Bill Text: CA AB2885 | 2023-2024 | Regular Session | Amended

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Bill Title: Artificial intelligence.

Spectrum: Partisan Bill (Democrat 2-0)

Status: (Engrossed) 2024-07-02 - Read second time. Ordered to Consent Calendar. [AB2885 Detail]

Download: California-2023-AB2885-Amended.html

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Amended  IN  Assembly  April 18, 2024

Amended  IN  Assembly  April 01, 2024

Amended  IN  Assembly  March 21, 2024

CALIFORNIA LEGISLATURE— 2023–2024 REGULAR SESSION

Assembly Bill

No. 2885

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Introduced by Assembly Member Bauer-Kahan
(Principal coauthor: Senator Umberg)

February 15, 2024

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An act to amend Section 22675 of the Business and Professions Code, to amend Section 75002 of the Education Code, to amend Sections 11546.45.5, 11547.5, and 53083.1 of the Government Code, and to amend Sections 42041, 42051.1, 42051.3, and 42060 of the Public Resources Code, relating to artificial intelligence.

LEGISLATIVE COUNSEL'S DIGEST

AB 2885, as amended, Bauer-Kahan. Artificial intelligence.

Existing law establishes the Government Operations Agency, which is governed by the Secretary of Government Operations. Existing law requires the Secretary of Government Operations to develop a coordinated plan to, among other things, evaluate the impact of the proliferation of deepfakes, defined to mean audio or visual content that has been generated or manipulated by artificial intelligence that would falsely appear to be authentic or truthful and that features depictions of people appearing to say or do things they did not say or do without their consent, on state government, California-based businesses, and residents of the state.

Existing law establishes within the Government Operations Agency the Department of Technology, which is supervised by the Director of Technology. Existing law requires the Department of Technology to conduct, in coordination with other interagency bodies as it deems appropriate, a comprehensive inventory of all high-risk automated decision systems that have been proposed for use, development, or procurement by, or are being used, developed, or procured by, any state agency. Existing law defines an “automated decision system” as a computational process derived from machine learning, statistical modeling, data analytics, or artificial intelligence that issues simplified output, including a score, classification, or recommendation, that is used to assist or replace human discretionary decisionmaking and materially impacts natural persons.

Existing law requires each local agency, as defined, to provide specified information to the public before approving an economic development subsidy, as defined, within its jurisdiction, and to, among other things, hold hearings and issue annual reports on those subsidies, as provided. Existing law requires those reports to contain, among other things, information about any net job loss or replacement due to the use of automation, artificial intelligence, or other technologies, if known.

Existing law establishes the California Online Community College, under the administration of the Board of Governors of the California Community Colleges, for purposes of creating an organized system of accessible, flexible, and high-quality online content, courses, and programs focused on providing industry-valued credentials compatible with the vocational and educational needs of Californians who are not currently accessing higher education. Existing law requires the California Online Community College to develop a Research and Development Unit to, among other things, focus on using technology, data science, behavioral science, machine learning, and artificial intelligence to build out student supports, as provided.

Existing law, the Plastic Pollution Prevention and Packaging Producer Responsibility Act administered by the Department of Resources Recycling and Recovery, among other things, requires manufacturers of certain single-use packaging and plastic food service ware to ensure that those products achieve specified recycling rates, as provided. Existing law requires the department to prepare one or more needs assessments designed to determine the necessary steps and investment needed for covered material, that includes an evaluation of integrating innovative and advanced technologies throughout a materials recovery facility that utilize artificial intelligence to improve data collection in order to identify, categorize, and track the disposition of covered materials throughout the recycling process.

Existing law requires a social media company, as defined, to submit a terms of service report on a semiannual basis to the Attorney General, as prescribed. Existing law requires the terms of service report to include, for each social medial platform owned or operated by the company, specified information that is disaggregated into categories, including how content was flagged or actioned by company employees or contractors, artificial intelligence software, community moderators, civil society partners, and users.

This bill would define the term ”artificial intelligence” for the purposes of the above-described provisions to mean an engineered or machine-based system that, that varies in its level of autonomy and that can, for explicit or implicit objectives, infers infer from the input it receives how to generate outputs that can influence physical or virtual environments.

Digest Key

Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: NO  

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Bill Text

The people of the State of California do enact as follows:

SECTION 1.

 Section 22675 of the Business and Professions Code is amended to read:

22675.

 For purposes of this chapter, the following definitions apply:

(a) “Actioned” means a social media company, due to a suspected or confirmed violation of the terms of service, has taken some form of action, including, but not limited to, removal, demonetization, deprioritization, or banning, against the relevant user or relevant item of content.

(b) “Artificial intelligence” has the same definition as in Section 11546.45.5 of the Government Code.

(c) (1) “Content” means statements or comments made by users and media that are created, posted, shared, or otherwise interacted with by users on an internet-based service or application.

(2) “Content” does not include media put on a service or application exclusively for the purpose of cloud storage, transmitting files, or file collaboration.

(d) “Public or semipublic internet-based service or application” excludes a service or application used to facilitate communication within a business or enterprise among employees or affiliates of the business or enterprise, provided that access to the service or application is restricted to employees or affiliates of the business or enterprise using the service or application.

(e) “Social media company” means a person or entity that owns or operates one or more social media platforms.

(f) “Social media platform” means a public or semipublic internet-based service or application that has users in California and that meets both of the following criteria:

(1) (A) A substantial function of the service or application is to connect users in order to allow users to interact socially with each other within the service or application.

(B) A service or application that provides email or direct messaging services shall not be considered to meet this criterion on the basis of that function alone.

(2) The service or application allows users to do all of the following:

(A) Construct a public or semipublic profile for purposes of signing into and using the service or application.

(B) Populate a list of other users with whom an individual shares a social connection within the system.

(C) Create or post content viewable by other users, including, but not limited to, on message boards, in chat rooms, or through a landing page or main feed that presents the user with content generated by other users.

(g) “Terms of service” means a policy or set of policies adopted by a social media company that specifies, at least, the user behavior and activities that are permitted on the internet-based service owned or operated by the social media company, and the user behavior and activities that may subject the user or an item of content to being actioned.

SEC. 2.

 Section 75002 of the Education Code is amended to read:

75002.

 For purposes of this part, the following terms have the following meanings:

(a) “Artificial intelligence” has the same definition as in Section 11546.45.5 of the Government Code.

(b) “Board of governors” means the Board of Governors of the California Community Colleges.

(c) “Chancellor’s office” means the Office of the Chancellor of the California Community Colleges.

(d) “College” means the California Online Community College established under this part.

(e) “Competency-based education” means systems of instruction, assessment, grading, and academic reporting that are based on students demonstrating that they have learned the knowledge and skills they are expected to learn as they progress through their education.

(f) “Guided Pathways Program” means a program that includes the activities and practices established pursuant to Section 88921.

(g) “Industry” means trade associations or those firms that produce similar products or provide similar services using somewhat similar business processes.

(h) “Stackable credential” means a part of a sequence of credentials that can be accumulated over time and move an individual along a career pathway or up a career ladder.

SEC. 3.

 Section 11546.45.5 of the Government Code is amended to read:

11546.45.5.

 (a) For purposes of this section:

(1) “Artificial intelligence” means an engineered or machine-based system that, that varies in its level of autonomy and that can, for explicit or implicit objectives, infers infer from the input it receives how to generate outputs that can influence physical or virtual environments.

