This is part of our series of scrap industry interviews where we uncover horror stories and bad practices. We’re sharing them with you to highlight how we can improve the scrap industry together. Names have been removed for legal reasons and some editing done for clarity.
Aussie in Trouble
“I run a scrap operation in Australia. We were working with a broker a few years ago who was helping us expand into the Pakistani market. We always ship our loads direct so we can have more control over the sales process and make sure we know the end user. It’s part of our standard process to avoid problems we’ve had in the past with some of the traders who operate locally.
We sent photos of some steel scrap we had that was going to be offered as oversized. We were looking for a buyer who would be able to process it once it arrived, since the cost of processing is much less in certain countries than it is here. The broker told us he had a buyer, the terms were good, and we signed an order.
We knew our broker fairly well since we had been working with him for a little over a year. We ended up loosening our terms for this transaction because we had developed a relationship with this broker and we hadn’t had any problems with any of his customers. In fact, we already sold a couple of loads to this company that he was connecting us with. So, even though we usually require full payment up front, with this particular shipment we accepted a payment of 20% and loaded the containers to ship to him, expecting payment within a week after shipment. Shipping times from Australia to Pakistan are not very long so before we knew it, our containers arrived at the port. However, we were still waiting on payment.
Two weeks turned into three weeks and then a month—still no payment. The buyer was giving us one excuse after another. Next thing we know, he’s contacted the broker and told him that he was having problems getting the containers cleared by customs, because the inspectors had classed the material as used parts and building supplies. Both types of scrap are taxable in Pakistan and require pretty high customs duties.
The buyer knew exactly the kind of material that we were selling him and he believed he would have no problem getting this material through customs and sent over to a yard for processing. But what we didn’t realise was that he didn’t have control of the situation on his end. He asked us to ship him something that is not allowed, and having only limited experience with selling scrap to Pakistan we didn’t know that this buyer could run into this type of problem.
Week after week, the demurrage charges and port fines started mounting. We learned that normally when a buyer abandons a shipment like this, either you need to bribe the customs officials or forget about your scrap, because it will end up being sold on the open market within two months in order to pay off the shipping company and the port fees. We couldn’t believe it! Our entire shipment was going to be gone and we were going to lose 80% of our money! The buyer should have known the rules within Pakistan. What a nightmare!
We believe in doing business the right way. Offering a bribe just isn’t something my company would ever do—even to save our entire shipment. So, we started making phone calls to the customs agent and the port to try to resolve this issue, legally. It took us three excruciating months and a lot of energy spent by our broker in-country until we finally were able to get those containers sent back to another buyer in India. Total financial losses were almost $100,000 USD. I can’t even begin to total up the amount of time and energy this whole problem cost us. If I had to put a price tag on that I would say we lost another $20,000, just in man-hours.
I’ve since seen the company’s Tradefox Score (in the low 500s out of 1000), and I’d never have done the deal if I knew that score beforehand. There were a couple of red flags on the report that would have stopped me in my tracks. In the future I’ll be checking every company’s score – it’s a no-brainer to pull up a report to save myself $100K+.”
Have your own scrap horror story? We’d love to hear it! You can email a written version of the story or send us an audio or video file to firstname.lastname@example.org. Or, send it via WhatsApp to Chris at +31 6 5392 8886.