02/26/2025 01:00 PM House JUDICIARY
| Audio | Topic |
|---|---|
| Start | |
| HB97 | |
| HB74 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 74 | TELECONFERENCED | |
| *+ | HB 97 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
ALASKA STATE LEGISLATURE
HOUSE JUDICIARY STANDING COMMITTEE
February 26, 2025
1:08 p.m.
MEMBERS PRESENT
Representative Andrew Gray, Chair
Representative Chuck Kopp, Vice Chair
Representative Ted Eischeid
Representative Genevieve Mina
Representative Jubilee Underwood
MEMBERS ABSENT
Representative Sarah Vance
Representative Mia Costello
COMMITTEE CALENDAR
HOUSE BILL NO. 97
"An Act relating to theft; relating to organized retail theft;
relating to property crimes; relating to aggravating factors at
sentencing; establishing a statewide marketplace facilitator
sales tax; and establishing the organized retail theft fund in
the general fund."
- HEARD & HELD
HOUSE BILL NO. 74
"An Act establishing the crime of airbag fraud."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 97
SHORT TITLE: ORG. RETAIL THEFT/FUND;MKTPLACE SALES TAX
SPONSOR(s): REPRESENTATIVE(s) FIELDS
02/12/25 (H) READ THE FIRST TIME - REFERRALS
02/12/25 (H) JUD, FIN
02/26/25 (H) JUD AT 1:00 PM GRUENBERG 120
BILL: HB 74
SHORT TITLE: CRIME COUNTERFEIT/NONFUNCTIONING AIRBAG
SPONSOR(s): REPRESENTATIVE(s) TOMASZEWSKI
01/29/25 (H) READ THE FIRST TIME - REFERRALS
01/29/25 (H) L&C, JUD
02/07/25 (H) L&C AT 9:00 AM BARNES 124
02/07/25 (H) -- MEETING CANCELED --
02/12/25 (H) L&C AT 3:15 PM BARNES 124
02/12/25 (H) Heard & Held
02/12/25 (H) MINUTE(L&C)
02/17/25 (H) L&C AT 3:15 PM BARNES 124
02/17/25 (H) Moved HB 74 Out of Committee
02/17/25 (H) MINUTE(L&C)
02/19/25 (H) L&C RPT 6DP
02/19/25 (H) DP: CARRICK, BURKE, NELSON, COULOMBE,
FIELDS, HALL
02/26/25 (H) JUD AT 1:00 PM GRUENBERG 120
WITNESS REGISTER
REPRESENTATIVE ZACK FIELDS
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: As prime sponsor, presented HB 97.
EVAN ANDERSON, Staff
Representative Zack Fields
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented the sectional analysis for HB 97,
on behalf of Representative Fields, prime sponsor.
JOHN STASER, Owner
Mountain View Sports Center
Anchorage, Alaska
POSITION STATEMENT: Gave invited testimony during the hearing
on HB 97.
DEB BONITO, President
Sourdough Mercantile, Inc;
Owner, Kobak Coffee
Anchorage, Alaska
POSITION STATEMENT: Gave invited testimony in support of HB 97.
JOHN SKIDMORE, Deputy Attorney General
Criminal Division
Department of Law
Juneau, Alaska
POSITION STATEMENT: Answered questions during the hearing on HB
97.
CLAIRE RADFORD, Attorney
Legislative Legal Services
Legislative Affairs Agency
Juneau, Alaska
POSITION STATEMENT: Answered questions during HB 97.
REPRESENTATIVE FRANK TOMASZEWSKI
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: As prime sponsor, presented HB 74.
DAVID GOFF, Staff
Representative Frank Tomaszewski
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented the sectional analysis for HB 74,
on behalf of Representative Tomaszewski, prime sponsor.
CRAIG ORLAN, Director of Local and State Government Retailers
American Honda Motor Company
Alexandria, Virginia
POSITION STATEMENT: Gave invited testimony during the hearing
on HB 74.
