What is potentially the next US-Canada trade dispute has nothing to do with the goods being transported across the border. Instead, its focus is the pallets used to ship the goods.
According to Bill Eggertson, the executive director of the Canadian Wood Pallet and Container Association, Canadian companies had better start preparing now for a change in regulations, even if the US agency involved in setting the rules is behind schedule in releasing its findings.
In order to prevent the spread of insects, international regulations state that wood pallets need to be treated, either by kiln drying or by fumigation, before they can cross international borders.
One very important exception to that rule is the Canada-US border. Because of the large number of pallets moving back and forth between the two countries, and because the pests themselves can easily cross the border without even a passport, an exemption was put in place saying pallets crossing that border can be constructed of untreated wood.
The exemption was designed to expire eventually, but no date was ever set. Even still, the general thought was it would likely be gone by 2015 or so.
Eggertson says that right now, the odds of the exemption being removed sooner rather than later are very good, because the United States Department of Agriculture (USDA) launched a snap, unilateral industry consultation (that concluded in February 2011) with the goal of eliminating the exemption immediately.
Because it was a public hearing, the Ottawa-based association got involved in the process and submitted comments. Specifically, it noted that any actions taken had to be bilateral, not a unilateral proclamation by the US. It also pointed out the financial cost.
“My members estimate that they ship 26 million new units per year to US customers, of which 20 percent are heat-treated. To treat the 80 percent will add $1.25 to $2 per unit, for a total new cost of $30 million, which will be paid by my members and their clients,” says Eggertson.
“USDA estimates that 300 million units come south—we have no idea if that is 100 million units per day or what—under load. We estimate that half are treated now, so the balance of 150 million would need to be kilned at $2 per pallet, or $300 million in total. Wholesalers, retailers, and consumers would evetually pay the costs for that.
“If exporters decide to use non-heat-treated units for domestic transport only and buy new-heat treated units to replace the non-heat-treated under load, my members would be very happy.”
The USDA backed down from its goal of an immediate ending of the exemption, but it left the industry hanging. Even though regulations state the agency must issue a ruling based on the findings of the consultation—which in this instance means setting a specific date when the regulation would expire—it hasn’t done so yet.
“The USDA chief of staff told us, ‘Full compliance is not before 2014.’ So that means either January 1, 2014 or some time after that.”
Before full compliance comes into effect, a period of informed compliance needs to occur. This is when shipments not meeting the standard would be accepted, but their owners would be sent warnings explaining the infractions.
Eggertson says the USDA has promised the informed compliance period will last between 10 and 14 months.
“If you average that as 12 months, we’re guessing that as of January 2013, if you’re shipping stuff that isn’t in compliance, you’ll be getting nasty comments saying you’d better pull your act together. As of January 2014, if you want to ship that stuff, it’s not getting across that border.”
Currently, it takes between four and eight weeks for a company to go through the training required for it to be certified to handle, create or repair treated pallets. But Eggertson warns those times will go up the closer it gets to the exemption lifting date as more businesses sign up for certification training and as the demands on the trainers increase.
Even though the old rules are still in effect, there is confusion at border crossings. US Customs and Border Protection (CBP) is reported to have turned away trucks carrying untreated pallets. Specifically, trucks at the Blaine, Washington crossing were said to have been turned back a number of times, according to St Albans, Vermont-based Deringer Logistics.