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Wooden
Pallets bug free for export...
Bark-Free
Pallets? The Issue Facing the World's Wooden Pallet Industry
In 2002, one hundred and thirty-two countries came together
in agreement to implement ISPM 15, an international guideline
for regulating wood packaging material for international shipments,
with the objective of controlling undesirable translocation
of quarantined biological pests. In an extension of this standard,
Australia, the EU, and other countries are proposing further
that this packaging be manufactured free of tree bark. Their
contention is that bark is a pathway for re-infestation, whether
treated or not. While technical studies are in progress to
test the proof of this theory, we at Penn State are studying
the economic ramifications on the North American pallet producing
industry, as well as their suppliers and customers, of adoption
of this specific additional regulation.
The component issues of the potential economic issue are many.
• Impact on North American export/import trade. U.S.
Department of Commerce statistics reveal that the United States
carries on $4 trillion worth of trade internationally, and
$160 billion is exported to the EU alone. The National Wooden
Pallet and Container Association estimates that approximately
one-half of this trade is conducted on wooden pallets and
containers. At question then, is how much of this trade would
be impacted, possibly through quarantine and/or rejection
at the ports of the world.
• Impact on North American continental logistics costs.
Industry experts suggest that any bark-free regulation enforced
on international shipments will become de-facto standards
for all wooden pallets, as customers recognize and seek to
avoid additional management costs of additional sortation.
• Environmental impact of lower yield on a major part
of the consumed lumber in North America. The practice of manufacturing
wooden pallets and crates from lower-grade material containing
bark, wane, woody knots, and other similar defects has been
considered in the past an excellent use-appropriate outlet
for lumber that might otherwise be scrapped or sold for lower
value chip and fuel. However, prohibition of these types of
defects in the wooden containers and pallets would require
either:
o Additional re-manufacturing of the low-grade lumber to eliminate
the defects, and/or
o Purchase of higher-grade lumber that normally goes to higher
value solid-wood uses, such as furniture, cabinetry, and flooring.
• The market impact of this potentially increased demand
for higher-grade lumber, and lower demand for the lower-grade
component.
• Cultural and administrative costs, sometimes labeled
"transaction costs." In most parts of the world,
regulation enforcement carries additional burden in the form
of administrative costs, enforcement costs, or costs related
to overcoming cultural barriers, such as graft and kick-backs.
The data forming the context of this issue vary widely from
region to region, but these are baseline data from which the
problem can be primarily formulated.
1. 95% of all U.S. packaged products are shipped on pallets,
92% of which pallets are made from wood (1).
2. Nearly $400 billion worth of U.S. trade is exported annually
on wood pallets and containers worldwide (1).
3. The U.S. wooden pallet and container industry is $5.1 billion
industry, of which the approximately 2800 component companies
paid $20 million in taxes and license fees, employed an average
of over 17 workers per company, and added over $1.1 billion
in wages to typically rural, economically depressed areas
(2).
4. The industry consumed over $2.6 billion in raw material,
and added over $2.4 billion in value to it, resulting in over
$5 billion worth of shipments. In order to keep this economic
engine running effiicently, the industry has spent nearly
800 million on capital equipment from 1997 to 2002 (2).
5. Over 85% of the 12,000+ lumber producing mills have log
debarkers, and probably more than 95% of all U.S. lumber by
volume is debarked prior to sawing (3).
6. At current debarker industry production rates, it would
take 8-9 years for the remaining sawmills to acquire debarkers
assuming all mills placed orders, and assuming mills currently
with debarkers did not place additional orders (3).
7. However, the cost of debarker equipment, which ranges from
$20,000 to $75,000 for a used debarker and $30,000 to $250,000
for a new debarker, would preclude many of the smaller sawmills,
those currently without debarking equipment from upgrading.
8. Log debarking does not guarantee bark-free logs or lumber.
The highly variable shape of logs, and texture of bark, dictates
that most logs are debarked to varying degrees of success.