ACTION NARRATIVE
1:08:06 PM
CHAIR ANDREW GRAY called the House Judiciary Standing Committee
meeting to order at 1:08 p.m. Representatives Mina, Eischeid,
Kopp, and Gray were present at the call to order.
Representative Underwood arrived as the meeting was in progress.
HB 97-ORG. RETAIL THEFT/FUND;MKTPLACE SALES TAX
[Contains discussion of HB 106.]
1:09:04 PM
CHAIR GRAY announced that the first order of business would be
HOUSE BILL NO. 97, "An Act relating to theft; relating to
organized retail theft; relating to property crimes; relating to
aggravating factors at sentencing; establishing a statewide
marketplace facilitator sales tax; and establishing the
organized retail theft fund in the general fund."
1:09:25 PM}
REPRESENTATIVE ZACK FIELDS, Alaska State Legislature, as prime
sponsor, presented HB 97. He explained that he was motivated to
introduce HB 97 because a disturbing number of retail business
have shut down in Anchorage, largely due to un-policing and
rising levels of unprosecuted retail theft. He referred to a
PowerPoint presentation on HB 97 [included in the committee
packet], beginning on slide 2, "Organized Retail Crime," which
read as follows [original punctuation provided]:
• Homeland Security Investigations (HSI) defines
ORC as "the association of two or more persons
engaged in illegally obtaining items of value
from retail establishments, through theft and/or
fraud, as part of a criminal enterprise. 1"
• According to the 2021 joint report released by
the Retail Industry Leaders Association (RILA)
and the Buy Safe America Coalition, in 2019,
nearly $70 billion in goods were stolen from
retailers. 2
• ORC is not simply shoplifting, and these crimes
are not victimless. A growing number of thefts
turn violent, and consumers, local communities
and businesses bear the costs of rising prices.
These thefts are detrimental to both businesses,
small and large alike, and the overall economy as
they pose both societal and health risks to the
community.
1:11:25 PM
REPRESENTATIVE FIELDS summarized slides 3-5, which listed the
types of retailers and products targeted for organized retail
crime (ORC) by ranking, with pharmacy, big box, and home
improvement making up the top three categories. He continued to
slide 6, "Economic Impact of Organized Retail Crime," which read
as follows [original punctuation provided]:
• The economic impact of retail crime is profound.
Retailers face increased costs for lost product,
security, and labor, which lead to higher prices
for consumers and ultimately, lower sales. Lower
sales translate to fewer jobs throughout the
economy. The result is $125.7 billion in lost
economic activity and 658,375 fewer jobs, paying
almost $39.3 billion in wages and benefits to
workers.
• National estimates reveal ORC costs federal and
state governments nearly $15 billion in lost tax
revenue, not including lost sales taxes.
• It is estimated that the average American family
will pay more than $500 annually in additional
costs due to the impact of ORC.
• ORC is a low-risk, high-reward income stream for
domestic and transnational criminal organizations
that greatly impacts inter-state and
international commerce and the overall economic
security of Alaska and the United States.
REPRESENTATIVE FIELDS continued to slide 7, which featured a
graph that illustrated the correlation between the growth in
online shopping and shoplifting. Forums like Facebook
Marketplace and Amazon are common vectors for stolen and
counterfeit goods to be resold. Slide 8 gave an example of the
rising rates of loss at Lowe's, as the retailer lost nearly $1
billion to loss of inventory ("shrink") in 2022. Slide 9
illustrated the connection between ORC and organized crime,
including drug trafficking, human trafficking, and violent
cartels. Slides 10-12 displayed graphics showing the
organizational structure of organized theft groups (OTG), the
organized retail theft (ORT) cycle, and an example of the
Central America labor trafficking threat.
1:16:14 PM
REPRESENTATIVE FIELDS continued to slide 13, which showed a
graph of the impact on small businesses and how often they are
experiencing ORC. He anecdotally reported that some Anchorage
businesses are experiencing significantly higher losses than
their national peers. Slide 14 displayed photos of ORT in
Alaska. Slide 15 indicated that in 2022, Alaska retailers lost
$202 million in revenue to theft. Slide 16 showed a map of
legislation addressing ORC across the U.S. He cautioned the
legislature from inadvertently penalizing someone who steals
food to survive and reiterated that the goal is to target ORC.
