Producers who may qualify for an exemption under California’s extended producer responsibility (“EPR”) packaging law (“SB 54” or the “Act”)[1] should consider reviewing CalRecycle’s[2] recently released Proposed Draft Regulation Text (“Draft Regs”) [3] for a preview of how CalRecycle proposes to handle applications for exemptions under the Act. [4]
CalRecycle has not yet initiated the official rule-making process – giving stakeholders an opportunity to fully digest the draft text of the rules before the rule-making process triggers the forty-five (45) day period for public comment. Under the Act, CalRecycle must adopt the rules no later than January 1, 2025. PRC § 42060(a). Given the time frame required to finalize proposed regulations, it is likely that CalRecycle will initiate the rule-making process in the immediate future.
Overview
Unless excluded or exempted, producers of single use packaging and plastic single use food service ware (“covered materials”) are subject to the Act, which requires producers to meet recycling rates and source reduction targets by specified dates, join a producer responsibility organization (PRO)(or satisfy rigorous requirements for independent compliance), pay various fees, and contribute to a mitigation fund.
Certain covered materials under the Act are categorically excluded, [5] meaning the exclusion is self-executing, whereas exemptions are effective only if CalRecycle grants the exemption. The Draft Regs address the application process for each exemption and requirements for maintaining the exemption.
The Act provides for the following exemptions:
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Exemptions for Long-term Storage Materials – certain materials associated with products used for the long-term protection or storage of a product that has a lifespan of not less than five years. PRC § 42041(e)(2)(F); see Draft Regs § 18980.2.1.
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Exemptions for Product-Specific Materials – certain materials that are not collected through a residential recycling service. PRC § 42041(e)(2)(H); see Draft Regs § 18980.2.2.
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Exemptions for Certain Covered Materials – materials that present “unique challenges” for compliance with the Act, or that cannot comply with the Act for health and safety reasons. PRC §§ 42060(a)(4), 42060(a)(3); PRC § 18980.2.3.; see Draft Regs § § 18980.2.3.
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Exemptions for Small Producers – producers with gross sales in California of less than $ 1 million. PRC § 42060(a)(5); see Draft Regs § 18980.5.2.
Information required under each of the exemption applications is fairly detailed and extensive. Suffice to say that producers who intend to submit an application for an exemption should plan for significant time to collect the required information.
For example, the information required in an application for Exemptions for Certain Covered Materials for covered materials that present unique challenges includes information about general policy objectives that granting the exemption could implicate, including risks to public health, the environment, economic development, burdens on vulnerable populations, disproportionate effects in identifiable classes of persons or industries, and conflicting obligations under other laws. Draft Regs § 18980.2.3 (a)(5)(iii). In addition, the producer must identify potential alternatives to the covered material, id. at § 18980.2.3(iv), and impacts to the existing processing and recycling infrastructure, id. at § 18980.2.3(a)(5)(vi).
Likewise, the application for an Exemption for Small Producers requires significant information, including proof that the producer’s gross sales in the most recent calendar year was less than $ 1 million and the nature of the producer’s sales, distribution, and imports – as well as records of each of the covered materials by covered material categories sold, offered for sale, distributed, or imported into the state, including the name and description of the materials and the number and weight sold annually. Draft Regs § 18980.5.2.
In some cases, the Draft Regs further qualify the availability for the exemption. For example, only packaging associated with a product that is a “non-consumable” good is eligible for the Exemption for Long-term Storage Materials. Draft Regs § 18980.2.1(b). As with some of the other exemptions, certain elements of the application for an Exemption for Long-Term Storage Materials must be supported by “information and evidence” (albeit a description of the information and evidence may suffice in some circumstances rather than submission of the actual data). Draft Regs § 18980.2.1(c)(4).
