Rule2021-19385
Allowing Earlier Equipment Marketing and Importation Opportunities
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
September 20, 2021
Effective
October 20, 2021
Issuing agencies
Federal Communications Commission
Abstract
The Federal Communications Commission (Commission) adopts targeted enhancements that will modernize the Commission's marketing and importation rules to allow radiofrequency (RF) equipment manufacturers to better gauge consumer interest and prepare for new product launches. These steps will further the communications sector's ability to drive innovation that will advance America's global competitiveness and promote economic growth. As product development cycles have accelerated, new marketplace models and assessment tools have emerged that rely on individual interest to fund products, optimize production, and match imports to anticipated sales. The rules the Commission is adopting will allow manufacturers to better use these tools to quickly deploy new technologies and devices to consumers while ensuring that communications equipment subject to equipment authorization continues to meet the Commission's stringent program requirements.
Full Text
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[Federal Register Volume 86, Number 179 (Monday, September 20, 2021)]
[Rules and Regulations]
[Pages 52088-52101]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-19385]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Parts 2 and 95
[ET Docket No. 20-382; FCC 21-72; FR ID 43219]
Allowing Earlier Equipment Marketing and Importation
Opportunities
AGENCY: Federal Communications Commission.
ACTION: Final rule.
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SUMMARY: The Federal Communications Commission (Commission) adopts
targeted enhancements that will modernize the Commission's marketing
and importation rules to allow radiofrequency (RF) equipment
manufacturers to better gauge consumer interest and prepare for new
product launches. These steps will further the communications sector's
ability to drive innovation that will advance America's global
competitiveness and promote economic growth. As product development
cycles have accelerated, new marketplace models and assessment tools
have emerged that rely on individual interest to fund products,
optimize production, and match imports to anticipated sales. The rules
the Commission is adopting will allow manufacturers to better use these
tools to quickly deploy new technologies and devices to consumers while
ensuring that communications equipment subject to equipment
authorization continues to meet the Commission's stringent program
requirements.
DATES: Effective October 20, 2021, except for Sec. Sec. 2.803(c)(2)(i)
and 2.1204(a)(11), which contain information collection requirements
that are not effective until approved by the Office of Management and
Budget. The Federal Communications Commission will publish a document
in the Federal Register announcing the effective date for those
sections.
FOR FURTHER INFORMATION CONTACT: Jamie Coleman, Spectrum Policy Branch
Chief, Policy and Rules Division, Office of Engineering and Technology,
at (202) 418-2705 or <a href="/cdn-cgi/l/email-protection#541e35393d317a173b383139353a141217177a333b22"><span class="__cf_email__" data-cfemail="39735854505c177a56555c545857797f7a7a175e564f">[email protected]</span></a>. For additional information
concerning the Paperwork Reduction Act information collection
requirements contained in this document, contact Nicole Ongele, Office
of Managing Director, at (202) 418-2991 or <a href="/cdn-cgi/l/email-protection#e4aa8d878b8881caab8a83818881a4828787ca838b92"><span class="__cf_email__" data-cfemail="125c7b717d7e773c5d7c75777e77527471713c757d64">[email protected]</span></a>.
SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Report
and Order, ET Docket No. 20-382, FCC 21-72, adopted and released June
17, 2021. The complete text of this document is available by
downloading the text from the Commission's website at <a href="https://www.fcc.gov/document/allowing-earlier-equipment-marketing-and-importation-opportunities-1">https://www.fcc.gov/document/allowing-earlier-equipment-marketing-and-importation-opportunities-1</a>. When the FCC Headquarters reopens to the
public, the full text of this document also will be available for
public inspection and copying during regular business hours in the FCC
Reference Center, 45 L Street NE, Washington, DC 20554. Alternative
formats are available for people with disabilities (Braille, large
print, electronic files, audio format) by sending an email to
<a href="/cdn-cgi/l/email-protection#30767373050004705653531e575f46"><span class="__cf_email__" data-cfemail="97d1d4d4a2a7a3d7f1f4f4b9f0f8e1">[email protected]</span></a> or calling the Commission's Consumer and Governmental
Affairs Bureau at (202) 418-0530 (voice), (202) 418-0432 (TTY).
Final Regulatory Flexibility Analyses
The Regulatory Flexibility Act of 1980, as amended (RFA) requires
that an agency prepare a regulatory flexibility analysis for notice and
comment rulemakings, unless the agency certifies that ``the rule will
not, if promulgated, have a significant economic impact on a
substantial number of small entities.'' As required by the RFA, an
Initial Regulatory Flexibility Analysis (IRFA) was incorporated in the
Notice of Proposed Rulemaking (NPRM) (86 FR 2337, Jan. 12, 2021). The
Commission sought written public comment on the proposals in the NPRM,
including comments on the IRFA. No comments were filed addressing the
IRFA. Accordingly, the Commission has prepared a Final Regulatory
Flexibility Analysis (FRFA) concerning the possible impact of the rule
changes contained in this document on small entities. This present FRFA
conforms to the RFA.
Paperwork Reduction Act
This document contains modified information collection
requirements. The Commission, as part of its continuing effort to
reduce paperwork burdens will invite the general public to comment on
the information collection requirements contained in this document as
required by the Paperwork Reduction Act of 1995, Public Law 104-13. In
addition, the Commission notes that pursuant to the Small Business
Paperwork Relief Act of 2002, Public Law 107-198, see 44 U.S.C.
3506(c)(4), we previously sought specific comment on how the Commission
might further reduce the information collection burden for small
business concerns with fewer than 25 employees.
In this present document, we have assessed the effects of requiring
marketing disclosures on RF equipment manufacturers, some of which may
be small entities, to market and import RF equipment, and find that the
Commission's rules are not unduly burdensome. We believe the regulatory
burdens the Commission is implementing are necessary to ensure that the
public receives the benefits of innovative products and technologies in
a prompt and efficient manner, and those burdens apply equally to large
and small entities without differential impact.
Congressional Review Act
The Commission has determined, and Administrator of the Office of
Information and Regulatory Affairs, Office of Management and Budget,
concurs, that this rule is ``non-major''
[[Page 52089]]
under the Congressional Review Act, 5 U.S.C. 804(2). The Commission
will send a copy of the First Report and Order and Order of Proposed
Modification to Congress and the Government Accountability Office
pursuant to 5 U.S.C. 801(a)(1)(A).
Synopsis
I. Background
The Commission's rules generally require that RF devices may be
marketed within or imported to the United States only after they have
been subjected to the appropriate equipment authorization procedure--
certification or supplier's declaration of conformity (SDoC). These
procedures require, among other things, that RF devices are tested to
show compliance with the Commission's rules and technical standards.
Currently the Commission's rules include some exceptions that provide
for limited marketing and importation of RF devices that have not yet
been subject to a complete equipment authorization process. For
example, some marketing prior to equipment authorization is permitted
in the form of conditional sales contracts between manufacturers and
retailers of RF devices; and, in the early stages of the production
process, such devices may be marketed to business, commercial,
industrial, scientific, or medical users. In both instances, marketing
to the general public is not permitted and the devices may not be
delivered prior to equipment authorization. Similarly, limited
quantities of unauthorized devices may be imported, but not marketed,
for testing, demonstration, or personal use.
In June 2020, the Consumer Technology Association (CTA) filed a
petition seeking to modify the rules pertaining to RF device marketing
and importation. See Petition of Consumer Technology Association to
Expand Marketing Opportunities for Innovative Technologies, RM-11857
(filed June 2, 2020) (CTA Petition). CTA asserted that the Commission's
current equipment authorization rules can slow the process of
developing and deploying new products and services, and it proposed
rule revisions targeting the prohibition on conditional sales to
consumers and the limited ability to import devices prior to
authorization. In December 2020, after considering the petition, and
the general support expressed in the associated record, the Commission
initiated this proceeding, in which it proposed changes to the
Commission's equipment marketing and importation rules that were
informed to a large extent by the CTA Petition.
In the NPRM, the Commission proposed to broaden the existing
conditional sales contract marketing exception beyond the limitation of
``retailers and wholesalers.'' The Commission acknowledged that new
sales models increasingly involve online marketplaces that provide
product developers and manufacturers direct access to consumers, thus
involving customers in the product development process to a greater
extent than before. As a result, device developers are provided with
investment and incentive to produce innovative products and consumers
benefit by seeing new products and features rolled out in a much
shorter timeframe. While the Commission proposed the new marketing rule
to allow manufacturers to better leverage this new development
paradigm, it nonetheless recognized the continued importance of keeping
unauthorized RF devices from becoming available, and it proposed that,
even under the new rule, delivery or physical transfer of devices to
consumers prior to equipment authorization would still be prohibited.
In addition, acknowledging industry's desire to speed the launch of
new products to keep pace with the increasingly compressed innovation
cycle, the Commission also proposed to broaden the conditions under
which RF devices can be imported prior to equipment authorization. The
Commission proposed to allow up to 4,000 RF devices to be imported
prior to equipment authorization for the purposes of certain pre-sale
activities, such as packaging and physical transfer to retail
locations. Under this proposal, the RF devices could not be displayed
to consumers prior to equipment authorization and the party responsible
for importation would be required to take steps to ensure that
appropriate device control is maintained until authorization is
obtained.
