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The Big Ban

After years of China being the world’s foremost buyer of most scrap commodities, its new import ban and other policy changes have scrap processors and traders concerned about the worldwide impacts.

November/December 2017

After years of China being the world’s foremost buyer of most scrap commodities, its new import ban and other policy changes have scrap processors and traders concerned about the worldwide impacts.

By Megan Quinn

China-BanChina is the world’s biggest importer of scrap. For years, its gargantuan appetite has meant big, generally reliable business for recyclers. But after more than 15 years of importing record volumes of material to feed its economic boom and its role as the world’s manufacturer, the country announced in July that it would stop accepting certain types of scrap by year’s end.

In the announcement, China told the World Trade Organization that it plans to ban 24 different “solid waste” materials, including several types of scrap plastic, mixed paper, and slags and drosses. Though the ban has yet to take effect, the announcement and other Chinese policy changes already have caused significant disruptions. Some Chinese importers have reported not being able to secure permits they need to continue importing scrap into the country. Exporters have expressed widespread confusion over whether or not the ban covers their materials. On top of that, China announced new technical standards for materials that were not banned, calling for a 0.3 percent prohibitives threshold for all materials—a move that, if implemented, could “effectively ban all imports,” ISRI President Robin Wiener warns. In the meantime, recyclers are taking steps to improve the quality of their material in an effort to meet stricter regulations.

Cause and Effect

China’s ban announcement is part of a strategy to reform its import system, which it says has become clogged with “foreign garbage”: unrecyclable and hazardous waste hidden among legitimate recyclable commodities. “To protect China’s environmental interests and people’s health, we urgently adjust the imported solid wastes list, and forbid the import of solid wastes that are highly polluted,” China told the WTO in July. China also wants to wind down its dependency on foreign scrap and beef up its efforts to recycle more materials within China, says Adina Renee Adler, ISRI’s senior director of government relations and international affairs.

Imports might be part of the problem, but it’s the country’s dramatic economic boom that gave rise to dramatic pollution, Adler says. “They realize they have a serious environmental crisis on their hands,” she says. “They don’t want to reduce economic development or manufacturing, but they know they need to do things a little differently because of the environmental impact.”

Public perception also may play a role in China’s recent motivation to clean up the environment and its targeting of scrap imports, she says, particularly after Chinese filmmaker Wang Jiuliang released a documentary, Plastic China, about a child who works and lives in squalid conditions at a primitive plastic recycling facility. The film was screened at the Sundance Film Festival, gained international attention, and “there’s even word that [Chinese President] Xi Jinping has watched it,” Adler says. Chinese recycling operations range in sophistication from the one depicted in the documentary on the low end to those that could meet U.S. or European standards, she notes.

Chinese officials are serious about cutting down on trash and pollution and prohibiting nearly all scrap imports within the next few years, Adler says, though that effort will be a huge challenge for a country that takes in approximately 29 million mt of paper and 7 million mt of plastic scrap each year. Last year, 45 percent (13.2 million mt) of that paper scrap and 11 percent (766,000 mt) of that plastic scrap came from the United States.

China accounts for more than half of the world’s total scrap imports, and cutting off such a major destination for material undoubtedly will change the way recyclers do business around the world, Adler says. This is especially true in the United States, which is the world’s largest scrap exporter—and China is its largest trading partner. About 30 percent of the scrap processed within the United States each year is exported, and about 40 percent of that goes to China.

An ISRI analysis estimates that the ban taking effect at the end of the year could affect 18 percent of the scrap traded between China and the United States annually, or 2.9 million tons of mixed paper and plastic scrap worth about $532 million. It also could affect more than 40,000 American jobs, Wiener wrote in a response letter to the WTO.

Scrap is Not Waste

ISRI and other recycling associations in the United States and abroad say they understand China’s motivation to improve its environment. Yet they disagree with China on a major point: which materials on the list are considered waste. The list of items China plans to ban includes several types of scrap plastic and mixed paper, which “are commodities, not trash,” Adler says.

China’s initial list of “waste,” released in July, also left recyclers with questions about whether the ban would apply to some of their materials. The plastics section of the list, for example, caused confusion because it was unclear whether the banned items were postconsumer, postindustrial, or both. ISRI was able to contact Chinese officials and determine the ban was specific to postconsumer plastics, but other details remain unclear, Adler says, such as whether regrind or pellets made from postconsumer material are banned. “Those are plastics that have been cleaned and separated, and it just happens to be coming from households—is that banned simply because it came from a postconsumer source? It’s perfectly clean and usable,” she says.

