Legislature(2023 - 2024)BUTROVICH 205
01/27/2023 01:30 PM Senate JUDICIARY
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| Audio | Topic |
|---|---|
| Start | |
| SB37 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 37 | TELECONFERENCED | |
SB 37-CRIME COUNTERFEIT/NONFUNCTIONING AIRBAG
1:30:46 PM
CHAIR CLAMAN announced the consideration of SENATE BILL NO. 37
"An Act establishing the crime of airbag fraud."
CHAIR CLAMAN stated that he would pass the gavel to Vice Chair
Kiehl for the duration of the bill presentation.
SENATOR KIEHL invited the sponsor and his staff to the witness
table.
1:31:30 PM
SENATOR CLAMAN, District H, speaking as the sponsor of SB 37,
introduced the legislation with the following statement:
Senate Bill 37 was brought to my attention in 2021 by
Honda Motor Company and the Automotive Anti-
Counterfeiting Council. In Alaska today there is no
law to prohibit the installation or reinstallation of
airbags that do not meet federal safety standards.
While airbags are made to protect us from serious
injuries, counterfeit or nonfunctioning airbags are
known to improperly deploy or not deploy at all
potentially resulting in serious injuries.
By establishing airbag fraud as a crime, SB 37
prohibits dangerous actors from knowingly selling,
installing, or manufacturing these dangerous and
improper devices. The bill references both counterfeit
and nonfunctioning airbags. A counterfeit airbag is
defined as a replacement airbag displaying an
unauthorized mark that is similar to the mark of a
motor vehicle manufacturer. A nonfunctioning airbag is
an inoperable or damaged airbag, or an airbag that has
previously been deployed or that was removed from a
vehicle because it created an unreasonable safety
risk.
Similar legislation has passed in 30 states. For
example, the Michigan Penal Code takes a more severe
approach to this crime and punishes airbag fraud as a
felony punishable by 4 years of imprisonment or a fine
of $10,000.00. In comparison, SB 37 defines airbag
fraud as a class A misdemeanor punishable by up to 1
year of imprisonment, a fine of up to $25,000 or both
and as a class C felony punishable by up to 5 years of
imprisonment, a fine of up to $50,000 or both if
serious injury or death is involved.
Airbag fraud has real world implications. eBay has
been a popular site for the sale of counterfeit or
nonfunctioning airbags. This led the non-profit
corporation Automotive Anti-Counterfeiting Council
(A2C2) to call on eBay in October 2021 to prohibit the
sale of all airbags after counterfeit airbags and
related components were shown to be consistently
available for sale on the site.
In response, eBay changed their Vehicles, parts and
accessories policy by prohibiting the sale of deployed
or rebuilt airbags and airbags covers. Airbags and
their accessories still may be sold by verified
sellers.
Senate Bill 37 is supported by the Coalition Against
Insurance Fraud, which believes in the protection of
consumers and the idea that consumers should be able
to trust their airbags.
The state has a responsibility to protect all Alaskans
from counterfeit and nonfunctioning airbags. This bill
acknowledges all victims of airbag fraud and makes
sure to punish every culprit that knowingly installs
or provides dangerous devices. This bill also provides
a protection for any party involved who might not be
aware of this fraud, such as owners and employees of
dealerships who unknowingly install or sell those
devices.
1:35:02 PM
EMILIE VIGNEAU, Intern, Senator Matt Claman, Alaska State
Legislature, Juneau, Alaska, presented the sectional
analysis for SB 37 on behalf of the sponsor. It read as
follows:
Section 1
AS 28.35.248. Airbag fraud
Establishes and defines 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.
1:36:14 PM
SENATOR KIEHL turned to invited testimony.
1:36:48 PM
CRAIG ORLAN, Director of State & Local Government Affairs,
American Honda Motor Co, Inc. stated that the automobile
industry saw foreign and domestic counterfeiters flooding the
market with ineffective air bags. The counterfeit airbags would
not provide protection in the event of a collision, resulting in
potential death and or injury. Many of these faulty devices are
imported from China. He agreed with the sponsor that 30 states
have enacted similar legislation.
1:38:38 PM
MR. ORLAN stated that Honda worked with law enforcement
officials on cases throughout the country. Similar legislation
led to the discovery of several counterfeit airbags across the
nation. Enacting legislation like SB 37 allows for the removal
of advertisements for counterfeit airbags on ecommerce cites.
1:39:45 PM
SENATOR TOBIN asked what point in the manufacturing process an
airbag is installed in a vehicle.
MR. ORLAN said the problem occurs after an airbag is deployed,
and a counterfeit replacement is installed.
SENATOR TOBIN asked if the airbags are inspected by dealers
buying used cars.
MR. ORLAN replied that the independent dealerships did not have
an obligation to remove and inspect an airbag to determine its
validity. The vehicle history is available to the consumer.
