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Online sales are rapidly increasing the WEEE free-riding

Online sales are rapidly increasing the WEEE free-riding
by Ellen Thornton at 14:33 in WEEE, Environmental

The OECD published a report in June 2018, detailing the impact of online sales of electronic and electrical equipment (EEE) in Europe, the United States and Canada. Online sales of EEE are now a major and growing part of retail in most OECD countries. A very significant proportion of these sales involve cross-border trade, and free-riding related to this is a growing concern.

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Due to a lack of data, it is difficult to estimate the scale of the problem. From the information available, between 5% and 10% of the OECD EEE market are online free riders. In the EU alone, that would represent 460,000 to 920,000 tonnes of EEE, in addition, the online sales market is currently increasing. Data from the United States Department of Commerce indicated that e-commerce sales in the United States amounted to USD 115.3 billion in the third quarter of 2017. This represents around 9% of total retail sales, which is a significant increase over 2008 (3.5%) and 2000 (1%) levels. According to the same source, online sales in the United States during this period have been growing around nine times faster than traditional in-store sales. If the current rates continue, online sales will likely represent 18% to 21% of total retail sales in the United States by 2025. The cause of free riding can often be unintentional and linked usually to a lack of information and confusion over compliance obligations, in addition to cases of deliberate avoidance. EPR regulations can be complex and ambiguous for sellers in addition to the variation in regulations across the EU, US, Canada and Australia, causing added confusion for international sellers.

When it comes to non-compliant online sellers, enforcement activities can be disorganised, in particular across jurisdictions, where a more efficient overlap of efforts could take place. Furthermore, there is little co-ordination with enforcement agencies in other fields, notably counterfeiting, product standards and tax. Often online sellers will take action to prevent challenges like counterfeiting, EPR avoidance and evasion receives considerably less attention. This may be due to a lack of awareness among online sellers, although some of the Producer Responsibility Organisations are making efforts to reach out to distance sellers to make them aware of their obligations. While many of the stakeholders consulted in the WEEE sector agree that online sales are an increasing challenge for EPR systems, there are very few estimates of the actual scale of the EEE online free-riding issue. The estimates that do exist are based on a set of underlying assumptions. A study by WRAP and Valpak estimates that 7% of the EEE placed on the UK market in 2015 (133,000 tonnes) was sold by unregistered companies. The authors state that this could be because "they are unaware of the regulations e.g. small companies based abroad selling through market place sites may not be familiar with UK regulatory requirements." The assumption is that much of this is made up by PV panel producers who are less aware of the regulations since they have only been obligated for two years.

In Japan, where an investigation in 2016 by the Ministry of Environment found that many online sellers subjected to the large WEEE recycling act were not fulfilling their obligations. Out of 616 online sellers that were identified, 483 failed to comply with the obligation to inform consumers about the collection fee, and 445 sellers did not provide required information about recycling. It is also important to note that many of the larger online platforms host many other sellers. For example, all of the transactions facilitated by eBay involve third party sellers. The platforms usually provide third party sellers with information regarding their legal obligations when placing EEE on the EU internal market but do normally not police registration and reporting of each marketplace participant. Recolight, the UK compliance scheme that specialises in lighting lamps, notes that "We believe that one of the largest online sales platforms, while registered with ERP as the PRO, only declares its own brand EEE products. This leads us to believe that the level of free riding taking place may be very high, our estimate being 2,500 tonnes or more of UK Category 13 per annum through sales of that firm alone. A recent survey of 11 PROs in the EU found that non-compliance rates were thought to be around 13%, although these were very rough estimates.

The impact free riding has can vary from country to country. Smaller countries, states and provinces in addition to those with more stringent EPR schemes or stronger currencies, appear to suffer disproportionately from the effect of overseas and online sales of EEE. Switzerland has an EPR system with three PROs, one for ICT, one for lighting, and one for household appliances. An Advanced Disposal Fee (ADF) is charged via the retailers and occasionally adjusted to reflect the costs of WEEE recycling. Buying outside of Switzerland, for example in Germany or France has always been common as the borders are easy to cross with few customs checks. Switzerland has also seen a considerable appreciation of its currency recently, which makes shopping in the neighbouring countries attractive, and online shopping makes this even easier. Around 10% of all Swiss retail purchases are thought to be abroad, and 29% of the ICT and consumer electronics market is online. It has been suggested that introducing a mandatory requirement to join a PRO would deal with about 60% of the cost deficit, but still leaving a further 40% deficit due to free-riding.

As the EU WEEE obligations are being expanded shortly to include all EEE placed on the market, rates of non-compliance may well dip before we see them on the rise. If you have any questions about your obligations as an EEE producer or seller, please contact us here to speak to one of our consultants. If you would like to read more articles and blogs, please sign up to receive our free monthly digest.​

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