Extent to which certain scrap metal is subject to the requirements of RCW 19.60.

SCRAP METAL – PAWNBROKERS – PROPERTY – Extent to which certain scrap metal is subject to the requirements of RCW 19.60.

1. A pawnbroker or second-hand dealer in the business of purchasing scrap metal for recycling and remanufacture is not required to follow the reporting requirements of RCW 19.60.020 and .040 to the extent the pawnbroker or second-hand dealer is dealing with “metal junk” as defined in RCW 19.60.010(2), because of the exemption set forth in RCW 19.60.085(4).

2. The existing definitions of “metal junk” and “second-hand property” in RCW 19.60.010 are not broad enough to include all metal that might be purchased for further processing and recycling.

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January 24, 2007

Honorable Dawn Morrell State Representative, 25th District P. O. Box 40600 Olympia,  WA  98504-0600

Cite As: AGO 2007 No. 3

Dear Representative Morrell:

            By letter previously acknowledged, you have asked for our opinion on two questions relating to whether RCW 19.60, which regulates pawnbrokers and second-hand dealers, applies to purchasing scrap metal for recycling or further processing. Among other things, RCW 19.60 requires pawnbrokers and second-hand dealers to maintain records about each transaction in which they engage, including the identification of the other party to the transaction and a detailed description of the property involved. RCW 19.60.020. The chapter also requires pawnbrokers and second-hand dealers to make these records available to law enforcement officers and to report to law enforcement whenever they have good reason to believe that property in their possession was previously stolen. RCW 19.60.040. You have asked the following questions:

1.         Are individuals in the business of purchasing scrap metal for the purpose of recycling the scrap metal required to abide by the provisions of RCW 19.60.020 and RCW 19.60.040 as they relate to the collection of information and the filing of reports to law enforcement?

 

2.        Are the existing definitions of “metal junk” and “second-hand property” in RCW 19.60.010 sufficiently expansive to include scrap metal being purchased for further processing and recycling?

 

[original page 2] BRIEF ANSWERS

            To the extent that a pawnbroker or second-hand dealer purchases “metal junk” as defined by RCW 19.60.010(2), such transactions are exempt from RCW 19.60 under RCW 19.60.085(4). Existing statutory definitions of “metal junk” and “second-hand property” in RCW 19.60 are not broad enough to include all metal that might be purchased as “scrap metal” for further processing and recycling.  

BACKGROUND

            Legislation governing pawnbrokers and second-hand dealers in Washington State dates back to the early 1900’s. See Laws of 1909, ch. 249, §§ 229-36. Prior to 1984, the requirements were limited and, for the most part, applied only to those businesses operating in cities of the first or second class. Final Bill Rep. on Substitute S.B. 4274, at 1, 48th Leg., Reg. Sess. (Wash. 1984). This resulted in local governments enacting their own laws governing the dealings of such persons. Id.

            The lack of uniformity in the regulation of pawnbrokers and second-hand dealers created significant problems for law enforcement. Id. The Legislature responded in 1984 by enacting uniform statewide legislation regulating pawnbrokers and second-hand dealers. See Laws of 1984, ch. 10, §§ 1-16. This legislation, as amended over the years, is contained in the Pawnbrokers and Second-Hand Dealers Act (Act), RCW 19.60.

            Today, all transactions of a pawnbroker or second-hand dealer are subject to the provisions of the Act, with the exception of those transactions that fall within any of the exemptions set forth in RCW 19.60.085. A “transaction” is defined in RCW 19.60.010(8) to include the pledge, purchase, consignment, or trade of any item of personal property from a member of the general public. The term “personal property” is not defined in the statute but takes on its ordinary dictionary meaning of everything that is the subject of ownership not coming under the denomination of real estate. Black’s Law Dictionary 1254 (8th ed. 2004).

ANALYSIS           

1.        Are individuals in the business of purchasing scrap metal for the purpose of recycling the scrap metal required to abide by the provisions of RCW 19.60.020 and RCW 19.60.040 as they relate to the collection of information and the filing of reports to law enforcement?

            RCW 19.60.020 requires pawnbrokers and second-hand dealers doing business in Washington to collect certain detailed information regarding all transactions.[1] Subsection (1) of [original page 3] this statute provides, among other requirements, the format in which the information must be kept, how long it must be retained, and the requirement for verification by government-issued picture identification of the seller, pledger, or consignor of any goods. Subsection (2) of the statute requires all records of such transactions to be open to inspection by designated law enforcement officers during ordinary business hours, or at reasonable times if ordinary hours of business are not kept, for a period of three years from the date of the transaction.

            RCW 19.60.040(1) requires that pawnbrokers and second-hand dealers provide law enforcement (upon request) with a transcript of the record of all transactions conducted on a preceding day. Subsection (2) of this statute requires pawnbrokers and second-hand dealers to report to law enforcement property in their possession they have good cause to believe has been previously lost or stolen. The name of the owner, if known, must accompany such a report, along with the date of receipt of the property and the person from whom it was obtained. RCW 19.60.040(2).

