BILL NUMBER: SB 245AMENDED BILL TEXT AMENDED IN SENATE APRIL 1, 2013 INTRODUCED BY Senator Correa (Principal coauthor: Senator Calderon) FEBRUARY 12, 2013 An act to add Chapter 6 (commencing with Section 48800) to Part 7 of Division 30 of the Public Resource s Code, relating to recycling. LEGISLATIVE COUNSEL'S DIGEST SB 245, as amended, Correa. Recycling: mattresses. Existing law requires a retailer of various specified products, such as rechargeable batteries and cell phones, sold in the state to have in place a system for the acceptance and collection of those products for reuse, recycling, or proper disposal. This bill woulddeclare the intention of the Legislature to enact subsequent legislation to establish a program for the management of used mattresses, with specified componentsenact the "Used Mattress Recycling Act" and would define terms for purposes of the act . The bill would require a qualified industry association, or a successor organization, to establish a mattress recycling organization by November 1, 2014, and would require each manufacturer and retailer to register with the mattress recycling organization by February 1, 2015. The bill would prohibit a manufacturer or a retailer from taking specified actions with regard to selling or distributing a mattress in the state after that date, unless the manufacturer or retailer is in compliance with the act, as specified. The bill would require the organization, by July 1, 2015, to develop a state plan for recycling used mattresses that includes specified goals and elements and to submit the plan to the Department of Resources Recycling and Recovery. The bill would require the department to review the plan for consistency and to notify the organization of any inconsistences within 90 days after submittal of the plan. The bill would provide that if the department does not find any inconsistencies, the plan would be deemed approved by the department. The bill would require the organization to implement the approved plan by November 1, 2015. The bill would require the organization to annually prepare and approve a proposed plan budget for the next calendar year and to submit the approved budget to the department. The department would be required to review the budget, as specified. The department would be required to notify the organization of the department's direct costs in implementing the act and the organization would be required to reimburse the department for those costs. The bill would require the department to deposit these amounts submitted by the organization into the Used Mattress Recycling Account, which the bill would establish in the Integrated Waste Management Fund. The bill would require the department to expend the moneys in the account, upon appropriation by the Legislature, to administer and enforce the act. The bill would require the organization to annually set the amount of a state mattress recycling charge that would be added to the purchase price of a mattress, and would require a manufacturer, retailer, wholesaler, distributor, or other party that sells a mattress to add the charge to the purchase price for the mattress. This bill would constitute a change in state statute that would result in a taxpayer paying a higher tax within the meaning of Section 3 of Article XIII A of the California Constitution, and thus would require for passage the approval of 2/3 of the membership of each house of the Legislature. The bill would specify procedures for the collection and disbursement of the charge by the organization. The bill would require the organization to be subject to an annual audit and to annually publish, and make publically available on its Internet Web site, a report regarding the implementation of the plan. The organization would be required to submit the annual report to the department, for review, as specified. The bill would require the organization to post information regarding compliance with the act on its Internet Web site and would require a retailer that distributes or sells a mattress to monitor the organization's Internet Web site. The department would be authorized to impose an administrative civil penalty on a manufacturer or retailer who sells a mattress in violation of the act. The department would be required to deposit these penalties into the Mattress Recovery and Recycling Penalty Account, which the bill would create in the Integrated Waste Management Fund. The department would be authorized to expend the moneys in that account, upon appropriation by the Legislature, to implement the act. The department would be required to annually review the organization's compliance with the act and notify the organization, as specified. The department would also be required to periodically, but not less than once every 3 months, determine whether a federal statute has been enacted that requires a national used mattress recycling plan. If the department determines that this federal statute has been enacted, the department would be required to post this information on its Internet Web site and submit a notice to the Secretary of State and the Office of the Legislative Counsel and the act would become inoperative 30 days after the date that the department issues that notice. Vote:majority2/3 . Appropriation: no. Fiscal committee:noyes . State-mandated local program: no. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Chapter 6 (commencing with Section 48800) is added to Part 7 of Division 30 of the Public Resources Code , to read: CHAPTER 6. USED MATTRESS RECYCLING ACT Article 1. Findings and Declarations 48800. The Legislature finds and declares all of the following: (a) At the end of their useful life, most mattresses and foundations or box-springs are either discarded in landfills or are renovated by companies, some of whom sell them to unsuspecting consumers in an unhygienic, unsafe, or dishonest manner. Some used mattresses are illegally dumped. (b) Used mattresses contain materials or components that have commercial value if reclaimed from the waste stream. (c) Recycling used mattress materials and components can also benefit the environment by conserving scarce resources, by reducing the air and water pollution and greenhouse gases that otherwise would be generated in producing new products from virgin materials, and by conserving landfill capacity. (d) The cost of collecting, dismantling, and reclaiming materials or components from used mattresses in most cases exceeds the recycling revenue generated from selling the reclaimed materials and components. (e) California encourages policies that divert recyclable products and materials from the state's landfills and that result in those products and materials being recycled or used in a commercially reasonable manner. (f) California would benefit from a plan that would allow the mattress industry to fund, develop, and publicize a program to establish and sustain a network of facilities that will recycle used mattress components and create recycling employment opportunities. (g) It is also critical that the plan minimize the expenditure of resources and funds for the state government's oversight responsibilities. (h) To increase recycling, reduce public agency costs for the end-of-life management of used mattresses, and reduce illegal dumping, the Used Mattress Recycling Act is hereby established by this chapter to develop, finance, and implement a convenient and cost-effective program to collect and recycle used mattresses generated in this state. 48801. This chapter shall be known, and may be cited, as the Used Mattress Recycling Act. Article 2. Definitions 48802. For the purposes of this chapter, the following terms have the following meanings: (a) (1) "Consumer" means an owner of a mattress, including a person, business, corporation, limited partnership, nonprofit organization, or governmental entity, and including the ultimate purchaser, owner, or lessee of a mattress. (2) "Consumer" does not include a government organization or other party that obtains one or more used mattresses in the course of collecting used mattresses for recycling for purposes of this chapter, or through the ordinary collection and handling of municipal solid waste. (b) "Distributor" means a company that has a contractual relationship with one or more manufacturers to market and sell mattresses to retailers. (c) "Foundation" means a ticking covered structure used to support a mattress or sleep surface. The structure may include constructed frames, foam, box springs, or other materials, used alone or in combination. (d) "Importer" means a party qualifying as an "importer of record" for purposes of Section 1484(a)(2)(B) of Title 19 of the United States Code, with regard to the import of a finished mattress sold in the state that was manufactured or assembled by a company outside the United States. (e) "Industry" means a person who manufactures mattresses sold in the state. (f) "Manufacturer" means a person that manufactures, assembles, or imports a finished new mattress in this state that is then sold, offered for sale, or distributed in the state. (g) (1) "Mattress" means a resilient material or combination of materials that is enclosed by a ticking, used alone or in combination with other products, and that is intended for or promoted for sleeping upon. (2) "Mattress" includes a foundation and a renovated mattress or renovated foundation. (3) "Mattress" does not include any of the following: (A) An unattached mattress pad or unattached mattress topper, including items with resilient filling, with or without ticking, intended to be used with or on top of a mattress. (B) A sleeping bag or pillow. (C) A car bed, crib, or bassinet mattress. (D) A carriage, basket, dressing table, stroller, playpen, infant carrier, lounge pad, or crib bumper. (E) A product containing liquid and gaseous filled ticking, including any water bed and air mattress that does not contain upholstery material between the ticking and the mattress core. (F) Upholstered furniture that does not otherwise contain a detachable mattress. (G) Juvenile product pads, including car bed pads, carriage pads, basket pads, infant carrier and lounge pads, dressing table pads, stroller pads, crib bumpers, and playpen pads. (h) "Mattress recycling organization" or "organization" means an organization exempt from tax under Section 501(c)(3) or Section 501 (c)(6) of the Internal Revenue Code of 1986, that is established by a qualified industry association, and that is composed of manufacturers and retailers, to develop, implement, and administer the mattress recycling program established by this chapter. (i) "Plan" means the plan for recycling used mattresses that is developed by the organization pursuant to Section 48804. (j) "Program" or "used mattress recycling program" means the program implemented by the mattress recycling organization pursuant to an approved