Scrap Industry News

The United States Maritime Administration (MARAD) has announced that it has reached an agreement with the Virginia Department of Environmental Quality (DEQ) to lift the temporary suspension of the disposal of vessels in the state’s James River fleet.

MARAD is also working with various other states to allow them to process the vessels. Shannon Russell, a spokeswoman for MARAD, says the agency is in discussions with Texas, Louisiana, Maryland and California. She says additional progress is most likely to happen in Texas.

In addition to Virginia, MARAD maintains fleets in Beaumont, Texas, and California’s Suison Bay. Maryland and Louisiana have ship dismantling facilities.

The suspension was a result of concerns that hull cleaning has a negative impact under the National Invasive Species Act. However, the Virginia DEQ ruled April 27 to allow the shipments.

According to one news report, since last year, the Coast Guard has required that ship hulls be brushed to remove marine growth that may have accumulated before they are towed to foreign waters. Some say the process could remove lead paint or decayed metals that would end up in the water.

While California officials have said state permits may be required for such work, the Virginia Department of Environmental Quality does not require permits. The move promoted MARAD to lift the moratorium in Virginia.

The James River fleet houses 54 vessels awaiting disposal.

Export with Care

The recycling industry is a global business. And, with more material being shipped outside of North America, cultural differences could pose problems for exporters who seek ways to boost their volumes. While shipping overseas can bring success, recyclers should also exercise caution.

Jeremy Levin, an attorney with Baker Botts, discussed the Foreign Corrupt Practices Act (FCPA) during the 2007 ISRI (Institute of Scrap Recycling Industries Inc.) Convention & Exposition. The purpose of the act, Levin noted, is to prohibit corrupt payments to foreign officials for the purpose of obtaining or retaining business or securing an improper advantage.

In his presentation, Levin noted that earlier this decade Schnitzer Steel was charged with violating this policy. The company settled with the two U.S. agencies and paid fines of slightly more than $15 million.

From a top-down approach, Levin noted that during the past two years, bribery cases have been brought forward from a number of higher-risk countries, including China, South Korea, India, Thailand, the Philippines and Indonesia.

In his presentation, Levin said that while Schnitzer is a high-profile scrap metal company that was cited, U.S. agencies are not only focused on similarly large
corporations.

The companies that fall under the purview of the act are sometimes in question. U.S. or foreign companies that are listed on U.S. securities exchanges, other businesses organized in the U.S. or foreign persons who commit any act in furtherance of a corrupt act while in U.S. territories are subject to the act.

Companies that do not fall under this act would include foreign subsidiaries of U.S. companies while acting outside U.S. territories. However, a U.S. parent company may be liable for improper payments made by its foreign subsidiaries in certain circumstances.

So, what exactly is considered an illegal payment? According to Levin’s reading of the act, these include an offer, payment or promise to pay to any foreign official, any foreign political party or official for the purpose of influencing that official or inducing that official to act or omit to act in violation of his lawful duty in order to assist in obtaining or retaining business.

Exceptions to the act include some gifts and hospitality, although there are limits and restrictions to these. Another exception would include facilitating payments to secure the performance of a routine government action. However, the payment must be a very modest amount.

As for the concept of what is considered a foreign official, Levin says that it would be any officer or employee of a foreign government of any department, agency or instrumentality.

Finally, Levin expressed significant caution over the use of third parties (often sales agents) who may be in a country where the chance of bribery may arise. These agents, who are often paid a commission for landing business, can cause the parent company a problem. It is the onus of the U.S. company to ensure that the independent agent who is working for the company abide by the FCPA.

Tip-offs for U.S. companies can include an agent’s refusal to provide references or to allow auditing going forward, books and records that lack transparecy, unwillingness to share information regarding ownership of the other company involved in the deal; related to or has close ties with government officials, requires that his or her identity not be exposed, a potential foreign government customer recommends the agent, the agent lacks an office or staff and payment is to be made through confidential or convoluted means.

Levin said companies can elicit more specific information from agents, especially at the time of renewal, use detailed internal questionnaires to identify red flags, ensure that all agent roles and responsibilities or third parties are identified and reported and a better understanding of compensation arrangements.

Taking a page from McGruff the Crime Dog, the staff at Cohen Bros., a Middletown, Ohio scrap recycler, worked with local law enforcement to apprehend two men who had stolen some aluminum forms and had attempted to sell them for scrap.

The material the men were hoping to sell was valued at around $20,000.

Don Zulanch with Cohen Bros. says that the company was immediately suspicious of the material. The company requested documentation to prove that the material belonged to the sellers. When the men returned with a handwritten note, Cohen Bros. contacted police. The two men were charged with felonies, including receiving stolen property.

Zulanch says that Cohen Bros., like the majority of scrap recyclers, uses great care to avoid purchasing stolen scrap. To reduce the chance, and to assist police, Zulanch says the company has cameras on the property that film all transactions. "We take all the precautions, all the steps. We want people to respect us," Zulanch says.

Chaparral Steel Co., based in Midlothian, Texas, has announced that its board of directors has retained the investment house of Goldman, Sachs & Co. and has begun a review of possible strategic alternatives.

Through this process, the company will be able to assess a number of other possibilities, including a possible strategic partnership, merger, acquisitions or a recapitalization.

Despite the move, Chaparral says there is no guarantee that the company will pursue any of the transactions that could result.

"The company will only pursue transactions that reflect the full value of this great company," says Tommy Valenta, president and CEO. "To capture that value, all strategic alternatives will be considered."

Chaparral is the second largest producer of structural steel beams in North America and supplies steel bars as well as recycling services.

IPSCO Inc. and SSAB Svenskt Stal AB have entered into an agreement that provides for IPSCO to be acquired for nearly $7.7 billion.

David Sutherland, IPSCO’s president and CEO, says, "This transaction delivers significant value to IPSCO’s shareholders. It also joins IPSCO with a leading player in the global steel industry and reinforces our already solid position as a leading supplier of steel plate and energy tubulars in North America."

He adds, "SSAB is a highly regarded company with a first-rate work force that shares similar values with IPSCO, including a commitment to quality products, workplace safety and manufacturing excellence. As part of this new, larger company, we will have a more diversified product offering that will enhance our ability to better serve both existing and new customers."