ISRI submitted its response to the WTO opposing the ban, stating that it includes “highly valuable commodities” that should be considered scrap, not waste. ISRI “has even provided suggestions for Chinese words that should be used to refer to scrap” to make it clearer that it is not waste, Adler says. ISRI also has urged China to clarify the ban’s scope to clear up confusion and avoid trade disruptions. ISRI “fully supports the efforts of the Chinese government to improve environmental protection and standards within its domestic recycling infrastructure. However, we disagree that a ban on the import of specification-grade scrap materials will help with those efforts,” Wiener wrote.

So far, Adler says, it has been difficult to get clarification from China’s environmental ministry, but ISRI has asserted its position in meetings with the Chinese government through its embassy in Washington, D.C. Embassy officials have requested ISRI’s guidance on best business practices in the recycling industry, and they are helping connect ISRI with authorities in China to continue the conversation. “We are actively involved in trying to sort this all out to minimize the impact” for recyclers, she says. ISRI also is working with the U.S. Embassy in Beijing; officials at the White House, the U.S. Department of Commerce, and the Office of the U.S. Trade Representative; and key members of Congress, she says.

Troubling Thresholds

China’s lack of differentiation between scrap and waste is just one concern for recyclers, however. Another major issue is its proposed quality thresholds. In August, the Chinese government published draft revisions to its technical standards, calling for a 0.3 percent prohibitives threshold for all imported scrap materials.

This threshold could effectively prohibit all scrap exports to China, even ones not included on the list, Wiener stressed. “It is simply not possible to achieve such a control level, nor is it possible to even measure it with such accuracy,” she stated in the WTO letter. Leonard Zeid, vice president of marketing for Midland Davis Corp. (Moline, Ill.), explains that the proposed standard is so strict “even a piece of tape on a box would be enough” to be considered contamination in an otherwise clean bale of corrugated.

In its ongoing discussions with the embassies, the WTO, and other entities, ISRI has called on China’s Ministry of Environmental Protection to instead follow the existing global standard, ISRI’s scrap specifications, which limit outthrows and prohibitives in scrap paper to between 0.5 percent and 5 percent, depending on paper grade, with similar limits for scrap plastic. Myles Cohen, president of Pratt Recycling (Conyers, Ga.), says recyclers have long depended on ISRI’s specifications to do business with China, and the 0.3 percent limit would be extremely difficult for recyclers to meet. For now, Cohen says, recyclers are trying to go about business as usual, but some shipments to China already have slowed or stopped. “I think we are still in this period of uncertainty, and nobody really knows how the new rules will be applied, or if they will be applied,” he says. “There is still paper being exported from the U.S., but some exporters are nervous about the markets, and rightfully so. They don’t want rejections at the ports. If they get rejections, the costs to recyclers could be disastrous.”

Though the ban has yet to take effect, plastic and paper recyclers say they already are feeling the effects all the way down to the municipal level. Material that once left the country on a regular basis is sticking around longer, and that means recycling centers, notably those on the West Coast, are starting to back up. By September, news outlets started reporting that haulers in places like Florence, Ore., had asked residents to stop recycling their plastic jugs and other plastic containers, saying they are too hard to sell in current market conditions. Some materials recovery facilities are responding to the new thresholds by running recyclable materials through the sorting lines twice to improve the quality, which is slowing down operations and leading to further backups.

Lagging Import Licenses

While paper and plastic scrap are still slowly leaving the United States destined for China, the shipments are facing another hurdle: Chinese authorities have been slow to issue new import permits since June, Adler says. The country issued 11 rounds of import permits from January through May, but it halted issuing new scrap permits in June and resumed in September. With just weeks left in the year, many importers quickly met their allotted shipment quotas, meaning they cannot bring in more materials until China issues new permits. That situation could leave U.S. exporters with no place to send some types of material—and it could leave processors in China with less material for their operations, she says.

Though it’s unclear exactly how many importers have been affected and to what degree, Zeid says his sources inside China hear the government will issue fewer import licenses in 2018—possibly 20 percent fewer, according to one importer. Adler says other importers have told her their licenses were not renewed after authorities conducted routine inspections and declared the business was noncompliant with certain regulations. Such companies had not received that type of penalty in the past and had never had trouble receiving import permits before, they reported.

