New methods for packaging elimination - Environmental dues
Legislative Decree No. 22 of February 5, 1997 - the so-called "Ronchi Decree" - which acknowledged the EU Directive No. 62 of December 24, 1994, introduced a new regime with respect to the management of packaging.
Such regime (contained in Articles 34 to 43 of the Decree) aims at:
- granting free competition also in the field of collection and recovery of used packaging, i.e., avoiding that different law regulations concerning packaging create obstacles within intra-EU Countries transactions;
- reducing the quantity of waste polluting the environment and, above all, increasing the possibilities of re-utilising said waste.
The scope of said regulation reconciles thus interests which often contrast, such as environmental, market and production issues.
1. OBJECTIVE AND SUBJECTIVE SCOPES
The regulation, which entered into force on May 1, 1997, applies to "...every item of packaging introduced in the national market...", including waste deriving therefrom, irrespective of the persons using or producing it, and the material it consists of.
The Decree (Article 35), gives not only detailed and precise definitions of packaging, in the various circumstances, of prevention, re-utilisation, recycling, recovery and elimination of same, but also sets forth the requirements for entities subject to the regime.
Article 35, Paragraph 1, letter q) and r), defines producers such as "...suppliers of packaging materials, manufacturers, transformers and importers of empty packages and packaging materials ..." and users such as "...dealers, distributors, fillers and users of empty packages and packaging materials".
1.1. Obligations for producers and users
1.1.1. Common obligations
Article 38 of the Decree establishes for producers and users the obligation of gathering all packaging waste, however collected by the public service through the service manager.
In order to comply with the above-mentioned obligation, producers and users should, within 180 days starting from the date of entry into force of the Decree (i.e., May 1, 1997), incorporate the National Packaging Consortium (the so-called "CONAI").
Draft Law No. 4792 concerning "New interventions on environmental issues", presently being discussed by Parliament, provides for an extension of the term for joining the CONAI by all producers and users, which may be postponed to December 31, 1998.
Said Draft Law establishes that for producers and users having an annual turnover which exceeds Lit. 1 billion it is mandatory to join the CONAI; for other entities the joining is optional, whereas the obligation to pay environmental dues to the CONAI remains compulsory.
The Draft Law in question establishes that, in case a producer or a user does not join the CONAI, it will be subject to an administrative penalty ranging from Lit. 15 to 90 million and will have to pay outstanding dues. The penalty may be reduced to a half, should the registration occur within March 31, 1999.
Moreover, common obligations for producers and users include the bearing of all costs relating to the collection, re-utilisation, recycling, recovery and elimination of packaging, as stated by Article 38, Paragraph 9 of Legislative Decree No. 22/1997.
1.1.2. Obligations for producers
As established by Paragraph 3 of Article 38 producers should, within November 1, 1997 (i.e., within six months from the date of entry into force of the Decree) decide whether to:
a) autonomously organise the management of packaging; or
b) join one of the Specialised Field Consortiums provided for by Article 40; or
c) adopt a guarantee deposit system.
In the first case, every entity should:
1. submit to the CONAI its specific Program, destined to be included in the five-year "General Program for the prevention and management of packages and packaging waste";
2. demonstrate, by February 1, 1998, to the National Waste Monitoring Bureau that:
- it adopts regulations for the collection of used packages that it has introduced into the market;
- it organises prevention from the accumulation of packaging waste;
- it provides end-users with correct information on collection of used packaging;
- it elaborates and transmits to the CONAI a program for prevention of waste accumulation;
3. transmit, by March 31, 1998, to the National Waste Monitoring Bureau a report on the management of their packaging (including a specific program) containing partial results achieved and unforeseen problems with possible solutions.
Such obligation is applicable on a yearly basis.
Non-compliance with the above-mentioned deadlines implies that producers automatically become members of the Specialised Field Consortiums.
The Statutes of the six incorporated Specialised Field Consortiums, approved by Ministerial Decree of July 15, 1998 (steel, aluminium, paper, wood, plastic and glass), establish that in case of non-fulfilment with the duties foreseen by Article 38, the Consortium sends an injunction to join; if the entity does not comply with the injunction, an automatic membership is presumed.
