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Filter Manufacturers Council Legal Update

Filter Manufacturers Council Legal Update

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Filter Manufacturers Council Legal Update

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  1. Filter Manufacturers Council Legal Update Presented by Deanne M. Ottaviano Arent Fox LLP Washington, DC October 18, 2010

  2. Agenda Part I: Recent Regulatory Action Part II: Legislative Issues Part III: Industry Issues Part IV: Political Prognostication Part V: Q&A

  3. Part I: Recent Regulatory Action

  4. EPA Update • EPA Ups Ethanol Allowance in Fuel • On October 13, 2010, EPA waived a limitation on selling fuel that is more than 10 percent ethanol for model year 2007 and newer cars and light trucks. The waiver applies to fuel that contains up to 15 percent ethanol – known as E15 – and only to model year 2007 and newer cars and light trucks. • A decision on the use of E15 in model year 2001 to 2006 vehicles will be made after EPA receives the results of additional DOE testing, which is expected to be completed in November. • However, no waiver is being granted this year for E15 use in model year 2000 and older cars and light trucks – or in any motorcycles, heavy-duty vehicles, or non-road engines – because currently there is not testing data to support such a waiver. • Several steps are being taken to help consumers easily identify the correct fuel for their vehicles and equipment. • EPA is proposing E15 pump labeling requirements, including a requirement that the fuel industry specify the ethanol content of gasoline sold to retailers.

  5. EPA/DOT Update • More CAFE and Greenhouse Gas Emissions Regulation • On September 30, 2010, EPA and DOT issued a Notice of Intent to begin developing new standards for greenhouse gases and fuel economy for light-duty vehicles for the 2017-2025 model years. CARB issued letter of support. • Announcement anticipates application to 2017 and later vehicles and CAFE standards are high as 62 MPG by 2025. • “Automotive technologies are available, or are expected to be available, to support a reduction in greenhouse gas emissions and commensurate increase in fuel economy in the 2017-2025 model year timeframe.” • NPRM expected by September 30, 2010 and final rule by July 31, 2012. • In April 2010, these agencies had rolled out the first-ever limits on carbon dioxide emissions and ramped up fuel economy for light-duty and medium duty vehicles for model years 2012-2016. • 2016 CAFE standard will be 35.5 MPG. • 2016 CO2 limit of not more than 250 grams per mile.

  6. CARB Update • Emissions Issues for Heavy Duty Truck • CARB requiring retrofit of existing heavy duty trucks: • Fleet owners have three compliance options. They may: • Install particulate filters and replace engines and/or vehicles on a prescribed schedule, based on the vehicle's engine model year; • Install high-level particulate filters on a minimum number of engines each year and replace a minimum number of older vehicles annually with vehicles that meet 2010 emission standards for new engines, both minimums based on size and engine ages of the fleet; or • Meet a fleet average for emissions of particulates and nitrogen oxides. • By 2023, all heavy-duty diesel trucks and buses traveling on the state's road would have to meet the 2010 emission standards for new engines.

  7. CARB Update • Emissions Issues for Heavy Duty Trucks • Proposed delay in retrofit requirements, including installation of DPFs, due to economic downturn and 20% reduction in trucking activity in the state. • For trucks with a gross vehicle weight rating (GVWR) less than 26,001 lbs, phase-in of retrofitted engines is delayed to 2015, but all engines must comply by 2023. • For trucks with a GVWR 26,001 lbs and over, the proposed compliance schedule requires PM filters from 2012 to 2014 on 1998 to 2006 model year engines and replaces 20 year old or older engines from 2015 to 2020, with all trucks having 2010 engines by 2023. • December 2010 Board meeting to consider these changes. • In July 2010, Rhode Island passed Assembly Bill 10-H 7850A, a new law requiring emissions retrofitting of state leased trucks and those owned by state contractors performing state work, limiting truck idling, and taking other measures as part of a “Diesel Emission Reduction Act.”

  8. EPA Update • EPA Pushed to Rein In Locomotive Emissions • On September 21, 2010, Center for Biodiversity, Friends of the Earth and others petitioned EPA to act on its promise to regulate greenhouse gas and black carbon emissions from passenger and freight trains. • EPA estimates that trains consumer 4 billion gallons of diesel fuel annuallt and emit 25,000 tons of particulate matter. • Petitioners say limits on idling and better traffic management would yield immediate reductions. • Similar engine retrofits and replacements to low emissions heavy duty diesel truck engines is goal.

  9. EPA Update • EPA Greenhouse Gas Reporting Program Rule Challenged • On October 30, 2009, EPA issued a mandatory greenhouse gas reporting rule applicable to requires large direct emitters of GHGs, and suppliers of fossil fuels and industrial gases to begin data collection in 2010 and report to EPA beginning in 2011. Certain technical amendments were finalized on October 7, 2010. • On September 16, 2010, the state of Texas and a coalition of petroleum, steel and other manufacturers led by the National Association of Manufacturers challenged the rule and sought a stay of enforcement from the U.S. Court of Appeals for the D.C. Circuit. • They argue compliance will cost $78 billion and that EPA did not conduct any of the required impact analysis to promulgate this rule.

