On Dec. 14, 2021, Jeff Farano, corporate counsel at SA Recycling, prepared to co-lead a tour of the company’s Terminal Island facility in Los Angeles with CEO Terry Adams for five representatives from the Department of Homeland Security (DHS). ISRI’s chief lobbyist, Billy Johnson, had connected SA Recycling with DHS because of the agency’s interest in understanding how recyclers recover, process, and collect mutilated coins. Stepping out to greet the guests, Farano hoped the tour would not only be a learning experience, but also demonstrate why domestic recyclers should be allowed to continue participating in the U.S. Mint’s Mutilated Coin Redemption Program.
Since its start in 1911, recyclers have taken part in the Mint’s redemption program, where individuals and businesses exchange damaged or mutilated coins that are no longer acceptable as legal tender. When washing machines, vending machines, or vehicles get shredded at recycling yards, the coins left inside them get shredded too, becoming bent, damaged, or twisted. The coins wind up in the Zorba because they aren’t magnetic.
“Shredders always pull every piece of metal out of a shredded vehicle and that almost always includes coins from the vehicle,” Farano says. “Under the Treasury Department’s program, we would turn the coins into the U.S. Mint and get compensated.”
Around 2003, much of the Zorba generated in the U.S. began going to China because of the country’s high demand for aluminum. Throughout the 2000s and 2010s, the Mint received a large number of coins from foreign participants. Believing these coins could be counterfeit, the Mint suspended the program in 2015 to assess its security.
In response, ISRI provided several recommendations to the Mint to strengthen the program including establishing a registered supplier program that included allowing random inspections. The Mint incorporated these recommendations into the rule it published in December 2017. However, many recommendations were never implemented before the Mint suspended the program again in 2019.
On May 5, 2021, the Mint announced plans to revise the program, including a prohibition on redeeming coins damaged during the recycling process. As the Mint never indicated plans to end the program during either suspension, recyclers continued collecting and storing coins.
Since the announcement, ISRI has advocated for the inclusion of domestic recyclers. In July 2021, the association submitted comments to the Mint providing recommendations to strengthen the program. Last fall, ISRI and its members worked with several members of the House of Representatives to submit a bipartisan letter to Mint Director David Ryder. The letter urged the Mint to work with domestic recyclers as the agency considers changes to the program.
Throughout the suspensions, ISRI has recommended government agencies tour recycling facilities to better understand the process. So, Johnson was pleased to get the call in August from DHS and the U.S. Attorney’s Office for the Southern District of California about a facility tour. “Recyclers don’t mind jumping through hoops,” he says. “We hope the Mint sees there are ways to continue this program, and we’re willing to work with the Mint to do it.”
The day of the tour found Farano and Adams walking the DHS representatives and Johnson through SA Recycling’s facility. “[Regulatory agencies] need a better understanding of how auto recycling works, and that includes the shredding and removal of all the coins from the shredded vehicle,” Farano says. “We’ve been encouraging them to come out and take a look because once regulators get a tour, they’ll have an ‘Aha!’ moment. And they’ll be able to create better rules and regulations.”
SA Recycling’s team showed the agents their entire metal separation process. “We took them from the beginning to see how the cars come in, right down to the final bits and pieces of copper wire and penny that come out at the end,” Farano says.
According to Johnson, DHS noticed many of the counterfeit coins coming to the Mint had quite a bit of heat applied to them. DHS agents learned firsthand at SA Recycling that recycling does not involve applying extreme heat to coins. “I think walking [the agents] through those processes really helped DHS better understand the difference between legitimate and illegitimate mutilated coins,” Farano says.
Johnson felt the tour was an incredibly fruitful experience for DHS; agents saw the process up close and spoke directly with the experts—recyclers. “The SA team answered every question they could have asked, from where they get the coins, to where they get separated and sorted,” Johnson says. “I think [the agents] left feeling very satisfied.”
Farano agrees the government workers came away with a greater understanding of shredding. “They really had no idea how we did what we did,” he says. “I think it was extremely helpful for them to see it so they can hopefully set up a program that will allow us [to participate] again and feel confident and comfortable that it’s a legitimate process.”
ISRI believes it’s important that recyclers grow and maintain transparent relationships with regulators and the public not only through regular engagement but also by letting them tour facilities and learn about processes. “Generally, [regulators] don’t fully understand what we’re doing inside the walls of a shredder,” Farano says. “By seeing the facility, they can understand why we shred and how we pull out the different finished raw products.”
On every tour he gives, Farano discusses the importance and value of shredding. “The biggest thing we try to get across on these tours is that without shredding and the metal recycling process, all the material [visitors see in the yard] would end up in a landfill,” he says. “The majority of metal that’s manufactured comes from recycled metal, and the full metal recycling lifecycle is important. Even things like pulling metal coins out helps the metal recycling process and helps the Treasury Department keep track of the coins. We provide a legitimate recycling process for them.”
The DHS team left SA Recycling with samples of the company’s stored mutilated coins. According to Johnson, the agency will send the coins to the Mint to run tests for authenticity. Other recyclers around the country may be contacted by DHS requesting a tour or random samples of mutilated coins. “It’s a promising first step,” he says.
Featured image courtesy of Kim Gorga via unsplash.com. Body images courtesy of ISRI.