Allowing Earlier Equipment Marketing and Importation Opportunities, 52088-52101 [2021-19385]

Agencies

• FEDERAL COMMUNICATIONS COMMISSION

[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 [www.gpo.gov]
[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 [email protected]. 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 [email protected].

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 https://www.fcc.gov/document/allowing-earlier-equipment-marketing-and-importation-opportunities-1. 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 
[email protected] 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