As of 1 January 2024, the full text of Government Decree 450/2023 (X.4.) on the detailed rules for the establishment and application of the redemption fee and the marketing of products subject to the redemption fee has entered into force, so it is worth examining what these changes mean, who exactly it concerns and how.
The Deposit Return System (DRS) Regulation is an important element of the environmental protection policies, more specifically recycling, which is also a priority at EU level. It is not unique and has long been applied in many European countries. According to a publication in 2021, Hungary had the highest per capita amount of non-recycled single-use beverage packaging of the 27 European countries surveyed. The EU’s target is to reach a 90% collection rate for glass, PET and aluminium within a few years and to reduce the environmental burden.
The new system is based on four actors: the concession company, producers, distributors, and consumers. The basic functioning of the system can be summarised as follows: the producer pays the redemption fee to the concession company for the products subject to the redemption fee and then sells the product to the distributor at a price increased by the redemption fee. The distributor then sells the product, at a price which includes the redemption fee, to the consumer, who, if he returns the product to a vending machine or other designated redemption point on the distributor’s premises, receives a refund from the concession company. The concession company may use the redemption fees not paid out to consumers for products not redeemed only for the operation of the system. This is the general scheme of the system, and the detailed rules and specific provisions affecting each operator are set out below.
Basic concepts
The Regulation makes a basic distinction between compulsory and voluntary redemption products. Compulsory redemption products are all non-recyclable plastic, metal or glass packaging for beverage products with a capacity of 0.1 to 3 litres, while voluntary products are all packaging that does not fit into the mandatory category but is marked “returnable” by the manufacturer. The distinction is that while mandatory returnable products will be subject to a deposit fee of HUF 50, voluntary returnable products will be subject to a deposit fee set by the manufacturer. There will be two significant exceptions to the mandatory redemption fee; milk and milk-based products packaging and products with less than 5,000 units per year will not be subject to DRS. In addition, products of special shapes and sizes, which cannot be returned by vending machines, will not be covered by this regulation.
Provisions concerning the manufacturer
A manufacturer producing a product subject to redemption fee must register their product at least 45 days before placing it on the market or, if they no longer market the product, they must notify the concession company of this fact. In addition, the manufacturer must mark the products with an appropriate redemption marking, which must be verified by the concession company. In addition, the producer must pay a connection fee or a service fee, which is set by decree by the Minister for Waste Management. These fees take into account the concession company’s investment costs and the costs of maintaining the compulsory take-back system, so that the revenue is sufficient to cover them. At this point, it is important to underline that producers have been given until 30 June 2024 to switch to the DRS system, until which time they can still market their products with mandatory return fees under the old rules.
Provisions concerning distributors
For distributors, the Regulation focuses on primarily on stores with a sales area of more than 400 m2, as they will be required to operate an automatic return system and to provide manual returns in the event of a failure. In these return points, products subject to a mandatory return fee can be returned, while products subject to a voluntary return fee will be returned on the basis of an agreement between the manufacturer and the distributor. The distributor also has an additional obligation to provide consumers with adequate information, both at the point of sale of the returnable product and at the place where the return is made.
The concession company
The concession company for the DRS system is also MOHU, the waste management company of MOL, which operates the EPR system. MOHU’s tasks include the provision of the IT platform for product registration, the verification of producer notifications, the procurement, installation and maintenance of return equipment, the collection, transport and treatment of waste, the establishment of return sites and the management of the return fee, i.e. the collection of the fee from producers and the payment of the fee to consumers or, in the case of manual returns, to distributors.
Issues related to the implementation of the DPR system
The mandatory buy-back scheme is expected to affect fewer businesses than the Extended Producer Responsibility (EPR) scheme for waste management, which applies from 1 July 2023, but it will be more challenging. The DRS Regulation has also modified the EPR rules, as the producer will no longer have to pay an Extended Producer Responsibility fee for products with a mandatory redemption fee for which a redemption fee liability arises, which may also be relevant for quarterly EPR returns.
As with any new system, questions and issues have arisen during the implementation of the DRS system, but MOHU’s position is that the answers to these issues will most likely have to wait until the end of the summer, since, as noted above, manufacturers have been given until the end of June 2024 to make the final transition to the deposit-fee system.
The content of this post does not constitute legal or tax advice and does not create an engagement. In each case, detailed knowledge of the individual case is necessary to assess it and to find a tailor-made solution. If you have any questions, please do not hesitate to contact us at http://www.bekespartners.com/.
