September/October 2005
First published in 1919, ReMA's scrap specifications have become the universal language for scrap buyers and sellers in domestic and international trades. Here's a look at their past, present, and future.
In scrap trades, you don't want Cobra in your Cocoa, do you?
If you're in the business of buying and selling copper scrap internationally, you already know that Cocoa is the ReMA term for chopped or shredded wire nodules containing at least 99 percent copper but no more than 0.25 percent tin. Just as important, the person on the other end of the transaction also knows this. You both agree that the product changing hands is Cocoa, not Cobra.
That distinction is important because Cobra also designates chopped or shredded wire nodules, but it can contain as little as 97 percent copper and four times as much tin as Cocoa. You both know what to expect—and what to specify in the contract. Regardless of the nationalities involved, you're speaking the same language because you're both using ReMA scrap specifications.
That, in a nutshell, is the benefit—and the beauty—of scrap specs.
Guidelines for the Industry
Specifications are, in simplest terms, shorthand for scrap transactions. ReMA specs generally assign a word, number, and/or letters to a specific scrap product followed by a brief item description, then a more detailed summary—the specification—of the material. Honey, for instance, is the word that denotes Yellow Brass Scrap, which is followed by a 36-word spec for the material.
As with Honey, virtually all ReMA nonferrous specs identify scrap items using distinctive—and sometimes humorous—words such as Candy, Druid, Naggy, and Taldork. In contrast, paper and ferrous specs use numbers, with paper grades designated by single and double digits and ferrous items identified by three-digit numbers.
Many newer categories of scrap specifications use letter and/or number codes. ReMA's plastic scrap specs, for example, all begin with the letter P to designate plastics. The P is then followed by a three-digit number, with each digit providing specific information about the recycled plastic. For example, in the plastic spec P-402, the number 4 refers to LDPE-type resin; the zero identifies the product as a bottle; and the 2 indicates the color of the plastic being recycled (in this case, pigment/dyed). These plastic specs can also be followed by one or two letters that provide additional information about the material's type (such as postconsumer or recovered) and its source (such as industrial, municipal, commercial, or institutional).
The stated purpose of all ReMA scrap specifications is to assist scrap traders "in the buying and selling of their materials and products." Some scrap traders use the specs verbatim in their transactions. "We always use the ReMA specs. I won't even talk to anyone who doesn't," says the manager of an East Coast ferrous and nonferrous recycling firm that trades domestically and internationally. "We usually use the ReMA language just as it is in our contracts."
Others use the specifications as only a starting point in their contractual language. "These designations are not really specifications per se, but guidelines," notes Robert J. Garino, ReMA's director of commodities. "They tend to be broad because they're meant as a starting point between buyer and seller." In other words, the specs are "adaptable and were designed as a basis for negotiations," he adds, noting that this is particularly needed in international trade.
| A Brief History of Specs
Published specifications for recycled commodities have been around for almost 90 years. The first scrap specifications were reportedly developed by the National Association of Waste Material Dealers (NAWMD). When this group was founded in 1913, the scrap industry was "chaotic" and "had no basic standards by which to operate," according to Scrap Age magazine. Thus, a main focus of the group's first meeting was "standardizing" the industry's commodities and "setting up trade customs." It wasn't until December 1919, however, that the association issued its first official Classification Number listing of scrap specifications. Official specs for iron and steel scrap were reportedly promulgated in February 1926 by the U.S. Department of Commerce in cooperation with the Institute of Scrap Iron and Steel (ISIS) and other industry groups. The oldest specs primarily dealt with metals and were conceived in an era when most long-distance business was transacted via teletype (meaning that messages were sent by telegram or "wire"). The longer the message or individual words in the message, the more expensive the transmission. To minimize transmission costs, the original scrap specs identified material with short numbers or words. "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," notes Jim Wilkoff of S. Wilkoff & Sons Inc. (Cleveland) in a 1989 article on specifications. In 1989, ReMA combined all of the specs created by the previous associations and published them in one book for the first time in the scrap industry's history. That book, called the Scrap Specifications Circular, has been through many iterations since then, with new editions published whenever new specs are added or old specs are deleted or modified. ReMA's specs are now also posted online at the ReMA Web site (www.isri.org). The online version essentially makes the specifications a "living document" that can be updated more frequently than the printed circular.
