Changes in the legal regulation of waste treatment

Pepeliaev Group advises that on 24 December 2019 the draft Federal Law “On amending the Federal Law 'On production and consumption waste'” (“Draft Law No. 869136-7) with respect to requirements concerning the disposal of goods and packaging[1] and the payment of the environmental fee, was submitted to the Russian State Duma.

Draft Law No. 869136-7 provides for the following new developments.

• The proposed new version of article 24.2(1) of Law No. 89-FZ[2] changes the list of entities that are obliged to dispose of the goods and packaging:

The current version of article 24.2(1)	The proposed version of article 24.2(1)
producers of goods in Russia; importers of goods	producers of goods in Russia; producers of packaging as a finished product in Russia; importers of goods and packaging

• The proposed version of article 24.2 (1.1) cancels the obligation of Russian producers of goods to dispose of the packaging of the goods they produce that are sold in Russia.
• The new version of article 24.2 (1.2) obliges importers of goods to dispose of the imported packaging of the goods instead of disposing of the packaging of imported goods.

If a new version is adopted, this will give rise to different interpretations of the importers’ obligations: whether it is packaging imported as a finished product, or the packaging of imported goods that they should dispose of. We believe that the current version fully regulates such relationships because packaging which is a finished product is to be disposed of as a product. The proposed version of article 24.2(1.2) allows for divergent interpretations of the provision, which will inevitably cause disputes (if the draft is adopted).

• Article 24.2(2) is supplemented by a condition that the list of goods and packaging to be disposed of is determined subject to the availability of technologies and commissioned production facilities to dispose of the waste from using goods and of the packaging of the goods.
• The changes proposed in article 24.2(9.2) impose an obligation to provide contracts for the disposal and certificates of disposal, not only the data regarding such contracts and certificates, when submitting reports.
• The new version of article 24.2(10), which provides for the producers and importers of goods in packaging to perform the obligation to dispose of such packaging of the goods, as amended by Draft Law No. 869136-7, imposes the specified obligation on Russian producers of packaging and importers of goods in the packaging and on the importers of the packaging.

The new versions of article 24.2 (1.2) and article 24.2 (10) are inconsistent with one another and, therefore, need to be refined for the discrepancies to be eliminated. Moreover, the new version of article 24.2(10) proposes a regulation that provides for privileged treatment of producers of goods in Russia that have been released from the obligation to dispose of the packaging of their goods, as compared with importers of goods, i.e. non-competitive business conditions.

• The new version of article 24.2(12) provides for disposal standards for the packaging of goods: the quantity of the packaging to be disposed of should be equal to the quantity of the packaging sold in Russia.

It is proposed that the disposal standard for the packaging should be 100% [3]. Substantiated doubt arises as to whether, as of today, packaging sold with goods can be collected in its entirety (according to public sources, the level of processing of plastic packaging, for instance, is 8%). Meanwhile, non-compliance with the disposal standard entails the obligation to pay the environmental fee. According to the Explanatory Note to Draft Law No. 869136-7, the proposed increase in the disposal standard up to 100% and therefore, the increase in the environmental fee, will encourage the formation of infrastructure for the separate collection of the packaging waste and the adjusting of the processing and disposal system and will allow the performance figures to be achieved that are set out in the National Project “Ecology” without using money from the state budget. Therefore, it is proposed that finding solutions for the issues the state is facing should be shifted to business which, in turn, will have to share the burden of expenses for the disposal of consumer waste with consumers.

• The new version of article 24.2(19) provides more detail regarding the list of data that the competent customs authority should file with the Federal Supervisory Natural Resources Management Service (known as 'Rosprirodnadzor’): in addition to data regarding the quantity of the imported goods and packaging, information regarding the importing legal entities and individual entrepreneurs should also be provided.
• Article 24.5(2) proposes changing the list of persons who must pay the environmental fee if the disposal standards are not met, such change being similar to the change to article 24.2(1): the environmental fee for packaging is to be payable by the producers of the packaging as well as by importers of the goods inside the packaging and of the packaging.
• Article 24.5(6) clarifies the calculation procedure for the environmental fee for the packaging taking into account the 100% disposal standard: the fee is equal to the rate of the environmental fee times the weight of the packaging of the goods.

The current regulation imposes the obligation to dispose of packaging produced in Russia on the producers of the goods using such packaging, i.e. the producers of the goods are subject to a dual responsibility: both for disposing of the produced goods and for disposing of the packaging of such goods which was produced by a different person. Such regulation gives an advantage to producers of the packaging, who are not liable for disposing of their goods. According to the Explanatory Note to Draft Law No. 869136-7, the proposed change will enhance the collection of packaging waste and the subsequent disposal of such waste and will ensure better control over the performance of the obligations to dispose of the waste because the number of producers of goods in packaging (including companies engaged in the pre-packaging of goods) are in the tens of thousands whereas there are only 4,147 producers of packaging. However, business associations believe that shifting the responsibility to the producers of packaging will result in an increase in the price for goods inside the packaging, since the environmental fee will be charged for the entire packaging produced (including the packaging in the form of production waste, unsold packaging, returned packaging, etc.), whereas at present the responsibility is imposed only for the packaging sold together with the goods.

What to think about

State authorities have regularly tried to improve the institution of the extended liability of producers (the ‘ELP’), including by increasing the disposal standards and the environmental fee rates, since the ELP was introduced in 2015. Thus, at the end of 2018 draft Resolutions of the Russian Government provided for increasing the environmental fee rates with respect to all groups of goods ‘with a view to increasing their stimulating role’. However, the Russian Ministry of Economic Development rejected^[4] this project owing to it being economically unjustified and to the lack of legal grounds for the set environmental fee rates to be reconsidered.

In the autumn of 2019 in accordance with the instruction of the Russian Ministry of Natural Resources and the Environment the Concept for Improving the ELP Institution was developed. The concept provided for, in particular, shifting the obligations to dispose of packaging to the producers of the packaging.

The new version of the Concept for Improving the ELP Institution provides for introducing a 100% disposal standard for all types of packaging, oils and batteries and for a gradual increase in the disposal standard for other goods subject to the ELP.

Therefore, it is obvious that the adoption of amendments increasing the responsibility of producers for the disposal of their goods cannot be avoided.

What is to be done

We propose reading the provisions of Draft Law No. 869136-7 with a view to preparing for the possible new developments.

• Analyse the procedure for returning the packaging of sold goods and from this perspective assess the conditions of contracts, consider the prospects of including conditions for returning the packaging of the purchased goods and jointly with counterparties devise measures to engage end consumers in finding a solution for the issue of returning the packaging.
• Consider the possibility for producers of goods to join the existing associations or for new associations to be established because such cooperation will help compliance with the disposal standards for packaging waste to be improved at the expense of the disposal of other waste from using the goods (article 24.2(4.1) of Law No. 89-FZ)^[5]. In view of the above, the types of used packaging could also be reconsidered.
• Come up with proposals to refine Draft Law No. 869136-7.

In 2020 draft Law No. 869136-7 is to undergo three hearings in the Russian State Duma. Thus, in 2020 enterprises have an opportunity to reconsider and redesign the system of collecting and disposing of waste in view of the expected changes.

Help from your adviser

Pepeliaev Group’s lawyers are ready to analyse risks arising in connection with Draft Law No. 869136-7 as a whole, and with regard to specific companies, to draw up proposals for improvement and send them to the relevant business associations and state authorities.