March/April 1989
Just released: ISRI Scrap Specifications Circular 1988. Do you know how to take advantage of it? Jim Wilkoff explains how and why scrap specifications came to be, how they are modified, and how using them--domestically and internationally--in a ferrous, nonferrous, or paper stock transaction can help satisfy both parties.
By Jim Wilkoff
Jim Wilkoff, of S. Wilkoff & Sons Co., Cleveland, Ohio, is a director of the Institute of Scrap Recycling Industries and is chairman of its Specifications Committee.
In this day of electronic communications and fax machines in offices around the world, it is hard to believe that words like Berry and Honey are used to improve communications. They are among hundreds of specification names chosen to identify grades of scrap, which helps sellers and buyers speak the same language during their transactions.
The members of the Institute of Scrap Recycling Industries' (ISRI) predecessor associations realized that the associations' prime responsibility was to serve the needs of their membership. They knew that defining specifications was an important service they had to provide. In December 1919, the National Association of Waste Material Dealers (NAWMD)--the National Association of Recycling Industries' original name--issued its
first "Classification Number" listing of scrap specifications. In the foreword to this document the association said, "This issue of the NAWMD Association Bulletin marks another step in the now firmly established policy of developing an organization which shall mean to its members something more than the payment of dues and attending an annual banquet. … It is with this idea in mind that the Classification Number listing has been compiled and circulated among 3,000 dealers and consumers."
There also is a long history of specification development from the Institute of Scrap Iron and Steel (ISIS) side of ISRI. According to Edward Barringer's Story of Scrap,following an industry-wide conference in February 1926, official specifications for iron and steel scrap were promulgated by the U.S. Department of Commerce. These specifications were revised in succeeding years and were reviewed in 1941 at the request of the Office of Price Administration and in 1951 at the request of the Office of Price Stabilization. Both reviews were part of the scrap industry's contribution to the American war efforts. In 1953 committees of ISIS and the American Iron and Steel Institute reviewed and reestablished the specifications for industry use.
Both scrap trade organizations realized that if buyers, sellers, exporters, and importers could together establish specifications for the various products they handled, it would be easier for their members to conduct business. When the specifications were first developed the fastest form of international communications was by teletype, which was relatively expensive. The traders of the day developed a language of code words and phrases that allowed them to say what was required to conclude a contract, while keeping the number of words in their cables to a minimum. To aid in this form of communication, NAWMD gave each of its specifications a four- or five-letter code name, such as "Berry" and "Honey," while ISIS used a three-digit number.
The result was a widely used and successful system for defining grades of all types of scrap. In fact, the importance and popularity of ReMA's nonferrous scrap metal specifications to international trade is attested to by the fact that they have been translated into French, German, Japanese, Korean, Chinese, and Portuguese. These specifications are used not only in transactions between U.S. and foreign companies, but also in transactions between companies outside the U.S. They have been widely used in international trade for more than 70 years.
The historical importance of ReMA's specifications can make the U.S. scrap industry proud of its contribution to the development of domestic and world trade. The current importance of specifications is even more relevant. For the first time in the scrap industry's history the specifications that relate to all of its products are now printed in one booklet: the recently published ISRI Scrap Specifications Circular 1988. The circular presents specifications for commodities in ferrous scrap (FS-88), nonferrous scrap (NF-88), and paper stock (PS-88 Domestic Transactions and PS-88 Export Transactions). Information explaining the ReMA Arbitration Service also is included in the circulars.
Over the last 70 years the commodities handled by the scrap industry have changed radically; for example, we now process space-age alloys but not bed brass. This change is reflected in the list of commodities in Circular 1988. ReMA's Specifications Committee is continually working to establish specifications for new commodities, to update and amend existing specifications because of a change in an item or a change in the way it is traded, and to delete specifications for items that no longer exist. This procedure guarantees that the specifications circular is a current, usable document. The constant updating requires that a revised circular be printed every two to four years.
How Specifications Are Used
It is important that ReMA's specifications are not only used but are used correctly. It is crucial to understand that the specifications are not binding regulations that must be used in all or any transactions, but rather that they are guidelines that two parties to a transaction can mutually agree to use.
