SB 17-CRIME COUNTERFEIT/NONFUNCTIONING AIRBAG  2:41:31 PM CHAIR BJORKMAN announced the consideration of SENATE BILL NO. 17 "An Act establishing the crime of airbag fraud." 2:41:36 PM SENATOR MATT CLAMAN, District H, Alaska State Legislature, Juneau, Alaska, as sponsor of SB 17 he delivered the following sponsor statement: [Original punctuation provided.] Senate Bill 17 was brought 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. 2:42:14 PM REPRESENTATIVE CLAMAN continued: By establishing airbag fraud as a crime, SB 17 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 over 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 17 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. Passage of this legislation will support federal efforts to stop the importation of counterfeit or nonfunctioning airbags through the federal unfair trade practices act. Passage of this law will allow federal authorities to seize these products at Alaska's border. Senate Bill 17 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 victims of airbag fraud and provides consequences for those who knowingly install or provide 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. 2:44:22 PM CARLY DENNIS, Staff, Senator Matt Claman, Alaska State Legislature, Juneau, Alaska, read the sectional analysis for SB 17 as follows: [Original punctuation provided.] Senate Bill 17  Sectional Analysis-Version A  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. 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. 2:45:49 PM SENATOR DUNBAR asked if SB 17 is different than last year's bill. 2:46:01 PM SENATOR CLAMAN answered that its identical to last year's bill. SENATOR DUNBAR stated that there have been issues in several industries, including automotive, where companies limit repairs to happen only at the companies' shops. Since airbags fall under federal safety rules he asked if manufacturers require their own branded airbags and installers and if there are consumer protections that allow independent shops or generic replacements to help keep costs down. 2:47:12 PM SENATOR CLAMAN responded he was not certain since that is market question, like Ford selling an oil filter but a person can buy a compatible one at an auto parts store with the same specifications Ford claims its filter is better consumers but most convenient and affordable. He stated that he's not sure how that works with airbags, but SB 17 highlights the risk of someone producing fake airbags that don't meet federal safety standards. He said Mr. Orlan from Honda is on the line and could possibly answer that question. 2:48:21 PM SENATOR DUNBAR stated that the State of Alaska is using the state's police power, ability, and criminal law to enforce safety regulations. He asked if the state is sort of unwittingly a monopoly power in the airbag market. 2:48:50 PM CRAIG ORLAN, Director, American Honda Motor Company, Washington D.C, answered questions and testified by invitation on SB 17. He stated that the auto industry already shares tools and diagnostics with independent parts makers and repair shops, supporting aftermarket repairs. This model is often cited by right-to-repair advocates. He said there's currently no generic airbag market, not due to legal barriers, but because airbags are costly, low-margin, high-liability products with low replacement volume. SB 17 doesn't change the cost or legality. Anyone can legally make airbags that meet federal safety standards. He stated that SB 17 targets bad actors intentionally selling fake airbags filled with debris like T-shirts, not real safety equipment. 2:51:46 PM CRAIG ORLAN stated that counterfeit, non-functional airbags are a serious threat everywhere. This isn't an issue with the legitimate auto supply chain, it's others installing fake airbags after accidents. The fake airbags have included sawdust, rags, and even explosive devices. He said there was a case in L.A. where the airbags were so dangerous the airbags had to be detonated by the bomb squad. A Wall Street Journal investigation linked these counterfeits to injuries and deaths nationwide. He said in Florida, a repair shop owner was charged for installing over 350 fake airbags. He stated that most of these products come from overseas, especially China. While federal agencies like Customs and Border Patrol and the FBI are supportive, they're limited in what the federal agencies can do since most fakes don't violate federal laws. State laws fill the gap allowing better enforcement, helping e-commerce platforms crack down, and stopping dangerous products before the airbags reach cars. He stated that SB 17 has support from automakers, repair shops, law enforcement, insurers, and consumers. Similar laws have passed in 38 states with bipartisan backing and no public opposition. 2:54:52 PM CHAIR BJORKMAN asked the reason why SB 17 excludes those who work on vehicles solely for law enforcement purposes. He said SB 17 includes a clause that exempts people who didn't know the airbag was counterfeit or defective and asked what stops someone from claiming ignorance to avoid liability. 2:55:29 PM SENATOR CLAMAN stated he will answer the second question. He said the intent SB 17 is to avoid creating a duty to inspect for fraudulent airbags. If someone unknowingly buys and drives a car with a fake airbag, then later sells the airbag to a dealer who also doesn't know, neither is criminally liable. It's about not punishing those with no knowledge. He stated that criminal liability requires knowledge though civil liability could still apply, SB 17 doesn't address it. 2:56:59 PM CRAIG ORLAN stated that the exemption for police vehicles was added based on law enforcement feedback. Some modificationslike removing airbags for barriers or performing PIT maneuversare necessary for their operations. He said these vehicles don't enter the consumer market, and the intent is to avoid unintentionally affecting law enforcement while targeting consumer safety. 2:58:25 PM CHAIR BJORKMAN held SB 17 in committee.