September/October 2011
Federal and state systems for collecting end-of-life vehicle data have imposed new mandates on the scrap recycling and auto dismantling industries. Recyclers want to reduce the time and cost of compliance—and keep from creating even higher regulatory hurdles.
By Diana Mota
The scrap recycling industry has had a couple of years to come to terms with the National Motor Vehicle Title Information System. Created by the 1992 Anti Theft Act—but not implemented until 2009—the system is a nationwide database of vehicle identification numbers and related information. The law’s goal is to prevent criminals from fraudulently reusing VINs or re-registering and selling vehicles that were intended for destruction—both of which are possible when each state keeps its own VIN records. To that end, the law requires entities that handle end-of-life vehicles, including auto dismantlers and scrap recyclers, to provide information on each whole vehicle to NMVTIS or take steps to ensure the information was otherwise reported.
Recyclers argue that NMVTIS reporting duplicates data they already provide to their state governments. The states themselves have to report certain VIN and title information to NMVTIS, and the law allows states to report on behalf of the recyclers and dismantlers. This provision has led many in the industry to hope the states would create streamlined reporting systems for recyclers to meet both state and federal requirements at the same time. “All of the information [NMVTIS is] asking us for, we already report to the DMV,” explains Gregg Marcucci, vehicle acquisitions manager for SA Recycling (Anaheim, Calif.). It makes more sense to report once, at the state level, he says, because “the more hands that touch the information, the more likely there are to be mistakes.” One state has developed such a model system—but another state revised its titling law in such a way that it all but halted ELV processing in the state. In other words, state-by-state implementation provides both challenges and opportunities for recyclers, who are finding they must monitor and get involved in state titling issues to ensure each state’s NMVTIS implementation considers the scrap industry’s needs. On the federal level, ReMA is working to reduce the NMVTIS compliance burden on scrap recyclers. Though law enforcement agencies, insurance companies, and car buyers are the beneficiaries of this data-collection system, those providing the data—the recyclers and auto dismantlers—bear many of the costs.
State Implementation
Those who developed the NMVTIS system and its implementing regulations did so without scrap industry input, recyclers say, resulting in a system that does not take into consideration the path an ELV takes before its final disposition or the volume of vehicles recyclers handle. To prevent such problems at the state level, ReMA is urging recyclers to get involved early as states change their titling laws to ensure they have the information they need to meet NMVTIS reporting requirements. Whenever states revise existing laws and regulations, “there’s opportunity as well as danger,” says Danielle Waterfield, ISRI’s assistant counsel and director of government affairs. “We need to get into early discussions so legislation isn’t enacted with unexpected consequences” for the industry.
Alabama is a textbook example of how things can go wrong. Up until now, Waterfield explains, few states have had a codified process for collecting titles from end-of-life vehicles. When a title is not available, it often has been sufficient for the recycler to accept an affidavit or other means of claiming ownership from the person relinquishing the vehicle. In 2010, Alabama passed a law that required titles for all ELVs. The problem, says Joel Denbo, chief manager of operations for Tennessee Valley Recycling (Decatur, Ala.), is that obtaining the title for an older vehicle can be difficult, if not impossible. Some of these vehicles have been in families for years, Denbo says. “How can you expect us to get a title on a 25-year-old car, or if there’s not one, [tell the owner] it has to sit in the backyard and never get recycled?” he asks. The result was that automobile shredder operations in the state virtually came to a standstill, Waterfield says.
The state’s recyclers pitched “a hard-fought battle to get new legislation in place” that reflects the difficulty of getting titles for older vehicles, Denbo says. In the end they prevailed: Under Alabama’s amended law, recyclers can purchase vehicles 12 years old or older with an affidavit as long as they check a database that ensures no liens exist on the vehicles. “It’s not perfect, but it’s as perfect as could be done in a legislative manner,” Denbo says. “There were a lot of compromises.” A continuing frustration, however, is that the new law adds one more layer of reporting. At Tennessee Valley, “we made an agreement with the local police that we would supply a daily download of the [VINs of the] cars we buy,” he says. “We did that voluntarily. So we report to them, we report to NMVTIS, and now we’re going to be reporting this to the state of Alabama.”
In retrospect, he says, the time to fight the law was before the state passed it. “Recyclers must be ever vigilant,” he says. “It’s important to stay on top of legislation.” Waterfield agrees. A law’s consequences for recyclers might not be obvious until it’s too late, she cautions. “In most instances, states don’t realize what they’re doing is impacting industries more than [it’s impacting] the state DMV. They’re struggling to understand” what NMVTIS requires of them. She recommends that recyclers scrutinize any legislation remotely related to their industry, particularly legislation dealing with any aspect of the vehicle titling process. Several states are considering laws that would require titles for all ELVs, she notes.
