25 February 2000 Source: http://www.access.gpo.gov/su_docs/aces/aaces002.html ----------------------------------------------------------------------- [Congressional Record: February 24, 2000 (Senate)] [Page S799-S820] From the Congressional Record Online via GPO Access [wais.access.gpo.gov] [DOCID:cr24fe00-47] STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTION [Excerpt] By Mr. HATCH (for himself and Mr. Leahy): S. 2105. A bill to amend chapter 65 of title 18, United States Code, to prohibit the unauthorized destruction, modification, or alteration of product identification codes used in consumer product recalls, for law enforcement, and for other purposes; to the Committee on the Judiciary. anti-tampering act of 2000 Mr. HATCH. Mr. President, I rise today to introduce with my good friend from Vermont, the distinguished Ranking Minority Member of the Senate Judiciary Committee, Senator Leahy, the ``Anti-Tampering Act of 2000.'' In short, this bill prohibits tampering with product identification codes--a practice that threatens the health and safety of US consumers, frustrates legitimate forensic activities of law enforcement, and impairs manufacturers' ability to protect their distribution channels, thereby exposing them to significant product liability exposure. Let me take just a moment to explain the need for this bill. Manufacturers code their products in order to protect their consumers and to assist law enforcement in investigating consumer complaints, as well as in conducting recalls of tampered products. These codes assist the manufacturer and law enforcement in tracing goods back to a particular lot, batch or date of production. They include batch codes, expiration dates, lot numbers, and other information that one can typically see imprinted on the bottom or side of most products. Legitimate goods produced by manufacturers are obtained by ``illegitimate decoders'', frequently by fraud, theft or false pretenses. These decoders then decode and otherwise tamper with product labeling to avoid detection so that they may sell these ill-gotten goods to unauthorized points of sale. The frightening aspect of this activity, Mr. President, is that a substantial portion of the US-made goods sold by illegitimate decoders have been adulterated or otherwise tampered with after manufacture, and present health and safety risks to consumers. Incredible as it may seem, thieves routinely tamper with product identification codes on stolen goods; counterfeiters affix fake codes on gray market goods that are then mixed with counterfeits; and distributors who have broken their distribution contracts with manufacturers typically obliterate product identification codes. Because gray market activity is largely lawful in the US, the diverters' distribution channels have been used by professional thieves and counterfeiters to traffic in their illegal merchandise. There appears to be a connection between counterfeit and decoded imports, and anti-counterfeiting enforcement efforts will be frustrated unless greater controls are placed on the importation of such decoded products. Regrettably, gray market networks are increasingly being used for the distribution and sale of counterfeit goods. Distributors have been found to sell counterfeit goods--from baby shampoo to infant formula to cosmetics and fragrances--purchased through gray market channels. In short, Mr. President, goods are decoded to hide evidence of fraudulent, unlawful conduct and to traffic in stolen, counterfeit, misbranded, out-of-date and unlawfully diverted merchandise. Let me offer you a few examples of the significant health and safety risks presented by this activity. As noted by the International Formula Council, product identification codes are, without question, the single most important factor in a successful recall. In recent years, this link between product coding and consumer protection has become increasingly evident. Following the Tylenol poisonings of 1982, product coding enabled Johnson & Johnson to identify the tainted production lots and issue a nationwide recall of potentially dangerous products. Similarly, the manufacturers of automobiles, toys, food products and other consumer goods have consistently relied upon product coding to identify and recall goods that fail to meet consumer quality and safety standards. Last year, the FDA used product codes to quickly identify a shipment of contaminated strawberries that had caused an outbreak of hepatitis in Michigan schools. More recently, the Slim Fast Corporation relied on product codes to identify and recall 192,000 cans of its ready-to-drink diet shakes because, according to the New York Times (Apr. 18, 1999), some of the cans might have been filled with a diluted cleaning solution. In addition, this summer, a leading manufacturer of infant formula used its product codes to identify and recall 7,000 cases of infant formula after a labeling error resulted in distribution of infant formula cans that may have contained an adult nutritional supplement that could have been harmful to infants. (USA Today, June 9, 1999.) An undercover investigation by the Food and Drug Administration's Office of Criminal Investigation in New York involved wholesale purchases of expensive fertility drugs. Fraudulent code numbers appeared on the counterfeit packaging containing these injectible products. Although laboratory analysis indicated the presence of the active ingredient in these