1.1.3. Obligations for users
Users must, pursuant to paragraph 4 of Article 38, gratuitously collect used packaging and relating waste and gather same in a "...place of collection agreed with the packaging producers".
2. THE NATIONAL PACKAGING CONSORTIUM (CONAI)
The National Packaging Consortium (CONAI) is a private law organisation aimed at the elimination, recovery and recycling of packaging waste. It is ruled by a Statute approved by the Ministry of Environment and the Ministry of Industry, Commerce and Handicraft.
The CONAI is a non-profit organisation whose unique purpose is that of ensuring that the national economic system achieves the following environmental aims:
- recovery within 2002 of 50% of the used packaging;
- recycling of at least half of same.
To this purpose, the CONAI relies upon the Public Administration and its differentiated collection systems.
The provision of the financial resources needed for the bearing of the recycling expenses occurs through the members' (producers and users of packaging on the Italian territory) dues.
2.1. CONAI Membership
The CONAI membership involves, pursuant to Article 6 of the CONAI Statute, in addition to the dues, the payment of:
a) a fixed amount of Lit 10,000;
b) a varying amount to be summed to the fixed share, in case the enterprises have a yearly turnover exceeding Lit. 1 billion, amounting to:
- for producers, 0.015% of the proceeds deriving from the sales of packaging and/or the raw material used for the production of same, operated on the Italian territory;
- for both industrial and handicraft users, 0.015% of costs borne for the purchase of empty packages and packaging materials;
- for commercial and distribution enterprises, 0.00025% of the total proceeds deriving from sales carried out.
2.2. CONAI Dues
The CONAI dues are to be paid on occasion of the "first sale", which is intended to be the passage from the packaging producer to the first user; it ensues that the latter will bear an additional cost to be included in the invoice issued by the producer, as "environmental dues to the CONAI".
Such dues indicated in the invoice, are to be considered an ancillary service, as indicated by Articles 12 and 13 of Presidential Decree No. 633/1972, and fall thus within the scope of VAT application.
For all subsequent sales, except for those to end-consumers, invoices must indicate, with reference to the dues paid on occasion of the first sale, the amount, included in the unitary sales price, of such dues.
In any case, for a transitional period of a maximum of 24 months starting from October 1, 1998, it is sufficient for invoices not relating to the first sale to include the wording "environmental dues to the CONAI: paid".
It is worth noting that, upon beneficiary's request, seller will be required to exhibit an extra ledger-card indicating the paid dues for each single reference and for the kinds of material the packaging is made of.
2.3.Payment of dues to the CONAI
As foreseen by Article 7, Paragraph 10 of the CONAI Regulation, entities which have to pay the dues must effect the payment within 90 days starting from the expiration date for the filing of the monthly producer return (see: Monthly Producer Return below).
The payment is to be carried out by means of a bank transfer on one of the six Current Accounts, corresponding to the six Specialised Field Consortiums, open at the Milan office of the "Banca Nazionale dell'Agricoltura".
2.4. Calculation of Dues
Dues must be calculated by multiplying the total weight of every packaging material by a fixed index, as follows:
- steel 30 lire/Kg;
- aluminium 100 lire/Kg;
- paper 30 lire/Kg;
- wood 5 lire/Kg;
- plastic 140 lire/Kg;
- glass 5 lire/Kg.
Should the invoice indicate the number of pieces for each package, the producer will have to give the user an additional datum, i.e., the weight of each unit. This latter value, multiplied by the amount of the whole lot, will give the total weight and thus the amount of the dues payable.
In case of complex packaging, structurally constituted of different materials, the calculation of the dues must be carried out by taking as a reference the prevailing material in terms of weight.
2.5. Procedure for invoicing the CONAI dues
The producer, in the invoice for the first sale, must report, for every kind of packaging material sold, a separate indication related to the "environmental dues to the CONAI".
No obligation exists as to the indication in the invoice of the dues for the sale subsequently carried out between franchiser and franchisee or between retailers. The CONAI Board of Directors reserves the right to identify for the future other operations for which an exemption is available.
3. PACKAGING IMPORTATION
Article 7, Paragraph 5, of the CONAI Regulation states that in case the packaging is produced abroad and subsequently imported, the moment of application of the environmental dues coincides with that of the "first sale" on national territory.