1:18:04 PM
REPRESENTATIVE FIELDS turned to slide 17, "What Can We Do to
Address the Problem," which read as follows [original
punctuation provided]:
• Update the definition of organized retail crime
and increase criminal penalties: States should
act to define the crime of "organized retail
theft" in criminal law to specify those thefts
involving two or more participants and an
intention of resale and include increased
penalties for those specific violations.
• The law and prosecutors must hold those who
engage in organized and significant retail theft
accountable: Since 2000, at least 40 states have
raised the thresholds for the value of stolen
goods to trigger a felony charge. In some
instances, criminals are taking advantage of
these increased higher thresholds to engage in
repeated thefts and avoid prosecution. States
should reconsider these thresholds and
prosecutors should avoid adopting broad non-
prosecution policies.
1:18:17 PM
REPRESENTATIVE FIELDS moved to slide 18, which compared the
existing criminal code in Title 11 to the penalties for theft
proposed in HB 97. He stated that the bill would do two things:
establish ORC in law and reduce the penalty threshold for theft.
The goal, he said, is to give prosecutors more tools to put
criminals behind bars, adding that ORT would be added as an
aggravating factor to allow the courts to impose a sentence
above the presumptive range. He concluded on slide 19, "HB 97
Proposes a 2% Sales Tax on 'Marketplace Facilitators' Both
Online & Offline," which read as follows [original punctuation
provided]:
• Marketplace facilitator means a person who
contracts with a third-party seller to facilitate
the sale of the third-party seller's property,
product, or services through a physical retail
location or online marketplace operated by the
person.
o The bill sets a minimum sales threshold for
marketplace facilitators who must remit the tax
at $200,000 or 200 separate transactions.
• HB 97 establishes an organized retail theft fund
in the general fund, intended to be appropriated
to local law enforcement agencies to investigate
and prosecute organized retail theft and related
fraud and property crimes.
1:21:11 PM
EVAN ANDERSON, Staff, Representative Zack Fields, Alaska State
Legislature, on behalf of Representative Fields, prime sponsor,
presented the sectional analysis for HB 97 [included in the
committee packet], which read as follows [original punctuation
provided]:
Section 1: This section amends AS 11.46.100 to modify
the definition of theft in the criminal code to
include organized retail theft.
Section 2: This section amends AS 11.46.120(a) to
update the definition of theft in the first degree,
and it lowers the threshold for these crimes to
$20,000 from $25,000.
Section 3: This section amends AS 11.46.130(a) to
modify the definition of theft in the second degree,
and it lowers the threshold for these crimes to a
range of $500 to $20,000 from the current range of
$750 to $25,000. This section also provides for
individuals with a prior similar conviction in the
last 5 years to be charged with theft in the second
degree.
Section 4: This section amends AS 11.46.140(a) to
modify the definition of theft in the third degree,
and it lowers the threshold for these crimes to a
range of $200 to $500 from the current range of $250
to $750. This section also provides for individuals
with a prior similar conviction in the last 5 years to
be charged with theft in the third degree.
Section 5: This section amends AS 11.46.150(a) to
modify the definition of theft in the fourth degree,
and it lowers the threshold for these crimes to $200
or less from the current range of $250 or less.
Section 6: This section amends the criminal code with
a new section Sec. 11.46.215 defining organized retail
theft.
Section 7: This section amends AS 11.46.220(c), which
deals with the crime of concealment of merchandise, to
conform with previous sections.
Section 8: This section amends AS 11.46.260(b), which
deals with the crime of removal of identification
marks, to conform with previous sections.
Section 9: This section amends AS 11.46.270(b), which
deals with the crime of unlawful possession, to
conform with previous sections.
Section 10: This section amends AS 11.46.280(d), which
deals with the crime of issuing a bad check, to
conform with previous sections.