Sixteen comments and one reply comment were filed in response to
the NPRM. While some commenters suggest modifications to the
Commission's proposals, all filers are generally supportive of the
overall marketing and importation proposals.
II. Discussion
The Commission recognizes that, in some instances, developments in
the modern device marketplace have outpaced those in the Commission's
equipment authorization regime. As a result, the Commission's rules may
limit the ability to market and import RF devices in new efficient and
cost-effective ways. The Commission therefore takes this opportunity to
adopt the rule changes proposed in the NPRM, with clarifying revisions,
which will provide additional options for taking advantage of modern
product development practices while ensuring against the use of
unauthorized RF devices. Accordingly, the Commission modifies its rules
to include an additional option that will allow for more importation of
RF devices prior to equipment authorization. Further, the Commission
modifies its rules to allow conditional sales of RF devices prior to
authorization, subject to certain requirements. In both instances, the
Commission is adopting rules that are crafted in a manner to not
undermine the Commission's equipment authorization program by
continuing to prevent end users from having access to unauthorized RF
devices. The Commission also makes targeted changes to its proposals to
clarify its intent regarding the interaction between the revised
marketing and importation rules. These changes eliminate a potential
conflict between the proposed importation and marketing provisions,
whereby imported and domestically-produced devices could be subject to
disparate requirements. The rules the Commission are adopting remove
this disparity and provide more consistent treatment by permitting
similar opportunities prior to equipment authorization regardless of
the device's country of origin.
In summary, the Commission is adopting a new condition under Sec.
2.1204 and a revised exception under Sec. 2.803 of the Commission's
rules to allow the importation and marketing of certain RF devices,
under specified constraints, prior to equipment authorization. In
general, the Commission is allowing the importation of a maximum of
12,000 RF devices for pre-sale activity if those devices: (1) Are
subject to a certification application that has been submitted to a
Telecommunication Certification Body (TCB); (2) include an externally-
visible temporary label prohibiting display to consumers, operation,
and delivery of the device prior to the grant of certification; and,
(3) remain under legal ownership of the device manufacturer, developer,
importer or ultimate consignee, or their designated customs broker (who
has a device retrieval process in place). Further, the Commission is
revising an existing exception in the Commission's rules to expand to
consumers the limited marketing and conditional sales of certain RF
devices prior to equipment authorization. The existing exception
generally allows conditional sales
[[Page 52090]]
contracts between manufacturers and wholesalers or retailers provided
that delivery is made contingent upon compliance with the applicable
equipment authorization and technical requirements. The Commission's
revisions to this condition expand conditional sales, and
advertisements for such sales, to include other entities, including
consumers, provided that the prospective buyer is advised at the time
of marketing that delivery of the device is conditional upon successful
completion of the applicable equipment authorization process. All
devices must remain under the legal ownership of the initiating party
(i.e., the manufacturer or developer), but physical transfer may be
permissible depending on the applicable device authorization
requirement. Physical transfer is prohibited for devices subject to the
Supplier's Declaration of Conformity equipment authorization process.
Devices subject to certification can be physically transferred to
contracting parties, other than the end user, for pre-sale activity if
the devices include a temporary label and the initiating party has
retrieval processes in place. The Commission also adopts the proposed
revision to Sec. 95.391, which prohibits the manufacturing,
importation, and sales of non-certified equipment for the Personal
Radio Services, to reflect the marketing exception the Commission
adopts and adds an additional reference to reflect the import condition
the Commission adopts.
A. Importation of RF Devices Prior to Equipment Authorization
The Commission is adopting the proposal to modernize its rules to
allow a limited number of RF devices to be imported into the United
States prior to equipment authorization for pre-sale activities,
including packaging and transferring physical possession to retail
locations, if those devices are subject to equipment authorization via
the certification process. The rule the Commission adopt adds a new
condition to Sec. 2.1204 of the Commission's rules to allow the
importation of up to 12,000 RF devices for pre-sale activity before the
equipment successfully completes certification. The imported devices
must be subject to the equipment authorization certification process
(i.e., excluding devices subject to Supplier's Declaration of
Conformity process) for which an application has been submitted to a
TCB. As noted above, the imported devices must include an externally-
visible temporary label noting the prohibition of display to consumers,
operation, and delivery of the device prior to the issuance of
certification. The devices must also remain under legal ownership of
the device manufacturer, developer, importer or ultimate consignee, or
their designated customs broker, who must have in place a device
retrieval process to be implemented in the event that the certification
process is not successfully completed. The Commission believes this
action will allow device manufacturers to better prepare for new
product launches while guarding against a proliferation of unauthorized
and non-compliant devices that might increase the risk of causing harm
to consumers or other radio operations.
The rule proposed by the Commission in the NPRM largely reflected
the proposal made by CTA in its petition. The Commission proposed to
allow up to 4,000 RF devices to be imported for pre-sale activities
prior to being certified. In this case, such pre-sale activities would
include imaging, packaging, and delivery of devices to retail
locations, but ``exclude the displaying of the device to consumers
prior to equipment authorization.'' CTA Petition at 12, n. 44. Under
the proposal, limited importation could occur if the manufacturer has a
reasonable belief that the device would receive authorization within
thirty days of importation. Additionally, the Commission proposed that
the device include a temporary label regarding related compliance
restrictions and the manufacturer would be required to maintain legal
ownership of the devices, even after delivery to retail locations,
until authorization is received, and have a process in place to
retrieve the devices in the event that authorization is not obtained.
While all comments received support the proposal's intent, they
include several requests to modify specific aspects, including the
numerical limitation on the devices imported, the requirement that a
manufacturer have a reasonable belief that authorization will be
granted within 30 days of importation, and labeling requirements. The
Commission addresses the various issues below and modifies the
Commission's proposed rules, as appropriate, based on the comments
received.
Numerical Limitation. The Commission is adopting rules that limit
to 12,000 the number of RF devices that can be imported for pre-sale
activities. While the Commission proposed to limit this new import
condition to 4,000 devices, it asked whether a higher level, such as
8,000, would be more appropriate, whether a smaller number of devices
would provide less risk of unauthorized devices becoming available to
the general public, and whether any safeguards beyond a simple
numerical limit would be necessary in this regard. Only HP Enterprise
supports the proposed 4,000 device limit. Otherwise, commenters
generally suggest that the Commission increases the device limit.
Suggestions ranged from a non-specific increase, to a 10,000 device
limit, and a more widely supported 12,000 device limit. Comments
proposing 12,000 devices generally state the larger limit would account
for the number of potential retailers throughout the country based upon
the estimated numbers of ``big box'' stores and wireless provider
locations, among others. Comments also note that a limit greater than
10,000 devices would increase the likelihood of more even distribution
to both urban and rural areas while still being small enough to
mitigate the potential risk of unauthorized widescale distribution.
Based on the record, the Commission finds that the proposed
importation limit of 4,000 devices would not be sufficient to achieve
the intended benefits. The Commission therefore adopts rules permitting
up to 12,000 units of a particular device to be imported for pre-sale
activities prior to the equipment being certified. As proposed, the
Commission also adopts a provision to allow the importation of devices
in excess of 12,000 subject to prior written approval from the Chief of
the Office of Engineering and Technology. Overall, the Commission finds
that a device limit of 12,000 will meet manufacturer and importer needs
while not compromising the integrity of the Commission's equipment
authorization program. The 12,000-unit limit is a maximum limit for a
particular device across all ports of entry into the United States.
Importation in excess of 12,000 units without prior written approval of
the FCC is prohibited and may subject the manufacturer or importer to
enforcement action.
The Commission's proposal did not specifically address how to
differentiate devices when determining compliance with the maximum
import quantity. Garmin provided comments suggesting that, in defining
the importation limit for a device, the Commission applies the
permissible quantity based on SKU number rather than to general product
names or model brands. The Commission notes that restricting the
importation limit to product name or model brand would restrict
manufacturers from importing the full range of a new product, such as
different sizes and product options. The Commission agrees with Garmin
that
[[Page 52091]]
additional clarification is necessary to provide certainty to
manufacturers and importers that take advantage of the additional
flexibility the Commission is providing regarding importation for pre-
sale activity. As such, the Commission is adopting an additional
provision to clarify that devices with different FCC IDs are considered
to be separate devices; i.e., up to 12,000 devices with the same FCC ID
number may be imported for pre-sale activities. The Commission adopts
this requirement as opposed to a SKU number-based requirement as
suggested by Garmin because FCC ID is the officially recognized method
for identifying equipment, is required by FCC rules to be labelled on
the device, and can be tracked through the FCC equipment authorization
system database; SKU numbers, on the other hand, have no regulatory
meaning under FCC rules. Moreover, use of FCC ID will not be burdensome
for manufacturers and importers because, as discussed below, devices
subject to the Commission's new rules may not be imported until an
application for certification has been submitted and therefore an FCC
ID will already be associated with such equipment.
Submission of Application for Certification. In the NPRM, the
Commission proposed to require that manufacturers importing devices
under the proposed exception have ``a reasonable belief that
authorization will be granted within 30 days of importation.'' The
Commission asked several questions related to how manufacturers could
comply with this requirement. Most commenters stating that 30 days
would not be sufficient suggest that 90 days would be more appropriate.
