Washington Way: Counterfeit Parts Seem Cheap But Have Very High Cost
By Mike Conlon
Counterfeit motor vehicle parts have a substantial negative impact on vehicle parts suppliers in the United States. Counterfeit parts are ones which bear a registered trademark but were not produced by or under license from the registered trademark owner. Therefore, use of the mark violates the trademark owner's rights.
Not only do counterfeit parts divert customers from purchasing products which legitimately bear the registered trademark, but often the traffic in these parts also severely impacts the market for remanufactured and rebuilt parts. Because these parts are new and seemingly of similar quality to the products they imitate, consumers are more likely to purchase them rather the rebuilt parts if the prices are similar. In many cases the prices of counterfeit parts are competitive with remanufactured parts because these parts are often of inferior quality to the original parts.
United States counterfeiting law currently imposes hefty fines and jail sentences on anyone convicted of trafficking in counterfeit items. In addition, the counterfeit goods may be confiscated and destroyed. Current law does not, however, cover some parties which aid in marketing counterfeit goods, and its penalties are not as extensive as they could be to ensure that if caught counterfeiters fully pay for their crime.
However, presently pending before Congress is a bill which would further strengthen the counterfeiting laws. H.R. 32, the "Stop Counterfeiting in Manufactured Goods Act," was introduced by Congressman Joe Knollenberg of Michigan and has already passed the House of Representatives. H.R. 32 extends the sweep of the laws by making production and sale of boxes, containers, labels and packaging bearing counterfeit trademarks a crime also and imposing substantial penalties on the parties who produce those items as well as those who use them.
The new bill also changes the rules regarding forfeiture of counterfeit goods. Under current law, once it is established that products bear counterfeit marks, the U.S. may seek a court order to destroy them. Under the pending bill, the counterfeit goods would be subject to almost automatic seizure under the more encompassing rules relating to forfeiture of drug-related goods. This would also allow the court to direct forfeiture of the proceeds of previously sold counterfeit goods as well as the goods themselves. In addition any property used to commit or facilitate counterfeiting would also be subject to forfeiture, including any equipment used to manufacture the goods and to transport them in the United States.
The changes made by Congressman Knollenberg's bill will make violation of the counterfeiting law a much more hazardous endeavor because of the greater loss that would occur if the counterfeiter is caught. The bill is still pending in committee in the Senate where its fate is not yet clear.
California is still moving ahead with new and stricter clean air rules. One pending rulemaking establishes stricter emissions limits for 2008 and later off-road diesel engines. Included in the rulemaking are provisions that affect the rebuilding and remanufacturing of off-road diesel engines in California after December 31, 2006.
These rebuilding provisions largely duplicate the previous Federal and California rules for on-road diesel engines. That means that those engines which are rebuilt in-frame or which are removed and rebuilt and then re-installed in the same vehicle must be rebuilt to the same certified configuration as the original engine or to a certified configuration of a later model year engine.
On the other hand, if a rebuilt or remanufactured engine is used to replace an engine in a vehicle, the replacement engine must have a certified configuration that is at least equivalent from an emissions standpoint to that of the engine being replaced. Under no circumstances may an engine be rebuilt to an emissions configuration which is less stringent than that to which its block was originally certified.
The rule also requires that any rebuilt or remanufactured engine be labeled in a form and using specific language regarding the rebuilding as set forth in the rule.
As originally drafted, the rule would also have increased the burden on engine rebuilders because all engines were to be rebuilt to the most stringent emissions configuration of any replacement part used in that engine. This provision would have effectively prevented rebuilders from using dimensionally equivalent parts from a newer engine if the newer engine had a stricter emissions rating because then the rebuilder would have to rebuild the engine to the newer engine's stricter configuration. For example, if a shop was rebuilding a 2004 diesel engine and wanted to use a camshaft which was interchangeable from a 2006 engine with a stricter emissions level, the rebuilder would have to rebuild to the stricter 2006 configuration rather than the 2004 configuration to which the engine was originally designed simply because of that one part.
The intent of the Air Resources Board was to ensure that engines were not rebuilt to a more lenient configuration. But this provision went too far and actually would have required engines to be rebuilt to stricter standards than the original. Because it imposed an unnecessary technical and possibly economic burden on rebuilders, AERA objected to this provision.
After considerable discussion, the Air Resources Board staff attempted to modify the language to accomplish its purpose without penalizing rebuilders. However, because of the multitude of situations which could occur with replacement parts, this effort was not successful, and in the end this requirement was deleted from the rule.
Finally, negotiations among the automobile manufacturers, the tool manufacturers and the aftermarket concerning the Motor Vehicle Right To Repair Act have adjourned without resolution. For those of you who are unaware, the pending Motor Vehicle Right To Repair Act (H.R. 2048) would require the motor vehicle manufacturers to provide all information necessary to diagnose, service or repair a vehicle to the vehicle owner and to his or her service technician. Presently, no such requirement exists and therefore a manufacturer can withhold critical repair information from aftermarket service providers so that a vehicle would have to be returned to the manufacturer's authorized dealers for repair or service.
Earlier this year, the sponsor of H.R. 2048, Congressman Joe Barton, had brought both sides together to see if an agreement would be reached regarding full distribution of this service information to avoid the necessity of a new law and government enforcement. During the past summer numerous meetings were held and progress was made towards an overall agreement.
However, in early October, discussions were halted because of the failure to reach agreement on three issues critical to the agreement. These issues were the refusal of the vehicle manufacturers 1) to provide full access to diagnostic and repair capabilities available to dealers, i.e., the software and tools; 2) to provide the aftermarket with equal rights in the group to be established to monitor and enforce the agreement; and 3) to provide the tools and software necessary to repair vehicles equipped with anti-theft immobilization systems.
Without the agreement of the vehicle manufacturers, it now appears that only legislation will provide full information access to aftermarket providers. Therefore it is now up to Congressman Barton to move the bill towards passage.