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SB 54: Who Must Comply with California's Plastics and Packaging Act? The Gummy Bear Question

Updated: May 7, 2023

California’s Plastic Pollution Prevention and Packaging Producer Responsibility Act (the “Act” or “SB 54”)[1] is a variation of the increasingly popular Extended Producer Responsibility (EPR) and circular economy frameworks in which a producer and/or other entities in the supply chain assume responsibility for a product through the post-consumer stage of a product's life cycle.

California already administers several EPR programs for specific consumer products (e.g., mattresses, paints, carpets); SB 54, however, and similar plastics legislation adopted by three other states, are unparalleled among EPR programs in the United States for their scope, impact, and complexity.[2] Of the four programs, SB 54 has been touted as placing the most sweeping restrictions on plastics in the nation.[3]

SB 54 requires “producers[4] of covered materials[5] (i.e., single use packaging and plastic food ware) to phase in source reduction and recyclable/composting mandates for plastic covered materials beginning in 2028 and ramping up to 2032, when a 25% source reduction and 65% recycling rate must be achieved.[6]In addition, all covered materials sold or distributed in California must be recyclable or compostable by 2032.[7]

Producers of covered materials must form a producer responsibility organization [“PRO”], for purposes of complying with the Act. [8] In addition to the costs associated with source reduction and recycling mandates, the PRO must fund implementation of the Act, including raising $500 million dollars a year over a ten-year period from its members for deposit into the California Plastic Pollution Mitigation Fund (“Fund”).[9] Of that amount, the PRO "may collect" up to $150 million from “plastic resin manufacturers” who sell plastic covered materials to producers who are participants of the PRO.[10] In addition, the PRO must raise funds to pay a fee (in an amount as yet to be determined) known as the “circular economy administrative fee” to cover the state’s costs to implement the Act. [11] CalRecycle may impose penalties up to $50,000 per day per violation on any entity not in compliance with the Act.[12]

At this stage of the game – the outset of the rulemaking process – there are many open questions about some of the most fundamental aspects of the Act, including, most notably, exactly who is responsible for compliance with the Act. For purpose of this article, we refer to this question as “the gummy bear question.”

As to a bottle of gummy bears, who is responsible for compliance with the Act? The manufacturer of the gummy bears? The manufacturer of the plastic bottle in which the gummy bears are packaged? The store where the gummy bears are sold? Some other entity or entities?

Variations of the gummy bear question have been raised by participants in the informal rulemaking workshops held by CalRecycle about SB 54 over the last couple of months.[13] Suffice to say, the opportunity for confusion is abundant.

The opening section of the Act signals that the plastic industry will bear responsibility for compliance, asserting: “[i]t is the intent of the Legislature to establish a producer responsibility program designed to ensure that producers of single-use packaging and food service ware covered by this program take responsibility for the costs associated with the end-of-life management of that material and ensure that the material is recyclable or compostable.”[14]

Governor Newsom’s office issued a press release after SB 54 was passed, announcing that “the legislation shifts the plastic pollution burden from consumers to the plastics industry by raising $5 billion from industry members over 10 years.”[15]Following suit, The New York Times headlined an article about the legislation, “California Requires Plastics Makers to Foot the Bill for Recycling.”[16] Likewise, the San Francisco Chronicle reported that “[p]lastics companies that do business in California will be required to create a producer responsibility organization to oversee how the bill is implemented.”[17]

But does SB 54 actually place the burden of compliance on the plastics industry?

While the Act requires “producers of covered materials” to join a PRO and comply with various provisions of the Act, the term “producer” is defined (as discussed below) by reference to the consumer products that use the packaging.[18] Thus, incorporating the definition of the term “producer” into the phrase “producer of covered materials” yields a different meaning than does the phrase by itself.

Under the Act, a producer is first defined as an entity that “manufactures a product that uses a covered material and who owns or is the licensee of the brand or trademark under which the product is used in commercial enterprise, sold, offered for sale, or distributed in the state.”[19]

If there is no person in the state who meets that criteria, the producer of the material is “the owner, or if the owner is not in the state, the exclusive licensee of a brand or trademark under which the covered product using the covered materials is used in a commercial enterprise, sold, offered for sale, or distributed in the state.”[20] If there is no person in the state that meets the foregoing criteria, the producers of the covered materials is the person who “sells, offers for sale, or distributes the product that uses the covered material in or into the state.”[21]

Thus, producers under the Act are owners/licensees of brands/trademarks of consumer products that use covered materials and secondarily distributors, retailers, and wholesalers of the consumer product that use covered materials.

The Act does impose some limited requirements directly on “retailers and wholesalers” of covered materials. “[R]etailers” and wholesalers” are defined as entities that sell covered materials (without reference to the independently defined term "producers" which, as discussed above, implicates retailers and wholesalers of consumer products using the covered materials).[22] Producers, retailers and wholesalers "or a PRO operating on behalf of a producer, retailer, or wholesaler" must register with CalRecycle and report information to CalRecycle for purposes of meeting the mandates for source reduction, recycling rates, and recyclability of materials under the Act.[23]

Thus, the Act contemplates that in some circumstances, retailers and wholesalers of covered materials may be members of PROs but does not provide clarification on what those circumstances may be.

As California grapples with its ambitious effort to minimize plastic waste, the threshold question of who is responsible for compliance with the Act (and for what provisions of the Act) must be addressed so the regulated community can clearly understand their obligations and mobilize and prepare for compliance. Clarity will also enable businesses to shift costs as appropriate in purchase and sale agreements within their supply chain and/or make other business decisions based on the cost of compliance with SB 54.

Businesses potentially subject to the Act may want to consider participating in or tracking developments with the ongoing rulemaking process, which may flush out the statutory definitions of producers. CalRecycle has encouraged stakeholders to provide comments to CalRecycle both about the topics raised in workshops and more general topics.[24]

[1] CA Pub Res Code (“PRC”) § 42040 et al. [2] Maine, California, and Colorado have all adopted similar plastics legislation. EPR laws are also in use in other countries, including many European countries who have adopted packaging mandates modeled after the EU’s Packaging and Packaging Waste Directive, 94/62 ES (1994). The Act requires that the implementing regulations shall consider relevant information on reduction programs and packaging used in other states, localities, and nations, including the European Union an ISO 18602. PRC § 42060 (b)(1)(c). [3] See, e.g., What to Know About California’s Landmark Plastics Law, New York Times, July 5, 2022. [4] PRC § 42041(w)(1). [5] Id. [6] PRC § 42050; see also, PRC §§ 42057. [7] PRC § 42050(b). [8] PRC § 42051(1). [9] The Fund will subsidize work by various state agencies to monitor and reduce the impacts of plastic on the environment and public health with certain funds earmarked to mitigate the impact of plastics on disadvantaged or low-income communities. PRC § 42064(d)-(m). [10] PRC § 42064 (e)(3)(A). The term “plastic resin manufacturers” is not defined, although the term “plastic” is defined. PRC § 42041 (t). [11] PRC § 42053.5. [12] PRC § 42081(a)(1). [13] The Act is administered by the California Department of Resources Recycling and Recovery commonly referred to as “CalRecycle.” [14] PRC § 42020 (b)(3)(B). [15] Governor Newsom Signs Legislation Cutting Harmful Plastic Pollution to Protect Communities, Oceans, and Animals, Press Release, Office of Governor (June 30, 2022). [16] California Requires Plastics Makers to Foot the Bill for Recycling, New York Times (July 1, 2022). [17] California Lawmakers Pass Major Plastic-Reduction Measure After Years of Thwarted Attempts, San Francisco Chronicle (June 2022). [18] PRC § 42041 (w). [19] PRC § 42041 (w)(1). [20] PRC § 42041 (w)(2). [21] PRC § 42041 (w)(3). [22] PRC § 42041 (a)(e)(1). [23] PRC § 42060 (a)(2)(A) (emphasis added). [24] This article is not intended as and should not be construed as legal advice.

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