(2) “Automated decision system” means a computational process derived from machine learning, statistical modeling, data analytics, or artificial intelligence that issues simplified output, including a score, classification, or recommendation, that is used to assist or replace human discretionary decisionmaking and materially impacts natural persons. “Automated decision system” does not include a spam email filter, firewall, antivirus software, identity and access management tools, calculator, database, dataset, or other compilation of data.

(3) “Board” means any administrative or regulatory board, commission, committee, council, association, or authority consisting of more than one person whose members are appointed by the Governor, the Legislature, or both.

(4) “Department” means the Department of Technology.

(5) “High-risk automated decision system” means an automated decision system that is used to assist or replace human discretionary decisions that have a legal or similarly significant effect, including decisions that materially impact access to, or approval for, housing or accommodations, education, employment, credit, health care, and criminal justice.

(6) (A) “State agency” means any of the following:

(i) Any state office, department, division, or bureau.

(ii) The California State University.

(iii) The Board of Parole Hearings.

(iv) Any board or other professional licensing and regulatory body under the administration or oversight of the Department of Consumer Affairs.

(B) “State agency” does not include the University of California, the Legislature, the judicial branch, or any board, except as provided in subparagraph (A).

(b) On or before September 1, 2024, the Department of Technology shall conduct, in coordination with other interagency bodies as it deems appropriate, a comprehensive inventory of all high-risk automated decision systems that have been proposed for use, development, or procurement by, or are being used, developed, or procured by, any state agency.

(c) The comprehensive inventory described by subdivision (b) shall include a description of all of the following:

(1) (A) Any decision the automated decision system can make or support and the intended benefits of that use.

(B) The alternatives to any use described in subparagraph (A).

(2) The results of any research assessing the efficacy and relative benefits of the uses and alternatives of the automated decision system described by paragraph (1).

(3) The categories of data and personal information the automated decision system uses to make its decisions.

(4) (A) The measures in place, if any, to mitigate the risks, including cybersecurity risk and the risk of inaccurate, unfairly discriminatory, or biased decisions, of the automated decision system.

(B) Measures described by this paragraph may include, but are not limited to, any of the following:

(i) Performance metrics to gauge the accuracy of the system.

(ii) Cybersecurity controls.

(iii) Privacy controls.

(iv) Risk assessments or audits for potential risks.

(v) Measures or processes in place to contest an automated decision.

(d) (1) On or before January 1, 2025, and annually thereafter, the department shall submit a report of the comprehensive inventory described in subdivision (b) to the Assembly Committee on Privacy and Consumer Protection and the Senate Committee on Governmental Organization.

(2) The requirement for submitting a report imposed under paragraph (1) is inoperative on January 1, 2029, pursuant to Section 10231.5.

(3) A report to be submitted pursuant to paragraph (1) shall be submitted in compliance with Section 9795.

SEC. 4.

 Section 11547.5 of the Government Code is amended to read:

11547.5.

 (a) For the purpose of this section:

(1) “Artificial intelligence” has the same definition as in Section 11546.45.5 of the Government Code.

(2) “Deepfake” means audio or visual content that has been generated or manipulated by artificial intelligence which would falsely appear to be authentic or truthful and which features depictions of people appearing to say or do things they did not say or do without their consent.

(3) “Digital content forgery” means the use of technologies, including artificial intelligence and machine learning techniques, to fabricate or manipulate audio, visual, or text content with the intent to mislead.

(4) “Digital content provenance” means the verifiable chronology of the original piece of digital content, such as an image, video, audio recording, or electronic document.

(5) “Secretary” means the Secretary of Government Operations.

(b) For purposes of informing the coordinated plan, as described in subdivision (c), and upon appropriation by the Legislature, the Secretary of Government Operations shall evaluate all of the following:

(1) The impact of the proliferation of deepfakes on state government, California-based businesses, and residents of the state.

(2) The risks, including privacy risks, associated with the deployment of digital content forgery technologies and deepfakes on state and local government, California-based businesses, and residents of the state.

(3) Potential privacy impacts of technologies allowing public verification of digital content provenance.

(4) The impact of digital content forgery technologies and deepfakes on civic engagement, including voters.

(5) The legal implications associated with the use of digital content forgery technologies, deepfakes, and technologies allowing public verification of digital content provenance.

(6) The best practices for preventing digital content forgery and deepfake technology to benefit the state, California-based businesses, and California residents, including exploring whether and how the adoption of a digital content provenance standard could assist with reducing the proliferation of digital content forgeries and deepfakes.

(c) The secretary shall develop a coordinated plan to accomplish all of the following:

(1) Investigate the feasibility of, and obstacles to, developing standards and technologies for state departments for determining digital content provenance.

(2) Increase the ability of internet companies, journalists, watchdog organizations, other relevant entities, and members of the public to meaningfully scrutinize and identify digital content forgeries and relay trust and information about digital content provenance to content consumers.

(3) Develop or identify mechanisms for content creators to cryptographically certify authenticity of original media and nondeceptive manipulations.

(4) Develop or identify mechanisms for content creators to enable the public to validate the authenticity of original media and nondeceptive manipulations to establish digital content provenance without materially compromising personal privacy or civil liberties.

(d) On or before October 1, 2024, the secretary shall report to the Legislature on the potential uses and risks of deepfake technology to the state government and California-based businesses.

(1) The secretary’s report shall include the coordinated plan required by subdivision (c), including recommendations for modifications to the definitions of digital content forgery and deepfakes.

(2) A report submitted pursuant to this subdivision shall be submitted in compliance with Section 9795.

(e) This section shall remain in effect only until January 1, 2025, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2025, deletes or extends that date.

SEC. 5.

 Section 53083.1 of the Government Code is amended to read:

53083.1.

 (a) On and after January 1, 2020, each local agency shall, before approving any economic development subsidy for a warehouse distribution center within its jurisdiction, and instead of complying with Section 53083, provide all of the following information in written form available to the public, and through its internet website, if applicable:

(1) The name and address of all corporations, including members of a commonly controlled group or members of a combined reporting group of which the corporation is a member, or any other business entities, except for sole proprietorships, that are the beneficiary of the economic development subsidy.

(2) The name and address of all warehouse distribution centers that are the beneficiary of the economic development subsidy.

(3) The start and end dates and schedule, if applicable, for the economic development subsidy.

(4) A description of the economic development subsidy, including the estimated total amount of the expenditure of public funds by, or of revenue lost to, the local agency as a result of the economic development subsidy.

(5) A statement of the public purposes for the economic development subsidy.

(6) The projected tax revenue to the local agency as a result of the economic development subsidy.

(7) The estimated number of jobs created by the economic development subsidy, including wage scale, broken down by full-time, part-time, and temporary positions.

(8) The estimated number of workers employed through temporary agencies.

(9) Whether any benefit package is offered, including health benefits, fringe benefits, and defined benefit pensions.

(10) Both of the following regarding each warehouse distribution center that is the beneficiary of the economic development subsidy:

(A) A description of the outreach, training, and hiring plans, including plans to hire disadvantaged workers.

(B) A description and total value of any state or federal subsidies in the process of being applied for, or received by, the warehouse distribution center.

(11) A description of any accountability measures, including, but not limited to, clawbacks of subsidies, provided in the contract if the warehouse distribution center does not meet the goal outlined in the contract for subsidies.