Depending on the requirements of the transaction they are negotiating, the parties can accept the terms of the specification as written or amend the specification. It is important to realize that when using any of the nonferrous specification code words, the contractual terms spelled out in the specification Apple are automatically part of the contract, unless the terms of Apple are specifically deleted or amended in the contract.
Included in every specification booklet is a preface, preamble, and/or general information section that should be reviewed when using the specifications.
Team Effort
The primary reason ReMA's specifications have been widely and continuously used for more than 70 years is that the method used to establish and update them has been supported by members from all segments of the scrap industry. When ReMA members believe a new specification should be established or an old one revised, they can bring their ideas to ReMA's Specifications Committee, which is a standing committee of the association. The Specifications Committee does not create or alter specifications, nor advise how they are to be used; rather, it guides the development and revision of the specifications. Notice of any requested change is published in a daily national trade publication so that all interested persons will have an opportunity to comment before the committee.
After a specification matter is brought before the committee, the chairman of the Specifications Committee asks the groups that deal with the commodity (for example, Foreign Trade, Ferrous, Nonferrous Metals, and Paper Stock) to ask their members for volunteers to serve on a subcommittee that will evaluate the request for a specification addition or change. To be effective, the subcommittee must be made up of members from all segments of the scrap industry that handle the commodity in question. After evaluating a specification the subcommittee makes a recommendation to the
Specifications Committee for a new or revised specification. The Specifications Committee reviews the recommendation and, if it approves it, presents it to the ReMA Board, which can adopt, reject, or amend the recommendation.
An example of the workings of the Specifications Committee is currently under way in ReMA's reevaluation of all specifications that deal with aluminum. The members of the subcommittee include representatives from the primary aluminum companies, the secondary aluminum smelters, the scrap processors, and the aluminum exporters. Together they meet to discuss what, if any, changes in the specifications that deal with aluminum should be recommended to the committee. Typically, the recommendation of the subcommittee and the Specifications Committee is based on a consensus.
The rules accepted by the ReMA Board governing the procedure for adding, amending, or withdrawing a specification are printed in the back of the specification circulars.
Transaction Instruction
To help industry members eliminate problems during a transaction, the Specifications Committee developed "Guidelines for Metals Transactions," published in the back of ISRI Scrap Specifications Circular 1988. These guidelines serve as reference points when writing contracts; suggesting the seller's and buyer's responsibilities in packaging, weighing, shipping, and receiving; creating a transportation program; and establishing procedures for dealing with rejections, downgrades, and claims.
Although the guidelines are not specifications, and they are not binding when using any of ReMA's specifications, they are a very useful and important part of the circular. The guidelines were developed over a two-year period by a subcommittee whose members represented all segments of the nonferrous metals industry. Although the content of the guidelines relates directly to the trading of nonferrous metals, its points and recommendations are equally relevant to writing a contract for the purchase or sale of any scrap commodity. ReMA's guidelines should be reviewed not only by employees who buy and sell metal, but also by operations employees.
By understanding and using the ISRI Scrap Specifications Circular 1988, many of the contractual, packaging, shipping, and handling problems that occur during a transaction can be avoided and the benefits of having an international language for scrap can be gained.
Cracking the Codes
The purpose of an ReMA scrap specification, whether it covers a paper, ferrous, or nonferrous commodity, is to describe in detail, using one code word or number, a commonly traded scrap product.
For each specification there is a code name or number, such as “Honey,” “200,” or “4,” followed by a commodity title like “Yellow Brass Scrap,” “No. 1 Heavy Melting Steel,” “Boxboard Cuttings.” The title is followed by a description of the product. This description may include characteristics such as minimum or maximum size, other physical descriptions, amounts of foreign material permitted, packaging, cleanliness, chemical analysis, or conditions (such as new versus old).
Negotiations are simplified when a buyer and seller agree to use a specification, since, to paraphrase an old saying, when specifications are used, the wheel does not have to be reinvented every time a contract is written. •