                                 CODE OF VIRGINIA

RECALL, WARRANTY, MAINTENANCE AND SALES INCENTIVE OBLIGATIONS (§ 46.2-1571)

A. Each motor vehicle manufacturer, factory branch, distributor, or distributor
branch shall (i) specify in writing to each of its motor vehicle dealers
licensed in the Commonwealth the dealer&#8217;s obligations for preparation,
delivery, recall, and warranty service on its products and (ii) compensate the
dealer for recall or warranty parts, service, and diagnostic work required of
the dealer by the manufacturer or distributor as follows:

   1. Compensation of a dealer for recall or warranty parts, service, and
   diagnostic work shall not be less than the amounts charged by the dealer for
   the manufacturer&#8217;s or distributor&#8217;s original parts, service, and
   diagnostic work to retail customers for nonwarranty service, parts, and
   diagnostic work installed or performed in the dealer&#8217;s service
   department. All manufacturer or distributor compensated parts, service,
   diagnostic work, updates to a vehicle accessory or function, or initialization
   or repair of a vehicle part, system, accessory, or function performed by the
   dealer shall be subject to this subsection. Diagnostic work shall include all
   time spent by a technician who meets the manufacturer&#8217;s or
   distributor&#8217;s qualifications and requirements for the repair work
   communicating with the manufacturer&#8217;s technical assistance or external
   manufacturer source in order to complete a warranty repair. Recall or warranty
   parts compensation shall be stated as a percentage of markup, which shall be
   an agreed reasonable approximation of retail markup and which shall be
   uniformly applied to all of the manufacturer&#8217;s or distributor&#8217;s
   parts unless otherwise provided for in this section. If the dealer and
   manufacturer or distributor cannot agree on the recall or warranty parts
   compensation markup to be paid to the dealer, the markup shall be determined
   by an average of the dealer&#8217;s retail markup on all of the
   manufacturer&#8217;s or distributor&#8217;s parts as described in subdivisions
   2 and 3.

   2. For purposes of determining recall or warranty parts and service
   compensation paid to a dealer by the manufacturer or distributor, including
   body-shop repairs, only retail repair orders, or the retail portion of repair
   orders containing retail and non-retail operations, shall be considered. For
   the purposes of this section, &#8220;retail&#8221; does not include
   menu-priced parts or services, services and parts used in internal repairs
   paid by the dealer, group discounts, special event discounts, special event
   promotions, and insurance-paid repairs.

   3. Increases in dealer recall or warranty parts and service compensation and
   diagnostic work compensation, pursuant to this section, shall be requested by
   the dealer in writing, shall be based on 100 consecutive repair orders or all
   repair orders over a 90-day period, whichever occurs first. If any portion of
   a retail repair order includes amounts that are not retail, such portion shall
   be excluded. Compensation for parts shall be stated as a percentage of markup
   that shall be uniformly applied to all the manufacturer&#8217;s or
   distributor&#8217;s parts. Compensation for parts used in a recall or similar
   repair, not including warranty repairs, shall be based on the highest price of
   such parts in the 12 months before the recall or similar repair is announced
   to dealers. If the manufacturer or distributor changes the parts number or
   similar designation of a part, the price of such part established pursuant to
   this subdivision shall be determined by the price of such part before such
   change.

   4. In the case of recall or warranty parts compensation, the provisions of
   this subsection shall be effective only for model year 1992 and succeeding
   model years.

   5. If a manufacturer or distributor furnishes a part to a dealer at no cost
   for use by the dealer in performing work for which the manufacturer or
   distributor is required to compensate the dealer under this section, the
   manufacturer or distributor shall compensate the dealer for the part in the
   same manner as recall or warranty parts compensation, less the wholesale
   costs, for such part as listed in the manufacturer&#8217;s current price
   schedules. A manufacturer or distributor may pay the dealer a reasonable
   handling fee instead of the compensation otherwise required by this subsection
   for special high-performance complete engine assemblies in limited production
   motor vehicles that constitute less than five percent of model production
   furnished to the dealer at no cost, if the manufacturer or distributor
   excludes such special high-performance complete engine assemblies in
   determining whether the amounts requested by the dealer for recall or warranty
   compensation are consistent with the amounts that the dealer charges its other
   retail service customers for parts used by the dealer to perform similar work.