Two filers, Information Technology Industry Council and the Joint
Commenters (Telecommunications Industry Association, Association of
Home Appliance Manufacturers, Engine, The internet Association,
INCOMPAS, the Rural & Agriculture Council of America, and TechFreedom),
suggest that 60-90 days would be generally sufficient and, for devices
that require a TCB to coordinate with the OET Lab prior to taking
action on the certification application, via the pre-approval guidance
procedure, 120-180 days would be ``reasonable.'' One commenter,
Information Technology and Innovation Foundation, states that the
increased complexity of devices would make enforcing an expectation
requirement difficult and suggests that the Commission allow
manufacturers options for ``demonstrating reasonable belief of imminent
authorization,'' such as relying on process milestones. Similarly,
Samsung suggests that delivery to an accredited test lab or TCB for
testing would be an appropriate basis for a reasonable expectation of
authorization. R Street Institute (R Street) also notes that
determining compliance with the criterion would be difficult and
suggests that the Commission provides manufacturers flexibility in this
regard, provided that they maintain documentation ``demonstrating their
internal logic regarding authorization.''
The Commission believes that parties who avail themselves of the
new importation exception should be permitted to do so only if they
reasonably believe that a certification will be issued as close to the
importation date as is possible. However, based upon the record, the
Commission declines to adopt the 30-day timeframe. As many commenters
suggest that the timeframe needed for certification can be
unpredictable depending on device complexity and other factors, the
Commission is adopting a rule that does not include a specific
timeframe but is instead based on the submission of the equipment
certification application. As the commenters' recommendations are
informed by their experiences with the equipment authorization process,
requiring a reasonable belief of completion of certification activities
within a specific timeframe would not accurately reflect the ``real
world'' process in many circumstances. Similarly, if the Commission
were to specify multiple timeframes to cover different situations,
there would still be numerous scenarios not covered, thus adding an
unnecessary level of complexity to the rule that could limit its
utility and result in confusion and inconsistent applicability.
Accordingly, the Commission is adopting a requirement that
importation for pre-sale activities prior to the device receiving
certification can only occur after compliance testing is complete and
an application for certification has been submitted, in good faith, to
a TCB. At that point, an applicant will have expended considerable
time, effort, and money to develop a product as well as entered into a
testing and approval process that requires expending additional
resources. The Commission finds that this specific milestone reflects a
point in the certification process by which the applicant can
reasonably expect a grant. Allowing importation prior to the completion
of compliance testing would increase the risk associated with
distributing the unauthorized devices because the testing could reveal
compliance issues that require device modification. The Commission will
not require any additional process milestones to be tracked to
demonstrate compliance with the adopted rule. The Commission notes that
some aviation and maritime devices subject to the equipment
certification process require additional reviews and approvals, such as
from the Federal Aviation Administration and the United States Coast
Guard. In some cases those additional approvals from other agencies
must be done prior to submitting an application for FCC equipment
certification and in some instances approval may be obtained
concurrently. The rule the Commission adopts here has no impact on
those requirements, but entities intending to avail themselves of this
new import condition should consider the processing time and technical
requirements of those reviews and approvals in relation to the
certification process to determine when to begin importation under the
new condition. Further, the Commission notes that parties must satisfy
all conditions required for their equipment and comply with all
conditions imposed by all relevant agencies under which the equipment
is regulated; permission to market devices under FCC rules does not
provide similar approval from other relevant agencies and all
requirements must be satisfied in accordance with those agencies'
rules. The Commission expects applications to be filed in good faith,
with accurate data and as completely as possible, and applicants must
be responsive to any TCB requests for additional data.
B. Marketing of RF Devices Prior to Equipment Authorization
The Commission is adopting its proposal to allow expanded
conditional sales of RF devices prior to authorization, with
appropriate clarifications regarding applicability and conditions. The
internet provides today's consumer with numerous opportunities to
obtain innovative new products both directly--via crowd-funding
platforms at the developmental stages, and through sales and
distribution services offered by manufacturers and developers--and
indirectly, through third party marketplaces, both online and in
person. This new-found ability to more easily obtain the latest
products has led to savvier consumers, who have a greater awareness of
technological developments and expect to obtain the newest products as
soon as possible. At the same time, the ability to deal directly with
consumers at the earliest
[[Page 52092]]
stages of development has created new efficiencies and investment
opportunities that provide smaller entities a chance to enter the
competitive marketplace. The Commission's new rule will allow
innovators to take advantage of modern product development practices
and better satisfy the expectations of today's consumer without
diminishing the protections that the Commission's overall marketing
rules provide.
In the NPRM, the Commission proposed to modify its marketing rules
in a manner that would allow consumers to participate in the
conditional sales of devices that have not received authorization. The
Commission did not receive any comments objecting to its overall
marketing proposal. Commenters did note generally that, in addition to
allowing consumers to receive new devices sooner, the proposal would
provide benefits throughout the supply chain that would allow
production to better match expected demand, thus providing efficiencies
that would lower costs and reduce waste in raw materials and energy.
One comment suggests that the new marketing exception apply to the
broadest category of devices and no commenters suggest excluding any
devices.
The Commission remains mindful that it must continue to protect
against the possibility of unauthorized RF devices making their way to
consumers and adopt rules intended to prevent such occurrences while
expanding marketing opportunities for innovators. Additionally, the
rules the Commission proposed in the NPRM to allow pre-sale activities
for imported devices would not have permitted similar flexibility for
domestically-produced devices. Thus, in adopting rules to permit
marketing activities prior to equipment certification, the Commission
also provides flexibility in the Commission's marketing provisions to
allow for pre-sale activities similar to those that the Commission is
allowing for imported devices. This action implements more consistent
measures for similarly-situated devices with similar safeguards to
prevent unauthorized devices from getting to consumers. Further, the
Commission's action will also benefit consumers, who will be able to
see and examine devices earlier so that they can make more timely
purchase decisions, and retailers, who will gain the opportunity to
become familiar with the features associated with new devices to better
prepare those devices for display and sale once they are certified and
may be operated.
As proposed in the NPRM, the Commission is broadening the
applicability of the prior conditional sales contract provision found
in Sec. 2.803(c) of the Commission's rules, which now will allow for
conditional sales to consumers. Specifically, the Commission is
modifying Sec. 2.803(c)(2)(i) to allow conditional sales contracts and
advertising for RF devices that have not yet received authorization,
under particular delivery and physical transfer conditions and a
requirement that the contracting party advises the buyer at the time of
marketing that the equipment is subject to FCC rules and delivery is
conditional upon successful completion of the applicable equipment
authorization process.
In the NPRM, the Commission proposed to allow conditional sales
contracts between manufacturers and potential customers. The intent was
to broaden the rule that originally limited conditional sales to
contracts between manufacturers and wholesalers or retailers, which was
based on a concern that unauthorized devices that made their way to
consumers could cause harmful interference to radio communications.
Ensuring that unauthorized RF devices do not cause harm remains among
the Commission's highest concerns. However, recognizing that product
marketing and distribution methods have evolved due to the internet and
new crowd-funding practices which bring the consumer into direct
contact with the developer or manufacturer, and based on the comments
received in response to the NPRM, the Commission is adopting a more
flexible rule that does not limit conditional sales contracts to
transactions only between manufacturers and potential customers.
In the NPRM, the Commission declined to propose a rule that
included the term ``responsible party'' in lieu of ``manufacturer'' as
suggested by CTA, and instead proposed conditional sales contracts
between manufacturers and potential customers. The Commission explained
its concerns that, given the specific meaning of the term,
``responsible party'' would not be appropriate in this context.
Further, the Commission asked for comment on this determination and
asked questions about more suitable alternatives. While no commenter
suggests replacing ``manufacturer'' with ``responsible party,'' Samsung
Electronics America (Samsung) suggests that the Commission clarifies
that affiliates and related corporate entities should be considered
acceptable in the context of ``manufacturer.'' Additionally, while not
providing specific rule changes, Samsung and CTA suggest the Commission
clarifies that the rule would also cover contracts between
manufacturers and retailers/wholesalers.
The Commission's intent in proposing to expand conditional sales
contract to ``manufacturers and potential customers'' was to broaden
the pool of parties allowed to enter into conditional sales contracts
with manufacturers, specifically to include consumers. Considering the
information in the record, the Commission finds that inclusion of the
phrase ``between manufacturers and potential customers'' would raise
confusion as to who may enter into conditional sales contracts. The
Commission recognizes that modern product development and distribution
systems can be complex and involve multiple entities in various roles.
As discussed in the NPRM, the Commission understands that, with the
proliferation of internet-based direct-to-consumer sales and e-commerce
platforms, various entities can access multiple distribution models to
reach consumers. To ensure that the language of the Commission's
revised marketing regulation does not hinder innovation or provide
unfair advantage or disadvantage to particular entities, the Commission
finds that it is not necessary to specify the permissible parties to
the conditional sales contracts. Thus, manufacturers, developers, or
other entities responsible for new device creation, development, or
production will be able to define their own role in the distribution
and supply chain of their devices. The Commission finds this to be
particularly important for smaller or new device developers who may not
manufacture their devices but wish to engage in the sale and
distribution process so they can appropriately plan for manufacturing
and distribution. By expanding the pool of parties to the conditional
sales contracts, the Commission is implementing rules that encourage
and expand opportunities for innovation and allow developers or other
parties that are not themselves a manufacturer to participate in the
sale and marketing of a device. At the same time, as noted below, the
Commission continues to prohibit delivery to consumers prior to
completion of the equipment authorization process.