plan. (k) "Qualified industry organization" means the International Sleep Products Association, a successor of that organization, or a group of mattress manufacturers that collectively represent at least 35 percent of the volume of mattresses manufactured in the United States. (l) (1) "Recycle" or "recycling" has the same meaning as defined in Section 40180. (2) "Recycle" does not include the renovation or the reuse of materials obtained from a used mattress in a renovated mattress, except in the form of clean recycled material. (m) "Recycling charge" or "charge" means the charge collected by the organization to fund the recycling of used mattresses. (n) "Renovate" or "renovation" means altering a used mattress for the purpose of resale and includes any one, or a combination of the following: (1) Replacing the mattress ticking or filling. (2) Adding additional filling. (3) Rebuilding a used mattress. (4) Replacing components with new or postconsumer materials, unless the material is a clean recycled material, consists of used electronic parts or controls, or is a used mattress base that is not covered by ticking. (o) (1) "Renovated mattress" means a mattress that has undergone renovation for the purpose of resale. (2) "Renovated mattress" does not include either of the following: (A) A product renovated by a person who intends to retain the renovated mattress for the person's own use. (B) A product renovated by a renovator hired by the person who intends to take back the renovated mattress for the person's own use. (p) "Retailer" means a person who sells mattresses in the state or offers to a consumer a mattress in the state through any means, including, but not limited to, by remote offering, including sales outlets or catalogs, electronically through the Internet, by telephone, or through the mail. (q) "Sale" or "sell" means the transfer of title of a mattress for consideration, including by a manufacturer, a distributer, or a retailer, for eventual consumption to a consumer in the state, regardless of whether the mattress was made in or imported into the state, including remote sales conducted through sales outlets, catalogs or the Internet or through any other similar electronic means. For purpose of this chapter, a long-term lease of not less than 12 months is the same as a sale. (r) "State mattress recycling charge" or "charge" means the charge imposed upon the sale of a new mattress pursuant to Article 5 (commencing with Section 48810). (s) (1) "Ticking" means the outermost layer of fabric or related material of a mattress. (2) "Ticking" does not include another layer of fabric or related material that is quilted together with, or otherwise attached to, the outermost layer of fabric or related material. (t) "Used mattress" means a mattress that has been discarded by a consumer. Article 3. Mattress Recycling Plan 48803. (a) On or before November 1, 2014, a qualified industry association or a successor organization shall establish a mattress recycling organization, which shall be composed of manufacturers and retailers, to develop, implement, and administer the mattress recycling program established by this chapter. (b) On or before February 1, 2015, each manufacturer and retailer shall register with the mattress recycling organization, at no charge to the manufacturer or retailer. (c) On and after February 1, 2015, a retailer shall not sell, distribute, or offer for sale a mattress in the state unless the retailer is in compliance with this chapter and the manufacturer of the mattress sold by the retailer is listed in compliance with this chapter, as specified in Section 48820. (d) On and after February 1, 2015, a manufacturer shall not manufacture, assemble, or import a finished new mattress in this state, or sell or distribute a mattress to a distributor or retailer, unless the manufacturer is in compliance with this chapter. 48804. On or before July 1, 2015, the mattress recycling organization shall develop and submit to the department a plan for recycling used mattresses in the state in an economically efficient and practical manner that includes all of the following goals and elements: (a) Methods to increase the number of used mattresses diverted from landfills, reduce the number of illegally dumped used mattresses, and increase the quantity of used materials recovered through this process and recycled for other uses. (b) The establishment and administration of a means for funding the plan in a manner that distributes the organization's costs uniformly over all mattresses sold in the state and that includes the charge set and collected pursuant to Article 5 (commencing with Section 48810). (c) The establishment of a financial incentive to encourage parties to collect for recycling used mattresses discarded or illegally dumped in the state. (d) The publishing of an annual report for each calendar year of operation, as specified in Section 48816. (e) Conducting research, as needed, related to improving the efficiency of used mattress collection, dismantling, and recycling operations, including pilot programs to test new processes, methods, or equipment on a local, regional, or otherwise limited basis. (f) Establishing the mattress recycling baseline amount in the state as of July 1, 2016, and setting goals to increase the recycling of used mattresses, as economically and programmatically practical. The goals may be revised by the organization based on the information