OFFlCE OF THE ATTORNEY GENERllL STATE OF TEYhS

JOHN CORNYN

August 11,1999

William R. Archer III, M.D. Commissioner of Health Texas Department of Health 1100W. 49th Street Austin, Texas 78756-3 199 Opinion No. JC-0093

Re: Constitutionality of section 501.024 of the Health and Safety Code, which requires manufacturers and distributors of hazardous substances to register annually with the Texas Department ofHealth andpay a fee of $150.00 (RQ-1221)

Dear Dr. Archer:

You have requested our opinion regarding the constitutionality of section 501.024 of the Texas Health and Safety Code, which requires manufacturers and distributors of hazardous substances to register annually with the Texas Department of Health and pay a fee of $150. We conclude that this provision is neither preempted by federal law nor contravenes the Commerce Clause of the United States Constitution.
Section 501.024 of the Health and Safety Code provides, in relevant part:

(a) Aperson who manufactures orrepacks ahazardous substance that is distributed in this state or who distributes a hazardous substance in this state shall have on tile with the department a registration statement asprovided by this section. (b) The board by rule shall prescribe the contents of the registration statement. (c) The person must tile the registration statement with the department before:
(1) beginning business in this state as a manufacturer, repacker, or distributor of ahazardous substance; and

(2) not laterthan September 1ofeach year afterthe initial tiling.William R. Archer III, M.D. - Page 2 (JC-0093)

(d) The initial registration statement and each annual registration statement must be accompanied by a fee of $150.

The Toy Manufacturers of America (“TMA”), an organization of manufacturers of small balls, balloons, marbles, and other toys and games that contain small parts, contends that section 501.024 contravenes the Federal Constitution in two respects: 1) it is preempted by federal statute, specifically 15 U.S.C. 5 1261, et seq., and thus invalid under the Supremacy Clause; and 2) it is inconsistent with the Commerce Clause. We shall address these arguments in turn.
The Federal Hazardous Substances Act (“FHSA”), 15U.S.C. $5 1261 - 1277 (1995), was initially enacted in 1960andhasbeen extensively amended. SeeFederal Hazardous Substances Act of 1960, Pub. L. No. 86-613, 74 Stat. 372 (1960). It provides in detail for the regulation of

“hazardous substances” by the Federal Consumer Product Safety Commissionwith particular regard to labeling. The term “hazardous substance” is defined to include, inter alia,

Any toy or other article intended for use by children which the Commission by regulation determines, in accordance with section 1262(e) of this title, presents an electrical, mechanical, or thermal hazard.

15USC. § 1261(f)(l)@) (1995) (emphasis added). Ontheotherhand, the Child Safety Protective Act (“CSPA”), id. $1278, was enacted only in 1994, asanother amendment to the FHSA. SeeChild Safety Protective Act of 1994,Pub. L.No. 103-267,108 Stat. 722 (1994). The CSPA is addressed, not to children’s toys or games that present an “electrical, mechanical, or thermal hazard,” but to those that pose a “choking hazard.” It imposes extensive labeling requirements for toys or games that constitute orcontain small parts, balloons, small balls, ormarbles, including labels warning that certain items are “not for children under 3 years.”

The Texas Hazardous Substances Act (“THSA”), chapter 501oftheHealth and Safety Code,
was first enacted in 1971. Act of May 27, 1971, 62d Leg., R.S., ch. 1033, 1971 Tex. Gen. Laws 3372. It is clearly derived from the FHSA, and it defines “hazardous substance” with regard to toys in language virtually identical to that of the federal statute:

a toy or other article, other than clothing, that is intended for use by
achild and that presents an electrical, mechanical, orthermal hazard.

TEX. HEALTH & SAFETYCODEANN.5 501.002(a)(2) (Vernon 1992). Texas has not, however, adopted a statute in any way equivalent to the CSPA. Thus, the registration and fee requirements of section 501.02&the subject of your inquiry--are applicable only to manufacturers and distributors of toys that pose electrical, mechanical, or thermal problems.

