RELATING TO MOTOR VEHICLES.

SB1119

THE SENATE

S.B. NO.

1119

THIRTY-THIRD LEGISLATURE, 2025

STATE OF HAWAII

A BILL FOR AN ACT

RELATING
TO MOTOR VEHICLES
.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

����
SECTION 1.
�
Chapter 437,
Hawaii Revised Statutes, is amended by adding a new section to be appropriately
designated and to read as follows:

����
"
�
437-
�
Remote transmission to vehicle.
�
(a)
�

After the date of sale of a motor vehicle by a dealer to a retail consumer,
the manufacturer may sell to the retail
consumer
,
or activate for a fee, a permanent or temporary motor vehicle accessory,
option, add-on, feature, improvement, or upgrade for a motor vehicle of a
line-make manufactured, imported, or distributed by the manufacturer; provided that
the accessory, option, add-on, feature, improvement, or upgrade is activated or
installed directly on the retail consumer's motor vehicle through remote
electronic transmission; provided further that if the motor vehicle was sold or
leased as new by a franchised new motor vehicle dealer in this State within the
five-year period preceding the remote electronic transmission, the manufacturer
or distributor shall pay the franchised new motor vehicle dealer a minimum of
twenty-five per cent of the gross revenue received by the manufacturer,
distributor, agent, or common entity for the sale, activation, and renewal during
the five-year period.
�
The manufacturer
or distributor shall provide each of its franchised dealers a quarterly
statement of the revenue received by the manufacturer during that quarter for
remote sales or activations and renewals relating to those vehicles sold or
leased by the dealer during the five-year period subsequent to the sale or
lease of the vehicle to the retail consumer.

����
(b)
�

When providing a new motor vehicle to a dealer for offer or sale to the
public, it shall be unlawful for the manufacturer or distributor to fail to
provide to the dealer a written disclosure that shall be provided to a
potential buyer of the new motor vehicle listing each accessory or function of
the vehicle that may be activated, updated, changed, or maintained by the
manufacturer through over the air or remote means, and the charge to the consumer
for activation, update, change, or maintenance.
�

A manufacturer may comply with this section by notifying the dealer that
the information is available on a website or by other digital means.
"

����
SECTION

2
.
�
Section
437-1.1, Hawaii Revised Statutes, is amended as follows:

����
1.
�
By adding a new definition to be
appropriately inserted and to read:

����
"
"Common
entity" means a person who:

����
(1)
�
I
s directly or indirectly
controlled by or has more than ten per cent of its equity interest directly or
indirectly owned, beneficially or of record, through any form of ownership
structure, by a manufacturer;

����
(2)
�
Has more than ten per cent of its
equity interest directly or indirectly controlled or owned, beneficially or of
record, through any form of ownership structure, by one or more persons who
also directly or indirectly control or own, beneficially or of record, more
than thirty per cent of the equity interest of a manufacturer; or

����
(3)
�
Is affiliated by joint venture,
agreement or otherwise, with a manufacturer, except for a distributor of the
manufacturer's motor vehicles.
"

����
2.
�
By amending the definition of
"distributor" to read:

����
"
"Distributor"
means any person, resident, or nonresident, [
including
]
independent
from
a manufacturer, who in whole or in part imports, offers for sale,
sells, or distributes
the manufacturer's
new motor vehicles to dealers[
.
]

pursuant to an agreement with the manufacturer.
"

����
3.
�
By amending the definition of
"franchise" or "franchise agreement" to read:

����
"
"Franchise"
or "franchise agreement" means any contract or agreement between a
duly
licensed new motor vehicle
dealer and a
duly licensed
manufacturer
or distributor that authorizes the dealer to engage in the business of selling
or purchasing any particular make or makes of new motor vehicles or motor
vehicle parts manufactured or distributed by the manufacturer or distributor,
or that establishes rights or obligations, or both, relating to the dealer's
new motor vehicle operation, including agreements relating to dealership
facilities or site control."

����
4.
�
By amending the definition of
"sale" or "selling" to read:

����
"
"Sale",
"selling", and equivalent expressions, mean the act or attempted act,
either as principal or an agent or in any capacity whatsoever, of selling,
bartering, exchanging,
leasing,
or otherwise disposing of, or
negotiating, or offering, or attempting to negotiate the sale, purchase,
lease,

or exchange of, or interest in, a motor vehicle, including an option to
purchase a motor vehicle[
.
]
, which may involve the following:

����
(1)
�
Accepting a deposit or receiving a
payment for the retail purchase, lease, or other use of a motor vehicle, but
does not include facilitating a motor vehicle dealer's acceptance of a deposit
or receipt of a payment from a consumer or receiving payment under a retail
installment sale contract;

����
(2)
�
Accepting a reservation from a
retail consumer for a specific motor vehicle identified by a vehicle
identification number or other product identifier;

����
(3)
�
Setting the retail price for the
purchase, lease, or other use of a motor vehicle, but does not include setting
a manufacturer's suggested retail price;

����
(4)
�
Offering or negotiating with a
retail consumer terms for the purchase, lease, or other use of a motor vehicle;

����
(5)
�
Offering or negotiating with a
retail consumer a value for a motor vehicle being traded in as part of the
purchase, lease, or other use of a motor vehicle, but does not include a
website or other means of electronic communication that identifies to a consumer
a conditional trade-in value and that contains language informing the consumer
that the trade-in value is not binding on any motor vehicle dealer;

����
(6)
�
Any transaction where the title of a
motor vehicle or a used motor vehicle is transferred to a retail consumer;

����
(7)
�
Any retail lease transaction where a
retail consumer leases a vehicle for a period of not less than twelve months,
but does not include administering lease agreements, taking assignments of
leases, performing required actions pursuant to the leases, or receiving
payments under a lease agreement that was originated by a motor vehicle dealer;

����
(8)
�
Displaying sample vehicles or
offering or coordinating test drives to customers;

����
(9)
�
Arranging the pickup or delivery of
a newly purchased new motor vehicle; or

���
(10)
�
Compensating salespersons,
employees, agents, or contractors to engage in the activities identified in
paragraphs (1) through (9).
"

����
SECTION

3
.
�
Section 437-28,
Hawaii Revised Statutes, is amended by amending subsection (a) to read as
follows:

����
"(a)
�
In addition to any other actions authorized
by law, the board, after notice and hearing as provided in chapter 91, and
subject to appeal to the circuit court of the circuit in which the board has
jurisdiction under the procedure and rules prescribed by the laws of the State
or the applicable rules of the courts pertaining to appeals to circuit courts,
may suspend, revoke, fine, or deny the renewal of any license, or prior to
notice and hearing deny the issuance of any license for any cause authorized by
law, including but not limited to circumstances where the board finds that the
applicant or holder, or any officer, director, general manager, trustee,
partner, or stockholder owning more than ten per cent interest of the applicant
or holder:

����
(1)
�
Has intentionally made a false
statement of a material fact in the application for a license or in any other
statement required by this chapter or has obtained or attempted to obtain a
license by fraud or misrepresentation;

����
(2)
�
Has failed to comply with, observe, or
adhere to any provision of this chapter or any other law relating to the sale,
taxing, or licensing of motor vehicles or any rule or order made pursuant to
this chapter;

����
(3)
�
Has committed a fraudulent act in
selling, purchasing, or otherwise dealing in motor vehicles or has
misrepresented the terms and conditions of a sale, purchase, or contract for
sale or purchase of a motor vehicle or any interest therein including an option
to purchase motor vehicles;

����
(4)
�
Has engaged in business under a past or
present license issued pursuant to this chapter, in a manner as to cause injury
to the public or to those with whom one is dealing;

����
(5)
�
Has failed to comply with, observe, or
adhere to any law in any other respect so that the board deems the applicant or
holder to be an unfit or improper person to hold a license;

����
(6)
�
Has failed to meet or maintain the
conditions and requirements necessary to qualify for the issuance of a license;

����
(7)
�
Is insolvent, has filed or is the
subject of a petition for bankruptcy, wage earner's plan, or financial
reorganization plan, or has made or proposes to make an assignment for benefit
of creditors;

����
(8)
�
Is not at least eighteen years of age,
or in the case of a partnership applicant or holder of a license, if any
general or limited partner is not at least eighteen years of age;

����
(9)
�
Has charged more than the legal rate of
interest on the sale, purchase, or attempted sale or purchase, or in arranging
the sale or purchase of a motor vehicle or any interest therein including an
option to purchase;

���
(10)
�
Has violated any law pertaining to
false advertising or to credit sales in the offering, soliciting, selling,
purchasing, or arranging to sell or purchase a motor vehicle or any interest
therein;

���
(11)
�
Has wilfully failed or refused to
perform any unequivocal and indisputable obligation under any written agreement
involving the sale or purchase of a motor vehicle or any interest therein,
including an option to purchase;

���
(12)
�
Has been denied the issuance of a
license under this chapter for substantial culpable cause or has had a license
issued under this chapter suspended, revoked, or the renewal thereof denied for
substantial culpable cause;

���
(13)
�
Has entered, has attempted to enter, or
proposes to enter into any contract or agreement contrary to this chapter or
any rule adopted thereunder;

���
(14)
�
Has been, is engaged, or proposes to
engage in the business of selling new motor vehicles as a dealer or auction
without a proper franchise therefor;

���
(15)
�
Has at any time employed, utilized, or
attempted or proposed to employ or utilize any person not licensed under this
chapter who is required to be so licensed;

���
(16)
�
Has entered or attempted to enter any
one-payment contract where the contract is required to be signed by the
purchaser prior to removal of the motor vehicle for test driving from the
seller's premises;

���
(17)
�
Is a salesperson or dealer and:

���������
(A)
�
Has required a purchaser of a motor
vehicle as a condition of sale and delivery, to purchase special features,
appliances, accessories, or equipment not desired or requested by the
purchaser; provided that this prohibition shall not apply as to special features,
appliances, accessories, or equipment which are ordinarily installed on the
vehicle when received or acquired by the dealer;

���������
(B)
�
Has represented and sold as an unused
motor vehicle any motor vehicle which has been leased or operated as a
demonstrator or U-drive motor vehicle;

���������
(C)
�
Has sold a new motor vehicle without
providing or securing for the purchaser the standard factory new car warranty
for the vehicle unless the dealer or salesperson clearly notes in writing on
the sales contract that the new motor vehicle is sold without the standard
factory warranty;

���������
(D)
�
Has sold a new motor vehicle covered by
a standard factory warranty without informing the purchaser in writing that any
repairs or other work necessary on any accessories [
which
]
that

were not installed by the manufacturer of the vehicle may not be obtainable in
a geographic location other than where the purchase occurred; provided that the
notice required by this section shall conform to the plain language
requirements of section 487A-1, regardless of the dollar amount of the
transaction;

���������
(E)
�
Has engaged in any improper business
conduct, including but not limited to employing, contracting with, or
compensating consumer consultants; or

���������
(F)
�
Has sold or leased a new or used motor
vehicle, other than at auction, without written documentation upon which the
salesperson or dealer shall appropriately indicate the type of sale, which both
the customer and salesperson or dealer shall place their initials in the
designated spaces prior to the signing of the contract of sale or lease and
that contains the following provision printed legibly in at least fourteen
point bold typeface:

"This (IS) (IS NOT) a door-to-door
sale.
�
There (IS A) (IS NO) 3-DAY RIGHT
TO CANCEL on this purchase.

____
Customer's Initials
�����
____ Salesperson's

�������������������������������������
�
or Dealer's Initials";

���
(18)
�
Is an applicant or holder of a
new
motor vehicle
dealer's license and:

���������
(A)
�
Has sold or proposed to sell new motor
vehicles without providing for the maintenance of a reasonable inventory of
parts for new vehicles or without providing and maintaining adequate repair
facilities and personnel for new vehicles at either the main licensed premises
or at any branch location;

���������
(B)
�
Has employed or proposed to employ any
salesperson who is not duly licensed under this chapter; [
or
]

���������
(C)
�
Has sold or proposed to sell new motor
vehicles without being franchised therefor;
or

���������
(D)
�
Is a manufacturer that has a
franchise agreement in effect with a new motor vehicle dealer in the State, is
a common entity of the manufacturer, or is otherwise not an independent person
or entity from the manufacturer or common entity as described in this
subparagraph;

���
(19)
�
Is an applicant or holder of an auction's
license and has sold or proposed to sell new motor vehicles without being
franchised therefor; or

���
(20)
�
Is an applicant for a salesperson's
license and:

���������
(A)
�
Does not intend to be employed as a
salesperson for a licensed motor vehicle dealer; or

���������
(B)
�
Intends to be employed as a salesperson
for more than one dealer;

���
(21)
�
Being a manufacturer or distributor[
:
]

that:

���������
(A)
�
Has required any dealer in the State to
enter into any agreement with the manufacturer or distributor or any other
party, to perform any act not required by or to refrain from performing any act
not contrary to the reasonable requirements of the franchise agreement with the
dealer, by threatening to cancel the franchise agreement or by threatening to
refuse, at the expiration of the current franchise agreement, to enter into a
new franchise agreement with the dealer;

���������
(B)
�
Has required any dealer in the State to
enter into any agreement with the manufacturer or distributor or any other
party, to perform any act not required by or to refrain from performing any act
not contrary to the reasonable requirements of the franchise agreement with the
dealer, by awarding or threatening to award a franchise to another person for
the sale of the same make of any motor vehicle in the relevant market area of a
dealer;

���������
(C)
�
Has canceled or failed to renew the
franchise agreement of any dealer in the State without good faith, as defined
herein.
�
As used in this subparagraph,
"good faith" means the duty of each party to any franchise agreement
to fully comply with that agreement, or to act in a fair and equitable manner
towards each other;

���������
(D)
�
Has delayed delivery of or refused to
deliver without cause, any new motor vehicle to a dealer, franchised to sell
the new motor vehicle, within a reasonable time after receipt of a written
order for the vehicle from the dealer.
�

