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Plastic or Wood? Packaging Wars Break Out at APHIS

Beveridge & Diamond, P.C., September 15, 2009

Who knew that simple wooden packaging materials, like pallets and crates, could create controversies over ozone depletion, brominated flame retardants, and forest destruction by insects?  A new regulatory initiative raises the prospect of possible wholesale changes in how America ships goods, and in doing so has fueled a vigorous dispute over the respective merits of plastic and wooden packaging.

On August 27, 2009, the U.S. Department of Agriculture’s Animal and Plant Health Inspection Service (APHIS) held a public meeting and published an advance notice of proposed rulemaking (ANPR) soliciting public comment on potential regulatory options for wood packaging materials (WPM) such as pallets, crates, cargo braces, and large spools, aiming to reduce the interstate spread of destructive pests such as the emerald ash borer and the Asian longhorned beetle.[1]  WPM is currently regulated under a combination of uniform international treatment standards and domestic quarantines.  APHIS also announced its intent to prepare an environmental impact statement (EIS) on the potential pest mitigation measures.  These actions mark major steps in APHIS’s long-standing efforts to address invasive species.  They stand to greatly impact the intensely competitive debate between suppliers of wood and plastic pallets.  Because WPM is so ubiquitous in the commerce stream, a very wide variety of businesses may be directly impacted.  Among the options for new regulations are uniform domestic treatment standards, alternative materials, and even new business models, all of which could impact the practice and cost of domestic shipping. 

Background

When it comes to shipping goods, wood is currently king.  In its ANPR, APHIS cited industry data indicating that 1.2 billion wood pallets are in circulation in the United States, with 93 percent of all goods moving on those pallets.  WPM accompanies nearly all types of domestically shipped commodities.  Yet WPM is subject to numerous restrictions.  One set of restrictions arises from the Lacey Act, which aims to prevent illegal logging.[2]  The substantive prohibition on illegally sourced wood (including wood used for WPM) has been in effect and enforceable since May 22, 2008; enforcement of the Lacey Act import declaration requirements for most WPM is being phased in over the next year.[3]  APHIS also regulates WPM to prevent the spread of insect infestation.

The spread of pests like the emerald ash borer, pine shoot beetle, Asian longhorned beetle, and others poses a substantial and increasing threat to the environment, agriculture, and forestry.  To reduce pest risks, WPM is regulated internationally under the International Plant Protection Convention’s International Standards for Phytosanitary Measures (ISPM), specifically the ISPM-15 Guidelines.  Under the Plant Protection Act,[4] APHIS has comprehensive regulations concerning imported unmanufactured wood articles.[5]  Those regulations were amended in 2004 to incorporate ISPM-15.[6]  Under the 2004 regulations, WPM may be imported under a general permit if it has been either heat treated to specifications or fumigated with methyl bromide, a regulated ozone-depleting chemical.  It must also be marked with a certification of compliance and country and producer codes. 

Domestically, WPM is subject to a number of pest-specific regional APHIS quarantines under 7 C.F.R. Part 301.  For example, the federal emerald ash borer quarantine affects the Midwest and Mid-Atlantic, and the Asian longhorned beetle is quarantined in parts of New York and New Jersey.  The quarantines place various conditions on the interstate movement of regulated articles from quarantined areas, creating confusion and compliance challenges for businesses.  California, for example, has had dozens of interceptions of infested WPM from other states in recent years, according to APHIS. 

Despite these regulations, in the ANPR APHIS expressed “a high level of concern that WPM may serve as a vehicle for human assisted long-distance movement of various plant pests.”  Part of the problem may be the regulatory program itself.  The ANPR admits that “the variety of requirements creates a regulatory framework that may create confusion and present challenges to industry and stakeholder compliance.”

Plastic packaging materials and pallets have arisen as a pest-free alternative to WPM.  Plastic pallets may be equipped with radio frequency identification (RFID) tags for tracking.  However, they are significantly more expensive than WPM, and they typically contain brominated flame retardants.  The relatively rapid growth of the market for plastic pallets has led to furious debates over the materials’ relative advantages, with wood and plastic packaging materials suppliers each claiming the other’s products are more toxic and otherwise hazardous.[7]  A plastic pallet supplier recently asked FDA to investigate the hazards of using WPM for transporting food.[8]

ANPR, Public Meeting, and EIS Scoping

To address the issues of plant pests and regulatory confusion, APHIS announced in the ANPR that “we are exploring the development of uniform measures to govern interstate movement of all WPM in order to provide greater ease of comprehension and compliance.”  The ANPR asks questions that implicate the future use of WPM for shipping goods in the United States.  Among the options under consideration are the following:

  • Implementing the ISPM 15 Guidelines for the domestic movement of WPM as well as for imported wood.  This option would likely increase the cost of domestically-produced WPM, but it is generally supported by WPM industry groups (with some potential changes) to reduce regulatory confusion. 
  • Pallet pooling, wherein pallet companies would retain ownership of individual pallets throughout a pallet’s lifecycle through rigorous inventory tracking and management, by leasing pallets to companies engaged in interstate commodity movement.  This business model would necessitate the use of higher quality wooden pallets than those generally in use, or alternative construction materials (plastics or resin, or combined wood and plastics).  These alternative materials are generally more expensive than traditional wooden pallets. 
  • Minimizing use of methyl bromide as a fumigant.  Although it is considered an ozone-depleting substance, methyl bromide is often considerably less expensive than heat treatment, so any phase-out of its use could raise costs for shippers and their clients.

