The New Frontier of EPRs for Polymeric Exterior Products
By Don Browne
Key Takeaways
- Extended Producer Responsibility (EPR) laws are theoretically designed to shift portions of the cost of packaging material handling and recycling to the manufacturers
- EPR provisions vary from state to state, posing costly challenges and confusion for PEPA members
- PEPA members should advocate for common sense application and exemptions in each state
Extended Producer Responsibility (EPR) is rapidly reshaping the policy landscape for building products and, in particular, the products’ packaging and and package recycling — and it's becoming a critical issue for manufacturers across the polymeric exterior building products industry.
This blog, based on a recent PEPA Industry Insider webinar presented by Alex Fernandez, Vice President, Government Affairs and Advocacy, and Manesh Rath, Partner at Keller and Heckman LLP and PEPA’s General Counsel, explains what EPR is, why states are increasingly adopting EPR laws, what these programs could mean for the Polymeric Exterior Products Association (PEPA) members and why staying informed now is essential as EPR policies continue to evolve.
States’ Rationalization for EPRs
EPRs are essentially state statutes, although most states have not enacted them yet. States contend that taxpayers or fee-paying residents pay the total cost of sorting and recycling or landfill disposal of packaging used for the products they purchase. They believe that product manufacturers who use this packaging should share the post-consumer cost of handling it.
According to the states, the EPR concept tries to change the payment model so that the product manufacturers will share responsibility for the packaging once the consumer disposes of it. More specifically, the producer pays a fee to the state through a non-governmental organization (NGO) known as a Producer Responsibility Organization (PRO) to support sorting, recycling and landfilling.
The PRO develops the formula for calculating the duty or fees imposed on the producer, defines covered materials and covered entities, and determines what qualifies as exemptions. In each state, PROs ensure EPR compliance by managing material collection, recycling and disposal. It is also these states’ belief that EPRs will increase the recycling rate of disposed packaging and will reduce environmental impact.
PEPA members note a problem with the states’ rationale: EPR implementation will not improve recycling capabilities as EPR revenues are not being applied to local municipal recycling facilities in these states and the cost for these new regulations will potentially be passed on to consumers.
There are currently seven states with EPR programs in place: California, Colorado, Maine, Maryland, Minnesota, Oregon and Washington State. Three states – Hawaii, Illinois and Rhode Island – are in the process of adopting a needs assessment to evaluate the statutory justification. And 15 states have proposed statutes.
Navigating EPRs By State
In an ideal world, these states would research the idea of EPRs further. However, the next best option would be a universal fee structure and set of reporting rules. But that’s not the case with the current seven states whose systems and regulations vary enough to make compliance costly and difficult for producers to manage.
“For seven states, it seems like you would have to hire somebody dedicated to managing the different EPRs,” Rath said. “For the projected 25 states that will someday have EPRs, may be looking at hiring a whole team that may have to focus their attention at least for a significant part of their year on compliance. I don’t yet know how it’s going to get done.”
In most active states, Circular Action Alliance (CAA) is the PRO. However, the variations in fee structures and reporting rules among states still make EPR navigation difficult and costly for producers.
Rath added that producers will have the option to self‑report their data to the PRO, which can audit both the reported numbers and the approved calculation methods used to generate them. But this does not ease the burden of multiple-state compliance and thus does not appear to be sustainable for PEPA’s manufacturer members.
B2B Exemptions for EPRs Need to Be Clarified and Common Sense
Three states have a business-to-business (B2B) or covered materials exemption: Colorado, Minnesota and Oregon. This covers packaging materials used solely for transportation or distribution to non-consumers and doesn’t go to a person who’s ultimately going to use the product inside the packaging. Whether or not this includes a homeowner varies from state to state.
In Oregon, the National Association of Wholesaler-Distributors (NAW) filed a federal lawsuit challenging the legality of Oregon's program. The NAW has sought similar relief in Colorado and in California. With specific regard to building materials, Rath argues that a practical approach would be to exempt products going directly to distributors for installers’ project use, and to find a different solution for the EPR program with respect to products going directly to retail channels for consumers.
PEPA is tracking the Oregon case, as well as similar cases elsewhere, to see what the final ruling will be and how it will impact members. PEPA members should watch this lawsuit closely and focus on the developing statutes in the other states. As a group, we should be lobbying for common sense B2B exemptions.
“I think we all need to make sure we file comments with our state legislators that impress upon them the importance of creating a business-to-business exemption and what the reasons are,” Rath said. “EPR rules predominantly consider items like a soda bottle, a water bottle, plastic bottles, (consumer product) packages, clamshells, shrink wraps, flexible packaging.. Those are the classic vision of packaging products that are subjected to EPR, not building products used by builders.”
Rath makes an argument that materials recovery facilities (MRFs) have the machinery to handle the consumer product packaging, but, for B2B packaging that’s too large or too complex in its composition for MRF handling, it’s the product recipients or (in PEPA’s case) the installers that handle this packaging on a commercial scale and know exactly what to do with proper sorting and disposal.
PEPA members should use this distinction to help state legislators understand why a more effective B2B exception is needed.
EPR Coverage Can Be Confusing and Burdensome
Producers should first confirm whether they are actually covered under EPR laws, as some manufacturers are not considered “producers” if another company performs the final packaging. If covered, they must track packaging materials and volumes, calculate recycled content, register with applicable state PROs based on product distribution and determine whether they qualify for any small-producer exemptions.
Let’s Call EPRs What They Really Are: Added Tax Revenue
EPRs are intended to increase revenue flow (especially from out-of-state producers) to support the cost of sorting, recycling and landfill. But these EPRs don’t offset taxpayer costs.
EPRs might have wider support if the money were dedicated to improving the infrastructure for sorting and recycling. In the case of California, an early adopter of EPR legislative activity, there were no guarantees to earmark funds for improving recycling infrastructure, and it was therefore perceived as an attempt to improve/expand the tax base.
States outsource EPR implementation – including fee collection – to a single PRO, which is a non-governmental entity or NGO. It can be argued that the EPR is a tax, and only legislatures and government agencies can institute taxes, deeming EPRs as potentially unconstitutional. This is one of the arguments that the NAW is raising in its suits in Colorado, Oregon and California.
PEPA is working with its members to quantify the impact of EPRs on our industry. To learn more, contact Alex Fernandez at afernandez@polymericexteriors.org.