Our last piece on the DRS summarised the changes the Scottish Government had announced to the scheme, but noted that the detail was still awaited. The draft amending Regulations have now been published, and provide that detail. While the future of the scheme remains in doubt, until any further changes are announced producers and retailers will still need to understand its terms.

As expected, the draft Regulations postpone the Scheme start date to 1 March 2024. The draft Regulations also clarify and expand some of the other proposed amendments to be made to the DRS, as set out below.

Small Containers

The draft Regulations confirm that all drinks containers under 100ml (i.e. including miniatures) will be excluded from the scope of the DRS.

"Low volume drink products"

We had previously reported that products with sales of less than 5,000 units per year would be excluded from the scheme.

The draft Regulations confirm that this threshold applies to any drink which "the producer markets, offers for sale, or sells for the purposes of its retail sale in Scotland". They otherwise provide the detail around the consequences of this exclusion. "Low volume drinks products" (as such products are now defined) are to be excluded from the definition of "scheme article". This means no 20p deposit will need to be charged on them, and they cannot be returned in exchange for a deposit. While the Minister said to Parliament that producers of these products could still 'opt in' to the deposit system (which might have been the preference of, for example, producers who also have products that sell above the threshold) the amendments do not appear to provide for that.

In addition, a retailer who only sells low volume drink products and no scheme articles will not need to operate a return point. However, any person selling a low volume drink product (including alongside scheme articles) will need to "communicate to the purchaser at the point of sale" that it is not a scheme article and cannot be returned for a deposit. This is the same as the obligation that applies to "non-scheme articles" (i.e. items that are already on the market before the DRS comes into effect).

Producers of low volume drinks products will nevertheless still need to register with the Scottish Environment Protection Agency ("SEPA") for the products to be lawfully sold in Scotland, on pain of a criminal offence. If the producer is not already registered (i.e. by virtue of other products that sell over the threshold) then it can register as a "listed producer", meaning a producer that only produces low volume drinks products. The producer of a low volume drink product (whether listed or registered) must provide information to SEPA about the product on an annual basis, including confirming that the product sells below the threshold, and notify SEPA if and when it exceeds it.

Regulation 22 of the draft Regulations contains transitional provisions in relation to producers who have already registered with SEPA, including to provide for their registration to take effect as at the new commencement date of 1 March without any new application being required. It also provides for the existing registration of a producer of low volume drink products to be converted into a "listing". The current drafting does not make provision for a registered producer that has both low volume and 'regular' products, but presumably the registration will be treated as a listing in respect of those low volume drink products while otherwise continuing as a registration in respect of the producer's other products.

Hospitality retailers

The Government had indicated that the exemption from the obligation to act as a return point would be extended to include retailers that sell the "large majority" of their drinks products for consumption on the premises (at present the exemption covers only those who sell exclusively for consumption on the premises).

The draft amending Regulations confirm that "the large majority" means at least 90% of scheme articles sold – i.e. a café / bar / restaurant (etc.) will now be able to sell up to 10% of its total drinks for customers to take away without having to operate a return point. . Such retailers will have to keep a record of the number of scheme articles sold to consumers for off-premises consumption each year and retain that record for a minimum of 2 years, presumably to allow their exempt status to be audited.

While the 20p deposit does not need to applied to drinks sold for on-premises consumption (the thinking being that the empty bottle / can will not leave the premises with the customer so can just be collected in by the retailer), it will have to be applied to that minority of takeaway sales. Retailers will therefore need to be clear at the point of sale what the customer intends to do with the scheme article, particularly because – if the customer does not pay the deposit but then takes the empty bottle / can away with them – the retailer will be left 20p out of pocket.

The draft Regulations also add a new obligation on "hospitality retailers" – still defined as retailers who sell exclusively for on-premises consumption, without reference to the 90% threshold – to retain for collection the empty bottles and cans they have collected in. This change was not previously trailed by the Scottish Government, and while it does reflect the obligation on return point operators ("RPOs") to retain returned packaging, the changes in combination leave a lacuna in the law: RPOs and "hospitality retailers" will be subject to a retention obligation, but retailers who sell at least 90% but less than 100% of their drinks for on-premises consumption fall into neither category. A retention obligation doesn't seem particularly necessary in any scenario, given that a retailer will be 20p out of pocket for every item they fail to return, but if there is to be one it should presumably apply universally.

Return point exemptions

The draft Regulations contain other amendments not previously trailed by the Government. We wrote previously about certain retailers being exempt from the need to operate a return point, including export shops and premises where scheme articles are sold solely by way of either a vending machine or a distance retail sale. The amendments will impose an obligation on such retailers, as well as those who are exempt by virtue of the '90%' rule outlined above, to display information stating that they are not required to be an RPO and identifying the location of the nearest return point.

In the case of vending machines, this requirement should only apply if the name and address of the owner is not shown on the machine, in which case the person with "management and control of the premises" on which the machine is found is taken to be the retailer. However, there is no obvious value in imposing this requirement on premises that only make distance sales, since by definition nobody can actually buy a scheme article there. In the case of retailers exempt under the 90% rule, displaying this information seems apt to cause confusion – will customers who did not buy their drink for takeaway purposes see that information and assume it means they are supposed to take their empty bottle / can to that nearby return point, rather than leave it on the premises for the retailer to collect in?

The amendments also give RPOs the ability to reject scheme articles if they are made wholly or partly of a particular type of material that the retailer does not permit on its premises for food safety or other health & safety reasons. This could, for example, allow a bakery to decline to accept glass bottles. Such considerations would previously have had to form the basis of an environmental health exemption, which would exempt the retailer from the need to be an RPO at all. The new change creates something of a halfway-house, with retailers able simply to decline certain items without having to obtain an exemption, but still being obliged to accept returns of items that do not contain the objectionable material. If a retailer does bar the return of certain materials it must display information explaining why, and pointing the consumer to the nearest usable return point.

Online takeback service

We have previously mentioned the Scottish Government's stated intention to amend the obligation on 'distance retailers' (i.e. online) to operate a 'takeback service' (i.e. the collection of empty containers from the place of delivery) so that it would only apply to the largest supermarkets and would be phased in between the launch date and 2025.

The draft Regulations are not entirely consistent with those previous statements. While they do limit the takeback service obligation to "large retailers" of groceries (by reference to the same £1 billion groceries turnover threshold as applies in relation to the Groceries Code of Practice), the obligation will take effect immediately on the commencement of the scheme.

Beyond that, there are some significant changes to the substance of the obligation. Perhaps the most significant limitation is that only individuals who are aged 66 or over, or have a disability within the meaning of the Equality Act 2010, can request a takeback service. Furthermore, the customer will now have to have at least 21 items for collection (presumably to limit the number of collection trips made to collect small numbers of items) On the other hand, the obligation is expanded so that the retailer does not only have to collect scheme articles that it sold to the consumer – as long as a consumer purchased at least one scheme article from the retailer via a distance sale, they can require a collection of all the empty bottles and cans they have.

The collection must be requested within six months of the consumer purchasing a scheme article from the retailer, who will then have to provide the takeback service within 4 weeks of the request. Retailers also must clearly display information where scheme articles are displayed for sale (apparently including in-store) explaining that they operate a free takeback service for eligible consumers, including how to request a takeback, when the retailer can refuse and the procedure and contact details for any complaint about the service.

If you have any queries on the issues noted above, please contact Charles Livingstone,  Grant Strachan, or your usual Brodies contact.