On December 1, 2023, the Japan International Cooperation Agency (JICA) Vietnam, in collaboration with the Embassy of Japan in Vietnam and the Japanese Chamber of Commerce and Industry (JCCI), held an event titled “Joint Workshop on Vietnam EPR Regulations.” The main target audience of the even was Japanese companies. At this workshop, Mr. Phan Tuan Hung, Director of the Legislative Department of the Ministry of Natural Resources and Environment (MONRE), and representatives of the National EPR Secretariat provided an overview and trends regarding the EPR (enhanced producer’s responsibility) Regulation in Vietnam. In the event, the discussion focused on the Draft Amendment to Decree No. 08/2022/ND-CP Detailing a Number of Articles of Law on Environmental Protection 2020, which was released on October 20, 2023, and the Draft Prime Minister’s Decision on the Recycling Cost Constant (Fs) for the implementation of the Extended Producer Responsibility (EPR) Scheme, for which public consultation was conducted this year. The discussion also included a question-and-answer (Q&A) session on challenges faced by companies. In addition, an expert from Japanese Ministry of the Environment’s Environmental Regeneration and Material Cycle Bureau gave a presentation on Japan’s EPR system and policies regarding the development of recycling-oriented businesses.
The event was held onsite at Thang Long Industrial Park No. 1 (in Dong Anh District, Hanoi) and online, with approximately 150 participants, mainly Japanese companies (including importers, manufacturers, and recyclers). Staff members of EnviX in Hanoi office also attended the workshop.
Q&A on Obligations of Producers and Importers
Q1: Under Japan’s EPR system, both manufacturers and consumers are responsible for recycling, but in Vietnam, only manufactures and importers are obliged to recycle. Is there any consideration making consumers assume EPR liability in the future?
A: The current law requires manufacturers and importers to fulfill their EPR liabilities. In fact, during the drafting phase of Decree No. 08/2022/ND-CP, a deposit return scheme (DRS) for consumers similar to ones implemented in some European countries was considered, but was ultimately not adopted due to many objections. However, further study on this issue will be conducted in the future.
Q2: The current law does not provide any clear definition of the term “manufacturer.” For example, an automobile is composed by parts/elements such as batteries, wheels and tires, and lubricants. How will the recycling responsibility be determined for each of the automobile manufacturer and the component manufacturer?
A: A manufacturer or importer of automobiles must fulfill its responsibility to recycle the vehicles that are sold in the Vietnamese market. On the other hand, manufacturers involved in parts and consumables used in the automobiles, such as batteries, wheels and tires, lubricants, etc., are not responsible for recycling the vehicles but rather responsible for (1) parts that they sold to the automobile manufacturer and (2) independent products sold in the Vietnamese market, such as lubricants, batteries, wheels, and tires. Such companies will be responsible for the recycling of all products sold to the Vietnamese market.
(EnviX comment: As indicated above, it is still not clear whether the component/part manufacturer or the end-product manufacturer is responsible for recycling when a component/part incorporated into an end-product is subject to Vietnam’s EPR regulations. Thus, EnviX staff members are planning to conduct a separate, individual interview in the future to clarify this issue.)
Q3: In order to fulfill their EPR liabilities, manufacturers and importers can choose to either (1) implement recycling or (2) pay into the Vietnam Environmental Protection Fund to assist in the recycling of products and packaging materials. If a company chooses to (1) implement recycling and fails to achieve a sufficient recycling rate, can the company satisfy the shortfall by paying some amounts of contribution to the Vietnam Environmental Protection Fund, as provided in (2) above?
A: The manufacturer/importer can only choose either (1) or (2). There is concern that implementing a combination of (1) and (2) would be difficult to manage and would significantly increase administrative costs. In many other countries, the way of implementing EPR responsibility is limited to one of two options: implement recycling or pay the government for recycling. But in Vietnam, multiple options are available. Furthermore, the option (1) can be implemented in three different ways (in-house recycling, outsourced to a recycler, or delegated to a third party (Producer Responsibility Organizations: PRO), or a combination of them.
Q4: If a company sells lubricants to a car manufacturer under a contract on consignment of processing, who will be responsible for recycling? This has caused confusion because there is no clear provision in the current law.