1:41:22 PM
SENATOR KAUFMAN wondered about unintended consequences. He posed
a hypothetical scenario regarding the sale of a vehicle that is
not compliant with the proposed legislation. He questioned
whether the bill was written with this potential scenario in
mind.
SENATOR CLAMAN responded that a seller would not be liable if
they installed what they thought was a legitimate part, even if
it was not. He said he has been working with auto dealers and
manufactures for several years, and this legislation was vetted
by auto dealers in Alaska.
SENATOR KAUFMAN proposed a hypothetical scenario involving a
steering wheel and liability.
SENATOR CLAMAN replied that using an off-label steering wheel in
a car would not create liability.
1:45:38 PM
SENATOR GIESSEL asked if there would be benefit in having a
buyer beware statement declaring that the airbag was not
inspected.
MR. ORLAN replied that consumer education is very important. He
wished to avoid placing an undue burden on dealers and
consumers. He targeted airbags because of the critical safety
nature of the equipment.
SENATOR GIESSEL requested more clarity.
1:48:33 PM
MR. ORLAN did not object to including consumer notification
about counterfeit airbags in SB 37.
SENATOR TOBIN mentioned the Federal Trade Commission Act and
wondered why selling a fraudulent airbag is not covered by that
Act.
SENATOR CLAMAN replied that federal sanctions are often stronger
than state sanctions and require extensive investigation. He
explained that federal authorities had limited opportunities to
intercept the faulty airbags. The proposed legislation would
allow state prosecutors the opportunity to pursue small-time
criminals.
SENATOR KIEHL asked Mr. Orlan to add his thoughts.
MR. ORLAN added that his industry works closely with
international agencies. A violation of federal trademark law or
a violation of hazardous material labeling attract the attention
of these agencies. Other states enacting similar legislation
work with the appropriate jurisdiction to seize those products
and keep them out of the chain of commerce.
1:52:40 PM
SENATOR KAUFMAN referenced the term on page 2, line 23,
paragraph (3) "nonfunctioning". He asked if a seller would be
required to cite any recall issued for the vehicle.
SENATOR CLAMAN clarified whether the hypothetical recall was for
the purpose of airbag issues.
SENATOR KAUFMAN wondered if he hypothetically owned the car and
was unaware of an airbag recall. Does the bill require owners to
check for recalls before selling?
SENATOR CLAMAN replied that in the scenario, the seller is
innocent and thus not liable. You might have trouble proving
lack of knowledge if a letter citing the recall was discovered.
1:56:26 PM
SENATOR KIEHL asked if the legislative intent was covered under
Alaska's Unfair Trade Practices and Consumer Protection Act
(UTPA). He asked if a criminal penalty was necessary for the
attorney general to seize the counterfeits and provide resources
to federal authorities.
SENATOR CLAMAN replied that he would return to the committee
with the answer after doing some research.
SENATOR KIEHL agreed that faulty airbags create a safety risk
and added that deliberately malfunctioning smoke detectors and
sprinkler systems were classified as B misdemeanors. He wondered
if additional provisions were contrasted to set the proposed
penalties in SB 37.
SENATOR CLAMAN replied that the decision about misdemeanor
classification was based on the intentional conduct of
installing counterfeit airbags.
2:00:18 PM
SENATOR KIEHL asked about the elevation to felony and how a
prosecutor might prove that serious injury or death resulted
from a faulty airbag. He pointed out that a fully functioning
airbag might not be sufficient in preventing death during a car
accident. He wondered how causality was shown.
SENATOR CLAMAN replied that is a question that is addressed at
trial. Experts are available during hearings to provide evidence
related to injury or death.
SENATOR TOBIN asked about the term certified preowned. She
wondered if an inspection of the airbag might prevent this type
of crime.
SENATOR CLAMAN responded that the only way to evaluate an airbag
is to remove it, which could create economic burdens. The actual
number of counterfeit airbags is not significant. The
seriousness of the crime warrants the strong penalty.
2:05:21 PM
MR. ORLAN agreed with the sponsor. He clarified that certified
preowned meant that a vehicle was inspected by the dealership.
Necessary repairs were made with original equipment parts. He
continued that authorized dealerships tend to look for
counterfeit parts. He responded to a question about recalls. He
stated that the terms counterfeit and nonfunctional were
carefully crafted in the proposed legislation. A recalled part
would not be considered nonfunctional or counterfeit.
SENATOR TOBIN asked about an additional inspection. Did a
preowned inspection include an airbag review following a prior
collision and deployment?
MR. ORLAN replied that a certified preowned Honda dealership
would inspect the airbag following a known deployment. He was
not able to speak for other dealerships.
2:07:29 PM
SENATOR KAUFMAN wondered if there is a nondestructive way to
inspect an uninstalled airbag.
MR. ORLAN replied that trained professionals could perform
airbag inspections. If an airbag is sold on eBay or a similar
platform, that is a red flag.
