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Export Regulations
Navigating Export Regulations

Proactive measures and strong relationships with government officials, industry associations, and customers can help exporters navigate sudden changes in export rules.

Exporting scrap is challenging even when recyclers know what the rules are and do their best to follow them.

The rules tend to shift as much as the seas the exports sail on, however. Recyclers need timely, accurate information to stay on top of the export game. Misinformation, poor communication, and differing interpretations of export regulations often compound the challenges of exporting scrap. What might have worked numerous times before could all of a sudden become a problem because one official interprets a regulation differently than another official, causing delays and lost profits. Add to the mix new export regulations or changes to existing rules, and conditions can get downright daunting.

Recyclers can take steps to arm themselves with the information they need to clear up the muddy waters of exporting scrap. Clear and frequent communication, network-building, and strong relationships with customers, agents, governments, and trade associations give recyclers the knowledge they need to meet export challenges.

The Information Gap

Recyclers say they have no problem with scrap trade regulations in general. The goal of most trade rules is laudable—to ensure the quality of scrap entering the country, says Ranjit Baxi, managing director of J&H Sales International (London) and president of the paper division of the Bureau of International Recycling (Brussels). Countries that import scrap want material that is usable and safe, not waste that ends up in their landfills. Most regulations stem from problem shipments or other controversial issues with imported material. “In the past, people exported everything and anything,” Baxi says.

Recyclers’ biggest complaints are about the lack of timely, clear information about trade-regulation changes. “The worst thing that can happen in our business is confusion because you don’t know what you can or can’t ship, what you can or can’t import,” says Robert Voss, managing director of Voss International (London), who also serves as chairman of BIR’s International Trade Council and president of Eurometrec (Brussels), the European Metal Trade and Recycling Federation. Though government agencies can disseminate information quickly, the problem is that “we often don’t get the right information, even from the countries themselves,” he says. Scrap shippers generally “can overcome problems put in front of us, but if we don’t know exactly what the problems are, it’s difficult to overcome them,” Voss says.

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Sometimes recyclers don’t find out about trade-policy changes—many of which are retroactive—until a shipment is on its way or sitting in a foreign port. “That’s a big part of the problem,” says Scott Horne, ISRI’s general counsel and vice president of government relations. “That’s not the way it’s supposed to work.” Importing countries should notify international organizations such as the World Trade Organization and the Basel Convention secretariat of changes in their laws or regulations when they occur, he says. Instead, most scrap shippers find out about a new or altered regulation when their customer tells them about it. “Oftentimes [the countries] don’t provide notification, or if they do, it comes well after the fact, usually only because somebody is screaming that their shipment has gotten held up, and the holdup is a violation of international law,” Horne says.

Learning about regulation changes after material leaves the home port puts a strain on recyclers and consumers, Voss says. “If legislation changes when your goods are halfway across the world, it’s difficult to make a reasoned judgment as to the best way [to handle] it.” Alan Alpert, president of Alpert & Alpert Iron & Metal (Los Angeles), who heads ISRI’s trade committee, agrees. “There’s nothing you can do but deal with the problem.” Alpert gives this example: Customs agents at China’s Ningbo port changed the category in which they classified certain scrap radiators on Feb. 28, effective March 1—too soon for companies that had containers on the water to respond. Immediately, Ningbo implemented its new rule, but other ports did not. Companies affected by the change approached the Chinese government for clarification, and the government ultimately implemented the change nationwide. Alpert says China made the right decision, but “it took time and effort to sort everything out,” which slowed down or stopped trade in some scrap radiators for about a month.

Companies in that situation can find themselves squeezed into a corner, with limited options. “Sometimes it means switching cargoes to another destination,” says Bob Stein, vice president of nonferrous marketing for Alter Trading Corp. (St. Louis) and president of BIR’s nonferrous division. Or, Voss says, the scrap shipper “may have to sell at a lesser value because it’s a better option than bringing the material back home.” Some recyclers choose not to ship to certain countries until issues are resolved, Horne says. “It’s simply a business decision because the risk associated with the uncertainty is too great to justify the financial reward of the sale.” When that happens, both sides lose. Some companies stop getting the raw material they need, while others are prevented from trading, Alpert says.