collected for the annual report. (g) Coordinating activities with existing used product collecting and recycling plans operating in the state, or elsewhere, for discarded mattresses or other products, and other relevant parties as appropriate, to provide efficient delivery of services and avoid unnecessary duplication of effort and expense. (h) Providing outreach efforts and education to consumers, manufacturers and retailers, for the purpose of promoting the recycling of used mattresses. This element shall include providing information to retailers that the organization determines will promote implementation of its plan, including, but not limited to, both of the following: (1) Written materials to be provided to the consumer with the mattress. These written materials shall include information on the proper disposal of used mattresses by consumers. (2) Advertising or other promotional materials, or both, that includes references to mattress recycling opportunities. (i) The promotion of consumer and public education about safety and other issues associated with the use of renovated mattresses. (j) Entering into contracts or agreements that are necessary and proper for the organization to carry out these duties consistent with the terms of this chapter, including, as the organization considers necessary, contracts with agencies of the federal, state, or political subdivisions of a state government to assist in the collection of charges and the enforcement of this chapter. (k) Annually evaluating the performance of the plan, taking into consideration technical and economic feasibilities, in achieving continuous, meaningful improvement in the rate of used mattress recycling in the state. 48805. (a) The departments shall review the plan submitted pursuant to Section 48804 for consistency with this chapter and shall notify the organization of any inconsistences within 90 days after submittal of the plan. (b) If the department does not find any inconsistencies regarding the plan, the plan shall be deemed approved by the department. 48806. On or before November 1, 2015, the mattress recycling organization shall implement the approved plan. Article 4. Budget 48806.5. On or before July 1, 2015, and on or before July 1 annually thereafter, the organization shall prepare a proposed plan budget for the next calendar year that includes all of the following: (a) Proposed recycling goals and other goals for the next calendar year. (b) Anticipated costs of implementing the program, including related programs, projects, contracts and administrative expenses. (c) A recommended funding level sufficient to cover the program's costs and to operate the program over a multiyear period in a prudent and responsible manner. 48807. (a) On or before October 1, 2015, and on or before October 1 annually thereafter, the organization shall approve a final plan budget. (b) The organization shall submit the final plan budget to the department. (c) Within 90 days after receiving the final plan budget, the department shall review that budget for consistency with this chapter and notify the organization of any inconsistencies. (d) If the department does not find any inconsistencies regarding the plan budget, that budget shall be deemed approved by the department. 48808. (a) The department shall notify the organization of the department's direct costs in implementing this chapter relating to the organization's activities pursuant to this chapter. (b) Once every three months, the organization shall reimburse the department for all direct costs the department incurs relating to the organization's activities pursuant to this chapter. (c) The department shall deposit all moneys submitted by the organization pursuant to this section into the Used Mattress Recycling Account, which is hereby established in the Integrated Waste Management Fund. Upon appropriation by the Legislature, moneys in the account shall be expended by the department to administer and enforce this chapter. The funds collected pursuant to this section shall not be expended for any other purpose. Article 5. State Mattress Recycling Charge 48810. (a) The organization shall annually set the amount of the state mattress recycling charge that shall be added to the purchase price of a mattress. (b) The amount of the state mattress recycling charge shall be sufficient to fund the revenue requirements set forth in an approved budget determined pursuant to Section 48807. (c) The organization may increase or decrease the charge more frequently than annually if it determines that an increase or decrease in the amount of the charge is needed to avoid funding shortfalls or excesses. Any change in the charges shall be announced 90 days before taking effect. The organization shall inform the department of any changes in the amount of the charge. 