Section 11: This section amends AS 11.46.285(b), which
deals with the crime of fraudulent use of an access
device or identification document, to conform with
previous sections.
Section 12: This section amends AS 11.46.360(a), which
deals with the crime of vehicle theft, to conform with
previous sections.
Section 13: This section amends AS 11.46.482(a), which
deals with the crime of criminal mischief, to conform
with previous sections.
Section 14: This section amends AS 11.46.530(b), which
deals with the crime of criminal simulation, to
conform with previous sections.
Section 15: This section amends AS 11.46.620(d), which
deals with the crime of misapplication of property, to
conform with previous sections.
Section 16: This section amends AS 11.46.980(e), which
allows for the combined value of goods or services to
be aggregated. This is a conforming change.
Section 17: This section adds new paragraphs to AS
11.46.990 to define the terms "aggregate value" and
"commercial establishment."
Section 18: This section amends AS 12.55.155(c) with a
new paragraph that adds organized retail theft as an
aggravating factor, which allows the sentencing court
to consider a sentence above the presumptive range set
out in AS 12.55.125.
Section 19: This section amends AS 43 with a new
chapter: Chapter 72: Marketplace Facilitator Sales
Tax.
- Sec. 43.72.010 establishes a 2% sales tax on
sales by marketplace facilitators.
- Sec. 43.72.020 requires the marketplace
facilitator to collect the tax, hold it in trust
for the state, and remit to Department of
Revenue. There is a minimum sales threshold for
the sales tax of $250,000 or 200 individual
transactions in the previous calendar year.
Marketplace facilitators who meet or exceed the
minimum sales threshold are required to register
and remit the tax to the state, including online
marketplace facilitators without a physical
presence in state.
- Sec 43.72.030 establishes liability for payment
of tax.
- Sec 43.72.040 provides for the same method of
accounting the person uses for federal tax
purposes.
- Sec 43.72.050 requires marketplace facilitators
file a tax return.
- Sec. 43.72.060 authorizes the Department to
adopt regulations relating to a rounding method.
- Sec. 43.72.070 allows the marketplace
facilitator to deduct bad debts from their tax
return.
- Sec. 43.72.080 provides that the Department may
require a cash deposit as a security, a bond to
guarantee solvency, or that the tax-payer's
corporate officers assume the tax liability.
- Sec 43.72.090 provides that the successor of a
marketplace facilitator who quits business be
liable for remitting any outstanding tax payment.
- Sec 43.72.100 names the tax imposed by this
chapter as a personal debt of the marketplace
facilitator and its personal representatives,
officers, or employees.
- Sec 43.72.110 establishes an organized retail
theft fund in the general fund. The Legislature
may appropriate funds to law enforcement agencies
to investigate and prosecute organized retail
theft. The fund is not a dedicated fund.
- Sec. 43.72.990 provides definitions for "law
enforcement agency," "marketplace facilitator,"
"online marketplace," "resident," and "third-
party seller." o The definition for "marketplace
facilitator' includes a person who contracts with
a third-party seller to facilitate the sale of
the third-party seller's property through either
a physical retail location or online marketplace.
Section 20: adds new sections in uncodified law to
provide for an immediate effective date for each of
this bill's sections.
1:27:00 PM
CHAIR GRAY opened invited testimony on HB 97.
1:27:22 PM
JOHN STASER, Owner, Mountain View Sports Center, shared his
belief that HB 97 would take a significant step towards reducing
retail theft in Alaska. He explained that thieves continue to
adapt their strategies. Most recently, they have been hitting
multiple stores in one day and staying below the felony theft
levels at each store to avoid higher punishment. Holding the
third-party sellers responsible would undermine the thieves'
ability to make a quick profit, he said, adding that anything to
disincentivize retail theft would help fight illicit drug use as
well.
