Connecticut distributor lost tens of millions of dollars because of empty bottle returns

Nearly three decades ago, a sitcom Seinfeld told the story of two characters making a profit by using soft drink bottles and beer cans to deposit 5 cents in New York, driving thousands of kilometers to Michigan to return the refund for 10 cents.

The story came true in Connecticut, when the state government raised the deposit – refund value for bottles to 10 cents by 2024, double the old level. Last year, they received two billion bottles, and the amount of refunds skyrocketed.

Deposit-Return System (DRS) is a model for users to spend a small amount when buying bottled water or cans, and receive money back when returning the packaging. This is an effective tool to enforce extended producer responsibility (EPR) in more than 40 countries including the US, European countries, and the Middle East.

In the US, 10 states have adopted or are planning this policy, including Connecticut. However, DRS fees are higher than neighboring states, causing “neighbor” residents to often drive trucks full of bottles to Connecticut to make a profit.

Mr. Matt Ritter, Speaker of the Connecticut House of Representatives, a politician campaigning to pass a bottle return law in 2021, said “it’s very heartbreaking, because it’s unimaginable that the people of New York, New Jersey and Rhode Island would return so many bottles.” These are Connecticut’s three “neighbor states”, which have deposits of 0-5 cents. That is, people bring bottles from their locality and return them to Connecticut to earn a profit of 5-10 cents per bottle.

Usually, the total refund amount is less than the deposit, as the highest refund rate is over 92% in Norway. But in Connecticut, 12% of distributors – which collect deposits and refunds based on the amount of bottles – said total refunds were $11.3 million higher than deposits.

Peter Gallo, vice president of Star Distributors in West Haven, said the company’s losses alone have amounted to more than $2 million since the 10-cent deposit policy took effect. This loss is increasing. “It’s hard to accept that we have to take on debt, instead of getting paid,” Gallo said.

Congressman Vincent Candelora called the policy of raising the deposit to 10 cents “an unmitigated disaster.” He believes that bottle and can recovery centers outside the state are smuggling most of their inventory to this state for profit. Because the billions of bottles and cans returned in the state of Connecticut are not just “two men putting cans into a mail truck”.

However, officials have no way to accurately track the number of “smuggled” bottles among the 2 billion bottles recovered last year. Because most shells lack identifying signs at the point of sale.

Mr. John-Michael Parker, co-chair of the Environmental Committee, proposed a solution for labeling products with specific barcodes or features unique to Connecticut. However, this solution faces technological challenges and pushback from the beverage industry.

To prevent this situation, in the middle of last week, lawmakers passed a bill to increase fines for illegal refunds, with a fine of 50-500 USD for the first violation. If there is a third violation, the fine can be increased to 2,000 USD, or even criminal. Also under this law, the Energy and Environmental Protection Agency will license collection and recycling centers, instead of just registering them as before.

To be licensed, collection and recycling centers must keep records of anyone who returns more than 1,000 bottles or cans in a day. Individuals (except qualified nonprofits) can only refund a maximum of 4,000 bottles per day, down from the previous cap of 5,000 bottles.

However, some new regulations make bottle processing, classification and recovery units concerned. Francis Bartolomeo, owner of Fran’s Cans and Bart’s Bottles, is concerned about the $2,500 annual licensing fee. He said that strengthening enforcement should be the responsibility of the state government.

“We were cleaning up the mess, and we ended up getting fined,” Bartolomeo said. He called on the government to return to the 5-cent deposit, instead of increasing fees at collection centers.

The speaker of the Connecticut House of Representatives opposed returning to the 5-cent deposit, noting that the fee was increased to encourage recycling.