Vietnam's policy on Extended Producer Responsibility requires companies to fulfill recycling obligations

The Environment Protection Law (EPL) in Vietnam was amended in 2022, which introduced a new policy called "extended producer responsibility" (EPR). The EPR policy places the onus of responsibility to recycle on companies.

According to the EPR policy, manufacturers and importers must either take responsibility for recycling a certain percentage of the products and packaging they produce or import into Vietnam, or they must make a financial contribution to the Vietnam Environment Protection (VEP) Fund.

In August 2022, the Ministry of Natural Resources and Environment (MONRE) issued Decree 08/2022/ND-PC, which includes specific regulations for the implementation of the EPL and the EPR policy. The Decree also outlines a timeline for the implementation of recycling requirements for different types of products and packaging, from 2022 to 2027.

Despite some recycling obligations already being in effect, there is still some uncertainty and ambiguity surrounding the implementation of the rules, which makes it challenging for companies to comply. On October 20, 2023, MONRE released a draft decree that aims to provide additional clarity to the companies with regard to the provisions of Decree 08/2022/ND-PC.

This article provides a detailed overview of the EPR policy as stipulated in the EPL and Decree 08/2022/ND-PC, which will help companies in Vietnam to comply with the regulations. This article also discusses the potential challenges and obstacles that companies may face.

Responsibilities for recycling as per the Environmental Protection Law

Under the Extended Producer Responsibility (EPR) policy of the Vietnam Environmental Protection Law (EPL), individuals and companies that produce or import products or packaging with recyclable value are required to recycle them according to specific ratios and standards.

There are two options available for individuals and companies to meet their recycling obligations:

1. They can organize the products or packaging to be recycled.

2. They can contribute financially to the Vietnam Environmental Protection (VEP) Fund, which supports the recycling of products and packaging.

Individuals and companies with recycling obligations must submit a recycling plan and report their recycling results annually to the Ministry of Natural Resources and Environment.

The financial contributions to the VEP Fund are determined by the weight or unit of the product or packaging and must be used to support recycling activities of products and packaging as specified in the EPL.

Which products and packaging are required to be recycled?

Decree 08/2022/ND-PC guides the implementation of the Extended Producer Responsibility Law (EPL). It mandates that commercial packaging for certain types of products must be recycled. These include food, cosmetics, medicines, fertilizers, animal feed, veterinary drugs, cleaning agents, formulations used in household, agricultural, and medical fields, as well as cement. Additionally, Appendix XXII, which was released along with Decree 08/2022/ND-PC, lists specific products and their mandatory recycling quotas.

Requirements for recycling products and packaging

The following text explains the mandatory ratios and specifications for recycling products and packaging that are enforced by Decree 08/2022/ND-PC. The mandatory recycling ratios are the minimum weight ratio of recycled products and packaging to the total weight of products and packaging produced and imported in a year. These ratios vary depending on the type of product and packaging and are set for three years. The ratios will be adjusted every three years to achieve Vietnam's recycling goals and environmental protection requirements.

Companies can achieve the mandatory ratios by recycling their own products or packaging, or by recycling products or packaging of the same type that are produced or imported by other companies. The recycling of imported scrap used for production materials is not counted towards the ratio.

If a company exceeds the mandatory recycling ratio in a given year, the excess portion can be counted towards the ratio in the following years.

Appendix XXII lists the various types of products and packaging that must be recycled and the corresponding mandatory quotas. It also outlines the mandatory recycling specifications, which are the selected recycling solutions that can be employed and the minimum requirements for the amount of material and fuel that must be recovered from the recycling of products or packaging. The minimum recycling requirement for products is currently set at 40% of their volume, while for packaging, it is the same as the mandatory recycling rate.