(b) Before granting an economic development subsidy to a warehouse distribution center, each local agency shall provide public notice and conduct a hearing regarding the economic development subsidy. A public hearing and notice under this subdivision is not required if a hearing and notice regarding the economic development subsidy is otherwise required by law.

(c) The information required to be provided in subdivision (a) shall remain available and easily accessible to the public under existing state and federal law and shall be posted on the local agency’s internet website, if applicable, for the entire term of the economic development subsidy.

(d) The local agency, after the action granting an economic development subsidy for a warehouse distribution center on or after January 1, 2020, shall issue an annual report during the term of the economic development subsidy for each economic development subsidy. The local agency shall make the report available to the public and through its internet website, if applicable. The report shall contain the information described in subdivision (a). The report shall also contain the following information, if applicable:

(1) The net tax revenue accruing to the local agency as a result of the economic development subsidy.

(2) The net number of jobs created by the economic development subsidy, including wage scales, broken down by full-time, part-time, and temporary positions.

(3) The number of workers employed through temporary agencies.

(4) Whether any benefit package is offered, including health benefits, fringe benefits, and defined benefit pensions.

(5) The number of disadvantaged workers employed, if known.

(6) Any net job loss or replacement due to the use of automation, artificial intelligence, or other technologies, if known.

(7) For each warehouse distribution center that is the beneficiary of the economic development subsidy, the retention rate of employees broken down by full-time and part-time positions, and whether the turnover rate of employees exceeds 20 percent.

(e) The local agency, after an action granting an economic development subsidy for a warehouse distribution center on or after January 1, 2020, shall hold an annual public hearing during the term of the economic development subsidy to consider any written or oral comments on the information contained in the report prepared pursuant to subdivision (d).

(f) Each public hearing required by this section shall be consolidated with a local agency’s regularly scheduled hearing.

(g) (1) The local agency shall submit the reports required in subdivisions (a) and (d) to the Governor’s Office of Business and Economic Development.

(2) The Governor’s Office of Business and Economic Development shall make each report submitted under paragraph (1) available to the public, and available through its internet website.

(h) A local agency shall not sign a nondisclosure agreement regarding a warehouse distribution center within its jurisdiction as part of negotiations or in the contract for any economic development subsidy.

(i) A warehouse distribution center shall provide a local agency any information necessary to comply with this section.

(j) As used in this section:

(1) “Artificial intelligence” has the same definition as in Section 11546.45.5 of the Government Code.

(2) “Disadvantaged worker” means an employee of the warehouse distribution center who satisfies any of the following:

(A) Was unemployed for the six 6 months immediately preceding employment with the warehouse distribution center. In the case of an employee that completed a program of study at a college, university, or other postsecondary educational institution, received a baccalaureate, postgraduate, or professional degree, and was unemployed for the six 6 months immediately preceding employment with the warehouse distribution center, that employee must have completed that program of study at least 12 months before the individual’s commencement of employment with the warehouse distribution center.

(B) Is a veteran who separated from service in the Armed Forces of the United States within the 12 months preceding commencement of employment with the warehouse distribution center.

(C) Was a recipient of the credit allowed under Section 32 of the Internal Revenue Code, relating to earned income, as applicable for federal purposes, for the previous taxable year.

(D) Is an ex-offender previously convicted of a felony.

(E) Is a recipient of either CalWORKs, in accordance with Article 2 (commencing with Section 11250) of Chapter 2 of Part 3 of Division 9 of the Welfare and Institutions Code, or general assistance, in accordance with Section 17000.5 of the Welfare and Institutions Code.

(3) “Economic development subsidy” means any expenditure of public funds or loss of revenue to a local agency in the amount of one hundred thousand dollars ($100,000) or more, for the purpose of stimulating economic development within the jurisdiction of a local agency, including, but not limited to, bonds, grants, loans, loan guarantees, fee waivers, land price subsidies, matching funds, tax abatements, tax exemptions, and tax credits. “Economic development subsidy” shall not include expenditures of public funds by, or loss of revenue to, the local agency for the purpose of providing housing affordable to persons and families of low or moderate income, as defined in Section 50093 of the Health and Safety Code.

(4) “Local agency” means a city, including a charter city, county, or city and county.

(5) “Members of a combined reporting group” has the same meaning as that term is defined in paragraph (3) of subdivision (b) of Section 25106.5 of Title 18 of the California Code of Regulations, as that section read on January 1, 2019.

(6) “Members of a commonly controlled group” has the same meaning as that term is defined in Section 25105 of the Revenue and Taxation Code.

(7) “Warehouse distribution center” means an establishment as defined by any of the following North American Industry Classification System (NAICS) Codes:

(A) 493110 for General Warehousing and Storage.

(B) 423 for Merchant Wholesalers, Durable Goods.

(C) 424 for Merchant Wholesalers, Nondurable Goods.

SEC. 6.

 Section 42041 of the Public Resources Code is amended to read:

42041.

 For purposes of this chapter, the following definitions apply:

(a) “Advisory board” means the producer responsibility advisory board established pursuant to Section 42070.

(b) “Artificial intelligence” has the same definition as in Section 11546.45.5 of the Government Code.

(c) “Bulk or large format packaging” means packaging for a large amount of a product in a large packaging, thereby offsetting the need for multiple smaller packaging units for the same amount of product.

(d) “California circular economy administrative fee” means the fee imposed by the department pursuant to Section 42053.5.

(e) “Concentrate” or “concentration” means reducing the amount of packaging needed for a product by reformulating the product to allow for smaller quantities of the product to be used for the same purpose as the previous, larger quantity.

(f) (1) “Covered material” means both of the following:

(A) Single-use packaging that is routinely recycled, disposed of, or discarded after its contents have been used or unpackaged, and typically not refilled or otherwise reused by the producer.

(B) Plastic single-use food service ware, including, but not limited to, plastic-coated paper or plastic-coated paperboard, paper or paperboard with plastic intentionally added during the manufacturing process, and multilayer flexible material. For purposes of this subparagraph, “single-use food service ware” includes both of the following:

(i) Trays, plates, bowls, clamshells, lids, cups, utensils, stirrers, hinged or lidded containers, and straws.

(ii) Wraps or wrappers and bags used in the packaging of food offered for sale or provided to customers by food service establishments.

(2) Notwithstanding paragraph (1), “covered material” does not include any of the following:

(A) Packaging used for any of the following products:

(i) Medical products and products defined as devices or prescription drugs, as specified in the Federal Food, Drug, and Cosmetic Act (21 U.S.C. Secs. 321(g), 321(h), and 353(b)(1)).

(ii) Drugs that are used for animal medicines, including, but not limited to, parasiticide products for animals.

(iii) Products intended for animals that are regulated as animal drugs, biologics, parasiticides, medical devices, or diagnostics used to treat, or administered to, animals under the Federal Food, Drug, and Cosmetic Act (21 U.S.C. Sec. 301 et seq.), the federal Virus-Serum-Toxin Act (21 U.S.C. Sec. 151 et seq.), or the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. Sec. 136 et seq.).

(iv) Infant formula, as defined in Section 321(z) of Title 21 of the United States Code.

(v) Medical food, as defined in Section 360ee(b)(3) of Title 21 of the United States Code.

(vi) Fortified oral nutritional supplements used for persons who require supplemental or sole source nutrition to meet nutritional needs due to special dietary needs directly related to cancer, chronic kidney disease, diabetes, malnutrition, or failure to thrive, as those terms are defined as by the International Classification of Diseases, Tenth Revision, or other medical conditions as determined by the department.