The delivery to another dealer of a motor vehicle of the same model and
similarly equipped as the vehicle ordered by a dealer who has not received
delivery thereof, but who had placed the written order for the vehicle prior to
the order of the dealer receiving the vehicle, shall be prima facie evidence of
a delayed delivery of, or refusal to deliver, a new motor vehicle without
cause.
�
The nondelivery of a new motor
vehicle to a dealer within sixty days after receipt of a written order for the
vehicle from a dealer shall also be prima facie evidence of delayed delivery
of, or refusal to deliver, a new motor vehicle without cause; provided that the
delayed delivery of, or refusal to deliver, a motor vehicle shall be deemed
with cause if the manufacturer establishes that the delay or refusal to deliver
is due to a shortage or curtailment of material, labor, transportation, utility
service, labor or production difficulty, or other similar cause beyond the
reasonable control of the manufacturer;

���������
(E)
�
Has discriminated against any of their
franchised dealers in the State by directly or indirectly charging the dealer
more for a new motor vehicle or services, parts, or accessories or a higher
rate of transportation for transporting the vehicle from the manufacturing or
assembly plant to the dealer or any portion of the distance, than is charged to
any other of their franchised dealers in the State for the same make, model,
and year of a new motor vehicle or for the same devices, parts, or accessories
for the similar transportation for the vehicle during the same period.
�
A manufacturer or distributor who provides or
causes to be provided greater transportation benefits for a new motor vehicle
as aforesaid to any of their franchised dealers in the State than is provided
to any of their competing franchised dealers in the State for the same or
lesser price or charge than that imposed upon the franchised dealer in the
State during the same period is deemed to have so discriminated against the
competing franchised dealer in the State.
�

Evidence of similar discriminatory practice against franchised dealers
in other states shall not constitute a defense to or justification of the
commission of the discriminatory act against the franchised dealer in the
State.
�
The intent and purpose of this
subparagraph is to eliminate inequitable pricing policies set by manufacturers
or distributors which result in higher prices of new motor vehicles to the
consumer in the State.
�
This subparagraph
shall be liberally interpreted to effect its intent and purpose and in the
application thereof, the substance and effect and not the form of the acts and
transactions shall be primarily considered in determining whether a
discriminatory act has been committed.
�

Nothing contained in this subparagraph shall prohibit establishing
delivered prices or destination charges to dealers in the State which
reasonably reflect the seller's total transportation costs incurred in the
manufacture or delivery of products to the dealers, including costs that are
related to the geographical distances and modes of transportation involved in
shipments to this State, or which meet those lower prices established by
competitors;

���������
(F)
�
Has required a dealer of new motor
vehicles in the State as a condition of sale and delivery of new motor vehicles
to purchase special features, appliances, accessories, or equipment not desired
or requested by the dealer; provided that this prohibition shall not apply to
special features, appliances, accessories, or equipment, except heaters, that
are regularly installed on that particular model or new motor vehicles as
"standard" equipment or to special features, appliances, accessories,
or equipment that are an integral part of the new motor vehicles and cannot be
removed therefrom without substantial expense.
�

Nothing in this subparagraph shall make it unlawful for a dealer to sell
a vehicle that includes a heater that has been installed as standard equipment;

��������
[
(G)
�
Has failed to adequately and fairly
compensate its dealers for labor incurred by the dealer to perform under and
comply with manufacturer's warranty agreements. In no event shall any
manufacturer or distributor pay its dealers a labor rate per hour for warranty
work that is less than that charged by the dealer to the retail customers of
the dealer nor shall the rates be more than the retail rates.
�
All claims made by the dealers for
compensation for delivery, preparation, and warranty work shall be paid within
thirty days after approval and shall be approved or disapproved within thirty
days after receipt.
�
When any claim is
disapproved, the dealer shall be notified in writing of the grounds for
disapproval;

��������
(H)
]
�
(G)
�

Has wilfully failed to affix the vehicle bumper impact notice
pursuant to section 437‑4.5(a), or wilfully misstated any information in
the notice.
�
Each failure or misstatement
is a separate offense;

�������
[
(I)
]
�
(H)
�

Has wilfully defaced, or removed the vehicle bumper impact notice
required by section 437‑4.5(a) prior to delivery of the vehicle to which
the notice is required to be affixed to the registered owner or lessee.
�
Each wilful defacement, alteration, or
removal is a separate offense; [
or
]

�������
[
(J)
]
�
(I)
�

Has required a dealer to refrain from participation in the
management of, investment in, or the acquisition of, any other line of new
motor vehicle or related products; provided that the new motor vehicle dealer
maintains a reasonable line of credit consistent with the requirements of
section 437-7(d)(1) for each make or line of new motor vehicle, remains in
compliance with reasonable facilities and other franchise requirements of the
manufacturer or distributor, and makes no unauthorized change in the principal
management of the dealer[
.
]
;

���������
(J)
�
As a manufacturer, has
competed
with a new motor vehicle dealer operating under a franchise agreement from the
manufacturer or from a distributor of the manufacturer through the ownership, operation,
or control, or participation therein, of any new motor vehicle dealer in this
State; provided that manufacturer or distributor shall not be deemed to be
competing under this subparagraph if the ownership, operation, or control is
either:

�������������
(i)
�
Temporary for a period not to exceed
one year, which may be extended once for an additional period of up to six
months upon application to, and approval by, the board, which shall be subject
to the manufacturer or distributor demonstrating the need for the extension; provided
further that all other new motor vehicle dealers of the same line or make shall
be given notice and an opportunity to be heard in connection with the
application; or

������������
(ii)
�
In a bona fide relationship where an
independent person has made a significant investment subject to loss in the
dealership and can reasonably expect to acquire full ownership of the
dealership on reasonable terms and within a reasonable time; or

���������
(K)
�
As a manufacturer, has competed with
a new motor vehicle dealer by selling, directly or indirectly, motor vehicles
to any retail consumer in the State, except through an independent new motor
vehicle dealer holding a franchise for the line or make that includes the motor
vehicle; provided that this subparagraph shall not preclude a manufacturer
from:

�������������
(i)
�
Selling new vehicles to its
employees or family members of employees, retirees or family members of
retirees, nonprofit organizations, or federal, state, or local governments;

������������
(ii)
�
Providing information to a consumer
for marketing purposes; or

�����������
(iii)
�
Displaying vehicles or allowing test
drives for promotional purposes at events where the manufacturer is a sponsor
and the vehicles are not for sale to the public at the event.
"

����
SECTION

4
.
�
Section
437-28.5, Hawaii Revised Statutes, is amended by amending subsections (a)
through (c) to read as follows:

����
"(a)
�
The same procedures, protections, rights, and
remedies provided to a dealer under section 437-3.6, section 437‑28(a)(21),
and part II shall apply to a distributor [
that is not a manufacturer
].

����
(b)
�
Notwithstanding the terms, provisions, or
conditions of any dealer or distributor agreement, franchise, or waiver
,

and notwithstanding any other legal or administrative remedies available,
and
following any dispute resolution process agreed to by the parties or required
by law,
any person who is licensed under this chapter and whose business or
property is injured by a violation of section 437-28[
(a)(21)
] or part II
may [
bring
]
:

����
(1)
�
Bring a protest before the board for
a determination of rights, to enjoin further violations and assess penalties as
permitted by the board; or

����
(2)
�
Bring a civil action in a court of
competent jurisdiction in the State to enjoin further violations and to recover
any damages together with the costs of the suit; provided that the laws of the
State of Hawaii shall apply to any action initiated under this subsection.

