BILL ANALYSIS                                                                                                                                                                                                    Ó







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        |Hearing Date:June 25, 2012         |Bill No:AB                         |
        |                                   |1583                               |
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                      SENATE COMMITTEE ON BUSINESS, PROFESSIONS 
                               AND ECONOMIC DEVELOPMENT
                          Senator Curren D. Price, Jr., Chair
                                           

                     Bill No:        AB 1583Author:Roger Hernández
                        As Amended:  June 15, 2012Fiscal:  Yes

        
        SUBJECT:  Bulk merchandise pallets.
        
        SUMMARY:  Prohibits junk dealers and recyclers from purchasing or 
        receiving bulk merchandise pallets, as defined, marked with indicia of 
        ownership, as defined, from anyone except the indicated owner, unless 
        specified information is provided.

        Existing law:
        
        1)Regulates junk dealers and recyclers and defines "junk" as 
          secondhand and used machinery and all ferrous (containing iron) and 
          nonferrous (excludes iron) scrap metals (as defined) and alloys, 
          including any and all secondhand and used furniture, pallets, or 
          other personal property, excluding livestock.  (Business and 
          Professions Code (BPC) § 21600)

        2)Requires junk dealers and recyclers to keep a written record of all 
          junk sales and purchases for at least two years and requires the 
          written information to be reported to the chief of police or 
          sheriff, as specified, and makes it a misdemeanor to make a false or 
          fictitious statement in the written record.  The written record must 
          include:  (BPC § 21606)

           a)   The place and date of the transaction.

           b)   The name, driver's license number and state of issue, and the 
             license plate number and state of issue of any vehicle used in 
             transporting the junk.

           c)   The name and address of each person to whom the junk is sold 





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             and that person's vehicle license number.

           d)   A description of the junk purchased or sold. 

           e)   A signed statement indicating that the seller owns or is 
             authorized to sell the junk. 

        3)Defines "merchandise pallet" as a wooden or plastic carrier or 
          container of specified size, used by a manufacturer or distributor 
          to transport merchandise to retail outlets, which has a notice 
          permanently affixed to it identifying the owner of the pallet and 
          providing other specified information.  (BPC § 22750)


        4)Makes it a crime for an unauthorized person, as defined, to possess 
          a merchandise pallet or
        for a person other than its owner to obliterate the identification 
          notice on a merchandise pallet.  (BPC § 22753)

        5)Requires any person or entity purchasing plastic bulk merchandise 
          containers who is in the business of recycling, shredding, or 
          destruction of plastic bulk merchandise containers, as defined, to 
          obtain a proof of ownership record and other identifying information 
          from a person selling five or more containers, and to retain the 
          required record for one year from the date do purchase or delivery, 
          as specified.  Makes a violation of these provisions a misdemeanor.  
          (BPC § 22755)

        This bill:

       1)Defines the following terms:

           a)   "Indicia of ownership" to mean words, symbols, or registered 
             trademarks printed, stamped, etched, attached, or otherwise 
             displayed on the exterior surface of the merchandise pallet that 
             reasonably identifies the owner.

           b)   "Bulk merchandise pallets" to mean plastic or wood containers, 
             carriers, or holders used by a manufacturer or distributor for 
             bulk transport of merchandise to wholesale or retail outlets.

       2)Prohibits a junk dealer or recycler from purchasing or receiving bulk 
          merchandise pallets marked with indicia of ownership from any person 
          or entity other than the indicated owner. 

       3)Authorizes a junk dealer or recycler to purchase or receive bulk 





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          merchandise pallets if the seller is not the indicated owner, only 
          if the seller or transferor provides a receipt verifying his or her 
          current ownership or a document indicating that he or she is 
          authorized by the owner to sell or transfer the merchandise pallets, 
          and requires the junk dealer or recycler to maintain copies of these 
          documents as part of the written record of the transaction. 

       4)Requires a junk dealer or recycler to make payment for a single 
          transaction involving five or more bulk merchandise pallets marked 
          with indicia of ownership where the seller is not the indicated 
          owner by mailed check or by cash or check collected by the seller 
          after three business days.

       5)Makes the obliteration of the indicia of ownership on a merchandise 
          pallet punishable under provisions of law guarding against grand and 
          petty theft, as specified.

       6)Requires a person or entity purchasing or transporting plastic bulk 
          merchandise containers who is in the business of recycling, 
          shredding, or destruction of plastic bulk merchandise containers, or 
          is in the business of transporting plastic bulk merchandise 
          containers for those purposes, to obtain a proof of ownership record 
          or bill of lading and other identifying information from the person 
          selling or delivering five or more containers, and to retain this 
          information, as specified.

       7)Makes technical and conforming changes.

        FISCAL EFFECT:  The Assembly Appropriations Committee analysis dated 
        May 2, 2012, cites negligible, non-reimbursable costs for prosecution 
        and/or incarceration, offset by fine revenue, for misdemeanor 
        violations of provisions associated with obliterating the indicia of 
        ownership on a merchandise pallet.

