To set the fees, CESA looked at industry best practices. Important principles considered were fairness, transparency, balancing the number of categories with costs of administration, ease of implementation and no “cross subsidization” of product categories. In other words, the cost of managing (collecting, processing, etc) one product category should not be subsidized by the fees paid on another category. These fees must cover the cost of managing both historical and orphan products (those that are no longer in production or which the manufacturer is no longer producing). The products are organized into categories that must make sense for communications to members, retailers and consumers . The products in the categories must also be similar in size and materials, while keeping the number of categories to a manageable number to control program costs. The fees must also support the creation of a reserve and contingency fund to ensure program financial stability. An ongoing surplus or deficit, however, will not be maintained.
The fees were set using the best available data for historical sales, forecasts of future sales, average weight of products and expected collection volumes. Program costs were separated into operational costs and non operational costs. Operational costs were allocated according to the weight of the amount expected to be collected for each product category (which included analyzing past sales). Non-operational costs were allocated on a per-unit basis. Further to that, a review of thousands of SKUs was conducted. As a result, fees and categories were adjusted. Fees were rounded to the nearest 25 cents.