����
(c)
�
Any person that brings or defends against
a
protest or
a civil action under subsection (b) may be entitled to recover
reasonable attorneys' fees as a part of any
determination,
damages
,

or injunction; provided that the person substantially prevails in establishing
or defending against a violation of section 437‑28[
(a)(21)
] or
part II."

����
SECTION

5
.
�
Section 437-52,
Hawaii Revised Statutes, is amended by amending subsection (a) to read as
follows:

����
"(a)
�
A manufacturer or distributor shall not:

����
(1)
�
Require any dealer in the State to
enter into any agreement with the manufacturer or distributor or any other
party that requires the law of another jurisdiction to apply to any dispute
between the dealer and manufacturer or distributor, or requires that the dealer
bring an action against the manufacturer or distributor in a venue outside of
Hawaii, or requires the dealer to agree to arbitration or waive its rights to
bring a cause of action against the manufacturer or distributor, unless done in
connection with a settlement agreement to resolve a matter or pending dispute between
a manufacturer or distributor, or officer, agent, or other representative
thereof, and the dealer; provided that such agreement has been entered
voluntarily for adequate and valuable consideration; and provided further that
the renewal or continuation of a franchise agreement shall not by itself
constitute adequate and valuable consideration;

����
(2)
�
Require any dealer in the State to
enter into any agreement with the manufacturer or distributor or any other
party, to prospectively assent to a release, assignment, novation, waiver, or
estoppel, which instrument or document operates, or is intended by the
applicant or licensee to operate, to relieve any person from any liability or
obligation of this chapter, unless done in connection with a settlement
agreement to resolve a matter or pending dispute between a manufacturer or
distributor, or officer, agent, or other representative thereof, and the
dealer; provided that [
such
]
the
agreement has been entered
voluntarily for adequate and valuable consideration; and provided further that
the renewal or continuation of a franchise agreement shall not by itself
constitute adequate and valuable consideration;

����
(3)
�
Cancel or fail to renew the franchise
agreement of any dealer in the State without providing notice, and without good
cause and good faith, as provided in section 437-58;

����
(4)
�
Refuse or fail to offer an incentive
program, bonus payment, holdback margin, or any other mechanism that
effectively lowers the net cost of a vehicle to any franchised dealer in the
State if the incentive, bonus, or holdback is made to one or more same line
make dealers in the State;

����
(5)
�
Unreasonably prevent or refuse to
approve the relocation of a dealership to another site within the dealer's
relevant market area.
�
The dealer shall
provide the manufacturer or distributor with notice of the proposed address and
a reasonable site plan of the proposed location.
�
The manufacturer or distributor shall approve
or deny the request in writing no later than sixty days after receipt of the
request.
�
Failure to deny the request
within sixty days constitutes approval;

����
(6)
�
Require a dealer to construct,
renovate, or make substantial alterations to the dealer's facilities unless the
manufacturer or distributor can demonstrate that [
such
]
the

construction, renovation, or alteration requirements are reasonable and
justifiable based on reasonable business consideration, including current and
reasonably foreseeable projections of economic conditions existing in the
automotive industry at the time [
such
]
the
action would be
required of the dealer, and agrees to make a good faith effort to make
available, at the dealer's option, a reasonable quantity and mix of new motor
vehicles, which, after a reasonable analysis of market conditions, are
projected to meet the sales level necessary to support the increased overhead
incurred by the dealer as a result of the required construction, renovation, or
alteration; provided that a dealer may be required by a manufacturer or
distributor to make reasonable facility improvements and technological upgrades
necessary to support the technology of the manufacturer's or distributor's
vehicles.
�
If the dealer chooses not to
make [
such
] facility improvements or technological upgrades, the
manufacturer or distributor shall not be obligated to provide the dealer with
the vehicles which require the improvements or upgrades or any corresponding
incentives or benefits.
�
A manufacturer
or distributor may not require a dealer to construct, renovate, or make
substantial alterations to the dealer's facility if the dealer has completed a
construction, renovation, or substantial alteration to the same component of
the facility that was required and approved by the manufacturer or distributor
within the previous ten years.
�
For
purposes of this paragraph, a "substantial alteration" means an
alteration that has a major impact on the architectural features,
characteristics, appearance, or integrity of a structure or lot.
�
The term "substantial alteration"
does not include routine maintenance, such as painting and repairs reasonably
necessary to maintain a dealership facility in attractive condition, or any
changes to items protected by federal intellectual property rights.
�
If a dealer has completed facility
construction, renovation, or substantial alteration under an incentive program,
the manufacturer or distributor may not deny a dealer payment or benefits
according to the terms of that program in place when the dealer began to
perform under the program.
�
If the
incentive program under which the dealer completed a facility construction,
renovation, or substantial alteration on or after January 1, 2016, does not
contain a specific time period during which the manufacturer or distributor
must provide payments or benefits to a dealer, then the manufacturer or
distributor may not deny the dealer payment or benefits under the terms of that
incentive program, as it existed when the dealer began to perform under the
program for the balance of ten years after the manufacturer or distributor made
the program available to the dealer, regardless of whether the manufacturer's
or distributor's facility program has been changed or canceled.
�
This paragraph shall not be construed to
require a manufacturer or distributor to provide payment or benefits if changes
have been made to the facility since the manufacturer's or distributor's
approval that would render the facility non-compliant, regardless of whether
the manufacturer's or distributor's image program has changed.
�
Facility changes that are necessitated due to
damage sustained from a natural disaster or as a result of necessary safety
upgrades shall not be considered a change to the facility that renders the
facility non-compliant; provided that those facility changes substantially
restore the facilities to the previous or current compliant state.
�
Eligibility for facility-related incentives
under this paragraph shall not apply to:

���������
(A)
�
Lump sum payments for the cost of the
facility upgrade;

���������
(B)
�
Payments on a per vehicle basis; and

���������
(C)
�
Any facility-related incentive program
in effect with one or more dealers in the State on July 1, 2018.

���������
Nothing
in this paragraph shall be construed to allow a franchised motor vehicle dealer
to impair or eliminate a manufacturer's or distributor's intellectual property
or trademark rights and trade dress usage guidelines; impair other intellectual
property interests owned or controlled by the manufacturer or distributor,
including the design and use of signs; or refuse to change the design or branding
of any signage or other branded items required by a manufacturer or distributor
at any time, if the manufacturer or distributor requires those changes of all
of its franchised dealers nationally;

����
(7)
�
Require the dealer to establish or
maintain an exclusive showroom or facility unless justified by current and
reasonably expected future economic conditions existing in the dealer's market
and the automobile industry at the time the request for an exclusive showroom
or facility is made; provided that the foregoing shall not restrict the terms
and conditions of any agreement for which the dealer has voluntarily accepted
separate and valuable consideration;

����
(8)
�
Condition the award of an additional
franchise on the dealer entering a site control agreement or the dealer waiving
its rights to protest the manufacturer's or distributor's award of an
additional franchise within the dealer's relevant market area; provided that
the foregoing shall not restrict the terms and conditions of any agreement for
which the dealer has voluntarily accepted separate and valuable consideration;

����
(9)
�
Require a dealer or the dealer's
employees to attend a training program that does not relate directly to the
sales or service of a new motor vehicle in the line make of that sold or
serviced, or both, by the dealer;