Article VIofthe United States Constitution provides that the laws oftheUnited States “shall be the supreme Law of the Land any Thing in the Constitution or Laws of any State to theWilliam R. Archer III, M.D. - Page 3 (JC-0093)

Contrary notwithstanding.” U.S. CONST.art. VI, cl. 2. As the Supreme Court said in Cipollone Y. Liggett Group, 505U.S. 504 (1992), since the 1819decision inM’Culloch v.Maryland, 17U.S. 316 (1819), “it has been settled that state law that conflicts with federal law is ‘without effect.“’ Cipollone, 505U.S. at516. Since, however, “the historic police powers ofthe States [are]not tobe superseded by

. . Federal Act unless that [is] the clear and manifest purpose of Congress,” preemption analysis begins with adetermination ofcongressional intent. Id. Asthe Texas Supreme Court said in HyundaiMotor Co. v.Alvarado, 974 S.W.2d 1(Tex. 1998):

A state law is preempted and “without effect” if it conflicts with federal law. A federal law may expressly preempt state law. Additionally, preemption may be implied if the scope of the statute indicates that Congress intended federal law to occupy the field exclusively or when state law actually conflicts with federal law. A state law presents an actual conflict with federal law when “it is impossible for aprivate party to comply with both state and federal requirements” or where state law “stands as an obstacle to the accomplishment and execution ofthe full purposes and objectives of Congress.” Hyundai, 974 S.W.2d at 4 (citations omitted); see also Tex. Att’y Gen. Op. Nos. JC-0052 (1999); JC-0007 (1999).

Aletter submitted by the TMA contends that section 501.024 ispreempted byboth the CSPA and the FHSA. With respect to the former, it is clear that no preemption exists, because there is no preempting Texas statute. The THSA and the CSPA, aswe have noted, impose entirely different labeling requirements. Texas has no statute requiring labeling of toys that present a “choking hazard.” With regard to such items, federal law prevails in this state without challenge.

As to the FHSA, we must consider three kinds ofpreemption: (1) express; (2) conflict; and (3) occupation of the field. In enacting that statute, Congress specifically addressed the matter of preemption. The statutory notes accompanying the 1976 amendments to the FHSA provide:

(b)(l)(A) Except as provided in paragraphs (2) and (3), if a hazardous substance or its packaging is subject to a cautionary labeling requirement under section 2(p) or 3(b) [subset. 2(p) of this section or section 1262(b) of this title] designed to protect against a risk of illness or injury associated with the substance, no State or political subdivision of a State may establish or continue in effect a cautionary labeling requirement applicable to such substance or packaging and designed to protect against the same risk of illness or injury unless such cautionary labeling requirement is identical to the labeling requirement under section 2(p) or 3(b) [subset. (p) of this section or section 1262(b) of this title].William R. Archer III, M.D. - Page 4 (X-0093)

(B) Except as provided in paragraphs (2), (3), and (4), if under regulations of the Commission promulgated under or for the enforcement ofsection2(q) [subset. (q)ofthis section] arequirement is established to protect against a risk of illness or injury associated with a hazardous substance, no State orpolitical subdivision of a State may establish or continue in effect a requirement applicable to such substance and designed toprotect against the same risk of illness or injury unless such requirement is identical to the requirement established under such regulations.

SeeFederal Hazardous Substances Act Amendments of 1976,§ 17(a),Pub. L.No. 94-284,90 Stat. 510 (statutory note addressing Effect Upon Federal and State Law) (emphasis added). Paragraph (b)(l)(A) preempts only “cautionary labeling requirements,” which section 501.024clearly doesnot. The TMA argues that the registration and fee arerequirements applicable to ahazardous substance and designed to protect against the same risk of illness or injury, and thus, that section 501.024 is preempted under paragraph (b)(l)(B). But paragraph (b)(l)(B) applies only to “regulations of the Commission promulgated under 2(q) [subset. (q) ofthis section].”
Subsection (q) relates to “banned hazardous substances,” which it defines as (A) any toy, or other article intended for use by children, which is
a hazardous substance, or which bears or contains a hazardous substance in such manner as to be susceptible of access by achild to whom such toy or other article is entrusted; or (B) any hazardous substance intended, or packaged in a form suitable, for use in the household, which the Commission by regulation classifies as a

