Government decree on detailed rules of extended producer responsibility published

The decree imposes several new obligations on persons who place “circular economy products” on the market or use them for their own purposes. Most of the decree’s provisions will apply from 1 July 2023; however, the affected entities will have tasks already from 1 April 2023.

In the framework of extended producer responsibility, as a general rule, the obliged entities must pay an extended producer responsibility fee to finance the management of waste from “circular economy products” they put on the market or use for their own purposes (“collective fulfilment”). Alternatively, “manufacturers” can fulfil their extended manufacturer responsibility obligations individually for electrical and electronic equipment, motor vehicles, and industrial or automotive batteries and accumulators.

“Circular economy products”

The following product groups will be covered by extended producer responsibility:

• packaging
• certain single-use and other plastic products (e.g. cups, bags, food containers, wipes, balloons)
• electrical and electronic equipment
• batteries and accumulators
• motor vehicles
• tyres
• office paper
• paper-based advertisement materials
• frying oil and frying fat
• textile products (e.g. clothing, home textiles, footwear)
• wooden furniture

The relevant “circular economy products” are listed by customs tariff number for the last six product groups, while in the case of packaging, electrical and electronic equipment, batteries and accumulators, and motor vehicles, the products defined in a separate government decree for the given product group will fall under the scope of extended producer responsibility.

The obligation also extends to “circular economy products” placed on the market or used for own purposes as accessories or components of other products.

Transactions subject to the obligation

The obligation to pay the extended producer responsibility fee is triggered by placing “circular economy products” on the market. Placing a “circular economy product” on the market includes:

• the first domestic sale and free transfer;
• sales from abroad to domestic households or other users via distance selling;
• removal from a VAT warehouse or product fee warehouse to the domestic territory;
• own use (including the final separation of packaging from the product brought into Hungary from abroad – except for reusable packaging brought back from abroad owned by a domestic entity – if the extended producer responsibility fee has not yet been paid for the packaging).

As a derogation from the main rule, storing a “circular economy product" into a VAT warehouse or a product fee warehouse, or transferring it within such a warehouse, is not classified as placing on the market. There is also no obligation for transferring products that are not in free customs circulation.

Main obligations of the affected entities

Some of the obligations stipulated by the decree are highlighted below:

• In the case of collective fulfilment, the first step is to register on the concession company’s electronic interface from 1 April 2023. Those who choose individual fulfilment must enter into a concession subcontractor agreement with the concession company.
• Starting from 1 May 2023, all obliged entities must apply for registration with the national waste management authority. Any changes in the data in the registers must be reported to the authority.
• Records must be kept of the “circular economy products” placed on the market, with the data content prescribed in the decree.
• Based on the register, data must be provided to the national waste management authority quarterly, by the 20th day of the month following the relevant quarter.
• Quarterly, based on the invoice issued by the concession company, the extended producer responsibility fee must be paid to the concession company. The amount of the per-unit extended producer responsibility fee will be determined by a separate ministerial decree. In the case of products subject to the environmental protection product fee, the extended producer responsibility fee will be deductible from the environmental protection product fee to be paid.
• Manufacturers must indicate in the invoice the wording prescribed in the decree regarding the extended producer responsibility fee.

“Manufacturers” established abroad may appoint a representative with a Hungarian tax number to fulfil the obligations. Those established abroad who place a “circular economy product” on the market by means of distance selling are obliged to fulfil their obligations through an authorized representative.

“Exemption” from the payment obligation

The decree provides for exemption from the obligations in certain cases, and in the case of fulfilling the required administrative tasks.

• Motor vehicle manufacturers may contractually assume the obligations of the seller of electrical and electronic equipment, batteries and accumulators, as well as tyres that qualify as accessories or parts of motor vehicles. In such cases, the entity assuming the extended producer responsibility obligation must fulfil it at the time of placing its product on the market.
• If the buyer of the “manufacturer” verifiably transports at least sixty percent of the purchased “circular economy products” abroad independently or as a component or accessory of another product, the buyer can “exempt” the seller of the products with a statement confirming this. The buyer making such a statement will be bound by the extended producer responsibility obligation in relation to the products it has put on the domestic market.

Recommended steps

The first and most important step is to assess which products and transactions are affected by the new obligation.

It is particularly important to check whether the products fall under the customs tariff numbers and legal definitions prescribed by the legislation, and in the case of products subject to the environmental protection product fee, to check whether there is a complete overlap between the material scope of the two obligations.

We recommend examining whether it is possible to apply one of the options provided by the decree, such as the completion of transactions in a VAT warehouse or product fee warehouse, contractual assumption of the obligation, or the use of a customer statement. We emphasize that the latter two options can only be a solution for two-party transactions; in the case of a multi-party sales chain, a VAT warehouse or a product fee warehouse may be used.

If you have any questions concerning the above, please contact:

László Deák
Partner
Email: laszlo.deak@pwc.com

Gábor Farkas
Partner
Email: gabor.farkas@pwc.com

Balázs Szük
Senior Manager
Email: balazs.szuk@pwc.com