(B) Packaging used to contain products regulated by the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. Sec. 136 et seq.).

(C) Plastic packaging containers that are used to contain and ship products that are classified for transportation as dangerous goods or hazardous materials under Part 178 (commencing with Section 178.0) of Subchapter C of Chapter I of Subtitle B of Title 49 of the Code of Federal Regulations.

(D) Packaging used to contain hazardous or flammable products classified by the 2012 federal Occupational Safety and Health Administration Hazard Communication Standard (29 C.F.R. 1910.1200).

(E) Beverage containers subject to the California Beverage Container Recycling and Litter Reduction Act (Division 12.1 (commencing with Section 14500)).

(F) Packaging used for the long-term protection or storage of a product that has a lifespan of not less than five years, as determined by the department.

(G) Packaging associated with products covered under the architectural paint recovery program established pursuant to Chapter 5 (commencing with Section 48700) of Part 7.

(H) (i) Covered material for which the producer demonstrates to the department that the covered material meets all of the following criteria:

(I) The covered material is not collected through a residential recycling collection service.

(II) The covered material does not undergo separation from other materials at a commingled recycling processing facility.

(III) The covered material is recycled at a responsible end market.

(IV) Until January 1, 2027, the producer annually demonstrates to the department that the material has had a recycling rate of 65 percent for three consecutive years. On and after January 1, 2027, the producer demonstrates to the department that the material has had a recycling rate at or over 70 percent annually, as demonstrated to the department every two years.

(ii) If only a portion of the covered material sold in or into the state by a producer meets the criteria of clause (i), only the portion of the covered material that meets the criteria of clause (i) is exempt from this chapter and any portion that does not meet the criteria is a covered material for purposes of this chapter.

(g) “Covered material category” means a category that includes covered material of a similar type and form, as determined by the department.

(h) “Curbside collection” means a program that includes the collection of material, including, but not limited to, covered materials, by a local jurisdiction or recycling or composting service provider under contract with a local jurisdiction.

(i) “Department” means the Department of Resources Recycling and Recovery.

(j) “Disadvantaged community” means an area identified by the California Environmental Protection Agency pursuant to Section 39711 of the Health and Safety Code or an area identified as a disadvantaged unincorporated community pursuant to Section 65302.10 of the Government Code.

(k) “Eliminate” or “elimination,” with respect to source reduction, means the removal of a plastic component from a covered material without replacing that component with a nonplastic component.

(l) “Expanded polystyrene” means blown polystyrene and expanded or extruded foams that are thermoplastic petrochemical materials utilizing a styrene monomer and processed by any technique or techniques, including, but not limited to, fusion of polymer spheres (expandable bead polystyrene), injection molding, foam molding, and extrusion-blow molding (extruded foam polystyrene).

(m) “Lightweighting” means reducing the weight or amount of material used in a specific packaging or food service ware without functionally changing the packaging or food service ware. “Lightweighting” does not include changes that result in a recyclable or compostable covered material becoming nonrecyclable or noncompostable or less likely to be recycled or composted.

(n) “Local jurisdiction” means a city, county, city and county, regional agency formed pursuant to Chapter 5 (commencing with Section 6500) of Division 7 of Title 1 of the Government Code or Article 3 (commencing with Section 40970) of Chapter 1 of Part 2, or special district that provides solid waste collection services.

(o) “Low-income community” means an area with household incomes at or below 80 percent of the statewide median income or with household incomes at or below the threshold designated as low income by the Department of Housing and Community Development’s list of state income limits adopted pursuant to Section 50093 of the Health and Safety Code.

(p) “Malus fee” means a charge imposed by a PRO on a participant producer for a covered material due to the adverse environmental or public health impacts of the covered material.

(q) “Materials recovery facility” or “MRF” means a recycling facility that receives recyclable material, including, but not limited to, any covered material, for mechanical or manual sorting into specification-grade commodities for sale to a broker or end market.

(r) “Needs assessment” means a needs assessment prepared pursuant to Section 42067.

(s) “Optimize” or “optimization” means limiting the amount of covered material used in packaging by meeting product or packaging needs with minimal material. This includes, but is not limited to, eliminating unnecessary components, right-sizing, concentrating, and using bulk or large format packaging.

(t) “Packaging” means any separable and distinct material component used for the containment, protection, handling, delivery, or presentation of goods by the producer for the user or consumer, ranging from raw materials to processed goods. “Packaging” includes, but is not limited to, all of the following:

(1) Sales packaging or primary packaging intended to provide the user or consumer the individual serving or unit of the product and most closely containing the product, food, or beverage.

(2) Grouped packaging or secondary packaging intended to bundle, sell in bulk, brand, or display the product.

(3) Transport packaging or tertiary packaging intended to protect the product during transport.

(4) Packaging components and ancillary elements integrated into packaging, including ancillary elements directly hung onto or attached to a product and that perform a packaging function, except both of the following:

(A) An element of the packaging or food service ware with a de minimis weight or volume, which is not an independent plastic component, as determined by the department.

(B) A component or element that is an integral part of the product, if all components or elements of the product are intended to be consumed or disposed of together.

(u) “Plastic” means a synthetic or semisynthetic material chemically synthesized by the polymerization of organic substances that can be shaped into various rigid and flexible forms, and includes coatings and adhesives. “Plastic” includes, without limitation, polyethylene terephthalate (PET), high density polyethylene (HDPE), polyvinyl chloride (PVC), low density polyethylene (LDPE), polypropylene (PP), polystyrene (PS), polylactic acid (PLA), and aliphatic biopolyesters, such as polyhydroxyalkanoate (PHA) and polyhydroxybutyrate (PHB). “Plastic” does not include natural rubber or naturally occurring polymers such as proteins or starches.

(v) “Plastic component” means any single piece of covered material made partially or entirely of plastic. A plastic component may constitute the entirety of the covered material or a separate or separable piece of the covered material.

(w) “Processing” means to sort, segregate, break or flake, and clean material to prepare it to meet the specification for sale to a responsible end market.

(x) (1) “Producer” means a person who manufactures a product that uses covered material and who owns or is the licensee of the brand or trademark under which the product is used in a commercial enterprise, sold, offered for sale, or distributed in the state.

(2) If there is no person in the state who is the producer for purposes of paragraph (1), the producer of the covered material is the owner or, if the owner is not in the state, the exclusive licensee of a brand or trademark under which the product using the covered material is used in a commercial enterprise, sold, offered for sale, or distributed in the state. For purposes of this subdivision, a licensee is a person holding the exclusive right to use a trademark or brand in the state in connection with the manufacture, sale, or distribution of the product packaged in or made from the covered material.

(3) If there is no person in the state who is the producer for purposes of paragraph (1) or (2), the producer of the covered material is the person who sells, offers for sale, or distributes the product that uses the covered material in or into the state.

(4) “Producer” does not include a person who produces, harvests, and packages an agricultural commodity on the site where the agricultural commodity was grown or raised.

(5) For purposes of this chapter, the sale of covered materials shall be deemed to occur in the state if the covered materials are delivered to the purchaser in the state.

(y) “Producer responsibility organization” or “PRO” means an organization that is exempt from taxation under Section 501(c)(3) of the federal Internal Revenue Code of 1986 and is formed for the purpose of implementing a plan to meet the requirements of this chapter.