products, the FDA was not able to determine the place or conditions of their manufacture because of the absence of legitimate batch code data. Fraudulent product identification coding has even been used in schemes involving bulk food products such as metric tons of frozen shrimp. For instance, a Florida indictment charged an importer with criminal offenses involving the repeated ``washing, mixing and soaking'' of putrid and decomposed shrimp in a solution containing copper sulfate, chlorine, lemon juice and other chemicals to conceal the inferiority of the product. Central to this scheme was the ``re- coding'' of product lots as they were repeatedly rejected by buyers, chemically treated, and re-sold to others who did not know the products' history. In short, without product coding, the task of identifying and recalling defective goods becomes infinitely more difficult and often impossible, leaving consumers exposed to potential harm, illness and even death. According to the U.S. Consumer Product Safety Commission, there were 273 product recalls last year and, on average, one high profile recall each week. In addition to the health and safety risks presented by this conduct, Mr. President, there is an additional, equally significant public policy interest served by this bill: codes play a vital part in traditional law enforcement activities. They assist law enforcement in investigating criminal activity, and they further aid in tracking stolen goods. They play a critical role in certain criminal investigations, allowing law enforcement officers to pinpoint the location and in some cases--including the World Trade Center bombing-- the identity of the offender. In cases of stolen or tainted goods, product codes point to the source of the product and the site of the crime. Unfortunately, Mr. President, there is no single federal statute that adequately addresses the problem of product identification code tampering of all consumer products. Federal law only applies to a limited category of consumer products. Moreover, federal law only applies if the decoder or tamperer [[Page S817]] exhibits criminal intent to harm the consumer. It does not address the vast majority of decoding cases that could result in harm to the consumer, but do not involve the specific intent to harm the consumer. Moreover, violations of current federal law result in only a misdemeanor. By criminalizing tampering with product identification codes, we hope to send a clear message to the professional criminals: We value the lives and well being of Americans and will not tolerate this conduct any more on our soil. You, the professional criminal, will persist in this activity at your economic and personal peril. Under the bill, tampering with product codes of pharmaceuticals, over-the-counter medicines consumer products, health and beauty aids, and other goods will constitute a criminal offense. Criminalizing this conduct will result in strengthened law enforcement tools, greater consumer protections and greater security for manufacturers' products. Mr. President, I believe it would be instructive to identify what this bill does not do, as there has been some misinformation about this measure. The bill does not restrict, prohibit, criminalize or otherwise impair lawful, arms-length diversion activity. In short, Mr. Chairman, the bill does not affect the legality or illegality of the gray market. It simply prohibits tampering with product identification codes. Diverters can continue to engage in parallel importing to the same extent after passage of this measure as they have in the past. However, to be clear, Mr. Chairman, they must do so without obliterating the product identification codes or affixing fake codes on the goods. Moreover, unintentional acts of decoding or other activities associated with decoded products are not subject to criminal or civil action, because the bill provides for a knowledge standard and protection for innocent violators. Thus, the innocent store clerk who merely scans merchandise at the check out counter and unwittingly permits the sale of decoded merchandise need not worry. Nor should either the innocent trucker who transports this merchandise or the innocent distributor who engages in distributing this merchandise to the retailer have cause for concern. Others have expressed concern that enactment of the bill will result in the end of discount retailers and discount prices. It is difficult to understand this objection. I cannot conceive why discounting would require altering the expiration dates or the source identifiers of the goods, unless all discounts are illegally diverted or are product that should be recalled. But risking the health and safety of American consumers, or selling them inferior or fake goods to keep alive a certain brand of ``discounting'' does not seem like much of a bargain to me. Discounts are routinely offered when inventories build up or styles change. Manufacturers and retailers will continue to discount when this bill is enacted. But consumers will have greater assurance that the discount they are receiving is not coming with an offsetting risk that the product is contaminated or defective. Finally, Mr. President, some argue that the bill's application to all products is unnecessarily broad. The bill's several important public policy goals require that it apply to all products. Let me explain why. The bill is intended to ensure effective and targeted product