States re-examining their titling laws also can create opportunity for the industry, Waterfield says. Recyclers have information about ELVs that law enforcement agencies want. The industry can offer that information as an incentive for states to create titling laws that facilitate greater compliance. In Georgia, recyclers and auto dismantlers did just that, and in the process they built some important relationships with law enforcement agencies, says Steve Levetan, senior vice president of Pull-A-Part (Atlanta). The scrap industry-law enforcement coalition succeeded in getting the state to create a real-time database of VIN and related information that fulfills state and recycler NMVTIS requirements and aids law enforcement efforts to fight vehicle theft and VIN fraud. “It’s the best example in the country of law enforcement and the recycling industry working together,” Levetan says.
When the law takes effect next year, within 48 hours of purchasing a vehicle, recyclers will electronically report their NMVTIS data to the state’s system, which will accept all the information the federal system requires. “We anticipate and will work to ensure [there’s] a bulk upload option,” Levetan says. The state will transmit the data to NMVTIS on recyclers’ behalf at no cost, making it the first state to streamline VIN reporting to NMVTIS. This system gives law enforcement agencies something they wanted—access to real-time data on the state’s ELVs. (Federal law, in contrast, gives recyclers 30 days to report information to NMVTIS.) It also gives recyclers something they wanted—it eliminates the double-reporting burden and the expense of reporting into the federal system. “We think it’s a good approach,” Levetan says, and he and others hope to replicate it in other states.
The deadline for state compliance with NMVTIS was Jan. 1, 2010, though the law does not contain a penalty for states that do not comply. The American Association of Motor Vehicle Administrators (Arlington, Va.), which administers NMVTIS, reported that as of May, 31 states were fully participating, 11 were developing their reporting systems, and nine (including Washington, D.C.) were providing data but were not checking it as the law requires.
Nationwide Concerns
While the states act to meet their NMVTIS responsibilities, scrap recyclers still hope to change the federal system to facilitate greater compliance by easing the burden of complying. Though the scrap industry did not have a seat at the table in the system’s development, ReMA President Robin Wiener is now a member of the NMVTIS advisory board. This group of stakeholders—which also includes representatives of insurance carriers, consumer groups, the salvage pool association, auto dismantlers, data consolidators, and consumer access providers—meets about three times a year to provide input and recommendations on NMVTIS operations and administration. Wiener also chairs a work group for the advisory board that’s developing a vehicle life-cycle chart and definitions for terms such as junk, salvage, and recycler to clear up confusion about ELV processing.
For recyclers, the lack of practical batch-uploading reporting options has been the biggest issue, Wiener says. AAMVA has a free data-entry portal for recyclers on its website, but users must enter data on each vehicle one by one—something that’s not practical for companies that handle large quantities of vehicles each month. “With the volume our members handle, we need to have a batch [uploading] system directly into NMVTIS,” Waterfield says. AAMVA has approved three private data consolidators to offer batch uploading systems, but each charges fees, either annually or per vehicle. “We’re not happy with the way it was implemented and the costs placed on the industry,” Levetan says. “This is a cost we shouldn’t have to bear.”
The data consolidator fees, the time and personnel required for compiling the information, and the hardware and software needed for data transmission add up to significant expenses for many scrap recycling companies. ReMA wants to find out those exact costs to strengthen its case to the NMVTIS advisory board for reducing or eliminating the data consolidation fees. It has distributed a survey to ReMA members to compile information on the financial burden NMVTIS places on the industry. (Individual company information will remain confidential. For a copy of the survey, which is due Oct. 1, contact Wiener at robinwiener@isri.org.)
Recyclers have a few other concerns about NMVTIS as well. The system balks at accepting VINs that are not 17 characters long, as they are in most modern U.S. vehicles, says SA Recycling’s Marcucci, who handles NMVTIS reporting via a data consolidator for the company’s 22 facilities. Cars manufactured prior to 1979 have 11-character VINs, and some foreign models have VINs that are just eight or 10 characters, he explains. “Anything that has a VIN sequence other than the traditional 17 digits has to be secondarily verified,” he says. Marcucci estimates that about 10 percent of what he enters is rejected by NMVTIS—hundreds of vehicles a month. “Then we have to go back and re-verify the numbers,” which could mean reviewing paperwork to ensure the VIN was transcribed correctly or checking the numbers on the vehicle itself, he says.
Recyclers also worry about enforcement—or rather, a lack of enforcement—of NMVTIS compliance. “Some people flagrantly blow it off because they figure nobody is going to say anything to them,” Denbo says. “That’s what really peeves me the most. If everyone has to do it, then OK,” but if a nearby scrapyard is not following the law, a seller could be inclined to go there instead, he says, because those selling their ELVs “don’t want to go through the scrutiny” of providing the required information.
