Attitude adjustments

Features - Industry Report

Recyclers have made plenty of adjustments to China’s Operation Green Fence, which has been in place for one year.

March 5, 2014
Brian Taylor

Operation Green Fence, a joint effort by several Chinese government agencies designed to more closely manage containerized scrap imports, was introduced in February 2013.

In early 2013, recyclers and traders in North America said the policy was enacted without any advance notice, leaving no time to make adjustments to shipments already on the water when the Green Fence regimen was established.

Chaos and financial harm resulted for the guilty and the innocent alike, recyclers and brokers complained, because of the enormous backups caused at Chinese ports as inspectors seemingly opened up and viewed each inbound container.

One year later, those bad memories are still fresh in the minds of many recyclers in the U.S., though the passage of time and the distribution of additional information about Operation Green Fence have helped lead to adjustments to the procedures and (in some cases) the attitudes of recyclers.

Cycling through

The reaction of recyclers and brokers to Operation Green Fence has in some ways paralleled the seven stages of grief outlined in 1969 by Swiss psychiatrist Elizabeth Kubler-Ross:

  • Stage One – shock or disbelief (“My container won’t be inspected or cleared for how long?!”);
  • Stage Two – denial (“There’s no way they can keep rigorously inspecting like this for more than a month.”);
  • Stage Three – anger (“If they don’t want our scrap, we’ll find somewhere else to send it!”);
  • Stage Four – bargaining (“If you’ll clean up and sign off on this one load of mixed paper, we’ll ship only OCC next month.”);
  • Stage Five – guilt (“Maybe this was bound to happen if we kept pushing prohibitive and out-throw percentages higher and farther away from the specifications.”);
  • Stage Six – depression (“Our first-half balance sheet has taken an enormous hit from this.”); and
  • Stage Seven – acceptance and hope (“Ultimately, this Green Fence was necessary to reward quality and weed out the bad operators.”).

Undoubtedly some recyclers lingered in certain stages longer than others, and by no means have all traders accepted Operation Green Fence as a reason to be hopeful about the future.

Positive spin

If recyclers in North America look back at the dollars-and-cents impact of Operation Green Fence in 2013 and see red ink, it may or may not comfort them to read about positive bottom-line effects being touted by the General Administration of Customs of the People’s Republic of China (China Customs), one of the agencies that oversees Green Fence.

A news release posted by China Customs in mid-January 2014 refers to a study conducted by a regional papermaking association claiming improved pulping yields thanks to Green Fence.

“According to [an] estimation made by the Fuyang Paper Association, papermaking companies in Fuyang earned 40 renminbi to 65 renminbi ($6.60 to $10.75) more on each ton of imported waste paper due to the lower moisture content and less foreign substances [in bales.].”

The news release, posted at, continues, “In this way, Green Fence has brought in 70 million renminbi ($11.5 million) more for the local papermaking industry (which imported 1.5 million tons of waste paper) for the first 10 months of 2013, according to the association.”

The China Customs news release connects the positive financial news to its inspection regimen at Chinese ports. “There are less plastic films and pop cans hidden in the waste paper now, and the moisture content is lower,” it quotes an inspector at the Fuyang Customs Office as saying as he looked at inbound bales in December 2013.

“The foreign suppliers realize now we will say ‘no’ to those waste paper cubes whose classification is confusing, and we will no longer accept those which contain foreign substances,” the inspector, surnamed Wang, adds.

China Customs says the Hangzhou Customs District received some 6.5 million tons of scrap materials from February to November 2013 and “seized at the scene 3,508 tons of those whose import were prohibited by the state. The antismuggling bureau has filed for investigation 11 solid waste smuggling cases involving a value of more than 490 million renminbi ($81 million).”

When material recovery facility (MRF) operator Cal Tigchelaar of Resource Management Cos., Chicago Ridge, Ill., was interviewed in late 2013 for a feature article in Recycling Today’s January 2014 edition, he offered some positive comments about the lasting impact of Operation Green Fence. “I’ve been going to Asia since 1997, and invariably in a paper mill we’d look at inventory of our material against others, and I’d wonder why we bothered to strive for quality,” he commented. “Now I finally feel vindicated to some extent.”

Tigchelaar’s colleague Mike Koh added, “For us, Green Fence really didn’t have as much of a negative consequence because we produce a good quality of paper. The people we do business with in China actually now want to do more business with us.”

The General Administration of Customs of the People’s Republic of China (China Customs), one of the authors and enforcers of Operation Green Fence protocols, issued a news release in mid-January 2014 offering a viewpoint from consuming paper mills that points to a positive bottom-line impact for scrap paper buyers. (See the sidebar “Positive spin” on the right.)

By the time recyclers gathered for a series of industry events in the final quarter of 2013, the viewpoints of secondary commodity processors, buyers and sellers from around the world regarding Operation Green Fence could be heard and compared.

