BILL ANALYSIS Ó
AB 2059
Page 1
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