  of                                                               
those  dealers  he represents  that  HB  272 accurately  provides                                                               
those corrections.                                                                                                              
                                                                                                                                
MR.  ALLWINE  noted that  HB  272  is  comprised of  8  sections.                                                               
Section 1  addresses AS 08.66.015,  which has been in  effect for                                                               
approximately 10  years.   The remaining sections  of HB  272, he                                                               
said, would clarify statutes from  "the prior session dealer bill                                                               
that was passed  and became law."  Mr. Allwine  said that Section                                                               
1 of HB 272 serves to  change AS 08.66.015.  Currently, he noted,                                                               
under that statute, no new-  or used-car dealers are permitted to                                                               
sell a  current-model used  vehicle, unless  they have  the sales                                                               
and service  agreement -  like a franchise  agreement -  with the                                                               
manufacturer of  that specific vehicle; however,  Section 1 would                                                               
[provide   exceptions  to   that  restriction].     Mr.   Allwine                                                               
highlighted some of  the exceptions [found on page  2, lines 2-10                                                               
of the bill]  and illustrated with examples how  they would work.                                                               
Without  the   amendments  proposed   in  Section  1,   he  said,                                                               
"everybody's out of compliance."                                                                                                
                                                                                                                                
MR.  ALLWINE  noted that  there  has  been  a lot  of  discussion                                                               
concerning  Canadian vehicles,  as related  to this  legislation.                                                               
He said he  had heard questions regarding how  vehicles are moved                                                               
between one country and another, and  what the definition is of a                                                               
grey-market vehicle.   He explained that  [vehicle] manufacturers                                                               
have  plants throughout  Canada,  the U.S.,  Mexico, and  Brazil.                                                               
The  vehicles  are built  and  then  the manufacturers  designate                                                               
which market the  vehicles will be shipped to.   For example, Mr.                                                               
Allwine noted  that he has  trucks that  are built in  Mexico and                                                               
minivans that are  built in Canada.  He added  that a designation                                                               
is  also made  that these  vehicles are  not to  be resold  "in a                                                               
foreign country."                                                                                                               
                                                                                                                                
MR. ALLWINE  referred to  a billing  document [used  by dealers],                                                               
which he  said he provided to  the committee.  He  read a portion                                                               
of it as follows:                                                                                                               
                                                                                                                                
     The  vehicle's  manufactured  to meet  specific  United                                                                    
     States requirements;  this vehicle is  not manufactured                                                                    
     for sale or registration outside of the United States.                                                                     
                                                                                                                                
MR. ALLWINE continued as follows:                                                                                               
                                                                                                                                
     Knowingly selling  -- if you're  a Canadian  dealer and                                                                    
     you sell  to an importer-somebody who  imports into our                                                                    
     country,  these  vehicles  will place  your  sales  and                                                                    
     service agreement, or your  franchise agreement, if you                                                                    
     choose  to call  it that,  in serious  jeopardy.   They                                                                    
     have terminated dealer agreements  in Canada over these                                                                    
     issues, so  it's not  in that  dealer's interest  to do                                                                    
     that.    So,  when  you start  at  the  beginning,  the                                                                    
     acquisition of these vehicles is  in question, at best.                                                                    
     Essentially what they do is  they hire college kids ...                                                                    
     [who]  go  out   and  buy  cars  under   the  guise  of                                                                    
     consumers.    Then  those cars  are  imported  to  this                                                                    
     country.                                                                                                                   
                                                                                                                                
MR. ALLWINE informed the committee  that the first thing that has                                                               
to  happen when  a  vehicle  comes into  [the  U.S.]  is for  the                                                               
speedometer to  be changed  from kilometers to  miles.   He noted                                                               
that  there  are  two  situations   that  can  arise:    One,  he                                                               
explained,  has to  do with  an  error in  the conversion,  which                                                               
could be  an honest  mistake.   He said that  this type  of error                                                               
will  cost  the consumer  thousands  of  dollars and  significant                                                               
inconvenience,  because,  the  issue  of "miles  unknown"  on  an                                                               
odometer  statement  is significant  and  will  render a  vehicle                                                               
virtually  worthless.    Two, he  revealed,  the  temptation  for                                                               
odometer  fraud is  great.   The added  value of  a vehicle  with                                                               
3,000  miles versus  a vehicle  with  23,000 is,  conservatively,                                                               
over $600  a vehicle, he  said.  He  added that the  equipment to                                                               
[tamper  with an  odometer] is  available over  the Internet  for                                                               
approximately $1,800.  He referred  to a recent article that says                                                               
that this type of fraud is on the rise.                                                                                         
                                                                                                                                