In this regard, the Commission modifies Sec. 2.803(c)(2)(ii), a
separate provision that allows limited marketing, in the form of sales,
to a narrow class of specialized entities. As noted in the NPRM, CTA
had asked that the provision be deleted or replaced with language
specifically addressing
[[Page 52093]]
manufacturers' ability to engage in activities related to the
Commission's importation proposal. The Commission in the NPRM sought
comment on whether a change to the provision was necessary to achieve
the proposal's discrete objective and whether doing so could eliminate
an important avenue for limited marketing that exists outside the
conditional sales contract context. In response to the NPRM, CTIA
requests that the Commission deletes Sec. 2.803(c)(2)(ii), as it
believes the new rule would eliminate the need for this section and
retaining it in the rules would be confusing.
In light of the information in the record and the changes the
Commission is making to Sec. 2.803(c)(2)(i) by expanding applicability
to all parties, the Commission finds that Sec. 2.803(c)(2)(ii) is no
longer necessary and the Commission removes it. The language that the
Commission is adopting in Sec. 2.803(c)(2)(i) encompasses conditional
sales to all parties, including business, commercial, industrial,
scientific, or medical users, thereby negating the need for a separate
exception targeted at those users.
The Commission also clarifies the conditions under which
conditional sales contracts may be made. The proposed rule would have
provided that delivery of devices subject to conditional sales
contracts would be conditional upon a determination that the equipment
complies with the applicable equipment authorization and technical
requirements. To clarify the requirement, the rule the Commission is
adopting instead states that delivery is conditional upon ``successful
completion of the equipment authorization process.'' This change does
not eliminate the need for determining compliance with the Commission's
technical requirements, but it more accurately reflects both of the
Commission's equipment authorization processes and the required
milestone for delivery. This better conveys the Commission's intent by
removing the ambiguity of a subjective condition referenced only to ``a
determination that the equipment complies with the applicable equipment
authorization and technical requirements'' rather than the actual
completion of the equipment authorization process.
C. Device Delivery and Possession
While the Commission now will permit conditional sales of RF
devices prior to equipment authorization, the Commission reiterates the
importance of continuing to ensure that unauthorized RF devices do not
reach consumers. No commenter suggests otherwise and several explicitly
express support for retaining the prohibition. Thus, the rule the
Commission is adopting continues to prohibit delivery of RF devices to
consumers prior to completion of the equipment authorization process.
The Commission expects that the disclosure requirements discussed below
will ensure that there is no consumer expectation of early delivery.
Likewise, the other process safeguards the Commission discusses below
should ensure that sellers take all necessary steps to prevent
operation of unauthorized devices and delivery to consumers. These
safeguards include provisions, previously introduced in the NPRM's
proposed importation provision, to allow devices subject to
certification to physically move through the supply chain as far as the
retailer, stopping short of the consumer.
In the NPRM, the Commission noted that the proposed rule could be
seen as lessening the barriers between device developers,
manufacturers, distributers, and consumers and asked whether any
additional safeguards would be warranted to protect against harmful
interference. Specifically, the Commission asked, with regard to both
marketing and importation, whether there are certain types of devices
for which conditional sales to consumers would not be appropriate,
citing as examples devices that would operate in bands that are subject
to rigorous coordination or installation requirements and devices that
operate to ensure safety of life onboard ships and aircraft. The
Commission also asked whether there are ways to prevent devices from
being marketed that have no likelihood of being approved due to
compliance issues and whether equipment that could operate only under a
Commission waiver should be prohibited from marketing prior to the
Commission granting a waiver. One comment suggests that the new rule
permitting conditional sales apply to the broadest category of devices
and no commenters suggest excluding any devices.
Equipment authorization of RF devices can be completed by one of
two processes. Certification involves rigorous testing by an FCC-
recognized accredited testing laboratory and listing in a Commission
database. By contrast, SDoC is a self-certification process that gives
the manufacturer substantially greater control over determining when a
product meets the Commission's equipment authorization requirements.
While not adopting any specific device exclusions at this time, the
Commission finds that requiring devices to complete the existing
equipment authorization processes will facilitate movement of devices
through the supply chain while maintaining controls to ensure against
unauthorized use and delivery to consumers. Specifically, the
Commission sees the two equipment authorization processes as providing
a means by which to distinguish between types of devices in
implementing various controls to limit physical access to unauthorized
RF devices.
Upon further analysis of its proposals, the Commission observes
that the proposal to permit conditional sales prior to completion of
the applicable equipment authorization process applied to all devices
whether they originated from domestic or foreign sources. However, the
Commission's new importation rules as adopted herein allow for pre-sale
activities where certain imported devices can be physically transferred
to retail locations, but the same flexibility was not specifically
proposed for other devices. Allowing transfer of physical possession of
certain imported devices to retailers, but not other devices, would
result in a disparity in the treatment of similar devices based on
whether they are imported or manufactured or developed in the U.S. To
ensure consistent measures between similarly situated devices
regardless of their origin, the Commission will permit devices subject
to the equipment authorization certification process to engage in the
same pre-sale activities and under similar conditions the Commission
adopts for imported devices. Specifically, the Commission will allow
the physical possession of devices subject to certification to be
transferred to distributers and retailers. Neither in the Commission's
import nor marketing provision does it extend this flexibility to
devices subject to SDoC because, unlike the more rigorous requirements
associated with the certification process, the SDoC process provides
manufacturers more flexibility in determining compliance with the FCC's
technical requirements.
The marketing rule provision the Commission is adopting will permit
physical transfer of devices subject to certification procedures, and
for which an application has been submitted to a TCB and compliance
testing is complete, for the sole purpose of pre-sale activity, which
includes packaging and transferring physical possession of devices to
distribution centers and retailers. Pre-sale activity does not include
display or demonstration of devices to consumers. This provision
prohibits physical transfer of RF devices subject to Supplier
Declaration of
[[Page 52094]]
Conformity prior to completion of that process. It also requires that
the party initiating the first conditional sales contract maintain
legal ownership of the relevant devices.
The NPRM proposed to require manufacturers that engage in pre-sale
activities to maintain legal ownership of imported RF devices that had
not received equipment authorization, even after physically
transferring them to retailers. When it made the proposal, the
Commission asked whether the requirement would further the Commission's
goal of keeping unauthorized devices from causing harm to consumers or
other radio operations, whether additional restrictions related to the
delivery and location of devices after importation would be necessary,
and about the manufacturer's responsibility in the event of
unauthorized operation. The Commission also asked several questions
related to the specific process of complying with the requirement and
whether the benefits of the rule would outweigh any burdens that it
would place on those involved in the process, such as manufacturers and
retailers.
Samsung states that requiring manufacturers to retain legal
ownership of imported RF devices will incentivize manufacturers to
ensure that retailers and other partners abide by the labeling rules
and other safeguards. Samsung recommends that the Commission clarify
that agreements exercising the new importation condition to deliver
devices to retail locations prior to authorization do not violate the
Sec. 2.803 marketing rules. Samsung argues that the current text of
Sec. 2.803(c)(2) may constrain the ability of manufacturers and
retailers (as well as others in the distribution chain) to exercise the
new importation condition to deliver devices to retail locations while
extracting representations and warranties to abide by the Commission's
safeguards. As an alternative to adding a new subsection to Sec.
2.803, Samsung recommends that the Commission clarifies that contracts
exercising the new condition, including physical transfer to retail
partner locations, do not constitute marketing pursuant to Sec. 2.803.
Similarly, CTA recommends that the Commission clarifies that the
proposed new importation condition does not violate the Commission's
marketing rules, but rather allows physical transfer of RF devices to
retail locations with the safeguard of a manufacturer retaining legal
ownership of those devices. CTA observes that manufacturers and
retailers must have agreements in place to ensure that those devices
are properly labeled, delivered, and stored until they are authorized
for consumer use.
The intent of the Commission's proposed rule on ownership of
imported RF devices was to protect consumers by ensuring that devices
that have not yet been authorized are not operated. The Commission
finds that it can achieve that important goal for both marketed and
imported devices that have completed certification testing and been
submitted to a TCB for approval by providing a process that allows for
physical transfer of marketed devices while legal ownership is
maintained by the first party to initiate a conditional sales contract
(i.e., a developer or manufacturer, or similar party) or, in the case
of imported devices, by the device manufacturer, developer, importer or
ultimate consignee, or their designated customs broker.
By permitting the physical transfer of devices, the Commission will
allow entities to take full advantage of modern marketing and
importation practices while still protecting against unauthorized use
of devices that have not completed the equipment authorization process.
The Commission is adding a new subsection to Sec. 2.803 of the
Commission's rules establishing the requirements applicable to
ownership and physical transfer of such devices.
D. Disclosures and Labeling
The Commission believes that most consumers today are generally
familiar with conditional sales and delayed delivery of new devices.
However, it needs to ensure that consumers purchasing devices that have
not yet received authorization are aware of the conditions for delivery
before entering into a conditional sales agreement. The Commission is
therefore adopting, as proposed, a requirement that the prospective
buyer be advised at the time of marketing, through a prominent
disclosure, that the equipment is subject to FCC rules and delivery to
the end user is conditional upon successful completion of the
applicable equipment authorization process.
In the NPRM, the Commission asked several questions regarding the
implementation and scope of this disclosure requirement. For example,
the Commission asked whether additional disclosures should be required
throughout the equipment authorization process and, in the event that
authorization is not obtained, how consumers would be notified, and
whether the Commission should require refund information to be provided
in the required disclosure. The Commission also asked about the
responsibility of online retailers to ensure that all device
advertisements involving conditional sales include the required
disclosures, and whether unique identifying information (e.g., model
numbers, expected FCC ID) that may be known at the time of marketing,
should be required in online advertisements. Finally, the Commission
asked whether it should require manufacturers to include a label on
device packaging noting that it must not be delivered to consumers
prior to obtaining equipment authorization and, if so, what additional
information to require on the label.
While two commenters suggest that the Commission provide specific
disclosure language, most commenters suggest a more general
requirement. However, INCOMPAS suggests that the Commission
specifically require a refund for consumers when device authorization
is not obtained. Information Technology Industry Council also argues in
favor of a refund requirement and disclosures on how consumers can
obtain refunds. The Public Interest Organizations (New America's Open
Technology Institute, Public Knowledge, Consumer Reports, and Access
Humboldt) went further, requesting the Commission require companies
utilizing the marketing exception to establish escrow funds for such
refunds. On the other hand, regarding a consumer refund process, many
commenters state the Commission should not adopt specific requirements
or, generally, that no additional requirements beyond the proposal are
necessary.
The Commission finds that it is necessary and appropriate for
parties initiating conditional sales contracts to advise buyers at the
time of marketing, through a prominent disclosure, that the equipment
is subject to FCC rules and delivery is conditional upon successful
completion of the appropriate equipment authorization process. To
ensure that the Commission's new rules for conditional sales to
consumers do not lead to unanticipated problems, the Commission will
also require this disclosure to make clear that these rules do not
address the applicability of consumer protection, contractual, or other
provisions under federal or state law. The contractual nature of these
conditional sales, along with the relevant contractual remedies
available to the buyers, should provide sufficient incentive for the
sellers to ensure that buyers are adequately informed of the conditions
of sale, including a refund process, if device authorization is not
successfully completed. Nevertheless, the Commission will require the
initiating party to include in their disclosure notification of any
[[Page 52095]]
responsibility of the initiating party to the buyer in the event that
the applicable equipment authorization process is not successfully
completed, including information regarding any applicable refund
policy. While most consumers are familiar with conditional sales, the
Commission finds that requiring this information will minimize
potential confusion for consumers who are unfamiliar with conditional
sales. Although CTA suggests that such disclosure could confuse
consumers who are already aware of the applicable refund policy, the
Commission finds such confusion unlikely, and finds on balance that the
public interest is better served by making this information available
to all consumers as part of the disclosure the Commission is requiring
here. The Commission does not find that it is necessary to require
standardized language for the disclosures nor does the Commission
believes that it needs to take any additional measures to ensure that
buyers are informed of the conditional nature of the sales contracts.
However, the Commission does find that it is important to ensure
that devices are not delivered to consumers and that distributers,
retailers, consumers, and other relevant entities are aware that the
devices must not be operated before equipment authorization is
complete. In addition to disclosures, the Commission is adopting the
temporary labeling requirement for RF devices when parties engage in
pre-sale activities that the Commission proposed for imported devices
and extending that requirement to devices under the marketing
provisions adopted by this document for those same pre-sale activities.
In the NPRM, the Commission requested comment about requiring a
temporary label on device packaging and what information that label
should include. The Commission went on to propose that devices imported
prior to certification under the new exception include a temporary
removable label that includes a specific warning against premature
operation, display, offers for sale, marketing, or sales and asked
whether additional information should be incorporated into such a
label. Garmin, INCOMPAS, and Hewlett Packard Enterprise specifically
opposed such a requirement, generally stating that it would not be
worth the investment in time and material. While R Street agreed with
the requirement, other supportive comments generally suggested that
existing labeling requirements would be sufficient, or pointed to
Commission guidance for temporary physical labels under the e-labeling
procedures for RF devices. No comments supported a temporary labeling
requirement beyond that proposed by the Commission.
The Commission continues to believe that a temporary label
indicating the status of RF devices will provide a necessary safeguard
against the inadvertent transfer of such devices to consumers and the
Commission is adopting the rule in both the importation and marketing
provisions with some modifications to the required language for
consistency with other provisions in the new rules. Specifically, when
parties engage in pre-sale activities, the Commission clarifies that
the device or its packaging must prominently display a visible
temporary label. This will ensure that the temporary label is not
hidden inside the device packaging where it would not be visible. The
Commission also clarifies that the device cannot be displayed to
consumers, operated, or delivered to end users until successful
completion of the applicable FCC equipment authorization process. The
Commission is not adopting the Commission's proposal that the label on
imported devices include language prohibiting offers of sale and
marketing, thus ensuring consistency in labeling for both imported and
domestic devices. The devices must not be available to consumers until
after the successful completion of the certification process and the
Commission expects that at the time of sale they will be in compliance
with all pertinent information, technical, labeling, and other
requirements within the Commission's rules. Because the labels are
temporary, the Commission finds that it would be unduly burdensome to
require the inclusion of any additional information such as
authorization status or specific contact information or otherwise
include any specific compliance guidance with the rules. As to
compliance via the Commission's existing requirements for electronic
labeling (e-labeling) of RF devices, it appears likely that commenters
are referring to Sec. 2.935(f) of the Commission's rules which
requires an external removable label that addresses compliance with any
applicable Commission requirements. However, in this case, as the
temporary label requirement is specifically codified in the
Commission's new rule, strict compliance with Sec. 2.935(f) is not
necessary and would likely not be desirable.
Once authorization has been completed, the RF devices must comply
with all pertinent Commission labeling and disclosure requirements. The
Commission adopts its proposal to allow, but not require, the
anticipated FCC ID to be included if obscured by a temporary label
until equipment authorization is successfully completed. Otherwise, the
Commission is not adopting requirements that specifically detail
actions required to ensure compliance in this regard.
E. Retrieval and Tracking of Unauthorized Devices
As proposed in the importation provision of the NPRM, the
Commission is requiring processes to retrieve equipment to be in place
prior to the commencement of pre-sale activities, and clarifying that
those processes must be implemented, in the event that authorization is
not successfully completed. In this regard, the Commission also asked
several questions about the level of detail of the process that should
be codified and the requirements for records retention and submission.
With the exception of R Street, commenters do not offer any specific
suggestions regarding retrieving equipment if authorization were to be
denied, but generally indicate that existing Commission processes are
adequate, and advocate a ``light touch'' regulatory approach. R Street
recommends that the Commission require RF device manufacturers to
submit formal plans to retrieve devices to limit the ability for bad
actors to let devices simply remain in the public sphere, rather than
bear the cost of retrieving the devices. R Street suggests that these
risks could be further limited by features such as a remote shutdown
requirement on the devices, but notes that the benefits of such an
approach may be limited by the costs of implementing it. The Commission
had asked about this remote shutdown approach, noting some similarity
to scenarios in which unauthorized devices operate under a part 5
experimental authorization.
In light of the expanded physical transfer provisions the
Commission is adopting in its marketing rule, the Commission finds it
necessary that the marketing provisions also require a process for
retrieval of devices, and completion of that process, in the event that
authorization is not successfully completed when parties engage in pre-
sale activities. Although the Commission is adopting this retrieval
requirement in both the Commission's importation and marketing rules,
the language of the two provisions varies slightly to accurately
designate the party responsible for the retrieval activities. For
marketed devices, the burden is on the first party to initiate a
conditional
[[Page 52096]]
sales contract or to physically transfer devices, while for imported
devices, the burden is on the device manufacturer, developer, importer
or ultimate consignee, or their designated customs broker. In both
instances, this will ensure that the party in legal ownership of the
devices, regardless of the devices' physical location, will be
responsible for maintaining and implementing a process for retrieval if
the applicable equipment authorization cannot be successfully
completed. The language the Commission adopts in the importation
provision, which was limited to the manufacturer in the Commission's
proposal, is consistent with party designations referenced in the
Commission's other existing importation conditions.
F. Recordkeeping
In the NPRM, the Commission proposed a recordkeeping requirement
for devices imported prior to equipment authorization that would
require manufacturers to maintain, for a period of 5 years, records
identifying the recipient of the devices along with information about
the devices and the shipping. The Commission asked several questions
related to the need for recordkeeping and related reporting and
responsibility issues. The Commission's recordkeeping questions were
informed by its concerns about situations where pre-ordered devices are
not ultimately authorized and enforcement actions may be required.
Commenters generally recommend either no new recordkeeping or minimal
requirements. No commenter supports additional reporting requirements.
Samsung states that adopting new record retention requirements is not
necessary because manufacturers regularly retain records related to
equipment authorization that must be presented to the Commission upon
request. Amazon states that an overly prescriptive approach or
burdensome reporting and recordkeeping requirements are not necessary
to protect consumers.
