BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                    AB 2059


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          Date of Hearing:   April 26, 2016


                   ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS


                                  Rudy Salas, Chair


          AB 2059  
          (Eduardo Garcia) - As Amended March 14, 2016


          SUBJECT:  Junk dealers and recyclers:  nonferrous materials.


          SUMMARY:  Exempts junk dealers and recyclers from the three-day  
          payment restrictions if the junk dealer or recycler obtains a  
          surety bond, as specified.  


          EXISTING LAW:


          1)Defines "junk" to mean any and all secondhand and used  
            machinery and all ferrous and nonferrous scrap metals and  
            alloys, including any and all secondhand and used furniture,  
            pallets, or other personal property, other than livestock, or  
            parts or portions thereof.  (BPC Section 21600)


          2)Defines a "junk dealer" to mean any person engaged in the  
            business of buying, selling and dealing in junk, any person  
            purchasing, gathering, collecting, soliciting or traveling  
            about from place to place procuring junk, and any person  
            operating, carrying on, conducting or maintaining a junk yard  
            or place where junk is gathered together and stored or kept  
            for shipment, sale or transfer.  (Business and Professions  
            Code (BPC) Section 21601)








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          3)Requires every junk dealer and every recycler to keep a  
            written record of all sales and purchases made in the course  
            of his or her business; a "recycler" means any processor,  
            recycling center, or noncertified recycler, as specified.   
            (BPC Section 21605)





          4)Requires every junk dealer and every recycler to maintain a  
            written record of all transactions which must include the  
            place and date of each sale or purchase of junk;  
            identification, as specified; vehicle license number and state  
            of issuance, as specified; name and address of each person to  
            whom junk is sold or disposed of, a description of the item or  
            items of junk purchased or sold; a statement indicating either  
            that the seller of the junk is the owner of it, or the name of  
            the person he or she obtained the junk from, as specified.   
            (BPC Section 21606(a))



          5)Prohibits a junk dealer or recycler from providing payment for  
            nonferrous material unless, in addition to meeting the written  
            record requirements, all of the following conditions are met:



             a)   The payment for the material is made by cash or check,  
               where the check may be mailed to the seller at the address  
               provided or the cash or check may be collected by the  
               seller from the junk dealer or recycler on or after the  
               third business day;








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             b)   At the time of sale, the junk dealer or recycler obtains  
               a clear photograph or video of the seller;



             c)   The junk dealer or recycler obtains the required  
               identification;



             d)   The junk dealer or recycler obtains a clear photograph  
               or video of the nonferrous material being purchased;



             e)   The junk dealer or recycler must preserve the written  
               record for a period of two-years; and, 



             f)   The junk dealer or recycler obtains a thumbprint of the  
               purchaser, as specified.  (BPC Section 21608.5(a)(1-6))



          6)Requires a junk dealer or a recycler to request to receive  
            theft alert notifications regarding the theft of commodity  
            metals, including, but not limited to, ferrous metal, copper,  
            brass aluminum, nickel, stainless steel, and alloys in the  
            junk dealer's or recycler's geographic region from the theft  
            alert system maintained by the Institute of Scrap Recycling  
            Industries, Inc., or its successor.  (BPC Section 21608.7)

          THIS BILL:
          
          1)Authorizes a junk dealer or recycler to provide payment to a  
            seller by check or cash before the three-day waiting period  
            expires if the junk dealer or recycler carries a surety bond  








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            in the minimum amount of $100,000, covering the business at  
            large, including all locations, which must be maintained  
            exclusively to cover the cost of loss to the verifiable owner  
            of stolen scrap metal proved to be purchased by the junk  
            dealer or recycler. 



          2)States that the recoverable loss to the verifiable owner of  
            the stolen scrap metal must be the damages specified in the  
            Civil Code, and further states that the reimbursement for the  
            value of stolen scrap metal is in no way to be treated under  
            law as an admission of culpability by the junk dealer or  
            recycler to any criminal activity involved in the alleged  
            theft of the scrap metal.  


          FISCAL EFFECT:  None.  This bill is keyed non-fiscal by the  
          Legislative Counsel.  


          COMMENTS:


          Purpose.  This bill is sponsored by the  West Coast Chapter of  
          the Institute of Scrap Recycling Industries .  According to the  
          author, "this measure would bring about a fair and reasonable  
          alternative to current recycling laws without jeopardizing the  
          efforts to stop illegal transfers of nonferrous metals.  In  
          fact, this bill promises to make serious inroads in stopping  
          black market recycling."


