August 25, Senator Richard Alloway, II Pennsylvania Senate, 33 rd District 172 Main Capitol Harrisburg, PA Dear Senator Alloway,

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1 August 25, 2017 Senator Richard Alloway, II Pennsylvania Senate, 33 rd District 172 Main Capitol Harrisburg, PA Dear Senator Alloway, On behalf of the Consumer Technology Association (CTA), thank you for the opportunity to comment on SB 800 and suggest improvements to Pennsylvania s electronics recycling system. CTA has significant concerns with this legislation and strongly opposes it in its current form. CTA is the trade association representing the U.S. consumer technology industry. CTA represents more than 2,200 companies eighty percent are small businesses and startups; others are among the world s best known manufacturing and retail brands. For many years, CTA has supported and advanced electronics recycling as part of the industry s broader commitment to environmental sustainability. According to the Pennsylvania Department of Environmental Protection (DEP), in 2015 Pennsylvania residents benefited from 62.3 million pounds of covered devices recycled by 61 manufacturers. This represents a substantial cost to the electronics manufacturers more than $10 million annually. This 48-page bill adds unnecessary complexity and cost to the electronics recycling system without likely recycling many additional pounds or providing better access to recycling. Instead, it would authorize a state takeover of this system and empower an unelected environmental board to establish a new tax and set tax rates on a major manufacturing industry. It creates a fee on the sale of new electronics, but the proceeds wouldn t go directly to recycling but rather would be directed to DEP to oversee and administer the new state-run program at a time when e-waste coming from homes and businesses would be declining. In addition, there has been no accounting of the current $5, annual registration fee for manufacturers since 2010 with little or none of that money going directly to support electronic recycling programs in communities. The bill s general provisions say that the program should be based on shared responsibility among consumers, retailers, and the government of the Commonwealth, but the details in the bill make it clear that manufacturers must cover the costs of the program in full. This is not shared responsibility; this is a new tax on a major manufacturing industry which will then have less control over a program over which they will have full financial responsibility. Our specific comments are provided below:

2 In the definitions section, the term financial obligation is defined as the proportion of the total annual cost for the collection, consolidation, transportation, recovery and management of waste electronic equipment for which a manufacturer has the responsibility to pay under this act. This is a manufacturer tax and cannot be supported. Section 301(2) is an export ban, and while some other states have similar language and CTA is sympathetic with efforts to assure quality recycling, it is unconstitutional for states to implement their own export policies. Section 303(a) authorizes the landfilling of leaded glass in this recycling bill, and this band-aid approach will draw national negative attention from recycling organizations and environmental NGOs. Section 401 tries to prohibit consumers from sharing in the cost of collection and recycling. This restriction is problematic on at least two levels. First, it reinforces the erroneous idea that recycling this equipment is free. Second, it does not provide local collectors the ability to design more customized local programs or use more expensive local service providers and have local residents who benefit from this premium service pay for it. Section 402 creates a new 0.5% fee on the sale of new electronic equipment. This approach appears to be the worst of both worlds it triggers all the retailer concerns regarding advance fees and the fee proceeds do not cover any of the major system costs of collection, transportation or recycling. Going through all the pain of an advance fee with proceeds only going to DEP to oversee the program a cost that is at most 4% of the total cost of program implementation is inconsistent with creating less government and does not promote workable public/private collaboration between DEP and the manufacturing industry. CTA and other industry stakeholders continue to investigate how a properly structured advance fee could solve the major electronics recycling challenges but this is not it. Section 502(a) calls for using if possible the existing collection, consolidation, transportation and recovery infrastructure regardless of how inefficient or duplicative it is. The state should not pick winners and losers in the recycling marketplace. If this section stays, it should state if competitive on price and performance rather than if possible to avoid multiple interpretations that could make administration difficult. Section 503 creates a state default plan for the collection, consolidation, transportation, processing and final management of waste electronic equipment by a state agency that has no expertise or experience in doing so. Without exception, these state-run programs have been proven to be significantly more expensive per pound than systems where manufacturers are given the responsibility to operate recycling programs without a state-run system. Furthermore, this section creates a government-run (but manufacturer-financed) collection system that is inconsistent with existing, privately-managed and privately-financed collection infrastructure such as those operated by Best Buy, Goodwill and Staples stores. Manufacturers that have made these investments that currently collect millions of pounds annually from Pennsylvania residents will no longer be able to count such privately-financed activities towards meeting their manufacturer recycling obligation. o Section 503(c) would require that all convenience centers the collection cornerstone of the state plan be staffed like expensive e-waste collection events. This is highly inefficient and would significantly increase the cost of collection. It is also hard to predict consumer response to events. It will be difficult for manufacturers, who are bound to produce results in all other aspects of their business as efficiently as possible, to justify the costs associated with this change to stockholders and the public. 2

