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124 Mr. Gray continued on to explain the National Sword Policy currently coming out 125 of China. China has historically been a big recipient of recycled materials. Now, 126 however, they have closed the door to shipments of recycling coming in to the 127 country and not letting the materials in unless they meet a very, very high standard. 128 One of the things impacting the revenue for Roseville over the past year is the 129 National Sword Policy. In the long run, this policy will actually be a good thing 130 for the recycling and manufacturing markets. But in the short-term, it is creating 131 difficulties. 132 133 Member Kruse asked if it is feasible to meet China's new standards. 134 135 Mr. Gray noted that China is currently issuing a standard of less than a half -percent 136 of contamination, which is a standard that even Eureka would have trouble meeting. 137 Perhaps the end negotiated level would be higher than that; it is hard to know. If 138 China goes on too long like this, their internal markets will run out of supply. 139 140 Chair Cihacek asked whether international markets are being impacted as 141 significantly as American recycling markets. 142 143 Mr. Gray responded that the system has worked so efficiently in the past, because 144 Chinese containers arrive here full of products; the containers are emptied and then 145 refilled with recyclables. Going elsewhere for recycling material would require an 146 entirely new system and structure. 147 148 Member Kruse asked if China currently uses all of the recyclable material it imports 149 from the United States. 150 151 Mr. Gray explained part of the problem with international markets is there are good 152 international end markets, companies that are responsible with the material and 153 have controls in place. And then there are also companies that do not have proper 154 environmental controls. There is not an easy way to track where the material goes. 155 Eighty-five percent of what Eureka generates stays in Minnesota, but Eureka is also 156 susceptible to global pricing fluctuations for commodities. 157 158 Member Misra asked whether there are facilities in the US that are positioned to 159 pick up this slack, particularly in plastics. Also, she asked if there is a way to track 160 the shipments going abroad. 161 162 Mr. Gray responded there is no system. Once it leaves the shores of America, the 163 tracking and enforcing of environmental controls is completely out of Eureka's 164 control. He also noted that there are markets in America for this type of material, 165 but these markets do not have the capacity to absorb it all. If it becomes clear China 166 will not back down, then there is incentive for that kind of capital and facilities to 167 develop in America. 168 Page 4 of 9