Vietnam’s Extended Producer Responsibility Policy: Company Recycling Obligations

We discuss company recycling obligations under the “extended producer responsibility” regime under Vietnam’s Environment Protection Law.

The implementation of the amended Environment Protection Law (EPL) in 2022 introduced a new “extended producer responsibility” (EPR) policy which places the burden of responsibility to recycle on companies.

Under the EPR policy, producers and importers must either take responsibility for recycling a certain proportion of the products and packaging that they manufacture or import into Vietnam or make a financial contribution to the Vietnam Environment Protection (VEP) Fund.

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In August 2022, the Ministry of Natural Resources and Environment (MONRE) released Decree 08/2022/ND-PC, which stipulated regulations guiding the implementation of the EPL, including several provisions on the EPR policy. The Decree also included a specific timeline for the implementation of recycling requirements for different types of products and packaging, ranging from 2022 to 2027.

Despite some of the recycling obligations already in effect, some uncertainty and ambiguity remain surrounding the implementation of the rules, making it difficult for companies to comply. On October 20, 2023, MONRE released a draft decree supplementing the provisions of Decree 08/2022/ND-PC, which, if passed, will provide additional clarity to companies.

In this article, we provide a detailed overview of the EPR policy as stipulated in the EPL and Decree 08/2022/ND-PC to facilitate compliance and discuss the potential challenges and obstacles that companies in Vietnam may face.w.

Recycling obligations under the EPL

Under the EPR policy of the EPL, companies and individuals involved in producing or importing of products or packaging with recyclable value are required to carry out recycling according to certain mandatory ratios and specifications.

Companies and individuals have the two following options for recycling products and packaging:

1. Organize for the products or packaging to be recycled; or
2. Contribute financially to the Vietnam Environmental Protection (VEP) Fund to support the recycling of products and packaging.

Companies and individuals with recycling obligations are required to register a recycling plan and annually report recycling results to the Ministry of Natural Resources and Environment.

Financial contributions to the VEP Fund are determined by weight or unit of product and packaging and must be used to support the recycling activities of products and packaging as specified in the EPL.

Types of products and packaging that must be recycled

Decree 08/2022/ND-PC guiding the implementation of the EPL stipulates that commercial packaging of the following types of products and goods must be recycled:

1. Food;
2. Cosmetics;
3. Medicines;
4. Fertilizers, animal feed, and veterinary drugs;
5. Cleaning agents and formulations used in household, agricultural, and medical fields; and
6. Cement.

In addition to the above, specific types of products and their mandatory recycling quotas are listed in Appendix XXII, released along with Decree 08/2022/ND-PC.

Mandatory ratios and specifications for recycling products and packaging

Mandatory recycling ratios, defined in Decree 08/2022/ND-PC, are the minimum ratio of the weight of the products and packaging that must be recycled to the total weight of the products and packaging produced and imported into the market in the year in which the recycling responsibilities are implemented. The recycling must be done according to certain specifications.

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The mandatory recycling ratio for each type of product and packaging is determined based on the life cycle, disposal rate, and collection rate of the products or packaging, as well as national recycling goals, environmental protection requirements, and socioeconomic conditions for each period.

The mandatory recycling ratios for each type of product or packaging are set for three years. The ratios will be adjusted every three years, gradually increasing the ratio to achieve Vietnam’s national recycling goals and environmental protection requirements. The ratios for the following three-year period will be issued by the Prime Minister before September 30 of the last year of the current three-year period.

Companies achieve the mandatory ratios in the following two ways:

• Recycle products or packaging that they produce or import themselves; and/or
• Recycle products or packaging of the same type listed in the “product or packaging catalog” column of Appendix XXII (see below) that are produced or imported by other companies.

The recycling of imported scrap used for production materials is not counted toward the ratio.

If a company exceeds the mandatory recycling ratio in a given year, the excess portion can be counted toward the ratio in the following years.

In addition to the mandatory recycling ratios, Appendix XXII outlines “mandatory recycling specifications”, which are the selected recycling solutions that can be employed. It also sets out the minimum requirements for the amount of material and fuel that must be recovered from the recycling of products or packaging. For products, the minimum recycling requirement is currently set at 40 percent of the product’s volume, while for packaging it is the same as the mandatory recycling rate.

Appendix XXII, which was released along with Decree 08/2022/ND-PC, lists the various types of products and packaging that must be recycled and the corresponding mandatory quotas. The full appendix, which can be downloaded here, includes 38 different types of products and packaging. Below is a sample of the recycling rates for various products.

Deadlines for the recycling of different types of products and packaging

The deadlines for companies to begin recycling various types of products and packaging, set out in the Decree 08/2022/ND-PC, are as follows:

1. Packaging and products such as batteries, lubricants, and tires: from January 1, 2024;
2. Electrical and electronic products from January 1, 2025;
3. Means of transportation: from January 1, 2027.

MONRE will be responsible for proposing regulations on the disposal of means of transportation before January 1, 2025.

Exemptions from recycling obligations

Certain companies and types of products are not subject to the recycling requirements stipulated in the EPL and Decree 08/2022/ND-PC, namely:

1. Products and packaging intended for export, temporary import, re-export, or production and importation for research, study, or experimental purposes;
2. Producers of packaging with revenue from sales and provision of services below VND 30 billion (US$1.18 million) in the previous year;
3. Importers of packaging with a total import value (calculated based on customs value) below VND 20 billion (US$786,008) in the previous year.