Product and packaging grouping	Product and packaging catalog	Mandatory recycling rate for the first 3 years	Mandatory recycling specifications (must recover at least 40% of the product’s volume, packaging is recycled according to the mandatory recycling rate)
Paper packaging	Paper and carton packaging	20%	Selected recycling solutions: 1. Production of commercial pulp. 2. Production of paper products such as toilet paper, cardboard, paper boxes, or other products.
Plastic bag	Rigid PET packaging	22%	Selected recycling solutions: 1. Production of recycled plastic pellets used as raw materials for industries. 2. Manufacturing other products (including PE fibers). 3. Chemical production (including oil).
Glass packaging	Glass bottles, jars, containers	15%	Selected recycling solutions: 1. Clean and reuse to meet manufacturer’s standards. 2. Grind into cullet for glass production. 3. Grind and crush into aggregate for construction
Batteries	Battery	12%	Selected recycling solutions: 1. Production of lead as raw material for industries. 2. Producing recycled plastic pellets or plastic by-products such as commercial chemicals, heavy oil, and synthetic gas as raw materials for industries. 3. Production of commercial acid/sulfate salt (by-product).
Monitors and devices containing monitors	Televisions and computer monitors, other types of screens	7%	Selected recycling solutions: 1. Recover and reuse components and accessories to ensure manufacturer’s standards. 2. Producing metal bars and billets as raw materials for industries. 3. Production of recycled plastic pellets or by-products from plastic such as commercial chemicals, heavy oil, and synthetic gas as raw materials and fuel for industries. 4. Production of glass in the form of particles < 5mm in size as raw materials and production fuel for industries. 5. Manufactured into other recycled products.
Motorized road vehicles	Two- and three-wheeled motorbikes	0.5%	Selected recycling solutions: 1. Recover and reuse parts and equipment to ensure manufacturer’s standards. 2. Producing metal bars and billets as raw materials for industries. 3. Production of recycled plastic pellets or by-products from plastic such as commercial chemicals, heavy oil, and synthetic gas as raw materials and fuel for industries. 4. Production of rubber powder or plastic by-products such as commercial chemicals, heavy oil, and synthetic gas as raw materials and fuel for industries. 5. Producing glass beads < 5mm in size as raw materials for industries. 6. Production of other products.

Deadlines for recycling various types of products and packaging

According to Decree 08/2022/ND-PC, companies are required to start recycling different types of products and packaging by specific deadlines, as listed below:

- Packaging and products like batteries, lubricants, and tires: starting from January 1, 2024;

- Electrical and electronic products: starting from January 1, 2025;

- Means of transportation: starting from January 1, 2027.

Before January 1, 2025, the Ministry of Natural Resources and Environment (MONRE) will propose regulations on the disposal of means of transportation.

Exclusions from recycling responsibilities

According to the EPL and Decree 08/2022/ND-PC, certain companies and products are exempt from recycling requirements. These include:

- Products and packaging meant for export, temporary import, re-export, or production and importation for research, study, or experimental purposes.

- Producers of packaging with revenue from sales and services which are less than VND 30 billion (US$1.18 million) in the previous year.

- Importers of packaging with an import value (calculated based on customs value) of less than VND 20 billion (US$786,008) in the previous year.

Approaches to Meeting Recycling Obligations

Companies have the option to handle recycling responsibilities themselves instead of contributing financially to the VEP Fund. If they choose to do so, they can decide how to carry out the recycling activities. They have four options to choose from:

1. Conduct the recycling activities on their own

2. Hire a recycling company to carry out the recycling duties

3. Authorize an intermediary organization to organize the recycling on their behalf ("authorized party")

4. Use a combination of the above methods

However, if companies decide to carry out recycling by themselves, they must make sure that their practices comply with Vietnam's environmental protection regulations. Companies that are not able to comply with these regulations should not handle the recycling themselves.

To help companies choose a compliant organization to carry out or arrange recycling activities, MONRE will publish a list of such organizations. Companies must not contract non-compliant organizations.

Companies in Vietnam have the option to handle recycling responsibilities themselves or contribute financially to the VEP Fund. If a company decides to handle recycling on their own, they must ensure that their practices comply with environmental protection regulations. Alternatively, they can hire a compliant organization to carry out the recycling duties. MONRE will publish a list of such organizations to assist companies in making the right choice. Companies must make an informed decision and choose a compliant organization to protect the environment and avoid any legal consequences.

Enrolling in recycling programs and documenting the outcomes of recycling efforts

Companies are required to register their recycling plans and report their previous year's recycling results to MONRE before March 31 of each year. If a company authorizes another party to carry out the recycling duties on their behalf, then that party is responsible for formulating and submitting the plans and reports.

Recycling plans are determined based on the volume of products and packaging produced and marketed in the previous year. The organization responsible for compiling and registering the plans and reports must ensure the accuracy of the information contained within.

Suppose a company's actual volume of products and packaging produced, marketed, or imported exceeds the volume stated in the registered recycling plan. In that case, the company must add the difference in volume to the following year's plan. Conversely, if the actual volume is less than the plan's volume, then the company may report the results according to the actual volume in its recycling report the following year.