MR. ALLWINE turned to another  issue regarding titling a vehicle.                                                               
He stated, "The  potential for a "flood" or a  totaled vehicle to                                                               
be dumped  on the Alaska  market is great.   The recourse  to the                                                               
importer, he said, is minimal.   He asked, "[Have you] ever tried                                                               
to sue somebody in another country?"   He also asked, "[Have you]                                                               
ever  tried  to  take  action  on your  credit  card  in  another                                                               
country?"  He said it is a difficult operation.                                                                                 
                                                                                                                                
MR. ALLWINE  turned to warranty issues,  which he said are  a big                                                               
problem with a manufactured used  car.  Many manufacturers, in an                                                               
effort to  stem the  tide of  vehicles into  [the U.S.]  "in this                                                               
manner" have "eliminated all their  warranty."  The offering of a                                                               
no-charge  service  contract,  under  the  guise  of  a  warranty                                                               
creates a  false impression  that the consumer  is getting  a new                                                               
vehicle with  a new  vehicle warranty, he  opined.   He commented                                                               
that he  believes he  included "something  that indicates  it's a                                                               
warranty" in the attachment provided  to the committee.  He said,                                                               
"The fact  is, if you're a  dealer, you're paying for  it, and if                                                               
you're paying for it - even  if it's no charge - you're attaching                                                               
it to  the car  deal, and  it's a service  contract.   That's the                                                               
long and short of it."                                                                                                          
                                                                                                                                
MR. ALLWINE  stated that new-car dealers  invest significant sums                                                               
of money  in training,  facilities, and tools.   For  example, he                                                               
noted  that  a  2004-model  vehicle   requires  about  $8,500  in                                                               
training and special tools.  He  said, "That's for one of the new                                                               
ones  we have  coming  up."   He  added, "Oh,  by  the way,  that                                                               
doesn't include the  training, because it seems like  none of the                                                               
training ends up in the great state of Alaska."                                                                                 
                                                                                                                                
MR.  ALLWINE stated  that  responsibility  is a  big  issue.   He                                                               
listed the  purchase, the  problems, the  tools, the  people, the                                                               
training,  and said,  "None  of  this is  offered  by a  used-car                                                               
dealer."   If  [consumers] have  a problem  with a  current-model                                                               
used  vehicle, [the  used-car dealer]  is going  to tell  them to                                                               
take it to  a new-car dealer to  have it fixed.   He added, "It's                                                               
always the new-car dealer."                                                                                                     
                                                                                                                                
MR.  ALLWINE referred  to previous  testimony and  indicated that                                                               
there was an impression left  that there's a lot of certification                                                               
that  goes on  before  "this vehicle  comes  into this  country";                                                               
[that]  the importers  are certified.   Mr.  Allwine stated  that                                                               
there's no  certification required.   He  remarked that  a little                                                               
bit of research  indicates that "the registration  to import into                                                               
our country, from  our government, is simply  'stuff,' it doesn't                                                               
necessarily have to be cars -  it can be anything."  He clarified                                                               
that it  is a  commerce registration,  not a  technical one.   He                                                               
said  that  the  [U.S.]  Department  of  Transportation  and  the                                                               
National Highway  Traffic Safety Administration do  not verify or                                                               
certify speedometers or  "any of that traffic  or that movement."                                                               
He   noted   one  exception:      "Our   government  requires   a                                                               
certification of  content."  The  only people who  are authorized                                                               
to certify that  content are the manufacturers;  the importers do                                                               
not  have  this ability.    He  added,  "And quite  frankly,  the                                                               
manufacturers will  not certify  the content."   He  continued as                                                               
follows:                                                                                                                        
                                                                                                                                
     How do they do it?  How  do they get them across?  It's                                                                    
     real simple.   They just print a copy  off the Internet                                                                    
     and they hand  it to the customs people,  and away they                                                                    
     go.                                                                                                                        
                                                                                                                                
