Though the Office of the U.S. Trade Representative (USTR) reinstated the 25% tariff on shredder wear parts imported from China on April 18, the situation might be looking up for the recycling industry. On Oct. 5, USTR announced it would seek public comments to revive a targeted tariff exclusion process for a specific list of products—including shredder wear parts–imported from China. The public comment period was open from Oct. 12 to Dec. 1.
ISRI submitted comments explaining why the exclusion for shredder wear parts should be reinstated and how the tariff has caused economic harm to U.S. small businesses, employment, manufacturing output, and critical supply chains.
Wear parts are essentially the heart of a shredder, keeping it operating all day long. But these parts need to be replaced almost daily, so having them in bulk is vital for U.S. recyclers. In its comments to USTR, ISRI noted wear parts can account for a huge portion of a shredder’s operating costs.
“With more than 85% of shredder wear parts currently being sourced from China, and those costs amounting to 60-70% of total cost of operations in this sector, the 25% tariff would make a huge difference especially to the smaller operators,” says David Eaton, ISRI’s director of government relations. “If the [exclusion] is denied then [recyclers will] likely face some tough decisions regarding employees, labor, and other expenditures that could cripple their operations.”
The tariff would cause a ripple effect through the manufacturing supply chain by making it more difficult for operators to deliver essential materials for infrastructure. Shredders produce recycled ferrous and nonferrous metals that are sold as raw materials to steel mills, foundries, and secondary aluminum smelters to be melted into new metal. “Seventy percent of U.S. steel is made from recycled metal, which is essential to meeting the [President Joe Biden’s] objective of building sustainable and resilient infrastructure,” ISRI notes in its comments.
Just as the tariff would lead to several negative consequences, reinstating the exclusion would have widespread benefits for not only the industry but also the manufacturing supply chain and the environment. “The recycling industry is critical to the Circular Economy connecting the ends of the manufacturing supply chain by taking products at the end of their original life and processing them into a usable commodity that can be manufactured into something new,” ISRI notes. Using recycled material for America’s transportation system protects the country’s natural resources by decreasing reliance on virgin materials.
The association highlighted the challenges of finding more supplies of the material outside of China. “While ideally we would not have to depend on sourcing parts from China, the current situation dictates that it’s necessary and therefore we will continue fighting for the exclusion until there are a range of other sources available that make sense to our members,” Eaton says.
Foundries outside of China that meet the quality standards tend to be high-priced products and can’t meet U.S. demand because of their small operations. While larger foundries have faced a variety of issues including capacity constraints, transportation bottlenecks, quality issues, or a combination. “In the end, auto shredders in the United States must source at least 85% of their parts from China,” ISRI notes. “And demand for material is only going to increase in the coming years in response to the United States’ efforts to improve our infrastructure in the coming decade.”
ISRI encouraged its members to send comments to USTR on the importance of reinstating the exclusion. The advocacy team sent members of relevant committees a document that outlined instructions for how to send comments on the USTR and supplied talking points to guide members on how to explain the hardship the tariff had placed on their businesses.
Since USTR did not announce its intent to examine the exclusion to reinstate until October, if it’s granted the exclusion, it will only reach back to Oct. 12 (when the comment period opened) rather than April 18 (when the old exclusion expired). While the agency reviews all the comments it received, ISRI is working with partners to gauge when USTR will announce a decision on the shredder wear parts exclusion.
Eaton was pleased that more members submitted comments this cycle than in 2018 when the tariff was initially imposed. The exemption was granted April 18, 2019, and in 2020, the government allowed companies and organizations to request continuation of the exemption for one year, which was granted to all that requested it.
“The advocacy of our members compliments the advocacy of ISRI’s team,” Eaton says. “Our members are the ones who are valued in this [comment] process by the decisionmakers [at USTR], so we appreciate them putting forth the effort to make their voices heard.”