(z) “Producer responsibility plan” or “plan,” unless context requires otherwise, means the plan produced by a PRO, or by a producer that chooses to assume responsibility to comply with this chapter individually, and submitted to the advisory board and department pursuant to Section 42051.1.

(aa) “Rate of inbound contamination” means the amount of nonrecyclable or noncompostable materials arriving at a materials recovery facility or other recycling or composting facility.

(ab) (1) “Recycle” or “recycling” means the process of collecting, sorting, cleansing, treating, and reconstituting materials that would otherwise ultimately be disposed of onto land or into water or the atmosphere, and returning them to, or maintaining them within, the economic mainstream in the form of recovered material for new, reused, or reconstituted products, including compost, that meet the quality standards necessary to be used in the marketplace.

(2) “Recycle” or “recycling” does not include any of the following:

(A) Combustion.

(B) Incineration.

(C) Energy generation.

(D) Fuel production, except for anaerobic digestion of source separated organic materials.

(E) Other forms of disposal.

(3) To be considered recycled, covered material shall be sent to a responsible end market.

(4) (A) The department may adopt regulations to define guidelines and verification requirements for covered material shipped out of state and exported to other countries for recycling, including processing requirements, and contamination standards, or to otherwise implement this paragraph.

(B) For any mixture of plastic waste exported to another country, the PRO or producer shall certify to the department that the processes and recycling technologies used meet both of the following requirements, as determined by the department:

(i) The plastic waste is a mixture of plastic types consisting only of one or more of polyethylene, polypropylene, or polyethylene terephthalate, and the export is destined for separate recycling of each material.

(ii) The plastic waste export is not prohibited by an applicable law or treaty of the destination jurisdiction, and the import of the plastic waste into the destination jurisdiction will be conducted in accordance with all applicable laws and treaties of that destination jurisdiction.

(C) For any mixture of plastic waste exported to other states or countries, the PRO or producer shall certify to the department that the recycling technology used meets the requirements of this subdivision.

(D) In meeting the requirements of subparagraphs (B) and (C), the PRO or producer shall provide documentation necessary to verify this certification and shall make the certification under penalty of perjury.

(5) The department’s regulations shall encourage recycling that minimizes generation of hazardous waste, generation of greenhouse gases, environmental impacts, environmental justice impacts, and public health impacts. The regulations shall include criteria to exclude plastic recycling technologies that produce significant amounts of hazardous waste.

(ac) “Recycling rate” means the percentage, overall and by category, of covered material sold, offered for sale, distributed, or imported in the state that is ultimately recycled. The recycling rate shall be calculated as the amount of covered material that is recycled in a given year divided by the total amount of covered material disposed of, as defined in subdivision (b) of Section 40192, and the amount of covered material recycled, unless and until the department adopts a new methodology for calculating the recycling rate by regulation.

(ad) “Recycling service provider” means a solid waste enterprise that provides solid waste handling services on behalf of a local jurisdiction.

(ae) “Responsible end market” means a materials market in which the recycling and recovery of materials or the disposal of contaminants is conducted in a way that benefits the environment and minimizes risks to public health and worker health and safety. The department may adopt regulations to identify responsible end markets and to establish criteria regarding benefits to the environment and minimizing risks to public health and worker health and safety.

(af) (1) “Retailer” or “wholesaler” means the person or entity who sells covered material in the state to purchasers or offers to purchasers the covered material in the state through any means, including, but not limited to, any of the following:

(A) Remote offering, including sales outlets or catalogs.

(B) Electronically through the internet.

(C) Telephone.

(D) Mail.

(E) Direct sales.

(2) A person who sells covered material as a third-party seller using an online marketplace as described in paragraph (3) shall be considered the retailer or wholesaler for purposes of such transactions. The owner or operator of the online marketplace shall not be considered the retailer or wholesaler for such sales.

(3) For purposes of this subdivision, “online marketplace” means a consumer-directed, electronically accessed platform in which all of the following are true:

(A) The platform includes features that enable third-party sellers to sell consumer products directly to consumers in the state without the owner or operator of the platform involved in the transaction other than by providing order processing, payment, storage, shipping, or delivery services.

(B) Third-party sellers use the features described in subparagraph (A) to sell directly to consumers in the state, with title to the consumer product passing from the third-party sellers directly to consumers and not being held by the owner or operator of the online marketplace at any point during the transaction, including upon receipt of the order and throughout the order fulfillment process.

(C) Except as provided by subparagraph (E), the owner or operator of the platform does not directly or indirectly control the covered material used in packaging and shipping of a consumer product in this state.

(D) The person or entity operating the platform has a contractual or similar relationship with consumers governing their use of the platform to purchase consumer products.

(E) Third-party sellers agree, pursuant to the platform’s terms and conditions or other enforceable agreement, that they will not use the platform to offer for sale, sell, or distribute into the state covered material that does not meet the requirements of this chapter.

(ag) “Reusable” or “refillable” or “reuse” or “refill,” in regard to packaging or food service ware, means either of the following:

(1) For packaging or food service ware that is reused or refilled by a producer, it satisfies all of the following:

(A) Explicitly designed and marketed to be utilized multiple times for the same product, or for another purposeful packaging use in a supply chain.

(B) Designed for durability to function properly in its original condition for multiple uses.

(C) Supported by adequate infrastructure to ensure the packaging or food service ware can be conveniently and safely reused or refilled for multiple cycles.

(D) Repeatedly recovered, inspected, and repaired, if necessary, and reissued into the supply chain for reuse or refill for multiple cycles.

(2) For packaging or food service ware that is reused or refilled by a consumer, it satisfies all of the following:

(A) Explicitly designed and marketed to be utilized multiple times for the same product.

(B) Designed for durability to function properly in its original condition for multiple uses.

(C) Supported by adequate and convenient availability of and retail infrastructure for bulk or large format packaging that may be refilled to ensure the packaging or food service ware can be conveniently and safely reused or refilled by the consumer multiple times.

(ah) “Right-size” or “right-sizing” means reducing the amount of material used to package an item by reducing unnecessary space or eliminating unnecessary components of the packaging.

(ai) “Rural area” has the same meaning as defined in Section 50101 of the Health and Safety Code.

(aj) “Single use” means conventionally disposed of after a single use or not sufficiently durable or washable to be, or not intended to be, reusable or refillable.

(ak) “Source reduction” means the reduction in the amount of covered material created by a producer relative to a baseline established pursuant to subdivision (b) of Section 42057. Methods of source reduction include, but are not limited to, shifting covered material to reusable or refillable packaging or a reusable product or eliminating unnecessary packaging. “Source reduction” does not include either of the following:

(1) Replacing a recyclable or compostable covered material with a nonrecyclable or noncompostable covered material or a covered material that is less likely to be recycled or composted.

(2) Switching from virgin covered material to postconsumer recycled content.

(al) “Source reduction plan” means the plan prepared as part of the PRO plan in accordance with Section 42057.

(am) “Unexpended funds” means moneys in a PRO’s accounts that the organization is not already obligated to pay pursuant to a contract, claim, or similar mechanism. “Unexpended funds” excludes the California circular economy administrative fees.

SEC. 7.

 Section 42051.1 of the Public Resources Code is amended to read:

42051.1.