   6. In the case of service work, manufacturer original parts or parts otherwise
   specified by the manufacturer or distributor, and parts provided by a dealer
   either pursuant to an adjustment program as defined in &#xA7; 59.1-207.34 or
   as otherwise requested by the manufacturer or distributor, the dealer shall be
   compensated in the same manner as for recall or warranty service or parts.
   				This section does not apply to compensation for parts such as components,
   systems, fixtures, appliances, furnishings, accessories, and features that are
   designed, used, and maintained primarily for nonvehicular, residential
   purposes. Recall, warranty, and sales incentive audits of dealer records may
   be conducted by the manufacturer, factory branch, distributor, or distributor
   branch on a reasonable basis, and dealer claims for recall, warranty, or sales
   incentive compensation shall not be denied except for good cause, such as
   performance of nonwarranty repairs, lack of material documentation, fraud, or
   misrepresentation. A dealer&#8217;s failure to comply with the specific
   requirements of the manufacturer or distributor for processing the claim shall
   not constitute grounds for the denial of the claim or reduction of the amount
   of compensation to the dealer as long as reasonable documentation or other
   evidence has been presented to substantiate the claim. The manufacturer,
   factory branch, distributor, or distributor branch shall not deny a claim or
   reduce the amount of compensation to the dealer for recall or warranty repairs
   to resolve a condition discovered by the dealer during the course of a
   separate repair requested by the customer or to resolve a condition on the
   basis of advice or recommendation by the dealer. Claims for dealer
   compensation shall be paid within 30 days of dealer submission or within 30
   days of the end of an incentive program or rejected in writing for stated
   reasons. The manufacturer, factory branch, distributor, or distributor branch
   shall allow a dealer to submit a claim for rental vehicle reimbursement as
   required pursuant to subdivision B 5, in 30-day increments, prior to the end
   of the rental vehicle period if the repair for which the rental vehicle is
   associated is open due to a delay in parts or repair information from the
   manufacturer, factory branch, distributor, or distributor branch. The
   manufacturer, factory branch, distributor, or distributor branch shall reserve
   the right to reasonable periodic audits to determine the validity of all such
   paid claims for dealer compensation. Any chargebacks for recall or warranty
   parts or service compensation and service incentives shall only be for the
   six-month period immediately following the date of the claim and, in the case
   of chargebacks for sales compensation only, for the six-month period
   immediately following the date of claim. The manufacturer, factory branch,
   distributor, or distributor branch may audit and charge back, pursuant to this
   paragraph, claims for rental vehicle reimbursement for the six-month period
   immediately following the date of payment of the claim for the warranty or
   recall repair associated with such rental. However, such limitations shall not
   be effective if a manufacturer, factory branch, distributor, or distributor
   branch has reasonable cause to believe that a claim submitted by a dealer is
   intentionally false or fraudulent. For purposes of this section,
   &#8220;reasonable cause&#8221; means a bona fide belief based upon evidence
   that the material issues of fact are such that a person of ordinary caution,
   prudence, and judgment could believe that a claim was intentionally false or
   fraudulent. A dealer shall not be charged back or otherwise liable for sales
   incentives or charges related to a motor vehicle sold by the dealer to a
   purchaser other than a licensed, franchised motor vehicle dealer and
   subsequently exported or resold, unless the manufacturer, factory branch,
   distributor, or distributor branch can demonstrate by a preponderance of the
   evidence that the dealer should have known of and did not exercise due
   diligence in discovering the purchaser&#8217;s intention to export or resell
   the motor vehicle.

B. It shall be unlawful for any motor vehicle manufacturer, factory branch,
distributor, or distributor branch to:

   1. Fail to perform any of its recall or warranty obligations, including tires,
   with respect to a motor vehicle;

   2. Fail to assume all responsibility for any liability resulting from
   structural or production defects;

   3. Fail to include in written notices of factory recalls to vehicle owners and
   dealers the expected date by which necessary parts and equipment will be
   available to dealers for the correction of defects;

   4. Fail to compensate any of the motor vehicle dealers licensed in the
   Commonwealth for repairs effected by the dealer of merchandise damaged in
   manufacture or transit to the dealer where the carrier is designated by the
   manufacturer, factory branch, distributor, or distributor branch;

