Scotland’s Parliament has introduced plans for a Deposit Return Scheme in Scotland (the “DRS”). The DRS will apply to single-use drinks containers, and obligations will be imposed on all parties in the supply chain. Similar schemes are to be introduced in other parts of the UK and Europe (and beyond).

The DRS has been subject to a lot of discussion and scrutiny over recent months, and is currently undergoing further amendment. The Deposit and Return Scheme for Scotland Amendment Regulations  (the Amendment Regulations”) come into force today, 30 June 2023. Further amendment is also anticipated prior to the launch of the DRS.

This article is the first of a series produced by DLA Piper; with this article providing an overview of the overarching aims and key obligations arising under the DRS, and the impact of recent amendments. Future articles will consider the impact of the delay to the launch of the DRS, outstanding issues and potential implications for parties in the supply chain, and how business should prepare for the launch of the DRS - currently scheduled for October 2025.

What is the DRS and how will it work?

The aim of the DRS is to “promote and secure an increase in recycling of materials, forming part of the Scottish Government’s response to the global climate emergency”. 

[1] Deposit Return Scheme for Scotland: accompanying statement (Link).

The scheme is designed to tackle single-use drinks containers and promote recycling, by charging a 20 pence redeemable deposit at each stage of the supply chain.

The DRS will work in a circular manner, with the 20 pence deposit being charged as follows:

• A producer or importer who introduces a qualifying product (a “Scheme Article” – see below) onto the UK market will pay a 20 pence deposit to a scheme administrator appointed by the Scottish Government to administer the DRS.
• Each participant in the supply chain through to the end consumer will then pay back that 20 pence deposit as they acquire the product.
• The end consumer returns the empty container to a designated return point and receives a refund of their 20 pence deposit.
• The empty container is then returned to the producer of the container, who then claims back the 20 pence deposit from the scheme administrator.

What type of packaging does the DRS apply to?

The DRS applies to a drink that is sold individually or in a multipack, which is contained in packaging which is:

•  made wholly/mainly from PET plastic, glass, and steel or aluminium (Note – see below regarding glass);
• contains between 50 ml and 3 litres of liquid and is sealed at the point of sale; and
• is in single-use packaging.

These items are defined as “Scheme Articles”. The DRS will not cover containers for items which are not intended for human consumption (e.g. plastic bottles containing cleaning products).

The DRS will apply to Scheme Articles (i.e. individual containers) which are first made available to be marketed, offered for sale or sold by a producer after the launch of the scheme.

When will the DRS “go live”?

In April 2023, it was announced that the DRS would not “go live” until March 2024. Amendments to formalise this delay to the launch of the scheme come into force today, 30 June 2023. These amendments will also introduce an important new exemption from the scheme for “Low Volume Drink Products”. I.e. Scheme Articles which are sold by a producer in quantities of under 5000 per year in Scotland. These products will not be subject to the requirements of the DRS.

However, on 7 June 2023, the Scottish Government announced that the DRS would be further delayed until October 2025 at the earliest. It was also announced that glass containers would be excluded from the scope of the scheme. Formal amendments to implement these changes are awaited, and anticipated to come into force in Autumn 2023. For detail regarding this recent announcement, please see our article here.

What are the obligations for compliance?

The DRS is designed to apply to all parties in the supply chain – from manufacturers through to consumers. Each “actor” is defined in the legislation and has specific obligations:

