How the new environmental fee forces goods manufacturers and importers to review their waste management strategies

Governmental Decree No. 284 (here in Russian) which sets the rates of the environmental fee came into force on 22 April 2016.

The approach to the definition of these rates clearly shows that the payment of the environmental fee will put a significant additional financial burden on goods manufacturers and importers. They should therefore consider, as soon as practicable, whether they have the technical capability to carry out the management of their waste products themselves. Otherwise, they will have to pay the environmental fee and, consequently, have to make a provision for this additional expenditure in their budgets.

Who is responsible for end-of-life goods waste management?

In accordance with the statutory provisions on industrial and consumer waste, manufacturers and importers of goodsin accordance with the established standards that have to be recycled must ensure that the waste management of such goods is carried out .

The Russian Government is responsible for drawing up a list of these goods with due regard to the resulting social and economic consequences, as well as the level and scope of their negative environmental impact. The current list (available here36 types of goods including textiles, paper products, petroleum products, plastic products, batteries, computers and communications equipment in Russian) is quite broad and contains .

As we previously reported, goods manufacturers and importers may discharge their waste management obligation either themselves (by creating the required infrastructure) or by contracting with waste management operators. It is also legally possible to delegate the obligation to comply with waste management requirements to associations or unions of manufacturers and importers.

What are the applicable compulsory recycling targets?

The Federal Service for Supervision of Natural Resources (“Rosprirodnadzor“zero” targets2015”) discussed for some time the compulsory recycling targets for end-of-life goods with the business community who raised concerns about the new obligations both in terms of the availability of the required infrastructure and the possibility of keeping separate records of the goods and their packaging, as well as the availability of financial resources to establish the required system internally. This resulted in a compromise under which were set for all types of goods in . These targets will also apply to certain types of goods in 2016 – 2017.

The introduction of a “moratorium” on the compulsory recycling targets for 2015 rendered the waste management obligation inapplicable in practice. This gave goods manufacturers and importers some respite to take a decision on how to comply with this obligation. However, higher compulsory targets apply from 2016, for instance, to metal containers – 20%; tyres and rubber products – 15%; petroleum products, glass, batteries, bottles and plastic bottles – 10%. Moreover, there is a risk that these targets will gradually increase during their review by the Russian Ministry of Natural Resources and Environment, which will be done every three years.

When and at what rate must the environmental fee be paid?

The environmental fee will be paid by goods manufacturers and importers who fully or partially fail to perform their waste management obligation.

The environmental fee (“EF” for the purpose of the formulae) is calculated by applying two formulae (depending on the type of goods/packaging):

• EF = EF rate x number of units of finished product to be recycled x the compulsory recycling target; or
• EF = EF rate x weight of the finished product or packaging x the compulsory recycling target.

If goods manufacturers or importers carry out waste management but fail to meet the established compulsory recycling targets, they must pay the environmental fee calculated as follows: EF = EF rate x (amount of recyclable end-of-life goods and/or packaging as per the compulsory recycling targets - actual amount of recycled end-of-life goods).

The environmental fee rates are set in Russian roubles for each tonne of the product and/or packaging to be recycled. These rates may, for example, range from RUB 2,025
(approx. EUR 28) for accumulators to RUB 33,476 (approx. EUR 470) for rechargeable batteries.

The first environmental fee will have to be paid by 15 April 2017 (for goods marketed in 2016).

What types of reports must be submitted?

Goods manufacturers and importers may be required to submit the following types of reports:

• a declaration of the quantity of marketed goods, which will be submitted regardless of the strategy chosen by the declarant (i.e. waste management or environmental fee payment);
• a waste management compliance report, which is prepared on the basis of the goods declaration; and/or
• an environmental fee calculation, which will be submitted in case of non-compliance with the compulsory recycling targets.

The declaration and the waste management compliance report must be submitted by 1 April of the year following the reporting one, and the environmental fee calculation – by 15 April of the same.

As a general rule, these reporting forms are to be submitted via telecommunications networks using a basic digital signature or, if this is not technically possible, in hard copy. For electronic submissions of reports, goods manufacturers and importers can use the free electronic service on the official website of Rosprirodnadzor (here in Russian).

What are the fines for failure to meet the waste management requirements?

No specific liability is currently provided for by statute for failure to comply with the waste management obligation, pay the environmental fee, submit or late submission of these reports. However, any of these violations could trigger the application of the general rule set by Article 8.2 of the Russian Code on Administrative Offences. This Article provides for administrative liability for failure to comply with the ecological and sanitary requirements within the framework of waste management. It prescribes amongst others an administrative suspension of a company’s operations for up to 90 days.

However, a bill (here in Russian) imposing significant administrative penalties on organisations and their officials for failure to comply with the waste management requirements has been passed by the Russian State Duma in the first reading. This bill, for instance, provides for the following fines against organisations:

What measures should goods manufacturers and importers take at this stage?

It is no exaggeration to state that the legal requirements for product waste management, to a large extent, still need improvement. For instance, there are outstanding issues, both legal (e.g. it remains unclear what a final product to be marketed is) and technical (relating to, first of all, the process and possibility of waste collection). Hence, some amendments are likely to be made to the current legislation in order to improve the existing mechanisms.

Despite this fact, the current year is the first time the manufacturers and importers of certain types of goods that are subject to the requirements of the industrial and consumer waste legislation are required to keep the records of their goods and packaging, recycle the end-of-life goods and/or pay the environmental fee. Thus, we recommend they analyse the following issues as soon as practicable:

• whether they keep separate records of the goods and packaging they put on the market using their existing IT systems;
• whether they are able to collect waste according to the specificity of the goods they sell;
• whether they are able to set up waste management infrastructure and whether this is a viable solution from a financial point of view;
• the potential amount to be paid as an environmental fee.

In our view, the choice between the strategy to manage waste and/or pay the environmental fee should be made based on the results of technical and financial analyses, which should notably take into account any potential financial and administrative burden.