SENATOR KAUFMAN asked if a dealership could diagnostically
detect a counterfeit airbag.
MR. ORLAN replied yes, diagnostics can provide a tool for
inspection. He noted that the relevant diagnostic alerts and
lights are often disabled by those installing the faulty
equipment.
SENATOR KAUFMAN asked about counterfeit airbags that defeat the
diagnostic utility.
MR. ORLAN responded that counterfeit airbags occasionally evade
diagnostic evaluation.
SENATOR KIEHL asked Howard Handler to provide his invited
testimony.
2:11:17 PM
HOWARD HANDLER, National Insurance Crime Bureau, Des Plaines,
Illinois provided invited testimony on SB 37.
The National Insurance Crime Bureau (NICB) is a national,
century-old, not-for-profit organization supported by
approximately 1,200 property and casualty insurance
companies, including many who write business in Alaska.
Working hand-in-hand with our Member companies and Alaska
law enforcement, we help to detect, prevent, and deter
insurance crimes.
Counterfeit airbags are a national and growing concern. The
National Highway Traffic Safety Administration (NHTSA) has
warned consumers that counterfeit airbags have been shown
to consistently malfunction, from non-deployment to the
expulsion of metal shrapnel during deployment. Vehicle
safety equipment as important as airbags are subject to
strict quality control standards to keep the public safe.
Counterfeiters are much more likely to skirt these
standards which can lead to disastrous consequences.
Counterfeit airbags are procured in many different ways,
from consumers unwittingly purchasing them on online to
unscrupulous body shops purposely installing counterfeits
while billing consumers and insurers for genuine, original
bags. Federal authorities in Philadelphia recently
announced an indictment of an individual accused of
fraudulently importing counterfeit airbags from China and
installing them in salvaged automobiles which were then
reintroduced to the market. No matter how counterfeit
airbags are obtained and installed in the vehicles of
unsuspecting motorists, the results can be deadly. NICB has
provided more information for the public and policymakers
on our website which can be found here.
Accordingly, we support SB 37 which creates a new criminal
statute penalizing those who knowingly selling a
counterfeit or nonfunctioning airbag. We thank you for this
scheduling a hearing and for considering our views as you
deliberate the merits of the bill.
SENATOR KIEHL returned the gavel to Senator Claman for public
testimony.
2:13:55 PM
CHAIR CLAMAN opened public testimony on SB 37; finding none, he
closed public testimony and held SB 37 in committee.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 37 version A 1.18.2023.PDF |
SJUD 1/27/2023 1:30:00 PM SJUD 4/3/2023 1:30:00 PM |
SB 37 |
| SB 37 Sponsor Statement version A 1.25.2023.pdf |
SJUD 1/27/2023 1:30:00 PM SJUD 4/3/2023 1:30:00 PM |
SB 37 |
| SB 37 Sectional Analysis version A 1.25.2023.pdf |
SJUD 1/27/2023 1:30:00 PM SJUD 4/3/2023 1:30:00 PM |
SB 37 |
| SB 37 Supporting Document - Letters Received as of 1.25.2023.pdf |
SJUD 1/27/2023 1:30:00 PM SJUD 4/3/2023 1:30:00 PM |
SB 37 |
| SB 37 Research - Honda Background 1.25.2023.pdf |
SJUD 1/27/2023 1:30:00 PM SJUD 4/3/2023 1:30:00 PM |
SB 37 |
| SB 37 Research - A2C2 Background 1.25.2023.pdf |
SJUD 1/27/2023 1:30:00 PM SJUD 4/3/2023 1:30:00 PM |
SB 37 |
| SB 37 Research - Michigan Laws 1.25.2023.pdf |
SJUD 1/27/2023 1:30:00 PM SJUD 4/3/2023 1:30:00 PM |
SB 37 |
| SB 37 Fiscal Note DOA-OPA 1.22.2023.pdf |
SJUD 1/27/2023 1:30:00 PM SJUD 4/3/2023 1:30:00 PM |
SB 37 |
| SB 37 Fiscal Note DOA-PDA 1.22.2023.pdf |
SJUD 1/27/2023 1:30:00 PM SJUD 4/3/2023 1:30:00 PM |
SB 37 |
| SB 37 Fiscal Note DOC-IDO 1.20.2023.pdf |
SJUD 1/27/2023 1:30:00 PM SJUD 4/3/2023 1:30:00 PM |
SB 37 |
| SB 37 Fiscal Note LAW-CJL 1.20.2023.pdf |
SJUD 1/27/2023 1:30:00 PM SJUD 4/3/2023 1:30:00 PM |
SB 37 |
| SB 37 Fiscal Note DPS-DET 1.19.2023.pdf |
SJUD 1/27/2023 1:30:00 PM SJUD 4/3/2023 1:30:00 PM |
SB 37 |