Below are two examples of debarked logs in one of the largest,
most high-tech sawmills in the Pacific Northwest.
9.
10. Due to the incomplete debarking of logs and resulting
lumber, much of the lumber supplied to the pallet industry
has some degree of bark occurrence, whether in the board,
cant, or pallet "shook" form. This bark occurrence
takes many forms and appearances, but it continues to appear
as an issue on some percentage of the lumber as it gets re-manufactured
for pallet component usage. The ten pictures below are examples
of typical bark (or bark-like) occurrence in pallet lumber
stock, in degrees from "a little" to "a lot".
11.
12.
13.
14.
15.
16. Past research indicates that the difference in lumber
recovery between square-edged lumber sawing and sawing to
allowable wane specifications is between 5.5-8% (4) and 18%
(5). These studies were run on higher grade lumber; for pallet
grade material, these percentages would certainly be much
higher. For instance, assuming a conservative 20% yield loss
due to square-edged sawing requirements, one could project
an equivalent increase of resource consumption...that is,
an additional one tree for each five trees harvested would
additionally need to be cut to meet current requirements of
the industry.
17. Recent research estimates the number of wooden pallets
used in exportation of U.S. products to be over 63 million
(6).
18. Our recent research efforts have focused on determination
of the amount of pallet and wooden container product, certified
as ISPM 15 compliant through treatment, which actually still
contains at least one occurrence of bark. Based on data collection
at pallet mills and customer inventories throughout Pennsylvania,
Ontario, and Washington, we found roughly 20% of 3750 ISPM-compliant
pallets retained at least one bark occurrence. One might extrapolate
from the estimate in point (17) above then, that 12-13 million
ISPM certified pallets of U.S. goods could be targeted for
exclusion (and resulting in quarantine and/or rejection) by
any "bark-free" addition to the current ISPM 15
agreement.
19. Some examples of bark or bark-like occurrences tallied
in the pallet data cited in point (18).
20.
21.
22.
23.
24.
25.
26. Typical pallet-product use example (shown below): Hi-value
pallets manufactured for high-tech semiconductor company.
Product value per pallet: about $250,000. Bark occurrence
rate: 33%.
27.
28. Another typical pallet-product use example (shown below):
Specialty pallet-box combo manufactured for seasonal fragile
products. Product value per container: about $1000. Bark occurrence
rate: 50%.
29.
Based on this early data collection, we have strong evidence
that a proposal to require bark-free pallets for international
trade will have far-ranging and deep economic impact around
the world. The wide range of issues, and the depth through
the world's logistical supply chain at which economic impact
might be incurred, appear to hide significant potential for
large economic, environmental, and socioeconomic loss. This
TechNote is the first in a series that will explore these
economic ramifications in more detail. As this information
is developed, an economic model will be developed to determine
how large the total economic impact of mandated "bark-free"
wooden pallets could be.
We hope you'll stay tuned.
Chuck Ray, Ph.D.
Penn State Wood Products Operations Specialist
mailto:Cdr14@psu.edu
(1) The National Wooden Pallet and Container Association
(2) The 2002 U.S. Census Bureau Report - Wood Container
and Pallet Manufacturing
(3) Keith Fulmer, USNR (major debarker manufacturer)
(4) Kuenzi, T. 2002. The effects of wane allowance, kerf,
and target size reduction on sawmill optimization. Oregon
State University. 29 p.
(5)Steele, P. 1984. Factors determining lumber recovery
in sawmilling. USDA Forest Service, Forest Products Laboratory,
General Technical Report FPL-39. 8 p.
(6) "Impact of international phytosanitary standards
on wood packaging materials end users: Pre-implementation
assessment." 2005. Molina-Murillo, S., T. Smith, M.
Reichenbach, amd R. Smith. The Forest Products Journal 55(9):24-26.
This study is funded by the National Wooden Pallet and Container
Association, Alexandria, VA, USA.
Thanks to http://woodpro.cas.psu.edu
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