SB54 (Part 2): Covered Materials, Fees, and Producer Next Steps
SB54 (Part 2): Covered Materials, Fees, and Producer Next Steps
SB54 (Part 2): Covered Materials, Fees, and Producer Next Steps
MARKET UPDATES
December 5, 2025
Grace Lam
Grace Lam
·
Co-founder
Andy Xian
Andy Xian
·
Blog Contributor
In Part 1, we broke down the core elements of California’s landmark packaging EPR law, key 2025 updates, and near-term compliance milestones, In this second installment, we go deeper, focusing on covered material categories (CMCs), how fees will be set, and the concrete, corporate-level actions producers must take today to manage risk and leverage eco-modulation for cost control.
In Part 1, we broke down the core elements of California’s landmark packaging EPR law, key 2025 updates, and near-term compliance milestones, In this second installment, we go deeper, focusing on covered material categories (CMCs), how fees will be set, and the concrete, corporate-level actions producers must take today to manage risk and leverage eco-modulation for cost control.
Covered Material Categories (CMCs): What’s Actually in Scope?
Under SB 54, every packaging component must be mapped into a Covered Material Category or CMC, a standardized classification system that defines:
What types of packaging are subject to the law
How each material is evaluated for recyclability
What fee schedule applies during the startup years
What data producers must report
Why Accurate Mapping Matters
For producers, this mapping is not just an administrative task; it’s the foundation for risk management and financial forecasting. During the early years of SB 54 (2027-2029 startup phase), your CMC assignment, and not yet your individual design attribute, primarily determines your fee. Incorrect or missing mapping will inflate your fees, create reporting errors, and can trigger audits and penalties under the law.
It is critical for compliance teams to understand that fees, recyclability scores, and reporting obligations all track at the component-level:
Bottle + cap = 2 components
Pouch + zipper + spout = 3 components
E-commerce mailer + label + tape = 3 components
Each of these must be mapped separately. Producers need accurate, SKU-level mapping now to forecast cost exposure and build internal compliance systems.
The Case of Plastics in California
Plastic packaging is the most scrutinized category under SB 54 due to its high environmental impact, low and uneven recycling rates, and significant producer obligations tied to reduction and recyclability targets. Similar to other EPR states, California uses a multi-tiered plastic classification system, distinguishing plastic packaging into over 30 different categories, such as rigid containers (like PET OR HDPE), multi-layer flexible plastics, and Polystyrene. Many of the most expensive CMCs under the startup fee schedule are expected to be the hard-to-recycle flexible and multi-layer plastics.
Unlike other states, however, California requires producers to specify further whether plastic components are included in other material classes. For example, there are two CMCs for glass bottles, one for those with plastic components (G1P) and one for those without (G1N). Producers need to pay special attention to the nuances in classification when completing their reporting in different states.
How Fees Will Work: The Two-Phase System
SB 54 shifts the financial burden of managing single-use packaging and plastic food service ware from local governments and consumers to producers. The law implements fees in two major phases: the startup period and the producer-specific period.
Phase 1: Startup Period (2027–2029): Fees will primarily hinge on CMCs and recyclability/compostability status. If your SKU maps to a hard-to-recycle CMC, you will likely incur higher fees. The fee structure has been streamlined into broad categories for the first iteration.
Phase 2: Producer-Specific Eco-Modulation (Starting as early as 2029): As CalRecycle and the designated Producer Responsibility Organization (PRO), the Circular Action Alliance (CAA), build out data systems, the program will evolve to eco-modulated fees. These fees will be tailored to each producer’s specific design choices, component counts, actual recycling outcomes, and contamination rates.
This system is designed to provide a financial incentive for companies to redesign their packaging and use materials that are demonstrably recyclable or compostable in California. Furthermore, the PRO must contribute $500 million annually from 2027 to 2037, a total of $5 billion for environmental remediation efforts.
Critical Deadlines and Data Requirements
The key deadlines revolve around data reporting for the 2023 calendar year. Although regulatory dates have seen revisions, the PRO has established key near-term milestones:
November 15, 2025: reporting 2023 baseline data due
Expected mid-2026: PRO submits plan
Expected mid-2026: SB54 Advisory Board reviews plan and offers written comments
On or before January 1, 2027: CalRecycle approves plan, program begins
March 1, 2027: PRO remits first administrative fees to CalRecycle
The Cost of Non-Compliance
Compliance failure under SB 54 carries substantial financial risk. CalRecycle is authorized to impose administrative civil penalties of up to $50,000 per day, per violation. This high penalty structure underscores the state's intent to enforce the law rigorously and treat non-compliance as a serious threat to the program’s success.
