Can smugglers still cashing-in on Michigan refund

Michigan lawmakers want to crack down on can and bottle smugglers they say are scamming Michigan for undeserved recycling refunds, corrupting a generous 10-cent per container payback policy once infamously portrayed in a "Seinfeld" episode and which beverage officials now claim costs the state millions of dollars annually.
AP Wire
Feb 23, 2013

 

"Seinfeld" characters Kramer and Newman failed miserably in their comedic attempt to cash in on the refund, when they loaded a mail truck full of cans and bottles in New York and attempted to drive them to Michigan. But lawmakers say it's a serious problem, especially in border counties, and they want to toughen penalties on people who try to return un-marked, out-of-state cans and bottles for refunds.

"If you are intending to defraud ... then you should be held accountable for it," said Republican Rep. Kenneth Kurtz of Coldwater. He recently introduced legislation aimed at cracking down on scammers who drive car and truck loads of cans from Indiana, Wisconsin and Ohio — states that do not offer refunds — to stores across the border in Michigan.

His legislation would make an attempt to return between 100 and 10,000 non-returnable containers punishable by up to 93 days in jail and a $1,000 fine. Current law sets penalties only for those who actually return fraudulent containers.

Michigan's 10 cent-per-container refund — the highest in the country — was enacted more than 30 years ago to encourage recycling. Many say it's worked. The state's recycling rate for cans and bottles was nearly 96 percent in 2011. Nine other states, including California, New York and Massachusetts, have nickel deposits on most containers.

Despite measures Michigan lawmakers have taken over the years, including tougher penalties for bottle scammers and new machines that kick out fraudulent cans, store owners and distributors along the border say illegal returns persist.

Mike Hautala owns Hautala Distributing, which services Gogebic and Ontonagon counties in the western part of the Upper Peninsula near the Wisconsin border. He said for every case of beer his distributorship delivers to a store along the border, it picks up about seven more cases of empty cans.

The state loses $10 million to $13 million a year to fraudulent redemptions, according to most recent 2007 estimates from the Michigan Beer and Wine Wholesalers Association. Angela Madden, the association's director of governmental affairs, said that number has likely gone down slightly because of changes implemented since, but not by much.

Bill Nichols, store director at Harding's Friendly Market in Niles about three miles from the Indiana border, said the store takes in about $6,000 worth of cans a week. He said every week he kicks out people for trying to return large garbage bags full of cans from Indiana, a state that offers no refund.

"You can go into the parking lot and look at the license plates and see that it says Indiana," he said.

Distributors pick up the containers people drop off at stores and pay the store a dime for every container. If the distributor picks up more bottles and cans than it left — the likely result of fraudulent redemption — the distributor is left in the hole, Madden said. If the distributor picks up fewer cans than it dropped off, the money that does not go back to the store is sent to the state. Twenty five percent of that money is sent back to retailers and 75 percent is put in a fund that pays for things like environmental cleanup, she said.

Hautala said he lost about $25,000 last year picking up more returned containers than he delivered. He said his company will recover some of that money from distributors who sell more containers than they pick up.

In 2008, Michigan passed laws aimed at cracking down on bottle fraud. One of the primary components required manufacturers to place a special mark on Michigan cans and bottles and said those containers could only be sold in Michigan or other states that have deposit laws.

A report the Department of Treasury delivered to Michigan lawmakers last fall estimated that the technology may have helped reduce redemptions of out-of-state containers by nearly 4 percent. But that reduction could also come from decline in sales, the report said.

As containers were given Michigan-specific marks, vending machines used in stores to count the cans and bottles were formatted with new technology to read the mark and reject cans that come in from across the border.

But Madden told the committee that many retailers have not yet taken advantage of the technology. She said while the state has provided funding for business to pay for the $5,000 machine upgrade, many "just refuse." If a store has an older model machine, they might have to shell out big bucks for a brand new machine that is compatible with the new technology, she said.

Hautala said only four machines are in the two counties his company serves.