Methods for fulfilling recycling responsibilities

Companies that decide to handle recycling responsibilities themselves instead of contributing financially to the VEP Fund can decide how to either:

• Carry out the recycling activities themselves;
• Contract a recycling company to carry out the recycling duties;
• Authorize an intermediary organization to organize the recycling on their behalf (“authorized party”); or
• Use a combination of the above methods.

Companies that choose to carry out recycling by themselves must ensure their recycling practices adhere to Vietnam’s environmental protection regulations. Companies should not carry out recycling by themselves if they are not able to comply with these regulations.

MONRE will publish a list of compliant organizations that can carry out or arrange recycling activities that companies to choose from. Companies should not contract non-compliant organizations.

Registering recycling plans and reporting recycling results

As mentioned above, companies are required to register recycling plans and report on the previous year’s recycling results to MONRE every year before March 31 of each year.

If the company fully authorizes another party to carry out the recycling duties on their behalf, then the authorized party is responsible for formulating and submitting these plans and reports.

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Recycling plans are determined based on the volume of products and packaging produced and put on the market in the previous year. The organization compiling and registering the plans and reports is responsible for the accuracy of the information contained within.

If a company’s actual volume of products and packaging produced, brought to market, or imported is greater than that stated in the registered recycling plan, then the company must add the difference in volume to the following year’s plan. On the other hand, if the actual volume is less than that stated in the plan, then the company may report the results according to the actual volume in its recycling report the following year.

MONRE will notify companies (or authorized parties) whose plans and reports do not meet requirements in writing and give them 30 working days to complete the plan or report.

Contributions to the VEP Fund and calculation

As mentioned above, companies may choose to contribute financially to the VEP Fund instead of carrying out recycling activities by themselves (elective contributions).

However, contributions to the VEP Fund are mandatory for companies and individuals that produce or import products and packaging that are difficult to recycle, contain hazardous substances, or are difficult to collect or treat. These mandatory contributions, which are determined by the weight or unit of product or packaging, must be made toward certain recycling activities listed in the EPL, namely:

1. Collection, transportation, and treatment of solid waste generated from households and individuals;
2. Research and development of technology, techniques, and initiatives for treating household solid waste; or
3. Collection, transportation, and treatment of packaging containing pesticides.

The specific types of products and their corresponding mandatory contribution amounts are listed in Appendix XXIII, released along with Decree 08/2022/ND-PC. These amounts will be adjusted every five years.

The receipt and use of financial contributions must be public, transparent, and for the intended purpose as prescribed by law.

Some companies and types of products are exempted from the mandatory contributions, namely:

• Products intended for export or temporary import, or re-export, and products manufactured or imported for research, study, or experimentation purposes.
• Producers with revenue from sales and service provision of less than VND 30 billion in the previous year; and
• Importers with a total import value (calculated according to customs value) of less than VND 20 billion in the previous year.

Companies that choose to contribute to the VEP Fund are not required to submit annual recycling plans or reports.

The “reasonable recycling cost per unit of weight of the product/packaging” will be determined by MONRE for each product and packaging. This cost per unit of weight will also be adjusted every three years.

Deadlines for making financial contributions

To make a financial contribution to the VEP Fund (both elective and mandatory), companies must self-declare and submit a financial contribution declaration form to the VEP Fund before March 31 of each year. The declared amount is calculated based on the volume of products and packaging produced, introduced into the market, and/or imported in the previous year.

Companies must then make a one-time payment to the VEP Fund before April 20 of each year. They can also choose to pay in two installments, in which an initial contribution of at least 50 percent of the total amount is made before April 20, and a second contribution of the remaining amount is made before October 20 of the same year.

If the declared volume of products and packaging is lower than the actual volume produced, introduced to the market, or imported, the company must make up the difference in its contribution in the following year. If it is higher, then the excess amount is deducted from the contribution in the following year.

Compliance challenges for companies in Vietnam

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Despite the additional guidelines for the implementation of the EPL issued by MONRE, companies are still faced with various ambiguities in the current regulations on recycling responsibilities.

For instance, specific methods and requirements for compiling recycling plans and recycling reports remain unclear, and dispute the fact that many companies are already required to submit them. Further clarity on methods for recycling various types of products is also needed, as the selected solutions outlined in Appendix XXII are not currently sufficient for all items.

Moreover, there remains some concern that Vietnam still does not have the recycling capabilities required to handle the demand that will be generated from the EPR policy, leading to calls for further incentives to develop the industry.

The draft decree released in October 2023 proposes several changes to the regulations which may help to provide guidance and clarity for companies.

First, the draft decree makes some amendments to Appendix XXII to ease, abolishing the 40 percent minimum material recuperation rate from the mandatory recycling specifications, while also removing some items from the list.

It also raises the threshold for exemption for importers from VND 20 billion to VND 30 billion, the same threshold as for producers. Finally, the draft decree also proposes to make the costs incurred from the mandatory recycling activities or the financial contribution to the VEP Fund tax deductible, thereby easing the cost burden for companies.

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