Businesses Subject to SB 54 Must Join the California Producer Responsibility Organization by July 1, 2024

Updated July 22, 2024

Over 10,000 businesses could soon be receiving notices from California that they must join a California-designated Producer Responsibility Organization (PRO). The first PRO approved by CalRecycle is the Circular Action Alliance (CAA).

Below is a quick review of what businesses may be receiving these notices and what they must do if they receive one. Each affected business must make its election in the next few months and in no case later than July 1, 2024.

Will my business be required to join a PRO by July 1?

CAA set a deadline of July 1, 2024 for producers to register with CAA as the PRO. There is no statutory deadline requiring a producer of a covered material to register with the PRO by July 1, 2024. The next statutory compliance deadline is January 1, 2027. By then, covered producers must have either (a) joined a PRO with an approved Plan (i.e., CAA) or (b) received approval from CalRecycle to comply as an independent producer, in order to sell, offer for sale, import, or distribute covered materials in the state.

Who is a producer?

A producer means:

• a person who manufactures a product that uses covered material and who owns or is the licensee of the brand or trademark under which the product is used in a commercial enterprise, sold, offered for sale, or distributed in the state;
• if there is no person in the state who meets this definition of producer, then the producer of the covered material is the owner or, if the owner is not in the state, the exclusive licensee of a brand or trademark under which the product using the covered material is used in a commercial enterprise, sold, offered for sale, or distributed in the state;
• if there is no person in the state who meets either of the above definitions, the producer of the covered material is the person who sells, offers for sale, or distributes the product that uses the covered material in or into the state.

A producer does not include a person who produces, harvests, and packages an agricultural commodity on the site where the agricultural commodity was grown or raised.

The sale of covered materials occurs in the state if the covered materials are delivered to the purchaser in the state.

What are covered materials?

Covered material means:

• single-use packaging that is routinely recycled, disposed of, or discarded after its contents have been used or unpackaged and typically not refilled or otherwise reused by the producer, and
• plastic single-use food-service ware, including, but not limited to, plastic-coated paper or plastic-coated paperboard, paper or paperboard with plastic intentionally added during the manufacturing process, and multilayer flexible material.

Covered material does not include medical products, drugs used for animal medicines, products intended for animals, infant formula, medical food, or certain fortified oral nutritional supplements. Nor does it include packaging used to contain products regulated by the Federal Insecticide, Fungicide, and Rodenticide Act or packaging used to contain and ship products that are classified for transportation as dangerous or hazardous materials, along with others.

For further guidance on this law’s applicability to your business and its products, please consult CalRecycle’s published lists of categories of covered materials on its website along with supplemental material.

Are there any alternatives to joining the PRO?

Alternatively, a producer may independently comply with SB 54 without participating in a PRO if the producer can demonstrate specific criteria to the department, and the department determines at its sole discretion that the producer meets all criteria as detailed in the Regulation. If you choose to comply individually, then you assume additional individual responsibilities.

How was the PRO selected? Will there be any additional PROs?

CalRecycle selects the PRO based on an application process. While multiple applications may be submitted, CAA was the first PRO that CalRecycle approved. Any organization seeking to become a PRO in the future must go through the same application process. A producer need join only one PRO.

How much will this cost me?

The PRO’s plan will include a fee for PRO participants. The fee is based on a fee schedule with precise dollar amounts still being developed by the PRO. Fees may be adjusted once a year or more frequently to cover approved budget expenses. Note that the regulation prohibits fees from being passed on to consumers as a separate item on a receipt or invoice.

The PRO shall determine the fee schedule for each producer based on (a) plan implementation costs, (b) operating costs, (c) costs of completing needs assessment, (d) costs to cover the environmental mitigation requirements, (e) and costs to reimburse the department. Starting in the third year, and annually thereafter, each producer will pay a fee as established in the PRO plan based on factors outlined in the regulation. The fee schedule will be part of the PRO’s annual budget. Currently, there is no proscribed registration fee to join the PRO.

• Eco-Modulated Fee. Each producer will be required to pay an annual fee based on the unique characteristics of a producer’s covered materials and certain regulatory factors. According to the draft regulations, the PRO calculates this “eco-modulated fee” for each producer and sets base fee rates for each product category.
• Circular Economy Administrative Fee. The PRO is required to pay CalRecycle a California circular economy administrative fee every three months starting at the end of the 2026–27 fiscal year to be deposited in the newly established California Circular Economy Fund.
• Environmental Mitigation Surcharge. A PRO must pay the California Department of Tax and Fee Administration a $500 million environmental surcharge fee each year to be deposited in the newly established California Plastic Pollution Mitigation Fund, established in the state treasury. The PRO may collect up to $150 million from plastic resin manufacturers that sell plastic-covered material to producers that take part in the PRO. Starting in 2027, a producer not in a PRO will be required to pay an environmental mitigation surcharge in an amount determined by the department.
• Penalties and Fines. Failure to comply with SB 54 will subject a producer, wholesaler, or retailer to penalties for violations. CalRecycle may also impose maximum administrative civil penalties of $50,000 per day per violation, with some exceptions.

What will be required of my business by July 1?

The PRO set a registration deadline of July 1, 2024. 

What will be required of me after I join the PRO?

Once you become a member of the PRO, you will receive additional information as it becomes available regarding the plan for compliance.

The plan will include (1) actions and investments to implement SB 54, (2) a source-reduction plan including for materials that cannot reasonably be anticipated to meet the requirements of SB 54, and technologies and means that will be used to achieve recycling requirements. The plan will include objective and measurable criteria as well as a budget for achieving its goals. Further plan requirements are proposed in the draft regulations.

What happens if I do not join a PRO?

If you fail to join a PRO or pursue alternative compliance, your business will be banned from selling in California. The law states that producers must not sell, offer for sale, import, or distribute covered materials in the state unless the producer is approved to participate in the plan of a PRO approved by the department for the source reduction, collection, processing, and recycling of covered material.

This prohibition goes into effect January 1, 2027, or once a plan is approved by the PRO, whichever is sooner.