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US Scrap Suppliers Perplexed over New Chinese Duty
May 20,2010 10:33CST
industry news

NEW YORK, May 20 -- A pending customs rule to stop duty evasions on scrap metal shipments to China are confusing and time consuming, but will unlikely stop U.S. suppliers from sending base metal scrap to the world's largest consumer.

Participants at this year's Institute for Scrap Recycling Industries (ISRI) convention in San Diego said they would continue shipping to China, but they still had many unanswered questions about the new rule, due to take effect June 1.

While ISRI has done a good job of communicating its members' concerns about the new regulation, the Chinese customs and inspection bureau has yet to answer the organization's many questions, according to Matthew Heitmeier, director of non-ferrous marketing at Louis Padnos Iron and Metal Co in Michigan.

For example, he said, "When we initially asked what the notice means, we wanted to know if it means when the cargo arrives on June 1? Or, is June 1 the date of loading? Still nothing has been communicated, yet."

In March, China announced requirements for importers to provide grades of metal scrap content on customs documents based on specifications in the international market starting on April 1.

Then on April 19, it further tightened imported scrap metal rules as part a crackdown on duty evasions. Mixed loads of scrap metal shipped in containers will no longer be allowed after June 1 and will have to be segregated by type, according to the Administration of Customs website (www.customs.gov.cn).

Some U.S. scrap suppliers worried that the new regulation would delay or reject all aluminum and copper scrap shipments. But others felt that the stiffer customs rules referred specifically to shipping containers filled with various types of scrap. The point is, no one knows for sure what the new rule means and specific details about how it will be implemented.

Several participants said they understood that the stricter rules were meant to identify unscrupulous dealers who packed less expensive scrap, like old motors, on top of more valuable scrap material, claiming the entire container held the cheaper material to fool customs inspectors and pay a lower duty.

The customs office was aiming to reclaim its just due.

"From our understanding, the main focus of the new regulations are designed for what they would classify as mixed loads with highly different valued material, such as putting electric motors in with copper and then declaring the value of the electric motors rather than more valuable copper," said Jerry Weinberg, U.S. vice president of Sigma Group, a secondary aluminum smelter and scrap trader in China.

"The main focus of the Chinese regulation is to not allow the lower value to be used as the taxable base for imports."

According to Heitmeier, China's new regulations have presented a major challenge for U.S. scrap exporters because of their elaborate and confusing reporting requirements.

What was previously a one-stage process, he said, has now turned into a six-part inspection process that includes before-and-after photos, numerous forms, and the need for approval before a supplier can get paid for a shipment.

Despite the new rules, numerous U.S. scrap exporters said, at this point, it would not stop them from shipping to China. But with many questions outstanding they have a wait-and-see attitude about how things develop at the Chinese port.

"We at Sigma do not see that there's going to be any change in what we normally would buy. When we buy mixed loads it's all aluminum. The main focus is going to be to restrict the practice of declaring lower valued material in a mixed load than the much higher valued material," said Weinberg.



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