One additional complaint is that even when a country announces its regulatory changes, the rules can be unclear. “The way China implements its rules is always somewhat clumsy, subject to interpretation and reinterpretation,” says Randy Goodman, an ISRI trade committee member and director of international marketing and logistics for OmniSource Southeast (Spartanburg, S.C.). “Sometimes it requires negotiation between ISRI, BIR, and our counterpart trade associations in China and the people writing the laws” to ensure everyone understands the regulation and what scrap shippers need to do to comply. In April, for instance, ISRI learned that China had created a new requirement for packaging “mixed loads” of metals, plastic, or paper scrap that’s scheduled to take effect June 1. As this issue went to press, ISRI was working to clarify exactly what China considers a mixed load.

Beyond their communication concerns, recyclers object that some trade controls or regulations can be difficult, even impossible, to implement commercially. For example, a country could demand inspections of every container of scrap entering the country, even if the shipper sent the material from multiple locations, Baxi says. The cost of doing business would escalate, as that would require that several inspectors travel to different loading points, he explains. “Legislation is always a problem to implement without increasing the cost to the buyer and seller,” he says. Further, some problems arise when the regulations mandate an unachievable ideal of product purity. “On the producing side,” Baxi notes, “it’s not possible to produce a bale of paper without one piece of plastic inside.” He believes that improvements in technology and infrastructure will help ensure that shipped material better matches what importing countries want, causing fewer problems and restrictions.

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Trade Travails

Trade Travails Which trade-regulation changes have disrupted the scrap industry the most? “It depends on the snapshot in time,” Horne says. To date, the initial round of licensing under China’s Administration of Quality Supervision, Inspection, and Quarantine in 2003-2004 tops Horne’s list of disruptions. Scrap shippers to China must have an AQSIQ license, which they renew every three years. When China implemented this policy, “there was an incredible amount of misinformation floating around,” Horne says, so ISRI decided to take action. “That’s when we actually started our relationships with China,” he says. “We traveled [there] to meet face to face [with Chinese officials] and get explanations so we could help our members navigate these new rules.” Horne names the first renewal of most of those licenses in December 2007 as the second-most-disruptive change to scrap exporting. “Again, there was a lot of misinformation, a lot of rumor. We had to intercede again with AQSIQ,” he says. Even when companies filed renewal applications on time, licenses were delayed significantly, he points out.

Voss agrees that the AQSIQ application and its renewal process have been “fairly onerous,” though “the actual methodology of the licensing is not that bad.” He also believes that the China Commodity Inspection Corp. inspections that AQSIQ requires may have caused some export delays—especially in the beginning. “In the early days, CCIC was haphazard because no one quite knew what CCIC was expected to do—nor did they—but then it seemed to settle down.”

China is not the only country that has caused major upheavals for scrap exporters, however. Las t year, the Indian government declared that all scrap was hazardous material—even materials on the Basel Convention’s green list, Voss says. Green-list materials are those the Organization for Economic Cooperation and Development (Paris) has determined do not pose an environmental risk when properly handled. Thanks to efforts by ISRI and BIR, India seemed to reverse its decision in April. “We still haven’t resolved all the questions that revolve around that,” Horne says.

Miscommunication was a large part of that particular problem, Horne and Voss say. “We were constantly sending out e-mails [to Indian officials] and often had to clarify our points,” Horne says. Ikbal Nathani of the Nathani Group of Cos. (Mumbai) flew several times to New Delhi on behalf of both ISRI and BIR, Horne and Voss say, as did ISRI President Robin Wiener. Still, “the government flipped on a couple of things,” Horne says. Verbal commitments conflicted with the written documents that followed. “It was pretty disruptive for a time—a lot of uncertainty,” he says. Voss agrees. “It’s the lack of clarity in places like India that causes the most problems,” he says. “They suddenly bring in draconian legislation, and then it’s an uphill battle to try and get it withdrawn.” He gives another example: the country’s decision that traders couldn’t import scrap, a policy that’s “ridiculous because the Indian scrap business functions through traders, not consumers.”

