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Pallet Wars Round II: State and Federal Pallet Bans Point to Increased Government Scrutiny
Overview of state and federal bans indicate increased scrutiny by government regulators.

By Chaille Brindley
Date Posted: 6/1/2010

           What started out as a public relations and marketing battle has spilled over into the arena of state and federal politics, as various pallet bans gain momentum across the country. The two key focuses are food safety and environmental and toxicity concerns associated with Deca-bromine (Deca), a controversial fire retardant used by Intelligent Global Pooling Systems (iGPS) in its second generation pallet.

            The wood and plastic pallet industries have been fighting a marketing war for over a year on issues, such as, fire safety, food safety, and environmental sustainability. A coalition of consumer advocates, environmentalists and industry members have lobbied for bans on Deca due to concerns about its impact on public health and the environment. It has been banned by some states in consumer electronics for a number of years, and the three manufacturers of the chemical serving the U.S. market recently agreed to a voluntary phase out of production. Both Maine and Maryland have passed and signed into law bills that ban the use of Deca in pallets after specific deadlines. Both of these bills allow for pallets made before the ban took effect to be used and recycled. 

            Concerns about wood pallets have been connected to food safety and contamination issues, and has been driven by iGPS, the first national pallet rental company using an all-plastic pallet. Bills were introduced in California, Missouri and New York this year to either study the issue or ban wood pallets for some situations and products. After the forest products industry raised a ruckus, the bills in California and Missouri were shelved. The New York ban is technically still in play although it has yet to get any real traction toward passage. 

            The main take home lesson is that the specter of pallet bans is now something that the industry will likely deal with for the foreseeable future. Here’s a breakdown of the major legislation in play and potential impacts.

 

Federal Legislation

            Despite the fact that the three manufacturers have agreed to phase out the chemical, Congresswoman Chellie Pingree (D-Maine) introduced late last year a bill to ban Deca by 2013 and require companies to use safer alternatives. The federal Deca ban is currently waiting to be deliberated by the House Energy & Commerce Committee. Hearings had been set for May where executives from the top three Deca producers were set to testify; however, other more pressing business forced a delay. It is expected that the committee will take up the issue later in the year. 

            The House committee stated about the reason for the inquiry, “The persistent and bioaccumulative nature of flame retardant chemicals raises concerns regarding their impact on human health and the environment. A growing number of peer-reviewed studies suggest a possible link between exposure to certain flame retardant chemicals and neurological, developmental, fertility, and reproductive problems in animals and in humans.”

            It is somewhat a mystery why Chairman Henry Waxman (D-Calif) would go to the effort to call hearings when the Albemarle Corporation, Chemtura Corporation, and ICL Performance Products have all agreed to a voluntary phaseout. This could be used as a ploy to help push passage of Pingree’s bill or possibly lay the groundwork for civil lawsuits or other actions.

            The chemical industry may oppose Pingree’s bill because it starts the ban ahead of the December 31, 2013 deadline set for transportation, shipping and military applications. The Senate has yet to take up the issue of a Deca ban.

            When it comes to food safety, the U.S. House passed food safety legislation last year. It did not really address pallets. The Senate recently passed an amendment by Senator Richard Durbin (D-Illinois) that establishes an early warning and notification system for human food, fines for companies that don’t promptly report contaminated products, and improves inspections/monitoring of imports. Any real application to pallet and packaging will likely come at the executive level as the Food & Drug Administration (FDA) seeks to implement new policies.

            Seeking to implement guidelines revisions mandated by the Sanitary Food Transportation Act of 2005, the FDA recently requested that commercial food transporters follow new interim guidelines while the agency evaluates current food safety transportation regulations. FDA is requesting contamination and outbreak data to help it craft new standards. 

            These interim voluntary guidelines are the first step in creating new regulations to govern sanitary practices of food products around the country. After evaluating comments submitted by the public, the FDA will propose specific regulatory changes.

            The FDA’s new industry guidelines cover safety measures that should be employed while the regulations are being written and finalized. These include ensuring that food in transit is maintained at appropriate temperatures; that such food is closely monitored for pests; that the vehicles used to transport foods are sanitary and in proper working condition; that pallets used are of good quality; and that sanitary measures are followed in the loading and unloading of foods.

            Given all the focus that iGPS has put on the sanitation issue, the wood pallet industry needs to be ready to make a strong defense for the solid track record behind wood packaging. Although pallets are only a small concern in the overall food safety issue, government regulations could have a major impact.