In addition to these reports of scrap import license problems, ISRI has heard news of reduced import quotas for nonferrous metals, especially insulated wire and motors, sometimes referred to as “Category 7” metals by the Chinese government. In July, Chinese government officials inspected more than 1,700 domestic metal scrap processors and importers for compliance with environmental regulations, and it declared 65 percent of them were noncompliant. As a penalty, Chinese importers either lost their import licenses, did not receive new ones, or were granted licenses for quotas of far less than they requested. That means they are placing fewer orders, Adler says, and importers are starting to worry the trend could “spill over” to other nonferrous metals, including Zorba.

Vannah Harriman, owner and president of Seven Points Recycling (Kansas City, Mo.), sells about 75 percent of her scrap to China, mostly shipping electric motors and other mixed metals. She is worried about how the proposed 0.3 percent contamination threshold might affect her, and she is worried that China may start considering her electric motor scrap shipments to be Category 7 scrap. Getting straight answers is a challenge, she says. For each of her Chinese contacts that says electric motors will be turned away at the port, “there’s another one of my contacts that is saying, ‘No, the motors are fine, so keep sending them.’” Harriman supports ISRI’s call for the Chinese government to officially recognize ISRI’s scrap specifications because she uses those same standards when inspecting and packing her shipments. “It’s not fair if this gets classified as Category 7. This is a clean, recyclable product,” she says.

Harriman says she is looking for markets in other countries in case the companies she sells to in China can no longer get import permits. She will have to diversify her business to stay afloat, she says. “I just have to do business today and look for business tomorrow,” she says.

The Future of Quality

Harriman says shippers shouldn’t be surprised at China’s actions. Years of unscrupulous shipping have ruined it for everyone, she says, and the only solution is to produce and ship better-quality scrap. “People’s impulse is to panic … but what they aren’t understanding is that this ban is something we brought upon ourselves as shippers.” Seven Points has had its fair share of run-ins with customers who try to sneak garbage into shipments, she says. It restricts items such as ballasts and ceiling fans, but “even so, when we receive loads from customers that are full of thousands of pounds of restricted items, we know they are also shipping this trash to China,” she says. Shippers got away with sending banned material to China for years, even after the country stepped up its inspection process and implemented programs such as National Sword, a separate effort from China this year to crack down on illegal “foreign waste” by introducing more stringent inspections of all containers at Chinese ports. “All I can do is ship a quality product,” she says. “If you can’t ship a quality product, you have to ship it to someone who can take that extra step” to produce cleaner material.

If the China ban has any kind of silver lining, it’s that more recyclers are taking steps to clean up their product, Cohen says. Stricter regulations from the world’s top scrap consumer finally might be the motivation recyclers need to invest in better equipment, try new methods, or simply be more vigilant about what goes into a shipping container. It’s the only survival strategy for the foreseeable future, Cohen says. “The suppliers we’re talking to are cleaning up and reducing the contamination of their materials,” he says. Yet it’s easier said than done.

Cohen and Zeid say better quality must start at the municipal level, where haulers and MRFs will have to be more vigilant against “wishful recycling,” the practice of putting something in the recycling bin that MRFs can’t handle or can’t find markets for, such as “garden hoses, postconsumer beverage cups, lawn furniture,” Cohen says. Better vigilance at the curbside level is the best way to help recyclers in the long run because there’s only so much that sorting equipment—even the newest, most technologically advanced products—can do for quality. Processors that are interested in investing in new equipment need to have an idea of where the market is going before making such a big investment, Zeid adds. And after the chaos of the last few months, “I don’t think anyone knows where the markets will really go.”

Even if China decides to relax its proposed regulations to be more in line with global quality standards, the last six months have been a serious wake-up call, these recyclers say. Who knows what the future holds, Zeid says, “except that we have to put quality first like never before.”

Megan Quinn is reporter/writer for Scrap.

Further Resources

ISRI is closely monitoring and responding to news related to China’s ban on scrap imports and its other policy changes affecting recyclers. Here’s how you can stay in the loop:

■ Subscribe to Leadership Update, ISRI’s weekly e-newsletter, for up-to-date news on the China ban and ISRI’s response. Visit isri.org/news-publications/newsletters.

■ Find documents about the China ban and proposed threshold changes, including text of China’s announcements and ISRI’s official responses to the Chinese government at isri.org/policy-regulations/international-trade/china.

Scrap will investigate the impact of China’s actions on specific scrap commodity sectors in future issues. Get your own subscription at scrap.org.

■ ISRI’s Trade Committee addresses the international trade of scrap materials, develops advocacy positions, and addresses compliance issues related to international trade. To join, contact Adina Renee Adler at aadler@isri.org or 202/662-8514.

■ Have questions, concerns, or information to share? Contact Adler at the information above.

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