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Keeping Up With the Changes
Far from being set in stone, scrap specifications are—and must be—flexible to keep up with changes in the industry. Outmoded specs—such as one for bed brass—are deleted. Existing specs can require modifications. New specs may need to be added in existing categories. And entirely new scrap sectors may require their own specs. Last year, for example, ReMA's board of directors approved the first specifications covering plastics from electronics products. In the rubber niche, ReMA created specs for steel wire from scrap tires in 2003 and, in July 2005, adopted specs for tire rubber destined primarily for civil engineering applications.
Thanks to these new categories, ReMA's specs—which covered only ferrous, nonferrous, and paper as recently as 1988—now also encompass plastics, glass cullet, electronics, tire rubber, and tire wire.
Going forward, there will continue to be a need to amend and expand the ReMA specs. Currently, for example, there is only one ReMA designation pertaining to aluminum extrusions. That designation combines extrusions with aluminum castings and forgings—a category that has little basis in practice in the industry. Additional specifications will also likely be needed in the newer categories of electronics, plastics, and rubber.
Some of the changes will be driven by the international market. Yogi Shah of Recoup Industries Inc. (Edison, N.J.), a shipper of scrap to India, praises ReMA's specs as being "commonly used and much needed," but he insists that "there are some improvements required in certain areas, such as electric motor scrap."
Most scrap motors, he explains, are approximately 90 percent steel, but the intrinsic value of the 8 to 12 percent of copper content is probably more than that of the steel. Because such motors are often shredded before shipment, the recycled product contains both ferrous and nonferrous elements. For that reason, scrap shippers can't send shredded electric motors to certain countries such as India, which has separate duty structures for steel and copper scrap. A new ReMA specification for motors could help remedy this situation, especially since India's customs agency already uses ReMA specs, Shah suggests. Such a spec "would probably fit best under steel scrap grades, where it would be subject to a lower duty," he says. "This would also be an accurate description of the product because it is predominantly steel."
Electric motors aren't the only scrap in need of a spec. Other traders are calling for specifications for such products as scrap transformers and compressors.
Raising another issue, David Chiao of Uni-All Group Ltd. (Atlanta), a shipper of scrap to China, suggests that ReMA specs should consider the processes used to produce particular scrap grades. In a widely used nonferrous spec such as Zorba, which covers the mixed nonferrous metals from shredders, the product can vary based on the infeed material, the machinery used, the geographic location, and even the season, he notes. The Zorba spec does allow sellers to add a number to identify the percentage of nonferrous content in the material—such as Zorba 80.
Still, Chiao asserts, "I think the spec should emphasize the processing procedure rather than the content of the end product." If a buyer in China puts the ReMA spec for Zorba 80 on all contract documents, the buyer is telling Chinese customs that the material contains 80 percent metallics. That percentage would not be legally acceptable to Chinese buyers, he says, and the material could be rejected for not conforming to Chinese environmental regulations. "In that case, what do you use for the contract?" Chiao asks.
No matter how or why proposed changes come about, they can't become an official part of ReMA's specs until they go through the association's formal approval process. Here's how it works:
Any person may ask to add, amend, or withdraw an ReMA specification by submitting a request in writing to ReMA's president. The president refers such requests to the specifications committee in the appropriate commodity division (ferrous, nonferrous, paper, tires/rubber, or electronics). Notice of the request is published in ISRI Focus newsletter as well as a national trade publication. The request is then considered in a public meeting, with interested parties able to attend or submit comments in writing. After this meeting, the committee summarizes the positions of the various parties and recommends to ReMA's board of directors what action to take. The board can then adopt, amend, or reject the recommendation or table the issue pending further review and recommendation by the committee. Any amended or new specification becomes official 30 days after board approval.
The process of amending or creating a specification can take anywhere from 90 days to 18 months. To help streamline the process, ReMA is considering devising a specifications form or draft worksheet with a line-by-line process for hammering out spec descriptions.
