Highlights of the Extended Producer Responsibility Act of 2022 and its Implementing Rules And Regulations

In 2022, Republic Act (“RA”) No. 11898, otherwise known as the Extended Producer Responsibility (“EPR”) Act of 2022 was passed as an amendment to RA No. 9003 or the Ecological Solid Waste Management Act. The law sought to institutionalize the practice of extended producer responsibility as a practical approach to efficient waste management, with a focus on waste reduction, recovery, and recycling. To implement the said law, the Department of Environment and Natural Resources (“DENR”) issued Administrative Order 2023-02 (“EPR IRR”) on 24 January 2023. We discuss below salient provisions of the EPR IRR. 

Establishment of EPR Programs

Under the RA No. 11898, within a period of 6 months following its effectivity, Obliged Enterprises were to establish or phase-in EPR programs for plastic packaging to achieve efficient management of plastic packaging waste, reduced production, importation, supply, or use of plastic packaging deemed low in reusability, recyclability or retrievability, and plastic neutrality through efficient recovery and diversion schemes. Under the EPR IRR, the EPR Programs may include activities and strategies involving:

1. Adoption of reusable packaging products, or packing design;
2. Inclusion of recycled content or recycled materials in packaging materials;
3. Adoption of appropriate product refilling systems for retailers;
4. Viable reduction rates plan;
5. Information and education campaign schemes;
6. Appropriate labelling of products and packaging materials to include information to facilitate recovery, reuse, recycling, and proper disposal of waste product and packaging;
7. Waste recovery schemes;
8. Diversion of recovered waste into value chains and value adding useful products;
9. Transportation of recovered waste to the appropriate composting, recycling or other diversion or disposal site in the country;
10. Clean-up of waste leaked to coastal areas, public roads, and other sites;
11. Establishment of commercial or industrial scale recycling, composting, thermal treatment, and other waste diversion or disposal facilities; and
12. Partnership with local government units, communities, and informal waste sectors.

Obliged Enterprises

For purposes of compliance with the EPR Program requirement, Obliged Enterprises include:

1. Large Enterprises, which include: (i) brand owners who sell or supply any commodity under a brand, label or identity using a product it produced, or material supplied to it by another manufacturer, or supplier; and (ii) product manufacturers or importers that supply its commodities for the use of the general consumer or distributes the same as a material product of a brand owner;
2. Micro, Small, and Medium Enterprises (“MSMEs”) when the total value of assets of all enterprises carrying the same brand, label or trademark exceeds that of a medium enterprise or Php100,000,000.00; and
3. Such other persons and entities as may be determined by the Secretary of the DENR.

MSMEs not falling within the above are not covered by the EPR Act of 2022. Despite this, they are encouraged to practice EPR voluntarily or be a part of the network of Obliged Enterprises, Collectives, or Product Recovery Organizations (“PROs”) practicing EPR.

Collective refers to a group of Obliged Enterprises that organized themselves, not as a PRO, to implement a common platform for the implementation of their EPR program. Meanwhile, a PRO refers to the organization, voluntarily formed or authorized by the Obliged Enterprises that shall serve as the viable platform to implement their EPR Program.

Registration of EPR Programs

An Obliged Enterprise, Collective, or PRO must register their respective EPR Programs with the National Solid Waste Commission, through the National Ecology Center (“NEC”). To register an EPR Program, the following must be submitted:

1. Letter of Intent stipulating whether the applicant is applying for EPR Registration as an Obliged Enterprise or as a Collective or aggrupation of Obliged Enterprises, with or without a PRO; and
2. Other Supporting Documents as may be required by the NEC, which may include Special Power of Attorney, Certificate of Registration from the Securities and Exchange Commission, Certificate of Registration with the Bureau of Internal Revenue, among others.

Compliance Period for Plastic Packaging Recovery Programs 

In connection with the establishment of plastic recovery programs to achieve plastic neutrality, the following targets for the recovery of plastic product footprint generated during the immediately preceding year is set as follows:

For this purpose, Obliged Enterprises must submit a report of their compliance or an EPR Act of 2022 Compliance Audit Report to the DENR every 30 June or the first working day immediately thereafter of such year.

Fiscal incentives 

Under the EPR Act of 2022, the following fiscal incentives may be availed of by Obliged Enterprises, PROs, and non-governmental organizations (“NGOs”) that develop or undertake effective solid waste management:

1. Tax Incentives. Obliged Enterprises or PROs acting on their behalf, and other registered business enterprises may apply for incentives following the approval process provided under Title XIII (Tax Incentives) of the National Internal Revenue Code of 1997, as amended, for eligible activities. Provided that such activities shall undergo the standard processes in the identification of qualified activities under the Strategic Investment Priority Plan.

2. Deductions. The EPR expenses of Obliged Enterprises, PROs and private enterprises shall be considered as necessary business expenses deductible from gross annual income subject to the substantiation requirements for necessary business expenses deductible from gross annual income.

3. Tax and Duty Exemption of Donations, Legacies, and Gifts. All legacies, gifts, and donations to, enterprises or private entities, including NGOs, for the support and maintenance of the program for socially acceptable, effective, and efficient solid waste management shall be exempt from all internal revenue taxes and customs duties, and shall be deductible in full, from the gross income of the donor for income tax purposes. 

Prohibited Acts and Penalties

Any Obliged Enterprise that fails to register its EPR Program or fails to comply with the compliance period for plastic packaging recovery programs may be imposed the following penalties: