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New shipping rules could spell increased costs for Lowcountry exporters
By Matthew French
Staff Writer
A little-publicized change in international law could have far-reaching consequences for any company looking to do shipping business overseas.
In an attempt to protect their environment and prevent the spread of both wood-borne diseases and pests, the European Union has imposed new rules regarding how wood shipped to the EU must be treated. The new rules address raw wood and wooden crates and pallets. This means the new rules will extend to nearly every company that ships actual goods to the EU.
Effective March 1, the European Union required all newly assembled, repaired or recycled unprocessed raw wood packaging materials (hardwood and softwood) entering the EU to be either heat treated or fumigated and officially marked. The EU is concerned that infestations of foreign insects or arboreal diseases could have a large adverse impact on the European economy. The United States is requiring similar treatment of wood products imported into this country, but those rules don’t take effect until
Sept. 15.
Other countries have either already followed suit or will by year’s end. According to the U.S. Department of Agriculture, Australia and China have already made the switch, and countries such as South Korea and the Philippines will require similar precautions by the end of this year.
Given that more than 41% of South Carolina products shipped abroad went to European Union countries, plus another 8.4% to the United Kingdom, the potential impact of the new regulations could extend well into the billions of dollars. This is forcing companies from the Palmetto State that send goods to Europe to evaluate their shipping services, says Bruce Wissinger, director of national accounts for McKinley Crating, a North Charleston-based crating and packaging company.
“Manufacturers will be forced to look at their manufacturing process for containers, logistics and transportation, and that includes crating, packing pallets and anything that uses basic wood,” Wissinger says. “The rules are intended to prevent wood-borne viruses and bugs. One thing companies may have to do is switch vendors if the vendors they’re currently using are unable to make their pallets or crates from man-made materials or if they are incapable of treating pallets or skids.”
And treatment is not an inexpensive task, says Tom Roth, McKinley’s president.
“The wood has to be heated to get the core of the wood up to 56 degrees Celsius (about 137 degrees Fahrenheit),” Roth says. “For a lot of companies like ours, it means investing in a heat treatment chamber on the premises. We brought one in just for this purpose (to meet the new international requirements), and it represents an investment of no less than $50,000.”
While companies like McKinley have to make the initial investment in the equipment, the cost of the equipment, plus the training and hiring of staff to run it, will have to be passed along. The costs won’t likely deter any companies from doing business internationally, but they will have to be taken into consideration as an added expense of doing business outside the United States.
The regulations, according to the U.S. Department of Agriculture, currently refer to the types of wood packaging material as “wood packing materials other than loose wood packing materials, used or for use with cargo to prevent damage, including, but not limited to, dunnage, crating, pallets, packing blocks, drums, cases and skids.”
But why now? Europe and the United States have been commercial partners for literally hundreds of years.
“New technology shows just how damaging it can be to introduce a foreign parasite,” says Wissinger. “There was a case several years ago of infested wood coming into the Chicago area, and a small forest was wiped out. We’ve only recognized the liability issues in the last 10 or 15 years.”
The alternative to heat treatment involves chemically treating the wood with methyl bromide. According to the USDA’s Agricultural Research Service, “there is no known single alternative fumigant, chemical, or other technology that can readily substitute for methyl bromide in efficacy, low cost, ease of use, wide availability, worker safety and environmental safety below the ozone layer.”
However, says Roth, many still consider heat treatment to be the method that would least impact the environment.
Companies responsible for producing the wood materials will have to have a certification company assert that their processes comply with the international regulations and will have to stamp the materials intended for shipment. To date, this USDA program has accredited only three inspection agencies, according to the National Wooden Pallet and Container Association. The closest geographic approved agency is in Conyers, Ga.
And non-compliance can be a costly mistake.
“As we understand it, one of three things can happen,” says Roth. “A shipment can be turned back, meaning anything that’s inside the same steel cargo container will be sent back, too. The entire shipment can be destroyed by the receiving government, or it can be held in quarantine and fumigated.”
The specific consequences depend largely on the country to which the shipment is sent.
“We are finding that even domestic shippers are treating their packaging materials because there is the possibility the crates will be exported at a later time,” Wissinger says. One of the problems we’ve run into is that the requirements to comply with this were delayed and delayed and delayed. While most in the transportation and shipping community are aware of the requirements, companies shipping goods abroad might not be. There has been something of a malaise on the part of U.S. exporters to get going on this.”
The issue will be addressed in May at the South Carolina International Trade Conference.
Matthew French covers imports and exports for the Business Journal. E-mail him at mfrench@crbj.com.
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