          Background.  Current Junk Recycling Requirements.  AB 844  
          (Berryhill), Chapter 731, Statutes of 2008 imposed additional  
          recordkeeping requirements and payment restrictions on junk  
          dealers and recyclers when purchasing nonferrous materials.   
          Junk dealers and recyclers are currently prohibited from buying  
          nonferrous materials unless the buyer obtains a copy of the  








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          seller's driver's license, a photograph or video of the material  
          being purchased, and a thumbprint of the seller.  Additionally,  
          payment is restricted to a check mailed to the seller or a cash  
          or check payment that can be collected by the seller three days  
          after the date of sale.  Junk dealers and recyclers are also  
          required to follow strict guidelines regarding the retention of  
          records, payment for materials, the photography or video of  
          items being purchased, and the collection of identification and  
          thumbprints of sellers, among others.  The payment restrictions  
          are exempted for individuals redeeming nonferrous materials with  
          a value less than $20 in a single transaction, when the primary  
          purpose of the transaction is the redemption of beverage  
          containers, or if the junk dealer and seller completed five or  
          more transactions per month.  

          However, other exemptions exist.  Under current law, if a seller  
          does routine business with a junk dealer or recycler (i.e., at  
          least five separate transactions on five or more separate days a  
          month with the same junk dealer or recycler for three separate  
          months), the three-day payment requirement does not apply.   
          Additionally, if a seller has an established relationship with a  
          junk dealer or recycler and has provided the name, physical  
          business address, and business telephone number of the seller's  
          business, business license number or tax identification number  
          and a copy of the driver's license of the person delivering the  
          nonferrous material on behalf of the seller, he or she will be  
          exempt from the check-by-mail-only payment requirement, among  
          other provisions.  

          This bill would exempt a junk dealer or recycler from the three  
          day requirement if the junk dealer or recycler carries a surety  
          bond of at least $100,000, covering the business entity  
          including all of its locations, to cover the cost of loss to the  
          verifiable owner of stolen scrap metal purchased by the junk  
          dealer or recycler and the cost to local law enforcement of  
          investigating the theft.

          Nonferrous Metal Recycling Industry.  According to the Institute  
          of Scrap Recycling Industries (ISRI), Inc., nonferrous (or not  








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          iron-based) metals are among the few materials that do not  
          degrade or lose their chemical or physical properties in the  
          recycling process.  Because of this, these metals have the  
          capacity to be recycled a nearly infinite number of times.   
          Nonferrous materials include copper, copper alloys, stainless  
          steel, or aluminum (but not beverage containers, as defined in  
          the California Public Resources Code).  

          In addition, the ISRI notes that in the United States, the value  
          of the nonferrous scrap industry approached $40 billion in 2014.  
           In terms of volume, nonferrous scrap materials make up a small  
          percentage of the total quantity of material recycled in the  
          United States, but by value they account for more than half of  
          the total earnings of the scrap recycling industry.  In 2014,  
          the U.S. exported nearly $11 billion worth of nonferrous scrap  
          to more than 85 countries.  Those figures represent a decrease  
          from 2012, where the value of the scrap industry was reported to  
          be $50 billion while the United States exported $14 billion to  
          more than 90 countries. 

          Legislative Trend in California.  Since the enactment of AB 844,  
          there have been a number of measures introduced and signed into  
          law with the intent of decreasing metal theft.  In the 2013-2014  
          legislative session alone, there were seven bills introduced to  
          curb the purported rise in metal theft.  Of those seven, two  
          were signed into law, two were vetoed by the Governor, two died  
          in the Assembly Committee on Business, Professions and Consumer  
          Protection, and one was amended to address and unrelated topic.   
          Both SB 485 (Calderon), Chapter 518, Statutes of 2013 and AB  
          2312 (Nestande and Olsen), Chapter 608, Statutes of 2014 placed  
          new requirements on junk dealers and recyclers and were either  
          sponsored or supported by the West Coast Chapter of the  
          Institute of Scrap Recycling Industries, the sponsor of this  
          bill .  SB 485 required a junk dealer or recycler to submit  
          additional information regarding its junk dealer business and  
          increased the fees that junk dealers or recyclers must pay for  
          each fixed location in an effort to reduce the number of  
          non-compliant dealers, and hopefully deter fraudulent  
          transactions and decrease the sale of stolen metal property.  AB  








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          2312 required a junk dealer or recycler to request to receive  
          metal theft alert notifications from an Internet-based theft  
          alert system.  