 (a) As a condition of producer responsibility plan approval, the PRO plan shall comply with the regulations adopted by the department pursuant to Section 42060. The PRO shall submit a plan and budget that includes the provisions necessary for the department to ensure producers covered under the plan comply with this chapter.

(b) The plan shall include all of the following:

(1) Actions and investments that the PRO will implement in order to meet the requirements of this chapter and address the needs and investments identified in the needs assessment.

(2) The source reduction plan required pursuant to Section 42057. For any covered material that is not reasonably anticipated by the PRO to achieve the requirements of this chapter, the PRO shall include in the plan a timeline and actions to discontinue use of the covered material category.

(3) Technologies and means that will be utilized to achieve recycling requirements, including demonstration that the means and technologies meet the conditions specified in subdivision (ab) of Section 42041.

(c) The plan shall include objective and measurable criteria whenever possible, and describe all of the following:

(1) How the PRO will meet the requirements of this chapter, including, but not limited to, how it will, in an economically efficient and practical manner, provide for the necessary infrastructure and viable responsible end markets to ensure the covered material will achieve the requirements of Section 42050 based on the needs assessments.

(2) How the PRO will support and achieve, and how the budget will fund, the collection, processing, recycling, or composting of, and the development of viable responsible end markets for, covered materials to meet the requirements of this chapter. This includes, but is not limited to, actions necessary to sort, segregate, break or flake, and process material to specifications for sale to a responsible end market. For purposes of this paragraph, “specifications” means the third-party purchasing specifications issued by a buyer or buyers of recycled materials for reprocessing into a new product.

(3) (A) How the plan is supplemental to, and not in conflict with, disruptive of, or adversely affecting, the performance of the solid waste network providing services in accordance with local solid waste handling requirements and the intent described in Section 40004, and how the PRO will leverage and utilize existing collection programs and recycling, composting, sorting, and processing infrastructure.

(B) Except as specified in subdivisions (b), (c), (d), and (e) of Section 42060.5, how the plan will be implemented in a manner utilizing solid waste collection programs and solid waste facilities as the designated system for the collection and processing of covered material.

(4) In accordance with Section 40059, how the plan and the activities undertaken pursuant to the plan will be implemented in compliance with state and local laws, rules, and regulations applicable to solid waste handling and in a manner that does not violate existing franchise agreements.

(5) How covered material will be collected, processed, and managed, and recycled, remanufactured, or composted, consistent with the goals, standards, and practices required by this chapter, including ensuring covered material collected for recycling will be transferred to viable responsible end markets for processing into new packaging or products, including, but not limited to, how the plan will enhance or expand viable responsible end markets in California including manufacturing.

(6) Arrangements with processors or recyclers to ensure that covered materials that are not collected through a curbside collection program or other local collection program are collected and recycled at a viable responsible end market, including any investment that will be made to cover the cost of the covered material being processed or recycled by processors or recyclers.

(7) Arrangements to establish and fund reuse or refill infrastructure, fund facility retrofits, or other needed infrastructure to eliminate plastic covered material, shift covered material from plastic to a nonplastic covered material category, or any other actions taken, or that will be taken, to implement the source reduction requirements pursuant to Section 42057.

(8) How postconsumer recycled content will be incorporated into covered material, including the amounts of postconsumer recycled content.

(9) How the plan will be implemented in a manner consistent with the waste hierarchy established in Section 40051.

(d) (1) The plan shall include a fee for participants of the PRO consistent with the provisions of Section 42053, set forth the calculation of the fee, and describe the process through which the PRO will collect the fee from producers that are participants of the PRO’s approved plan.

(2) The plan shall include a description of the fee structure and a schedule of the fees actually charged to producers who are participants of a PRO’s approved plan.

(e) The plan shall include efforts to use education and promotion to encourage proper participation in recycling and composting collection and reuse and refill systems. The PRO shall ensure coordination between these efforts and existing educational and promotional efforts. These may include, but are not limited to, all of the following:

(1) Education and engagement to reduce the rate of inbound contamination or unwanted materials.

(2) Outreach to obtain consistently high levels of public participation in and use of collection services and reuse and refill systems.

(3) Education and engagement with residents on proper recycling, composting, and reuse and refill behaviors.

(4) Support for increased statewide and local outreach needed to achieve the plan’s goals.

(f) The plan shall include a closure or transfer plan to settle the affairs of the PRO that ensures that producers who are participants of the PRO’s approved plan will continue to meet their obligations in the event of dissolution of the organization or revocation of a plan by the department and that describes a process for notifying the department, the advisory board, local jurisdictions, and any contractors of the dissolution. The closure or transfer plan shall provide for sufficient reserve funds in the trust fund or escrow account established pursuant to Section 42056 to allow the PRO to satisfy all obligations in the event of dissolution of the PRO until the participants of the PRO’s approved plan have become a participant of a different PRO’s approved plan.

(g) (1) The plan shall include a process for determining the costs that will be incurred by local jurisdictions, recycling service providers, alternative collection systems, and others under this chapter and shall include a mechanism and schedule for transferring the portion of the fee required by paragraph (7) of subdivision (c) of Section 42053 to local jurisdictions. The PRO shall determine the costs based on information provided by local jurisdictions, recycling service providers, and others under this chapter. Payment of these costs shall be reflected in the budget pursuant to subdivision (j).

(2) The plan shall include a process to resolve disputes for determining and paying the reasonable costs pursuant to paragraph (1) that arise between the PRO and a local jurisdiction or a recycling service provider. This process shall be reviewed by the advisory board to ensure the PRO covers costs related to this chapter and shall become effective upon plan approval by the department.

(h) The plan shall include the source reduction data specified in subdivision (c) of Section 42057.

(i) (1) The plan shall include consideration of the needs assessment and any recommended investments to meet the needs identified in the needs assessments and inform the budget.

(2) The budget shall not propose investing in activities in violation of Section 40004 or an agreement entered into pursuant to Section 40059 and shall include a mechanism to disburse funds for identified activities.

(3) The budget may include, but shall not be limited to, elements that will accomplish all of the following:

(A) Expanding access to or improvement of curbside collection services wherever feasible.

(B) Expanding access to dropoff recycling services or other mechanisms where curbside collection services are not feasible, or as necessary in order to supplement curbside collection services to achieve the requirements of this chapter.

(C) Expanding access to collection services in public spaces.

(D) Providing or facilitating deployment of innovative enhanced collection, composting, and recycling systems and innovative recycling systems within a recycling center or MRF that utilizes advanced technology, such as artificial intelligence and robotics, to improve the identification and sorting of covered materials, where feasible.

(E) Creation of on-premises access to recycling or composting services for multifamily residences.

(F) Funding, providing, or facilitating the efficient transport of materials from remote or rural areas to centralized sorting facilities, brokers, or viable responsible end markets.

(G) Enhancing existing materials recycling or composting infrastructure by developing a quality incentive payment, grants, and other mechanisms sufficient to cover the cost of separating, processing, baling, recycling, composting, remanufacturing, and transporting desired materials that meet viable responsible end market quality specifications, or for reducing the rate of inbound contamination to composting facilities.

(H) Infrastructure or other mechanisms needed to implement a source reduction plan, including, but not limited to, investments in reuse, refill, and composting infrastructure.

(I) Infrastructure or other activities needed to achieve recycling rates for all covered material under the plan and ensure covered material is recyclable or compostable.

(4) In developing the budget, the PRO may delineate investments the PRO will make based on covered material categories.