Presenters at times offered comments similar to those of Tigchelaar and Koh—that secondary commodity quality improvements were overdue in some cases—but many also proclaimed that the turmoil brought about by Green Fence had made 2013 a difficult and unprofitable year.

Hard hit but recovering

Perhaps no recycling sector has been harder hit by Operation Green Fence than the plastic scrap sector. Thus, Green Fence was a primary topic of discussion at RePlas 2013 in November 2013 in Hangzhou, China. The China Scrap Plastics Association (CSPA) sponsored the event.

Reviewing 2013 data at the event, Lu Xisen of the Tianjin Price Information Service said the slowdown at ports caused by the implementation of Operation Green Fence was the main reason China’s plastic scrap imports dropped from 790,000 tons in January 2013 to 480,000 tons in February. (See the sidebar “By the numbers” below.)

While that figure bounced back somewhat to 610,000 tons in March 2013, Lu noted, the restricted flow of plastic scrap into Chinese ports caused overseas exporters and Chinese manufacturers to look for alternatives.

Lu said some of these exporters have begun shipping plastic scrap to Malaysia or Vietnam, where it is processed into flakes or pellets that can then be shipped into China with less scrutiny.

Although recyclers in other parts of the world have complained about a lack of clear communication from Chinese authorities regarding Operation Green Fence, China Scrap Plastics Association (CSPA) President Dr. Du Huanzheng told RePlas attendees he was pleased with the lines of communication that have been established between the government and plastics recyclers in China. “Just before Green Fence, AQSIQ (Administration of Quality Supervision, Inspection and Quarantine) had contacted our association and identified which are the illegal procedures,” Du said.

Subsequently, he said, government agencies “have been extensively hearing from us [and] working with us on implementation. We are very happy to see such communication.”

Du added that AQSIQ had conducted seven workshops on Operation Green Fence since August in cooperation with CSPA that attracted 60 recycling companies. “Our government highly requests our reports from the field,” he added.

CSPA Executive President Dr. Steve Wong, who is also president of Hong Kong-based Fukutomi Co. Ltd., said the association will work on lengthening that line of communication to other parts of the world. “We want to establish a long-term idea and communication chain with foreign and international counterparts,” he commented.

Li Shuyuan of China’s Ministry of Environmental Protection said Operation Green Fence remained necessary to prevent “secondary pollution” and to “counter foreign waste smuggling.”

Li stated that companies caught using an AQSIQ license to import mixed wastes or using licenses that do not belong to them not only face cancellation of their licenses but they also “will face criminal charges.”

China’s government has been paying particular attention to irregularities in plastic scrap imports, she said, because plastic scrap has chemical regulatory tie-ins with environmental and human health implications.

Surendra Borad, chairman of Gemini Corp., Antwerp, Belgium, who also chairs the Plastics Division of the Bureau of International Recycling (BIR), Brussels, offered his viewpoint as a plastic scrap exporter.

“Recycled plastic traders may perceive Green Fence as a hindrance in the immediate future, but it will serve the interests of the trading community in the long run,” he commented. “Green Fence is in the best interest of the users of reprocessed plastics and for the environment,” Borad said, adding that it also will “benefit the Chinese recycling industry in the long run.”

Path of least resistance

While traders such as Borad can point to positive aspects of China’s Green Fence, as the shipment of some plastic scrap to Vietnam or Malaysia demonstrates, business owners also will look for alternatives if one nation puts up unwelcome barriers.

By the numbers

Recyclers and brokers in North America at times found it difficult and frustrating to ship materials to China after Operation Green Fence was enacted in February 2013.

Statistics maintained by government agencies in China and the U.S. show that the tension resulted in lower volumes of business.

Operation Green Fence is not the only factor affecting outbound scrap shipments, as scrap generation was modest in the U.S. throughout much of 2013 and demand from China can vary greatly depending on the health of its metals production sector and the country’s scrap generation.

According to U.S. Census Bureau statistics compiled by the U.S. Geological Survey (USGS), China imported 341,000 metric tons of copper scrap from the U.S. in 2012. In the first nine months of 2013, China imported 236,000 metric tons, putting it on a pace to import 314,700 metric tons in 2013, a 7.7 percent decrease.

Aluminum scrap also declined from 1.06 million metric tons shipped in the first nine months of 2012 to 934,000 metric tons in the first nine months of 2013, representing an 11.9 percent drop.

Plastic scrap was scrutinized as thoroughly as any material, and figures presented at the RePlas 2013 event in Hangzhou, China, point to the early effects of Operation Green Fence.

Lu Xisen of the Tianjin Price Information Service cited the slowdown and backup at ports as the initial reason why China’s plastic scrap imports dropped from 790,000 tons in January 2013 to 480,000 tons in February.

