BILL ANALYSIS C.S.H.B. 1736 By: Swinford 3-27-95 Committee Report (Substituted) BACKGROUND Farm, industrial and outside power equipment dealers obtain their inventory through a franchise contractual agreement with a supplier who is generally a manufacturer, wholesaler or distributor. In the 1980s, many equipment dealerships went out of business and attributed a portion of their collapse to dealer/supplier franchise agreements. In 1991, the 72nd Legislature responded to this problem and passed H.B. 1694 by Swinford, providing equipment dealers certain rights regarding the termination of a franchise agreement. Under current law, suppliers must refund dealers the cost of the equipment that they return new and undamaged. Suppliers must also refund 85 percent of the current price of new, undamaged repair parts returned by the dealer. The dealer and supplier evenly share the cost of shipping items to the supplier, who must pay the dealer within 60 days of receiving the items. There are some cases, however, in which a supplier would arrange for the dealer to deliver the items to a person other than the supplier. Current statute does not provide provisions to allow such arrangements and also offers no requirements for listing inventory to be returned to the supplier once the franchise agreement has been terminated. PURPOSE The purpose of this Act is to permit farm, industrial and outdoor suppliers to deliver items to a person designated by the supplier upon termination of a franchise agreement, and to require the listing of inventory the dealer intends to return to the supplier or his designated person. RULEMAKING AUTHORITY It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency, or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends Section 19.43, Business and Commerce Code. Allows a dealer to deliver inventory to a person designated by the supplier. Provides that forklifts and material-handling equipment may be returned to suppliers for dealer cost. Requires the dealer to provide the supplier a list of the inventory to be returned. Also sets forth that the list must be submitted prior to returning the inventory and before the 120th day after the termination became effective. Requires the list to include, if possible, each item's trade name, description and serial number. Requires the supplier to send the dealer a written notice of each item not subject to reimbursement and the destination of each item that is to be delivered to a person designated by the supplier. Sets forth that the written notice must be sent prior to the 60th day after the inventory list was received. Sets forth that a supplier must reimburse the dealer for returned items before the 91st day after the supplier or the person designated by the supplier receives the items. Upon payment, the title is transferred to the supplier or the person he has designated. Sets forth that the supplier must pay the additional costs, if any, of delivering an item to a person designated by the supplier. Sets forth that by agreement, the supplier and dealer may alter the time limits provided in this section. SECTION 2. Applies only to terminations of agreement made on or after the effective date of this Act. SECTION 3. Effective Date: September 1, 1995. SECTION 4. Emergency Clause. COMPARISON OF ORIGINAL TO SUBSTITUTE The original legislation did not allow a dealer to return forklifts and material-handling equipment to the supplier for reimbursement. It required that disputes over returnable items be settled as provided by law before a dealer may return a disputed item or receive compensation for it. The original bill only provided the supplier 31 days to reimburse the dealer for inventory he delivered, while the substitute provides 91 days. The substitute also clarifies the time period allotted to dealers for submitting an inventory list to suppliers. It begins the 120-day period on the effective date of the termination, whereas the original bill begins the time period on the date that the termination notice is given by either party. SUMMARY OF COMMITTEE ACTION H.B. 1736 was considered by the committee in a public hearing on March 14, 1995. The bill was left pending. H.B. 1736 was again considered by the committee in a public hearing on March 21, 1995. The committee considered a complete substitute for the bill. The substitute was adopted without objection. The bill was reported favorably as substituted, with the recommendation that it do pass and be printed and be sent to the Committee on Local and Consent Calendars, by a record vote of 9 ayes, 0 nays, 0 pnv, 0 absent.