3 o Section 503(c)(2) would force counties to arrange for collection activities within their county in one form or another. Given the poor response to Harrisburg University s simple questions about electronics recycling activities in some counties, what happens in counties that don t respond/don t care about setting up any sort of collection center? The bill does not account for this inevitable situation and seems to create a new recycling mandate on counties. This same lack of widespread county interest in some areas is compounded by the complicated state/county RFP process specified in Section 505. Coordination between counties and state agencies can also be time consuming and cumbersome for a variety of reasons including coordinating varying calendar/budget years. The DEP is also likely not capable of overseeing this effort, based on their inability to provide comprehensive information on manufacturer state plans. Section 505(b)(4) states that where no local-government-owned property is available, DEP is to determine sites that meet the design and operating criteria for convenience centers and that could be established by nonprofit organizations, retailers or private businesses. In addition to being outside DEP s scope of experience, the bill fails to recognize that convenience centers as defined in the bill are inherently governmental in nature and are not compatible the many privatelyoperated collection centers. Section 507 biases the process though language that can and will be viewed as picking winners and losers, favoring certain vendors seeking contracts which will ultimately distort competitive markets raising prices for all. This is clearly enabling a government agency to interfere with private enterprise. Section 509(a) ostensibly provides the option for manufacturers to run their own plans, but these alternative plans must be structured according to county lines and gives county officials veto authority over the proposed manufacturer program. Several rural counties have cooperative arrangements among themselves and this provision could undo those arrangements. It also places manufacturers at the mercy of local governments regardless of whether or not there is adequate nonprofit/retail collection infrastructure in the county. This section appears to authorize local government to take over all electronics collection systems in Pennsylvania an idea that would likely invite legal challenges on multiple levels. This would also have a potential to interfere with local and municipal zoning regulations that may not provide for such alternative plans. Section 509(c) actually attempts to shift full environmental and pollution liability for all materials management to manufacturers complying with this mandate via an alternative (i.e., private) plan. This attempt to shift liability from recyclers and other actual material handlers to manufacturers who do not have the responsibility or knowledge of day-to-date recycling operations. The result would likely be that no manufacturer ever pursues an alternative plan. Section 509(d)(5) creates county-specific per capita goals. Implementing county-specific per capita goals is an unworkable and unproven approach as counties are too small to be a reliable regulatory metric for state-wide recycling programs. On a county scale per capita collections can fluctuate significantly from year-to-year, and differ from county to county because of differing population demographics, transportation systems supporting collection locations, and proximity to collection locations in adjoining counties. No other state has attempted such a complex and county-specific approach, in part due to the enforcement challenges for all involved. Section 509(e) creates a payment and credit system that is unfair and terribly complicated. Under this section all manufacturers would have to pay for the state plan, and at some future point in time manufacturers operating alternative plans would get a discount on their state plan 3

