On June 26, 2023, the Vietnam Chamber of Commerce and Industry (VCCI), jointly with the Vietnam’s Ministry of Natural Resources and Environment (MONRE), held a seminar to soliciting opinions on the Draft Prime Minister’s Decision on the Recycling Cost Constant (Fs) for the implementation of the Extended Producer Responsibility (EPR) Scheme. The seminar was chaired by Mr. Dau Anh Tuan, Director General of VCCI’s Legal Department, and attended by representatives from MONRE, the National EPR Council, business associations, recyclers, and relevant companies.

As a background to the seminar, on April 27, 2023, the Vietnamese Government published 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 (hereinafter “the Draft”) and invited comments from ministries and businesses for two months. This seminar was held on the last day of the two-month comment period, thus serving as a general wrap-up meeting to exchange views with the industrial community.


Photo by EnviX

There was a lively exchange of opinions on the Draft and other relevant topics from the different standpoints of the authorities, industry and recyclers at the seminar. The original documents of the proposed recycling cost constant (Fs), the commentary by the authorities, and the comments from organizations can be downloaded from the following URL:
https://vibonline.com.vn/su_kien/hoi-thao-gop-y-du-thao-quyet-dinh-cua-thu-tuong-chinh-phu-ban-hanh-dinh-muc-chi-phi-tai-che-hop-ly-hop-le-doi-voi-mot-don-vi-khoi-luong-san-pham-bao-bi-va-chi-phi-quan-ly-hanh-chinh-phuc-vu

 

What is recycling cost constant (Fs)?

Recycling obligations under the Extended Producer Responsibility (EPR) scheme are stipulated in Article 54 of the Law on Environmental Protection 2020 (72/2020/QH14), which requires target companies to choose and implement one of the following two options:

  • To recycle their products and packaging materials by themselves.
  • To pay a contribution to the Vietnam Environmental Protection Fund to recycle their products and packaging materials.

If the latter option is chosen, the contribution amount to the fund is calculated by the following formula. The recycling cost constant (Fs) included in this formula is the main issue currently under discussion. Fs is a constant that is set for each product, and the amount of contribution that a company has to pay varies depending on the Fs values.

Payable amount of contribution (F)
= Compulsory recycling rate (R) x Quantity of products/packaging materials (V) x Recycling cost constant (Fs)

 

Questions and & answers on the proposed Fs regulations in the Draft

  • Q: The proposed Fs values in the Draft are higher than those in other countries because they were set based on the results of two studies showing higher Fs. It is not appropriate to adopt them in Vietnam, and lower Fs values should be reconsidered.
    • A: The Fs values are determined solely based on cost information provided by formal recycling facilities. If cost information from informal recyclers is used, it will be inappropriate. In the Draft, independent sources of information from 33 public recycling facilities (mainly located in the northern area) and 33 facilities managed by recycling associations (mainly located in the southern area), picked up by MONRE’s expert consulting group, were examined. Ideally, to conduct an objective comparison of Fs values, the same calculation method, the same fee structure, and the same EPR scheme are required. In practice, however, EPR schemes are very different across the world, and recycling cost calculation methods vary widely from country to country. Furthermore, in many countries, recycling costs are provided by Producer Responsibility Organizations (PRO) based on the market mechanism. On the other hand, Vietnam’s Fs are set by the central government, so similar government-regulated recycling costs, such as those in Taiwan and Singapore, should be referred to. In addition, even among European countries with similar economic, scientific, and technological levels, recycling costs for the same product vary, and the difference can be as much as 10 to 20 times. Therefore, it should be difficult to insist that the proposed Fs values are higher than average ones because it is unfounded.
  • Q: Including administrative costs in Fs calculation is not compliant with the Law on Environmental Protection. Assuming the proportion of administrative costs to be 3% is inappropriate in reality because it is too high.
    • A: According to Article 81 of Decree No. 08/2022/ND-CP, administrative costs can be included in recycling costs. This means that there is no violation of the law. In the Draft, 3% of the total cost of collection, transportation, and recycling is considered as administrative cost. In contrast, in other countries, the administrative costs charged by PROs to support recycling activities are typically 10 to 25% of the recycling costs. For example, in South Africa the administrative cost rate is about 20% for packaging materials recycling. In Singapore, the rate is about 25% for electrical and electronic products recycling, while 5 to 25% depending on the product in Europe. Therefore, we can say that the administrative costs proposed in the Draft are much lower than those in other countries. However, we will continue to consider reducing the administrative cost ratio.
  • Q: For materials that are easy to collect and recycle (e.g., glass-made packaging materials), the Fs adjustment factor [a]* was set at [a = 0.2] in the March 2023 proposal. Why does the Draft significantly increase the factor to [a = 1.0]?
    • A: This is because that most of glass containers and packaging have not been collected due to the low value of recycled materials, although their collection is not difficult. However, we will reconsider the Fs adjustment factor for glass containers and packaging.
      (* The Fs adjustment factor [a]: A value used to increase Fs values in phases. The specific Fs value is calculated by multiplying the assumed recycling cost as set by the government by this adjustment factor.)
  • Q: The adjustment factors (a) for electrical and electronic products are proposed to be ranged from 0.5 to 1.0. The level of [ a = 0.5] indicates that the recycling industry is efficient. However, in reality, the collection, sorting, and recycling of electrical and electronic products in Vietnam are mostly done by informal recyclers. In order to promote the recycling industry in such a situation, the adjustment factor needs to be raised gradually.
    • A: We accept this opinion and will consider adjusting the adjustment factor appropriately according to the difficulty of collection and recycling.
  • Q: For materials with high recovery value, Fs should be set to zero, like ones in the equivalent schemes in Norway and Denmark.
    • A: This question confuses an EPR scheme with the Deposit Return Scheme (DRS) adopted in some European countries, including Norway and Denmark. In particular, the collection and sorting of discarded products and packaging materials is very costly and the amount is much higher than the profit obtained by selling recycled materials. Therefore, manufacturers have to pay recycling costs (including administrative costs) to PRO in order to have their products recycled. Setting recycling costs (Fs) at “0” is unprecedented in any EPR model and does not follow international practice.
  • Q: If the proposed high Fs are set as is, there is concern that the cost of the high Fs will be added to the selling price, thus affecting consumer demand.
    • A: Producers/importers can choose to either (1) conduct recycling themselves or (2) make a contribution to the Vietnam Environmental Protection Fund to assist in the recycling of products and packaging materials. This means that the use of Fs is only an option and not a recommended measure. By optimizing the cost of recycling, the government is basically encouraging companies to conduct recycling themselves (especially for materials with high recovery value) rather than paying into the fund.
  • Q: Since the value of recycled goods is not deducted from Fs, the Fs do not follow the circular economy principle. Recyclers of materials with high recovery value, such as steel, aluminum, paper packaging, plastic bottles, and automobiles, all make good profits, so it is not reasonable for manufacturers to support recyclers.
    • A: Calculation of Fs takes into account the value of recycled goods. And a distinction should be made when we look at who benefits from recycling. Informal recyclers benefit more because they do not pay the cost of environmental protection. Licensed recyclers, on the other hand, must import and procure raw material scrap, as well as protect the environment. And private companies that treat industrial waste will not enter the market unless they can make a profit, which means that they need to be supported through the EPR scheme in order to promote the recycling industry.

