The Delegated Regulation requires that products destroyed under Article 2(f) have been subject to quality assessment procedures including visual inspection and sorting that prioritises restocking and repairs. The Invalusys grading taxonomy provides that assessment framework, routing every item through a structured evaluation that maps directly to the derogation pathways.
Five grades classify inventory by condition and determine the compliance pathway each item follows. The CLARITY grading engine applies this taxonomy operationally, generating the evidence trail Article 3 requires.
The Five Grades
| Grade | Classification | Condition Profile | Compliance Pathway |
|---|---|---|---|
| A | New / As-New | Original tags intact, packaging complete, no visible wear. Indistinguishable from new stock. | Exits to brand channels. Out of scope for DER-NCE — the brand has a primary resale obligation before any derogation applies. |
| B | Good — Minor Issues | Tags removed or packaging opened but garment in sellable condition. May require re-tagging or re-packaging. | Enters margin/recovery assessment. Resale viable through secondary channels at reduced margin. Grade B is the volume driver for recommerce. |
| C | Fair — Needs Intervention | Visible wear, minor soiling, or minor damage that is repairable. Requires cleaning, pressing, or light repair before resale. | Enters DER-NCE cost-effectiveness assessment. If cost-effective, routes to reconditioning. If not, routes to derogation under Article 2(f). |
| D | Poor — Derogation Candidate | Significant damage, heavy soiling, structural defects, or contamination. Repair technically feasible but unlikely to be cost-effective. | Routes to derogation assessment. DER-NCE calculation determines whether Article 2(f) applies. |
| E | Unfit — Fast Track | Product unsafe, legally non-compliant, IP-infringing, or damaged beyond any feasible repair. Includes hygiene contamination. | Fast-tracks to destruction certificate under applicable independent ground. |
Grade A: Out of Scope for Derogation
Grade A inventory is new or as-new stock that the brand has a commercial obligation to sell through primary channels. The ESPR destruction ban does not apply to stock that can be sold — it applies to decisions to destroy. An economic operator cannot destroy Grade A inventory and claim any derogation ground; the product is fit for sale.
In the Invalusys framework, Grade A exits to the brand’s own channels and is out of scope for the DER-NCE calculation, the derogation pathway, and the certification process.
Grades B and C: The Recovery Assessment Zone
Grades B and C represent the commercial heart of the returns challenge. Grade B items are sellable through secondary channels with minimal intervention. Grade C items require cleaning, pressing, re-tagging, or light repair before they are marketable.
For both grades, the first question is commercial: what is the expected recovery value through the best available channel? The DER-NCE engine compares reconditioning investment against expected net recovery, using proprietary resale transaction data to determine the optimal routing.
For Grade C specifically, the Article 1(2) cost-effectiveness test becomes relevant. If reconditioning cost exceeds the full replacement cost benchmark, the item is a derogation candidate. If it does not, the brand is required to recondition.
Grade D: The Derogation Threshold
Grade D items are the products where the cost-effectiveness calculation is most commercially significant. These are items with meaningful damage where repair is technically possible but economically questionable. The DER-NCE calculation determines whether the brand has a legal basis to destroy.
The precision of this calculation matters. An inaccurate assessment that routes a cost-effective repair to destruction exposes the brand to regulatory challenge. An inaccurate assessment that routes a legitimately uneconomic repair to reconditioning wastes operational resource. The proprietary data inputs — reconditioning cost benchmarks from Kalostar and resale recovery values from RMX transaction history — reduce uncertainty in both directions.
Grade E: Fast-Track Destruction
Grade E captures products where the derogation ground is immediately apparent: safety hazards, legal non-compliance, IP infringement, or damage so severe that repair is not technically feasible. These items bypass the cost-effectiveness assessment entirely because an independent derogation ground applies without needing to evaluate repair options.
The CLARITY engine identifies Grade E items early in the assessment process, routing them directly to the applicable derogation with the documentation Article 3 requires. This reduces processing time on items where the outcome is predetermined.
Why Grading Accuracy Determines Both Compliance and Recovery
An item graded too harshly — a Grade B classified as Grade D — bypasses resale channels and reduces recovery. An item graded too leniently — a Grade D classified as Grade B — enters resale channels where it underperforms or fails to sell, and the eventual disposal lacks the derogation documentation that should have been created at the original assessment.
Grading accuracy is not a processing efficiency question. It is a compliance question and a commercial performance question simultaneously. The Invalusys taxonomy, operationalised through the CLARITY engine, addresses both by embedding regulatory pathway logic into the grading decision itself.
