Origin of Material

A recent trend in the petrochemical industry is causing great debate and adding significant cost and delivery time to projects. This trend is the practice of specifying material origin requirements for raw material used. For example, a purchase requisition may state “All material shall originate in North America, Western Europe, or Korea.

The intent of these requirements can vary from politically motivated to safety motivated, but either way, customers are adamant that these requirements must be met. The problem arises when these requirements are vaguely written, and not communicated properly. If your customer has such a requirement, here are the questions you should ask to make sure the intent is met, without adding excessive cost or lead-time:

1) What is the definition of “material”? It seems like a simple question, but when using an oil console as an example, there are thousands of small parts that make up the equipment. Is the customer referring to the raw material that is used in pressure containing parts only? This is usually the case, but if not written clearly, the requirement could be interpreted to include such items as paint, ink, rivets, or even the manufacturer’s nameplate. These are obviously extreme examples, but they exemplify the complicated nature of the requirement. When faced with an over-zealous inspector, it helps to have a clear definition of “material”.

2) In the event that non-conforming material is identified, is the customer willing to allow additional testing of the piece to gain acceptance? If equipment has been fabricated, assembled, tested and is being prepared for shipment, there should be some means to allow non-conforming material, such as PMI, PT or hardness testing, among others. If the intent of specifying material origin is to increase safety, then there should be reasonable examinations available to qualify material that does not conform to the list of qualified countries or regions.

3) What is the definition of “origin”? If you buy a stainless steel, weld-neck pipe flange from XYZ pipe distributor in your area, the origin of that flange could be his shelf, where he stocks the flanges. But if you look further, from where did XYZ buy that flange? Where was it machined from the forging? Where was it melted into the steel billet before it was machined? Where did the Nickel come from that went into the steel billet? In today’s global marketplace, it is virtually impossible to trace all of these above steps, but for the right price, anything can be done. Most material test certificates (MTR’s) will not specify origin of manufacture or melt. The question is, what was the intent of the person specifying “origin”, and how much are they willing to pay for it?

4) Does the material origin requirement apply to purchased, commodity components that are installed in the system, (i.e. pumps, filters, coolers, valves, instrumentation, etc..)? As a manufacturer of piping packages, COBEY purchases many commodity items that become part of the final assembled unit. It is very difficult, if not impossible, to impose origin requirements on manufacturers of mass produced items . It should be established that purchased commodities, if approved by the end user, are considered acceptable regardless of origin. Many times, a material origin requirement will be in direct conflict with an acceptable vendor list (AVL) or acceptable manufacturer list (AML). The AVL or AML should apply in these cases.

5) What method of qualification was used to allow some countries or regions, while excluding others? By requiring that all material originate in the United States for reasons of safety, are you suggesting that the worst foundry in the United States makes a better quality product than the best foundry in Russia? Although the intent is to ensure safety and quality, this may not be the most effective way of doing it. By identifying and concentrating on the method of qualification, you can avoid unnecessary obstacles to project completion.
Cobey has vast experience with projects involving material origin requirements. The scope of the requirement varies widely and seldom has a suitable definition. We have seen unnecessary expense and extended lead time while adding little value to the end product. Many times, a politically motivated customer imposes origin requirements under the guise of a safety requirement, while unwittingly adding thousands of dollars of cost to their project.

Cobey Inc is a global designer and manufacturer of customized modular lubrication-compression-conditioning packages for the oil & gas, power gen and air separation industries. Products include lube oil consoles, dry gas seal panels, high speed reciprocating compressors, water injection skids, rundown tanks and rotating equipment packages. Systems can be designed to customer specifications, industry and applicable ISO/API standards.