Extended producer responsibility (EPR) laws are relatively new – the first were signed into law in 2021 and 2022 – and are aimed at encouraging producers to package goods in a more environmentally conscientious manner and providing much needed revenue for in-state recyclers overwhelmed by the incoming volumes of recyclable material. In essence, EPR laws require producers whose products reach in-state consumers to register with a producer responsibility organization (PRO) or stewardship organization (SO), report the amount of material that enters the state, and pay fees for that material.
As detailed in this blog post, how and if these new laws apply to alcohol beverage suppliers is nuanced given both the developing nature of EPR laws as well as the interplay with preexisting container deposit or bottle bill laws.
Who and What Is Covered by the New EPR Laws?
As of the writing of this article, five states have passed EPR laws and 10 others have introduced bills during their most recent legislative sessions, including Connecticut, Hawaii, Nebraska, and New York. EPR programs are still evolving as the various regulatory processes continue; however, once passed by a state, the new rules typically require the state to designate a PRO/SO to administer the producer requirements and aid producers and state agencies with the necessary reporting and payment requirements. For those states that have passed EPR laws, the nonprofit organization Circular Action Alliance is the PRO/SO that has been selected to oversee the process.
Each EPR law has its own definition of “producer” (i.e., those required to report) and of “covered material” (i.e., the materials that must be reported). There are several specifics within each state but, generally, the producer is the entity who actually produces the subject goods or the owner of the brand that is contracting to have the item produced. Speaking broadly, the covered material contemplated by these laws includes the cardboard boxes and glass or aluminum containers that protect and contain the items purchased from retailers. In this regard, EPR laws apply to alcoholic beverages, non-alcoholic beverages, and nearly all other types of consumer goods.
However, exemptions exist for small producers and certain materials. The specifics as to when a producer is exempt from registering and making EPR payments vary by state but, in many instances, those producers shipping small amounts into a certain state will be exempt. For example, Minnesota exempts producers responsible for less than one metric ton of covered material or $2,000,000 in global gross revenue. However, it is important to remember that even if a small producer is, given its status, exempt from registering with a PRO/SO or paying the related EPR fees, it will likely still have reporting requirements to substantiate its claims of being exempt.
How Do These Laws Apply and Interface with Alcohol Beverage Laws?
In the world of beverage alcohol, there are numerous laws already in place, many of which have been in force for decades, that are aimed at sustainability and designed to fund and encourage recycling. These are referred to as beverage container deposit/recycling deposit requirements or “bottle bills.” These laws generally require subject beverages to have, listed on their labels, their deposit amount or to otherwise identify the bottle as one that is subject to deposit requirements. They also require a small deposit to be paid by the retailer and/or by the consumer for the purchase of subject beverages, only refunding the deposit to the consumer when the bottle is returned and requiring a reimbursement and handling fee to be paid by distributors and/or manufacturers for the processing/recycling of the containers.
The exact recycling model, deposit collection, and payment process varies by state. For instance, California does not require the amount of the deposit to be listed on the bottles and requires the distributor and the manufacturer/importer to remit payments, but it does not require the retailer to submit payments, as the retailers are generally acting as the redemption centers for consumers.
Fortunately, many of the EPR laws specifically exempt items subject to beverage container deposit requirements. However, the interplay between the older beverage container deposit requirements and the newer EPR laws are not always straightforward. For example, in Oregon, “beverage containers” as defined by the recycling deposit regulations are excluded from the definition of “covered products” (i.e., those subject to EPR requirements). But only “water or flavored water; beer or another malt beverage; mineral water, soda water, or a similar carbonated soft drink; kombucha; or hard seltzer” are subject to deposit regulation, not wine or spirits. This means, for a producer that is selling wine, spirits, and malt beverages into Oregon, while they would be able to exclude the weight of the cases for the malt beverages (malt cans/bottles would be exempt), they would still have to calculate the weight of the bottles and cases for the wine and spirits when reporting.
In short, given the developing nature of these laws, coupled with the nuances of their interplay with other alcohol beverage-specific requirements, there is no one-size-fits-all analysis as to how and when these laws apply to alcohol beverage producers. There are some instances where an alcohol-specific exemption may apply and other states where no such exemption exists. To ensure compliance in this rapidly evolving landscape, each company’s business structure must be examined carefully to determine whether it, or the products it ships, are subject to EPR laws, bottle bills, or both.
To determine how your business may be impacted by this developing regulatory regime, please contact one of the members of McDermott’s alcohol beverage team.