MR.  ALLWINE stated  that  the  final argument  is  in regard  to                                                               
legislative intent.  At the  time that the statute was originally                                                               
enacted, he  said, numerous consumers  and new-car  dealers, both                                                               
in  Alaska  and Washington  had  lost  hundreds of  thousands  of                                                               
dollars.   The reason for that  loss, Mr. Allwine noted,  is "the                                                               
brokering of  new cars and  trucks."  He  stated that it  was the                                                               
intent of the  original law to eliminate the  opportunity to sell                                                               
new cars  without being  a franchised new-car  dealer, "so  as to                                                               
rectify  the  existing situation  at  that  time and  to  provide                                                               
protection to the public."  He explained as follows:                                                                            
                                                                                                                                
     They did this  by providing that an  individual may not                                                                    
     hold him or herself out  to be a new-car dealer, unless                                                                    
     they  hold  a  sales  and service  agreement  for  that                                                                    
     specific product,  [and] that they may  not represent a                                                                    
     used car as a new car ....                                                                                                 
                                                                                                                                
     The  wholesale  manufacture  and importation  of  these                                                                    
     cars is in violation  of the original statute's intent.                                                                    
     These are  new cars under a  thin veil of being  a used                                                                    
     car.                                                                                                                       
                                                                                                                                
MR. ALLWINE  noted that one  of the attachments that  he provided                                                               
to the  committee, in addition  to showing a warranty,  shows the                                                               
miles  on  "those   cars."    He  remarked,  "And   that  was  an                                                               
advertisement out of  an Anchorage paper."  He said,  "A car with                                                               
seven miles on  it is still a new  car.  They may call  it a used                                                               
car, but  this is the manufacturing  of a used car  to circumvent                                                               
the statute in  our state."  The statute as  it stands right now,                                                               
he  reiterated, doesn't  allow anybody  to  sell a  current-model                                                               
used car.   The proposed legislation, he  reminded the committee,                                                               
would change the  statute so that "new- or  used-car dealers have                                                               
the ability  to sell a  current-model used  car, but it  does not                                                               
allow  for  the  brokering  or the  wholesale  manufacturing  and                                                               
importation  of a  Canadian  vehicle."   Mr.  Allwine said  that,                                                               
ultimately, if a  consumer has a difficulty  with a current-model                                                               
used car, he/she  only turns to one source, which  is the new-car                                                               
dealer.   He posited that  it is  not appropriate for  a used-car                                                               
dealer to have the ability to  sell a new car, without having any                                                               
responsibility or obligation beyond the sale.                                                                                   
                                                                                                                                
Number 2231                                                                                                                     
                                                                                                                                
REPRESENTATIVE   LYNN   asked   Mr.  Allwine   who   placed   the                                                               
advertisement to  which he previously referred,  because he noted                                                               
that the name was not showing on the handout.                                                                                   
                                                                                                                                
MR.  ALLWINE  offered  to  hand   out  a  clearer  copy  of  that                                                               
advertisement to the committee.                                                                                                 
                                                                                                                                
Number 2250                                                                                                                     
                                                                                                                                
The House  State Affairs Standing Committee  meeting was recessed                                                               
at 8:36 a.m. to a call of the chair.                                                                                            
                                                                                                                                
Number 2251                                                                                                                     
                                                                                                                                
CHAIR WEYHRAUCH  called the  meeting back to  order at  9:36 a.m.                                                               
Present  at the  call back  to order  were Representatives  Holm,                                                               
Seaton,  Gruenberg, and  Weyhrauch.   Representatives  Dahlstrom,                                                               
Lynn, and Crawford arrived as the meeting was in progress.                                                                      
                                                                                                                                
Number 2275                                                                                                                     
                                                                                                                                
REPRESENTATIVE  HOLM indicated  a  problem  between "the  timing"                                                               
regarding  new  cars  versus  "new-used cars."    He  noted  that                                                               
"normal course of business" is not  defined in statute.  He asked                                                               
Mr. Allwine  where he  thinks the  law could  be changed  [to] be                                                               
"somewhat of  a fallback position  for both used-car  dealers and                                                               
new-car dealers."                                                                                                               
                                                                                                                                
Number 2370                                                                                                                     
                                                                                                                                
MR. ALLWINE answered that the bill,  as written, is an attempt to                                                               
level  the  playing field  on  used  vehicles.    He said  it  is                                                               
recognized  that rental  fleets  will,  historically, turn  their                                                               
vehicles  in approximately  a six-month  period.   He added  that                                                               
manufacturers  require a  retention  [of] rental  vehicles for  a                                                               
specific  period  of  time,  which  traditionally  has  been  six                                                               
months.                                                                                                                         
                                                                                                                                
