Overview of the RMA and Its Impact on Manufacturers
Oregon’s Plastic Pollution and Recycling Modernization Act (RMA), which became effective July 1, 2025, requires “producers”—companies selling packaged goods, printing paper, or food serviceware in Oregon—to fund and manage the recycling process for those materials. Under the RMA, affected manufacturers must take several key steps to comply, each with financial implications.
The law required producers to register and begin paying fees by July 1, 2025, with a state-approved Producer Responsibility Organization (PRO). Currently, the only PRO in Oregon is the Circular Action Alliance (CAA), which handles recycling efforts on behalf of producers while collecting fees. PRO fee is the primary program cost to manufacturers to fund recycling infrastructure improvements and operations. The fee structure includes a base rate per material type (with different rates for plastic, metal, paper, etc.) calibrated to recycling costs. Mid-sized and large producers generally pay variable fees based on their sales volumes and the weight/amount of covered materials sold in Oregon, while small producers under certain thresholds can opt for a flat annual fee instead of weight-based fees. The PRO sets and updates the final detailed fee schedule for each material periodically.
In addition to paying fees, producers must track and report data on their products distributed in and into Oregon, including the weight of materials sold. The largest producers must also conduct periodic life-cycle assessments. Manufacturers may encounter internal costs associated with setting up systems to capture this data and prepare the required reports. Companies might need to invest in IT upgrades or process changes to segregate Oregon sales and packaging data. These compliance costs (employee training, software, consulting, etc.) should also be considered in financial plans, though they are generally expensed as incurred.
Timing of Cost Recognition (When to Record the Expense)
Companies should recognize RMA-related costs in the period in which the obligation is incurred. Under accrual accounting and US GAAP, an expense and corresponding liability should be recorded once it is both probable that an obligation has been incurred and the amount can be reasonably estimated. For the RMA’s producer fees, the obligating event is the sale or distribution of a covered product in Oregon that triggers the recycling fee, so recycling expenses should be accrued in the same period as the sales to properly match costs with the related revenue. In practice, this means PRO fees should be estimated and accrued when products with packaging are shipped into Oregon on a quarterly or even monthly basis.
Capitalization vs. Expensing of RMA Costs
A critical question for manufacturers is whether any of the recycling-related costs can be capitalized (deferred) or if they must be expensed immediately. Under US GAAP, costs can only be capitalized as assets if they provide a future economic benefit beyond the current period. The routine RMA expenses, such as PRO fees paid to fund recycling are a compliance cost to participate in the market for the current period and generally do not create a future benefit for the company. Consequently, they should be expensed as incurred and not recorded as an asset.
In particular, RMA PRO fees should not be capitalized into inventory value. GAAP inventory costing rules explicitly exclude selling or distribution expenses from the cost of inventory (ASC 330-10-30). The recycling fees are effectively a cost of disposing or recycling packaging after the sale—a downstream selling cost—and thus are treated as period costs, not as part of manufacturing cost. This means companies should not burden their product cost or margins by embedding these fees in inventory on the balance sheet. Instead, the fees hit the income statement in the period incurred.
Manufacturers may decide whether to include these compliance costs within “Cost of Sales” line or within “Selling, General, & Administrative Expenses.” Different presentation approaches are acceptable as long as they are consistent and clearly disclosed. Again, including the recycling fees in Cost of Goods Sold does not permit capitalizing them in inventory; it only affects income statement classification.
Navigating Compliance: How Aldrich Can Help
Changes in fee rates, reporting requirements, or additional regulations (like future plastic reduction targets) could all impact accounting and financial planning. Adapting to the Recycling Modernization Act presents a learning curve for many manufacturers, but you don’t have to navigate it alone. Aldrich is here to support your finance team in implementing these changes. Our firm has extensive knowledge in technical accounting and compliance for manufacturers, and we are closely following Oregon’s RMA rollout.