1:29:53 PM
DEB BONITO, President, Sourdough Mercantile, Inc; Co-Owner,
Kobak Coffee, said she concurred with Mr. Staser's testimony and
expressed her support for the bill. She explained that lowering
the threshold would help fight theft and associated crime,
because thieves know to stay below the threshold [to avoid
higher punishment].
1:30:53 PM
The committee took a brief at-ease at 1:30 p.m.
1:30:59 PM
CHAIR GRAY sought questions from committee members.
1:31:25 PM
REPRESENTATIVE UNDERWOOD asked whether the bill sponsor was
familiar with the differences between the governor's bill [HB
106] and HB 97.
REPRESENTATIVE FIELDS stated that the two bills were developed
independently, adding that he had asked for the Department of
Law's (DOL) help in critiquing his bill and determining the best
vehicle to advance. He asked the committee whether - without
imposing a user fee on the online marketplaces - the legislature
would be doing enough to disrupt this very lucrative criminal
marketplace.
REPRESENTATIVE UNDERWOOD asked Mr. Skidmore to explain the
differences between HB 106 and HB 97.
1:33:30 PM
JOHN SKIDMORE, Deputy Attorney General, Criminal Division,
Department of Law (DOL), said there are three primary
difference: firstly, there is no tax in HB 106; secondly, HB 97
would reduce the class C felony threshold from $250 to $200 and
the Class B felony from $25,000 to $20,000; thirdly, HB 106
would create a higher level crime for organized theft, whereas
HB 97 would create a new theory of theft and focus exclusively
on commercial retail theft.
1:37:21 PM
REPRESENTATIVE UNDERWOOD asked whether there are any
constitutional concerns associated with the taxes in HB 97.
MR. SKIDMORE said he's unaware of any constitutional problems
while acknowledging that he's not an expert on that subject.
REPRESENTATIVE FIELDS stated that there's a meaningful
distinction between "designated" and "dedicated" to illustrate
intent. He highlighted one additional difference between the
two proposals: HB 106 would three people or more to constitute
organized theft, whereas HB 97 would only require two.
1:39:09 PM
CLAIRE RADFORD, Attorney, Legislative Legal Services,
Legislative Affairs Agency (LAA), in response to Representative
Underwood's question about constitutional concerns, said there's
a small chance that there may be a single subject issue with the
bill. She explained that under HB 97, the single subject may be
commerce; however, if a challenge were brought, a court could
decide that commerce doesn't accurately capture the criminal
provisions in the bill. In addition, there's a small risk of an
equal protection concern regarding the taxes on marketplace
facilitators. She explained that to win an equal protection
challenge, at a minimum, it would need to be shown that the tax
serves a legitimate governmental purpose, which fairly relates
to taxing only marketplace facilitators.
1:41:10 PM
REPRESENTATIVE MINA asked how the bill would impact an
individual shoplifter who sells [stolen goods] on the
marketplace.
REPRESENTATIVE FIELDS said if the shoplifter were selling a $225
jacket, they would be [prosecuted] at an elevated penalty level.
Beyond that, the bill would attempt to correct the marketplace
distortion whereby online facilitators are fueling organized
crime and level the playing field for local establishments.
REPRESENTATIVE MINA considered the example of people selling
jewelry on Instagram and questioned the level of formality
that's required to be in contract with the third-party seller.
REPRESENTATIVE FIELDS questioned how to most accurately describe
these online third-party vendors, such as Facebook Marketplace,
Amazon, and Instagram, in the bill.
MS. RADFORD offered to follow up with the requested information.
1:45:18 PM
REPRESENTATIVE MINA shared her understanding that the Alaska
Remote Seller Sales Tax Commission repealed the transaction
threshold related to a sales tax in January 2025. She asked
whether HB 97 would create a new tax or reinstate a prior tax.
REPRESENTATIVE FIELDS did not know the answer. He reiterated
that the bill would establish a new user fee to target third
party sellers that are vectors for organized crime.
REPRESENTATIVE MINA pointed out that price negotiations often
occur on these third-party marketplaces and asked how accurate
the two percent sales tax would be.