  10. EPA Update • FMC Objects to EPA Proposal to Categorize Used Oil as “Solid Waste” • On August 3, 2010, FMC submitted comments on an EPA proposal to re-categorize used oil as a “solid waste” because of the likely negative impacts on efforts to recycle used oil and used oil filters. • The existing 1985 used oil regulations encourage recycling by allowing for the development of markets for both “on-spec” and “off-spec” used oil for use as a traditional fuel. • If categorized as a “solid waste,” only limited facilities could collect and burn and used oil recycling prices and market would likely collapse. • No EPA response yet.

  11. Part II: Legislative Issues

  12. Legislative Issues: Oil Filter Recycling • Landfill Bans on Oil Filters • New Wisconsin oil filter landfill ban and California enhancements to ban discussed in March 2010. • In April 2010, Utah House Bill 263 became law and bans disposal of used oil filters in landfills and establishes fines for violators. • In June 2010, Delaware Senate Bill S.B. 234 became law banning “used oil & filters, batteries, household hazardous wastes, electronic wastes, etc.” from landfills and establishing new recycling public education and incentives. Rationale is that the state’s recycling rate is lower than surrounding states and it is running out of landfill space.

  13. Legislative Issues: Oil Filter Recycling • Recycling Initiatives/Directives • ISRI Voluntary Design for Recycling® • Created in part to head off governmental mandates like the European Union's Waste Electrical and Electronic Equipment (WEEE) Directive or End-of-Life Vehicle (ELV) Directive. • WEEE is an EU directive that mandates that producers are financially responsible for the collection and treatment of waste electrical equipment. • The ELV directive seeks to prevent pollution and make vehicle dismantling and recycling more environmentally-friendly and emphasizes the importance of increasing the use of recycled materials in vehicle manufacture. The directive’s total recovery target is 95 percent by Jan. 1, 2015.

  14. Legislative Issues: Oil Filter Recycling • Waste Electrical and Electronic Equipment (WEEE) Directive • In 2009, the Commission issued a report on implementation, and concluded there were no remarkable changes toward attainment of ELV targets and that several member states had failed to implement.* • Typically, in the U.S., practices related to extended producer responsibility (“EPR”) fall under “product stewardship” – which calls upon all parties involved in a product’s life cycle (i.e., producers, manufacturers, retailers, users, and disposers) to share responsibility for reducing the product’s impacts on the environment. • The focus of most product stewardship programs related to vehicles at the national level in the U.S. has been on voluntary measures to address contaminants of particular concern or to further specific recycling goals, such as mercury switches and tires. • Several states have taken specific actions to prevent pollution associated with mercury in vehicles scrap tires, and lead-acid batteries. • Recycling and life cycle analysis are increasingly an important part of the way U.S. manufacturers develop vehicles. EPA has an updated Fact Sheet on this topic.** • * available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:52009DC0635:EN:NOT • ** available at http://www.epa.gov/oswer/international/factsheets/pdfs/200811_elv_directive.pdf

  15. Legislative Issues: Oil Filter Recycling • End-of-Life Vehicle (ELV) Directive • In 2009, the Commission adopted a Report on the implementation of Directive 2000/53/EC on End-Of-Life Vehicles for the period 2005-2008. • Experienced difficulty getting Member States to report. • In 2006, nineteen Member States met the reuse/recycling target of 80% (the Czech Republic and France were close to meeting the target). • The reuse/recovery target of 85% was met by thirteen Member States. (Spain was close to meeting the target). • This study showed that, “Overall, the implementation of the Directive should be further improved.” • EU authorities will continue to review progress toward attainment of ELV targets.

  16. Legislative Issues: Oil Filter Recycling • Cartridge v. Spin-on Oil Filters • Will use of cartridge oil filters affect recycling? • Should FMC evaluate the recyclability implications of the choices being made in the industry?

  17. Part III: Industry Issues

  18. Industry Issues • Honda/Acura Statements Regarding Use of Aftermarket Parts • August 20, 2010 “Position Statement” • “American Honda’s new vehicle warranty and replacement parts warranty do not apply to any part which is not purchased from an authorized US Honda dealer. American Honda will not be responsible for any subsequent repair costs associated with vehicle or part failures caused by the use of parts other than Honda Genuine parts purchased from an authorized US Honda dealer.” • Acura Statement uses identical language. • Essentially, Honda/ Acura are saying that if a vehicle or part failure is caused by some part other than one Honda/ Acura is responsible for, Honda/ Acura is not responsible for the subsequent repair.