          This bill does not eliminate the current payment restrictions,  
          but provides an additional exemption to the payment restrictions  
          for those junk dealers or recyclers who obtain a surety bond  
          (minimum of $100,000) to cover the cost of loss to the  
          verifiable owner of stolen scrap metal.  In addition, this bill  
          specifies that if a junk dealer or recycler must reimburse a  
          verifiable owner of the loss, it shall not be treated as an  
          admission of culpability by the junk dealer or recycler for  
          criminal activity.  

          Metal Theft.  National Insurance Crime Bureau.  In 2013, The  
          National Insurance Crime Bureau (NICB) released a report  
          regarding metal theft, which stated, "thieves have been willing  
          to go to almost any length to obtain the metal.  They have  
          stripped sheets of metal from building rooftops, stolen memorial  
          decorations from cemeteries, ripped apart air conditioners for  
          the copper coils within, and stripped homes and buildings of  
          wiring and piping? The thieves can endanger the safety of  
          themselves and those in the surrounding community, and weaken  
          the infrastructure vital to our everyday lives.  Unoccupied  
          buildings have exploded due to gas lines being stolen, stretches  
          of highway have been left dark after thieves stole wiring from  
          utility poles, and tornado warning sirens have been rendered  
          inoperable due to wiring being stolen? Regardless of the motive,  
          the damage caused by such thefts is often several times the  
          value of the metal stolen, leaving the victims with hefty repair  
          costs which are then often passed on to insurance companies."   
          (Metal Theft Claims and Questionable Claim Referrals from  
          January 1 2010 to December 31, 2012, April 19, 2013, NICB).

          However, the NICB released an updated report which finds that  
          insured metal theft claims in 2014 were down 8% from 2012  
          levels.  "In 2012, a total of 13,731 metal theft claims were  
          processed.  The number dropped to 13,632 in 2013 and decreased  
          again in 2014 to 12,630-a decline of eight percent from 2012.   








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          During this three-year period, 39,993 insurance claims for the  
          theft of copper, bronze, brass or aluminum were handled-38,985  
          of them (98%) involving copper.  When the number of metal theft  
          claims per month and monthly average copper prices are compared,  
          the number of claims filed is found to have a  
          statistically-significant correlation with the price of copper."  
           (Metal Theft Claims and Questionable Claim Referrals from  
          January 1, 2012 through December 31, 2014, July 15, 2015, NICB).  


          Legislative Trends Nationally.  Metal theft is not unique to  
          California and has been recognized as a problem by numerous  
          states.  As a result of legislative action in the United States,  
           the Council of State Governments (CSG) conducted a study in  
          2014, Scrap Metal Theft: Is Legislation Working for States?,  
          which aimed to review the effectiveness of metal theft  
          legislation across the nation.  As noted in that study, the rise  
          of metal theft triggered some form of legislation in all 50  
          states.  Many of the legislative remedies included similar  
          frameworks to California laws such as identification  
          requirements for sellers, payment restrictions, and strict  
          record retention requirements for junk dealers and recyclers.   
          However, when the CSG began its statewide analysis,  
          comprehensive data was not available from the states because 1)  
          the sources of data were insufficient to determine the accurate  
          rate of metal theft; 2) no state tracks the number of metal  
          thefts; and, 3) at the local level, the quality and accuracy of  
          the accessible data is unknown and could not be used to explain  
          state trends.  The CSG report states, "although a number of  
          states have focused on metal theft, such as creating task forces  
          designed to study metal theft trends, and possible legislative  
          solutions, no state collects comprehensive data on metal theft."  


          Prior Related Legislation. AB 841 (Torres) of 2013 would have  
          required junk dealers and recyclers to provide payment to  
          sellers of nonferrous material by mailed check only, as  
          specified.   NOTE: This bill was vetoed by the Governor due to  
          prior legislation, namely SB 485, already addressing the issue;  








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          the Governor stated that the existing laws needed to be enforced  
          rather than introducing more legislation. 

          AB 1095 (Nestande) of 2013 would have required a junk dealer or  
          recycler to pay a seller of nonferrous materials only by mailed  
          check or by a check collected by the seller in person at least  
          30 days from the date of sale, requires a junk dealer or  
          recycler to hold the purchased material for 30 days unless  
          specified conditions are met, and deletes existing provisions  
          exempting a seller who completes at least five or more separate  
          transactions per month from specified payment requirements.    
          NOTE: This bill died in the Assembly Committee on Business,  
          Professions and Consumer Protection.  

