Shipping Pallets: Canada prepares for treated pallets
Better safe than sorry.
That sums up the Canadian Wood Pallet and Container Association approach to a proposed end to the bi-lateral exemption on heat treated pallets between the US and Canada.
In recent months, I’ve received a number of emails from leading manufacturers who ship into Canada asking whether they will have to treat their pallets and if so, when.
The questions are a response to a proposal posted in late December 2010 from the U.S. Department of Agriculture, Animal and Plant Health Inspection Service (APHIS) that would remove the exemption from ISPM 15 on wood packaging material moving between Canada and the United States in both directions beginning in 2011. I wrote about this proposal last March.
As it turns out, the proposal is still in discussion, with no firm date for implementation – the USDA did not respond to emails or telephone calls asking for comment. But, based on a discussion I had last week with Bill Eggertson, executive director of the Canadian Wood Pallet and Container Association, it appears that the bi-lateral exemption on treated pallets shipped to and from the US and Canada is going to end in 2014. That gives shippers about 18 to 24 months to come up with a plan to comply.
“I am telling my members that they may not need to be in full compliance before 2014,” says Eggertson, whose organization represents Canadian pallet manufacturers. “That sounds like a long ways off, but it can take up to 3 months for a pallet manufacturer to get certified. If a shipper isn’t using certified pallets, their goods aren’t going anywhere.”
What does this all mean to US shippers? Let’s take a step back. For a number of years, companies that ship their products globally have had to use pallets that meet the ISPM 15 standard. That requires a pallet or container made from wood to use lumber that has been heat or chemically treated to kill pests that may infest a forest and kill native species. A company can also comply with ISPM 15 by shipping on a pallet manufactured from an alternative material, like plastic, metal, corrugated or molded fiberboard pallets.
The exception is Canada and the US. When ISPM 15 went into effect, according to Eggertson, the two countries agreed to wait until 2014 or 2015 to implement the requirement in North America. “Right now, we’re the only jurisdiction in the world that has this bi-lateral agreement not to require treated pallets between our two countries,” says Eggertson. Given that an estimated 300 million pallets pass back and forth each year between the two countries, it’s a big deal.
That changed in 2010, when the USDA proposed speeding up the calendar. According to Eggertson, a couple of factors slowed down implementation of the new rule. One was a matter of defining the requirements. For instance, what manifest documentation would be required so that a truck wasn’t stopped or held up at the border? Will pallet repair companies need to be certified to repair damaged treated pallets? And, more importantly, who is going to pay to get all the pallets currently in the system up to ISPM 15 standards.
“We estimated there would be a one time $300 million hit to treat all the pooled pallets being used now,” says Eggertson. “On top of that, there would be about a $30 million annual hit for Canadian manufacturers to maintain enough treated pallets for global shipments and shipments between Canada and the US.” Something similar would have to happen on our side of the border as well. Without additional kiln-drying capacity, there could be a shortage of heat treated pallets. That could create an opportunity for CHEP and PECO, assuming they can get their pallets dried. It also could create demand for iGPS, or manufacturers of plastic pallets, corrugated pallets and molded fiberboard pallets.
As Eggertson said to me: someone has to pay, and it’s probably the consumer.
For Canada, there’s a bigger issue. According to Eggertson, Canadian manufacturers will have to invest in additional capacity to heat treat all of the lumber that will now have to be treated.
Eggertson has been told the proposed change is in review at the USDA. “The details have not been released, but we have been led to believe that informed compliance will begin at the end of 2012 or 2013,” Eggertson says. That means a manufacturer will be able to continue to ship on untreated pallets as long as they don’t have pests. Full compliance – meaning pallets will have to meet ISPM 15 standards – is anticipated to begin in early 2014.
“We assume it’s going to happen and there are a number of reasons that it should happen,’ says Eggertson. “For Canadian companies that are already shipping to Europe and China, this won’t be a big deal. But for anyone else, we’re telling them they need to make sure their pallet supplier can provide them with certified pallets.”