The Commission finds that the recordkeeping requirement proposed in
the NPRM is the minimal required to ensure that, should it become
necessary, the Commission will have access, as needed for enforcement
or other purposes, to information regarding devices imported prior to
authorization. The Commission therefore adopts the recordkeeping
requirement with a change to the party responsible for recordkeeping.
Specifically, recordkeeping will be the responsibility of the device
manufacturer, developer, importer or ultimate consignee, or their
designated customs broker. In addition to being consistent with other
importation recordkeeping requirements in the Commission's rules, this
change also acknowledges that entities other than a device manufacturer
may be responsible for the importation of these devices.
Because the new marketing exception the Commission adopts here
expressly prohibits the delivery to end users any of the subject
devices prior to authorization, it follows that compliant entities
would maintain legal or physical possession, as appropriate, of the
pre-ordered devices as provided in the Commission's rules. Thus, the
Commission does not see a benefit to imposing reporting requirements,
as they would not directly further the Commission's underlying goal of
keeping unauthorized devices from becoming available to the general
public. Further, the Commission believes that it is good business
practice to maintain sales documentation and thoroughly track
customers, particularly when, as with the Commission's marketing
exception, sales are conducted through conditional sales contracts. The
Commission expects that sellers, through the normal course of business,
will maintain records of the conditional sales contract permitted by
the marketing rule the Commission is adopting through this Report and
Order. So, the Commission is not adopting any new reporting
requirements, but the it is adopting a recordkeeping requirement
consistent with that adopted for devices imported prior to equipment
authorization. The party initiating a conditional sales contract or
physically transferring devices under the Commission's new marketing
exception must maintain, for a period of five years, records
identifying each entity to whom a device is conditionally sold or
physically transferred, the device name and product identifier, the
quantity conditionally sold or physically transferred, the date on
which the device authorization was submitted, and the expected FCC ID
number. The party initiating the conditional sales contract or
physically transferring devices must provide these records upon the
request of Commission personnel.
G. Enforcement
In the NPRM, the Commission asked several questions about the
appropriate enforcement actions that should be taken in the event of
non-compliance with any of the new importation requirements and the
effect the marketing proposal would have on enforcement activities. It
specifically asked questions about appropriate sanctions for instances
where unauthorized devices are delivered to consumers prior to receipt
of the equipment authorization, including, for example, whether the
base forfeiture for such violations should be based on the number of
units delivered and whether the Commission should deny future equipment
authorization applications from grantees who deliver unauthorized
devices to consumers. Additionally, the Commission asked about how to
hold online vendors accountable and what penalties would apply to any
consumer who operates an unauthorized device that was obtained through
a violation of the Commission's conditional sale procedure.
Commenters did not specifically address enforcement related to the
importation proposal. While some commenters expressed concerns about
risks to consumers in the event that equipment authorization is not
ultimately obtained, none cited this concern as a reason to not adopt
the proposed rule. No commenters provided specific recommendations
regarding the consideration of violations or the determination of
appropriate penalties. Any comments that addressed enforcement
generally stated that existing enforcement tools would provide
sufficient means to address compliance issues without any modification.
Commenters generally concurred that the FTC and state agencies and
courts would be appropriate venues for consumer contractual complaints.
Information Technology and Innovation Foundation states that there is
always a risk of bad actors knowingly flouting regulations or small,
unsophisticated parties unknowingly failing to comply, but that the
risk of non-compliant radios becoming publicly available does not seem
to increase with the Commission's proposed rule changes. However,
Information Technology and Innovation Foundation recommends that the
Commission should always view enforcement as a primary concern.
Information Technology Industry Council notes existing safeguards that
are currently in place via not only the Commission, but also the FTC
and states' attorneys general, and argues that new Commission
enforcement mechanisms are not necessary. Similarly, CTA argues that
consumer redress mechanisms are in place, if necessary, and that if a
manufacturer does not deliver a device where a customer remitted some
consideration, the FTC and state consumer protection agencies are
experts in redressing such harms.
The Commission finds that other agencies, including the Federal
Trade
[[Page 52097]]
Commission and the various states' attorneys general, would be the
appropriate venues for consumer complaints about these issues and the
Commission will not implement additional enforcement measures at this
time. The Commission's rules already include exceptions for marketing
prior to equipment authorization. Although the exception that the
Commission adopts today provides for a greater scale of pre-
authorization device marketing, the Commission believes that its
existing enforcement measures will be sufficient to mitigate and
address potential harm.
H. Open Proceeding
In the NPRM, the Commission acknowledged an open equipment
authorization proceeding, ET Docket 15-170, which also asked questions
about importation, and tentatively concluded that the Commission's new
marketing and importation proposals may be acted upon separately. See
Amendment of Parts 0, 1, 2, 15 and 18 of the Commission's Rules
regarding Authorization of Radiofrequency Equipment, ET Docket No. 15-
170, Notice of Proposed Rulemaking, 30 FCC Rcd 7725 (2015) (2015
Equipment Authorization Notice); and Amendment of Parts 0, 1, 2, 15 and
18 of the Commission's Rules regarding Authorization of Radiofrequency
Equipment, ET Docket No. 15-170, First Report and Order, 32 FCC Rcd
8746 (2017) (2017 Equipment Authorization Order). Two commenters
specifically requested that the Commission also take action on two
proposals from ET Docket 15-170.
In the context of the Commission's importation exception, Garmin
suggests that the Commission revisit its outstanding proposal for
``provisional certification.'' In the 2015 Equipment Authorization
Notice, the Commission discussed the idea of a ``provisional
certification'' as a potential method for addressing the
confidentiality concerns of applicants for certification in which
granted certifications would not be included in the Commission's public
database before the RF device is made available for sale. The
Commission also suggested that a provisionally certified device could
also be imported prior to acknowledgement in the Commission's database.
Garmin submitted several filings in support of the proposal in ET
Docket 15-170. As a provisional grant of certification procedure would
affect all stakeholders in the equipment authorization process, it goes
beyond the narrow focus of this proceeding, the marketing and
importation rules. Thus, the Commission does not believe that this
Report and Order provides an appropriate venue for the proposal's
consideration. Additionally, as an alternative to the provisional grant
proposal, Garmin also includes an entirely new proposal for a
``deferred grant eligibility confirmation letter'' which would be
issued by a TCB prior to the grant of certification. Such a letter
would indicate the device has met the equipment authorization
requirements and the grant would not occur until a date specified by
the applicant. This proposal would similarly impact many aspects of the
equipment authorization process, and the responsibilities of TCBs, in
particular, so the Commission likewise believes it is beyond the scope
of this proceeding.
Additionally, one commenter, CTIA suggested that the Commission
also act on outstanding proposals related to the certification of
modular transmitters. A modular transmitter is a completely self-
contained RF transmitter device that typically is incorporated into
another product and is subject to, among others, the requirements of
Sec. 15.212 of the Commission's rules. The 2015 Equipment
Authorization Notice included proposed changes to these requirements
and compliance with such requirements in the context of the
certification process. These proposals relate to the certification
process and it is not necessary for us to take action at this time to
allow us to adopt the instant marketing and importation rules.
III. Final Regulatory Flexibility Analysis
A. Need for, and Objectives of, the Report and Order
In June 2020, the Consumer Technology Association (CTA) filed a
petition for rulemaking seeking modification of the Commission's rules
pertaining to the marketing and importation of radiofrequency (RF)
devices. CTA argued that those rules were out-of-date and may hinder
development and deployment of state-of-the-art RF products and
services. In December 2020, after considering the petition, and the
general support expressed in the associated record, the Commission
initiated this proceeding, proposing changes to the Commission's
marketing and equipment rules that were informed to a large extent by
the CTA Petition.
In this Report and Order the Commission adopts targeted
enhancements to the Commission's marketing and importation rules that
will allow equipment manufacturers to better gauge consumer interest
and prepare for new product launches. Given the rapid and widespread
deployment of the radiofrequency (RF) devices integral to nearly all
aspects of modern life, these steps will further the communications
sector's ability to drive innovation and promote economic growth. As
product development cycles have accelerated, new marketplace models and
assessment tools have emerged that rely on individual interest to fund
products and allow sellers to optimize the number of products they
produce or import to match anticipated sales. The rules the Commission
adopts will allow manufacturers to better utilize these tools to speed
the newest technologies and must-have devices to consumers. The
Commission has crafted these rules in a manner that will not harm the
underlying goals of the Commission's equipment authorization program:
Ensuring that the communications equipment Americans rely on every day,
such as their cellphones and Wi-Fi devices, comply with the
Commission's technical rules; and providing assurance to all spectrum
users that their devices will work as intended and operate free from
harmful interference.
B. Summary of Significant Issues Raised by Public Comments in Response
to the IRFA
There were no comments filed that specifically addressed the rules
and polices proposed in the IRFA.
C. Response to Comments by the Chief Counsel for Advocacy of the Small
Business Administration
Pursuant to the Small Business Jobs Act of 2010, which amended the
RFA, the Commission is required to respond to any comments filed by the
Chief Counsel for Advocacy of the Small Business Administration (SBA),
and to provide a detailed statement of any change made to the proposed
rules as a result of those comments. The Chief Counsel did not file any
comments in response to the proposed rules in this proceeding.