Strategic Action: Eco-Modulation and Cost Control
As the program matures, packaging design becomes a critical lever for cost control, not just sustainability. By acting now, producers can use the transition period to their advantage.
Design Lever | Expected Fee Impact | Why This Works |
Mono-material structures (like a rigid PET bottle without multiple layers, single resin container) | Lower fees | Mono-materials simplify collection, sorting, and end-market processing. Harder to recycle are multi-resin laminates or films with layered adhesives. CalRecycle draft regulation emphasises design for recyclability. |
High post-consumer recycled (PCR) content and avoidance of problematic materials (avoiding PVC, black carbon plastics, polystyrene) | Lower fees | The statute and EPR commentary emphasise using recycled content and phasing out materials that impede recycling. |
Avoiding flexible multi-layer films and “hard-to-process” formats (metallised films, bonded laminates, black opaque films) | Avoid higher fees/receive less “malus” | Since these formats are often rejected at MRFs or have negligible end-markets, EPR programs hold higher cost burdens for them. The CAA fee methodology references “cost to manage” indices tied to material attributes. |
Designing for reuse or refill systems (where feasible) | Potential lower fees or exemption in future phases | As EPR regimes mature, reuse/refill systems are increasingly rewarded. Though early years may focus more on recyclability, reuse is emerging as the next wave. |
Designers and producers who act early will benefit once the fee system moves to Phase 2. Reviewing your SKU portfolio now, mapping every component to the correct CMC, and flagging high-risk packaging formats gives your team time to identify redesign opportunities and prioritize high-volume SKUs. By starting this shift now, you move toward formats that will be rewarded rather than penalized under SB 54’s evolving fee structure.
What’s Next?
With SB 54’s deadlines approaching, annual updates to CMCs, evolving fee rules, and ongoing stakeholder consultations, producers face a rapidly shifting compliance environment. At Neta AI, we help automate CMC mapping, monitor regulatory updates in real time, model future fee exposure, and embed actionable design insights across your packaging portfolio. Working with Neta AI means compliance doesn’t become a cost center, but a competitive advantage.
Covered Material Categories (CMCs): What’s Actually in Scope?
Under SB 54, every packaging component must be mapped into a Covered Material Category or CMC, a standardized classification system that defines:
What types of packaging are subject to the law
How each material is evaluated for recyclability
What fee schedule applies during the startup years
What data producers must report
Why Accurate Mapping Matters
For producers, this mapping is not just an administrative task; it’s the foundation for risk management and financial forecasting. During the early years of SB 54 (2027-2029 startup phase), your CMC assignment, and not yet your individual design attribute, primarily determines your fee. Incorrect or missing mapping will inflate your fees, create reporting errors, and can trigger audits and penalties under the law.
It is critical for compliance teams to understand that fees, recyclability scores, and reporting obligations all track at the component-level:
Bottle + cap = 2 components
Pouch + zipper + spout = 3 components
E-commerce mailer + label + tape = 3 components
Each of these must be mapped separately. Producers need accurate, SKU-level mapping now to forecast cost exposure and build internal compliance systems.
The Case of Plastics in California
Plastic packaging is the most scrutinized category under SB 54 due to its high environmental impact, low and uneven recycling rates, and significant producer obligations tied to reduction and recyclability targets. Similar to other EPR states, California uses a multi-tiered plastic classification system, distinguishing plastic packaging into over 30 different categories, such as rigid containers (like PET OR HDPE), multi-layer flexible plastics, and Polystyrene. Many of the most expensive CMCs under the startup fee schedule are expected to be the hard-to-recycle flexible and multi-layer plastics.
Unlike other states, however, California requires producers to specify further whether plastic components are included in other material classes. For example, there are two CMCs for glass bottles, one for those with plastic components (G1P) and one for those without (G1N). Producers need to pay special attention to the nuances in classification when completing their reporting in different states.
How Fees Will Work: The Two-Phase System
SB 54 shifts the financial burden of managing single-use packaging and plastic food service ware from local governments and consumers to producers. The law implements fees in two major phases: the startup period and the producer-specific period.
Phase 1: Startup Period (2027–2029): Fees will primarily hinge on CMCs and recyclability/compostability status. If your SKU maps to a hard-to-recycle CMC, you will likely incur higher fees. The fee structure has been streamlined into broad categories for the first iteration.
Phase 2: Producer-Specific Eco-Modulation (Starting as early as 2029): As CalRecycle and the designated Producer Responsibility Organization (PRO), the Circular Action Alliance (CAA), build out data systems, the program will evolve to eco-modulated fees. These fees will be tailored to each producer’s specific design choices, component counts, actual recycling outcomes, and contamination rates.
