Navigating New Waters: Getting Ahead of Extended Producer Responsibility Laws

Whereas some states with effective EPR laws, such as Maryland, have only recently enacted EPR laws, others, such as Oregon, which passed its Plastic Pollution and Recycling Modernization Act (SB 582) in 2021, are already in the implementation stage. EPR laws stand to impose complex and potentially costly burdens on a wide range of companies, from product manufacturers and packaging producers to grocery stores and restaurants.

In this emerging legal landscape, companies face numerous, unharmonized compliance obligations. The absence of uniform standards complicates compliance, requiring close attention to different state requirements. Companies that produce packaging or are heavily reliant on packaging materials or food service ware are encouraged to engage now with these regulations to avoid falling behind competitors and mitigate the risk of fees or penalties for noncompliance.

What Are EPR laws?
EPR laws are regulatory frameworks designed to shift the costs of waste management for certain products and items from municipalities to “producers”—defined broadly to include, depending on the specifics of any given transaction:

• Distributors of covered materials
• Manufacturers
• Brand owners
• Retailers (e.g., supermarkets, restaurants, convenience stores, etc.)

Essentially EPR laws require producers to internalize the costs of waste management by requiring companies that manufacture, distribute or sell items covered by the law to support the collection, recycling and disposal of products at the end of their useful life. The types of materials covered by these laws include primary packaging (used to directly protect or contain a product), secondary or shipping materials (used to transport products), service packaging (packaging that is sold empty to a business then used or filled at the point of sale) and single-use food service ware like takeout containers, plastic cutlery or cups. As such, EPR laws may impact virtually any business that sells products into a state, even brand owners who do not directly sell or distribute their product into the state.

Producers face several key obligations under EPR laws, including registration with a designated Producer Responsibility Organizations (PROs). PROs are entities tasked by the state with administering the EPR programs. Although EPR laws contemplate the existence of multiple PROs, with which producers can choose to register. To date, however, there is only one, the Circular Action Alliance (CAA).

Registration typically involves detailed reporting on the specific types, volumes and characteristics of packaging introduced into the state. Reporting may be quite complex depending on the variation in packaging produced or used by a company. Even a single type of plastic, such as polyethylene terephthalate (PET) (#1), may be reported differently depending on its form and use—for instance, clear PET bottles, colored PET bottles, rigid PET containers and PET films are treated as distinct categories under California’s EPR program.

Producers must also pay fees to PROs, which use these funds to support the EPR program. Fees may vary substantially by material type, form, recyclability and environmental impact. Oregon’s proposed fees, for example, range from $0.03/pound for corrugated cardboard to $2.58/pound for expanded polystyrene (e.g., Styrofoam) containers.

Although a general framework for packaging-related EPR programs exists, variations in individual state standards significantly complicate compliance efforts. Thus, definitions of covered materials, as well as exclusions, differ on a state-by-state basis. Similarly, different states define “producers” differently for identical transaction scenarios. Across the board, failure to comply with EPR laws, including the obligation to register with a PRO or pay fees will expose businesses to penalties, with statutory daily maximums ranging from as low as $1,500 per day (Colorado) and as high as $100,000 per day (Minnesota).

The Big Picture of EPR
For companies with nationwide business, the proliferation of EPR laws stands to subject them to an increasingly busy schedule of deadlines. (See Attachment 1) Moreover, despite their lofty ambitions, EPR laws present several complications:

• Complexity and lack of harmonization in the applicability criteria stand to create confusion even for sophisticated businesses about whether they are subject to the laws of a given state. The ”producer” responsible for complying in any given transaction depends on how the transaction is structured and how the products enter state commerce. It is time consuming, burdensome and, in cases, practically impossible to ferret out the details in all instances.
• Lack of notice regarding fee setting. To date, the CAA has finalized only a single set of EPR fees (for Oregon). Moreover, the fee-setting occurs on an ex post facto basis predicated on prior year’s activity, thereby depriving businesses of the ability to plan in advance for the financial repercussions of compliance.
• For certain companies, the fees may be set so high that they will have to stop doing business in a given states or, alternatively, to strive to recoup costs by raising prices, which will increase the burden to consumers at a time of increasing financial uncertainty.

On these bases, EPR laws stand to be controversial, with legal challenges likely on various grounds. Pillsbury attorneys have been tracking EPR laws from the inception and have extensive experience in representing clients interested in challenging overreaching, new environmental laws.