          AB 909 (Gray) of 2013 would have required the Board of State and  
          Community Corrections to establish the Metal Theft Task Force  
          Program to provide, evaluate and monitor grants disbursed to  
          enhance the capacity of local law enforcement and prosecutors to  
          deter, investigate, and prosecute metal theft and related metal  
          theft crimes.  NOTE: This bill was vetoed by the Governor due to  
          prior legislation, namely SB 485, already addressing the issue;  
          the Governor stated that the existing laws provide a funding  
          source for greater enforcement within the existing  
          infrastructure.   


          AB 2312 (Nestande and Olsen), Chapter 608, Statutes of 2013  
          required a junk dealer or recycler to request to receive metal  
          theft alert notifications from an Internet-based theft alert  
          system and requires a junk dealer or recycler to provide a  
          statement that they have requested to receive theft alert  
          notifications when seeking a weighmasters license.  


          AB 801 (Brown) of 2013 would have required junk dealers and  
          recyclers to obtain specified information before providing  
          payment for nonferrous materials marked with an indicia of  
          ownership, as defined, and would require that this information  
          be retained as part of the written record of purchases.  NOTE:  








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          This bill died in the Assembly Committee on Business,  
          Professions and Consumer Protection. 


          SB 485 (Calderon), Chapter 518, Statutes of 2013 required a junk  
          dealer or recycler to submit additional information regarding  
          its junk dealer business to Department of Food and Agriculture  
          (DFA) when applying for a weighmaster's license or a renewal  
          license; required the DFA to complete an investigation of the  
          information on the application or renewal within a specified  
          period of time and revoke the license if the information  
          submitted in the application or renewal is materially  
          inaccurate; increased the fees that junk dealers or recyclers  
          pay for each fixed location, and sunsets those provisions on  
          January 1, 2019.  

          SB 757 (Berryhill) of 2013 would make conforming changes to  
          authorize a junk dealer or recycler buying newspaper or  
          California Redemption Value (CRV) containers to accept as valid  
          seller identification a passport from any country or a Matricula  
          Consular issued by Mexico.  It also specifies that the term  
          "secondhand dealer" does not include a junk dealer.  NOTE: This  
          bill was substantially amended to address an unrelated issue.   



          AB 316 (Carter), Chapter 317, Statutes of 2011 provided that  
          every person who steals, takes, or carries away copper materials  
          which are of a value exceeding $950 is guilty of grand theft,  
          punishable as specified.

          SB 447 (Maldonado), Chapter 732, Statutes of 2008 required scrap  
          metal dealers and recyclers to report what materials are being  
          scraped at their facilities and by whom on a daily basis.  
          AB 844 (Berryhill), Chapter 731, Statutes of 2008 required  
          recyclers to hold payment for three days, check photo  
          identification and take a thumbprint of anyone selling scrap  
          metals.  AB 844 also required any person convicted of metal  
          theft to pay restitution for the materials stolen and for any  








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          collateral damage caused during the theft.
          SB 691 (Calderon), Chapter 730, Statutes of 2008 required junk  
          dealers and recyclers to take thumbprints of individuals selling  
          copper, copper alloys, aluminum and stainless steel, and  
          required sellers to show government identification and proof of  
          their current address.  

          ARGUMENTS IN SUPPORT: 

          The  West Coast Chapter of the Institute of Scrap Recycling  
          Industries  , writes in support, "ISRI is in strong support of  
          [this bill] which would amend Section 21608.5 of the [BPC] by  
          giving scrap metal recyclers (i.e., buyers of scrap) and option  
          of paying cash to scrap metal collectors (i.e., their customers  
          - sellers) in lieu of the current three-day waiting period if  
          the scrap metal recycler posts a $100,000 surety bond to cover  
          the loss by the victim of stolen metal purchased by the  
          recycler.  It would also cover the cost for law enforcement to  
          investigate the metal theft in question." 


          The  California Association of Mutual Water Companies  writes in  
          support, "[This bill] would require law-abiding metal recycling  
          centers to post a $100,000 bond in order to make cash payments  
          to scrap metal collectors.  Currently, law-abiding recycling  
          centers are required to withhold payments for three days while  
          rogue illegal operations are paying cash with impunity from the  
          law.  As scrap metal collectors sell to rogue operations who  
          accept stolen metal, the ability of law enforcement to track  
          sales is also being lost, and law-abiding recycling centers are  
          losing out."


