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.