���
(10)
�
Require a dealer to pay all or part of
the cost of an advertising campaign or contest, or purchase any promotional
materials, showroom, or other display decorations or materials at the expense
of the dealer without the consent of the dealer, which consent shall not be
unreasonably withheld;

���
(11)
�
Implement or establish a customer
satisfaction index or other system measuring a customer's degree of
satisfaction with a dealer as a sale or service provider unless [
any such
]

the
system is designed and implemented in [
such
] a way that is
fair and equitable to both the manufacturer and the dealer.
�
In any dispute between a manufacturer,
distributor, and a dealer, the party claiming the benefit of the system as
justification for acts in relation to the franchise shall have the burden of
demonstrating the fairness and equity of the system� both in design and
implementation in relation to the pending dispute.
�
Upon request of any dealer, a manufacturer or
distributor shall disclose in writing to [
such
]
the
dealer a
description of how that system is designed and applied to [
such
]
the

dealer;

���
(12)
�
Implement or establish an unreasonable,
arbitrary, or unfair sales or service performance standard in determining a
dealer's compliance with a franchise agreement.
�

If the sales or service performance standard is to be used as the basis
for a termination of a dealer, then the performance standard shall be deemed
unreasonable, arbitrary, or unfair if the standard does not include material
and relevant local market factors, including but not limited to the geography
of the dealer's assigned territory as set forth in the franchise agreement,
market demographics, change in population, product popularity, number of
competitor dealers, and consumer travel patterns;

���
(13)
�
Implement or establish a system of
motor vehicle allocation or distribution to one or more of its dealers that is
unfair, inequitable, or unreasonably discriminatory.
�
As used in this paragraph, "unfair"
includes without limitation, requiring a dealer to accept new vehicles not
ordered by the dealer or the refusal or failure to offer to any dealer all
models offered to its other same line make dealers in the State.
�
The failure to deliver any motor vehicle
shall not be considered a violation of this section if [
such
]
the

failure is due to an act of God, work stoppage, or delay caused by a strike or
labor difficulty, shortage of products or materials, freight delays, embargo,
or other causes of which the motor vehicle franchisor shall have no control.
�
Notwithstanding the foregoing, a dealer may
be required by a manufacturer or distributor to make reasonable facility
improvements and technological upgrades necessary to support the technology of
the manufacturer's or distributor's vehicles.
�

If the dealer chooses not to make [
such
]
the
facility
improvements or technological upgrades, the manufacturer or distributor shall
not be obligated to provide the dealer with the vehicles which require the
improvements or upgrades; [
or
]

���
(14)
�
Require a dealer that is constructing,
renovating, or substantially altering its dealership facility to purchase
goods, building materials, or services for the dealership facility, including
but not limited to office furniture, design features, flooring, and wall
coverings, from a vendor chosen by the manufacturer or distributor if:
�
goods, building materials, or services of a
substantially similar appearance, function, design, and quality are available
from other sources; and the franchised motor vehicle dealer has received the
manufacturer's or distributor's approval; provided that this approval shall not
be unreasonably withheld or unreasonably delayed.
�
In the event that a manufacturer or
distributor does not approve the dealer's use of substantially similar goods,
building materials, or services, the manufacturer or distributor shall provide
the dealer, in writing at the time of disapproval, a detailed list of reasons
why the proposed substantially similar items are not acceptable.
�
Nothing in this paragraph shall be construed
to allow a franchised motor vehicle dealer to impair or eliminate a
manufacturer's or distributor's intellectual property or trademark rights and
trade dress usage guidelines or impair other intellectual property interests
owned or controlled by the manufacturer or distributor, including the design
and use of signs[
.
]
; or

���
(15)
�
Require a new motor vehicle dealer
to purchase or lease any electric vehicle charging station, or any other
equipment to power or fuel a vehicle, at the dealer's expense unless the
equipment is necessary based upon a reasonable estimate of the sales and
service volume expected by the dealer during the following three-year period.
�
It shall be considered unreasonable to
require a dealer to make the equipment at the dealership available to the
general public.
�
Notwithstanding the
terms or conditions of any franchise or other agreement, policy, or incentive
program, it shall be unlawful for any manufacturer or distributor to require
that any of its dealers in the State purchase or lease any diagnostic equipment
or tool for the maintenance, servicing, or repair of vehicles if the dealer has
other diagnostic equipment or tools available for servicing another brand or
line make of vehicle manufactured or distributed by that manufacturer or
distributor that can perform the work to the standards required by, and that
have been approved by, the applicable manufacturer or distributor; provided
that approval by the manufacturer or distributor shall not be unreasonably
withheld.
�
Nothing in this paragraph
shall prohibit a manufacturer or distributor from establishing an incentive
program for its dealers within the State that provides financial assistance to
dealers that purchase or install diagnostic equipment; provided that the
incentive compensation paid to the dealer for the dealer's purchase or lease
and installation of the equipment is reasonable and the amount is paid in a
lump sum related specifically to the cost of the equipment.
"

����
SECTION

6
.
�
Section 437-53,
Hawaii Revised Statutes, is amended to read as follows:

����
"[
[
]�
437-53[
]
]
�
Sale, assignment, or transfer of franchise to
qualified purchaser.
�
(a)
�
A
manufacturer or distributor shall not unreasonably withhold consent to the sale,
assignment, or transfer of the franchise to a qualified purchaser capable of
being licensed as a dealer.

����
(b)
�
The dealer shall notify the manufacturer or distributor,
in writing, of its desire to sell, assign, or transfer its franchise and identify
the proposed transferee's name, address, financial qualifications, and business
experience.
�
Along with [
such
]
the

notice, the dealer shall also provide the manufacturer or distributor with completed
application forms and related information generally used by the manufacturer or
distributor to conduct its review of [
such
] a proposal, and a copy of all
agreements regarding the proposed sale, assignment, or transfer.
�
The manufacturer or distributor shall, within
thirty days of receipt of the application and all supporting documentation as specified
therein, review the application and identify in writing the additional information,
data, or documents, if any, needed by the manufacturer or distributor to complete
its review.
�
If the manufacturer or distributor
does not reject the application within sixty days of receipt of the completed application
and all supporting documentation or within sixty days of receipt of any additional
information, data, or documents timely requested by the manufacturer or distributor,
the application shall be considered approved, unless the sixty-day deadline is extended
by mutual agreement of the manufacturer or distributor and the dealer.

����
(c)
�
If a manufacturer or distributor denies a dealer's
proposed sale, assignment, or transfer of the franchise, the dealer may file a
petition in the manner prescribed in section 437-51, within sixty days of the notice
of denial.
�
The manufacturer or distributor
shall have the burden of proof to demonstrate at a hearing pursuant to a timely
filed complaint that the proposed transferee [
is not of good moral character
or does
]
:

����
(1)
�
Has been convicted of a felony or a
crime of fraud, deceit, or moral turpitude;

����
(2)
�
Does
not meet the written, reasonable,
and uniformly applied business standards or qualifications of the manufacturer relating
to the financial qualifications of the transferee and business experience of the
transferee or the transferee's executive management[
.
]
; or

����
(3)
�
Is not willing to be bound by the
existing terms of the franchise agreement by which the dealer is bound;
provided that the manufacturer or distributor shall not condition the transfer
of a franchise agreement upon site control or an agreement to renovate or make
substantial improvements to a facility; provided further that voluntary and
noncoerced acceptance of the condition by the transferee in writing, including
but not limited to a written agreement for which the transferee has accepted
separate and valuable consideration, shall not constitute a violation.