A: For example, if an automobile manufacturer (Company A) purchases lubricating oil from a lubricants manufacturer (Company B) and distributes it in the market under Company B’s brand, Company B must assume responsibility for recycling the lubricating oil. On the other hand, if Company A consigns processing of lubricating oil to Company B and distributes it in the market under Company A’s brand, the recycling responsibility shall be borne by Company A. Please note that the “manufacturer” is required to label its products in accordance with Decree No. 43/2017/ND-CP. This Decree defines the term “manufacturer” as “an organization or individual who is legally responsible for particular products distributed in the Vietnamese market.” Therefore, under the EPR Regulation, manufacturers and importers are organizations/individuals legally responsible for the concerned products and packaging materials. It is currently proposed to include clear provision about this issue in the proposed amendment to Decree No. 08/2022/ND-CP.
Q5: A company (Company A) imports lubricating oil and sells it to an auto parts manufacturer (Company B), which uses it in the manufacture of an engine. The engine is then supplied to an automobile manufacturer (Company C), who uses it in the manufacture of automobiles. In this case, who is responsible for recycling the lubricating oil?
A: The importer (Company A) must be responsible for recycling the lubricating oil. On the other hand, the engines do not fall under the target products specified in Annex XXII of Decree No. 08/2022/ND-CP. Therefore, Company B is not responsible for recycling engines manufactured at its own plant.
Q6: A company (Company A) imports batteries for electric vehicles (EVs) and sells them to an automobile manufacturer (Company B) for installation in its EVs. In this installation process, the label indicating the brand name is peeled off the battery before it is installed in the vehicle. In this case, when a consumer wants to replace the battery after several years of use, to which company (Company A or Company B) should the consumer return the battery? Since the life of batteries is generally shorter than that of automobiles, these cases are likely to arise.
A: In this case, the importer (Company A) is responsible for the recycling of the batteries, regardless of whether they are labeled or not. The responsibility for collecting these batteries remains with Company A or a recycler outsourced by Company A, not with the consumer. In this case, the Company A shall recycle batteries to satisfy the compulsory recycling rate (8%) or pay into the Vietnam Environmental Protection Fund.
Q7: If a company is importing both batteries and laptop computers that incorporate batteries, does the recycling liability stipulated in item No. 16 “Batteries” in Annex XXII to the Decree No. 08/2022/ND-CP apply to laptop batteries or only to batteries independently sold on the market?
A: No. 16 of the Annex provides for batteries sold alone on the market. If a battery is installed in a laptop computer, the importer is responsible for recycling the entire laptop computer. In this case, the recycling responsibility for the battery (compulsory recycling rate of 8%) and that for the laptop computer (compulsory recycling rate of 10%) shall be clearly separated.
Q8: Must a processing company that exports 100% of their products to foreign countries implement EPR liability for its exported products?
A: In principle, a manufacturer must fulfill its EPR responsibility only if it sells its products on the Vietnamese market and generates waste in Vietnam. Therefore, processing companies that sorely exporting their products abroad do not bear EPR responsibility under the current regulations in Vietnam. However, they may have to fulfill their recycling responsibility to the destination countries.
Q9: If a company recycles packaging, is the responsibility for recycling determined based on the amount of packaging material or that of the entire product?
A: Companies are responsible only for the amount of direct and outer packaging. In accordance with Decree No. 43/2017/ND-CP on Goods Labelling, product packaging is defined as “direct packaging and outer packaging”.
Q10: Is the exemption from EPR liability (recycling or processing) based on the sales value of the entire business or is it determined based on the sales value of the subject product?
A: Under the current law, the exemption from EPR liability is determined based on the sales amount of the entire business (or import amount in the case of importers), not the subject product. However, we will consider in the future amending the law to determine the subject of regulation based on the amount of sales of the subject product.
Q&A on Recycling Businesses under EPR Regulations
Q11: If a company manufactures paper and packaging materials, and it can recycle paper scrap at its own plant. In this case, can the company register as a paper recycler?
A: It is possible for a company to recycle at its plant even if it is not a recycler, as long as it can conduct recycling with recycling methods as specified in Column 5 of Annex XXII to Decree No. 08/2022/ND-CP. In addition, it is not mandatory for companies to apply to MONRE for permission to engage in the recycling business (a hazardous waste disposal license is required, of course). If they do register with MONRE, they will need to clearly report on their recycling process (input raw materials and output recycled materials).