An interesting feature of the Exemption for Long-Term Storage Materials is that in lieu of other supporting evidence about the lifespan and intended use of the product, the producer may provide a written warranty by the producer sufficient to establish a particular lifespan for a product. The warranty must guarantee that the product will remain usable for its intended purpose or else the producer will take back and replace the item at its expense. Draft Regs. § 18980.2.1 (c)(4).
Maintaining the Exemptions
All of the exemptions, once granted, would be effective for one year, except Exemptions for Product-Specific Materials, which would be effective for two years – and CalRecycle may, at its sole discretion, provide for duration longer than one year for Exemptions for Certain Covered Materials. Draft Regs §§18980.2.1(f)),18980.2.2(e)), 18980.2.3 (f), and 18980.5.2(b).
With the exception of the Exemption for Small Producers, the requirements for maintaining the exemptions are generally the same – ninety (90) days before the expiration date of the exemption, the applicant must submit a certification, under penalty of perjury, that the information in the initial application has not changed. CalRecycle’s approval of subsequent certifications maintains the exemption for the same time period as the original exemption. Draft Regs §§ 18980.2.1(g), 18980.2.2(f), 18980.2.3 (g).
Under the Exemption for Small Producers, the producer must update all information that was submitted as part of the original application ninety (90) days before the exemption would otherwise expire. Draft Regs § 18980.5.2 (c).[6]
Confidentiality of Information
In addition to the disclosure requirements in the California Public Records Act,[7] the Draft Regs expressly provide that all records submitted to CalRecycle pursuant to the Act are public records subject to mandatory disclosure unless an express exemption applies or the information constitutes a trade secret. Draft Regs § 18980.15(a-b). To assert a trade secret, producers must specifically designate as “trade” secret” each portion of the submission containing a trade secret. Id. Legal counsel should be consulted about what constitutes a trade secret for purposes of the Act and how to preserve the protection, which may depend on the facts and measures taken to protect the confidentiality of the information.
While the text of the draft regulations may change before the proposed rules are published and/or after public comment, the Draft Regs provide a roadmap for how CalRecyle envisions the application process for exemptions at this point.
Some producers (e.g., small producers or producers who only sell covered materials subject to an exemption) may avoid further regulation under the Act altogether if an exemption is approved. Other producers may still be regulated under the Act for non-exempt covered materials but nonetheless elect to apply for an exemption for eligible covered materials; among other things, they could reduce fees and reporting requirements associated with the covered materials subject to an approved exemption. For the same reasons, producers should also identify those covered materials in their portfolio that are categorically excluded even if they are otherwise subject to the Act.
[1] The Plastic Pollution Prevention and Packaging Producer Responsibility Act. PRC § 42070 et al. For convenience, we refer to this law is a “packaging” EPR law; however, the law covers both single use packaging and plastic single use foodware.
[2] California's Department of Resources Recycling and Recovery is commonly known as “CalRecycle.”
[4] Producers are defined under the Act at Public Resources Code (“PRC”) § 42041(w). In addition to the exclusions and exemptions discussed in this article, the definition of “producers” excludes “a person who produces, harvests, and packages an agricultural commodity on the site where the agricultural commodity was grown or raised.” PRC § 42041(w)(4).
[5] Categorically excluded covered materials (subject to applicable requirements for each exclusion) are: certain packaging for drugs, medical devices, and prescription drugs; packaging that is “reusable” or “refillable”; various products used to treat animals, including drugs and medical devices; infant formula; medical food; oral nutritional supplements; pesticides, fungicides, and rodenticides; plastic packaging containers used to contain and ship products classified as dangerous goods or hazardous materials; beverages subject to the California law regulating beverage recycling; and packaging associated with products covered under the architectural paint program. PRC § 42041(e).
[6] Due to a typographical error in the Draft Regs, they currently provide that only information in “subdivision (a)(1)(A),” (i.e., the legal name of the entity making the application), must be updated. In response to a query from EGC, CalRecycle has confirmed that the intent here was to refer to “subdivision (a)” under which all information originally submitted must be updated.
[7] Government Code § 7920 et seq.