����
(d)
�
This section shall not apply to a dealer or
an officer, partner, or stockholder of a dealership that sells or transfers a
partial interest to another officer, partner, stockholder, spouse, child,
grandchild, parent, sibling, or a general manager, or other employee with
significant and varied managerial experience for a dealer, within five years of
entering into a franchise agreement; provided that a dealer, officer, partner,
or stockholder shall not have the right to sell or transfer a partial interest,
or a right thereunder, without the consent of the manufacturer or distributor,
except that the consent may be denied only if the proposed transferee has been
convicted of a felony or a crime of fraud, deceit, or moral turpitude.
�
The manufacturer or distributor shall not
condition consent upon a change in the franchise agreement.
"

����
SECTION

7
.
�
Section 437-54,
Hawaii Revised Statutes, is amended to read as follows:

����
"[
[
]�437-54[
]
]
�
Transfer of franchise to successor who is not
a qualified purchaser.
�
(a)
�
A manufacturer or distributor shall not
refuse or fail to give effect, unless it has good cause, to the dealer's
designated successor[
,
]
for principal operator of the dealership,

whether designated by will, other estate planning document, or written notice
to the manufacturer or distributor either while the dealer was living or within
[
ninety days of
]
a reasonable time following
the dealer's death [
or
]
,

incapacity[
.
]
, or retirement.
�

The designated successor shall be:

����
(1)
�
The person identified in a written notice
delivered to the manufacturer;

����
(2)
�
If the dealer dies, the person
entitled to inherit the deceased dealer's ownership interest in the new motor
vehicle dealership under the terms of the deceased dealer's will or
testamentary trust, or who has otherwise been designated in writing by a
deceased dealer to succeed the deceased dealer in the new motor vehicle
dealership, or who is entitled to inherit under the laws of intestate
succession of the State or the appointed and qualified personal representative
or testamentary trustee of the deceased new motor vehicle dealer; or

����
(3)
�
If the dealer becomes incapacitated,
the person appointed by the court as the legal representative of the dealer.

����
(b)
�
In determining whether good cause exists for
the manufacturer's or distributor's refusal to honor the succession, the
manufacturer or distributor shall have the burden to prove that the successor [
is
not of good moral character, is
]
:

����
(1)
�
Has been convicted of a felony or a
crime of fraud, deceit, or moral turpitude;

����
(2)
�
Is
not willing to be bound by
the
existing
terms of the franchise agreement[
, and
]
by which
the dealer was bound; or

����
(3)
�
Does not meet the written,
reasonable, and uniformly applied business standards or qualifications of the
manufacturer or distributor relating to the financial qualifications of the
successor and business experience of the successor or successor's executive
management; provided that if the successor is the:

���������
(A)
�
Spouse, child, grandchild, parent, or
sibling of the dealer; or

���������
(B)
�
Executive manager of the dealership,

���������
then
the manufacturer shall show the designated successor
is [
either
] not
qualified to operate the dealership [
or
]
and
fails to demonstrate
that the dealership will be operated by a qualified executive manager.

����
(c)
�
The designated successor shall furnish
written notice to the manufacturer or distributor including all necessary
application forms and related information customarily required by the
manufacturer or distributor of the successor's intention to succeed to the
ownership of the new motor vehicle dealership within sixty days [
prior to
]

before
the designee's actual proposed succession to dealership ownership
for the manufacturer or distributor to determine whether the [
proposed
]
designated

successor meets the [
normal, reasonable, and uniformly applied standards for
the grant of an application as a new motor vehicle dealer.
]
requirements
of this section.

����
(d)
�
The manufacturer or distributor shall notify
the [
proposed
]
designated
successor of its belief that good cause
exists to refuse to honor the succession within sixty days after receipt of the
notice of the proposed successor's intent to succeed the franchise, and the
manufacturer or distributor shall detail its reasons why it believes good cause
exists to deny the succession.

����
(e)
�
A [
proposed
]
designated
successor
may file a petition in the manner prescribed in section 437-51 within sixty
days after receipt of the manufacturer's or distributor's notice of refusal to
honor the succession.
�
The franchise
shall continue, and the manufacturer or distributor is prohibited from any
action to the contrary, until a final [
judgment
]
determination,
including exhaustion of all appellate remedies,
has been rendered on the
proposed succession.

����
(f)
�
If the designated successor does not choose
to protest under subsection (e); or the protest is not successful, the
manufacturer or distributor shall allow the designated successor a period of
time not to exceed six months to negotiate a sale of the dealership.
�
Any proposed sale under this section shall be
subject to section 437-53.
"

����
SECTION

8
.
�
Section 437-56,
Hawaii Revised Statutes, is amended to read as follows:

����
"
�437-56
�

Reimbursement for parts[
.
]
and labor.
�
(a)
�

Each manufacturer or distributor shall specify in writing to each of its
dealers licensed in the State the dealer's obligations for pre-delivery
preparation and warranty service on its products.
�
A manufacturer or distributor shall timely
compensate a motor vehicle dealer who performs required work to prepare a
vehicle for delivery, maintain or repair a manufacturer's or distributor's
product under a warranty or maintenance plan, extended warranty, certified
pre-owned warranty, service contract or other manufacturer or distributor
reimbursed work, or to repair a motor vehicle as a result of a manufacturer's
or distributor's recall, campaign service, authorized goodwill, directive, or
bulletin.

����
[
(a)
]

(b)
�
Compensation for
parts used in required work described in subsection (a) shall be determined pursuant
to the methods described in this subsection.
�
In no event shall any manufacturer or
distributor pay its dealers a markup on parts for warranty work that is less
than that charged by the dealer to the retail customers of the dealer; provided
that [
such
]
the
dealer's retail parts markup is not unreasonable
when compared with that of same line make authorized franchise dealers of the
manufacturer or distributor for identical merchandise or services in the State.
�
If a manufacturer or distributor furnishes
a part or component to a motor vehicle dealer at no cost to use in performing
repairs under a recall, campaign service action, or warranty repair, the
manufacturer or distributor shall compensate the dealer for the part or
component in the same manner as warranty parts compensation under this
subsection, less the reasonable cost for the part or component.
�
The manufacturer or distributor shall be
prohibited from establishing or implementing a special part or component number
for parts used in warranty work if the result of the special part or component
lowers compensation to the dealer below that amount calculated pursuant to this
section.

����
[
(b)
]

(c)

�
The retail markup charged by
the dealer shall be established by submitting to the manufacturer or
distributor a sufficient quantity of numerically consecutive repair orders from
the most recent months to provide one hundred qualifying customer-paid repair
orders[
.
�
For a dealer unable to
provide one hundred qualifying customer-paid repair orders out of all
numerically consecutive repair orders within the two-month period prior to the
submission, the dealer shall submit customer service repair orders of all
types, including customer pay, warranty, and internal, for that two-month
period.
]
�
or sixty consecutive
days of non-warranty customer-paid service repair orders that contain
warranty-like parts, whichever is less, covering repairs made no more than one
hundred eighty days before the submission.
�

The repair orders shall contain the price and percentage markup.
�
Dealers shall declare in their submission the
average markup the dealer is declaring as its new parts reimbursement
rate.
�
The declared parts reimbursement
markup shall take effect within [
ninety
]
thirty
days after
initial submission to the manufacturer or distributor [
and shall be presumed
to be fair and reasonable.
�
However, the
manufacturer or distributor may make reasonable requests for additional
information supporting the submission.
�

The ninety-day time frame in which the manufacturer or distributor shall
make the declared parts reimbursement markup effective shall commence following
receipt from the dealer of any reasonably requested supporting information.
]

subject to the procedures in subsection (f).

�
The dealer shall not request a change in the
parts reimbursement markup more than once every twelve months.

����
(d)
�
A dealer shall be adequately and fairly
compensated for labor used in required work as described in subsection (a) that
shall be not less than the retail rate customarily charged by the dealer for
labor.
�
The retail rate customarily
charged by the dealer for labor may be established by submitting to the
manufacturer or distributor a sufficient quantity of numerically consecutive
repair orders from the most recent months to provide one hundred qualifying
customer-paid repair orders or sixty consecutive days of non-warranty
customer-paid service repair orders that contain warranty-like repairs,
whichever is less, covering repairs made not more than one hundred eighty days
before the submission and dividing the amount of the dealer's total labor sales
by the number of total labor hours that generated the sales.
�
The repair orders shall contain the price and
hourly rate.
�
A dealer shall include in the
dealer's submission the hourly rate the dealer is declaring as its new labor
reimbursement rate.
�
The average labor
rate shall go into effect thirty days following the declaration, subject to the
procedures described in subsection (f).
�
The
dealer shall not request a change in the labor rate reimbursement markup more
than once every twelve months.

����
[
(c)
]

(e)
�
In determining qualifying
repair orders for parts[
,
]
and labor,
the following work shall
not be included: repairs for manufacturer or distributor special events;
repairs covered by any insurance or service contract; federal, state, or local
government legislated vehicle emission or safety inspections; parts sold at wholesale
or repairs performed at wholesale, which shall include any sale or service to a
fleet of vehicles; engine assemblies and transmission assemblies; routine
maintenance not covered under any retail customer warranty, such as fluids,
filters, and belts not provided in the course of repairs; nuts, bolts,
fasteners, and similar items that do not have an individual part number; tires;
[
and
] vehicle reconditioning[
.
]
; and vehicles owned by the
dealer or the dealer's employees at the time of the repair.

����
(f)
�
A manufacturer or distributor may contest to
the dealer the material accuracy of the retail parts markup or labor rate that
was calculated by the dealer under this section within thirty days after
receiving notice from the dealer or, if the manufacturer or distributor
requests supplemental repair orders pursuant to this subsection, within thirty days
after receiving the supplemental repair orders.
�
If the manufacturer or distributor seeks to
contest the retail parts markup or labor rate, or both, the manufacturer or
distributor shall submit no more than one notification to the dealer.
�
The notification shall be limited to an
assertion that the rate is materially inaccurate or fraudulent, and shall
provide a full explanation of any and all reasons for the allegation, evidence
substantiating the manufacturer or distributor's position, a copy of all
calculations used by the manufacturer or distributor in determining the
manufacturer or distributor's position, and a proposed adjusted retail parts
markup or labor rate, as applicable, on the basis of the repair orders
submitted by the dealer.
�
After
submitting the notification, the manufacturer or distributor shall not add to,
expand, supplement, or otherwise modify any element of that notification,
including but not limited to its grounds for contesting the retail parts markup
or labor rate, or both, without justification.
�
A manufacturer or distributor shall not deny
the dealer's submission for the retail parts markup, retail labor rate, or both.
�
If a manufacturer or distributor contests the
accuracy of the cost for parts or labor pursuant to this subsection, the
following shall apply:

����
(1)
�
If the dealer agrees with the
conclusions of the manufacturer or distributor and any corresponding adjustment
to the retail parts markup or labor rate, no further action shall be required.
�
The new adjusted rate shall be deemed
effective as of thirty calendar days after the manufacturer's or distributor's
receipt of the notice pursuant to subsections (c) and (d);

����
(2)
�
In the event the manufacturer or
distributor provides all of the information required in this subsection to the
dealer, and the dealer does not agree with the adjusted rate proposed by the
manufacturer or distributor, the manufacturer or distributor shall pay the
dealer at the manufacturer or distributor's proposed adjusted retail parts
markup or labor rate until a decision is rendered upon any board protest filed
pursuant to section 437-28.5 or any mutual resolution between the manufacturer
or distributor and the dealer.
�
The
manufacturer's or distributor's proposed adjusted rate shall be deemed to be
effective as of thirty days from the date of the manufacturer or distributor's
receipt of the notice submitted pursuant to subsections (c) and (d);

����
(3)
�
If the manufacturer or distributor
determines from the dealer's set of repair orders submitted pursuant to subsections
(c) and (d) that the dealer's submission for a retail parts markup or labor
rate is substantially higher than the dealer's current warranty rate, the
manufacturer or distributor may request, in writing, within thirty days after
the manufacturer or distributor's receipt of the notice submitted pursuant to
subsections (c) or (d), all repair orders closed within the period of thirty
days immediately preceding, or thirty days immediately following, the set of
repair orders submitted by the dealer.
�
If
the dealer fails to provide the supplemental repair orders, all time periods
under this section shall be suspended until the supplemental repair orders are
provided; or

����
(4)
�
If the manufacturer or distributor
requests supplemental repair orders pursuant to paragraphs (1) and (3), the
manufacturer or distributor may calculate a proposed adjusted retail parts
markup or labor rate, as applicable, based upon any set of the qualified repair
orders submitted by the dealer, if the manufacturer or distributor complies
with all of the following requirements:

���������
(A)
�
The manufacturer or distributor uses
the same requirements applicable to the dealer's submission pursuant to subsection
(f);

���������
(B)
�
The manufacturer or distributor uses
the formula to calculate retail labor rate or retail parts markup as provided
in subsections (c) and (d); and

���������
(C)
�
The manufacturer or distributor
omits all charges in the repair orders as provided in subsection (e).

����
(g)
�
If the manufacturer or distributor does not
contest the retail parts markup or labor rate that was calculated by the
dealer, or if the manufacturer or distributor fails to contest the rate
pursuant to subsection (f), within thirty days after receiving the notice
submitted by the dealer pursuant to subsections (c) or (d), the uncontested
retail parts markup or labor rate shall take effect thirty days after the
manufacturer or distributor's receipt of the notice and the manufacturer or
distributor shall use the new retail parts markup or retail labor rate, or
both, if applicable, to determine compensation to fulfill warranty obligations
to the dealer pursuant to this section.

����
(h)
�
When calculating the retail parts markup and
retail labor rate, promotional reward program cash-equivalent pay methods shall
not be considered discounts.