Nevertheless, two simplified procedures were reported by the President of CONAI as follows: "Enterprises importing goods for less than Lit. 5 billion, may choose a lump-sum system by paying 0.15% of the importation value. On the other hand, enterprises importing goods for more than Lit. 5 billion may choose to pay a single contribution, equal to Lit. 60 per Kilo, on differentiated packaging (i.e., plastic, wood, glass, etc.)".
4. EXEMPTIONS FROM CONAI DUES
The exemption from dues, foreseen only in case of sale by a user of full packaging outside the Italian territory, may be applied by means of an ordinary or simplified procedure.
The ordinary procedure establishes that, once the disposal is effected, the user, irrespective of its being a member or not of the Consortium, submits to the CONAI a written request for reimbursement in addition to the Customs documentation.
The simplified procedure foresees that the user requires a pre-exemption from the dues, on the basis of a so-called "plafond" (documented packaging exported during prior year, calculated on the total amount of the purchased packaging).
The rule in question foresees only in the first case, in favour of the exporter user, an offsetting with environmental dues to be paid.
5.1. Monthly Producers Return
Within the fifteenth day following the end of each month, producers, which carry out the first sale, must submit to the CONAI a separate form for each single material indicating the packaging sold.
Said form must include:
- identification data of the producer;
- exempt quantities;
- quantities subject to dues;
- unitary environmental dues denominated in lire/Kg;
- total amount of dues;
- allocation of quantities between "primary packaging" and "secondary packaging", as defined by Article 35 of Legislative Decree No. 22/1997.
A primary packaging is deemed as - at the sales outlet - a sales unit for the end-user or for the consumer.
A multiple or secondary packaging is deemed to be - at the sales outlet - a packaging used to compound a certain number of sales units, notwithstanding the fact that it is sold as such to the end-user or to the consumer, or that it is used to facilitate shelf re-stocking of sales outlets. It may be removed from the product without changing its characteristics.
5.2. Monthly Importers Return
For importers of full or empty packaging, one unique form is comprehensive of the six materials used for packaging.
The importer has to enclose in the return a list of numbers and dates of VAT protocols attributed to the bills of entry and/or copy of INTRASTAT returns.
5.3. Consolidated Tax Return
Two enclosures must be made:
1. to indicate the goals to be reached within the next five years, by May 1, 2002, with reference to the management of packaging;
2. to indicate the essential pre-requisites for the manufacture, composition, re-utilisation and recoverableness of packaging.
In order to allow proper monitoring of the achievement of recovery and recycling goals, producers, users and "...all entities engaged in activities of recycling and recovery of packaging waste...", will have to file the Consolidated Tax Return.
Said return must include the data related to the quantity of packaging for each single material and for every kind of package introduced into the market, the quantity of re-utilised packaging and recycled waste deriving from the national market.
5.4. Tax and accounting issues
"Environmental dues to the CONAI", periodically paid, are considered to be cost-related to the production and will have thus to appear among production costs (item 7) of the profit and loss account of the CONAI member.
"Environmental dues to the CONAI", invoiced by the same CONAI, are deemed to be a consideration for the provision of services by the CONAI and are thus subject to VAT.
In consideration of the obligations foreseen for packaging producers and users by Article 38 of Legislative Decree No. 22/1997, Article 54 of the same Decree establishes a series of penalties to be applied in case of violations and crimes related to such obligations.
According to Paragraph 1, in fact, non-compliance with obligations of Article 38, Paragraphs 5, 6 and 7 for producers, is punishable by an administrative penalty ranging from Lit. 15 million to 90 million. The same penalty applies to users violating obligations under Article 38, Paragraph 3.
A penalty ranging from Lit. 10 million to 60 million applies if one eliminates recovered containers in a dump. The same penalty is applied for the introduction on the market of packaging (entirely or partially) containing concentrations of lead, mercury, cadmium and chromium exceeding some predetermined quantities.
On the contrary, starting from January 1, 1998 the trading of packaging not fulfilling C.E.N. standards is punishable by pecuniary administrative penalties ranging from Lit. 5 million to 30 million.
For any further information, please contact:
Mr. Antonino Calabrò, Ernst & Young, correspondent to Ernst & Young, Milan
Telephone number: ++39/2/85141 E-mail: Click Contact Link
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.