(j) (1) The plan shall include a budget designed to fully fund the costs necessary to implement this chapter. The budget shall include, but not be limited to, fully funding the plan and all other costs associated with implementing the plan, including, but not limited to, all of the following:

(A) Actions and investments identified in the plan to fund the budget and needs and investments identified in the needs assessments.

(B) Costs associated with this chapter incurred by local jurisdictions, recycling service providers, and other collection programs, and costs related to consumer outreach and education; the transportation of covered materials to a materials recovery facility, broker, or viable responsible end market; cleaning, sorting, aggregating, and baling covered materials as necessary to bring those materials to a viable responsible end market; waste stream sampling and reporting required by this chapter for local governments; costs incurred to educate ratepayers to improve the preparation and sorting of covered material; and improvements to collection, sorting, decontamination, remanufacturing, and other infrastructure necessary to achieve recycling rates. These costs include costs related to both curbside and noncurbside collection programs and may be varied based on population density, distance to a viable responsible end market, and other relevant factors.

(C) Reimbursing costs incurred by the department and the California Department of Tax and Fee Administration.

(D) Administering the PRO.

(E) Environmental mitigation activities associated with Section 42064.

(F) Investments to develop and sustain viable responsible end markets for each covered material category.

(G) Other investments necessary to implement the plan and achieve the source reduction, recyclability and compostability, recycling rate, and other requirements of this chapter, including, but not limited to, ensuring that plan implementation avoids and minimizes negative environmental or public health impacts on disadvantaged or low-income communities or rural areas.

(H) If reasonable and able to be discretely directed, funding derived from a material type may be spent on investments needed for that specific material type.

(2) A producer or PRO shall not expend revenue collected for implementation of the plan for any of the following purposes:

(A) To pay an administrative civil penalty pursuant to Section 42081.

(B) To pay costs associated with litigation between the producer or organization and the state.

(C) To compensate a person whose position is primarily representing the PRO relative to the passage, defeat, approval, or modification of legislation that is being considered by a local, state, or federal government body, nor shall the PRO use or permit the use of these funds for paid advertisement 30 calendar days prior to or during a legislative session for the purposes of encouraging the passage, defeat, approval, or modification of legislation that is being considered, or was considered during the previous legislative session.

(D) To subsidize, incentivize, or otherwise support incineration, engineered municipal solid waste conversion, the production of energy or fuels, except for fuels produced using anaerobic digestion of source separated organic materials, or other disposal activities.

(3) (A) A PRO shall not maintain total program reserves exceeding 60 percent of its annual operating expenses, consistent with the requirements of the Financial Accounting Standards Board’s Accounting Standards Update 2016-14, Not-for-Profit Entities (Topic 958), and any future updates to that standard.

(B) The department, in approving the annual PRO budget, may authorize the total reserves to be increased to up to 75 percent of the PRO’s annual operating expenses if the department determines the increase is necessary to implement the requirements of this chapter.

(C) If a PRO’s reserves exceed the amount specified in subparagraph (A) or (B), the department may require the PRO or a participant producer to increase spending on implementing the requirements of this chapter.

(k) Consistent with subdivision (l), as part of the plan, the PRO or a participant producer may rely on a range of means to collect and recycle or compost various categories of covered materials that are not collected and recycled or composted through a curbside collection program or other local collection program, including, but not limited to, dropoff recycling services and retailer take-back.

(l) (1) A plan shall include curbside recycling and composting collection for covered materials under any of the following circumstances:

(A) The category of covered materials can be made suitable for curbside collection and can be effectively sorted by the facilities receiving the curbside collected material for recycling or composting.

(B) The recycling facility providing processing and sorting service, in consultation with the local jurisdiction, agrees to include the category of covered materials as an accepted material for recycling or composting and agrees to collect and sort the material in a manner that achieves the quality necessary for recycling and remanufacturing or composting.

(C) The provider of the curbside collection and recycling or composting service agrees to the costs arrangement.

(2) If a MRF chooses to send material to another sorting facility for additional sorting and recycling of covered materials, the PRO shall provide the initial MRF a rebate based on criteria the PRO shall develop to cover transportation costs of the covered materials provided the covered material is free of toxic or hazardous materials.

(m) The plan shall include specific measures to ensure that producers participating in the plan comply with the requirements of the plan and this chapter. Those measures shall include, at a minimum, all of the following elements:

(1) Adequate incentives for compliance, including, but not limited to, fees for failing to provide accurate and timely information required to be provided to the PRO or otherwise materially violating requirements of the plan or this chapter. Notwithstanding the PRO’s assessment of a fee, the department may take enforcement action pursuant to Article 5 (commencing with Section 42080) against individual producers or the PRO in violation of this chapter.

(2) Protocols to ensure that the PRO becomes aware, within a reasonable time, of producers’ violations of the requirements of the plan or this chapter.

(3) Criteria for determining when a producer’s performance merits terminating the producer’s participation in the PRO’s plan, and a process for making that determination.

(4) Record maintenance protocols requiring the PRO to maintain records sufficient to demonstrate whether each producer participating in the plan has complied with the requirements of the plan and this chapter for at least the previous three years. Those protocols shall ensure that all records remain reasonably accessible by the department upon request.

(5) The plan shall include the specific data information required under subdivision (c) of Section 42057.

(n) The PRO shall ensure that the plan implementation avoids or minimizes negative environmental or public health impacts on disadvantaged or low-income communities or rural areas and vulnerable communities outside the state.

SEC. 8.

 Section 42051.3 of the Public Resources Code is amended to read:

42051.3.

 (a) (1) A PRO shall annually submit to the department and make publicly available on its internet website an annual report and budget that describes how the PRO is implementing the approved plan and how the PRO has complied with the requirements of this chapter and its implementing regulations.

(2) The annual report shall describe in detail progress made toward meeting or exceeding the requirements in Section 42050 and shall include an evaluation of whether the PRO is reasonably likely to meet those requirements. If the PRO is not reasonably likely to meet those requirements, the PRO shall submit to the department an amendment to the plan to include additional measures to be implemented to ensure the requirements are met.

(3) The annual report shall include all of the following:

(A) The PRO’s cost and revenues, including an updated budget and any updates to the fee schedule necessary to ensure the revenues are sufficient to cover the full costs of implementing this chapter in the upcoming year.

(B) An updated list of the names and contact information of each participant of the plan.

(C) A description of outreach efforts and education to consumers.

(D) A report on activities the PRO has taken to implement each provision of the plan, including, but not limited to, all of the following:

(i) A description of the methods used to collect, transport, process, and recycle or compost covered material.

(ii) The recycling technologies and means that will be utilized to achieve recycling requirements, including demonstration that the means and technologies meet the conditions specified in subdivision (ab) of Section 42041.

(iii) Progress made in meeting source reduction goals.

(iv) Current recycling rates and progress made in meeting recycling rates and any investments made to achieve recycling rate requirements.

(E) The source reduction data specified in subdivision (c) of Section 42057.

(b) (1) Within 90 calendar days of receiving an annual report, the department shall, in accordance with Section 42063, review the report and notify the PRO of any deficiencies in the annual report. No later than 60 calendar days after receiving this notice from the department, the PRO shall provide additional information, modifications, or corrections in response to the department’s notification.