48811. (a) Each manufacturer, retailer, distributor, or other party that sells a mattress to a consumer or to the ultimate end user of the mattress in the state shall add the charge determined pursuant to Section 48810 to the purchase price of the mattress, and shall remit the charge collected to the organization. (b) In each transaction described in subdivision (a), the charge shall be clearly visible on the invoice or functionally equivalent billing document provided by the seller to the buyer as a separate line item and shall be accompanied by a brief description of the charge as the state mattress recycling charge. (c) The organization may establish alternative or additional means for collecting or remitting the charge if the other means are practicable and do not compromise the objectives of this chapter. (d) The organization shall develop reimbursement criteria to enable retailers to recover the administrative costs associated with collecting the charge. (e) The organization shall determine the rules and procedures that are necessary and proper to implement the collection of the charge in a fair, efficient, and lawful manner. (f) (1) The organization may conduct an audit of those parties that are required to remit the charge to the organization to verify that the charges paid are proper and accurate, and to ensure all parties required by this chapter to pay or collect the charge are paying or collecting the proper amount. (2) An audit conducted pursuant to this subdivision shall be carried out in accordance with generally accepted auditing practices and shall be limited in scope to confirming whether the charge has been properly collected on all sales of mattresses to consumers in the state. (3) The audit shall be structured and conducted in a manner that will minimize the cost and disruption to the party being audited. (4) For purposes of conducting audits pursuant to this section, the organization shall hire independent third-party auditors that will respect the confidential proprietary nature of commercial and transactional information obtained in the course of the audit, and that will not disclose the data to retailers, manufacturers, or other parties that do not have a specific need for access to that information. 48812. (a) The organization shall deposit the charges and other sums collected by the organization pursuant to this chapter in accounts that are maintained by the organization and are disbursed only by the organization. (b) A charge imposed pursuant to this section shall not be subject to any sales tax, excise tax, and value added tax, income tax, gross receipts tax, use tax, or any other type of tax, levy, duty, or assessment imposed by the state or a political subdivision of the state. (c) Until the organization disburses the charges and other money collected pursuant to this chapter, the organization may invest those funds only in obligations of the United States or any agency thereof, in an interest-bearing account or certificate of deposit of a bank that is a member of the Federal Reserve System, or in an obligation fully guaranteed as to principal and interest by the United States. (d) The organization may enter into a joint venture or agreements and contracts with third parties, including, but not limited to, corporations, partnerships, nonprofit entities, and government agencies, to undertake activities on the organization's behalf that are consistent with this chapter. (e) The organization may issue bonds, obtain loans, and obtain other forms of debt financing, if the proceeds from those transactions are used for purposes consistent with this chapter. Article 6. Records, Audits, and Annual Report 48815. (a) The organization shall keep minutes, books, and records that clearly reflect the activities and transactions of the organization. (b) The books of the organization shall be audited at the organization's expense by a certified public accountant retained by the organization at least once each calendar year. (c) The organization shall arrange for the audit to be delivered to the department. The department shall review the audit for consistency with the plan created pursuant to this chapter and shall notify the organization of any inconsistencies. The organization may also obtain copies of the audit upon request. The audit of the organization shall not disclose confidential proprietary information. 48816. Not less than once each calendar year, the organization shall publish, and make publically available on its Internet Web site, a report that describes for the preceding calendar year all of the following: (a) The organization's costs and revenues, (b) The quantity of mattresses disposed of in solid waste landfills, which shall be provided by the department to interested parties. (c) The quantity of discarded used mattresses collected for recycling in the program. (d) The quantity of used mattresses collected for recycling from different categories of sources. (e) The quantity of each category of materials recycled. (f) The uses for the recycled materials. (g) The quantity of otherwise disposed of materials. 48817. The organization shall submit the annual report published pursuant to Section 48816 to the department. The department shall review the annual report for consistency with Section 48816 and shall notify the organization of any inconsistencies. Article 7. Enforcement 48820. (a) On February 1, 2015, and, commencing with the 2016 calendar year, on or before July 1 annually thereafter, the organization shall post on its Internet Web site a list of manufacturers and retailers who are in compliance with this chapter. (b) A manufacturer or retailer that is not listed on the organization's Internet Web site pursuant to this section, but demonstrates to the satisfaction of the organization that it is in compliance with this chapter before the next notice is required to be posted pursuant to this section, may request a certification letter from the organization stating that the manufacturer or retailer is in compliance. The manufacturer or retailer that