PITTSBURGH — US scrap exporters are enjoying short-term relief from the restart of China’s North American customs inspections division, but longer-term fears are emerging about stricter guidelines complicating future shipments and trade with that nation.
The inspection operations of the Chinese Certification and Inspection Group (CCIC) North America will officially resume on Friday June 8.
“Due to the need for system adjustments, our company will start accepting inspection applications on June 8,” CCIC North America said on June 1.
While the announcement did not directly address the thousands of containers on the water that have not yet been issued the final certificate required to clear Chinese customs, sources said shippers are in the process of obtaining that approval.
“CCIC can now issue the certificate for material on the water if the pre-shipment inspection was properly done. Today we have already collected certificates,” one exporter told American Metal Market.
Other exporters said they were actively working to obtain the final certificate but noted that a bottleneck of material awaiting certification may delay the issuance of the necessary paperwork.
“We are working on the certificates now. The backlog must be by the thousands. So far we still [haven’t] received them yet,” a second exporter said.
The Chinese government’s 30-day suspension of its North America customs division shocked the industry and disrupted the global scrap trade. Uncertainty over whether or not CCIC North America would actually restart operations temporarily prompted exporters either to stop buying material in the US domestic market or to hold shipments while they evaluated potential new markets for future trade.
Cost versus flexibility
In tandem with the CCIC North America resumption, the Chinese government outlined new rules for pre-shipment inspection procedures. The country has been working to strengthen and further regulate the scrap import process, which some US exporters fear will only make non-ferrous scrap trade with that country more challenging.
“From now on, the inspection will be much stricter than before. The future of inspection standards will be stricter. Before, you could send pictures; but from now on, you must do a live inspection in the yard and this will add some new costs. We will just buy high-quality scrap going forward. We will transfer from buying zorba fines to large zorba and twitch, and this will impact the importing volume. Copper scrap No 1, No 2, and bare bright are still okay, as well as brass scrap, aside from yellow brass, which will need to be improved by the yard,” the first exporter said.
These protocols were detailed in Notice No 48 of 2018, which was issued on May 28 by China’s General Administration of Customs. That agency will now have oversight for all supervision and administration of pre-shipment inspections, according to the notice.
The protocols listed by the agency outlined procedures for pre-shipment inspection activities, which became effective on June 1.
“‘Pre-shipping inspection’ shall mean the inspection, loading under supervision and stamping with sealing marks, and the issuance of the pre-shipping inspection certificate thereafter, by a pre-shipping inspection agency,” the customs administration said.
These requirements open the door for new third-party inspection agencies to become licensed to conduct pre-shipment inspections, the agency noted.
Prior to this announcement, CCIC North America was the sole agency in the United States able to conduct pre-shipment inspections, US exporters told American Metal Market.
“At the moment, CCIC is the only institution for scrap inspection, but now we can chose other institutions to do the inspection for the scrap business. This will improve the efficiency of CCIC. If you can use any other company, you have more flexibility. It’s a good thing, but right now we haven’t heard of any third parties doing inspections,” a third exporter said.
Still, the news was bittersweet for some in the industry who feared that stricter protocols will inevitably drive up the costs for scrap shipments to China, despite the increased flexibility afforded by multiple inspection agencies.
“Things will get more expensive and take more time, but it’s better than the alternative. This could bring the cost of inspections up. Right now almost 100% of inspections [are] done with photos. So even with new companies, you will now need to have travel time and travel expenses, just like CCIC Canada,” a fourth exporter said.
“The CCIC is back in business [but] with negative restrictions. [You] have to have an inspector watch the loading process, and they have to put the seal on the container. [This will be a] costly process,” according to a fifth exporter source.
Drastic shifts in China’s import policies over the last year have ushered in a new era of trade for the global scrap industry.
China has set aggressive restrictions on impurities in scrap metal imports, limiting the acceptable level of contaminants in non-ferrous scrap and in wires and cables to 1% and 0.5%, respectively; placed a 25% tariff on aluminium scrap imports; and expedited a ban on imports of Category 7 copper scrap.
The uncertainty of what will or won’t be allowed to enter into the country going forward - and potential for future knee-jerk shifts in policy - has unsettled some in the industry.
“China is a wild card right now. We do not want to be at the mercy of China’s regulatory agencies going forward. We are improving our processes to make it easier for us to export or to make [it] so the items don’t have to be exported,” a sixth exporter said.
“I’m told they are inspecting for the 1% contamination, which is very problematic, but even an expert has a hard time knowing what 1% looks like. So while they say it is 1% max, some stuff is probably getting in. You can’t just do a simple visual inspection,” the sixth exporter added.
Others shared a similar degree of concern, and are erring on the side of caution until more details emerge about how strictly shipments will be reviewed.
“It’s really about how tough the inspections are going to be on contamination and whether their 1% rule is upheld. China will determine what happens here. We feel there is more risk to the downside versus the upside, and we don’t want to get too far ahead. I think keeping an even position is prudent at this time,” a seventh exporter said.
“China has made it very clear that what they are looking for is furnace-ready material. It is going to be stricter than it was before, but at least there is movement,” the fifth exporter said. “You better be shipping the right stuff.”
Chinese consumers have also expressed uncertainty over the rigidity of the material inspections, noting that despite CCIC getting the green light to resume pre-shipment operations, exporters still must pass the stringent inspections once material arrives at the port.
“[Exporters] should not be too happy about the CCIC announcement,” one Chinese consumer said, adding that the loading inspection occurs after the container has already arrived in port and can only be carried out by local Chinese customs.
"If the scrap is dropped onto the floor, the dirt will already make it fail the test, it can be that strict,” this consumer warned.
Julian Luk, London, contributed to this report.