July 12, 2013
For some U.S. recyclers, China's "Green Fence" is a gateway to more opportunities.
The policy, which went into effect in February, strictly enforces regulations on importing dirty scrap materials into the country. It has led to a significant drop in imports of plastic waste and put some recyclers out of business, at least temporarily.
The policy is bad news for some municipalities, which are having a tougher time with some low-grade plastics that they collect, since they can no longer ship it to China.
But Green Fence is opening up opportunities for some U.S. plastics recyclers.
The policy also has leveled the playing field by allowing large-scale companies that have invested additional money in pollution control and recycling services to operate at a more equal and fair-cost level, according to Kathy Xuan, CEO of full-service recycler Parc Corp. of Romeoville, Ill.
With China taking a harder look at the plastic waste it imports, U.S.-based recyclers are looking for opportunities in the changing global market.
Parc has doubled production in the last six months, Xuan said in a July 2 webinar hosted by the Society of the Plastics Industry Inc. of Washington.
Xuan joined other recycling industry executives — Saurabh Naik, president and CEO of Intercontinental Export-Import Inc.; Dave Kaplan, CEO of Maine Plastics Inc.; and Mike Biddle, president of MBA Polymers Inc. — in a discussion and brief Q&A on how China's policy has affected their companies and might impact the future.
"Legitimate recyclers applaud the move," Biddle said during the webinar. "We've been wanting this to happen because it levels the playing field. We've been operating more costly recycling facilities for years."
Recyclers "playing by the rules" have not been greatly impacted by enforcement, he said.
Richmond, Calif.-based MBA recycles plastics from difficult waste streams like auto shredder residue, electronics and appliances.
Biddle said MBA has had a plant in China for several years and has been importing "perhaps the most complex waste import into China" hand-in-hand with customs and environmental regulators. Though, he added, the cost of doing so has increased greatly for a number of reasons.
The policy is not good news for everyone. It has had significant and notable negative economic impacts in China, said Michael Taylor, SPI's senior director of international trade.
In the first three months of enforcement — between February and April — 55 shipments were halted in Chinese ports and more than 7,600 tons of recyclable materials were rejected or sent back to suppliers. Customs officials have also suspended the import licenses of 247 companies, Xuan said.
Recent crackdowns have required companies to import only those recycled materials that have gone through some kind of processing. It's no longer enough for items just to be clean and sorted, she said.
In the used-to-be depots of recycled materials in China, small companies have shut down, she said.
She added that some companies have attempted to continue operating at night — sneaking materials inside inbound and outbound shipments after dark — but government officials have cut power supplies in some areas to prevent that from happening.
The Green Fence operation is enforcing environmental laws already established in China. As part of that crackdown, violating those laws now comes with some significant consequences — violating pollution laws is now a criminal offense, Taylor said.
According to some reports, violating those laws could lead all the way to a death sentence, Biddle said.
The Green Fence also has caused some confusion.
Companies may not be sure who has the final say in accepting or rejecting a shipment. A company could get the go-ahead from the China Certification & Inspection Group, but be surprised when a shipment is rejected or delayed by customs, said Kaplan of Maine Plastics.
SPI is looking into whether that aspect of the policy would be considered an unfair trade practice or "at least a trade distortion," Taylor said. He added that a company could ship a mixed bale that complies with all regulations but still have its shipment turned away at customs because of a trace amount of contamination or "simply because it's mixed."
He said SPI may speak to U.S. government officials about those discrepancies.
Maine Plastics is working to educate suppliers and explain Green Fence policies such as acceptable levels of contamination, Kaplan said.
The company, based in Zion, Ill., also plans to implement "byproduct management programs" for its customers and help them develop programs to use recycled content.
The Green Fence has allowed Maine Plastics to invest in new equipment and technologies to capture those materials that were previously destined for landfills or Chinese ports, he said.
Kaplan was not the only executive using Chinese policy to focus on North America.
MBA also is working with its customers — the largest mixed-waste players in the U.S. — to up their game and increase the value of their recyclables, if not completely recycle their plastics in the U.S., Biddle said.
The company intends to build a full processing plant in the U.S. and has plans to close its small R&D center in Richmond and move those operations to the United Kingdom.
In 2012, 72 percent of Intercontinental Export-Import's business was in exports (60 percent of that in China) and the remaining 28 percent of the total business in value-added domestic recycling.
In five years, the Columbia, Md., firm could be heading toward flipping those numbers. "That's a very agreeable thing," Naik said.
IEI — part of the Naik Group of Industries — is looking at new markets for low-end scrap materials, but the company also investing heavily at home.
"We see the Green Fence as an opportunity to grow domestically, to create new markets for our export material, to create new jobs," said Saureen Naik, export sales manager of overseas operations. "Overall, we see this as an opportunity and not a threat."
In the next three years, the company plans to invest around $30 million in recycling technology and compounding in the U.S., she said.
The firm previously announced plans to invest $6 million in new capacity in the U.S., though it did not identify specifics of the investment.
IEI is also coming up with new ways to manufacture products containing recycled materials in the U.S., she said.
It's important for everyone to be responsible for the scrap produced in their country, according to Naik.
"Over the years, we've really been using China as a scapegoat. We've been dumping a lot of our low-end materials into China. And I think that this policy is really an opportunity" to look examine actions, impacts and carbon footprints, she said. It provides "a chance to take more actions and come up with new technologies that we can really establish here in the U.S. [as] alternate means and alternate recycling methods for our own scrap."
Biddle at MBA echoed Naik's sentiments. He said Green Fence should encourage U.S. cities to produce less contaminated waste and recycle more waste at home.
China plans to continue its crackdown through October or November of this year, but the country is unlikely to return to its pre-Green Fence environment. Crackdowns will occur, Taylor said.
"I think this space will be a lot more challenging, a lot more difficult and problematic, from here going forward," he said.
For a country dealing with a serious pollution problem, that's not a bad thing. Biddle encouraged China to continue maintaining its environmental policies.
"They want resources, not garbage, and you can't blame them for that," he said.