REPRESENTATIVE FIELDS responded if the e-commerce is transacted
online, it's more likely the tax would be captured.
1:47:33 PM
REPRESENTATIVE EISCHEID questioned the rationale behind the
minimum threshold of $250,000 in sales or 200 separate
transactions.
REPRESENTATIVE FIELDS reasoned that the goal is to target high
volume online retailers, as opposed to a person who sells a bike
to their neighbors.
REPRESENTATIVE EISCHEID asked whether the minimum thresholds
were based on research.
MR. ANDERSON admitted that from a previous version of the bill,
the number had increased after feedback from stakeholders.
REPRESENTATIVE EISCHEID asked whether the bill would incentivize
criminals to steal lower value items more often.
REPRESENTATIVE FIELDS said the lower threshold would make it
harder to steal things that smaller businesses need to stay in
business. He added that the goal is to protect additional
product for local store owners.
1:50:26 PM
CHAIR GRAY speculated that lowering the thresholds, in
combination with inflation, would create new crimes for people
who wouldn't otherwise be charged, which he characterized as an
aggressive change.
REPRESENTATIVE FIELDS shared several examples and emphasized
that $200 may not seem like a lot of money, but it negatively
impacts store owners' margins when the volume is high. He
reiterated that the bill would target local businesses in
downtown and midtown Anchorage that he'd like to see stay open.
CHAIR GRAY asked how two people constitutes organized crime.
REPRESENTATIVE FIELDS clarified that these two people are
typically considered "boosters" and operating as part of a
larger organized crime network. He added that if law
enforcement had ample evidence to prove that these two
individuals were part of a broader network, "let them
prosecute."
CHAIR GRAY contended that one person could also be part a larger
network and committing crimes on its behalf.
REPRESENTATIVE FIELDS responded, "that is a very fair point,"
adding that the committee could make that change with guidance
from Legislative Legal Services and Department of Law (DOL).
1:54:12 PM
REPRESENTATIVE MINA asked how retail theft has shifted as online
marketplaces have become more prevalent.
REPRESENTATIVE FIELDS offered to follow up with the requested
information.
CHAIR GRAY announced that the bill would be held over.
HB 74-CRIME COUNTERFEIT/NONFUNCTIONING AIRBAG
1:55:21 PM
CHAIR GRAY announced that the final order of business would be
HOUSE BILL NO. 74, "An Act establishing the crime of airbag
fraud."
1:55:41 PM
The committee took an at-ease from 1:55 p.m. to 1:56 p.m.
1:56:47 PM
REPRESENTATIVE FRANK TOMASZEWSKI, Alaska State Legislature, as
prime sponsor, presented HB 74. He paraphrased the sponsor
statement [included in the committee packet], which read as
follows [original punctuation provided]:
House Bill 74 establishes the crime of airbag fraud
for knowingly selling, installing, or manufacturing a
counterfeit or nonfunctioning airbag. Currently in
Alaska, there is no law to prohibit the installation
or reinstallation of airbags that do not meet federal
safety standards. By establishing airbag fraud, House
Bill 74 prohibits bad actors from knowingly selling,
installing, or manufacturing these dangerous and
improper devices.
Similar legislation already exists in over 30 states.
House Bill 74 establishes airbag fraud as a Class A
misdemeanor or a Class C felony if death or serious
injury to another person results.
House Bill 74 protects owners and employees of motor
vehicle dealerships if they are unaware of counterfeit
parts in a vehicle. It does not create a duty for
owners and employees to inspect a vehicle for
counterfeit parts before selling it. It does not
inhibit the sale of vehicles for parts or salvage, or
as a transfer to or from an insurance company to
fulfil an insurance claim.
1:59:39 PM
DAVID GOFF, Staff, Representative Frank Tomaszewski, Alaska
State Legislature, on behalf of Representative Tomaszewski,
prime sponsor, presented sectional analysis for HB 74 [included
in the committee packet], which read as follows [original
punctuation provided]:
Section 1
Amends the airbag fraud statute (AS 28.35.248) by
establishing and defining airbag fraud as knowingly
selling, offering for sale, installing, reinstalling,
or manufacturing a counterfeit or nonfunctioning
airbag or device that is intended to conceal a
counterfeit or nonfunctioning airbag, or intentionally
selling, leasing or trading a vehicle that the person
knows has a counterfeit or nonfunctioning airbag.