D. Description and Estimate of the Number of Small Entities to Which
Rules Will Apply
The RFA directs agencies to provide a description of, and where
feasible, an estimate of the number of small entities that may be
affected by the proposed rules, if adopted. The RFA generally defines
the term ``small entity'' as having the same meaning as the terms
``small business,'' ``small organization,'' and ``small governmental
jurisdiction.'' In addition, the term ``small business'' has the same
meaning as the term ``small business concern'' under the
[[Page 52098]]
Small Business Act. A ``small business concern'' is one which: (1) Is
independently owned and operated; (2) is not dominant in its field of
operation; and (3) satisfies any additional criteria established by the
Small Business Administration (SBA).
Small Businesses, Small Organizations, Small Governmental
Jurisdictions. The Commission's actions, over time, may affect small
entities that are not easily categorized at present. The Commission
therefore describes here, at the outset, three broad groups of small
entities that could be directly affected herein. First, while there are
industry specific size standards for small businesses that are used in
the regulatory flexibility analysis, according to data from the Small
Business Administration's (SBA) Office of Advocacy, in general a small
business is an independent business having fewer than 500 employees.
These types of small businesses represent 99.9% of all businesses in
the United States, which translates to 30.7 million businesses.
Next, the type of small entity described as a ``small
organization'' is generally ``any not-for-profit enterprise which is
independently owned and operated and is not dominant in its field.''
The Internal Revenue Service (IRS) uses a revenue benchmark of $50,000
or less to delineate its annual electronic filing requirements for
small exempt organizations. Nationwide, for tax year 2018, there were
approximately 571,709 small exempt organizations in the U.S. reporting
revenues of $50,000 or less according to the registration and tax data
for exempt organizations available from the IRS.
Finally, the small entity described as a ``small governmental
jurisdiction'' is defined generally as ``governments of cities,
counties, towns, townships, villages, school districts, or special
districts, with a population of less than fifty thousand.'' U.S. Census
Bureau data from the 2017 Census of Governments indicate that there
were 90,075 local governmental jurisdictions consisting of general
purpose governments and special purpose governments in the United
States. Of this number there were 36,931 general purpose governments
(county, municipal and town or township) with populations of less than
50,000 and 12,040 special purpose governments--independent school
districts with enrollment populations of less than 50,000. Accordingly,
based on the 2017 U.S. Census of Governments data, the Commission
estimates that at least 48,971 entities fall into the category of
``small governmental jurisdictions.''
Radio Frequency Equipment Manufacturers (RF Manufacturers). Neither
the Commission nor the SBA has developed a small business size standard
applicable to Radio Frequency Equipment Manufacturers (RF
Manufacturers). There are several analogous SBA small entity categories
applicable to RF Manufacturers--Fixed Microwave Services, Other
Communications Equipment Manufacturing, and Radio and Television
Broadcasting and Wireless Communications Equipment Manufacturing. A
description of these small entity categories and the small business
size standards under the SBA rules are detailed below.
Fixed Microwave Services. Microwave services include common
carrier, private-operational fixed, and broadcast auxiliary radio
services. They also include the Upper Microwave Flexible Use Service,
Millimeter Wave Service, Local Multipoint Distribution Service (LMDS),
the Digital Electronic Message Service (DEMS), and the 24 GHz Service,
where licensees can choose between common carrier and non-common
carrier status. There are approximately 66,680 common carrier fixed
licensees, 69,360 private and public safety operational-fixed
licensees, 20,150 broadcast auxiliary radio licensees, 411 LMDS
licenses, 33 24 GHz DEMS licenses, 777 39 GHz licenses, and five 24 GHz
licenses, and 467 Millimeter Wave licenses in the microwave services.
The Commission has not yet defined a small business with respect to
microwave services. The closest applicable SBA category is Wireless
Telecommunications Carriers (except Satellite) and the appropriate size
standard for this category under SBA rules is that such a business is
small if it has 1,500 or fewer employees. For this industry, U.S.
Census Bureau data for 2012 show that there were 967 firms that
operated for the entire year. Of this total, 955 firms had employment
of 999 or fewer employees and 12 had employment of 1,000 employees or
more. Thus under this SBA category and the associated size standard,
the Commission estimates that a majority of fixed microwave service
licensees can be considered small.
The Commission does not have data specifying the number of these
licensees that have more than 1,500 employees, and thus is unable at
this time to estimate with greater precision the number of fixed
microwave service licensees that would qualify as small business
concerns under the SBA's small business size standard. Consequently,
the Commission estimates that there are up to 36,708 common carrier
fixed licensees and up to 59,291 private operational-fixed licensees
and broadcast auxiliary radio licensees in the microwave services that
may be small and may be affected by the rules and policies discussed
herein. The Commission notes, however, that the microwave fixed
licensee category includes some large entities.
Other Communications Equipment Manufacturing. This industry
comprises establishments primarily engaged in manufacturing
communications equipment (except telephone apparatus, and radio and
television broadcast, and wireless communications equipment). Examples
of such manufacturing include fire detection and alarm systems
manufacturing, Intercom systems and equipment manufacturing, and
signals (e.g., highway, pedestrian, railway, traffic) manufacturing.
The SBA has established a size standard for this industry as all such
firms having 750 or fewer employees. U.S. Census Bureau data for 2012
shows that 383 establishments operated in that year. Of that number,
379 operated with fewer than 500 employees and 4 had 500 to 999
employees. Based on this data, the Commission concludes that the
majority of Other Communications Equipment Manufacturers are small.
Radio and Television Broadcasting and Wireless Communications
Equipment Manufacturing. This industry comprises establishments
primarily engaged in manufacturing radio and television broadcast and
wireless communications equipment. Examples of products made by these
establishments are: Transmitting and receiving antennas, cable
television equipment, GPS equipment, pagers, cellular phones, mobile
communications equipment, and radio and television studio and
broadcasting equipment. The SBA has established a small business size
standard for this industry of 1,250 employees or less. U.S. Census
Bureau data for 2012 show that 841 establishments operated in this
industry in that year. Of that number, 828 establishments operated with
fewer than 1,000 employees, 7 establishments operated with between
1,000 and 2,499 employees and 6 establishments operated with 2,500 or
more employees. Based on this data, the Commission concludes that a
majority of manufacturers in this industry are small.
E. Description of Projected Reporting, Recordkeeping, and Other
Compliance Requirements for Small Entities
In the Report and Order, the Commission adopts rules that affect
reporting, recordkeeping, and other
[[Page 52099]]
compliance requirements for small entities. Regarding marketing of RF
devices, the Report and Order will require that the seller of a
conditionally-purchased RF device advise the conditional purchaser that
the device is subject to FCC rules, and that delivery of the device to
the purchaser is contingent upon device compliance with applicable FCC
equipment authorization and technical requirements. Regarding
importation of RF devices into the United States prior to equipment
authorization for pre-sale activities--including imaging, packaging,
and delivery to retail locations--the Report and Order will require
that each imported RF device display a temporary removable label
stating that it cannot be displayed, operated, offered for sale,
marketed to consumers, or sold prior to proper FCC equipment
authorization has been granted, and will further require that importing
manufacturers have processes in place to retrieve any equipment
transferred to a conditional purchaser, in the event that such
authorization is denied by the FCC. Moreover, importing manufacturers
will be required to maintain, for a period of 60 months, records
identifying the recipients of RF devices imported for pre-sale
activities. Such records must identify several factors such as the
device name and product identifier, the quantity shipped, the date on
which the device authorization was sought, the expected FCC ID number,
and the identity of the recipient, including address and telephone
number.
The Report and Order also particular recordkeeping requirements
that will be imposed on RF manufacturers so that RF equipment that is
conditionally sold can be accounted for if equipment authorization is
ultimately not granted or enforcement action needs to be taken, and the
period of time that manufacturers should be required to retain those
records and provide them to the FCC upon request. Additionally, the
Report and Order requests that a manufacturer that imports an RF device
should be required to document (and provide such documentation to the
FCC upon request) the basis for its belief that the FCC will authorize
that device.
F. Steps Taken To Minimize the Significant Economic Impact on Small
Entities, and Significant Alternatives Considered
The RFA requires an agency to describe any significant alternatives
that it has considered in reaching its proposed approach, which may
include the following four alternatives (among others): (1) The
establishment of differing compliance or reporting requirements or
timetables that take into account the resources available to small
entities; (2) the clarification, consolidation, or simplification of
compliance or reporting requirements under the rule for small entities;
(3) the use of performance, rather than design, standards; and (4) an
exemption from coverage of the rule, or any part thereof, for small
entities.
The Report and Order rules set forth are minimal, and the
Commission believes would significantly assist RF equipment
manufacturers, some of which may be small entities, to market and
import RF equipment. Although the Commission believe that the
Commission's rules are not unduly burdensome, the Commission sought
comment on a number of alternatives or supplements to those rules and
procedures, such as whether the Commission should require marketing
disclosures at all or just some points of the pre-authorization
process, whether the Commission should require specific language or
instead permit parties to choose how they word their disclosures, and
whether all or only certain importation safeguards are needed.