“banned hazardous substance” on the basis of a finding that, notwithstanding such cautionary labeling as is or may be required under this chapter for that substance, the degree or nature of the hazard involved in the presence or use of such substance in households is such that the objective of the protection of the public health and safety can be adequately served only by keeping such substance, when so intended or packaged, out of the channels of interstate commerce.
15U.S.C. $1261(q) (1995). It is obvious that, if ahazardous substance is “banned” under section 1261, subsection (q), it cannot be deemed “a hazardous substance that is distributed in this state,” and consequently, it is not a substance for which registration and payment of the fee is required.
Thus, federal law does not expressZypreempt theregistration and feerequirement ofsection 501.024 ofthe Health and Safety Code. Neither isconflict preemption present: itispossible to fully comply with both federal and state law by, on the one hand, observing the federal labeling requirements and, on the other, registering in Texas and paying the annual fee. Finally, the veryWilliam R. Archer III, M.D. - Page 5 (JC-0093)

language ofthe federal statute indicates that Congress contemplated that states could legislate in this area, provided they complied with the mandated restrictions. Accordingly, it cannot plausibly be maintained that “Congress intended federal law to occupy the field.”

A 1995letter prepared bythe Assistant General Counsel forRegulatory Affairs ofthe United States Consumer Product Safety Commission specifically considered whether section 501.024 of the Texas Health and Safety Code waspreempted by the FHSA, and concluded that no preemption exists:

We do not believe that these [registration] requirements would

be considered “cautionary labeling requirements” under the FHSA preemption provision. The Texas law requires one to file
a registration statement for a hazardous substance and to pay a fee. It does not require any registration information on theproduct’s label. Nor does it appear that the registration requirement would be preempted by section 18(b)(l)(B) of the FHSA. Section 2(q) authorizes the Commission to ban or otherwise restrict a hazardous substance. In contrast, the Texas law’s registration provision seems to be an administrative mechanism to provide the state with information about firms manufacturing or distributing hazardous substances inthe state and to charge afee. The registration provision does not prescribe restrictions necessary to ensure the safety of a hazardous substance, asdoes section 2(q) ofthe FHSA. Based on the limited information you have provided, we do not believe that this registration requirement would address “the same risk” as any particular regulation under section 2(q).

Letter from Stephen Lemberg, Asst. Gen. Counsel forRegulatory Affairs, U.S. Consumer Product Safety Comm’n, to H. Allen Irish, Gov’t Affairs Counsel, Nat’1 Paint & Coatings Ass’n 2, 3 (Sept. 15, 1995) (on file with Opinion Committee). An agency’s interpretation of a statute it is charged with implementing is entitled to considerable deference, provided it isreasonable and does not clearly conflict with the statute. Chemical Manufacturers Ass ‘nv.Natural Resources Defense Council, Inc., 470 U.S. 116,150 (1985). In our opinion, this letter fully supports our conclusion that section 501.024 isneither expressly preempted by federal law nor an obstacle to enforcement ofthe federal statute. We conclude that section 501.024 is not preempted by the FHSA.

The TMA also suggests that the fee requirement of section 501.024 contravenes the Commerce Clause ofthe Federal Constitution. Asthe Supreme Court has frequently observed, the language ofthe Commerce Clause “contain[s] afurther, negative command, known asthe dormant Commerce Clause, prohibiting certain state taxation even when Congress has failed to legislate on thesubject.” Oklahoma Tax Comm ‘nv.JeffersonLines,Znc., 514U.S. 175,179 (1995). Lump SUITI annual fees imposed by a state have been described by the Supreme Courtas“flat taxes.” American Trucking Ass’n, Inc. Y.Scheiner, 483 U.S. 266, 271 (1987). The Court has held that a state taxWilliam R. Archer III, M.D. - Page 6 (X-0093)

imposed on interstate commerce must, in order to bevalid, pass afour-part test: the tax must be (1) applied to an activity with a substantial nexus to the taxing state; (2) fairly apportioned; (3) nondiscriminatory against interstate commerce; and (4) fairly related to the services provided by the state. Complete Auto Transit, Inc. v.Brady, 430 U.S. 274 (1977). In Scheiner, the Supreme Court invalidated an annual “axle tax” imposed by the State ofPennsylvania on interstate trucks that used its highways.

Not all state taxes on interstate commerce, however, are subject to the test of Brady. The Supreme Court has drawn adistinction between “user fees” and general revenue taxes. “‘User fees’
are taxes or other fees collected by the state as reimbursement for use of state-owned or stateprovided facilities or services.” Centerfor Auto Safety v.Athey, 37F.3d 139, 142 (4th Cir. 1994). Because user fees “are purportedly assessed to reimburse the State for costs incurred in providing specific quantifiable services,” they are not true revenue measures and the considerations applicable to ordinary tax measures do not apply.” Id. at 142(citing Commonwealth Edison Co. v. Montana, 453 U.S. 609,621 n.12 (1981)).