MONRE will notify companies (or authorized parties) whose plans and reports fail to meet the requirements in writing and give them 30 working days to complete the plan or report.

VEP Fund Contributions and How they are calculated

Companies have the option to financially contribute to the VEP Fund instead of carrying out recycling activities on their own. This is called elective contribution.

However, it is mandatory for companies and individuals who produce or import products and packaging that are difficult to recycle, contain hazardous substances, or are difficult to collect or treat to make contributions to the VEP Fund. These contributions are determined by the weight or unit of product or packaging and must be made towards specific recycling activities listed in the EPL.

These activities include the collection, transportation, and treatment of solid waste generated from households and individuals; research and development of technology, techniques, and initiatives for treating household solid waste; or the collection, transportation, and treatment of packaging containing pesticides. The specific types of products and their corresponding mandatory contribution amounts are listed in Appendix XXIII, which is released along with Decree 08/2022/ND-PC. These amounts will be adjusted every five years.

It is important to note that the receipt and use of financial contributions towards the VEP Fund must be public, transparent, and for the intended purpose as prescribed by law.

There are some exemptions from mandatory contributions, including products intended for export or temporary import, products manufactured or imported for research, study, or experimentation purposes, producers with revenue from sales and service provision of less than VND 30 billion in the previous year, and importers with a total import value (calculated according to customs value) of less than VND 20 billion in the previous year.

Companies that choose to contribute to the VEP Fund are not required to submit annual recycling plans or reports.

The Ministry of Natural Resources and Environment (MONRE) will establish the "reasonable recycling cost per unit of weight of the product/packaging" for each product and packaging. This cost per unit of weight will be reviewed and updated every three years.

Due dates for submitting financial contributions

In order to financially contribute to the VEP Fund, both elective and mandatory, companies must declare and submit a financial contribution declaration form to the VEP Fund before March 31 of each year. The amount declared is calculated based on the volume of products and packaging produced, introduced into the market, and/or imported in the previous year.

Following this, companies must make a one-time payment to the VEP Fund before April 20 of each year. Alternatively, they can choose to pay in two installments, with an initial contribution of at least 50 percent of the total amount before April 20, and a second contribution of the remaining amount before October 20 of the same year.

If the volume of products and packaging declared is lower than the actual volume produced, introduced to the market, or imported, then the company must make up the difference in its contribution in the following year. Conversely, if the volume is higher, then the excess amount is deducted from the contribution in the following year.

Challenges related to compliance that companies face in Vietnam

Companies implementing the EPL guidelines issued by MONRE are still facing ambiguities in the current regulations regarding recycling responsibilities. For example, the specific methods and requirements for compiling recycling plans and reports remain unclear, despite many companies being already required to submit them. Moreover, there is a need for further clarity on recycling methods for various product types, as the existing solutions outlined in Appendix XXII are not sufficient for all items.

There are also concerns that Vietnam lacks the recycling capabilities required to handle the demand that will be generated by the EPR policy. Therefore, calls have been made for further incentives to develop the industry.

To address these issues, a draft decree was released in October 2023 to propose changes to the regulations. The draft decree aims to provide guidance and clarity for companies. It proposes to ease the regulations by removing the 40 percent minimum material recuperation rate from the mandatory recycling specifications in Appendix XXII and removing some items from the list.

Additionally, the draft decree raises the threshold for exemption for importers from VND 20 billion to VND 30 billion, matching the threshold for producers. Finally, the draft decree also proposes to make the costs incurred from the mandatory recycling activities or the financial contribution to the VEP Fund tax deductible, thereby reducing the cost burden for companies.

Conclusion

In conclusion, the implementation of the amended Environment Protection Law (EPL) in 2022 with the introduction of the "extended producer responsibility" (EPR) policy in Vietnam signifies a significant step towards sustainability and environmental protection. The EPR policy places the onus on companies to take responsibility for recycling a certain proportion of products and packaging they introduce into the market or contribute financially to the Vietnam Environment Protection (VEP) Fund. Despite some uncertainties and challenges surrounding the implementation of the rules, efforts are being made to provide clarity and facilitate compliance for companies operating in Vietnam. The ongoing developments, including the release of the draft decree in October 2023, aim to address ambiguities, improve regulations, and support businesses in meeting their recycling obligations effectively. Overall, the push towards a more sustainable business environment through the EPR policy highlights Vietnam's commitment to environmental conservation and sustainable development.