The Commission believes that the regulatory burdens that the
Commission is implementing are necessary in order to ensure that the
public receives the benefits of innovative products and technologies in
a prompt and efficient manner, and those burdens apply equally to large
and small entities, thus without differential impact. The Commission
will continue to examine alternatives in the future with the objectives
of eliminating unnecessary regulations and minimizing any significant
impact on small entities.
IV. Ordering Clauses
It is ordered that, pursuant to sections 4(i), 301, 302, 303(c),
303(f), and 303(r) of the Communications Act of 1934, as amended, 47
U.S.C. 154(i), 301, 302a, 303(c), 303(f), and 303(r), this Report and
Order is adopted as set forth above.
It is further ordered that the amendments of the Commission's rules
as set forth in Appendix A are adopted, effective thirty days from the
date of publication in the Federal Register, except for Sec. Sec.
2.803(c)(2) and 2.1204(a)(11), which contain new or modified
information collection requirements that require approval by the Office
of Management and Budget under the Paperwork Reduction Act and will
become effective after the Commission publishes a notice in the Federal
Register announcing such approval and the relevant effective date.
It is further ordered that the Commission's Consumer & Governmental
Affairs Bureau, Reference Information Center, shall send a copy of this
Report and Order, including the Final Regulatory Flexibility Analysis,
to the Chief Counsel for Advocacy of the Small Business Administration.
It is further ordered that the Commission shall send a copy of this
Report and Order in a report to be sent to Congress and the Government
Accountability Office pursuant to the Congressional Review Act, see 5
U.S.C. 801(a)(1)(A).
List of Subjects in 47 CFR Parts 2 and 95
Communications equipment, Radio, Telecommunications.
Federal Communications Commission.
Marlene Dortch,
Secretary.
Final Rules
For the reasons discussed in the preamble, the Federal
Communications Commission amends 47 CFR parts 2 and 95 as follows:
PART 2--FREQUENCY ALLOCATIONS AND RADIO TREATY MATTERS; GENERAL
RULES AND REGULATIONS
0
1. The authority citation for part 2 continues to read as follows:
Authority: 47 U.S.C. 154, 302a, 303, and 336, unless otherwise
noted.
0
2. Amend Sec. 2.803 by revising paragraph (c)(2)(i) and removing and
reserving paragraph (c)(2)(ii) to read as follows:
Sec. 2.803 Marketing of radio frequency devices prior to equipment
authorization.
* * * * *
(c) * * *
(2) * * *
(i) Conditional sales contracts (including agreements to produce
new devices manufactured in accordance with designated specifications),
and advertisements for such sales, are permitted under the following
conditions:
(A) The initiating party must provide to the prospective buyer at
the time of marketing, through a prominent disclosure:
(1) Notification that the equipment is subject to the FCC rules and
delivery to the end user is conditional upon successful completion of
the applicable equipment authorization process;
(2) Notification that FCC rules do not address the applicability of
consumer protection, contractual, or other provisions under federal or
state law; and
[[Page 52100]]
(3) Notification of any responsibility of the initiating party to
the buyer in the event that the applicable equipment authorization
process is not successfully completed, including information regarding
any applicable refund policy.
(B) For devices subject to Supplier Declaration of Conformity
procedures under subpart J of this chapter, physical transfer of
equipment from the initiating party to other entities, including
delivery to the end user, prior to successful completion of the
equipment authorization process is prohibited.
(C) For devices subject to Certification procedures under subpart J
of this chapter, delivery to the end user prior to successful
completion of the equipment authorization process is prohibited;
transfer of physical possession of devices to other entities for the
sole purpose of pre-sale activity is permitted only after compliance
testing by an FCC-recognized accredited testing laboratory is completed
and an application for Certification is submitted to an FCC-recognized
Telecommunication Certification Body pursuant to Sec. 2.911. Pre-sale
activity includes packaging and transferring physical possession of
devices to distribution centers and retailers. Pre-sale activity does
not include display or demonstration of devices.
(1) Each device, or its packaging, physically transferred for the
purpose of pre-sale activity must prominently display a visible
temporary removable label stating: ``This device cannot be delivered to
end users, displayed, or operated until the device receives
certification from the FCC. Under penalty of law, this label must not
be removed prior to receiving an FCC certification grant.''
(2) The first party to initiate a conditional sales contract under
paragraph (c)(2)(i) of this section or to physically transfer devices
must have processes in place to retrieve the equipment in the event
that the equipment is not successfully certified and must complete such
retrieval immediately after a determination is made that the equipment
certification cannot be successfully completed.
(D) Notwithstanding Sec. 2.926, radiofrequency devices marketed
pursuant to paragraph (c)(2)(i) of this section may include the
expected FCC ID if obscured by the temporary label described in
paragraph (c)(2)(i)(B)(1) of this section or, in the case of electronic
labeling, if the expected FCC ID cannot be viewed prior to
authorization.
(E) All radiofrequency devices marketed under paragraph (c)(2)(i)
of this section must remain under legal ownership of the first party to
initiate a conditional sales contract.
(F) The first party to initiate a conditional sales contract or any
party that physically transfers devices under paragraph (c)(2)(i) of
this section must maintain, for a period of sixty (60) months, records
of each conditional sale contract. Such records must identify the
device name and product identifier, the quantity conditionally sold,
the date on which the device authorization was sought, the expected FCC
ID number, and the identity of the conditional buyer, including contact
information. The first party to initiate a conditional sales contract
or any party that physically transfers devices under paragraph
(c)(2)(i) of this section must provide these records upon the request
of Commission personnel.
* * * * *
0
3. Amend Sec. 2.1204 by adding paragraph (a)(11) to read as follows:
Sec. 2.1204 Import conditions.
(a) * * *
(11) The radio frequency device is subject to Certification under
Sec. 2.907 and is being imported in quantities of 12,000 or fewer
units for pre-sale activity. For purposes of this paragraph, quantities
are determined by the number of devices with the same FCC ID.
(i) The Chief, Office of Engineering and Technology, may approve
importation of a greater number of units in a manner otherwise
consistent with paragraph (a)(11) of this section in response to a
specific request.
(ii) Pre-sale activity includes packaging and transferring physical
possession of devices to distribution centers and retailers. Pre-sale
activity does not include display or demonstration of devices. Except
as provided in Sec. 2.803(c)(2)(i), the devices must not be delivered
to end users, displayed, operated, or sold until equipment
Certification under Sec. 2.907 has been obtained.
(iii) Radiofrequency devices can only be imported under the
exception of paragraph (a)(11) of this section after compliance testing
by an FCC-recognized accredited testing laboratory is completed and an
application for certification is submitted to an FCC-recognized
Telecommunication Certification Body pursuant to Sec. 2.911 of this
part;
(iv) Each device, or its packaging, imported under this exception
must prominently display a visible temporary removable label stating:
``This device cannot be delivered to end users, displayed, or operated
until the device receives certification from the FCC. Under penalty of
law, this label must not be removed prior to receiving an FCC
certification grant.''
(v) Notwithstanding Sec. 2.926, radiofrequency devices imported
pursuant to paragraph (a)(11) of this section may include the expected
FCC ID if obscured by the temporary label described in paragraph
(a)(11)(iv) this section or, in the case of electronic labeling, if it
cannot be viewed prior to authorization.
(vi) The radiofrequency devices must remain under legal ownership
of the device manufacturer, developer, importer or ultimate consignee,
or their designated customs broker, and only transferring physical
possession of the devices for pre-sale activity as defined in paragraph
(a)(11) of this section is permitted prior to Grant of Certification
under Sec. 2.907. The device manufacturer, developer, importer or
ultimate consignee, or their designated customs broker must have
processes in place to retrieve the equipment in the event that the
equipment is not successfully certified and must complete such
retrieval immediately after a determination is made that certification
cannot be successfully completed.
(vii) The device manufacturer, developer, importer or ultimate
consignee, or their designated customs broker must maintain, for a
period of sixty (60) months, records identifying the recipient of
devices imported for pre-sale activities. Such records must identify
the device name and product identifier, the quantity shipped, the date
on which the device authorization was sought, the expected FCC ID
number, and the identity of the recipient, including contact
information. The device manufacturer, developer, importer or ultimate
consignee, or their designated customs broker must provide records
maintained under this provision upon the request of Commission
personnel.
* * * * *
PART 95--PERSONAL RADIO SERVICES
0
4. The authority citation for part 95 continues to read as follows:
Authority: 47 U.S.C. 154, 303, 307.
0
5. Revise Sec. 95.391 to read as follows:
Sec. 95.391 Manufacturing, importation, and sales of non-certified
equipment prohibited.
No person shall manufacture, import, sell, or offer for sale non-
certified equipment for the Personal Radio Services except as provided
for in Sec. Sec. 2.803(c)(2)(i) and 2.1204(a)(11) of this
[[Page 52101]]
chapter. See Sec. 302(b) of the Communications Act (47 U.S.C.
302a(b)). See also part 2, subpart I (Sec. 2.801 et seq.) of this
chapter for rules governing marketing of radiofrequency devices; part
2, subpart K (Sec. 2.1201 et seq.) of this chapter for rules governing
import conditions.
[FR Doc. 2021-19385 Filed 9-17-21; 8:45 am]
BILLING CODE 6712-01-P
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</html>Indexed from Federal Register on September 20, 2021.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.