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ECJ ruling on definition of waste in the context of consumer electronics

The Court of Justice of the European Union (“ECJ) published a decision on 4 July 2019 concerning the treatment of returned and unsold consumer electronics, including those returned under guarantee, and particularly whether these need to be classified as waste when they have not undergone functionality testing. This decision will be of interest to product retailers and manufacturers involved in refurbishment and repair programmes, particularly those which involve the cross-border shipment of defective goods to a central repair facility. However, ultimately it seems that this decision should not have any impact on the treatment of defective goods subject to such programmes.

Background

The ECJ decision was in response to a referral from the Dutch Court of Appeal in a case involving the prosecution of Tronex BV for breach of the EU Waste Shipment Regulation (1013/2006/EC) (the “WSR).

Tronex was a wholesaler of residual consignments of electronic goods. The consignment at issue consisted of electric kettles, steam irons, fans and shavers. Some of these had been returned by consumers under the relevant product guarantee whilst others were from discontinued product ranges. Some appliances were defective or broken. Most appliances were packed in their original boxes, but some had no packaging. Tronex intended to ship the consignment to a third party based in Tanzania as non-waste.

The WSR establishes procedures and control regimes for the shipment of waste, depending on the origin, destination and route of the shipment, the type of waste shipped and the type of treatment to be applied to the waste at its destination. Crucially, these procedures and controls only apply to shipments qualifying as waste and so the dispute concerned whether Tronex’s shipment should have been categorised as waste or not.

The definition of waste is provided for in the Waste Framework Directive (2008/98/EC) which defines it as “any substance or object which the holder discards or intends or is required to discard“. The Dutch court referred a number of questions to the ECJ focussed on ascertaining whether the appliances in the shipment in question should have been treated as waste at various stages:

    1. when returned by the retailer to its supplier either as a defective product under guarantee or as unsold stock;
    2. when sold by a retailer or supplier to a buyer of residual consignments (eg such as Tronex); and
    3. when sold by the buyer to a (foreign) third party (eg such as the third party buyer in Tanzania) as part of a larger consignment.

ECJ decision

Perhaps unhelpfully, in its decision the ECJ does not specifically address the three different stages identified in the Dutch court’s referral but instead provides general comments on when a consignment should be considered waste. That said, the ECJ does acknowledge that  if the goods were already waste when acquired by Tronex, then they would continue to be considered waste until disposed of or recovered. This is a key point to bear in mind when considering the decision – if either the retailer or supplier had an intention to discard, then Tronex’s own intention when transferring to the third party would be irrelevant.

To begin with, the ECJ’s decision reiterates a number of long-standing principles of waste law. For example, that the fact that the consignment had a commercial value – Tronex had paid for the consignment and was seeking to sell it to the third party in Tanzania – would not prevent it from being considered waste.

However, it is the Court’s comments on when returned defective products should be treated as waste that are perhaps most interesting. Notably the court referred to the Shell Nederland decision stating that “it is only situations in which the reuse of the goods or substance in question is not a mere possibility but a certainty” that defective goods should be treated as non-waste. The ECJ concludes its judgment by stating 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 its supplier, is to be regarded as a ‘shipment of waste’ … [for the purposes of the WSR] … 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…”

Application to repair and refurbishment programmes

Retailers and manufacturers involved in refurbishment and repair programmes that involve the cross-border shipment of defective products returned by customers may be alarmed by the ECJ’s comments around the need for there to have been functionality testing for the product to be shipped as non-waste. Functionality and repairability testing will usually be undertaken at a repair centre, often located in a different country.

The ECJ’s decision seems to be at odds with the position taken under Annex VI of the Waste Electrical and Electronic Equipment Directive (2012/19/EU) (“WEEE Directive) which sets minimum requirements for the shipment of used electrical or electronic equipment (EEE) when it is shipped as non-waste. Annex VI envisages the possibility that used EEE will not be viewed as waste in four scenarios, two of which would potentially be relevant to the Tronex scenario:

    1. when the used EEE is being shipped for direct re-use and is fully functional; and
    2. when the defective EEE is sent back to the producer (or a third party acting on its behalf) for repair under warranty with the intention of reuse, even where the EEE has not yet been subject to any functionality testing.

Unfortunately the ECJ did not consider Annex VI in its decision (and neither did Advocate General Kokott address it in any detail in her opinion) which is potentially because the transposition deadline for the WEEE Directive was 14 February 2014, four days after Tronex’s attempted shipment.

Clearly the transfer of returned defective goods from the retailers and suppliers to Tronex would not fall within the first of the two grounds identified above. As the ECJ identified (and relied upon its conclusions), the retailers and suppliers had undertaken no functionality testing and did not know whether the used EEE could be directly re-used.

However, the position is less clear in respect of the second of the grounds above. That said, our view is that it is possible to distinguish this type of repair under warranty scenario from the scenario in the Tronex case. In the repair under warranty scenario, when the defective EEE is returned by the retailer to its supplier or the producer, arguably there is no intention to discard as the retailer is transferring it as part of a business to business contractual arrangement under which defective products are returned ultimately to the producer for repair or refurbishment. Of course, the retailer would want to make sure they were clearly complying with the other requirements of Annex VI to prevent the shipment from being considered waste (e.g. appropriately packaging the item to prevent against further damage). On the other hand, on the facts of the Tronex case, when the retailers and suppliers sold the used EEE to Tronex, they were not returning it to the original producer and they had no certainty as to what would ultimately happen to the EEE. They were transferring the EEE to Tronex as they did not want to hold it themselves, or as suggested by the ECJ, it was a “burden” to them. In these circumstances it is much harder to argue that the retailers and suppliers did not intend to discard the EEE, although ultimately this will be a question for the Dutch courts to decide considering the facts of the case.

Conclusions

It would have been helpful if the ECJ had addressed WEEE Annex VI in its decision and attempted to distinguish the Tronex scenario from the scenarios envisaged by Annex VI under which used EEE is shipped as non-waste. As this has not happened, the hope is that the ECJ’s comments regarding the need for EEE to have been subject to functionality testing to be shipped as non-waste will be read as limited to cases with a similar fact pattern to Tronex i.e. where used EEE is being transferred to a third party outside of the scope of a producer’s repair and refurbishment programme.