This system is designed to provide a financial incentive for companies to redesign their packaging and use materials that are demonstrably recyclable or compostable in California. Furthermore, the PRO must contribute $500 million annually from 2027 to 2037, a total of $5 billion for environmental remediation efforts.
Critical Deadlines and Data Requirements
The key deadlines revolve around data reporting for the 2023 calendar year. Although regulatory dates have seen revisions, the PRO has established key near-term milestones:
November 15, 2025: reporting 2023 baseline data due
Expected mid-2026: PRO submits plan
Expected mid-2026: SB54 Advisory Board reviews plan and offers written comments
On or before January 1, 2027: CalRecycle approves plan, program begins
March 1, 2027: PRO remits first administrative fees to CalRecycle
The Cost of Non-Compliance
Compliance failure under SB 54 carries substantial financial risk. CalRecycle is authorized to impose administrative civil penalties of up to $50,000 per day, per violation. This high penalty structure underscores the state's intent to enforce the law rigorously and treat non-compliance as a serious threat to the program’s success.
Strategic Action: Eco-Modulation and Cost Control
As the program matures, packaging design becomes a critical lever for cost control, not just sustainability. By acting now, producers can use the transition period to their advantage.
Design Lever | Expected Fee Impact | Why This Works |
Mono-material structures (like a rigid PET bottle without multiple layers, single resin container) | Lower fees | Mono-materials simplify collection, sorting, and end-market processing. Harder to recycle are multi-resin laminates or films with layered adhesives. CalRecycle draft regulation emphasises design for recyclability. |
High post-consumer recycled (PCR) content and avoidance of problematic materials (avoiding PVC, black carbon plastics, polystyrene) | Lower fees | The statute and EPR commentary emphasise using recycled content and phasing out materials that impede recycling. |
Avoiding flexible multi-layer films and “hard-to-process” formats (metallised films, bonded laminates, black opaque films) | Avoid higher fees/receive less “malus” | Since these formats are often rejected at MRFs or have negligible end-markets, EPR programs hold higher cost burdens for them. The CAA fee methodology references “cost to manage” indices tied to material attributes. |
Designing for reuse or refill systems (where feasible) | Potential lower fees or exemption in future phases | As EPR regimes mature, reuse/refill systems are increasingly rewarded. Though early years may focus more on recyclability, reuse is emerging as the next wave. |
Designers and producers who act early will benefit once the fee system moves to Phase 2. Reviewing your SKU portfolio now, mapping every component to the correct CMC, and flagging high-risk packaging formats gives your team time to identify redesign opportunities and prioritize high-volume SKUs. By starting this shift now, you move toward formats that will be rewarded rather than penalized under SB 54’s evolving fee structure.
What’s Next?
With SB 54’s deadlines approaching, annual updates to CMCs, evolving fee rules, and ongoing stakeholder consultations, producers face a rapidly shifting compliance environment. At Neta AI, we help automate CMC mapping, monitor regulatory updates in real time, model future fee exposure, and embed actionable design insights across your packaging portfolio. Working with Neta AI means compliance doesn’t become a cost center, but a competitive advantage.
Covered Material Categories (CMCs): What’s Actually in Scope?
Under SB 54, every packaging component must be mapped into a Covered Material Category or CMC, a standardized classification system that defines:
What types of packaging are subject to the law
How each material is evaluated for recyclability
What fee schedule applies during the startup years
What data producers must report
Why Accurate Mapping Matters
For producers, this mapping is not just an administrative task; it’s the foundation for risk management and financial forecasting. During the early years of SB 54 (2027-2029 startup phase), your CMC assignment, and not yet your individual design attribute, primarily determines your fee. Incorrect or missing mapping will inflate your fees, create reporting errors, and can trigger audits and penalties under the law.
It is critical for compliance teams to understand that fees, recyclability scores, and reporting obligations all track at the component-level:
Bottle + cap = 2 components
Pouch + zipper + spout = 3 components
E-commerce mailer + label + tape = 3 components
Each of these must be mapped separately. Producers need accurate, SKU-level mapping now to forecast cost exposure and build internal compliance systems.
The Case of Plastics in California
Plastic packaging is the most scrutinized category under SB 54 due to its high environmental impact, low and uneven recycling rates, and significant producer obligations tied to reduction and recyclability targets. Similar to other EPR states, California uses a multi-tiered plastic classification system, distinguishing plastic packaging into over 30 different categories, such as rigid containers (like PET OR HDPE), multi-layer flexible plastics, and Polystyrene. Many of the most expensive CMCs under the startup fee schedule are expected to be the hard-to-recycle flexible and multi-layer plastics.
