By Catherine W. Johnson
Introduction
On December 2, 2024, California's Department of Resources Recycling and Recovery (“CalRecycle”) released proposed regulations for California’s extended producer responsibility (“EPR”) packaging and food service ware program – known as the Plastic Pollution Prevention and Packaging Producer Responsibility Act or SB 54. Final regulations have not yet been adopted – but under the proposed regulations (and previous versions of the proposed regulations), a mandatory malus fee would apply to producers of covered materials that use packaging containing a Proposition 65 (“Prop 65”) chemical.
SB 54
Under SB 54, “producers” (the brand owner or other parties in the supply chain depending on the facts) must participate in a producer responsibility organization (“PRO”) plan by January 1, 2027 or they are prohibited from selling products into California that use covered materials unless they meet stringent requirements for individual compliance.[1] Under the proposed regulations, producers must register with CalRecycle on or before July 1, 2025.[2]
Producers are subject to fees based on the weight and type of covered materials they use.[3] Base fees are then adjusted by eco-modulated fees (either credits or malus assessments) designed to incentivize environmentally desirable outcomes. The statute does not explicitly specify when fees must first be paid by producers; however, the PRO (Circular Action Alliance or “CAA”) must remit certain fees to the state on an annual basis by July 1, 2027, indicating fees will likely be assessed against producers within the first quarter of 2027 or shortly thereafter.[4]
While the specifics vary by program, the trend is towards using eco-modulated fees to encourage more sustainable packaging, including penalties for chemical additives that hinder recyclability or pose environmental risks. In addition, several states, including California, prohibit or restrict the use of certain chemicals in packaging (e.g., heavy metals), particularly food packaging (e.g., per- and polyfluoroalkyl substances known as “PFAS”), under laws unrelated to an EPR program.
Under California’s proposed rule, producers would be assessed a malus fee for use of covered materials that contain a Prop 65 chemical. [5]
SB 54 and Prop 65
The Prop 65 list includes over 900 chemicals that the state of California has determined are carcinogens or reproductive toxicants, and new chemicals are added to the list every year. Under Prop 65, where an exposure to a Prop 65 chemical is knowing and intentional, a business must provide “clear and reasonable” warnings unless it can establish the level of exposure associated with its product is safe.
Under the proposed regulations, producers would be assessed a malus fee without regard to the level of exposure, meaning fees could be assessed for the presence of a Prop 65 chemical in packaging or food service ware even when no Prop 65 warning would be required under Proposition 65.
Rather than focusing on enforcing Proposition 65 or mandating warnings, this proposed requirement aims to discourage the use of hazardous materials in packaging and food service ware by making it more expensive for businesses to use such packaging. The benefits of reducing hazardous materials go beyond immediate exposure risks to consumers. It can also lessen the environmental impact associated with end-of-life pathways for the packaging, such as hazardous materials leaching into soil and groundwater from landfills and complications associated with recycling.
By the same token, determining which chemicals are present in packaging and at what levels can be costly and complex – and reformulating packaging to remove Prop 65 chemicals can be expensive or compromise the functionality of the packaging.
If this requirement is adopted, it remains to be seen how CAA would choose to implement this requirement, what the amount of the malus fee would be, or what documentation would be required to avoid the malus fee. All of these factors could significantly affect its impact.
Conclusion
At present, under the proposed regulations implementing SB 54, the PRO would be responsible for assessing a malus fee against producers that use a covered material containing a Prop 65 chemical. How this requirement is implemented could have significant impacts for businesses who are producers – and for their suppliers who manufacture the packaging and plastic single use food service ware.
[1] Public Resources Code (PRC) § 42051(b)(1).
[2] Proposed Regulations: 14 California Code of Regulation (“CCR”) § 18980.5(a).
[3] PRC § 42040 et seq.
[4] PRC § 42064 (f)(2).
[5] Proposed Regulations at 14 CCR § 18980.6.7 (h).
This article is for informational purposes only and does not constitute legal advice. It is considered attorney advertising.
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