        COMMENTS:
        
       1.Purpose.  This bill is sponsored by  MillerCoors  (Sponsor) to prohibit 
          junk dealers and recyclers from purchasing or receiving bulk 
          merchandise pallets marked with indicia of ownership from anyone 
          except the indicated owner, unless the seller or transporter 
          provides proof of ownership.  The Author contends that AB 1583 will 
          ensure businesses stop losing their property because the legislation 
          applies to all merchandise pallets, not only to plastic ones used 
          for milk, eggs, and beverages.

       2.Background.  While much of the recent focus of the efforts to curb 





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          the recycling of stolen goods has been upon metal theft, the Sponsor 
          indicates that there are significant problems with the theft of 
          plastics.  The Sponsor states the following regarding the existing 
          problems with the theft of plastic pallets: 

             "Despite current requirements on junk dealers and recyclers when 
             purchasing merchandise pallets, theft of merchandise pallets is 
             becoming a serious problem for food and beverage manufacturers 
             and distributors.  Higher scrap values paid recyclers of the 
             plastic resins typically used in pallets is a major factor in 
             these thefts.  Replacing a pallet can cost approximately $30 and 
             total losses are estimated in the millions of dollars.  

             "In December of 2011, the L.A. County Sheriff investigators 
             recovered $1.3 million in stolen plastic containers, boxes, and 
             crates.  According to lead detective Shelley Jones from the 
             Sheriff's Industry Substation, stolen plastic pallets cost 
             businesses in the San Gabriel Valley alone nearly $10 million 
             annually.  Sheriff's officials said the recovered property was 
             part of a complex web of organized crime operating nationally 
             and internationally that deals in stealing, recycling, and 
             reselling trademarked plastic containers.

             "AB 1583 tightens and clarifies existing laws relative to 
             purchase of merchandise pallets, adding a prohibition on 
             purchasing or receiving pallets marked with indicia of ownership 
             unless the seller can prove lawful ownership or possession.  
             When the seller is not the indicated owner, payment must be made 
             by check mailed to the address on the seller's photo ID or by 
             cash after the third business day.  The bill also expands 
             current law to require that persons who transport bulk 
             merchandise containers for the purpose of shredding, recycling, 
             or destroying, whether or not they are a junk dealer or 
             recycler, also obtain or carry proof of ownership or lawful 
             possession."

       3.Related Legislation:  In 2007, the Senate Governmental Organization 
          Committee authored  SB 520  (Chapter 349, Statutes of 2007) which 
          added BPC § 21609.5 to prohibit junk dealers or recyclers from 
          purchasing or receiving aluminum beer kegs with marks indicating 
          ownership, unless the kegs are being provided directly by the owner. 
           According to the Sponsor, AB 1583 is designed to enact similar 
          provisions regarding plastic merchandise pallets.  

           AB 1508  (Carter, 2012) revises the exemption on the sale of 
          nonferrous materials with a value under $20 from certain payment 





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          restrictions by requiring the majority of the transaction be for the 
          redemption of beverage containers and prohibiting the redemption of 
          materials made of copper or copper alloys, as specified.  This bill 
          is set for hearing June 25, 2012 in this Committee.

           AB 2003  (Torres, 2012) requires junk dealers and recyclers to 
          provide payment to sellers of nonferrous material by mailed check 
          only, as specified.  This bill failed passage in this Committee on 
          June 18, 2012.  

          AB 2298  (Ma, 2012) authorizes an appointee of the head of a county 
          agriculture commission to inspect written records of sales and 
          purchases by junk dealers or recyclers.  This bill is set for 
          hearing on June 26 in Senate Public Safety Committee.

           SB 1387  (Emmerson, 2012) prohibits a junk dealer or recycler from 
          possessing manhole covers, backflow devices, and fire hydrants 
          without written certification on the letterhead of the public agency 
          or utility that owns or previously owned that material.  Failure to 
          comply with this provision would result in a criminal fine of up to 
          $3,000.  This bill has been referred to the Assembly Public Safety 
          Committee for hearing.

           SB 1045  (Emmerson, 2012) provides that any junk dealer or recycler 
          who possesses a fire hydrant, a fire department connection, as 
          specified, or a backflow device or connection to that device or part 
          of that device without a prescribed written certification, from the 
          agency or utility owning or previously owning the material is liable 
          to the agency or utility for the wrongful possession of that 
          material.  This bill is awaiting hearing in the Assembly.

       4.Arguments in Support.   California Beer and Beverage Distributors  
          state that in recent years, California beer distributors have 
          experienced a higher frequency in the theft of pallets used in the 
          delivery of beer.  AB 1583 de-incentivizes the theft of pallets 
          which are a costly and crucial element in the transportation and 
          distribution of beer.

        California Grocers Association  believes AB 1583 will ensure businesses 
          in California stop losing their property, it applies to all 
          merchandise pallets, not only to plastic ones used for milk, eggs, 
          and beverages; making sure people do not make a profit out of stolen 
          wood and plastic pallets.

