Transporting Commodities – The Road to Success
Did you know that approximately 11.6 million trucks moved freight across the border between Canada and United States in 2016 (U.S. Bureau of Transportation)? This movement of goods is made possible because of the North American Free Trade Agreement (NAFTA), a treaty signed between Canada, Mexico and the United States. The U.S. has been Canada’s top trading partner for several years with approximately U.S. $545 billion in trade occurring in 2016.
A portion of this trade includes transportation of recyclable commodities from Ontario’s MRFs to U.S. end markets. To that end, Recyclable Materials Marketing (ReMM) created a detailed document for the Continuous Improvement Fund (CIF) outlining the various factors to consider when transporting recyclable commodities into the U.S.
Exporting to U.S. Markets
In most cases, MRF operators request that the commodity buyer arrange for the transportation from the MRF to the end market. In some instances, U.S. end markets will not arrange for transportation and will request a delivered price.
Here are key steps to undertake, prior to transporting commodities from Ontario to the U.S.:
Compare the commodity prices
Calculate freight allowance
Obtain freight quotes
Complete all paperwork
Consider if the quoted prices from a U.S. market are competitive with Canadian end markets. Pricing indexes like the CIF Price sheet, which provides Canadian market prices for a variety of recyclable commodities, can help with that process. Remember that quotes from U.S. end markets need to be converted to Canadian dollars (based on published exchange rates).
Freight Allowance If the U.S. end market does not want to arrange for delivery from Canada, it will provide a freight allowance in addition to the market price. For example if the commodity price is $0.15/lb (USD) and the freight allowance is $0.02/lb (USD), the total delivered price will be $0.17/lb (USD). The next step is to obtain freight quotes to determine if the freight allowance is enough to cover the freight costs.
The Essentials of Transporting Recyclable Commodities from Canada to the U.S. details freight quotes. Here is a list of questions to consider, however, in evaluating the rate:
Is the trucking company licensed to transport material from Canada to the U.S.?
Can the trucking company provide a copy of its Certificate of Insurance?
What type of truck will be used?
Are there any known weight restrictions?
Is the quote in U.S. or Canadian dollars?
Does the quote include fuel surcharges?
Does the quote include border customs fees?
How much loading and unloading time does the trucking company allow?
Are fees charged in the event of a delay during loading or unloading?
Is the quote “all-in”, meaning that it includes all fees?
Missing and/or improperly completed paperwork can cause significant problems that can be mitigated by ensuring you have a customs broker who assists you with the proper documentation and processing payments.
Documents generally required include:
Bill of Lading (BOL)
Weigh scale ticket from MRF
Customs form including proper Tariff Code
Pre-Arrival Processing Systems (PAPS) sticker.
It is crucial that this information is sent to the border as early as 48 hours but no later than 2 hours prior to the trucks arrival at the border, to prevent delays and additional charges. Additional details related to transporting recyclable commodities from Ontario to the U.S. can be found in the document.
Financial benefits may be realized by selling to overseas markets. China is generally viewed as the primary overseas destination for recyclable commodities exported from Ontario. However, Ontario recyclers should be aware the “National Sword 2017” program may present challenges.
According to China’s General Administration of Customs (GAC), the “National Sword 2017” campaign is designed to target illegal smuggling of “foreign waste,” including plastics, industrial waste, electronics and other household waste materials. The National Sword 2017 is a follow up program to “Operation Green Fence”, a program implemented in 2013 to aggressively inspect containers to curtail contaminated recyclables and waste. During the first year of Operation Green Fence, approximately 22,000 containers were deemed unqualified for import and rejected.
Recently, as part of National Sword 2017, enforcement officials seized 85,000 tons of recyclables, primarily scrap plastics and metals, with a value of 1 billion (about $146.5 million USD), according to a June 16 report provided to Plastics Recycling Update by Steve Wong, a leader at Chinese plastics recycling firm Fukutomi and the China Scrap Plastics Association. “The suspects were arrested and were found to be illegally using third-party import permits for plastic waste imports,” Wong wrote in his memo.
While Operation Green Fence and National Sword 2017 were designed to reduce contamination and illegal importation practices respectively, there are indications China may be preparing to implement additional bans. On April 18, a government task force approved a “prohibition on import of (selected) solid waste in promotion of reform on solid waste imports management.” Wong, told Resource Recycling the policy will “effectively ban the import of plastic scraps and some other solid waste by stage and category before (the) end of 2018.”
Given these changes, exporting recyclables into China hold increasing challenges. Still, for Ontario recycling facilities that produce acceptable material for export, China (or other countries) will remain as an option for end markets.
ReMM is currently working on a follow-up document that will provide all the ins and outs of exporting commodities overseas, watch for a link to it in upcoming CIF updates.