4 tax the following year. This is yet another mechanism for forcing all manufacturers into a state plan a government takeover of the Pennsylvania electronics recycling system. Section 511(a) allows a manufacturer to implement a voluntary program but only receive a 10% credit while spending more money on implementing the recycling program. In addition, the language stating not a substitute for effectively means that only government-run collection systems will be allowed to fulfill this increased mandate. The ability for manufacturers who accept all CEDs (which would exclude most private collectors) to receive only a credit for up to 10% of the total collections is not a sufficient incentive. Section 511(b)(4) would require any voluntary manufacturer recycling program to accept all waste electronic equipment regardless of type, brand, manufacturer or size. So even though Staples excludes TVs because they do not sell TVs, HP would get zero credit. The same situation would apply to Dell Reconnect Goodwill sites. This is another example of why a state run program should not try to displace existing, privately-managed collections. Section 511(d) establishes the 10% credit towards a manufacturer tax for voluntarily recycling, but it creates new, unprecedented standards of proof of recycling to receive even the 10% credit. A similar requirement is spelled out in Section 608(d). Why is special proof required of these pounds as opposed to pounds collected under the state plan which has limited ability to audit and track materials? This proposal implies that such proof is required even though no stakeholder has in any version of a state or voluntary program accused retailers of generating ghost pounds. Recyclers under manufacturer s plans have a much better record than those under local recyclers possibly due to the manufacturers use of proprietary vendor management and tracking systems. Section 606(b) creates a remarkably complicated payment system where manufacturers would have to make six different payments in the first year. This would be the most complicated recycling taxation system in the country. Section 607 creates an accounting nightmare of adjustments and credits. Section 803(2) delegates an unelected body the Environmental Quality Board the authority to set the tax rate on manufacturers. CTA strongly objects authorizing any such unelected board the ability to set tax rates on manufacturers. Given the extensive problems with SB800 CTA recommends that SB800 not advance or, at minimum, be replaced with a more reasonable set of amendments to the CDRA as suggested in Appendix 1 below. CTA shares the goal of seeing a well-designed and well-run recycling program accessible to Pennsylvania consumers, and I look forward to working with you on that goal. Sincerely, THE CONSUMER TECHNOLOGY ASSOCIATION Walter Alcorn Vice President, Environmental Affairs and Industry Sustainability 4

5 APPENDIX 1 PROPOSED CHANGES TO PENNSYLVANIA CDRA Section is revised by adding a definition of metropolitan area as follows: Metropolitan area. A county that, as of the 2010 United States Census, had a population density of greater than 200 persons per square mile. Section (c)(2) is revised as follows: 35 P.S (c)(2). Reporting by manufacturers When a manufacturer or group of manufacturers participates in, or conducts its own, collection, transportation, and recycling program or programs for covered devices, the manufacturer or group of manufacturers shall submit a report to the department annually by January 30, beginning the year after the program is initiated. The report shall consist of: (a) a complete listing of collection, transportation, and recycling programs that the manufacturer or group of manufacturers participates in or conducts; (b) a complete listing of all collection sites included in such programs; (c) a complete listing of the person or persons operating such collection sites; (d) the amount by weight of covered devices collected at such collection sites during the previous year; (e) the total weight of covered devices collected from consumers in this Commonwealth by the manufacturer or group of manufacturer during the previous year; and (f) documentation verifying collection and recycling of the devices. Section (f)(1) is revised as follows: 35 P.S (f)(1). Effect of failure to comply with approved plan (i) (ii) (iii) (iv) If the total weight of pounds of covered devices collected, transported, and recycling during a program year by a manufacturer or group of manufacturers is less than the sum of obligated shares in weight for that program year of each manufacturer participating in the plan, the manufacturer or group of manufacturers shall submit to the department by March 13 of the following program year a payment to cover the cost of collecting, transporting, and recycling the unmet portion of the sum of the obligated shares in weight. For the purpose of calculating any payment owed by a manufacturer or group of manufacturers under this subsection, starting with the program year beginning January 1, 2019, and continuing each year thereafter, the weight of covered devices collected outside of metropolitan areas is calculated at 1.5 times their actual weight. The payment shall be equal to the quantity of the unmet portion, in pounds, plus an additional 10% of such quantity, multiplied by the cost per pound for collection, transportation, and recycling of covered devices. All payments collected under subparagraph (iii) shall be deposited into the Electronic Materials Recycling account and shall be used to fund the activities under this act. 5