   5. Fail to fully compensate its motor vehicle dealers licensed in the
   Commonwealth for recall or warranty parts, work, and service pursuant to
   subsection A either by reduction in the amount due to the dealer or by
   separate charge, surcharge, or other imposition by which the motor vehicle
   manufacturer, factory branch, distributor, or distributor branch seeks to
   recover its costs of complying with subsection A, or for legal costs and
   expenses incurred by such dealers in connection with recall or warranty
   obligations for which the manufacturer, factory branch, distributor, or
   distributor branch is legally responsible or which the manufacturer, factory
   branch, distributor, or distributor branch imposes upon the dealer. Failure to
   fully reimburse a dealer for the cost to the dealer of a rental vehicle
   provided to a customer as required, offered, advertised as available, or
   agreed to by the manufacturer or distributor shall be considered a violation
   of this subsection. A dealer&#8217;s inability to provide a specified type of
   vehicle, including line-make, size, or category, from the rental market shall
   not be grounds to refuse to fully reimburse a dealer under this subdivision.
   Failure to provide compensation consistent with this section to a dealer for
   assistance requested by a customer whose vehicle was subjected to an
   over-the-air or remote change, repair, or update to any part, system,
   accessory, or function by the vehicle manufacturer or distributor and
   performed at the dealership to satisfy the customer shall be considered a
   violation of this subsection;

   6. Misrepresent in any way to purchasers of motor vehicles that warranties
   with respect to the manufacture, performance, or design of the vehicle are
   made by the dealer, either as warrantor or co-warrantor;

   7. Require the dealer to make warranties to customers in any manner related to
   the manufacture, performance, or design of the vehicle;

   8. Shift or attempt to shift to the motor vehicle dealer, directly or
   indirectly, any liabilities of the manufacturer, factory branch, distributor
   or distributor branch under the Virginia Motor Vehicle Warranty Enforcement
   Act (&#xA7; 59.1-207.9 et seq.), unless such liability results from the act or
   omission by the dealer;

   9. Deny any dealer the right to return any part or accessory that the dealer
   has not sold within 12 months where the part or accessory was not obtained
   through a specific order initiated by the dealer but instead was specified
   for, sold to and shipped to the dealer pursuant to an automated ordering
   system, provided that such part or accessory is in the condition required for
   return to the manufacturer, factory branch, distributor, or distributor
   branch, and the dealer returns the part within 30 days of it becoming eligible
   under this subdivision. For purposes of this subdivision, an &#8220;automated
   ordering system&#8221; is a computerized system that automatically specifies
   parts and accessories for sale and shipment to the dealer without specific
   order thereof initiated by the dealer. The manufacturer, factory branch,
   distributor, or distributor branch shall not charge a restocking or handling
   fee for any part or accessory being returned under this subdivision. This
   subdivision shall not apply if the manufacturer, factory branch, distributor,
   or distributor branch has available to the dealer an alternate system for
   ordering parts and accessories that provides for shipment of ordered parts and
   accessories to the dealer within the same time frame as the dealer would
   receive them when ordered through the automated ordering system.
   Notwithstanding the provisions of this subdivision, the manufacturer, factory
   branch, distributor, or distributor branch shall not deny any dealer the right
   to return, within 12 months of the date of purchase, any part or accessory
   needed to complete a recall or similar repair for compensation and the
   manufacturer, factory branch, distributor, or distributor branch is prohibited
   from deeming such part obsolete or nonreturnable by removing it from current
   parts codes or catalogs; or

   10. When providing a new motor vehicle to a dealer for offer or sale to the
   public, fail to provide to such dealer a written disclosure that may be
   provided to a potential buyer of the new motor vehicle of each accessory or
   function of the vehicle that may be initiated, updated, changed, or maintained
   by the manufacturer or distributor through over-the-air or remote means, and
   the charge to the customer at the time of the new motor vehicle sale for such
   initiation, update, change, or maintenance. A manufacturer or distributor may
   comply with this subdivision by notifying the dealer that such information is
   available on a website or by other digital means.

C. Notwithstanding the terms of any franchise, it shall be unlawful for any
motor vehicle manufacturer, factory branch, distributor, or distributor branch
to fail to indemnify and hold harmless its motor vehicle dealers against any
losses or damages arising out of complaints, claims, or suits relating to the
manufacture, assembly, or design of motor vehicles, parts, or accessories, or
other functions by the manufacturer, factory branch, distributor, or distributor
branch beyond the control of the dealer, including, without limitation, the
selection by the manufacturer, factory branch, distributor, or distributor
branch of parts or components for the vehicle or any damages to merchandise
occurring in transit to the dealer where the carrier is designated by the
manufacturer, factory branch, distributor, or distributor branch. The dealer
shall notify the manufacturer of pending suits in which allegations are made
that come within this subsection whenever reasonably practicable to do so. Every
motor vehicle dealer franchise issued to, amended, or renewed for motor vehicle
dealers in Virginia shall be construed to incorporate provisions consistent with
the requirements of this subsection.