            Bob Moore, CEO of iGPS, recently stated in a conference call that iGPS intends to start a program this summer where it will begin washing all of its pallets as they move through the depot network. This would be a significant move intended to address the food safety issue. While the wood pallet industry could respond, it would need to pass along this cost to customers or eat the expense if the sanitation concern erupts. Washing wood pallets could also cause some mold issues if proper procedures aren’t taken to mitigate excessive moisture content on the surface.

            The current guidelines only specify the use of “good quality” pallets without offering a clear explanation what that means. Does that mean rental pallets will be given some sort of advantage over limited use, white wood pallets?  Will pallets have to be treated or washed in the future? The outcome of these rules could reverberate throughout the supply chain.

           

State Legislation

Maine Deca Ban

            Speaker of the House in the Maine Legislature, Hannah Pingree, pushed for changes to the state’s existing Deca ban to include pallets. The original draft legislation would have excluded all plastic pallets with Deca from being used in the state after January 1, 2011. Chemical and plastics interests, led by iGPS, worked with Speaker Pingree to temper the legislation.

            The final bill that was signed into the law provided exemptions for recycled products and material, and some replacement parts containing the “Octa” and “Penta” mixture of polybrominated diphenyl ether. These chemicals are very similar to Deca and were banned a number of years ago.

            The Deca ban on pallets in Maine prohibits the manufacture, sale, distribution for sale and use in the state starting January 1, 2012. Pallets made before the deadline are exempt.

            A one-year extension may be granted to parties that effectively demonstrate safer alternatives do not exist or fail to meet a number of criteria, including fire safety standards. Additionally the state commissioner overseeing the issue may grant a one-year extension if some plastic pallet companies need additional time to test alternatives or modify manufacturing processes to produce a safer alternative.

            The Maine bill requires that any alternative meet minimum standard. Any new chemical must not be identified as a persistent, bioaccumulative and toxic chemical by the EPA; use a brominated or chlorinated flame retardant; or create another chemical as a breakdown product through degradation or metabolism. The Maine legislation allows for studies to determine the ability for alternatives to meet these minimum requirements.

             Albemarle Corporation, one of the major Deca manufacturers, recently announced that it has developed GreenArmor, a polymer-based flame retardant technology. Albemarle claims this product is a recyclable and an eco-friendly alternative to Deca.

            Other options include phosphorus-based flame retardants that tend to require more active ingredients to do the same job as brominated options. This can add to the weight of a pallet.

            It remains to be seen if alternatives will meet the criteria established by Maine. As a fairly ecologically focused state, Maine has led the way in specifically expanding existing Deca bans to pallets.

            In a recent phone conference, Bob Moore, chairman and CEO of iGPS, said that his company was currently testing alternatives to its existing pallet design with Deca. Moore said, “We are burn testing a new chemical today. Environmentalists love it…It is performing extremely well. It is out performing Deca in terms of its ability to extinguish the fire. It is lighter weight, because you have to use less of it, and it is not bio accumulative. It is Deca, Penta and Octa free. It is a chemical that the chemical companies have had. But it will be more expensive.” Moore refused to name the chemical although he did indicate that iGPS was confident this product would work.

 

Maryland Ban

            A Deca ban in Maryland overwhelmingly passed both chambers of the state General Assembly and was signed into law on May 4th. It closely follows the language in the voluntary phase out agreement that the U.S. Environmental Protection Agency (EPA) signed with major chemical companies.

            The Maryland ban has a three tier implementation schedule outlawing the manufacture, lease, sale or distribute for sale products made with Deca. Deca is banned for products, such as mattresses, upholstered furniture for residential use and electronic equipment starting on December 31, 2010. All other products containing Deca except for military equipment, transportation equipment and components of transportation or military equipment (such as pallets) are banned starting December 31, 2012. The final stage bans Deca in military equipment, transportation equipment and components of transportation equipment (such as pallets) after December 31, 2013. All of these bans exclude products made before the ban takes place as well as recycled products. The Maryland law also allows retailers to sell, recycle or otherwise dispose of remaining inventory.  

            One very unique twist is that the Maryland law bans Deca in pallets used to ship unpackaged fruits and vegetables beginning on December 31, 2012. This may put pressure on iGPS to accelerate its plans for switching to a new fire retardant because it is one year sooner than the timeline in the rest of the bill as well as the Maine ban. Unlike the Maine bill, the Maryland ban does not set strict requirements on future alternatives.

 

California Pallet Study

            Wood pallet opponents pushed for the introduction of Assembly Bill 2607 in the California Legislature. It called for the Department of Food and Agriculture to “conduct a study of the health and safety issues of wood pallets used for shipping pallets and the risk they may pose to the state’s food supply.” This bill could have provided “justification” for lawmakers to put stiff requirements on wood pallets used in the state’s massive food industry.

