Rejected consumer goods – are they “waste”?

4 August 2019 by Rosalind English

As invidual consumers we are constantly exhorted to separate the goods and substances we want to get rid of into “rubbish” destined for landfill or items for recycling. Clearly we have to pay attention to this to avoid material going into landfill that could be recycled or turned into energy, but not only that; we need to be aware of the cost of goods being manufactured that never see the light of day at all, because by virtue of being mixed by less pristine goods, they count as waste, with all the consequences that entails.

In a recent ruling the CJEU considered the question of retail goods that have been returned by consumers or become redundant in the seller’s product range: Openbaar Ministerie v Tronex BV C-624/17.

The case should raise alarm bells. When we return an item against a refund of the purchase price we do not think we are discarding it. The CJEU ruling turned on the application of Article 3(1) of the Waste Directive 2008/98/EC, which provides that

‘“waste” means any substance or object which the holder discards or intends or is required to discard’.

Individual consumers are clearly not liable under waste legislation for returning goods. But the concept of waste forms the basis of a criminal penalty for possession in EU member states.  So once those items reach the retailer the situation changes, because it may or may not become “waste” in their hands.

There is an excellent report of this judgment in the latest CMS newsletter. As the article points out, this definition “strongly divides opinion”. Carnwath LJ put this problem in a nutshell in 2007 when he observed that “a search for logical coherence in the ECJ case law on [this] point [is] probably doomed to failure.” (OSS Group Ltd v Environment Agency [2007] EWCA Civ 611.)

The subjective “intention to discard” could be a useful guide to the status of material in the hands of the original producer but it was hard to apply to the status of material in the hands of someone who bought it for recycling or reprocessing, or who put it to some valuable use. In no ordinary sense was such a person ‘discarding’ or getting rid of the material, and his intention was precisely the opposite.

…

Unfortunately, the ECJ continued to insist that the “discarding” test remained applicable, even when the “holder” was an end-user whose only subjective intention was to use, not to get rid of, the materials.

Subsequent cases have revealed a similar inclination by the ECJ to regard substances as “waste” until they have actually been recycled into usable products or incinerated, producing energy. This applies even if the party holding the waste has bought it for recycling or reprocessing or who puts it to some other valuable use. As Carnwath LJ said,

In no ordinary sense is such a person “discarding” or “getting rid of” the material. His intention is precisely the opposite.

The instant case concerned the EU Waste Shipments Regulation No 1013/2006 and the Waste Electrical and Electronic Equipment Directive 2012/19/EU (“WEEE Directive”).

The facts, briefly, are as follows. Tronex BV operates a wholesale residual stock business. Five years ago it was found to be planning a consignment of electrical equipment which it had bought from retailers and wholesalers, to be shipped in a container to a third party in Tanzania. The consignment consisted of small domestic appliances such as kettles which had been returned by consumers under a product guarantee, on the one hand, and goods which, because of a change to the product range, for example, were or could no longer be sold (normally), on the other. A number of the boxes in which the appliances were packaged carried a notice stating their defects. The glass in some of the glass kettles was damaged. The shipment was to take place without notification or consent in accordance with the Waste Shipment Regulation.

The Dutch court referred the question to the CJEU of whether appliances which had a value to the holder but which were a burden to retailers who would rather get rid of them were “waste”. The main issue before the Luxembourg Court was whether Tronex could be penalised for having prepared an illegal shipment of waste.

The test for the relevant waste legislation is whether the object or substance in question is no longer of any use to its holder and therefore constitutes a burden which the holder will seek to discard. If that is the case, there is a risk that the holder will dispose of the object or substance in his possession in a way capable of causing harm to the environment, in particular by surrendering possession of it, dumping it or disposing of it in an uncontrolled manner. As AG Kolkott noted in her Opinion, this could not be assumed to be the case here, since Tronex sold the electrical appliances and thus hoped to make some financial gain from their supply.