recalls, to enhance law enforcement investigations, and to protect American consumers and the legitimate businesses who serve them from the depredations of illegitimate diverters. Product recalls apply to all products and law enforcement investigations implicate all products. For instance, the codes on the batteries in the Olympic Park bombing in Atlanta, Georgia were used to exonerate the security guard then under suspicion in that case, Richard Jewell. The code on the microprocessor chip on the bomb in the Pan Am air crash linked the bombing to terrorists. And even on a more pedestrian level, the code on a crowbar in a recent New York burglary led police to the criminal. So, Mr. President, I am pleased to introduce this important measure today. It enjoys the strong backing of the Coalition Against Product Tampering (CAPT). The CAPT is a coalition of private sector companies, consumer groups, unions and law enforcement agencies which are concerned about product decoding and product tampering and the role these activities play in fueling and supporting other criminal enterprises, including money laundering, organized retail theft, and counterfeiting. I would ask unanimous consent, Mr. President, that the CAPT's membership list be included in the record after my remarks. I have received numerous members of this group expressing their support for the legislation introduced today. In conclusion, Mr. President, law enforcement, consumer groups, unions, and others agree with me that intentional decoding of products threatens the health and safety of American consumers. According to the National Association of Manufacturers, manufacturers cannot conceive of a single legitimate reason to decode products. Nor can I. The ``Anti- Tampering Act of 2000'' I am introducing today is a narrowly tailored approach to this problem and should be enacted. I ask unanimous consent that the text of the bill and a section-by- section analysis of the legislation appear in the Record. There being no objection, the material was ordered to be printed in the Record, as follows: S. 2105 Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, SECTION 1. SHORT TITLE. This Act may be cited as the ``Antitampering Act of 2000''. SEC. 2. PROHIBITION OF UNAUTHORIZED ALTERATION OF PRODUCT IDENTIFICATION CODES. (a) In General.--Chapter 65 of title 18, United States Code, is amended by inserting after section 1365 the following: ``Sec. 1365A. Tampering with product identification codes ``(a) Definitions.--In this section-- ``(1) the term `consumer'-- ``(A) means-- ``(i) the ultimate user or purchaser of a good; or ``(ii) any hotel, restaurant, or other provider of services that must remove or alter the container, label, or packaging of a good in order to make the good available to the ultimate user or purchaser; and ``(B) does not include any retailer or other distributor who acquires a good for resale; ``(2) the term `flea market' means any location, other than a permanent retail store, at which space is rented or otherwise made available for the conduct of business of a transient or limited vendor; ``(3) the term `good' means any article, product, or commodity that is customarily produced or distributed for sale, rental, or licensing in interstate or foreign commerce, and any container, packaging, label, or component thereof; ``(4) the term `manufacturer' means-- ``(A) the original manufacturer of a good; and ``(B) any duly appointed agent or representative of that manufacturer acting within the scope of its agency or representation; ``(5) the term `product identification code'-- ``(A) means any visible number, letter, symbol, marking, date (including an expiration date), or code that is affixed to or embedded in any good, by which the manufacturer of the good may trace the good back to a particular lot, batch, date of production, or date of removal; ``(B) does not include-- ``(i) copyright management information (as defined in section 1202(c) of title 17) conveyed in connection with copies or phonorecords of a copyrighted work or any performance or display of a copyrighted work; ``(ii) other codes or markings on the good; or ``(iii) a Universal Product Code; and ``(C) does not include any trademark or copyright notice by itself or any item listed in subparagraph (A) that is affixed to, superimposed on, or embedded in a trademark or copyright notice; ``(6) the term `transient or limited vendor' does not include a person who sells by sample, catalog, or brochure for future delivery to the purchaser; ``(7) the term `Universal Product Code' means a 12-digit, all numeric code that identifies the consumer package consisting of-- ``(A) a 1-digit number system character; ``(B) a 5-digit manufacturer identification number; ``(C) a 5-digit item code; ``(D) a 1-digit check number; and ``(E) the bar code symbol that encodes the 12-digit Universal Product Code; and ``(8) the term `value' means the face, par, or market value, whichever is the greatest. ``(b) Prohibited Acts.