At the August 27, 2009 public meeting in Washington, D.C., Paul Chaloux, the APHIS Emerald Ash Borer Program coordinator, spoke to attendees about APHIS’s broad requests for public input on options for preventing the spread of pests in WPM shipped domestically.  At this time, APHIS is most interested in comments on imposing a uniform national standard. 

Under any option, the stated goal is “to maximize protection of U.S. agriculture and forests against plant pests associated with WPM without unduly affecting domestic trade or the environment.”[9]  In its ANPR and the accompanying notice of intent to prepare an EIS on the rulemaking options, APHIS enumerated more than a dozen questions on which comment is sought, including the impacts of different alternatives on pollutant emissions (including greenhouse gas emissions); who should be responsible for ensuring that WPM moving interstate meets any requirements that are imposed; the projected costs of various regulatory options; and the actual magnitude of the pest risks associated with WPM moving interstate. 

Public statements at the meeting vividly illustrated the diverging viewpoints on the control of pests in packaging materials.  A number of speakers expressed support for a shift to plastic packaging materials because of concerns about wood-treating chemicals, waste, and deforestation as well as pest control.  On the other hand, speakers from the National Wooden Pallet & Container Association (NWPCA) and from WPM suppliers praised the environmental and cost benefits of WPM, even noting its potential use for biofuels.  They also contested whether WPM is a prominent vector for pests at all, saying the risks were more from interstate transport of firewood.  Supporters of both wood and plastic packaging materials referred to competing life-cycle analyses of their preferred products, indicating that APHIS will need to take a hard look at the science and economics behind any proposed rule.  The Nature Conservancy expressed general support for domestic adoption of the ISPM-15 Guidelines, and another speaker noted that the methyl bromide option under ISPM-15 could be made more environmentally friendly with certain chemical conversion technologies.  Ultimately, it seems there is wide agreement that some national standard is needed and perhaps inevitable, but the parameters of that standard will be quite contentious. 

Implications

The potential regulation will directly impact shipping companies and packaging suppliers, but the direction APHIS takes in its pest control efforts will also impact a broad range of other industry sectors.  This is especially true since it is, at this early stage, unclear which entities along the supply chain would be legally responsible for ensuring compliance.  A move toward pallet pooling could pose the biggest change to how companies ship goods in America.  Stakeholders should consider commenting on the potential economic, practical, and legal impacts of the various options for shipping regulations. 

The August 27, 2009 public meeting in Washington, D.C. was only the first of a series.  A subsequent public meeting on the topic was held in Portland, Oregon on September 2, and others will be held in Houston, Texas on September 15 and in Grand Rapids, Michigan on September 29.[10]  Written comments on the ANPR and on the scope of the EIS may also be submitted to Docket APHIS-2009-0016 through October 26, 2009. 

For more information, please contact Mark Duvall, mduvall@bdlaw.com, or Laura Duncan, lduncan@bdlaw.com.  This update was prepared with the assistance of Alexandra Wyatt. 


[1] 74 Fed. Reg. 41368 (Aug. 17, 2009) (notice of public meetings), http://edocket.access.gpo.gov/2009/pdf/E9-19643.pdf; 74 Fed. Reg. 43,643 (Aug. 27, 2009) (ANPR), http://edocket.access.gpo.gov/2009/pdf/E9-20708.pdf.

[2] See Beveridge & Diamond, P.C., “Update on the Lacey Act Import Declaration Enforcement Schedule” (Apr. 3, 2009), http://www.bdlaw.com/news-532.html; “Lacey Act Amendments Update” (Mar. 9, 2009), http://www.bdlaw.com/news-news-516.html; “Lacey Act Amendments Impact Wood Products” (Mar. 6, 2009), http://www.bdlaw.com/news-511.html; “Upcoming Deadlines Under Lacey Act Amendments” (Nov. 25, 2008), http://www.bdlaw.com/news-418.html.

[3] 74 Fed. Reg. 45415 (Sept. 2, 2009), http://edocket.access.gpo.gov/2009/pdf/E9-21216.pdf.

[4] 114 Stat. 438, 106 Pub. L. 224 (2000), codified at 7 U.S.C. §§  7701-7772. 

[5] 7 C.F.R. Part 319, Subpart - Logs, Lumber, and Other Unmanufactured Wood Articles.

[6] 7 C.F.R. § 319.40-3(b).

[7] See, e.g., National Wooden Pallet and Container Association, “Plastic Pallets:  From Fire Hazard to Toxic Platform?”, http://www.reuters.com/article/pressRelease/idUS140381+14-Apr-2009+PRN20090414; Intelligent Global Pooling Systems, “What the Wooden Pallet Industry Does Not Want You to Know”, http://www.igps.net/fact_sheet1.php.

[8] Press Release, Intelligent Global Packaging Systems, “iGPS Calls for FDA Investigation of Wood Pallets and Risks to Food Safety: America’s Food Supply at Risk from Bacteria and Formaldehyde-Laden Pallets” (Aug. 11, 2009), http://igps.net/about/press.php?id=57.

[9] 74 Fed. Reg. at 43,644.

[10] 74 Fed. Reg. 41,368 (Aug. 17, 2009), http://edocket.access.gpo.gov/2009/pdf/E9-19643.pdf.

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