        California Nevada Soft Drink Association  states:  "Many bottlers are 
          continuing to experience substantial financial loss in the theft and 





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          misappropriation of plastic pallets and shells used in the delivery 
          of beverage products to retailers.  We believe this is occurring on 
          a large scale where these shells are sold to plastic re-processors 
          and ground into plastic flake. This requires bottlers to replace 
          these expensive items and defeats the environmental goal to reuse 
          these items in the delivery of our products."

        California Retailers Association  (CRA) states that in a slumping 
          economy, organized retail crime has been on the rise causing 
          retailers to do all that they can to minimize their losses.  The 
          theft of merchandise pallets is an ongoing problem and an area of 
          potentially significant financial loss for CRA's members.  With the 
          increased value of resin, merchandise pallet theft has become a 
          highly lucrative business for thieves.  AB 1583 would serve as a 
          deterrent to pallet thieves and would minimize the frequency of 
          these crimes, according to CRA.

       Writing in support,  Rockview Farms  indicates that it purchases nearly 
          450,000 milk crates annually at a cost of more than $1.7 million, 
          and police reports and investigations have found that milk crates 
          and plastic pallets are stolen and sold illegally to junk 
          dealers/recyclers who then grind the plastic containers into chips 
          to be resold for a lesser price.

       Safeway Inc.  states:  "Theft of merchandise pallets has become a 
          serious problem for Safeway.  We manufacture and distribute our own 
          products as well as operate retail facilities and have noticed that 
          higher scrap values paid recyclers for he resins typically used in 
          pallets is a major factor in these thefts.  AB 1583 will ensure that 
          Safeway will stop losing our property as it applies to all 
          merchandise pallets, including our plastic and wood pallets." 

       5.Oppose Unless Amended.  The  California Chapters of the Institute of 
          Scrap Recycling Industries  (ISRI) has taken an "oppose unless 
          amended" position on the bill.  Although ISRI indicates that it 
          supports many provisions in the bill, it believes that the proposed 
          BPC § 21609.7 is unnecessary in that it is duplicative of current 
          law. Specifically, ISRI points out that BPC §§ 22750 and 22755(b) 
          provide "any person or entity purchasing plastic bulk merchandise 
          containers, who is in the business of recycling, shredding, or 
          destruction of plastic bulk merchandise containers, shall obtain a 
          proof of ownership record from a person selling five or more plastic 
          bulk merchandise containers that shows that the person selling the 
          containers has lawful possession or ownership of the containers, and 
          shall also verify the seller's identity by a driver's license or 
          other government-issued photo identification."  It further states 





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          that "any person who violates the provisions of this section is 
          guilty of a misdemeanor."  ISRI argues that the duplicate provisions 
          should be removed from the bill since the existing law relating to 
          the purchasing of plastic bulk merchandise containers is clearly 
          sufficient.

       ISRI further opposes the amendments to BPC § 21609.7(c) and 22755(c) 
          which provide that payment may only be made by check and only after 
          the third business day.  ISRI points out that this requirement was 
          established for the sale or purchase of non-ferrous metals (copper, 
          aluminum, etc.).  The Legislature imposed the requirement, which 
          ISRI supported, because the theft of non-ferrous metals poses a 
          health and safety issue.  "However, the recycling of merchandise 
          containers is not a health and safety issue it is a proof of 
          ownership issue.  If a recycler has an authorization letter or a 
          contract with the owner of the merchandise containers, we believe 
          payment of said containers should be left up to the parties at hand. 
           Once that ownership has been established, why would the Legislature 
          want to interject itself on a legitimate transaction?"  As amended 
          on June 15, 2012, AB 1583 deleted the payment provision in section 
          22755(c), but the same payment language is still found in section 
          21609.7(c), and ISRI would ask that it also be removed from the 
          bill.

       Ultimately ISRI argues that the problem is not the sufficiency of the 
          current law; it is the lack of judicial enforcement of the current 
          law.  "Simply stated, few local police agencies have the desire to 
          redirect their scarce resources to enforce the merchandise container 
          laws.  This is not an issue of substantive law.  This is an issue 
          where dairy, bakery, and soft drink industries need to make sure the 
          supermarkets in which their products are sold keep the merchandise 
          containers in a secure location." 
        


        SUPPORT AND OPPOSITION:
        
         Support:  

        MillerCoors (Sponsor)
        California Beer and Beverage Distributors
        California Grocers Association
        California Nevada Soft Drink Association
        California Police Chiefs Association
        California Retailers Association
        Coca-Cola Refreshments





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        Dairy Institute
        Downey Distribution/Manufacturing Center of the Coca-Cola Bottling 
          Company of Southern California
        Intelligent Global Pooling Systems
        Los Angeles County District Attorney's Office
        Los Angeles County Sheriff's Department
        Rockview Farms
        Safeway Inc.

         Oppose Unless Amended:  

        California Chapters of the Institute of Scrap Recycling Industries

         Opposition:  

        None on file as of June 20, 2012



        Consultant:G. V. Ayers