Establishes airbag fraud as a class A misdemeanor or a
class C felony if death or serious physical injury to
another person occurs as a result of the counterfeit
or nonfunctioning airbag.
Establishes that the liability of any party in a civil
action is not precluded. Provides that this
legislation does not create a duty to inspect a
vehicle for a counterfeit or nonfunctioning airbag
before its sale.
This section excludes a person installing,
reinstalling, or replacing an airbag on a vehicle used
solely for police work; an owner or employee of a
motor vehicle dealership or the owner of a vehicle who
does not have knowledge that the vehicle's airbag is
counterfeit or nonfunctioning; a person who transfers
a vehicle title to an insurance company to satisfy an
insurance claim; or an insurance company that sells or
otherwise disposes of a vehicle as authorized by law
or regulation.
2:01:34 PM
CHAIR GRAY asked why insurance companies would be exempt from
selling a vehicle with nonfunctioning or counterfeit parts.
REPRESENTATIVE TOMASZEWSKI said generally, insurance companies
are selling a vehicle that's been totaled with airbags deployed,
thereby selling it as a "parts vehicle." He said the bill would
acknowledge that and prevent the insurance company from being
held liable.
CHAIR GRAY questioned the intent of the language on page 2, line
19, which stated that the bill would not create a duty for the
owner or employee of a motor vehicle dealership or the owner of
the vehicle to determine whether the airbag is counterfeit or
nonfunctioning.
MR. GOFF deferred the question to the invited testifiers.
2:04:55 PM
CHAIR GRAY opened invited testimony.
2:05:07 PM
CRAIG ORLAN, Director of Local and State Government Retailers,
American Honda Motor Company, stated that this problem has been
plaguing the industry for over a decade. However, he assured
the committee that it's not a problem with the legitimate
automotive supply chain. When customers are involved in an
accident, they sometimes replace their airbags at an independent
repair facility, of which there are a handful of bad actors who
knowingly replace those airbags with products that are not
intended to provide protection, such as newspaper, rags,
sawdust, or t-shirts. He shared examples to highlight the
magnitude of the issue, reporting that the Wall Street Journal
underwent an extensive investigation of the problem and
identified several deaths and injuries all over the country that
were directly related to these knockoffs. He said the primary
goal is to prevent these counterfeits from being installed,
adding that the vast majority of the products originate
overseas. While there has been great support from federal law
enforcement agencies, they have limited authority to act. By
supplementing federal law with state law, state and federal
cooperation would help prevent these airbags from entering the
country and help address e-commerce retailers - who sell these
products in a timely manner. He concluded that similar
legislation had been enacted in 38 states with broad bipartisan
support and no public opposition.
2:07:59 PM
CHAIR GRAY,[referencing page 2, line 19], asked why the state
would not want dealerships to determine whether an airbag is
counterfeit or nonfunctioning.
MR. ORLAN opined that it would be an undue burden to require
vehicle owners or dealerships to physically remove the airbag to
confirm that it is legitimate every time the vehicle diagnostic
system reports an issue.
CHAIR GRAY sought to confirm that it's impossible to check the
functionality of an airbag without physically removing it.
MR. ORLAN answered, "Correct."
CHAIR GRAY asked for verification that this issue does not apply
to a brand-new vehicle purchased from a dealership.
MR. ORLAN confirmed that this is not a problem with the
legitimate automotive manufacturing process; however, it could
apply to a used vehicle from a dealership if it had repairs made
in the aftermarket.
CHAIR GRAY announced HB 74 would be held over.
2:11:15 PM
ADJOURNMENT
There being no further business before the committee, the House
Judiciary Standing Committee meeting was adjourned at 2:11 p.m.