MR. ALLWINE  said that Representative  Holm raises an  issue that                                                               
Mr. Arpino had indicated yesterday,  regarding a vehicle that's a                                                               
repossession.  Ultimately,  he said, [the intent of  the bill] is                                                               
to correct the statute in such  a manner that new-car dealers and                                                               
used-car  dealers  are  in  compliance.    He  said,  "There  are                                                               
essentially four  ways that any of  us would end up  with another                                                               
...  manufacturer's  vehicle as  a  current-model  vehicle."   He                                                               
listed the four ways:  taking  it as trade-in; buying it directly                                                               
from a consumer;  [obtaining the vehicle] from  a rental [fleet],                                                               
either  directly,   or  through   auctions;  or   "a  repossessed                                                               
vehicle."  He continued:                                                                                                        
                                                                                                                                
     So,  if you  were to  include repossessed  vehicle, you                                                                    
     have  covered all  of the  legitimate  sources of  used                                                                    
     vehicles  that  would  be  available   to  all  of  the                                                                    
     dealers.                                                                                                                   
                                                                                                                                
Number 2491                                                                                                                     
                                                                                                                                
REPRESENTATIVE  SEATON  referred  to the  previous  testimony  of                                                               
someone who  obtains most  of his  cars at  dealer auctions.   He                                                               
said  that  it  appears  that [the  proposed  legislation  would]                                                               
exclude "those sources of cars."                                                                                                
                                                                                                                                
MR. ALLWINE responded that that  is incorrect.  He clarified, "If                                                               
it ... has been  a rental vehicle and it has  been retained for a                                                               
period  of six  months -  as the  bill states  - that  vehicle is                                                               
available for sale to any dealer."                                                                                              
                                                                                                                                
REPRESENTATIVE  SEATON clarified  that he  was not  talking about                                                               
rental cars, but about "other cars."   He said, "I mean there are                                                               
dealer  auctions on  used  cars all  the time."    He stated  his                                                               
understanding that  the proposed legislation "wants  to carve out                                                               
an  exception so  that no  current-year  model could  be sold  at                                                               
dealer  auctions to  anyone other  than a  dealership that  has a                                                               
service and sales agreement with a manufacturer."                                                                               
                                                                                                                                
MR.  ALLWINE  stated  that  that  is not  exactly  correct.    He                                                               
continued as follows:                                                                                                           
                                                                                                                                
     These are  the basic sources  that I have  cited; these                                                                    
     are  how the  cars are  run through  an auction.   This                                                                    
     would not permit  any dealer to buy a  vehicle that was                                                                    
     imported  to this  country as  a manufactured  used car                                                                    
     with a handful of miles on it, at an auction.                                                                              
                                                                                                                                
REPRESENTATIVE  SEATON asked  Mr.  Allwine to  "forget about  the                                                               
'imported  to  this country,'  because  this  doesn't talk  about                                                               
that."   He said that  [HB 272] addresses  any current-model-year                                                               
car.  He stated his interpretation  that HB 272 says that a used-                                                               
car  dealer cannot  go to  an auction  and buy  any car  that's a                                                               
current-year  model.    The  only   people  who  can  do  so,  he                                                               
continued, would be the manufacturers' licensed dealers.                                                                        
                                                                                                                                
MR. ALLWINE  responded that he believes  Representative Seaton is                                                               
reading [the  language] incorrectly, because the  source of those                                                               
used cars  would either be  a lender offering vehicles  that have                                                               
been repossessed,  or rental vehicles.   He  asked Representative                                                               
Seaton to remember,  "We're doing this very small  window of only                                                               
current-model year."   He  noted, "Those  are the  prime sources,                                                               
excluding - as you mentioned before - ... imported vehicles."                                                                   
                                                                                                                                
Number 2560                                                                                                                     
                                                                                                                                
REPRESENTATIVE  SEATON  said  that   he  has  purchased  vehicles                                                               
through  the  insurance auction  frequently.    The cars  may  be                                                               
"dinged up,"  and some of  them are current-year models  that are                                                               
sold.  However,  he offered his understanding  that, according to                                                               
HB  272, only  the manufacturer  or dealer  could buy  a current-                                                               
model-year car.                                                                                                                 
                                                                                                                                
Number 2586                                                                                                                     
                                                                                                                                
MR. ALLWINE replied as follows:                                                                                                 
                                                                                                                                
     The type  of vehicles you're  citing - if you  chose to                                                                    
     include  that,  I  suppose   it  would  be  acceptable;                                                                    
     however, those vehicles - if  they're disposed of by an                                                                    
     insurance carrier,  and they're  current-model vehicles                                                                    
     -  those vehicles  are  usually  totaled vehicles,  and                                                                    
      they're traditionally not purchased by new- and used-                                                                     
     car dealers.  That's a little bit out of the realm.                                                                        
                                                                                                                                
Number 2669                                                                                                                     
                                                                                                                                
REPRESENTATIVE  GRUENBERG noted  that the  committee had  heard a                                                               
lot of  testimony yesterday  regarding auctions.   He  stated his                                                               
understanding  that  used-car  dealers   buy  their  vehicles  at                                                               
auctions,  but  under this  proposed  legislation  they would  no                                                               
longer be able  to do that.   He said that he would  like to have                                                               
"a person from that group" join  Mr. Allwine at the witness table                                                               
to find  out exactly what  it is "they are  not able to  do under                                                               
the bill," and to hear [Mr. Allwine's] response.                                                                                
                                                                                                                                
Number 2700                                                                                                                     
                                                                                                                                
TERI  PETRAM, testifying  on  behalf of  Lyberger's  Car &  Truck                                                               
Sales,  LLC, joined  Mr. Allwine  at  the witness  table per  the                                                               
request of the chair.                                                                                                           
                                                                                                                                
REPRESENTATIVE  GRUENBERG  repeated  his  comment  regarding  the                                                               
previous day's  testimony from  used-car dealers.   He  asked Ms.                                                               
Petram, "Were you talking about exclusively for an auction?"                                                                    
                                                                                                                                
MS. PETRAM answered yes.                                                                                                        
                                                                                                                                
REPRESENTATIVE  GRUENBERG  offered  his  understanding  that  the                                                               
point  of contention  between Mr.  Allwine and  Ms. Petram  is in                                                               
regard to  the ability to  purchase vehicles at  foreign auction.                                                               
He asked if that is correct.                                                                                                    
                                                                                                                                
MS. PETRAM answered yes.                                                                                                        
                                                                                                                                
[AN  UNIDENTIFIED  SPEAKER  commented, via  teleconference,  that                                                               
that is not correct.]                                                                                                           
                                                                                                                                
Number 2775                                                                                                                     
                                                                                                                                
CHAIR WEYHRAUCH told  the unidentified speaker that he  is out of                                                               
order.                                                                                                                          
                                                                                                                                
MR. ALLWINE  stated that  HB 272 will  carve out  the importation                                                               
and  manufacture  of  used  vehicles   from  Canadian  markets  -                                                               
vehicles that  were not  intended for  the United  States market.                                                               
He added, "It will not  preclude Lyberger's or myself from buying                                                               
current-model vehicles at  auction, if they come  from the source                                                               
of  rentals or  potentially  -  if you  choose  to  include it  -                                                               
lenders repossessions.  It will preclude grey-market cars."                                                                     
                                                                                                                                
REPRESENTATIVE GRUENBERG  noted that he doesn't  know the meaning                                                               
of grey-market  cars; however,  he said that  he doesn't  want to                                                               
get into that now.  He asked,  "Why shouldn't they be able to buy                                                               
cars at a foreign auction?"                                                                                                     
                                                                                                                                
MR. ALLWINE  answered that it's  not actually a  foreign auction;                                                               
the auctions are in  the U.S.  He opined, "This  does not place a                                                               
hardship on  a used-car dealer."   He revealed,  "These vehicles,                                                               
when  they go  through  the auction,  are  disclosed as  Canadian                                                               
vehicles."                                                                                                                      
                                                                                                                                
REPRESENTATIVE GRUENBERG  asked, "Why should  you be able  to buy                                                               
these vehicles, and not them?"                                                                                                  
                                                                                                                                
MR. ALLWINE replied  that, based on having  a franchise agreement                                                               
with a manufacturer,  that manufacturer is unwilling  to "give me                                                               
that latitude for  very long."  He clarified, "In  other words, I                                                               
also will not be able to buy those."  He continued as follows:                                                                  
                                                                                                                                