          ARGUMENTS IN OPPOSITION:


          The  California State Sheriffs' Association  writes in opposition,  
          "We are concerned because [this bill] creates an exemption from  
          this statute for a recycler that carries a surety bond designed  








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          to cover the cost of loss to the verifiable owner of stolen  
          scrap metal proved to be purchased by the junk dealer or  
          recycler, as well as to cover the cost to local law enforcement  
          relating to its investigation of the alleged theft of the  
          specific material in question.  It is unclear how this bond  
          would be accessed by a person experiencing a loss or a law  
          enforcement agency that has investigatory costs in connection  
          with a criminal act.  We appreciate [the author's] intent, but  
          we feel current law strikes the appropriate balance between  
          deterrence and limited business interference."


          The  California Farm Bureau Federation  (Farm Bureau) "[writes] to  
          express concerns with [this bill].  [The] Farm Bureau represents  
          more than 53,000 members as it strives to protect and improve  
          the ability of farmers and ranchers engaged in production  
          agriculture to provide a reliable supply of food and fiber  
          through responsible stewardship of California's resources. Metal  
          theft continues to be a problem for farmers and ranchers in  
          California.  [This bill] threatens to weaken the laws put in  
          place to prevent the sale of stolen metal and it is for this  
          reason that Farm Bureau opposes [this bill] unless it is amended  
                                                                    to address concerns.  In recent years the California Legislature  
          has considered numerous proposals to address the widespread  
          issue of metal theft. Many proposals have been adopted,  
          including the requirement that junk dealers and recyclers hold  
          payment for metal to limit opportunities for thieves stealing  
          metal to obtain immediate cash payments, often to feed drug  
          habits.  [This bill] would eliminate the requirement that  
          payments be delayed if a recycler held a bond to pay for  
          investigation and losses associated with metal theft."

          The  California Chapters of the National Electrical Contractors  
          Association  , the  California Legislative Council of the Plumbing,  
          Heating and Piping Industry  , the  Western Line Constructors  , and  
          the  Wall and Ceiling Alliance  write in opposition, "The  
          Legislature has passed a number of laws over the past few years  
          in an attempt to slow the rapidly increasing problem of metal  
          theft.  Among those is a requirement to hold payments by cash or  








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          check to on or after the third business day after the sale.   
          This was put in place to deter unscrupulous sellers who are  
          looking for instant cash and to allow more time for junk dealers  
          and recyclers to assess the seller before providing payment.  We  
          feel that the elimination of this requirement runs contradictory  
          to the effort to reduce crimes related to metal theft.  For  
          these reasons, we oppose [this bill]."

          The  California Central Valley Flood Control Association  writes  
          in opposition, "The purpose of the 3-day wait period is to  
          enable a victim of metal theft to discover the theft and report  
          the incident to local law enforcement, which in turn can contact  
          local junk dealers or recyclers to warn about the potential sale  
          of stolen metal.  The provision of this modest wait period was a  
          key component of legislative efforts to respond to increased  
          incidents of metal theft throughout California." 

          POLICY ISSUES FOR CONSIDERATION:


          This bill will modify the current payment restrictions to permit  
          junk dealers or recyclers who obtain a surety bond to be exempt  
          from the current three-day payment restrictions.  In an effort  
          to understand the impact of this bill, the author should amend  
          the bill to include a three-year sunset provision.  The  
          three-year sunset will ensure the Legislature will be able to  
          review the impacts of this bill and any potential impacts on its  
          efforts to reduce and eliminate metal theft in this state.  In  
          addition, the author should require the California Research  
          Bureau to complete a report reviewing the impact of this  
          measure.


          AMENDMENTS:


          In order to address the policy issue raised above, the author  
          should amend the bill as follows:









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          On page 4, after "metal." Insert  This paragraph shall remain in  
          effect until January 1, 2020.   


           On or before June 1, 2019, the California Research Bureau shall  
          provide a report to the Legislature on the impact of the bond  
          provision.


           


          REGISTERED SUPPORT:  


          West Coast Chapter of the Institute of Scrap Recycling  
          Industries (sponsor)
          California Association of Mutual Water Companies


          REGISTERED OPPOSITION:  
          California Central Valley Flood Control Association


          California Chapters of the National Electrical Contractors  
          Association 


          California Farm Bureau Federation


          California Legislative Council of the Plumbing, Heating and  
          Piping Industry


          California State Sheriffs' Association
          Wall and Ceiling Alliance









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          Western Line Constructors 





          Analysis Prepared by:Elissa Silva / B. & P. / (916) 319-3301