Customs & Trade Compliance Risks for FMCG in the Circular Economy

Executive Summary

Fast‑moving consumer goods (FMCG) companies are under intensifying pressure to adopt circular business models – from reusable packaging and refill systems to recycled content, reverse logistics and secondary materials. Yet customs and trade compliance frameworks remain rooted in linear supply chains. This misalignment creates strategic, operational and regulatory risks, directly affect cost, speed‑to‑market and brand reputation. FMCG leaders who anticipate these challenges will be better positioned to scale circularity profitably and compliantly.

Circularity disrupts FMCG supply chain assumptions

FMCG supply chains are built for speed, predictability and scale. Circular models introduce flows – returns, reusable packaging, remanufactured components, recycled inputs –  that customs systems were never designed to handle. The result is potential for friction at the border, inconsistent regulatory treatment and increased compliance exposure.

1 Classification: a critical gap for reusable and recycled inputs

The Harmonised System (HS) lacks clarity for many FMCG‑specific circular flows, including:

• Reusable packaging (e.g. crates, pallets, refillable bottles)
• Returned consumer goods for sorting, repair or recycling
• Recycled plastics, paper and aluminium used as inputs
• By‑products and secondary materials from manufacturing waste streams

This ambiguity can lead to:

• Delays in clearance for high‑volume, time‑sensitive shipments
• Divergent treatment across customs authorities
• Increased landed‑cost volatility
• Risk of misdeclaration penalties

We have seen customs authorities query whether plastic flakes are plastic waste/scrap, or an industrial input material. For FMCG, where margins are tight and speed is everything, classification uncertainty quickly becomes a structural risk.

2 Origin rules: recycled content and refurbishment are poorly recognised

Circular FMCG models increasingly rely on:

• Recycled content in packaging
• Refurbished or remanufactured equipment (e.g. dispensers, vending units)
• Multi‑life‑cycle components in appliances or durable goods
• Regional circular hubs for repair, sorting, or reprocessing

Yet preferential origin rules rarely recognise:

• The value added through recycling or refurbishment
• The transformation of waste into secondary raw materials
• Multi‑cycle components with complex origin histories

This can result in:

• Loss of preferential tariff treatment
• Higher duty exposure for recycled‑content products
• Suboptimal location decisions for circular operations

We’ve seen wastes from different sources used as a new material, which have lost their origin identities and so caused issues in determining the correct origin of the resulting product incorporating mixed-origin inputs.   For FMCG companies investing heavily in recycled content commitments, this is a material commercial challenge.

3 Valuation: circular FMCG flows challenge traditional models

Circularity introduces valuation challenges that customs frameworks struggle to accommodate:

• Returned goods often have no transactional value
• Reusable packaging may circulate without sale
• Recycled materials may have fluctuating or negative value
• Reverse logistics flows may involve credits, deposits, or incentives

Without clear valuation guidance, FMCG companies face:

• Disputes with customs authorities
• Inconsistent duty calculations
• Administrative burden in high‑volume environments

We know that recovered materials can have a negative value once collection, sorting and cleaning have taken place. Yet customs authorities challenge the nominal value to be used at import, increasing the value and customs duty payable. Given the scale of FMCG movements, even small valuation discrepancies can have a material financial impact.

4 Regulatory overlaps: waste vs product

Circular FMCG flows sit at the intersection of customs and environmental regulation. This is particularly acute for:

• Used packaging
• Food‑contact materials
• Returned consumer goods
• Recycled plastics subject to environmental controls
• Organic waste streams from production

Misalignment between regulatory authorities can lead to:

• Seizures or detentions of shipments
• Lengthy notification and consent procedures
• Conflicting interpretations of “waste” vs “secondary material” vs “new material”
• Reputational risk if shipments are mishandled or misdeclared

For FMCG brands with strong sustainability commitments, this is a governance issue as much as a compliance one.

5 Digitalisation: essential for FMCG traceability

Digital product passports, batch‑level traceability and data‑rich documentation will be critical for FMCG circularity. However:

• Standards are emerging unevenly across markets
• Customs acceptance of digital evidence varies
• Interoperability across suppliers remains limited

FMCG companies must prepare for a transition period where digital and paper‑based systems coexist – increasing complexity.

6 Strategic implications for FMCG leaders

To remain competitive and compliant, FMCG leaders should prioritise:

• Compliance‑by‑design in circular packaging and product strategies
• Investment in traceability systems that support customs and sustainability reporting
• Scenario planning for regulatory divergence across key markets
• Cross‑functional governance linking sustainability, supply chain, legal and customs
• Proactive engagement with regulators and industry bodies to shape emerging standards

Circularity is reshaping the FMCG landscape. The companies that succeed will be those that treat customs and trade compliance not as an afterthought, but as a strategic, integrated enabler of sustainable growth.