DRAFT GUIDELINES FOR THE EXPORT OF SCRAP METAL
 28 Feb 2004

Pursuant to Coalition Provisional Authority Memorandum No. 8, which amends Order No. 12 dated 8 June, 2003, the Minister of Trade is issuing the following draft guidelines for the export of scrap metal.

Submissions and comments are invited from interested parties and should be addressed to Export Licensing Guidelines, Ministry of Trade, or emailed to scraplicense@CPA-IQ.ORG, by 5 pm 20 March, 2004. The Minister will address all comments received in a public notice that will accompany the final rule.

Overview
The Ministry of Trade wishes to regulate the current trade in scrap metal, encourage the development of cross-border trade and to create a system involving licensed exporters, who will bid for the right to export, and registered dealers who will gather the scrap. Licensed exporters may only buy from registered dealers. Only registered dealers may sell to licensed exporters.

Those who receive licenses to export and those who become registered dealers will be required to keep comprehensive records of all their transactions and to keep those records within Iraq and available at any time for audit by the Ministry.

It will be the responsibility of both exporters and dealers to prove the legality of their transactions. Any dealing in illicit or looted material will be subject to the cancellation of licenses/registrations.

Registration of Dealers
The Ministry of Trade will accept applications for registration as a dealer from any company, currently registered in Iraq. In order to provide an advantage to the local economy and an immediate benefit to the people of Iraq, all companies wishing to register must be wholly or majority owned by Iraqi citizens in good standing. This restriction will cease from 30 September 2004 after which nationals of any country may register as dealers. A fee will be charged for registration. The number of registered dealers may be limited to approximately 30, possibly allocated among different regions.

Registration will begin shortly. Details of the registration process and an application form will be made available on line.

Export Licenses
The Ministry will make available licenses for the right to export scrap metal to be sold by a public competitive bid process.

Companies and individuals will bid for the right to export a set quantity of scrap metal in metric tonnes.

Each auction will offer licenses to export a set total quantity. i.e. the Ministry may offer licenses to export a total of 100,000 tonnes. Bidders will state how much of that total they are bidding for and what price per tonne they are willing to offer.

No bidder will be able to bid for more than 25 per cent of the quantity offered.

Depending on demand, the Ministry Of Trade may offer further amounts for auction.

Bids will be received securely. The bid process will be open to audit and an appeals procedure will be put in place to resolve any dispute.

Conditions of License
One of the most important purposes of this bid process is to inhibit unlawful activity in Iraq. Licenses may be revoked without compensation if a licensee can be shown to have traded in illicit or looted material.

It will be the responsibility of the bidder and exporter to be aware of the appropriate regulations.

Use of licenses
When a licensee wishes to use his license, he will notify the Ministry of Trade and specify the port of entry he wishes to use. The Ministry will coordinate with the Customs Service to expedite shipment.

Frequently Asked Questions

Q. Why are you allowing the export of scrap metal ? Should it remain in Iraq?
A. There is a very large amount of scrap metal in the country – well in excess of Iraq’s current needs. Following the war and the looting, Iraq’s major iron and steel plants are no longer working. The scrap has to be exported to be put to use.

Q. Is this the right time to start licensing exports ?
A. World market scrap prices are at a record high now. This is an excellent opportunity to create jobs and provide lucrative business opportunities for the people of Iraq. In addition, the money earned from scrap can then be used for redevelopment.

Q. Why not wait until the smelting plants are repaired ?
A. It will take considerable time to put these plants into operation and large amounts of investment.

Q. Why not leave the scrap where it is ?
A. Scrap metal is an environmental hazard and dangerous, especially to children. The presence of large amounts of scrap is both a hindrance to redevelopment and acts as a disincentive to visitors and investors. We have a beautiful country. We need to make it look beautiful again.

Q. What will be the effect on employment of exporting the scrap ?
A. It will have an immediate beneficial impact. Providing clear rules will encourage exports and the collection of scrap. This is a labour intensive business and will put Iraqis back to work.

Q. Will allowing exports just encourage looting ?
A. No, the main aim of this process is to regulate the current trade. By setting out clear rules and registration procedures, we are encouraging legitimate businessmen to trade in scrap. This will in turn drive out the looters and the criminals.

Q. How will you discourage dealers and exporters from dealing in looted materials ?
A. All registered dealers and licensed exporters will be required to keep detailed records of all their transactions. The records must be kept in Iraq and made available for audit by the Ministry.

Q. What penalties exist for those who break the rules ?
A. A registered dealer will lose his registration and will be permanently banned from selling to exporters. A licensed exporter will forfeit any amount he has paid and may be barred from future auctions or required to pay a large fine. Criminal sanctions will also be applied where appropriate.

Q. What will the licenses cost ?
A. The price will be set by a competitive bidding process. Companies will pay the market value of the licenses. This will generate revenue for the government.

Q. Will this process penalise people who have already collected scrap metal ?
A. No, by clarifying the rules and making exports legally possible, the market will be extended.

Q. Will new entrants who have not yet collected any scrap be disadvantaged?
A. Yes, but any new entrant in any new market starts with a disadvantage. Those who can overcome this are the successful businessmen of a prosperous, free market economy. As anybody can see, there is still plenty of scrap still available for collection.

Q. How do you prevent one person or a small group buying from all the licenses ?
A. No one may buy more than 25 per cent of the amount offered at any one time. If enough demand exists, the Ministry may make further amounts available over time.

Q. Could the registered dealers form a cartel and raise prices ?
A. No, the process of becoming a registered dealer will be quick and simple, and it will not be overly expensive. New dealers could enter the market at any time, which will stop cartels forming.

Q. How do I know the bid process will be fair ?
A. The bids will be received securely via a reputable third party with no possibility of collusion. We will publicise the bid process to attract a wide selection of bidders. We will put in place an appeals procedure and an independent adjudicator who will have access to all information.

Q. Will the profits from this just go to foreigners ?
A. No, first of all anybody can bid for the licenses to export. We expect Iraqi companies to participate fully in this process. Secondly the government will charge for these licenses and will gather revenue for the benefit of the Iraqi people. Finally, we have specified that for the first six months only Iraqis can become registered dealers.

Q. What will it cost to register ?
A. The fee has not yet been set. We would welcome suggestions. We believe it should be low enough to be accessible to a large number of businesses, while being high enough to provide an incentive to deal legally and fairly. If it was too low the threat of losing the registration might not be effective.

Q. How do I become a registered dealer ?
A. We will explain the process in detail when we publish the final rules. We will make this as simple as possible.

Q. Who can become a registered dealer or licensed exporter ?
A. Anybody who fulfils the nationality requirements (with respect to dealer registration), pays the fees and is not otherwise barred for reasons of former regime activity.

Q.Why have a bid process ? Why not just collect a straightforward export tax at the border ?
A. A bid process raises more revenue for the government and is both easier and less expensive to collect. Scrap is also variable with certain categories worth a lot more than others.

Q. How do you control the possibility that license holders may export more scrap than their license allows them to ?
A. The Ministry of Trade will keep a central list of all licensed exporters. Exporters will be required to notify the Ministry of the amount they intend to export and the port of entry. The Customs Service at the port of entry will ensure that the amounts expected are not exceeded.