"We don't want to get bogged down trying to negotiate the specification in the meeting phase," says Randy Goodman of Hugo Neu Global Trade L.L.C. (Jersey City, N.J.) and chair of ReMA's nonferrous specifications committee. "That's the wrong time to put it out there. Today, we do specification work by e-mail and conference call. We get the pertinent input from those in the industry before we go to the committee meeting. If we've done our homework, the process works much faster."
| Passing the Spec Test
An unintended benefit of ReMA specifications is that they can help distinguish amateur scrap operators from serious business ventures. Just ask Andy Wahl of Newell Recycling of Atlanta Inc. (East Point, Ga.), who says he receives 10 calls a week from people who want to get into the business of exporting scrap. "I begin the conversation by asking about the ReMA specs for the product they're interested in trading," he says. "If they don't know what I'm talking about, I know they're not serious. It saves me a lot of time." |
An International Issue
Most advocates of ReMA specifications note that the guidelines tend to be used more frequently in international transactions than in domestic deals. This is especially true in nations where the scrap recycling and consuming industries have been firmly established for decades, such as the United States and the European Union. There, it's common for scrap consumers to have their own specs.
"Domestic entities don't tend to use our specs as much," says ReMA's Robert Garino. "If you're a U.S. brass mill, for example, you have specs that fit your specialized products. Some specs are literally specific to one mill or an individual customer. Some are even confidential."
That said, domestic scrap consumers can still benefit from knowing about ReMA specifications, in part because of their major influence on international trade in many markets. To increase exposure of ReMA specs among the association's U.S. members, in fact, Robert Garino showcases a different spec in each issue of his weekly Monday Report e-mail newsletter. That move has generated significant commentary and dialog from ReMA members about the specifications.
Given the growing globalization of the scrap industry, though, perhaps the biggest looming challenge for ReMA will be managing how its specifications are used internationally. Many nations already use ReMA specifications in their domestic industries as well as in determining their duty structures for imported scrap, and this trend is growing, especially in Asian countries like India and China. In 2004, in fact, ReMA entered into a licensing agreement with the Beijing Zhongse Metal Recycling Institute for the use of ReMA's nonferrous specifications in China. The license agreement includes translation of ReMA's Scrap Specifications Circular into Chinese and distribution of this translated version in China. This five-year license is "part of our continued efforts to ensure global acceptance and adoption of ReMA's specifications," says ReMA President Robin Wiener.
ISRI as well as the Bureau of International Recycling (Brussels, Belgium) has also held several discussions with Chinese authorities on specs-related issues. The associations, for instance, have asked the Chinese government to clarify its definition of mixed metal scrap, in part because China's customs inspectors have at times placed insulated copper wire in the mixed scrap category. There have been similar issues with ferrous grades.
ISRI is also closely monitoring plans by the Central Japan Commodity Exchange to launch a ferrous scrap futures trading contract in October. The London Metal Exchange has considered offering a similar contract, though such an event, if it comes about, would be further in the future. Both exchanges would need to work closely with the recycling industry on the appropriate specification for any traded product. Having the right spec could, in fact, decide the success or failure of any scrap futures contract.
In addition, ReMA has increasingly reached out to other industry organizations to coordinate best practices regarding scrap specifications and categories. It's in everyone's best interest, after all, to avoid duplicating efforts, ReMA's Garino states.
Scrap specifications have obviously come a long way in their almost 90-year history. They started out as an industry resource with limited scope, one designed primarily for domestic transactions and updated only occasionally. Now, thanks to ISRI, scrap specs are a full-time, continuous, international effort that helps traders conduct business in any location, at any time, worldwide.
Chris Munford is a writer based in New Jersey. He formerly held editing positions with American Metal Market, Platt's Metals Week, and Metal Bulletin.
Publisher's Note: Printed copies of the ReMA Scrap Specifications Circular 2005 are available for $6 to ReMA members, $12 to nonmembers. Call 202/737-1770 or order through the ReMA Store at www.isri.org. A PDF version of the specifications can also be downloaded for free from the Specifications section of the ReMA Web site.
In addition to guidelines for ferrous, nonferrous, paper, plastics, glass cullet, electronics, and rubber, the circular includes information on the preparation and transportation of materials; rules and procedures for adding, amending, or withdrawing specifications; and information and guidelines on dispute arbitration and arbitration services available.
First published in 1919, ReMA's scrap specifications have become the universal language for scrap buyers and sellers in domestic and international trades. Here's a look at their past, present, and future.