As our readers know, Cassels Brock is an active participant in
the Equipment Leasing and Finance Association
(“ELFA”) and an annual attendee of its
legal forum. At the most recent forum, Bonnie Michael of Volvo
Financial Services USA gave a presentation on the California
Heavy-Duty Vehicle Greenhouse Gas (GHG) Emission Reduction
Regulation (the “regulation”), which
came into effect on January 1, 2010 and was amended on January 11,
2012. Although it is from California, the regulation may have
a direct extra-territorial impact upon Canadian lessors as it
affects any lessor who leases certain types of motor vehicles that
are used on Californian roads.
The regulation requires that certain modifications be made to
all Class 7 or Class 8 HD tractors that pull 53 foot or longer box
type trailers and 53 foot or longer box type trailers that are
pulled by HD tractors (collectively, the “Subject
Vehicles”). Under the regulation, the
“owner” of the Subject Vehicles must comply with the
California Department of Motor Vehicles’ environmental
requirements. The regulation defines an “owner”
as “the registered owner of the tractor or trailer by the
California Department of Motor Vehicles or its equivalent in any
other state, province or country.” Accordingly, if a leasing
company is registered as the owner of the Subject Vehicles in any
Canadian province or territory and the lessee uses the Subject
Vehicles on Californian roads, then that leasing company is subject
to the regulation regardless of whether the lessor itself does
business in California.
The regulation provides limited exemptions for lessors who
satisfy certain disclosure obligations. Specifically, a lessor will
not be deemed to be an owner if it provides the lessee with
specific statements as defined and set out in the regulation. In
order to qualify under this exemption, the lessor must demonstrate
that it has provided the lessee with written notice that clearly
informs the lessee about the requirements of the regulation.
The consequences for non-compliance with the regulation are
stiff. Owners who fail to comply with the regulation or qualify
under an exemption face a fine of up to $1,000 per day and/or
imprisonment for a term of not more than 6 months. The notice
requirement period is retroactive to January 1, 2010 (when the
regulation first came into effect). Needless to say, the per diem
penalty could be quite large if there has been non-compliance for a
significant period of time. At the legal forum, no one was aware of
any action being taken under the regulation but, not surprisingly,
participants were concerned.
As a consequence of this regulation, if a Canadian lessor is
leasing Subject Vehicles to a Canadian or American lessee who uses
such vehicles in California then that lessor must provide the
lessee with the prescribed statements. Therefore, lessors should
consider whether to include these specific provisions in their
lease documentation, or in some other demonstrative manner, and
implement that disclosure policy accordingly so that all lessees
are made aware of the regulation.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The Canadian Office of the Superintendent of Financial Institutions ("OSFI") recently ruled that a bank cannot promote comprehensive credit insurance ("CCI") within its Canadian branches under the Insurance Business (Banks and Bank Holdings Companies) Regulations (the "Regulations").
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