Beyond China and India

Export confusion extends beyond China and India, of course. Certain African countries recently banned the export of copper scrap to stop the theft of copper cable, a move that Voss likened to using a sledgehammer to crack a nut. “The easy answer is just to stop exports,” he says, but that will not stop cable theft.

Even developed nations can be “somewhat difficult” regarding trade regulations, Horne says. About two years ago, the European Union issued Annex VII to its regulation 1013/2006, which governs shipments of waste and scrap. Annex VII specified that a certain document must accompany scrap shipments, but the amount of proprietary information the document required had members quite upset and concerned, he says. Together, ISRI and BIR “were able to have the rules amended to protect the information,” Horne says, though he just heard from an ISRI member with an Annex VII concern that’s “related to that same issue.”

Europe also has become much stricter with its inspection procedures, Voss notes. Some countries require inspections of material exported to China even if the country does not have a CCIC office. That means added expense and time for the exporter because a CCIC inspector must fly in (usually at the supplier’s expense), which can take two to three days, he says. “It can have a dramatic effect on your profitability.” Along the same lines, the automated system for registering shipments leaving the United States has caused issues for some recyclers because it slows down the export process, Goodman says. The security and documentation procedure, which the United States implemented more than a year ago, shortens the window for when exporters must turn in paperwork and have containers at port, he says. Goodman says he understands it’s part of doing business in today’s more cautious environment. “It’s not necessarily a bad thing; it’s just an inconvenience.”

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The fact that Europe controls scrap under waste legislation is another ongoing issue that affects exports. “We don’t have restrictions on exporters or importers of scrap per se, but we are always controlled under waste legislation and the inherent problems that brings with it—for example, the Annex VII document, which we are learning to live with,” Voss says.

That aside, the biggest problem with importing and exporting scrap in Europe is “we don’t enjoy a level playing field,” Voss says. Each sovereign nation within the EU individually interprets scrap legislation, and each interpretation can “differ dramatically,” he says. “Some countries are much easier and others more restrictive. Even in the United Kingdom, we have a different legislative body governing environment in England than we do in Scotland, even though we’re part of the same nation.”

Interpretations of regulations can vary even within individual countries. Voss recalls a customer that found itself in just that position. The customer had exported a substantial quantity of scrap to India, he recounts. The first time, the company did not have a problem. India accepted the material as scrap. The second time, however, Indian Customs refused to accept the material as scrap, Voss says. The customer fought the decision for eight months. Only the shipping line made money, Voss says, because the material stayed in containers for months. In the end, the customer lost a lot of money. “The reason was, purely and simply, because one individual customs officer had interpreted the import legislation in a different way than another,” he says. “That was in India, but it could have been in China—it could have been anywhere.” Further, he says, it could happen to anyone. “Luckily, we didn’t lose money, but it could have easily been us.”

What’s a Company to Do?

It’s a challenge whenever a scrap shipper has to deal with another country’s laws and regulations, Horne says, especially if the company doesn’t have someone on staff who understands the language of that country. It also helps to have someone “on the ground” in the destination country who can talk with government officials face to face, he says. Alter Trading has an office in Hong Kong, for instance, so it can “react quickly if things change in China,” Stein says. Alpert also receives information from his overseas offices as well as his agents, customers, trade associations, and the foreign government’s agencies. “We hear from different sources and often get different information [from each one], so we have to go through all that to find out what the truth is,” he says.

Shippers without their own international representatives often rely on business contacts for information from the destination country. “It comes back to people,” Voss says. “If you have good relationships with agents and customers, they keep you informed.” Scrap shippers can stay informed in other ways as well. Alpert says his company’s employees travel to different regions and attend conferences and board meetings to gather information. “We spend a lot of time, money, and energy to make sure we’re up to date on all the issues,” he says. Stein suggests reading Englishlanguage versions of newspapers from where your company does business, as well as visiting the Web sites of international and country-specific regulatory bodies and reading bulletins from trade organizations. “That’s how we do it.”

