Until 10 December 2019, stakeholders have the opportunity to comment on the draft Deposit and Return Scheme for Scotland Regulations 2020 (the “Draft Regulations”)[1], which introduce a new Deposit Return Scheme (“DRS”) for single-use drinks containers made out of PET plastic, steel, aluminium and glass (“in-scope containers”) placed on the Scottish market. The aim of the Draft Regulations is to promote and secure an increase in recycling of such materials and promote a circular economy.

The Draft Regulations, subject to representations, suggest an ambitious timeframe such that the DRS is expected to be operational by 1 April 2021, which leaves producers and retailers with limited time to put in place the necessary infrastructure and other measures. Comments on the detail of the Draft Regulations and the timelines by industry and others are encouraged so that the practicalities of the DRS and the changes required in the supply chain to practically implement the DRS effectively and efficiently are understood before final form Regulations are implemented.

For the remainder of the UK, there is intent to progress a DRS and further consultations on the design of the scheme are expected.

Any representations on the Draft Regulations should be submitted using the form at Annex A to the consultation document: www.gov.scot/binaries/content/documents/govscot/publications/consultation-paper/2019/09/deposit-return-schemme-scotland-regulations-accompanying-statement-proposed-regulations

Responses should be submitted through Citizenspace (https://consult.gov.scot/environment-forestry/deposit-schemefor-scotland), by emailing: DRSinScotland@gov.scot, or by writing to Deposit Return Scheme Consultation, Environmental Quality and Circular Economy Division, Area 3H, Victoria Quay, Leith Docks, Edinburgh, EH6 6QQ.

Summary of the proposed DRS

The DRS will apply to all in-scope containers between 50ml and 3l in volume, which are placed on the Scottish market. A 20p deposit shall be applied each time an in-scope container is sold in Scotland. Zero Waste Scotland has stated that the Scottish Government is clear that the deposit should not be subject to VAT, however, it has noted that discussions are ongoing with the UK Government to reach a final position on this matter.

The consumer will be entitled to recover the deposit when it returns the drinks container to a designated return point. Notably, the Draft Regulations provide that the retailer must inform the customer of the amount of the deposit and whether the container is in-scope. This will therefore place a burden on retailers.

Producers of in-scope containers (the “brand owner” for containers branded in the UK, or where the brand owner is located outside the UK, the “importer”), must register with the Scottish Environmental Protection Agency (“SEPA”) in order to lawfully place such containers on the market in Scotland otherwise they will be prohibited for sale in Scotland. Similarly, retailers are not permitted to sell or market in-scope containers where the producer is not registered with SEPA (the regulator for the DRS).For some of the industry the product is placed on the UK market rather than the Scottish market so more information and changes will be required to make this structure work appropriately or other approaches may be preferred post the consultation.

Similarly producers are required to maintain a record of the number and type of in-scope containers which they first place on the market for retail sale in Scotland and collect an annually increasing target percentage of such containers placed on the market each year (starting at 70% in 2022). Producers will be able to appoint a scheme administrator to meet their DRS obligations on their behalf, subject to such entity receiving prior approval from the Scottish Ministers.

Retailers will be obliged to provide a return point for in-scope containers at the premises from which the sales of such containers are made, either over the counter or by using a reverse vending machine. Online and distance sales retailers must provide takeback services from the site of delivery to consumers. The practical and financial implications of these requirements could therefore be significant and are likely to trigger a need for considerable forward planning.

Businesses that sell in-scope containers to be opened and consumed on-site, such as pubs and restaurants, will be subject to the deposit but will have the choice as to whether to charge the deposit to their customers and will only be required to return the containers they sell on their own premises. Where specified criteria are met, Scottish Ministers may also exempt a retailer from acting as a return point and may approve any other person who wishes to act as a return point. Non-retail spaces will be able to act as return locations on an opt-in basis. These could include recycling centres, schools or other community hubs.

For both producers and retailers, failure to comply with the DRS Regulations will be a criminal offence punishable by a fine of £10,000 (if prosecuted in the Sheriff's Court on summary conviction) or an unlimited fine (if prosecuted on indictment). Civil enforcement measures will also be available to SEPA.

Commentary

The majority of stakeholders and consultees were in favour of a DRS, but there has been considerable debate as to how it should be implemented[2]. Whilst the Draft Regulations place onerous obligations on producers, which term is broadly defined, there are also a number of requirements placed upon retailers. “Retailer” is broadly defined in the Draft Regulations, meaning that a wide range of businesses will be caught - from retail giants to local corner shops, all of whom will be potentially subject to the same responsibilities and risks. This in turn could impact upon producers' ability to comply with the DRS.

The scope of the DRS has also been contentious. Whilst some suggest that the proposals do not go far enough, many industry stakeholders are concerned by the inclusion of glass containers in the scheme, arguing that it will actually reduce glass recycling rates and will be a significant cost and present logistical difficulties for retailers to manage and store the glass containers.

Stakeholders have also raised concerns over the ambitious timeline for the implementation of the DRS, particularly whilst there is still significant uncertainty regarding the infrastructure that will be required for the scheme. Some retailers of scale will need to undertake in-store refits and/or extensions to accommodate the machines and storage facilities, therefore requiring substantial investment. Industry has predicted that the capital expenditure required to implement and comply with the DRS will be significantly more than the Scottish Government’s estimate of £60m.

Lastly, the question remains as to how the Scottish DRS will work alongside the DRS proposed for the rest of the UK, the plans for which are not as well advanced. The UK Government has said that it will work closely with the devolved administrations to ensure a consistent and coherent UK approach, but no substantive information has yet been provided as to how this will be achieved. This is of particular importance given the risk of fraud and other major changes pending including reform of the producer responsibility packaging waste regime and the proposed plastic tax, both of which have significant economic implications and more details on which are expected in the forthcoming months. For all it is crucial that the application of these measures are considered as a whole so that all those in the value chain are treated proportionately and the impacts properly considered including the risk of adverse unforeseen consequences.

Those affected by the DRS should consider whether they wish to make representations on the Draft Regulations by 10 December 2019 so that their views are considered on this significant scheme and, in the meantime, commence strategic planning ahead of its implementation.

Article co-authored by Jessica Buttanshaw.