6 Section is revised as follows: 35 P.S Duties of department The department shall: (1) Encourage the use of existing collection and consolidation infrastructure for handling covered devices to the extent that this infrastructure is accessible on a regular and ongoing basis to at least 85% of the population of this Commonwealth, is cost effective and meets the environmentally sound management requirements of section (2) Update the list maintained pursuant to section 302(b) 2 upon receipt by the department of a manufacturer s registration or an annual manufacturer registration renewal. (3) Organize and coordinate public education and outreach. The department shall work with retailers to develop the appropriate public education and outreach materials and to assist retailers as necessary in the conduct of their public education and outreach efforts. (4) Review all plans submitted by a manufacturer or group of manufacturers for the collection, transportation and recycling of covered devices. (5) Oversee the implementation of all approved plans and take the necessary actions to ensure compliance with approved plans. (6) Assist local governments in performing covered device recycling activities through grants to local governments drawn solely from the Electronic Materials Recycling Account. Such grants shall be distributed when the moneys in the Electronic Materials Recycling Account exceed $500,000 at any time during a program year. The total amount of such grants in such program year shall not be less than $200,000. Section is revised as follows: 35 P.S Annual reports (a) The department shall prepare and submit annually to the General Assembly and post on its Internet website a report that includes: (1) The total weight of covered devices collected in this Commonwealth during the previous calendar year. (2) A complete listing of all manufacturers collection, transportation and recycling programs and collection sites operating in this Commonwealth during the prior calendar year, the parties that operated them and the amount of material by weight collected at each site. (3) An evaluation of the effectiveness of the department s education and outreach program with retailers and local governments. (4) An evaluation of the existing collection and processing infrastructure. 6

7 (5) An evaluation of how the department is carrying out its duties imposed on the department under this act. (6) The amount of the grants provided to each local government in this Commonwealth pursuant to Section (6) in the previous calendar year. (7) Recommendations for expanding the program to include additional electronic devices. All recommendations shall be accompanied by an analysis of the positive and negative aspects along with a cost benefit analysis of the recommendations. (b) The department shall prepare and submit annually to the General Assembly Environmental Resources & Energy Committees a report that includes: (1) The balance of the Electronic Materials Recycling Account as of December 31 of the previous calendar year. (2) The number of full-time or full-time equivalent department employees dedicated to carrying out the duties imposed on the department under this act. Section is revised as follows: 35 P.S Additional duties The department shall: (1) Maintain an Internet website and toll-free telephone number complete with up-to-date listings of where consumers may take covered devices for recycling under this act. (2) No more frequently than annually and no less frequently than biennially, review the amount of the covered device recycling and registration fee. The Environmental Quality Board may promulgate regulations to adjust fees so that the fees generate sufficient revenue reasonably necessary to implement this act, except that registration fees shall not be increased for the purpose of funding additional grants to local governments required under Section (6). (3) By no later than March 1, 2020, submit to the General Assembly Environmental Resources & Energy Committees a report that reviews the adequacy of the collection of covered devices in this Commonwealth and assesses whether the implementation of this act continues to further the purposes of the act without unduly burdening retailers and manufacturers. Section is revised as follows: 35 P.S Fees for collection or recycling of covered devices Any person who operates a program in this Commonwealth for the collection of covered devices may charge a fee or cost to a consumer for the collection, transportation or recycling of a covered device, regardless of whether the person operating the program is a manufacturer, retailer, for-profit or not-forprofit corporation, unit of government, or any other person. 7