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Contract to Manufacture and Sell Plastic Packaging

Supply of Plastic Packaging Goods Agreement - Manufacture

TR.C&L.04.18

This Supply of Plastic Packaging Goods Agreement - Manufacture is designed for use by suppliers when selling goods to business customers where the goods comprise or include plastic packaging and some or all of that packaging is subject to the new “plastic packaging tax” (PPT) that applies from 1 April 2022.

Under Sections 42-85 of the Finance Act 2021, a business producing any relevant goods or having such goods imported on their behalf becomes liable under that Act for PPT. The goods will be relevant goods where they comprise or include any “chargeable plastic packaging component”. That type of component is defined by the Act.

Where you are liable for an amount of PPT under the Act, and you supply any such component (or goods including any such component) to your business customers, you might wish to pass on to them an equivalent amount, i.e. recoup it in addition to the price of the goods, rather than absorbing the PPT cost that you have had to bear.

Whether or not you decide to absorb the PPT, you should include in your sales contracts for any goods comprising or including any such component a suitable clause to take account of the effects and requirements of the PPT provisions of the Finance Act 2021, including the requirement to provide customers with certain information.

This document template includes a pricing clause that takes account of the supplier’s liability for PPT on plastic that it is supplying to the buyer under the Agreement. To ensure that, after any necessary adaptation by you, all of the provisions of the Agreement meet your requirements and circumstances, you should take legal advice as to whether and how the PPT provisions of the Finance Act 2021 do or might affect your business.

This template is for use when the seller manufactures and sells goods which comprise or include any component as defined by the Act, and the buyer intends to use those goods purchased from the supplier to produce new or different goods. Several scenarios are covered by this template, including the following:

• You manufacture plastic packaging and sell it to business customers without any other goods or materials. The customer uses its own goods/materials to make a product which it then packages and sells using the plastic packaging that you supplied to it. Some or all of the plastic packaging that you supply is taxable as a “component”.

• You manufacture packaging and sell it to business customers without any other goods or materials. Some of the packaging that you supply is plastic packaging. The customer uses its own goods/materials to make a product which it then packages and sells using the plastic and other packaging that you supplied to it. Some or all of the plastic packaging that you supply is taxable as a “component”.

• You manufacture goods/materials which include packaging goods/materials, and you sell it to business customers. Some or all of the packaging goods/materials that you supply is plastic packaging. The customer uses its own goods/materials together with the packaging and other goods/materials that you supplied and it makes a packaged product from them which it then sells. Some or all of the plastic packaging that you supply is taxable as a “component”.

This Supply of Plastic Packaging Goods Agreement - Manufacture should only be used between two UK-based businesses who wish to establish a long-term supply relationship where the goods are for delivery only in the UK. It carefully regulates the legal relationship between both parties and ensures a fair balance of rights and obligations.

This template is designed to be used only when supplying business customers, not consumer customers. However, where you are liable for PPT on any component and you do not simply want to absorb that tax cost but instead increase your price to consumers to reflect that cost, you should consider what if anything you should include in your terms of sale to consumers in relation to that increase.

This document recognises the fact that additional considerations to those found in standard supply agreements are necessary when a long-term relationship is established, and as such provides comprehensive protections and measures for both seller and customer in all relevant areas.

If you wish to use this document in a scenario that involves personal data, standard clauses for data protection and data processing are available in the UK GDPR & Data Protection Group.

Optional phrases / clauses are enclosed in square brackets. These should be read carefully and selected so as to be compatible with one another. Unused options should be removed from the document.

This document is in open format. Either enter the requisite details in the highlighted fields or adjust the wording to suit your purposes.

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