Q12: How will support for waste product and packaging recycling activities be provided? Will this include support for projects that import paper raw materials (used paper) and recycle those materials?
A: Support for recycling activities for discarded products and packaging materials will be implemented starting in 2024; MONRE will publish the criteria and conditions for supports each September. To receive this support, recyclers must submit an application to MONRE, which will be evaluated and approved by the National EPR Council (whose members include representatives of manufacturers and recyclers, among others). When a recycler wants to receive this support, the company must report its recycling performance. The MONRE is currently developing legislation to manage fund for this support. In the future, activities of recyclers (including input raw materials and output recycled materials) will be monitored by a third-party organization. Imports of paper scrap for recycling purposes will not be accounted for in the performance report; only the amount recycled using domestic raw materials will be counted, in general.
Q13: Will the full amount of assistance paid to the Environmental Protection Fund be allocated to recyclers?
A: As a general rule, the entire amount of the support fund (aggregation of contributions paid to the Fund) must be expended for the recycling of waste products and packaging by the end of the fiscal year. However, not all recyclers will receive support funds, as there should be competition among recyclers. It also depends on the annual support criteria. For example, if MONRE put a focus on the recycling of difficult-to-recycle plastics, the relevant recyclers will be given priority for granting support fund.
Q14: If a recycler is outsourced by a manufacturer/importer, must the recycler collect and recycle sorely manufacture/importer’s products?
A: The outsourced recycler should collect and recycle equivalent batteries (including other brands of products) to be able to meet the compulsory recycling rate.
Q15: Since recycling methods for lubricants are limited, is it possible to add other methods? Also, how do you evaluate if recycling is done correctly or not?
A: Indeed, according to Annex XXII to the Decree No. 08/2022/ND-CP, there are only two recycling methods for engine lubricants: (1) extraction of the original oil or refining of other oils, (2) refining to extract several types of oil. In order to do so, the proposed amendments to this Decree also consider adding “recovery of discarded products for the production of other commercial oil products” as a recycling method. In addition, the current law does not specify agencies to evaluate whether or not the recycling of target products is properly conducted. Essentially, it is important to check whether recycled products meet quality requirements when they are placed on the market.
Q16: The MONRE has not yet published the list of recyclers made according to Article 79 of Decree No. 08/2022/ND-CP. Don’t companies have to implement their recycling obligations before the first reporting deadline (March 31, 2024)? If they do not comply, will they be penalized?
A: MONRE will publish this list of recyclers for reference and selection by manufacturers/importers. However, it does not mean that the manufacturer/importer must consign recycling to vendors on this list. Basically, any recycler with sufficient capacity and conditions can provide recycling services. In addition, manufacturers/importers will be penalized in accordance with Decree No. 45/2022/ND-CP if they fail to fulfill their recycling responsibilities for the products/packaging materials under the EPR scheme.
In addition to items discussed above, legislation currently scheduled includes: the Draft Prime Minister’s Decision Promulgating the Appropriate Recycling Cost Constant (Fs) per Unit Weight of Products/Packaging Materials and Administrative Cost for Managing, Monitoring, and Supporting the Implementation of Manufacturers/Importers’ Waste Collection and Treatment Responsibilities, for which public consultation was conducted for a long time in 2023, is expected to be enforced by the end of December of 2023; the Draft Prime Ministerial Decision Promulgating Administrative Management Costs” (first released on April 27, 2023) is expected to be promulgated during December 2023. Meanwhile, the Draft Decree Amending and Supplementing the Decree No. 08/2022/ND-CP Detailing a Number of Articles of Law on Environmental Protection 2020 (first released on October 20, 2023) is expected to be promulgated during the first quarter of 2024 in order to meet the first reporting deadline (March 31, 2024). Therefore, at this stage, MONRE is still open for comments on this draft decree.
The authorities also stated that the national EPR electronic portal (https://epr.monre.gov.vn) is currently under construction and will be officially released at the end of 2023. Upon the release of the portal, it will no longer be necessary to submit paper documents to implement the responsibilities of manufacturers and importers in accordance with Decree No. 08/2022/ND-CP. Instead, various operations (registration, declaration, aggregation, management, etc.) will be carried out on the portal.