And the machines are not "100 percent fool-proof," Nichols said. If a person repeatedly puts an out-of-state can into the machine, it will often accept it, he said.

Michigan is not alone in its fight against bottle fraud. Mark Oldfield, spokesman for California's Department of Resources Recycling and Recovery, said the state, which gives a 5-cent refund for most containers and 10 cents for those more than 24 ounces, is losing about $30 million to $50 million a year from redeeming out-of-state cans.

Oldfield said a new law in California this year requires people who bring in more than 25 pounds of aluminum or plastic, or more than 100 pounds of glass, to report the source and the destination of the material to the state. Border patrol stations along the major highways near the border also gather license plate numbers and information of vehicles seen bringing in cans and bottles.

Despite their best efforts to clamp down on fraudulent bottles, a federal lawsuit may shake things up even more. In 2012, a federal appeals court in Cincinnati struck down the Michigan law that makes beverage companies put a special mark on cans sold in the state. It said the Michigan law is illegally affecting interstate commerce by dictating where cans can be distributed.

Joy Yearout, spokeswoman for Michigan Attorney General Bill Schuette, said the office has requested a stay on the ruling and plans to file a petition with the U.S. Supreme Court in April.

Comments

zwesterhouse

Someone needs to FOIA and present some numbers from the State. This is one big farce and money grab. For every can/bottle that gets smashed on the highway, abandoned or for whatever reason does not get cashed back in, what happens to that money? It has to be in the millions - maybe 200 million? every year. So then what is the state or whomever doing to account for those surplus funds? for the past years since 1970's when the bottle deposits were enacted. So then whats the big deal if someone cashes in out of state bottles?? Because there are millions of bottles that never get returned for the 10 cents. Some reporter needs to follow the money and tell us whats really going on. What is up with the all this crap????

ohwell

I am confused. If I purchase the drink at one store and return it to a different, that is the wrong? If the can has a MI refund on it, what is the big deal. And because one has out of state plates, they are committing fraud. MI has been known to have a tourist in it from time to time. Whose to say these people along the borders aren't collecting the cans from some slob that throws them out the window? I see people with garbage bags of cans all the time, especially in the summer. I am still confused, because a distributor drops off say 10 cases and picks up 20 cases of returnables, that is fraud. Again, let's say I bought my beverage of choice at one store and returned it a different store.

I think the lawmakers have bigger worries than who returns cans and bottles.

Say No To Tourist's

ohwell, I'm actually suprized your confused on this, not meant in a bad way though. Any can or bottle bought in Michigan with the Mi with 10c return mark on it can be returned anywhere in Mi, doesnt matter how many you have. The problem lies when people from out of state who have a no return policy on the cans/bottles are redeeming them in Mi for the refund.

grandhaven1974

The focus needs to be on the retailers and distributors that accept the out of state non deposit containers. There is no check and balance and if people think they can get away with returning out of state containers they will. If returns are more carefully scrutinized and out of state containers are rejected then people will get tired of bringing in useless containers. If it is a technology issue that requires bar code readers, then only stores with the proper technology to scan them should be allowed to accept refunds. Yes it is costly but no retailer or distributor has a right to complain about losing money when they voluntarily accept no deposit containers without first checking them.

GH55

Everything I have ever heard concerning bottle DEPOSITS, I am not sure why the AP Wire reporter keeps calling them refunds, is that the distributors make out like bandits because nowhere near the same amount of bottles and cans make it back for return of the deposit. That's one reason that so many people can make it worth while to go through the trash cans at the parks, beaches and to name another example, college football games.
To cite some examples from some of the border counties way up north, that seem to accept the cans regardless of origin or marking, seems like bad business or they are participating in the fraud. If the distributor is continually accepting 7 times what they deliver, you would think with a minimal effort the fraud would be exposed.
This law ranks right up there with the newly enacted smoking ban in restaurants! Soon after the law was enacted I moved to the Washington DC area for work. The District of Columbia at that time had no deposit law. The litter was attrocious!
Michigan is fairly clean because of this law! Do not forget that! Prosecute the fraud!

 

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