As California continues to push forward with its ambitious packaging overhaul, produce suppliers operating on already razor-thin margins face growing uncertainty over who will ultimately bear the financial brunt of the state's Extended Producer Responsibility legislation.
While lawmakers called in August for a pause on fee assessments and collection through 2026 and 2027 to ease pressure on businesses and consumer grocery prices, legal experts stress that a delay in payment is not the same as a delay in compliance. With SB 54 regulations already in effect, produce companies must navigate complex operational and budget decisions today to ensure they remain compliant while keeping costs manageable.
Christopher “Smitty” Smith, a partner with the Los Angeles-based law firm Saul Ewing, recently sat down with The Packer to break down what these evolving mandates mean for the produce industry. Advising stakeholders at every link of the supply chain, Smith says that while regulatory giants like CalRecycle and industry groups like the American Institute for Packaging and the Environment (Ameripen) continue to hash out the details, businesses cannot afford to sit on the sidelines as compliance deadlines loom.
For companies hoping state lawmakers or legal challenges will derail California's overhaul, Smith offers a reality check: regulatory momentum isn't slowing down.
“It seems to me that it's all systems go,” Smith says.
Having advised food and packaging stakeholders since the adoption of SB 54 two years ago, he notes that most affected companies are already proactively moving toward compliance.
“My clients who produce a lot of plastic as part of their business — and none of them are actually the plastic manufacturers, they're the food product companies that are in the middle — they're all either in line or in the process of getting in line with compliance,” he says.
Smith warns produce businesses against banking on delays or regulatory rollbacks, noting that EPR frameworks are already established norms internationally.
“First and foremost, for [The Packer audience], is to dissuade thinking that burying your head in the sand is going to lead to a good outcome. That's not the case,” Smith cautions. “These EPR laws are not new. If you do any work in Europe, they've already been responsible for doing this for the better part of a decade.”
Addressing the underlying shift in state policy, Smith says that regulators view SB 54 as correcting a long-standing financial imbalance — one where packaging waste disposal costs were passed on to residents rather than the companies introducing materials into the marketplace.
“Consumers have been paying these costs forever, and producers haven't been bearing those costs,” Smith says. “I think that's not comforting for producers to know. But that is the sheer reality: EPR is not new. It's not going away. It's not going to a legal challenge that will shut it down.”
Smith stresses that proactive compliance is the only viable path forward for suppliers aiming to protect their bottom line.
“It's coming, and it's best to be prepared,” he says. “It's best to come into compliance because at a certain point, CalRecycle is going to come for those that haven't submitted compliance, and it's going to be ugly. It's going to be a whole lot of fees and penalties.”
Why Legal Challenges Won't Derail SB 54
While Smith says there are currently scores of legal challenges over SB 343 and SB 54, they're ultimately different animals and serve different regulatory functions. SB 54 mandates material reduction, requiring companies to make all packaging recyclable or compostable by 2032. SB 343 governs labeling, banning the “chasing arrows” recycling symbol unless strict statewide sorting standards are met.
Although industry groups have recently tried to loop SB 54 into existing legal challenges against SB 343, Smith doubts that tactic will work — even if SB 343 itself faces a First Amendment challenge.
“I don't foresee that looping in of SB 54 as leading to success,” Smith says. “SB 343 is vulnerable to a Free Speech challenge... [but] SB 54 is totally different. It's just count up how much plastic packaging you send into California... and then work towards reducing your waste stream.”
Despite the frustration for produce suppliers locked into long-term contracts for certain plastic packaging, Smith warns against ignoring the broader landscape.
“People who don't comply are the ones that really keep me busy,” Smith says. "[It's necessary] to come into compliance, and not just in California, but in all the states that have plastic packaging EPR laws because they're not going away. They're not going to be summarily dismissed. They're not going to disappear. And this is not a new thing. This is an old thing that you've already had to do for a decade at least. So, get in line.”
From Carrot to Stick: Price Hikes and Pending Penalties
For produce suppliers, accepting the reality of EPR mandates often comes with initial pushback, but Smith notes that initial panic typically gives way to necessity when California accounts for a significant portion of revenue.