D. On any new motor vehicle, any uncorrected damage or any corrected damage
exceeding three percent of the manufacturer&#8217;s or distributor&#8217;s
suggested retail price as defined in 15 U.S.C. §§ 1231 -1233, as measured by
retail repair costs, must be disclosed to the dealer in writing prior to
delivery. Factory mechanical repair and damage to glass, tires, and bumpers are
excluded from the three percent rule when properly replaced by identical
manufacturer&#8217;s or distributor&#8217;s original equipment or parts.
Whenever a new motor vehicle is damaged in transit, when the carrier or means of
transportation is determined by the manufacturer or distributor, or whenever a
motor vehicle is otherwise damaged prior to delivery to the new motor vehicle
dealer, the new motor vehicle dealer shall:

   1. Notify the manufacturer or distributor of the damage within three business
   days from the date of delivery of the new motor vehicle to the new motor
   vehicle dealership or within the additional time specified in the franchise;
   and

   2. Request from the manufacturer or distributor authorization to replace the
   components, parts, and accessories damaged or otherwise correct the damage,
   unless the damage to the vehicle exceeds the three percent rule, in which case
   the dealer may reject the vehicle within three business days.

E. If the manufacturer or distributor refuses or fails to authorize correction
of such damage within 10 days after receipt of notification, or if the dealer
rejects the vehicle because damage exceeds the three percent rule, ownership of
the new motor vehicle shall revert to the manufacturer or distributor, and the
new motor vehicle dealer shall have no obligation, financial or otherwise, with
respect to such motor vehicle. Should either the manufacturer, distributor, or
the dealer elect to correct the damage or any other damage exceeding the three
percent rule, full disclosure shall be made by the dealer in writing to the
buyer and an acknowledgement by the buyer is required. If there is less than
three percent damage, no disclosure is required, provided the damage has been
corrected. Predelivery mechanical work shall not require a disclosure. Failure
to disclose any corrected damage within the knowledge of the selling dealer to a
new motor vehicle in excess of the three percent rule shall constitute grounds
for revocation of the buyer order, provided that, within 30 days of purchase,
the motor vehicle is returned to the dealer with an accompanying written notice
of the grounds for revocation. In case of revocation pursuant to this section,
the dealer shall accept the vehicle and refund any payments made to the dealer
in connection with the transaction, less a reasonable allowance for the
consumer&#8217;s use of the vehicle as defined in &#xA7; 59.1-207.11. Nothing in
this section shall be construed to exempt from the provisions of this section
damage to a new motor vehicle that occurs following delivery of the vehicle to
the dealer.

F. If there is a dispute between the manufacturer, factory branch, distributor,
or distributor branch and the dealer with respect to any matter referred to in
subsection A, B, or C, either party may petition the Commissioner in writing,
within 30 days after either party has given written notice of the dispute to the
other, for a hearing. The decision of the Commissioner shall be binding on the
parties, subject to rights of judicial review and appeal as provided in Chapter
40 (&#xA7; 2.2-4000 et seq.) of Title 2.2. However, nothing contained in this
section shall give the Commissioner any authority as to the content or
interpretation of any manufacturer&#8217;s or distributor&#8217;s warranty. A
manufacturer, factory branch, distributor, or distributor branch may not collect
chargebacks, fully or in part, either through direct payment or by charge to the
dealer&#8217;s account, for recall or warranty parts or service compensation,
including service incentives, sales incentives, other sales compensation,
surcharges, fees, penalties, or any financial imposition of any type arising
from an alleged failure of the dealer to comply with a policy of, directive
from, or agreement with the manufacturer, factory branch, distributor, or
distributor branch until 40 days following final notice of the amount charged to
the dealer following all internal processes of the manufacturer, factory,
factory branch, distributor, or distributor branch. Within 30 days following
receipt of such final notice, the dealer may petition the Commissioner, in
writing, for a hearing. If a dealer requests such a hearing, the manufacturer,
factory branch, distributor, or distributor branch may not collect the
chargeback, fully or in part, either through direct payment or by charge to the
dealer&#8217;s account, until the completion of the hearing and a final decision
of the Commissioner concerning the validity of the chargeback.

HISTORY: 1988, c. 865, § 46.1-550.5:30; 1989, cc. 365, 727; 1990, c. 250; 1991,
c. 92; 1992, c. 135; 1993, c. 90; 1994, c. 783; 1995, cc. 421, 477; 1997, c.
484; 1998, c. 681; 2001, cc. 80, 89; 2006, cc. 809, 818; 2007, c. 830; 2009, cc.
173, 176; 2010, cc. 284, 318; 2013, cc. 260, 630; 2016, cc. 432, 534; 2022, cc.
715, 752; 2023, cc. 310, 311; 2025, cc. 546, 558.