--Except as provided in subsection (d) or as otherwise expressly authorized under any other provision of Federal law, it shall be unlawful for any person, other than the consumer or the manufacturer of a good, knowingly and without the authorization of the manufacturer-- [[Page S818]] ``(1) to directly or indirectly alter, conceal, remove, obliterate, deface, strip, or peel any product identification code affixed to or embedded in a good and visible to the consumer; ``(2) to directly or indirectly affix to or embed in a good a product identification code that is visible to the consumer and that is intended by the manufacturer for a different good, such that the code no longer accurately identifies the lot, batch, date of production, or date of removal of the good; ``(3) to directly or indirectly affix to or embed in a good any number, letter, symbol, marking, date, or code intended to simulate a product identification code that is otherwise visible to the consumer; ``(4) to import, reimport, export, sell, offer for sale, hold for sale, distribute, or broker a good-- ``(A) in a case in which the person knows that the product identification code, which otherwise would be visible to the consumer, has been altered, concealed, removed, obliterated, defaced, stripped, peeled, affixed, or embedded in violation of paragraph (1) or (2); or ``(B) in a case in which the person knows that the good bears a number, letter, symbol, marking, date, or code in violation of paragraph (3); or ``(5) to sell, offer for sale, or knowingly permit the sale at a flea market of-- ``(A) baby food, infant formula, or any other similar product manufactured and packaged for sale for consumption by a child who is less than 3 years of age; or ``(B) any food, drug, device, or cosmetic (as those terms are defined in section 201 of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 321)); unless that person keeps for public inspection written documentation identifying such person as an authorized representative of the manufacturer or distributor of the food, drug, device, or cosmetic. ``(c) Applicability.--The prohibitions set forth in paragraphs (1) through (4) of subsection (b) shall apply to visible product identification codes (or simulated product identification codes in a case to which subsection (b)(3) applies) affixed to, or embedded in, any good held for sale or distribution in interstate or foreign commerce or after shipment therein, including any good held in a United States Customs Service bonded warehouse or foreign trade zone. ``(d) Exceptions.-- ``(1) Universal product code codes.--Nothing in this section prohibits a person from affixing a Universal Product Code, security tag, or other legitimate pricing or inventory code or other information required by Federal or State law, if such code or information does not (or can be removed so as not to) permanently alter, conceal, remove, obliterate, deface, strip, or peel any product identification code. ``(2) Repackaging for resale.--Nothing in this section prohibits a person from removing a good from a primary package or container and repackaging the good in another package or container, or from placing a good and its original packaging within new packaging, if-- ``(A) the good retains its original product identification code, which has not been permanently altered, concealed, or removed; ``(B) the repackaging is in full compliance with all applicable Federal laws and regulations, including section 301 of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 331); and ``(C) a new package includes a label that clearly states-- ``(i) that the good has been repackaged; and ``(ii) the name of the repacker. ``(e) Criminal Penalties.--Any person who willfully violates this section-- ``(1) shall be fined under this title, imprisoned not more than 1 year, or both; ``(2) shall be fined under this title, imprisoned not more than 5 years, or both, if the total value of the good or goods involved in the violation is greater than $10,000; ``(3) shall be fined under this title, imprisoned not more than 10 years, or both, if-- ``(A) the person acts with reckless disregard for the health or safety of the public and under circumstances manifesting extreme indifference to such risk; and ``(B) the violation threatens the health or safety of the public; ``(4) shall be fined under this title, imprisoned not more than 20 years, or both, if-- ``(A) the person acts with reckless disregard for the risk that another person will be placed in danger of death or bodily injury and under circumstances manifesting extreme indifference to such risk; and ``(B) serious bodily injury to any individual results; ``(5) shall be fined under this title, imprisoned for any term of years or for life, or both, if-- ``(A) the person acts with reckless disregard for the risk that another person will be placed in danger of death or bodily injury and under circumstances manifesting extreme indifference to such risk; and ``(B) the death of an individual results; and ``(6) with respect to any second or subsequent violation of this section, be convicted of a felony, and be subject to twice the maximum term of imprisonment that would otherwise be imposed under this subsection, fined under this title, or both. ``(f) Injunctions and Impounding, Forfeiture, and Disposition of Goods.-- ``(1) Injunctions and impounding.--In any prosecution under this section, upon motion of the United States, the court may-- ``(A) grant 1 or more temporary, preliminary, or permanent injunctions on such terms as the court determines to be reasonable to prevent or restrain the alleged violation; and ``(B) at any time during the proceedings, order the impounding, on such terms as the court determines to be reasonable, of any good that the court has reasonable cause to believe was involved in the violation. ``(2) Forfeiture and disposition of goods.