2021 South Carolina Code of Laws
Title 56 - Motor Vehicles
Chapter 15 - Regulation Of Manufacturers, Distributors And Dealers
Section 56-15-60. Fulfillment of warranty agreements; dealers' claims for compensation.

(A) It is unlawful for a new motor vehicle manufacturer to recover any portion of its costs for compensating dealers for recalls or warranty parts and service, either by reduction in the amount due to the dealer, or by separate charge, surcharge, or other imposition.

(B) A manufacturer or distributor shall specify in writing to each of its dealers operating in this State the dealer's obligations for preparation, delivery, and warranty services related to the manufacturer or distributor's products. The manufacturer or distributor shall compensate the dealer for the warranty services the manufacturer or distributor requires the dealer to provide, including warranty and recall obligations related to repairing and servicing motor vehicles of the manufacturer or distributor and all parts and components authorized by the manufacturer to be installed in or manufactured for installation in such motor vehicles.

(C)(1) The manufacturer or distributor shall provide to the dealer a schedule of compensation that specifies reasonable compensation the manufacturer or distributor will pay to the dealer for the warranty services, including for parts, labor, and diagnostics. For parts and labor warranty reimbursement, reasonable compensation shall not be less than the rate charged by the dealer for like services to nonwarranty customers for nonwarranty parts, service, and repairs if the dealer has submitted a request for retail reimbursement pursuant to item (4).

(2) If the dealer has requested retail reimbursement pursuant to item (4), the schedule of compensation for parts must be determined by multiplying the price paid by the dealer for warranty parts by the sum of one and the dealer's average percentage markup. The dealer's average percentage markup is calculated by subtracting one from the result of dividing the total amounts charged by the dealer for parts used in warranty-like repairs by the total cost to the dealer for the parts in the retail service orders submitted pursuant to item (4).

(3) If the dealer has requested retail reimbursement pursuant to item (4), the schedule of compensation for labor-related warranty services must be determined by dividing the total amount of retail sales attributable to labor for warranty-like services by the number of hours of labor spent to generate the retail sales in the retail service orders submitted pursuant to item (4).

(4)(a) The dealer may establish its retail average percentage markup for parts or its labor rate by submitting to the manufacturer copies of one hundred sequential retail service orders paid by the dealer's customers, or all of the dealer's retail service orders paid by the dealer's customers in a ninety-day period, whichever is less, for services provided within the previous one hundred eighty-day period. The manufacturer or distributor may not consider retail service orders or portions of retail service orders attributable to the following types of repairs:

(i) repairs to motor vehicles owned by the dealer;

(ii) repairs made pursuant to manufacturer special events and manufacturer discounted service campaigns;

(iii) parts sold at wholesale or discounted by a dealer for repairs made to government vehicles or insurance work for which volume discounts have been negotiated;

(iv) tires;

(v) routine maintenance such as alignments, flushes, oil changes, brake pads or rotors, lightbulbs, fluids, filters, batteries, belts, and hoses;

(vi) nuts, bolts, fasteners, and similar items that do not have an individual part number.

(b) Within thirty days of receiving the dealer's submission, the manufacturer or distributor may request additional necessary documentation to support the submitted orders. If the manufacturer or distributor requests additional documentation to support the submission, then the time period in which the manufacturer or distributor must approve or deny the establishment of the franchise motor vehicle dealer's average percentage markup must be extended by thirty days. The manufacturer or distributor then shall approve or deny the establishment of the dealer's average percentage markup or labor rate. If the manufacturer or distributor approves the establishment of the dealer's average percentage markup or labor rate, the markup or rate calculated under this subitem goes into effect thirty days after the date of the manufacturer's or distributor's approval.

(c) A manufacturer or distributor may not require a dealer to establish an average percentage markup or labor rate by a methodology, or by requiring the submission of information, that is unduly burdensome or time-consuming to the dealer including, but not limited to, requiring part-by-part or transaction-by-transaction calculations.

(d) A dealer may not request a change in the dealer's average percentage markup or labor rate more than once in any twelve-month period.

(D)(1) If a manufacturer or distributor provides a part or component to a dealer at reduced or no cost for repairs completed because of a recall, campaign service action, or warranty repair, then the manufacturer or distributor shall compensate the dealer for the part or component in the same manner as compensation for warranty parts based on the dealer's average markup less the cost for the part or component as listed in the manufacturer's or distributor's price schedule.

(2) A manufacturer may not take or threaten to take any adverse action against a dealer seeking to obtain compensation pursuant to this subsection including, but not limited to, creating or implementing an obstacle or process that is inconsistent with the manufacturer's obligations to the dealer.

(3) Within thirty days of receiving a manufacturer's notice of denial of the dealer's parts or labor submission, a new motor vehicle dealer may file a protest with the court of common pleas to protest a manufacturer's denial. If a protest is filed, then the manufacturer possesses the burden of proof to establish that the dealer's submission did not meet the respective submission requirements contained within this subsection or is inaccurate or unreasonable. If a dealer prevails in a protest filed under this subsection, then the dealer's increased parts or labor reimbursement must be provided retroactively as of the date the submission would have been effective but for the manufacturer's denial.

(E) It is a violation of this section for any new motor vehicle manufacturer to fail to:

(1) perform any warranty obligations; or

(2) compensate any new motor vehicle dealer for repairs effected by a recall.