• Producer – a producer includes both: (1) the brand owner of a Scheme Article branded in the UK; and (2) the importer of a Scheme Article which is branded outside the UK and being placed on the UK market for the first time. In addition, any business which fills and seals a drink for consumption off-site will be considered a producer (e.g. fresh drinks prepared on-site and packaged in a sealed container). Producers are required to register with SEPA and provide ongoing information, accept the return of qualifying scheme packaging from retailers, and meet collection targets.
• Retailer – a retailer is a person/business which markets, offers for sale or sells a Scheme Article to consumers in Scotland. A retailer may have a physical “shop-front”, but also includes online operators, cafes (where items are sold for consumption off-premises), and vending machine operators. Retailers must display information to consumers that the bottle is a Scheme Article and that a 20 pence deposit is being charged.
• Wholesalers - the DRS does not apply to sales of Scheme Articles to business customers. However,  if it is envisaged that the product will eventually be sold to a consumer via retail sale, the wholesaler must charge the 20 pence deposit.
• Consumers – a consumer is a person who purchases a Scheme Article outwith their trade, business, craft or profession. If a consumer wishes to recover the 20 pence deposit paid when purchasing the product, the must return the Scheme Article to a return point or use a takeback service (see below).
• Hospitality Retailers – this is a new category introduced by the Amendment Regulations, due to come into force on 30 June 2023. This category includes cafes and restaurants which sell Scheme Articles exclusively for consumption on the premises. These retailers must retain any Scheme Articles sold for consumption on the premises for collection by the producer of that packaging.

When would a business be required to operate a takeback service or return point?

In general terms, premises which carry out retail sales of Scheme Articles will be required to operate a return point. This requires retailers to accept Scheme Articles (whether purchased from that store or not) which are brought to the return point by a consumer, and pay to the consumer the 20 pence deposit. This deposit can then be reclaimed by the retailer when it is returned to the producer.

It is possible for retailers to apply for an exemption in limited circumstances, including where another nearby retailer has agreed to accept returns on behalf of another retailer, or where the operation of a return point would risk the retailer being in breach of other legal obligations (e.g. fire safety or food safety).

Retailers who sell Scheme Articles via distance sale (such as online sales) will be required to provide a “takeback service” to consumers. This requires the online retailer to arrange for Scheme Articles to be collected from the address to which they were delivered (free of charge) and return the deposit paid by the consumer.

Under the Amendment Regulations, the Scottish Government have narrowed the requirements for the retailers required to operate a takeback service. Only those which are “large retailers” (having a UK annual turnover exceeding £1bn) will be required to offer a takeback service to customers having a disability or are aged over 66. This is a significant narrowing of the obligation.

What are the penalties for non-compliance?

The regulator who will oversee compliance and enforcement of the DRS is the Scottish Environmental Protection Agency (“SEPA”). SEPA will have the power to enforce breaches of the legislation and carry out investigations.

Criminal proceedings may be brought against businesses or an officer for non-compliance. The regulations provide that a financial penalty can be imposed (on summary conviction, up to the statutory maximum (currently £10,000), or an unlimited fine if charged on indictment). Reputational harm should also be considered.

However, as an alternative to recommending prosecution, SEPA has the power to impose other penalties, including issuing a fixed monetary penalty or accepting a voluntary enforcement undertaking from the party in breach of the obligation.

The legislation does not provide for a grace period when the DRS becomes operational. It is anticipated that guidance on compliance and enforcement will be issued by SEPA prior to the launch of the DRS.

What are the key deadlines for businesses?

There is a deadline for producer registration, ahead of a later date for the launch of the DRS.

Parties who meet the definition of a “Producer” are required to register with SEPA each year, and if they have a turnover of over £85,000 per annum, a registration fee (currently £365) will be payable. The Amendment Regulations provide that the application must be received by SEPA before 12 January 2024.

The key operative provisions for the DRS (including charging the 20 pence deposit, operating the return points and take back service, and enforcement provisions) are not yet in force. As noted above, the Scottish Government recently announced that the launch of the DRS has been delayed until October 2025 at the earliest. Formal amendment to the launch date is awaited.

Comment

The DRS will impose significant obligations on the various actors in the supply chain. Early preparation will be key for businesses to ensure that their processes and systems will comply with the DRS.

Key questions on the operation of the scheme remain outstanding. However, the recent announcement to delay the launch of the DRS will allow an extra period of time for resolving these issues and for businesses to prepare.

Stay tuned for future articles in this series which will explore details of the DRS in depth.

If you would like to discuss any of the topics raised in this article, please contact Naomi Pryde or Jennifer Talbot.