  19. Industry Issues • Honda/Acura Statements Regarding Use of Aftermarket Parts • The Magnuson-Moss Act and the Clean Air Act prohibit vehicle manufacturers from voiding the vehicle warranty simply because aftermarket replacement parts are used. Efforts to tell consumers that their car warranties would be voided by using aftermarket parts were what led to the language in both laws. • The specific language says that "no warrantor ... may condition his ... warranty on the consumer's using, in connection with such product, any article or service (other than an article or service provided without charge under terms of the warranty) which is identified by brand, trade, or corporate name...." • In other words, a car company may not, for example, tell a consumer that his vehicle warranty is voided if he uses aftermarket filters, or brake parts, or ignition parts, or computer modules, or anything else. However, if the vehicle manufacturer is providing those parts for free, it may use its own designated brand. • Vehicle manufacturers cannot void the vehicle warranty just because aftermarket parts are used.

  20. Industry Issues • Honda/Acura Statements Regarding Use of Aftermarket Parts • The warranty laws do not mean that a car company is responsible for damage caused by an aftermarket part. If the part causes the vehicle to fail, for example, the vehicle manufacturer is not required to pay for that repair. • The burden of proving that the aftermarket part caused the vehicle to fail is on the vehicle producer. If it cannot prove that the fault lays with the aftermarket part, then the vehicle manufacturer's warranty obligation is not obviated and it must pay for the resulting damage. • If the aftermarket part caused the problem, the vehicle manufacturer may be exonerated.

  21. Industry Issues • Honda/Acura Statements Regarding Use of Aftermarket Parts • The statement is disingenuous, and calculated to confuse consumers. • Offensive in that it references "aftermarket, counterfeit or gray market" as if they are all the same thing. • September 1 AASA Statement and initiation of dialogue with American Honda: • “AASA rejects any implication that all aftermarket products are somehow inferior to OE parts and have the same risks that are associated with counterfeit and gray market goods. This claim is absolutely incorrect. Quality aftermarket products are designed, validated and manufactured using the same formal quality operating system as those used in original equipment applications.” • AAIA filed complaint with FTC alleging this is a violation of warranty laws.

  22. Industry Issues • Coalition for a Level Playing Field, LLC v. Autozone, Inc. • On September 16, 2010, trial court in the U.S. District Court for the Southern District of New York dismissed this Robinson-Patman price discrimination case brought by “mom-and-pop” retailers/”jobbers” against aftermarket parts manufacturers, as well as Wal-Mart, Sam’s Club and Autozone. • Large chains advertise prices below plaintiffs’ costs. • Dismissed based on: (1) preclusion of some claims brought by same coalition, tried to a jury and lost in October 2004; and (2) implausibility of the allegations in the complaint to state a price discrimination claim. Court held plaintiffs “fail to plausibly allege: (i) that disparate prices charged by defendants reflect anticompetitive price discrimination rather than permissible functional discounts; (ii) that those prices are not the product of materially different contractual arrangements; or (iii) that certain alleged discount arrangements are not merely non-price terms of sale (which do not implicate the Act).”

  23. Part IV: Political Prognostication

  24. Part VI – Political Prognostications • March predictions • Will a “cap and trade” system for emissions be established by October 1, 2010? • Yes - 8% • No - 90%

  25. Part VI – Political Prognostications • March predictions • Will the last prisoner be transferred or released from Guatanamo Bay by September 30, 2010? • Yes - 0% • No - 100%

  26. Part VI – Political Prognostications • March predictions • Will Iran conduct a nuclear weapons test by September 30, 2010? • Yes - 4% • No – 90%

  27. Part VI – Political Prognostications • March predictions • Will David Paterson depart as NY Governor by September 30, 2010? • Yes - 10% • No - 80%

  28. Part VI – Political Prognostications • March predictions • Who will win NCAA Tournament this year? • Kansas? 8% • Kentucky? 8% • Syracuse? 10% • Other? 80%

  29. Part VI – Political Prognostications • New predictions • Will Democrats retain the House of Representatives in November mid-term elections? • Yes • No

  30. Part VI – Political Prognostications • New predictions • Will Democrats retain the Senate in November mid-term elections? • Yes • No

  31. Part VI – Political Prognostications • New predictions • Will the U.S. Chamber of Commerce be found to have used foreign funds in its U.S. election efforts by November mid-term elections? • Yes • No

  32. Part VI – Political Prognostications • New predictions • What will be the outcome of the 2010 New York governor's race? • Cuomo (D) • Paladino (R) • Other

  33. Part VI – Political Prognostications • New predictions • Will Rahm Emanuel be elected mayor of Chicago in 2011? • Yes • No

  34. Part VI – Political Prognostications • New predictions • Which will be the result(s) of United States v. Blago, Part Deux? • Guilty on at least one more count • Not guilty on all remaining counts

  35. Part VI – Political Prognostications • New predictions • Which region will have the highest hybrid electric vehicle sales (in dollars) in 2010? • North America • Europe • Asia • Other

  36. Part VI – Political Prognostications • New predictions • How many iPads will Apple sell in 2010? • More than 12.5 million • Less than 12.5 million

  37. Filter Manufacturers Council Legal Update Questions and Answers Presented by Deanne M. Ottaviano Arent Fox LLP Washington, DC October 18, 2010