Changing Pallet Rules to Add Costs of Shipping to Canada

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The Packer Jan 24, 2012

The U.S. and Canada are expected to change the requirements for wood pallets transporting goods between the two countries.

Industry officials said the change will add costs for shippers and may stress supplies for shippers in both countries not already using heat-treated ISPM15 compliant pallets.

The proposed regulation on the requirements for wood packaging materials imported from Canada was published in December 2010, but the final rule has not yet been issued. The proposed rule eliminates an exemption allowing wood packaging material from Canada to enter the U.S. without first meeting the treatment and marking requirements required of wood packaging from all other countries. According to the proposal, removing the exemption is necessary to prevent invasive pests from entering the U.S.

“It was supposed to start last year, but the regulation did not get published and that’s why everything is on hold,” said Edgar Deomano, technical director for the National Wood Pallet and Container Association.

Deomano said Canada is ready to enforce the regulation but is waiting for an agreement with the U.S. so the two countries can begin enforcement at the same time, he said.

An official with the U.S. Department of Agriculture Animal and Plant Health Inspection Service did not return calls seeking comment on the issue.

The proposed regulation sparked opposition from the Washington, D.C.-based Grocery Manufacturing Association. In a Feb. 1, 2011, letter to the USDA, GMA general counsel James Skiles said the proposed rule will be costly, stating that estimates suggest total costs of implementing the regulation will exceed $100 million annually.

“The proposed changes will add significant costs to the U.S. supply chain for food and consumer goods which are dependent upon the use of pallets for packaging and transport,” he said in the letter to the USDA.

What’s more, Skiles said the exemption granted for U.S. and Canada pallets was scientifically sound.

“The risk of non-native invasive species being introduced between the regions was initially deemed insignificant and still does not pose a large threat from pallets given that the two regions still share significant areas of land and forests where any existing pests would be able to move and spread freely in a natural setting,” he said.

Deomano said he doesn’t believe the proposed requirement, when it becomes final, will create a big shortage of ISPM15-compliant pallets.

“Here in the U.S., a lot of pallet companies are already doing it for their customers,” he said. “Shippers will just have to make sure they transport something from the U.S. to Canada that (the pallets) are treated and marked.”

Costs will be on average about $1 higher for the treated and marked pallets, he said. Currently, recycled pallets costs between $3 and $6 for a 48-inch by 40-inch pallet. A new pallet can cost between $8 and $20, depending on how the pallet is built.

Deomano said wood pallets have about a 90% market share in the U.S., though pallets made of plastic and other materials is steadily growing.

Gary Sharon, vice president of Litco International, Vienna, Ohio, said the company’s presswood pallets are already ISPM15 compliant and approved for export anywhere in the world.

Sharon said there may not be enough heat-treating capability to satisfy the movement of pallets between the U.S. and Canada.

Excluding Canada, there are about 60 to 70 million heat-treated pallets that leave the U.S. annually for export, with about 90% of those pallets conventional wood and the other 10% are plastic or pressed wood. However, movement of pallets to Canada is in the 300 million pallet per year range.

“You can see the amount of stress it is going to create for the capacity to (treat) these quick enough,” Sharon said.

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