receives that letter shall be deemed to be in compliance with this chapter. (c) A retailer that distributes or sells a mattress shall monitor the organization's Internet Web site to determine if a manufacturer is in compliance with this chapter. A retailer otherwise in compliance with this chapter shall be deemed in compliance with this chapter if, on the date the retailer ordered or purchased a mattress, or within 30 calendar days before or after that date, the manufacturer was listed as covered or compliant on the organization's Internet Web site. (d) A retailer may exhaust existing stock in its inventory through sales to the public if the existing stock was purchased when the manufacturer was in compliance with the requirements of this chapter at the time of the existing stock's initial purchase. (e) A manufacturer that distributes or sells a mattress to a retailer for resale in the state shall monitor the organization's Internet Web site to determine if the retailer is in compliance with this chapter. A manufacturer otherwise in compliance with this chapter shall be deemed in compliance with this chapter if, on the date the retailer ordered or purchased a mattress, or within 30 calendar days before or after that date, the retailer was listed as covered or compliant on the organization's Internet Web site. (f) If the organization determines that a manufacturer or retailer is not in compliance with this chapter, it shall remove the name of the manufacturer or retailer from the organization's Internet Web site pursuant to this section and the manufacturer or retailer shall not sell a mattresses in the state until the organization determines that the manufacturer or retailer is in compliance with this chapter, except that a retailer may exhaust its existing stock in its inventory consistent with the requirements of subdivision (d). 48821. (a) The department may impose an administrative civil penalty on a manufacturer or retailer who sells a mattress in violation of this chapter. The amount of the civil penalty shall not exceed five hundred dollars ($500) per mattress sold in violation of this chapter. (b) The department shall deposit all penalties collected pursuant to this section into the Mattress Recovery and Recycling Penalty Account, which is hereby created in the Integrated Waste Management Fund. Upon appropriation by the Legislature, moneys deposited into the Mattress Recovery and Recycling Penalty Account may be expended by the department to enforce this chapter. 48822. The department shall annually review the organization's compliance with this chapter, based on the results of the report and an annual audit provided by the organization. If the department determines the organization is not in compliance with this chapter, the department shall identify any inconsistencies and notify the organization of those inconsistencies. Article 8. Antitrust Immunity 48830. (a) Except as provided in subdivision (b), an action by the organization or its members that relates to any of the following is not a violation of the Cartwright Act (Chapter 2 (commencing with Section 16700) of Part 2 of Division 7 of the Business and Professions Code), the Unfair Practices Act (Chapter 4 (commencing with Section 17000) of Part 2 of Division 7 of the Business and Professions Code), or the Unfair Competition Law (Chapter 5 (commencing with Section 17200) of Part 2 of Division 7 of the Business and Professions Code): (1) The development, implementation, or management by the organization of a mattress recycling plan pursuant to this chapter and the types or quantities of used mattress being recycled or otherwise managed under that plan. (2) The cost and structure of a mattress recycling plan approved by the department. (3) The organization's establishment, administration, collection, or disbursement of charges associated with funding the implementation of this chapter. (b) Subdivision (a) does not apply to an agreement that does any of the following: (1) Fixes a price of or for new mattresses, except for any action related to fees or costs associated with participation in a mattress recycling plan developed and implemented by the organization in accordance with this chapter. (2) Fixes the output of production of mattresses. (3) Restricts the geographic area in which, or customers to whom, new mattresses will be sold. Article 9. Operation of Chapter 48835. (a) The department shall periodically, but not less than once every three months, determine whether a federal statute has been enacted that requires a national used mattress recycling plan. (b) If the department determines that a federal statute has been enacted that requires a national used mattress recycling plan, the department shall post this determination on its Internet Web site and shall submit a notice to the Secretary of State and the Office of the Legislative Counsel. (c) Thirty days after the date that the department issues the notice required pursuant to subdivision (b), the requirements of this chapter shall become inoperative.SECTION 1.The Legislature hereby declares its intention to enact subsequent legislation to establish a program for the management of used mattresses that would create an economically practical system for recycling used mattresses, reduce the impact of illegally dumped mattresses, harness existing infrastructure for transporting used mattresses to recyclers, and minimize costs to both governments and consumers.