     And if you  chose to say, "What's good for  one is good                                                                    
     for the  other," that would certainly  be acceptable to                                                                    
     me;  but the  fact is,  the manufacturers  control that                                                                    
     situation with  us, and  they ...  don't permit  us for                                                                    
     very long  to go purchase Canadian  vehicles and resell                                                                    
     them in this market.                                                                                                       
                                                                                                                                
REPRESENTATIVE  GRUENBERG  asked  Mr.  Allwine  if  he  would  be                                                               
willing to have everybody prohibited from doing that.                                                                           
                                                                                                                                
MR. ALLWINE answered,  "I'd love it, I just don't  know that it's                                                               
appropriate at this time.  But I would love it, yes, sir."                                                                      
                                                                                                                                
REPRESENTATIVE  GRUENBERG asked  if that  would be  acceptable to                                                               
the used-car industry.                                                                                                          
                                                                                                                                
Number 2900                                                                                                                     
                                                                                                                                
MS. PETRAM  answered that there  is more than just  her interests                                                               
involved  in HB  272.   She  said that  there  are auctions  that                                                               
employ hundreds  of people who  would be  effected by this.   She                                                               
noted,  "And where  they  get their  vehicles  is different  than                                                               
where Lyberger's gets [its] vehicles."                                                                                          
                                                                                                                                
Number 2964                                                                                                                     
                                                                                                                                
REPRESENTATIVE SEATON  said it  sounds like  Mr. Allwine  wants a                                                               
law passed  that will say that  it is illegal to  import current-                                                               
model  Canadian vehicles  into  the U.S.  for  sale, which  would                                                               
involve changing  a law  that would  change a  trade relationship                                                               
between  the  U.S.  and  Canada.    He  stated  that  he  is  not                                                               
particularly comfortable [in] doing that.                                                                                       
                                                                                                                                
MR.  ALLWINE  stated,  "That  is   not  what  we're  asking  [the                                                               
legislature] to  do."   He said  he would  defer to  the attorney                                                               
general's office for further clarification.                                                                                     
                                                                                                                                
TAPE 03-63, SIDE B                                                                                                            
Number 2983                                                                                                                     
                                                                                                                                
CLYDE  (ED)  SNIFFEN,  JR.,   Assistant  Attorney  General,  Fair                                                               
Business   Practices   Section,   Civil   Division   (Anchorage),                                                               
Department Of  Law, testified that  he has been working  with the                                                               
auto dealers on  language for HB 272, but  primarily the language                                                               
contained in  Sections 2-8.  He  emphasized that the bulk  of the                                                               
bill  is  contained  in  those   sections,  which  are  important                                                               
revisions to  the current  auto dealer  statute.   He categorized                                                               
those changes as  points of clarification and  some deletions [of                                                               
language] that  doesn't apply  to the  way car  dealers advertise                                                               
and sell  used cars  in Alaska.   He said,  "So, with  respect to                                                               
Sections 2-8, we request your support."                                                                                         
                                                                                                                                
MR. SNIFFEN referred  to the controversial Section 1.   He turned                                                               
to  a recent  question regarding  whether or  not this  law would                                                               
have an  impact on  foreign trade, whether  there are  some North                                                               
American Free  Trade Agreement (NAFTA)  issues that come  up, and                                                               
whether it's  the legislature's province to  interfere with these                                                               
trade relations.  He continued as follows:                                                                                      
                                                                                                                                
     If there is  a problem, it already  exists, because the                                                                    
     current  statute  already  prevents these  things  from                                                                    
     happening.   So,  I  don't know  that  the language  of                                                                    
     Section 1, in HB 272,  would change anything.  ... [HB]                                                                    
     272,  in  a sense,  carves  out  an exception  to  this                                                                    
     problem   that   allows   at  least   some   of   these                                                                    
     transactions to  proceed.   That is,  transactions that                                                                    
     involve  the  acquisition  of  a  Canadian-manufactured                                                                    
     vehicle or  a vehicle  manufactured for sale  in Canada                                                                    
     from  an ordinary  consumer, from  a rental  fleet, and                                                                    
     from some other areas.                                                                                                     
                                                                                                                                