“Not reporting is not a good option,” Levetan cautions. Entities that fail to report each month could face a $1,000 civil penalty per violation—that’s per vehicle, so those penalties could quickly add up. The U.S. Department of Justice’s Bureau of Justice Assistance is working with the National Highway Traffic Safety Administration and the Federal Bureau of Investigation (all in Washington, D.C.) to enforce the law. To date, BJA reports conducting on-site inspections in Delaware, Maryland, New Jersey, New York, Pennsylvania, and Virginia. It regularly monitors NMVTIS, auto salvage auction, and insurance industry records to determine which businesses have not submitted timely reports, it says. Identified businesses receive a phone call and a 30-day non-report notice. If the businesses still fail to report, the bureau says it will pursue civil penalties. As of June, businesses in 30 states had received non-reporting notices, which resulted in about 100,000 more vehicles being reported, according to a BJA bulletin. The bureau also has implemented a non-reporting referrals process: Anyone can submit information on companies that allegedly aren’t reporting as required by sending an e-mail to nmvtis@usdoj.gov with “non-reporting referral” in the subject line. It currently has more than 100 active referrals in 23 states, it says.
By the end of 2010, NMVTIS had processed up to 89.5 million online transactions, including 29 million from “junk,” salvage, and insurance entities, and consumers had used the system to research nearly 100,000 vehicle histories. As of May, the system housed 381 million title records—more than 87 percent of the total U.S. vehicle population. And the system is working as the law intended, AAMVA says: Arizona has reported a 99-percent recovery rate on vehicles identified as stolen, and Virginia has seen a 17-percent decrease in motor vehicle thefts, for example.
Recyclers say they will continue to comply with NMVTIS as the law requires while they work to correct aspects of it they consider unfair. They support its goals in principle, they say, even though its implementation has been frustrating. As Denbo puts it, “If we truly are doing a public service, it would make me feel better that the labor and efforts we’ve put into doing this have had some good outcome.”
Diana Mota is associate editor of Scrap. For more information on NMVTIS, ReMA members can go to www.isri.org/nmvtis.
NMVTIS 101
The American Association of Motor Vehicle Administrators (Arlington, Va.) operates the National Motor Vehicle Title Information System for the U.S. Department of Justice (Washington, D.C.). States must report title data (on nearly all state-registered vehicles, not just end-of-life vehicles) at least once every 24 hours and check the database prior to issuing a title to verify that it’s valid. Other entities—including recyclers and auto dismantlers—that handle five or more vehicles per year must report the following information about each vehicle to NMVTIS:
--Vehicle identification number;
--Date on which they received the vehicle;
--Name of the individual or entity from whom they obtained it and the name of the person who received it;
--Statement of what the firm has done with or plans to do with the vehicle (crush, shred, sell domestically, export, and so on); and
--For the sale or export of whole vehicles, the name of the buyer.
A company must report this data within 30 days of its receipt of the vehicle, whether or not it has processed it in that time. If the method of handling ultimately differs from what the company reported, it must go back and update the record.
Recyclers who receive crushed or flattened previously reported vehicles must document the fact that reporting has already taken place. The company can
--have the seller complete and sign a certification form (ISRI members can access a sample form at www.isri.org/nmvtis);
--obtain a signed manifest, invoice, or title document with a stamped or printed statement indicating the seller has reported the vehicles to NMVTIS; or
--verify at www.nmvtis.gov that the supplier is registered, reports information to NMVTIS regularly, and has reported the sale of these specific vehicles to this company.
NMVTIS updates its list of reported vehicles each month, and the DOJ recommends that recyclers maintain a copy of the supplier’s reporting status and check once a month that their suppliers consistently report vehicle data. Recyclers bear the responsibility of ensuring any vehicle they handle is reported based on their state’s procedures.
If a recycler can’t confirm that the supplier of a crushed or baled vehicle reported it to NMVTIS, it must conduct a “good-faith visual inspection” to find the VIN on the vehicle and report it. If that doesn’t work, the recycler can report the VIN based on documentation the supplier provides, such as the title.
Recyclers can report one vehicle at a time for free through the AAMVA website (www.aamva.org) or use a data consolidator from AAMVA’s approved list, which at press time consisted of
--Audatex (San Diego), www.audatex.us;
--Auto Data Direct (Tallahassee, Fla.), www.add123.com; and
--Insurance Services Office ClaimSearch (Jersey City, N.J.), www.iso.com.
Each consolidator can set its own fees. States have the option of creating a system that collects the information recyclers must report to NMVTIS and reporting it to the federal system for them. Georgia is the only state that currently plans to do so, with a system that will begin operating in 2012.
Federal and state systems for collecting end-of-life vehicle data have imposed new mandates on the scrap recycling and auto dismantling industries. Recyclers want to reduce the time and cost of compliance—and keep from creating even higher regulatory hurdles.