����
(i)
�
A dealer shall be reasonably compensated by
the manufacturer or distributor for work to prepare and deliver a vehicle,
maintain or repair a manufacturer or distributor's product under a warranty,
maintenance plan, extended warranty, certified pre-owned warranty, service
contract, or other manufacturer or distributor reimbursed work; or to repair a
motor vehicle as a result of a manufacturer or distributor's recall, campaign
service, authorized goodwill, directive, or bulletin.
�
Compensation to the dealer for labor time
involved with the work shall be the labor time allowance contained in the
manufacturer or distributor's labor time guide for the repair or the time
allowance contained in the labor time guide used by the dealer for labor
furnished other than pursuant to open recall, warranty, or other manufacturer
or distributor reimbursed service work, whichever is greater.
�
If neither time guide contains an allowance
for a repair, compensation for labor time shall be the actual time spent to
complete the repair.
�
A manufacturer or
distributor may require requests for labor time be submitted in accordance with
a uniform process or procedure, which may not be unduly burdensome or time
consuming.
�
It shall be considered unduly
burdensome for the manufacturer or distributor, among other things, to require
the dealer to submit repair orders for service work performed other than for
the specific repair which is the subject of the reimbursement claim.
�
The manufacturer or distributor shall respond
to an accurate and complete labor time claim within thirty days of receipt or
the claim shall be deemed approved.
�
A
manufacturer or distributor may object to the labor time allowance submitted in
a claim by a dealer and request a modification of the dealer's labor time
allowance for a specific claim; provided that the objection includes
documentation including any formal time or motion studies carried out by the
manufacturer or distributor that demonstrate the dealer's claimed labor time
allowance is excessive.
�
A dealer shall
respond to a manufacturer or distributor's request for modification of the
dealer's labor time allowance within sixty days by furnishing the manufacturer
or distributor with documentation of its own demonstrating the dealer's claimed
labor time allowance is not excessive.
�

����
For the purposes of this section, a
dealer's claimed labor time allowance shall be deemed acceptable if the labor
time allowance is consistent with the labor time allowance for the same or
substantially similar repairs defined by any retail labor time guide utilized
by the dealer or any formal time or motion studies carried out by the dealer that
demonstrate the dealer's claimed labor time allowance is not excessive.

����
[
(d)
]

(j)
�
Dealers shall have at least
thirty days after the repair work is completed to submit a claim for
approval.
�
All claims made by the dealers
for compensation for [
delivery, preparation, and warranty
] work
to
prepare and deliver a vehicle, maintain or repair a manufacturer or distributor's
product under a warranty, maintenance plan, extended warranty, certified
pre-owned warranty, service contract, or other manufacturer or distributor
reimbursed work; or to repair a motor vehicle as a result of a manufacturer or
distributor's recall, campaign service, authorized goodwill, directive, or
bulletin,
shall be approved or disapproved and if approved, paid within
forty-five days after receipt by a manufacturer or distributor of a properly
completed claim.
�
All sale incentive
claims shall be approved or disapproved and if approved, paid within sixty days
after receipt by a manufacturer or distributor of a properly completed
claim.
�
When any claim is disapproved,
the dealer shall be notified in writing of the grounds for disapproval.
�
A claim may not be disapproved based solely
on a dealer's failure to comply with a specific claim processing requirement,
such as a clerical error or other administrative technicality that does not put
into question the legitimacy of the claim after the dealer properly resubmits
the claim in accordance with the manufacturer or distributor's reasonable
submission guidelines.
�
If a claim does
not meet the submission guidelines, the written notice disapproving the claim shall
identify the specific claim documentation procedure violated by the dealer for
the dealer to resubmit a claim for payment or compensation if the claim was
denied for a dealer's incidental failure within sixty days of the disapproval.

�
Failure to disapprove a claim within the
required time frame constitutes approval of the claim.

����
[
(e)
]

(k)
�
A manufacturer or distributor
may not recover, or attempt to recover, from dealers its cost for reimbursing a
dealer for warranty work as required by this section.
�
This subsection shall not prohibit a
manufacturer or distributor from increasing the prices of parts or vehicles in
the normal course of business.

����
[
(f)
]

(l)
�
For the purposes of this
section, the director of commerce and consumer affairs shall:

����
(1)
�
Conduct a review of the costs of the
repairs of motor vehicles, including the prices charged by dealers for
performing repairs under warranty and repairs not under warranty; and

����
(2)
�
Compare such costs to repairs performed
by non-dealers."

����
SECTION
9
.
�
Section 437-57, Hawaii Revised Statutes, is
amended by amending subsections (b) and (c) to read as follows:

����
"(b)
�

A manufacturer or distributor shall not chargeback a dealer for sales or
warranty payments unless the manufacturer or distributor can satisfy its burden
of proof that the dealer's claim was fraudulent or [
that the dealer did not
substantially comply with the reasonable written procedures of the manufacturer
or distributor.
]
unsubstantiated.
�

A manufacturer or distributor shall not charge back a claim based solely
on a dealer's failure to comply with a specific claim processing requirement,
such as a clerical error or other administrative technicality that does not put
into question the legitimacy of the claim after the dealer properly resubmits
the claim in accordance with the manufacturer or distributor's submission
guidelines.

����
(c)
�

The manufacturer or distributor shall provide the dealer a written
notice thirty days before imposing a proposed chargeback[
.
]
identifying
the specific claim documentation procedure violated by the dealer for the
dealer to resubmit a claim for payment or compensation if the claim was denied
for a dealer's incidental failure as described in subsection (b).
�
The dealer may protest the imposition of a
proposed chargeback [
prior to
]
before
the imposition of a
proposed chargeback.
�
The dealer,
manufacturer, or distributor shall conduct any internal dispute resolution
process in accordance with the franchise agreement.
�
After the internal dispute resolution process
is concluded, the dealer may file a petition in the manner prescribed in
section [
437-51
]
437-28.5
protesting the proposed chargeback
amount.
�
If a petition is filed, the
proposed chargeback shall be stayed during the entirety of the action and until
a final judgment has been rendered."

����
SECTION
10
.
�
Section 437-59, Hawaii Revised Statutes, is
amended by amending subsection (e) to read as follows:

����
"
(e)
�
All reimbursement claims made by new motor
vehicle dealers pursuant to this section for recall repairs, or for
compensation where no part or repair is reasonably available and the vehicle is
subject to a stop-sale order shall be subject to the same limitations and
requirements as a warranty reimbursement claim made under section 437-56 [
or
437‑28(a)(21)(G)
].
�
In the
alternative, a manufacturer may compensate its franchised dealers under a
national recall compensation program; provided that the compensation under the
program is equal to or greater than that provided under subsection (a) or the
manufacturer and dealer otherwise agree."

����
SECTION 11.
�

Statutory material to be repealed is bracketed and stricken.
�
New statutory material is underscored.

����
SECTION 12.
�
This Act shall take effect upon its approval.

INTRODUCED BY:

_____________________________

Report Title:

Motor
Vehicle Industry Licensing Board; Motor Vehicle Sales; Motor Vehicle Dealers;
Manufacturers; Distributors

Description:

Amends the Hawaii Motor Vehicle Industry Licensing Act by
adding the definition of common entity and expanding the definition of sale or
selling.
�
Allows a licensed dealer or
distributor to protest before the board for damages against another dealer or
distributor.
�
Establishes a dispute
resolution process for manufacturers and distributors to contest the accuracy
of a dealer's reimbursement for parts and labor.

The summary description
of legislation appearing on this page is for informational purposes only and is
not legislation or evidence of legislative intent.