     I've  listened to  the testimony  from  Jim Arpino  and                                                                    
     from the  representative from  Lyberger's, and  I think                                                                    
     there  [have]  been some  good  points  raised, in  the                                                                    
     sense that:  "What if you  want to go to an auction and                                                                    
     purchase a vehicle manufactured  for sale in the United                                                                    
     States  and  bring  it  up   to  Alaska?    Would  this                                                                    
     legislation  prohibit  that?"     And  the  answer  is:                                                                    
     "Well,  the   current  legislation   already  prohibits                                                                    
     that."  The changes suggested by  HB 272 do not seem to                                                                    
     account  for  that  sort  of  situation,  and  I'm  not                                                                    
     certain whether or not it  should or should not.  There                                                                    
     are probably always  going to be some  of these nuances                                                                    
     that come up that we'll have  to ... work with ... into                                                                    
     the future, to decide if  there are issues that we need                                                                    
     to   address   through   further  amendments   to   the                                                                    
     legislation.                                                                                                               
                                                                                                                                
MR.  SNIFFEN stated  that the  position of  the attorney  general                                                               
(AG) on Section 1  is to be looking out for  the interests of the                                                               
consumers.  The  AG's office, he added, would prefer  to stay out                                                               
of   the  battle   between  the   new-   and  used-car   dealers.                                                               
Notwithstanding that, he said he  thinks some of the comments Mr.                                                               
Allwine  made  were  appropriate, because  there  are  situations                                                               
where consumers are simply not  aware that these vehicles do have                                                               
some of  these issues.  For  example:  the vehicles  may not have                                                               
manufacture  warranties;  they do  not  have  Alaska "lemon  law"                                                               
protections, because  the are  used vehicles;  and they  have had                                                               
odometer switches  done, which may or  may not have been  done in                                                               
an inappropriate  fashion.  He  added that [the AG's  office] has                                                               
not  investigated the  latter, therefore  it cannot  testify with                                                               
any certainty  on whether  "the swaps"  are consistently  done in                                                               
violation of law, or not.                                                                                                       
                                                                                                                                
MR.  SNIFFEN  stated  that  those  types  of  disclosures,  at  a                                                               
minimum, need to be made.   He added that he is uncertain whether                                                               
or  not they  are  done in  all circumstances  and,  based on  an                                                               
earlier question  by one of the  representatives, apparently they                                                               
are not made all the time.                                                                                                      
                                                                                                                                
Number 2810                                                                                                                     
                                                                                                                                
MR.  SNIFFEN stated  his  belief that  the  importation of  these                                                               
vehicles manufactured for sale in Canada  is illegal.  He said he                                                               
thinks they are legally imported and that the importation                                                                       
process is proceeding in accordance with state and federal law.                                                                 
He continued as follows:                                                                                                        
                                                                                                                                
     Where I  think the  problem lies  is upstream  from the                                                                    
     importation process.   There is just simply  no way you                                                                    
     can  get  a vehicle  onto  Mr.  Lyberger's lot  ...  in                                                                    
     Anchorage  that is  a  current-model  vehicle with  100                                                                    
     miles  on  it,  manufactured  originally  for  sale  in                                                                    
     Canada,  that  doesn't involve  some  kind  of, if  not                                                                    
     illegal,  at   least  illegitimate   practice  upstream                                                                    
     somewhere:     ...  a  dealer  violating   a  franchise                                                                    
     agreement;  ... an  importer  who has  set  up a  dummy                                                                    
     company to  buy vehicles somehow; [or]  ... an importer                                                                    
     who's  paying  college  kids  to  buy  these  vehicles.                                                                    
     There  is a  transaction of  that kind  that is  taking                                                                    
     place, that results in these  vehicles getting into the                                                                    
     hands  of the  importers,  and  then they're  imported,                                                                    
     probably illegally,  into the  United States,  and they                                                                    
     end up on used-car dealer lots.                                                                                            
                                                                                                                                
     If  we want  to open  up a  market for  those kinds  of                                                                    
     vehicles  in Alaska,  you're  going  to encourage  that                                                                    
     kind of activity to continue.   And I'm not certain how                                                                    
     other  states have  dealt with  this issue.   I'm  sure                                                                    
     this happens  in some  of the  bordering states  in the                                                                    
     Lower  48.    I   don't  know  if  there's  legislation                                                                    
     considered  in those  states to  stop this,  but Alaska                                                                    
     doesn't  need to  follow  necessarily,  we can  perhaps                                                                    
     lead in this area, since  we do have a close connection                                                                    
     with our Canadian friends.                                                                                                 
                                                                                                                                