            AB 2607 also required state officials to study the sustainable and recyclable alternatives to wood pallets. A group of industry leaders, including the National Wooden Pallet & Container Association (NWPCA) and the California Forestry Association, successfully lobbied against the bill, which was eventually halted before a hearing could take place.

 

Missouri Ban

            Claiming concern over food safety, Missouri State Representative Walt Bivins (R-District 97) introduced House Bill 2382 that put severe limitations on pallets used to transport food products in the state. Almost as quickly as the bill was introduced, it was pulled after a variety of wood products interests pointed out the problems associated with the bill.

            The Missouri bill would have required the following:

            • Any pallet used for food products must be “treated by methods such as to effectively eliminate pathogens, and tested for the presence of potential contaminants absorbed or introduced into or onto such pallet.”

            • “Any pallet or pallet waste material shall be recycled to the maximum extent possible for those materials which do not create a hazard to human health by such recycling.”

            • Beginning January 2011, the bill calls for leadership in the Missouri House of Representatives and Senate to provide a report on the methods for preventing “the importation of invasive pests in or on wood pallets.” After the report is issued, the bill says that anyone who ships incompliant packaging into the state could be held liable for “damages caused by such pest.”

            • Food-related pallets beginning January 2011 would have to be listed under “Underwriters Laboratories Inc. Standards for safety UL 2335, standards for fire tests of storage pallets, in effect as of December 31, 2009.”

            By requiring treatment and testing, Bill 2382 would add a whole new requirement for pallets used with food in the state. Depending on how the law is interpreted, it could also disadvantage wood pallets compared to plastic. Right now most shippers view pallets as tertiary packaging that is not intended for direct contact with food products. Usually, there are some additional layers of packaging between a pallet and food products and perishables.

            The invasive pest issue would make the shipper liable for any damage it causes by knowingly shipping non-compliant packaging into the state. This would ultimately favor plastic pallets, which completely eliminate any risk associated with wood pests.

            Currently, wood is the base line for the fire codes and is not required to meet these commercial testing and listing requirements. By mandating that all pallets be listed under UL2335, it would have added a significant technical hurdle to the use of wood pallets in the state. 

            Although Bill 2382 was shelved, it identifies the strategy and legislative agenda of anti-wood pallet interests, especially iGPS. Pallet companies need to be aware that the state governments have become the defacto battle ground for the wood vs. plastic pallet debate. Given the importance of interstate commerce to the pallet industry, changes in one state can impact nearby states as well as the industry as a whole. Even though efforts to regulate pallets in the name of food safety are only in their infancy, they could have a big impact depending on how everything shakes out.

 

New York Bans

            The New York General Assembly has been active on both the food safety and Deca fronts. Earlier this year, Delegate William Boyland from Brooklyn introduced Assembly Bill A09173. It requires pallets used for food or other perishable items to be “made of impermeable materials.” This would mandate that a pallet be “resistant to infestation or contamination of pesticides, including but not limited to insecticides, algaecides, fungicides, bactericides and herbicides.”

            In essence, this bill would outlaw the use of wood pallets in the state of New York. It has gotten no real traction and is unlikely to pass due to the constraints it would place on the logistical infrastructure of the state for no good reason. Plastic pallets would be the most likely replacement for wood in this case. And there are probably not enough plastic pallets in circulation in the region to take care of the demand. Passage of any such a measure would likely cause logistics costs to rise.

            The New York legislature is also considering Senate Bill 1119, a general ban on Deca for certain commercial products. Similar to legislation in Maine and Maryland, it provides allowance for used and recycled products containing Deca.


 

Pallet Legislation Impacts?

            You may be wondering what all the fuss is about when it comes to pallet bans and food safety regulations. Recently passed or proposed laws could impact the requirements in your market.

            The only two pallet-related laws that have been signed into laws this year so far are the Maine and Maryland bans on Deca-bromine (Deca). This could have a major impact on Intelligent Global Pooling Systems(iGPS), which now uses the controversial fire retardant in its second generation pallet design. The full impact of these laws is yet to be felt because the bans don’t start for a number of years.

            iGPS has insisted that Deca is not a major concern for either its customers or pool. That all seems to be riding on two major presuppositions. First, that iGPS will be able to find an effective, safe alternative that doesn’t break the bank. And second, that Deca does not leach out of its pallet and will not cause any legal liability for the company.

            The complete answer to both of those concerns may lie in the future. By tempering the Maine legislation, it does appear that iGPS has sidestepped a major hurdle. But with new legislation on the horizon, its battle with anti-Deca interests is far from over.








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