--Upon conviction of any person of a violation of this section, the court shall-- ``(A) order the forfeiture of any good involved in the violation or that has been impounded under paragraph (1)(B); and ``(B) either-- ``(i) order the destruction of each good forfeited under subparagraph (A); ``(ii) order the disposal of the good by delivery to such Federal, State, or local government agencies as, in the opinion of the court, have a need for such good, or by gift to such charitable or nonprofit institutions as, in the opinion of the court, have a need for such good; or ``(iii) order the return of the goods involved upon the request of any interested party. ``(g) Civil Remedies.-- ``(1) In general.--Any person who is injured by a violation of this section, or demonstrates the likelihood of such injury, may bring a civil action in an appropriate district court of the United States against the alleged violator. ``(2) Injunctions and impounding and disposition of goods.--In any action under paragraph (1), the court may-- ``(A) grant 1 or more temporary, preliminary, or permanent injunctions upon the posting of a bond at least equal to the value of the goods affected on such terms as the court determines to be reasonable to prevent or restrain the violation; ``(B) at any time while the action is pending, order the impounding of the goods affected-- ``(i) if the court has reasonable cause to believe the goods were involved in the violation; ``(ii) upon the posting of a bond at least equal to the value of the goods affected; and ``(iii) on other terms such as the court determines to be reasonable; and ``(C) as part of a final judgment or decree, in the court's discretion-- ``(i) order the destruction of any good involved in the violation or that has been impounded under subparagraph (B); ``(ii) order the disposal of the good-- ``(I) by delivery to such Federal, State, or local government agencies as, in the opinion of the court, have a need for such good; or ``(II) by gift to such charitable or nonprofit institutions as, in the opinion of the court, have a need for such good, if such disposition would not otherwise be in violation of law, and if the manufacturer consents to such disposition; or ``(iii) order the return of the goods involved in the violation to the manufacturer upon the request of any interested party. ``(3) Damages.-- ``(A) In general.--Subject to subparagraph (B), in any action under paragraph (1), the plaintiff shall be entitled to recover-- ``(i) the actual damages suffered by the plaintiff as a result of the violation, and; ``(ii) any profits of the violator that are attributable to the violation and are not taken into account in computing the actual damages. ``(B) Statutory damages.--In any action under paragraph (1), the plaintiff may elect, at any time before final judgment is rendered, to recover, instead of actual damages and profits described in subparagraph (A), an award of statutory damages for any violation under this section in an amount equal to-- ``(i) not less than $500 and not more than $100,000, with respect to each type of goods involved in the violation; and ``(ii) if the court finds that the violation threatens the health and safety of the public, not less than $5,000 and not more than $1,000,000, with respect to each type of good involved in the violation. ``(C) Proof of damages.--In establishing the violator's profits, the plaintiff shall be required to present proof only of the violator's sales, and the violator shall be required to prove all elements of cost or deduction claimed. ``(4) Costs and attorney's fees.--In any action under paragraph (1), in addition to any damages recovered under paragraph (3), the court in its discretion may award the prevailing party its costs of the action and its reasonable attorney's fees. ``(5) Repeat violations.-- ``(A) Treble damages.--In any case in which a person violates this section within 3 years after the date on which a final judgment was entered against that person for a previous violation of this section, the court, in an action brought under this subsection, may increase the award of damages for the later violation to not more than 3 times the amount that would otherwise be awarded under paragraph (3), as the court considers appropriate. ``(B) Burden of proof.--A plaintiff that seeks damages as described in subparagraph (A) shall bear the burden of proving the existence of the earlier violation. ``(6) Limitations on actions.--No civil action may be commenced under this section later than 3 years after the date on which [[Page S819]] the claimant discovers or has reason to know of the violation. ``(7) Innocent violations.--In any action under paragraph (1), the court in its discretion may reduce or remit the total award of damages or award no damages in any case in which the violator sustains the burden of proving, and the court finds, that the violator was not aware and had no reason to believe that the acts of the violator constituted a violation. ``(h) Enforcement Actions.-- ``(1) In general.--Subject to paragraphs (2) and (3), the Attorney General and the Secretary of the Treasury shall enforce the requirements of this section. ``(2) Agency discretion.--The head of a department or agency of the Federal Government (including the Commissioner of Food and Drugs and the Secretary of Agriculture) may investigate any violation of this section involving a good that is regulated by a provision of law administered by that department or agency. ``(3) Customs service.