But that is not the end of the matter. Although it is in principle for domestic courts to decide on the evidence whether the holder of a substance or article intends to discard it, and hence whether it is waste, this is not a subjective question. It must be interpreted with due regard for the aim pursued by recital 6 of the Waste Directive, which is to minimise the negative effects of the generation and management of waste on human health and the environment.

So although the appliances had a value to Tronex, it was significant that they were otherwise a burden to retailers which would rather just get rid of them.

The CJEU’s judgment

The Court ruled that “the shipment to a third country of a consignment of electrical and electronic appliances, such as those at issue in the main proceedings, which had been initially intended for retail sale but which were returned by the consumer or which, for various reasons, were sent back by the retailer to the supplier, [should] be regarded as a “shipment of waste” within the meaning of Article 1(1) of the [Transfrontier Shipments of Waste Regulation], read in conjunction with Article 2(1) thereof and Article 3(1) of the [Waste Framework Directive],

where that consignment contains appliances the good working condition of which has not been previously ascertained or which are not adequately protected from transport damage. Such goods which have become redundant in the Seller’s product range and which are in their unopened original packaging, on the other hand, must not, without indications to the contrary, be regarded as waste.

The concept of ‘waste’, continued the Court, must not be understood as excluding substances and objects which have a commercial value and which are capable of economic reutilisation (judgment of 12 December 2013, Shell Nederland, C‑241/12 and C‑242/12).

As the CMS article points out, most of the guidance in this ruling is already very well known. “However one particular part of the ruling is written in such a way that it may cause confusion, and maybe even consternation for regulators.” The Court commented for instance:

• Articles can be waste even if they have a residual value, and the electrical appliances in question were clearly an example of this, as both Tronex and Tronex’s customer paid money for them.
• The fact that appliances which are no longer fit for the purpose originally intended by the earlier holders (the retailers, wholesalers etc.), or cannot be used for the original purpose without repair, is a factor to consider and indicates a waste status. The WEEE Directive broadly refers to these as features that might distinguish a waste electrical product from an electrical product.
• The packaging of the appliances can be taken into account. In this instance, some appliances were in their original packaging and others had no packaging at all. Again, the WEEE Directive is relevant here, as it provides that packaging (or absence of packaging) can be an indicator whether such appliance could be waste. 
• The defective/non-defective nature of appliances, whether they can be sold without being repaired and whether their reuse is certain, are also factors.
• How the consignor and consignee decide to describe the consignment may be a factor but of course not determinatively so.

The confusion consequent on these criteria is obvious. The Dutch company’s consignment was a mixed bag; it was not a homogenous composition of either waste or non-waste appliances. As CMS observes,

Our experience is that in such circumstances, regulators will not see it as their duty to try and separate different fractions of a single consignment and regulate in respect only of the waste fraction. Instead they are more likely to regard the whole consignment as a consignment of waste (i.e. mix waste with non-waste and the resultant whole is likely to be waste). In addition to the above ruling, this is what the ECJ stated at paragraph 31 of its judgment: “… the mere fact that the seller and the buyer have categorised the sale as being that of a consignment and that that consignment contains appliances which must be regarded as waste does not mean that all the appliances contained in that consignment constitute waste”.

We shall have to see how the Dutch appeal court, and more widely the regulators and the waste management sector react to this ECJ ruling. Certainly for those countries which operate a duty of care in respect of waste, this aspect of the ECJ ruling may well cause confusion rather than provide clarity.

Any consumer product organisation that proposes to contract with a party in terms of returned products will need to be alert to that party’s potential management of these products to avoid prosecution under waste law provisions.

This is a hard nut to crack but if left to abstract referrals to the CJEU we are not going to make any further headway on the problem of waste. How each country goes about waste collection is of course a matter for sovereign governments, but it should not be beyond the wit of policy makers to sort out the most efficient way to prevent overcautious application of EU legislation and the unnecessary costs involved.