The best way to address export problems, of course, is to prevent them before they develop, Voss says. Sharing information about the industry with public officials from importing and exporting countries is a step in that direction, the recyclers say. If officials have a better understanding of the scrap industry, the laws and regulations they propose will reflect that understanding. In Voss’ view, “It’s the lack of understanding and the lack of clearly defined legislation that causes problems. That goes to the root of all our problems.”

Recyclers must acknowledge, however, that it’s their responsibility to educate government officials about the industry and its issues, Voss says. “We can’t expect them to come and learn about our business.” Baxi concurs. “Good, friendly dialogue could sort out a lot of legislation,” and more such dialogue needs to happen at the grassroots level. Recyclers must work with legislators and regulators to create rules that make sense, serve the intended purpose, and are enforceable, he asserts.

Associations can play a key role in untangling export problems, these recyclers say. “Some of the major issues are better handled by the trade associations than by a single company,” Alpert says. Voss agrees, asserting that recyclers “need the trade association strength behind them.” Associations bring “significant authority” to any trade-related issue, especially for smaller companies that don’t have representatives in other countries.

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Many issues begin as isolated incidents, says Matt Heitmeier, an ISRI trade committee member and director of nonferrous marketing for Louis Padnos Iron & Metal Co. (Grand Rapids, Mich.), and “often people try to deal with it themselves. It’s very important [that companies] document what the issues are and notify ISRI immediately” so the association can develop solutions for the problems that surface, he says. When that happens, ISRI and BIR quickly gather information to understand the issue and separate the truth from the rumor, Voss and Horne say. “Half the battle is getting the correct information,” Voss reiterates. As they gather information, the associations inform their respective members of the issue. In some situations, the associations form delegations—often working together—to meet with representatives of the specific country and get results. Baxi believes associations such as ISRI and BIR also should actively facilitate global trade by asking importing countries what the recycling industry can do to improve and give them the product they really want, he says.

The associations also must work with their own countries’ trade representatives and government officials, Voss says, to help them understand the industry—“who we are, what we’re doing, and what our problems are”—and bring them onboard so they can assist when needed. “You have to have a very good relationship with trade organizations and individual sovereign governments because they’re the ones that get legislation amended or looked at more closely,” he notes. “They’re the people with the power to get things changed.” Eurometrec has built solid relationships with the EU’s director general for trade, who now understands the scrap business, Voss says. “If you show up in China or India with an official EU trade delegation or something coming from the trade commission, it has a lot more impact than if it comes even from ISRI or BIR.”

In the United States, ISRI has worked extensively with the U.S. Department of Commerce and the U.S. Trade Representative to increase Chinese government transparency and to explain to Chinese officials the wide-ranging impact certain regulatory changes can have on the scrap trade, Horne says. The U.S. government even invited ISRI to participate in transparency talks as part of the first joint meeting of the U.S.-China Strategic Economic Dialogue in July 2009. ISRI also has worked with U.S. officials on trade with India, Malaysia, and Indonesia, Horne says.

The recycling industry has raised its profile with governments worldwide in recent years and forged solid relationships with trade and other officials, all of which has earned it a seat at the table on import/export issues. “Years ago, if we said, ‘We don’t agree with this legislation,’ we wouldn’t even get an interview,” Voss says. Today, the industry has influenced laws, policies, and regulations successfully, he notes. “When it comes to changing important legislation—particularly where scrap and waste are concerned—we are very effective.” He points to the industry’s relationship with China’s AQSIQ as a model example of its progress. “They listen to us,” he says. “They now know who we are and what our problems are.”

Goodman doesn’t recall many “deal-breaking issues—[ones] that slow down the art of trading or exporting materials,” he says. “They might pose scary moments, but in the long run they’re worked out over time through organizations like ISRI and BIR.” While applauding the industry’s progress, Voss remains realistic and vigilant going forward, knowing that other trade challenges are sure to arise and that “it’s very often two steps forward, three steps backward.” To succeed in exporting scrap, Heitmeier says, “you have to be flexible; you have to know your customers and their needs; and you have to be open to change. It always changes—that’s the one constant.”

Diana Mota is associate editor of Scrap. [This article previously appeared in the May/June 2010 issue of Scrap magazine. Reprinted with permission.]

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