(F)(1) All claims made by a new motor vehicle dealer pursuant to this section for labor and parts shall be paid within thirty days following approval; provided, however, that the manufacturer may audit claims for up to one year after payment and charge the dealer for fraudulent claims, work done unnecessarily, or work not properly performed. All claims must be approved or disapproved within thirty days after receipt on forms and in the manner specified by the manufacturer. Any claim not specifically disapproved in writing within thirty days after receipt shall be construed to be approved and payment must follow within thirty days.

(2) The manufacturer or distributor shall not disapprove a reimbursement claim if the dealer can substantiate the claim, in accordance with the manufacturer's reasonable policies and procedures. A claim may not be denied or charged back due to a dealer's unintentional administrative error if the claim meets the requirements of this subsection. The one-year limitation on the manufacturer's right to audit a claim shall not be in effect in the case of fraudulent claims.

(G)(1) Any audit for warranty or recall parts, service compensation, or compensation for a qualifying used motor vehicle in accordance with subsection (I) only may be conducted once within any twelve-month period and only must be for the twelve-month period immediately following the date of the payment of the claim by the manufacturer, factory branch, distributor, or distributor branch.

(2) Any audit for sales incentives, service incentives, rebates, or other forms of incentive compensation only may be conducted once within any twelve-month period and only must be for the twelve-month period immediately following the date of the payment of the claim by the manufacturer, factory branch, distributor, or distributor branch pursuant to a sales incentives program, service incentives program, rebate program, or other form of incentive compensation program.

(3) The limitations of this subsection do not apply to fraudulent claims.

(H) A manufacturer or distributor shall not charge a dealer back for sales incentives, service incentives, rebates, or other forms of incentive compensation subsequent to the payment of the claim unless it can be shown that the claim was false, fraudulent, or that the dealer failed to reasonably substantiate the claim in accordance with the manufacturer's reasonable written procedures.

(I)(1) A manufacturer shall compensate its new motor vehicle dealers for all labor and parts required by the manufacturer to perform recall repairs. Compensation for recall repairs must be reasonable. If parts or a remedy are not reasonably available to perform a recall service or repair on a used vehicle held for sale by a dealer authorized to sell and service new vehicles of the same line make within thirty days of the manufacturer issuing the initial notice of recall, and the manufacturer has issued a Stop-Sale or Do-Not-Drive order on the vehicle, the manufacturer shall compensate the dealer at a prorated rate of at least one percent of the value of the vehicle each month beginning on the date that is thirty days after the date on which the Stop-Sale or Do-Not-Drive order was provided to the dealer until the earlier of either of the following:

(a) The date the recall or remedy parts are made available.

(b) The date the dealer sells, trades, or otherwise disposes of the affected used motor vehicle.

(2) The value of a used vehicle must be the average trade-in value for used vehicles as indicated in an independent third-party guide for the year, make, and model of the recalled vehicle.

(3) This subsection only applies to used vehicles subject to safety or emissions recalls pursuant to and recalled in accordance with federal law and regulations and where a Stop-Sale or Do-Not-Drive order has been issued and repair parts or remedy remain unavailable for thirty days or longer. This subsection further applies only to new motor vehicle dealers holding an affected used vehicle for sale:

(a) in inventory at the time the Stop-Sale or Do-Not-Drive order was issued;

(b) which was taken in the used vehicle inventory of the dealer as a consumer trade in incident to the purchase of a new vehicle from the dealer after the Stop-Sale or Do-Not-Drive order was issued; and

(c) that is a line make that the dealer is franchised to sell or on which the dealer is authorized to perform recall repairs.

(4) Subject to the audit provisions of subsection (G)(1), it is a violation of this section for a manufacturer to reduce the amount of compensation otherwise owed to an individual new motor vehicle dealer, whether through a chargeback, removal of the individual dealer from an incentive program, or reduction in amount owed under an incentive program solely because the new motor vehicle dealer has submitted a claim for reimbursement under this section. This item does not apply to an action by a manufacturer that is applied uniformly among all dealers of the same line-make in the State.

(5) All reimbursement claims made by new motor vehicle dealers pursuant to this section for recall remedies or repairs, or for compensation where no part or repair is reasonably available and the vehicle is subject to a Stop-Sale or Do-Not-Drive order, is subject to the same limitations and requirements as a warranty reimbursement claim made under this section. In the alternative, a manufacturer may compensate its franchised dealers under a national recall compensation program, provided the compensation under the program is equal to or greater than that provided under this subsection; or as the manufacturer and dealer otherwise agree.

(6) A manufacturer may direct the manner and method in which a dealer shall demonstrate the inventory status of an affected used motor vehicle to determine eligibility under this section, provided that the manner and method may not be unduly burdensome and may not require information that is unduly burdensome to provide.

(7) Nothing in this section requires a manufacturer to provide total compensation to a dealer which would exceed the total average trade-in value of the affected used motor vehicle as originally determined under item (2).

(8) Any remedy provided to a dealer under this subsection is exclusive and may not be combined with any other state or federal recall compensation remedy.

HISTORY: 1962 Code Section 46-150.156; 1972 (57) 2419; 2000 Act No. 287, Section 3; 2013 Act No. 44, Section 4, eff June 7, 2013; 2021 Act No. 31 (S.510), Section 8, eff August 4, 2021.

Editor's Note

2021 Act No. 31, Section 14, provides as follows:

"SECTION 14. This act takes effect ninety days after approval by the Governor and applies to all current and future franchises and other agreements in existence between any franchisee located in this State and a franchisor as of the effective date of this act."

Effect of Amendment

2021 Act No. 31, Section 8, rewrote the section.