Unlike other states, however, California requires producers to specify further whether plastic components are included in other material classes. For example, there are two CMCs for glass bottles, one for those with plastic components (G1P) and one for those without (G1N). Producers need to pay special attention to the nuances in classification when completing their reporting in different states.
How Fees Will Work: The Two-Phase System
SB 54 shifts the financial burden of managing single-use packaging and plastic food service ware from local governments and consumers to producers. The law implements fees in two major phases: the startup period and the producer-specific period.
Phase 1: Startup Period (2027–2029): Fees will primarily hinge on CMCs and recyclability/compostability status. If your SKU maps to a hard-to-recycle CMC, you will likely incur higher fees. The fee structure has been streamlined into broad categories for the first iteration.
Phase 2: Producer-Specific Eco-Modulation (Starting as early as 2029): As CalRecycle and the designated Producer Responsibility Organization (PRO), the Circular Action Alliance (CAA), build out data systems, the program will evolve to eco-modulated fees. These fees will be tailored to each producer’s specific design choices, component counts, actual recycling outcomes, and contamination rates.
This system is designed to provide a financial incentive for companies to redesign their packaging and use materials that are demonstrably recyclable or compostable in California. Furthermore, the PRO must contribute $500 million annually from 2027 to 2037, a total of $5 billion for environmental remediation efforts.
Critical Deadlines and Data Requirements
The key deadlines revolve around data reporting for the 2023 calendar year. Although regulatory dates have seen revisions, the PRO has established key near-term milestones:
November 15, 2025: reporting 2023 baseline data due
Expected mid-2026: PRO submits plan
Expected mid-2026: SB54 Advisory Board reviews plan and offers written comments
On or before January 1, 2027: CalRecycle approves plan, program begins
March 1, 2027: PRO remits first administrative fees to CalRecycle
The Cost of Non-Compliance
Compliance failure under SB 54 carries substantial financial risk. CalRecycle is authorized to impose administrative civil penalties of up to $50,000 per day, per violation. This high penalty structure underscores the state's intent to enforce the law rigorously and treat non-compliance as a serious threat to the program’s success.
Strategic Action: Eco-Modulation and Cost Control
As the program matures, packaging design becomes a critical lever for cost control, not just sustainability. By acting now, producers can use the transition period to their advantage.
Design Lever | Expected Fee Impact | Why This Works |
Mono-material structures (like a rigid PET bottle without multiple layers, single resin container) | Lower fees | Mono-materials simplify collection, sorting, and end-market processing. Harder to recycle are multi-resin laminates or films with layered adhesives. CalRecycle draft regulation emphasises design for recyclability. |
High post-consumer recycled (PCR) content and avoidance of problematic materials (avoiding PVC, black carbon plastics, polystyrene) | Lower fees | The statute and EPR commentary emphasise using recycled content and phasing out materials that impede recycling. |
Avoiding flexible multi-layer films and “hard-to-process” formats (metallised films, bonded laminates, black opaque films) | Avoid higher fees/receive less “malus” | Since these formats are often rejected at MRFs or have negligible end-markets, EPR programs hold higher cost burdens for them. The CAA fee methodology references “cost to manage” indices tied to material attributes. |
Designing for reuse or refill systems (where feasible) | Potential lower fees or exemption in future phases | As EPR regimes mature, reuse/refill systems are increasingly rewarded. Though early years may focus more on recyclability, reuse is emerging as the next wave. |
Designers and producers who act early will benefit once the fee system moves to Phase 2. Reviewing your SKU portfolio now, mapping every component to the correct CMC, and flagging high-risk packaging formats gives your team time to identify redesign opportunities and prioritize high-volume SKUs. By starting this shift now, you move toward formats that will be rewarded rather than penalized under SB 54’s evolving fee structure.
What’s Next?
With SB 54’s deadlines approaching, annual updates to CMCs, evolving fee rules, and ongoing stakeholder consultations, producers face a rapidly shifting compliance environment. At Neta AI, we help automate CMC mapping, monitor regulatory updates in real time, model future fee exposure, and embed actionable design insights across your packaging portfolio. Working with Neta AI means compliance doesn’t become a cost center, but a competitive advantage.
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Make smarter
packaging decisions
See how we can cut your time spent on packaging compliance and data tracking by half
Make smarter
packaging decisions
See how we can cut your time spent on packaging compliance and data tracking by half
Make smarter
packaging decisions
See how we can cut your time spent on packaging compliance and data tracking by half
