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Federal Register / Vol. 86, No. 179 / Monday, September 20, 2021 / Rules and Regulations
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 Commissions 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 manufacturers 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 2.803
marketing rules. Samsung argues that the current text of 2.803c2 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 Commissions safeguards. As an alternative to adding a new subsection to 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 2.803. Similarly, CTA
recommends that the Commission clarifies that the proposed new importation condition does not violate the Commissions 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
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labeled, delivered, and stored until they are authorized for consumer use.
The intent of the Commissions 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 2.803 of the Commissions 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
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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 Americas 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 Commissions 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
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