-- ``(A) In general.--The United States Customs Service shall-- ``(i) seize any good imported, reimported, or offered for import into the United States in violation of subsection (b)(4); ``(ii) promptly notify the manufacturer or duly appointed agent or representative of the seizure; and ``(iii) destroy or dispose of the goods in accordance with the procedures set forth in section 526(e) of Tariff Act of 1930 (19 U.S.C. 1526(e)). ``(B) Voluntary disclosures.--In order to assist the United States Customs Service in carrying out its obligations under this paragraph, any domestic or foreign manufacturer may voluntarily record with the United States Customs Service-- ``(i) its name and address; ``(ii) a description of its goods and product identification codes; and ``(iii) such other information as may facilitate the enforcement of this section.''. (b) Conforming Amendment.--The table of sections for chapter 65 of title 18, United States Code, is amended by inserting after the item relating to section 1365 the following: ``1365A. Tampering with product identification codes.''. (c) Regulatory Authority.--Not later than 6 months after the date of enactment of this Act, the Attorney General, after consultation with the Secretary of the Treasury, the Commissioner of Food and Drugs, and the head of any other department or agency of the Federal Government that the Attorney General determines to be appropriate, shall issue such rules and regulations as may be necessary to implement section 1365A of title 18, United States Code, as added by this section. SEC. 3. ATTORNEY GENERAL REPORTING REQUIREMENTS. Section 2320(f) of title 18, United States Code, is amended-- (1) by striking ``of title 18'' each place that term appears; (2) by inserting ``tampering with product identification codes (as defined in section 1365A),'' after ``involve''; and (3) in paragraph (4), by inserting ``1365A,'' after ``sections''. SEC. 4. EFFECTIVE DATE. This Act and the amendments made by this Act shall take effect 6 months after the date of enactment of this Act. Supporters of the Anti-Tampering Act of 1999 manufacturers and business trade associations 3M Abott Laboratories American Home Products Corp. Allied Domecq Spirits & Wine (USA) Bose Corporation Bristol-Myers Squibb Co. Chanel, Inc. Compar Converse Inc. Cosmair Estee Lauder, Inc. Ford Motor Company Giorgio Givenchy Intel Corporation International Business Machines Corp. John Paul Mitchell Systems Joseph E. Seagram & Sons, Inc. Matrix Essentials Maytag Corporation Motorola, Inc. NEXXUS Products Co. Nocopi Technologies, Inc. Novartis Novell, Inc. O.C. Tanner Company Optical Security Inc. Oreck Corporation Pfizer Inc. Rolex Watch U.S.A., Inc. SICPA Stanley Works The Proctor & Gamble Company Warner-Lambert Co. American Academy of Pediatrics American College of Nurse-Midwives American Beauty Association American Health and Beauty Aids Institute American Home Appliances Association American Watch Association Association of Women's Health, Obstetric and Neonatal Nurses Coalition to Preserve the Integrity of American Trademarks Consumer Electronic Manufacturers Association Consumer Health Care Products Association Cosmetic, Toiletry and Fragrance Association Distilled Spirits Council of the United States, Inc. Grocery Manufacturers of America International Formula Council National Association of Beverage Importers National Association of Manufacturers National Association of Neonatal Nurses National Association of Wholesaler-Distributors National Food Processors Association Wine and Spirits Wholesalers of America, Inc. consumer groups and unions National Consumers League PACE, Paper, Allied-Industrial, Chemical & Energy Workers International Union, AFL-CIO Service Employees International Union, AFL-CIO u.s. law enforcement Construction Industry's Crime Prevention Program of Southern California Fraternal Order of Police Ohio Patrolmen's Benevolent Association ____ The ``Anti-Tampering Act of 1000''--Section-by-Section Analysis section 1. short title The bill may be cited as the ``Anti-Tampering Act of 2000.'' section 2. unauthorized alteration of product identification codes prohibited Subsection (a). In general Section 2 of the bill amends Title 18 of the United States Code to create a new section 1365A prohibiting for all goods the intentional removal or alteration of product identification codes, as well as the affixing of fake codes, as follows: Section 1365A(a). Definitions. New section 1365A(a) of Title 18 sets forth the definitions of the relevant terms used in new section 1365A. By definition, the prohibitions contained in the bill would not apply to the ultimate user or purchaser of the good, to any hotel, restaurant or other provider of services that alters the packaging in order to make it available to the ultimate consumer, or any retailer or distributor who acquires a good for resale. Under this subsection, the definition of product identification code includes any visible number, letter, symbol, marking, date (including an expiration date), or code that is affixed to or embedded in any good by which the manufacturer may trace the good back to a particular lot, batch, date of production or date of removal. It specifically excludes (1) copyright management information conveyed in connection with copies or phonorecords of a copyrighted work or encryption information, (2) any or all other codes or markings on the good, (3) a Universal Product Code, and (4) trademark or copyright notices, including notices that are affixed to, superimposed on or embedded in product identification codes. Section 1365A(b). Prohibited Acts. Section 1365A(b) sets forth the activities that are prohibited. It seeks to target and prohibit each phase of the decoding process--the act of decoding, the affixing of fake codes, and the distribution of the decoded or falsely coded product. The bill includes a knowledge standard that applies throughout the decoding to distribution process. Specifically, this subsection prohibits the intentional alteration or removal of any visible product identification code. It also prohibits the intentional affixing of any fake or simulated code upon any good, label, container, packaging, or component thereof. The prohibition does not apply to the original manufacturer or the final consumer. This subsection further prohibits the importation, re-importation, exportation, sale, offering or holding for sale, distribution, or brokering of goods or components thereof whose product identification codes have been altered, concealed, removed or falsified. In addition, this subsection prohibits selling, offering for sale, or knowingly permitting the sale at flea markets of certain products, including baby food, infant formula, and other products covered by the Federal Food, Drug, and Cosmetic Act, except by authorized representatives of the manufacturer or distributor. Section 1365A(c). Applicability to Goods Held in Free Trade Zones. Section 1365A(c) extends the prohibitions against decoding and false coding to all goods held for sale or distribution in interstate or foreign commerce, including goods held in Customs bonded warehouses and free trade zones. Section 1365A(d). Exclusions. The bill excludes from section 1365A the act of affixing genuine Universal Product Codes, security tags or other legitimate pricing or inventory codes that can be removed without damaging the product identification code. It also excludes from section 1365A certain types of repackaging activities. The bill will permit the removal of shipping containers and the repackaging of goods for the purpose of selling the goods in different quantities. The exception would apply only if each retail item retains its original product identification code, the repackaging is in full compliance with all applicable laws and regulations, and the new package includes a label stating that the good has been repackaged and containing the name of the repacker. Section 1365A(e). Criminal penalties. Section 1365A(e) imposes criminal penalties on [[Page S820]] any person who knowingly and willfully engages in decoding violations. This subsection imposes fines pursuant to the schedule of fines set forth in Title 18. A person violating the Act could be imprisoned up to one year for the first offense; up to 5 years if the value of the goods exceed $10,000; up to 10 years if the violation threatens public health and safety; up to 20 years if the violation results in bodily injury; and up to life imprisonment if a death results from the violation. If there are subsequent violations, the bill imposes twice the term of imprisonment that would otherwise be imposed. Section 1365A(f). Injunctions and Impounding, Forfeiture, and Disposition of Goods. This section authorizes the court in its discretion, upon motion of the United States, to grant injunctive relief to prevent or restrain the alleged violation, and impound goods that the court has reasonable cause to believe are involved in the violation. This section also requires the court upon conviction to order the forfeiture of any goods involved in the violation and either the destruction, disposal or return of the goods involved. Section 1365A(g). Civil Remedies. Section 1365A(g) provides consumers and manufacturers who are injured or threatened with injury with a civil right of action against persons who knowingly engage in decoding activities. Paragraph (2) further authorizes the court at its discretion to issue injunctions, and to impound the goods in the custody of the defendant. As part of a final judgment or decree, the court may order the destruction, disposal or return to the manufacturer of the goods involved in the violation of this section. The goods may also be delivered to a government agency or provided as gifts to charitable institutions, if the manufacturer consents to the disposition. Paragraph (3) sets forth the civil damages available to persons injured or who can demonstrate the likelihood of injury by violations of the Act. These damages include actual damages and profits, or, upon election by the plaintiff, statutory damages in an amount not less than $500 and not more than $100,000 for each type of goods involved in the violation. Available statutory damages are increased to not less than $5,000 and not more than $1,000,000 in cases in which the violation threatens the health and safety of the public. In addition, paragraph (5) allows the civil plaintiff to seek treble damages in the event of repeat violations made within 3 years of the original violation. Paragraph (7) also authorizes the court to reduce or eliminate the total damages award, or award no damages, if the violator sustains the burden of proving, and the court finds, that the violator was not aware and had not reason to believe the acts of the violator constituted a violation. Paragraph (4) provides that the court in its discretion may award the prevailing