Plastic scrap imports bounced back to 610,000 tons in March 2013, Lu noted, but its restricted flow into Chinese ports continued in subsequent months.

That was one of the main points brought up by Robert Stein of St. Louis-based scrap metals company Alter Trading Co. in a presentation he made at the 2013 China International Scrap Conference. That event was hosted by the China Entry-Exit Inspection and Quarantine Association Reused and Recycling Branch (CIQAR) in Ningbo, China, in early November 2013.

Stein, who also is the chair of the BIR Nonferrous Division, asked Chinese government officials to consider the possible consequences of burdensome trade barriers and hurdles to its own nation’s business owners.

“The costs of continuing to meet AQSIQ licensing requirements are high both in terms of money and business time,” Stein said. “And, yet, despite achieving this AQSIQ approval, exporters have remained prey to all-too-familiar whispers and warnings of changes to the rules relating to how we get our valuable scrap into China. Some of these changes actually happen; others do not. But all of them take up valuable business time as we assess the potential impact on our operations. Perhaps worst of all, some of the changes happen at very short notice.”

If 2014 brings with it additional regulations or new twists to Operation Green Fence, Chinese scrap buyers may suffer a competitive disadvantage, Stein said. “I hope you can see why importing countries other than China might seem an eminently more attractive option for the reputable exporters with whom, I’m sure, you would prefer to do business,” he told the assembled delegates.

“The stark truth is that for my company and many others globally, the compliance issue costs of supplying scrap to China are the highest that I know of in the entire world,” Stein remarked. “Scrap metal, like any other commodity, eventually finds its way to the most efficient market of value, which, simply put, means that we regularly compare costs of getting our product to various markets as part of the decision as to where it will ultimately be shipped. All impediments that stand in the way of easy material flow cost us money and are obviously a part of the calculation. In today’s world of increasing costs, the compliance issues that we face in our shipments to China all too often dictate that our scrap metal either stays in the domestic market or is exported to countries other than China.”

Stein said the issue is not one of national sovereignty but rather of business climate. “We, as a scrap metal company, have absolutely no misgivings with China wanting to make sure that ecologically unsound material does not find its ways to your shores. But the costs for us to undergo inspections by CCIC (China Certification and Inspection Group); maintaining an AQSIQ license; extra and special handling and packaging are all inflationary to your consuming sector.”

Recyclers are able to take steps to clear all those hurdles, Stein said, but doing so comes at a cost to Chinese businesses. “As a responsible recycler, we, along with many other quality shippers around the world, will do whatever it is that you want us to do; but, please understand that the more difficult you make it, the higher the costs are to the entities who ultimately must pay the price for the extra costs that are incurred—in this case it’s the Chinese consumer. We cannot tolerate changes of policy that are put forward with little or no notice, and the most recent case of this, last spring, resulted in thousands of tons of scrap being diverted to other markets at sometimes lower prices,” Stein commented.

“It is a universal truth that bears repetition: commodities, including scrap and other recyclables, find their way to points of consumption via the path of least resistance,” he said. “For the seller, every obstacle is an additional cost; and if there is no mechanism for recouping that additional cost, the buyer would not be behaving in the best interests of his own business and of his employees if he did not at least pursue more cost-friendly alternatives.”

The next steps

Speakers at the 2013 Annual Convention of the CMRA (China Nonferrous Metals Industry Association Recycling Metal Branch), held in November in Chongqing, China, noted that Green Fence procedures caused expensive delays for importers and exporters, but many also commented that in the long run the changes will be beneficial for recyclers who play by the rules.

Operation Green Fence indisputably “affected the customs clearance of importers” stated Wang Jiwei, vice president and secretary general of the CMRA.

The increased scrutiny of imported scrap came at the same time as increased taxes and increased energy costs for nonferrous scrap recyclers and secondary metals producers, noted Wang, making 2013 a difficult year for the sector in China.

Delays caused by Operation Green Fence were frustrating for metals recyclers, according to Wang, because “there are basically no smuggling cases for scrap metal,” and substandard shipments of mixed waste do not try to enter the country labeled as scrap metal.

“Copper and aluminum are not smuggled into China, however we were affected [by the port slowdowns], and our customs declaration process has been slowed down,” he stated.

Alexandre Delacoux, director general of the Brussels-based BIR, acknowledged that Green Fence caused difficulties, but he also played up the positive aspects of the initiative.

“I think Green Fence shows that China can apply [these standards] because you can pursue quality,” he commented. “I’m very glad about that.”

As 2014 proceeds, recyclers are well past the initial shock and disbelief stage brought on by China’s introduction of Operation Green Fence. If recyclers have reached the acceptance and hope stage, likely among their hopes is that no new surprises enter the picture in the year ahead.


The author is editor of Recycling Today and can be contacted at