     And it is  going to be a policy call  on whether or not                                                                    
     we  want to  do  something to  prohibit that  practice.                                                                    
     Actually,  we  already  have law  that  prohibits  that                                                                    
     practice.  And  if we're going to keep that  law, do we                                                                    
     want to carve  out at least some  exceptions that allow                                                                    
     some  of  the  more  legitimate  transactions  to  take                                                                    
     place, so new-  and used-car dealers can  sell at least                                                                    
     some of these cars?                                                                                                        
                                                                                                                                
Number 2710                                                                                                                     
                                                                                                                                
REPRESENTATIVE  SEATON  asked Mr.  Sniffen  to  confirm that  his                                                               
feeling is that  these cars are probably  being imported legally,                                                               
but there was  probably a Canadian franchise  violation that most                                                               
likely occurred before the importation.                                                                                         
                                                                                                                                
MR.  SNIFFEN responded  that that  is the  understanding of  [the                                                               
AG], based on reports received  from importers in Alaska and from                                                               
some of  the new- and used-car  dealers.  He reiterated  that the                                                               
AG has not investigated this issue in any detail.                                                                               
                                                                                                                                
REPRESENTATIVE SEATON said that he  doesn't know if the franchise                                                               
agreements are  private or  have to  do with  Canadian laws.   He                                                               
asked  Mr.  Sniffen  what  he   is  suggesting  be  done  by  the                                                               
legislature.                                                                                                                    
                                                                                                                                
MR. SNIFFEN  said he  doesn't think  that the  AG or  the new-car                                                               
dealers   proposing  [Section   1]  are   suggesting  that   [the                                                               
legislature]  should   do  something  to  stop   those  kinds  of                                                               
transactions.   He  added that,  frankly, he  doesn't think  that                                                               
there is  anything that  can be  done to  stop those  things from                                                               
happening.  He continued as follows:                                                                                            
                                                                                                                                
     I think it's  meant to just point out  that these used-                                                                    
     car dealers  seem to be  suggesting, "Hey,  we're going                                                                    
     to  auctions  and we're  buying  these  cars and  doing                                                                    
     everything  [legally]."     Well,  they   are,  because                                                                    
     they're  ignoring some  of  these  other problems  that                                                                    
     occur upstream.   And  to say  that these  vehicles are                                                                    
     imported ... legally and [that]  everything is fine and                                                                    
     dandy is only good to a  point.  Sure, they're fine and                                                                    
     dandy ... once  you get to the  importers, but upstream                                                                    
     from that  there are  some transactions  that shouldn't                                                                    
     be  taking  place, and  if  dealers  in Canada  and,  I                                                                    
     think,  laws in  Canada  were  enforced properly,  they                                                                    
     wouldn't find their way to the importer.                                                                                   
                                                                                                                                
     ...  The current  law actually  says you  couldn't sell                                                                    
     these cars  anyway, and HB  272 continues in  that same                                                                    
     vein, but  at least  carves out exceptions  for certain                                                                    
     kinds of transactions.                                                                                                     
                                                                                                                                
Number 2577                                                                                                                     
                                                                                                                                
REPRESENTATIVE GRUENBERG  stated that  he has  a large  number of                                                               
questions on the entire bill.   He said he wanted [the committee]                                                               
to  at least  get  a  handle on  what  he  called, "the  Canadian                                                               
problem."   He  remarked that  the more  testimony he  hears, the                                                               
more questions he has.                                                                                                          
                                                                                                                                
CHAIR WEYHRAUCH  stated that his intent  is to ask that  the bill                                                               
be  moved   out  of  committee,  so   he  invited  Representative                                                               
Gruenberg to ask his questions of Mr. Sniffen.                                                                                  
                                                                                                                                
Number 2534                                                                                                                     
                                                                                                                                
REPRESENTATIVE  LYNN  moved  to   report  CSHB  272(L&C)  out  of                                                               
committee  with individual  recommendations and  the accompanying                                                               
fiscal  note.    There  being no  objection,  CSHB  272(L&C)  was                                                               
reported out of the House State Affairs Standing Committee.                                                                     

Document Name Date/Time Subjects