“A lot of all my clients come to me either in despair, like ‘this will never happen, we can't ever do it,' and then lo and behold, a month or two later, we have everything done,” Smith says. “Or they come to me like, ‘California sucks, and I hate this.' But then I ask if they do business in California, and they tell me it's 65% of the company's gross revenue. So, California doesn't suck when it's making you money. It only sucks when they're telling you that you have to comply with California laws.”
Currently, state regulators are using an incentive-heavy approach, but Smith warns that state enforcement will soon turn aggressive.
“We're in the carrot moment right now, but the stick moment is looming, and it is not far away,” Smith says. “And that stick moment will be the penalties that are gonna just knock people's socks off... I've been doing California environmental law for 20 years, and have seen things like this before, and once they start assessing penalties, people will literally lose their minds.”
At its core, EPR forces companies to dismantle the long-held assumption that waste simply vanishes after disposal — a paradigm shift that inevitably impacts product pricing, says Smith.
"[Years ago, working on the Basel Convention,] I started to realize the idea that it just disappears is a fallacy we've created, and now the laws are starting to reckon with that fallacy,” Smith says. “All that EPR does is take that end-of-life cost and push it back into the business transaction.”
For an industry operating on razor-thin margins, absorbing these new compliance expenses leaves businesses with only one practical move: raise prices.
“That's just capitalism,” he says. “If your product costs more to make, then you have to increase the cost of your product.”
Can Packaging Audits Turn to Millions Saved?
Even as compliance timelines shift, regulators rely on historical data to establish baseline fees, making back-fee exposure a real possibility for unprepared produce operations.
“They don't ask for your current data when you're working on submission and compliance, they're asking for historical data,” Smith says, noting that evaluations typically look back to 2023. “What they're trying to do is set a baseline... they increase the fees and costs on the types of plastic that are least recyclable and most commonly used and make those the most expensive to use.”
By intentionally penalizing hard-to-recycle materials, EPR structures upend traditional purchasing logic — rendering “cheap” plastic options far more expensive once regulatory fees are factored in, Smith says.
“When it comes to the least expensive packaging option, not surprisingly, that least expensive option has the most fees and costs associated with it because that least expensive option is the least recyclable plastic,” Smith says. “Even though they're cheaper to purchase as a business, when you fold in the compliance costs, they're not cheaper anymore.”
While auditing supply chains to uncover these costs can be frustrating, Smith stresses that it often reveals unexpected efficiencies and cost-saving shifts away from high-fee packaging.
“I've had clients that have howled at the moon at having to deal with this stuff,” Smith says. “Then they end up dealing with it, and they're like, ‘Whoa, oh my gosh! You know what? I was using this PT wrap on all my packages, and it was costing me a fortune. And now that I know the fees on that are huge, I'm not going to use it anymore. And I figured out I don't need to use it, and it's going to save me millions of dollars every year.'”
An Attorney's Advice: Act Now or Pay Later
When it comes to taking control of the EPR landscape, Smith says produce companies essentially have three choices: handle it internally, hire outside experts, or ignore it and pay the price later.
“There's the do-it-yourself option, which is totally workable if you have the time, the energy and the capabilities,” he says.
The second path is bringing in outside counsel and compliance consultants to audit supply chains, run business data, and secure proper standing before enforcement hits.
The final choice — non-compliance — is the one Smith cautions against most, warning that burying one's head in the sand will prove catastrophically expensive as more states enact EPR regulations.
“The non-compliant option actually leads back to me, and when it leads to me on the back end, when they get dinged, when they get a penalty letter... those letters are really where I make my money because once you're dealing with a penalty that's six, seven, eight figures, then you're like, ‘Oh my gosh, this actually is a problem,'” Smith says.
With around 20 states poised to enforce packaging regulations as momentum builds nationwide, Smith delivers a stark final reminder for the produce industry as he reflects on clients who waited to act.
“The cost would have been four figures, five figures, and now it's six, seven, eight figures,” Smith says. “I'm just here to advise. But that non-compliance option always, always leads back to me... It just happens at the back end, and it is just much more expensive.”
