By now consumers are well accustomed to preordering books, playoff tickets, and other goods and services before they are brought to market. Manufacturers, in turn, use this information to gauge consumer demand and prepare product launches accordingly. Now, due to recent actions by the Federal Communications Commission (FCC), the benefits of the preordering model will be extended to radiofrequency (RF) devices, which encompass cellphones, Wi-Fi routers and any number of commonly used electronic products that emit RF energy.
Late last year the FCC proposed to give manufacturers greater flexibility to import or market RF devices before receiving equipment authorization. In so doing, the Commission recognized that new sales models increasingly involve online marketplaces that provide manufacturers direct access to consumers, and that this has brought consumers into the product development process to a greater extent than before. To adjust to this new reality, the Commission sought to give manufacturers better opportunities to accurately measure consumer demand and prepare for new product launches without having to wait for equipment authorization. Ultimately, the goal was to deliver new technologies to market and into consumers' hands more quickly.
On June 17, 2021, the FCC released a Report and Order in which it adopted its proposed rules, albeit with some important modifications. The following is an overview of some of the key elements of the amended rules and how they will affect importation and marketing of RF devices.
What is the Purpose of the FCC's Equipment Authorization Program?
The FCC's equipment authorization program is intended to ensure that RF devices comply with the FCC's technical requirements before they are imported into or marketed in the United States. In this context, "marketing" is defined very broadly to include "sale or lease, or offering for sale or lease, including advertising for sale or lease, or importation, shipment, or distribution for the purpose of selling or leasing or offering for sale or lease."
There are two approval procedures for equipment authorization—certification and supplier's declaration of conformity (SDoC). Certification is the more rigorous process and is reserved for devices that are most likely to cause interference, such as those with transmitters like smartphones, laptops with Wi-Fi, and Bluetooth headphones. Certified devices must be tested by an FCC-recognized accredited testing laboratory and reviewed by an FCC-recognized Telecommunications Certification Body (TCB). The SDoC process only requires that the party responsible for compliance (who must be located in the United States) ensure that equipment meets the FCC's technical standards.
What did the FCC Change?
Importation of RF Devices Prior to Equipment Authorization.
To allow manufacturers to better prepare for new product launches, the FCC will allow importation of up to 12,000 RF devices for pre-sale activity before the equipment successfully completes certification. A manufacturer that needs to exceed that limit must ask the FCC for approval to do so.
In this context, permitted "pre-sale activities" include packaging and transferring physical possession of devices to distribution centers and retail locations, but do not include display or demonstration of devices. Also, 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, and must remain under legal ownership of the 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.
Devices with different FCC IDs are considered to be separate devices, meaning that up to 12,000 devices with the same FCC ID number may be imported for pre-sale activities. Importation for pre-sale activities prior certification may only occur after compliance testing of the relevant device is complete and an application for certification has been submitted in good faith to a TCB.
Marketing of RF Devices Prior to Equipment Authorization.
While the FCC's rules generally prohibit marketing of RF devices prior to equipment authorization, they include a limited exception that permits pre-authorization conditional sales to wholesalers and retailers (in a conditional sale, actual delivery of the product to the buyer is postponed until equipment authorization is obtained). The FCC has now expanded this exception to include conditional sales to consumers.
Prospective buyers still have to be advised at the time of marketing that the equipment is subject to the FCC's rules, and that delivery to the buyer is contingent upon successful completion of the applicable equipment authorization process. The party that initiates the conditional sales contract must also disclose its responsibilities to the buyer in the event that the applicable equipment authorization process is not successfully completed, including information about refunds.
To ensure that domestic and imported devices are afforded similar treatment, each will be subject to the same requirements vis-à-vis pre-sale activities. This means, for example, that the FCC will allow the physical possession of devices subject to certification, regardless of their origin, to be transferred to distributors and retailers. The FCC did not extend this flexibility to devices subject to the SDoC authorization process, in part, because SDoC is a self-approval process. As such, SDoC gives manufacturers more control over the authorization process than certification, which sometimes requires an extended dialogue with the FCC and the relevant TCB (particularly when newer technologies are involved).
Ultimately, the FCC hopes that allowing conditional sales to consumers will fuel new entry into market for RF devices: "The ability to deal directly with consumers at the earliest stages of development has created new efficiencies and investment opportunities that provide smaller entities a chance to enter the competitive marketplace. Our 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 our overall marketing rules provide."
Retrieval and Tracking of Unauthorized Devices.
Prior to commencement of pre-sale activities, there must be processes in place for retrieving equipment in the event that the authorization process has not been successfully completed. For marketed devices, the burden of retrieval is on the first party to initiate a conditional 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. This is intended to ensure that the party having 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.
Recordkeeping.
A device manufacturer, developer, importer or ultimate consignee, or their designated customs broker importing devices pursuant to the new rule must maintain records identifying the recipient of the devices along with information about the devices and shipping . Such records must be retained for five years.
Likewise, the party initiating a conditional sales contract or physically transferring devices under the amended rules must maintain, for a period of 5 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.
When do the Amended Rules go into Effect?
Although the Report and Order will go into effect 30 days after the FCC publishes it in the Federal Register, companies will not be able to take advantage of the new rules Order for a few months. Specifically, the FCC must submit its new importation and marketing rules to the Office of Management and Budget (OMB) for approval because they include "new or modified information collection requirements." The process for obtaining OMB approval typically takes 3-4 months, requiring first a 60-day public notice period and then a 30-day public notice period where the FCC seeks comment on the new requirements. The FCC will then publish a notice in the Federal Register announcing the effective date of the new rules.
* * * *
Equipment authorization is a constantly evolving area of FCC law, and an active area of FCC enforcement. Anyone making, selling, importing, or advertising RF devices should continue to monitor current developments and future FCC activities in this arena.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