party its costs and attorneys' fees. Paragraph (6) imposes a three-year statute of limitations on the filing of a civil action. The limitation begins running from the date on which the claimant discovers or has reason to know of the violation. Section 1365A(h). Enforcement actions. Section 1365A(h) requires the Attorney General and Secretary of Treasury to enforce the requirements of this new section of Title 18. It also authorizes the head of a department or agency of the Federal Government (including the Secretary of Agriculture and the Commissioner of the Food and Drug Administration) to investigate alleged violations involving goods regulated by their respective agencies. This section also requires Customs Service officials to seize decoded products, notify the manufacturer of such seizure, and destroy or dispose of such goods. In order to facilitate this Customs seizure, the manufacturer would be permitted to record with the Customs Service any relevant information concerning product identification codes. Subsection (b). Conforming amendments Subsection (b) makes a conforming amendment to Title 18 to include the title of new section 1365A in the table of sections for chapter 65 of Title 18. Subsection (c). Regulatory authority Subsection (c) of the bill requires the Attorney General, after consultation with the Secretary of the Treasury, the FDA Commissioner, and the head of any other department or agency of the Federal Government the Attorney General determines appropriate, to issue regulations implementing new section 1365A of Title 18 within six months of enactment. Section 3. Attorney General Reporting Requirements Section 3 of the bill requires the Attorney General to include in his or her reports to Congress on the business of the Department of Justice all actions taken by the Department regarding product decoding. Section 4. Effective date Section 4 of the bill states that the bill will become effective six months after enactment. Mr. LEAHY. Mr. President, I am joining forces with my good friend Senator Hatch on a Judiciary Committee bill that would prohibit improper tampering with product identification codes. Manufacturers code their products in order to protect their consumers and to assist law enforcement in investigating consumer complaints, as well as in conducting recalls of tampered products. These codes assist the manufacturer and law enforcement in tracing goods back to a particular lot, batch or date of production. They include batch codes, expiration dates, lot numbers, and other information that one can typically see imprinted on the bottom or side of most products. This product identification codes are extremely important in terms of product recall. There were over 250 product recalls last year-- including two recent product recalls, one of ready-to-eat diet shakes and the other regarding the recall of 7,000 cases of infant formula. Also, product codes were of great help regarding the Tylenol poisonings of 1982 and the contaminated strawberry incident in Michigan in which school children became ill. Forensic experts have used product identification codes in investigating numerous crimes including the bombing of the World Trade Center in New York City. Sometimes product codes are used to exonerate the innocent. For example, the product codes in the batteries involved in the Olympic Park, Atlanta, bombing helped exonerate the security guard, Richard Jewell, under suspicion in that case. Product codes have been fraudulently altered regarding medicines, fertility drugs, and even bulk frozen shrimp. This makes it very difficult to trade back these products and to determine their safety. This bill addresses those concerns. This bill contains significant improvements over a version introduced in the other body some time ago. Wholesalers were worried that they could not repackage goods--together into ``sale baskets''--to be sold at discount prices. This bill permits the resale of products at discounted prices. Each individual item would have to keep the original code but the prices could be changed depending on competitive market forces. It is important that manufacturers not be able to control prices by operation of this bill. Consumers interested in bargains need to be able to get the best bargain they can get. This bill does not prevent the reselling of overstocked, or other, goods to discount retailers. The bill also makes clear that any innocent alterations of product identification codes are not subject to the criminal provisions. The bill contains a provision unrelated to product identification codes which I want to discuss for a moment. The bill prohibits at flea markets the sale of baby food, infant formula, or similar products made for consumption of children under three years of age. It also prohibits the sale of drugs, medical foods, cosmetics, and medical devices as defined in the Federal Food, Drug and Cosmetic Act at flea markets unless the seller keeps for public inspection written documentation identifying the seller person as an authorized representative of the manufacturer or distributor of the food, drug, device, or cosmetic. This appears to be a reasonable policy but I am very interested in the views of my colleagues on this matter as there may be other ways to achieve the goals of these flea market provisions. I intend to work closely with the Committee Chairman, Senator Hatch, and my other colleagues regarding this bill. ____________________