InAthey, the Court ofAppeals forthe Fourth Circuit considered achallenge to afee imposed by the State of Maryland on charitable organizations that solicited in the state. Relying on the Supreme Court’s decision inEvansville-Vanderburgh AirportAuth. Dist. v.DeltaAirlines, 405U.S. 707, 717-20 (1972), the Fourth Circuit said that, in order to pass constitutional muster under the Commerce Clause, a “user fee must (1)reflect a fair, ifimperfect, approximation of the cost of using state facilities forthe taxpayer’s benefit, (2)not discriminate against interstate commerce, and (3) not be excessive in relation to the costs incurred by the taxing authorities.” Athey, 37 F.3d at 142. The court upheld the user fee on all three criteria. As to the first and third, “the Commerce Clause does not require that user fees be precisely correlated to actual use that a party makes of government services,” but only that the “fee be based on a ‘fair approximation of the costs of benefits supplied.“’ Id. at 143. The court found that the purpose ofthe user fee was to monitor and administer charitable organizations. “[Clharities seeking to solicit in Maryland use the state’s apparatus forregulating charities, and, asaresult, derive abenefit, namely the privilege ofsoliciting in Maryland where donor confidence is enhanced owing to the state’s regulation of charities.” Id. at 143-44 (footnotes omitted). As to the second factor, the fee doesn’t discriminate against out-ofstate charities because all charities arerequired topay the feeifthey operate inMaryland. Id. at 143.

In our opinion, the registration and fee requirement of section 501.024 bears a closer resemblance to the kind of “userfee” considered inAthey than to the Pennsylvania axle tax struck down by the Supreme Court in Scheiner. As inAthey, a single fee isimposed only once per year per business entity (charity/toy manufacturer-distributor) rather than on every instrumentality of that entity (truck-axle/toy). As aresult, the annual fee inboth Maryland and Texas ismodest compared to that assessed in Pennsylvania. Thus, we apply the “user fee” criteria to section 501.024.

Just asthecharities inMaryland receive abenefit from state law,manufacturers ofpotentially hazardous toys likewise derive abenefit from the THSA. The Texas Board ofHealth isrequired to enact rules, TEX.HEALTH& SAFETYCODEANN.5 501.025 (Vernon 1992), to regulate hazardousWilliam R. Archer III, M.D. - Page 7 (JC-0093)

toys in various ways such asdetermining flammability, id. 5501.021, and designating certain items
as “banned hazardous substances,” id. 5 501.022. In addition, the Texas Department of Health is required to implement labeling standards, id. $ 501.023; conduct examinations and investigations, id. 5 501.031; inspect and copy records ofmanufacturers and distributors, id. 5 501.032; and seize and dispose of banned or misbranded hazardous substances, id. 5 501.033. As did the charitable organizations in Athey, toy manufacturers and distributors in Texas are accorded the privilege of doing business with consumer confidence enhanced by virtue ofthe state’s regulation ofhazardous toys. We think it is likely that such aplenitude of services ismore than sufficient to offset a fee of $150 per year. Although resolution of this matter ultimately requires a factual determination that
we cannot make in the opinion process, we believe that the Texas Board ofHealth may make such
a finding. Likewise, section 501.024 does not discriminate against interstate commerce. It is applicable equally to anyone who distributes in Texas and to any manufacturer or repacker whose product is distributed in Texas. We conclude that, under the “user fee” test, section 501.024 ofthe Texas Health and Safety Code does not offend the Commerce Clause of the United States Constitution.William R. Archer III, M.D. - Page 8 (JC-0093)

SUMMARY
Section 501.024 ofthe Texas Health and Safety Code, which requires persons who distribute hazardous substances in Texas, and manufacturers and repackers whose hazardous substances are distributed in Texas, toregister annually with the Texas Department of Health and pay a fee of $150.00, is neither preempted by federal law nor violative of the Commerce Clause of the United States Constitution.

JO L N CO>NYN Attorney General of Texas

ANDY TAYLOR First Assistant Attorney General

CLARK RENT ERVIN Deputy Attorney General - General Counsel

ELIZABETH ROBINSON Chair, Opinion Committee

Rick Gilpin Assistant Attorney General - Opinion Committee