(2) Within 90 calendar days of receipt of an annual report deemed complete, the department shall review the report for compliance with this chapter and shall approve, disapprove, or conditionally approve the annual report. As part of this review, the department shall evaluate the annual report to determine whether the PRO, in light of its implementation of the plan and any amendments or pending amendments to the plan pursuant to paragraph (1) of subdivision (e) of Section 42051.2, is reasonably likely to meet the requirements of the plan and this chapter.

(3) (A) If the department conditionally approves or disapproves the annual report, the PRO shall resubmit a revised annual report addressing the department’s written reasons for its decision within 30 calendar days of the conditional approval or disapproval.

(B) The department, within 60 calendar days from the date a PRO resubmits a revised annual report, shall approve or disapprove a final annual report.

(4) If the department disapproves a revised annual report submitted pursuant to subparagraph (A) of paragraph (3), the PRO may submit only one additional final annual report, subject to review in accordance with subparagraph (B) of paragraph (3), which shall include the revisions necessary for approval by the department.

(5) If a PRO fails to submit an annual report that obtains approval by the department, the department may deem the PRO no longer in compliance with this chapter.

SEC. 9.

 Section 42060 of the Public Resources Code is amended to read:

42060.

 (a) By January 1, 2025, the department shall adopt regulations necessary to implement and enforce this chapter and to ensure that the requirements of this chapter and in particular the requirements established in Section 42050 and the policy goal established in Section 41780.01 as it relates to covered material are met. The regulations shall include, but not be limited to, all of the following:

(1) Any regulations necessary to ensure the PRO fully funds plan implementation, including fully funding the budget. This shall include the costs incurred by a local jurisdiction or a local jurisdiction’s recycling service providers to implement this chapter, including, but not limited to, the cost of consumer education and of collection, including the cost of containers where relevant, as well as the processing, storage, and transportation of covered materials. Costs may vary based on population density or other relevant factors and shall allow local jurisdictions to protect ratepayers from increased costs associated with the processing and marketing of covered material.

(2) (A) Establish a mandatory process for producers, retailers, and wholesalers, or a PRO operating on behalf of a producer, retailer, or wholesaler, to register with and report to the department.

(B) The process shall include establishing appropriate timelines to begin regular reporting following the adoption of the regulations. The department shall consider, along with any other factors the department deems appropriate, the amount of information being reported in developing the timelines.

(C) (i) Data requests by the department shall be consistent with the covered material categories established and posted on the department’s internet website pursuant to subdivision (a) of Section 42061.

(ii) To the maximum extent feasible, the department shall seek to use records and information that the local jurisdiction, producer, retailer, wholesaler, or PRO already maintains, in order to minimize the burden imposed by the reporting and recordkeeping requirements while still enabling the department to determine compliance with this chapter.

(D) The department shall, to the extent feasible, make the reporting consistent with other recognized third-party reporting systems used by producers or other packaging extended producer responsibility programs.

(E) Market-sensitive trade secret data received by the department pursuant to this chapter shall be held confidentially by the department as required by Section 40062 and any implementing regulations, provided that the furnisher of the data complies with the requirements set forth in subdivision (b) of Section 40062 and any implementing regulations for identifying the information claimed to be a trade secret.

(F) The department shall create an online registration form to facilitate submitting reports pursuant to this subdivision. To the extent permissible under applicable law, the department may contract with an independent third-party online reporting system with recognized standards for waste characterization, source reduction, and recycling.

(3) (A) The department shall establish a process to identify covered material that, while determined to be single use for purposes of this chapter, presents unique challenges in complying with this chapter. The department may exempt covered material identified pursuant to this subparagraph from this chapter.

(B) For any covered material identified as presenting unique challenges and exempted from this chapter under subparagraph (A), the department may at any point develop a plan to phase the covered material into the requirements of this chapter.

(4) The department shall establish a process to identify covered material that cannot comply with this chapter for health and safety reasons, or because it is unsafe to recycle. The department may exempt that covered material from this chapter.

(5) The department shall establish a process to exempt from the requirements of this chapter, except for the requirements of subdivision (b) of Section 42050, small producers, small retailers, and small wholesalers based on size, revenue, number of retail locations, and market share, as follows:

(A) Subject to subparagraph (B), the department shall exempt producers, retailers, or wholesalers that, in the most recent calendar year, had gross sales of less than one million dollars ($1,000,000) in the state.

(B) If the department determines that exempting a particular small producer, small retailer, or small wholesaler pursuant to subparagraph (A) would hinder the ability of a type of covered material or covered material category from complying with the requirements of this chapter, the department may determine that the particular small producer, small retailer, or small wholesaler will not be exempted from the requirements of this chapter.

(6) (A) The department shall include mechanisms necessary to reduce the amount of covered material entering the environment, in accordance with the regulations adopted pursuant to this section.

(B) The department may consider reductions of covered material achieved by a producer before the effective date of the regulations toward a producer’s compliance with this chapter if the producer can demonstrate to the satisfaction of the department that the producer reduced the covered material in a manner consistent with this chapter and actions taken to comply with Chapter 5.5 (commencing with Section 42300).

(C) In calculating the reductions necessary to achieve the requirements adopted pursuant to subdivision (a), the department shall consider source reduction achieved pursuant to Section 42057.

(7) The department shall establish a process to require coordination between a PRO and producer that is not a participant of the PRO’s approved plan and between multiple PROs as necessary. This includes determining how much each PRO shall charge producers of plastic covered material in order to prorate the funding as necessary to raise the revenue required by Section 42064.

(8) The department shall establish a methodology and process to calculate, to the extent feasible, an annual recycling rate defined in subdivision (ac) of Section 42041.

(b) (1) The department shall ensure that any regulations adopted pursuant to this chapter consider guidelines and do not conflict with regulations issued by the United States Food and Drug Administration and the United States Department of Agriculture and consider requirements imposed by other California state agencies.

(2) Neither the department nor the PRO shall impose any requirement, including, but not limited to, a recycled content requirement, in direct conflict with a federal law or regulation, including, but not limited to, laws or regulations covering tamper-evident packaging pursuant to Section 211.132 of Title 21 of the Code of Federal Regulations, laws or regulations covering child-resistant packaging pursuant to Part 1700 (commencing with Section 1700.1) of Subchapter E of Chapter II of Title 16 of the Code of Federal Regulations, regulations, rules, or guidelines issued by the United States Department of Agriculture or the United States Food and Drug Administration relevant to packaging agricultural commodities, requirements for microbial contamination, structural integrity, or safety of packaging under the Federal Food, Drug, and Cosmetic Act (21 U.S.C. Sec. 301 et seq.), 21 U.S.C. Sec. 2101 et seq., the federal FDA Food Safety Modernization Act (Public Law 111-353), the federal Poultry Products Inspection Act (21 U.S.C. Sec. 451 et seq.), the Federal Meat Inspection Act (21 U.S.C. Sec. 601 et seq.), or the federal Egg Products Inspection Act (21 U.S.C. Sec. 1031 et seq.). Neither the department nor a PRO shall impose a postconsumer recycled content requirement for covered material for fresh produce.

(c) In developing the regulations, the department shall consider relevant information on reduction programs and approaches in other states, localities, and nations, including, but not limited to, the European Union, India, Costa Rica, China, Chile, and Canada, and international standards, including, but not limited to, ISO 18602.

(d) In adopting regulations pursuant to this section, the department shall ensure the regulations, and activities conducted in accordance with the regulations, avoid or minimize disproportionate impacts to disadvantaged or low-income communities or rural areas.