            Pawnbrokers and second-hand dealers purchasing scrap metal are required to comply with the requirements set forth in RCW 19.60.020 and .040 unless they fit within one of the exemptions set forth in RCW 19.60.085. This statute provides, in its entirety, as follows:

            The provisions of this chapter do not apply to transactions conducted by the following:

            (1) Motor vehicle dealers licensed under chapter 46.70 RCW;

            (2) Vehicle wreckers or hulk haulers licensed under chapter 46.79 or 46.80 RCW;

           (3) Persons giving an allowance for the trade-in or exchange of second-hand property on the
            purchase of other merchandise of the same kind of greater value; and

            (4) Persons in the business of buying or selling empty food and beverage containers or metal or
            nonmetal junk.

RCW 19.60.085 (emphasis added).

            The version of the Act as amended and adopted in 1984 did not include the exemption for persons in the business of buying or selling “metal junk” now contained in subsection (4). In 1985, the Legislature amended the Act, adding metal junk dealers to the list of persons exempt under RCW 19.60.085 and excluding used book dealers from the definition of “second-hand property” in RCW 19.60.010(7). Laws of 1985, ch. 70, §§ 1, 4. The Final Bill Report elucidates the Legislature’s purpose for this change:

Some dealers have found it difficult to comply with the record-keeping requirements of the Act. Law enforcement officers agree with this assessment. In particular, the Act’s property-holding periods and item-by-item disclosure requirements are burdensome and impractical for used-book sellers and metal [original page 4] junk dealers who have a rapid inventory turnover and a high-volume business. Some argue that the cost to these dealers of complying with the Act’s requirements is higher than the cost of their losses due to theft, especially because used-book and metal junk dealers have relatively inexpensive inventories.

            RCW 19.60.010(2) defines “metal junk” as “any metal that has previously been milled, shaped, stamped, or forged and that is no longer useful in its original form, except precious metals.” RCW 19.60.010(7) defines “second-hand property” as “any item of personal property offered for sale which is not new, including metals in any form, except postage stamps, coins that are legal tender, bullion in the form of fabricated hallmarked bars, used books, and clothing of a resale value of seventy-five dollars or less, except furs.”

            As the preceding definitions make apparent, all metals that are used or otherwise considered “not new” will come within the definition of “second-hand property”; moreover, “any metal that has previously been milled, shaped, stamped, or forged and that is no longer useful in its original form, except precious metals” would be “metal junk.” RCW 19.60.010(7), (2). It is readily apparent that not all “scrap metal” will fall within the definition of “second-hand property” or “metal junk.

            While typically the types of metals sold for scrap come from used manufactured articles or parts no longer fit for the use originally intended, some new metals also are sold as scrap metal. We note that a recent surge in the price of metals has resulted in a rash of thefts involving both used and new metal property throughout the country. Thieves are attempting to market this [original page 5] property for sale through scrap dealers for a quick source of cash. In particular, copper has been heavily targeted by thieves after hitting a record high earlier in the year. This means warehouses, utility companies, cargo trucks, and construction sites throughout the country are reporting record thefts of new metal property, such as large spools of copper wiring and new copper piping.[3] We think this type of unused metal property sold as scrap would be considered new and, therefore, would not come within the definition of “second-hand property” in RCW 19.60.010(7) or “metal junk” under RCW 19.60.010(2).

            At this point, we should distinguish between (1) wire, piping, and other metals stolen from warehouses and storage and construction sites (material awaiting its initial installation and use), and (2) metals being removed from existing buildings, power and phone lines, fences, and other structures already in use. Thefts from existing structures have also been widely reported. This wire, piping, or other metal taken from an existing structure has already been in use. Therefore it is “not new” and falls within the definition of “second-hand property” as contained in RCW 19.60.010(7).[4] We note also that if metal taken from an existing structure meets the definition of “metal junk” as set forth in RCW 19.60.010(2), persons in the business of buying or selling “metal junk” are exempt from the reporting requirements by virtue of RCW 19.60.085.[5]

            [original page 6] To summarize, the term “second-hand property” includes some, but not all, metal which might be offered for sale to a pawnbroker or second-hand dealer. “New” metal not previously incorporated in any structure or otherwise put to use falls outside the definition. However, it is worth noting that purchases of new metal property by a pawnbroker or second-hand dealer would not excuse compliance with the Act. Any person who is “engaged in whole or in part in the business of purchasing, selling, trading, consignment selling, or otherwise transferring for value, second-hand property” is considered a second-hand dealer under RCW 19.60.010(6). A person in the business of purchasing both new metal property and “second-hand property” (whether metal or non-metal) is a second-hand dealer and must comply with the record-keeping, reporting, and retention requirements for all transactions unless otherwise exempt under RCW 19.60.085.[6]

            We trust that the foregoing analysis will be helpful to you.

                                                                        Sincerely,

                                                                        ROB MCKENNA
                                                                        Attorney General

                                                                        COLLEEN G. WARREN
                                                                        Senior Counsel

:pmd

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                [1]    Under RCW 19.60.010(6), “[s]econd-hand dealer means every person engaged in whole or in part in the business of purchasing, selling, trading, consignment selling, or otherwise transferring for value, second-hand property including metal junk, melted metals, [and] precious metals[.]” RCW 19.60.010(4) defines a “pawnbroker” as “every person engaged, in whole or in part, in the business of loaning money on the security of pledges of personal property, or deposits or conditional sales of personal property, or the purchase or sale of personal property.” .