 

Other opinions from industry

  • Q: The implementation of the recycling responsibility for electrical and electronic products will start in 2024, but in the first two years, the focus should be on providing guidance to companies and no penalties should be applied (except for intentional violations).
    • A: As Decree No. 45/2022/ND-CP on Administrative Penalties in the Field of Environmental Protection is already in force, any delay in implementing penalties for violations would require an amendment to the Law on Environmental Protection and is beyond the authority of MONRE. In addition, Vietnam’s EPR regulation is not a new regulation as it was originally enacted 18 years ago (note: this may refer to the Law on Environmental Protection 2005) and was only embodied in the Law on Environmental Protection 2020. We also need to ensure fairness for manufacturers who comply with the EPR regulation.
  • Q: At present, there are no facilities in Vietnam that meet the technical requirements for recycling lubricating oil. In recycling such oil, there is an essential process of re-refining, which requires the construction of a small refinery and a large investment. Besides, the price of automobile engine oil (PCEO and HDEO) is 45,000–55,000 VND (approx. 1.9–2.3 USD)/liter, and the price of motorcycle engine oil (MCEO) is 75,000–80,000 VND (approx. 3.2–3.4 USD)/liter. The Fs for lubricating oil proposed in the Draft is set at 12,978 VND (approx. 0.6 USD)/kg, and if manufacturers add this cost to their production cost, it will have a significant impact on the market. For example, the application of the proposed Fs will cause the price of automobile engine oil to increase by up to 35%, which is unacceptable to consumers and will put manufacturers in a difficult situation.
    • A: We accept this opinion and will consider adjusting the cost of recycling lubricating oil.
  • Q: If electrical and electronic manufacturers choose to pay into the Environmental Protection Fund, how will the government collect e-waste according to the prescribed recycling rate? The effective implementation of this collection will require the participation of environmental companies with extensive experience in such collection, in addition to local governments. Since the promulgation of Decision No. 16/2015/QD-TTg, manufacturers have been establishing collection points. Can local governments continue to organize and expand collection points on behalf of manufacturers? If there are not enough collection points and recycling technologies are not established, companies will choose to pay a fee.
    • A: The use of contributions paid to the Environmental Protection Fund includes a plan to support projects to establish collection points for electrical, electronic, and other products. In addition, according to Article 75 of the Law on Environmental Protection 2020, local governments and environmental health authorities, under the guidance of MONRE, will actively work on waste collection to sort waste at the point of waste generation from January 1, 2025. It is expected that the cost of recycling materials with high recovery value will be even lower than the payable amount to the Fund.