Despite some attendees concerned about a sluggish economy, the recent National Wooden Pallet & Container Association (NWPCA) Recycling and Repair Conference and Expo buzzed with excitement. The program covered a number of hot topics such as phytosanitary standards, industry lawsuits against CHEP, the economy and PDS for remanufactured pallets.

Attendees gave the conference high marks for having quality sessions on key topics. Hal Vandiver of the Material Handling Industry of America commented on the state of the economy as it relates to materials handling. According to industrial production, consumer confidence, housing starts, capacity utilization, and other indices, the manufacturing economy may have bottomed out. The National Association of Business Economists (NABE) believes that the economy is in little danger of double dipping back into recession. The NABE expects around 3.5% growth though the end of 2003. Current oil prices pose little threat to the economy. The NABE claims that oil would have to surge to around $30 per barrel and stay there for several months to derail economic growth.

The end users’ panel helped pallet companies look at the world from their customers’ point of view. Interestingly, none of the three panelists had any good words to say about online auctions. Gary Sweatt of Delco Remy pointed to the lack of standardization as a problem for the wood pallet industry. Delco Remy buys 25-30% new pallets with the rest being recycled pallets.

Quality, especially for recycled pallets, tends to vary all over the place according to Gary. A representative from the Sysco Corporation invited the white wood pallet industry to develop a viable option to existing third party leasing companies. In the near future, the NWPCA plans to sponsor a study of the white wood exchange system versus rental pools.

The latest government reports and technology on the phytosanitary issue drew interest from many recyclers in attendance. The NWPCA made news by announcing it is working with APHIS to develop and possibly oversee a fumigation certification program for wood pallets. Similar to the role that the American Lumber Standards Committee plays for heat treating, NWPCA would oversee the certification agencies and administer the fumigation program under the direction of APHIS. Currently, APHIS and the NWPCA are negotiating the details.

Some members questioned why the NWPCA would take such an active role. Bruce Scholnick, NWPCA president, responded, "Our Board has directed this program development be pursued in order to provide our members the widest possible range of options." The NWPCA is filling a void because it appears the American Lumber Standards Committee (ALSC) does not want to oversee fumigation. NWPCA hopes to have a program in place by the time the IPPC lifts its temporary suspension of the phytosanitary standard probably sometime later on this year.

Representatives from APHIS and the ALSC answered questions about the maze of phytosanitary regulations. Recycled pallets must be re-certified and re-marked. Previous marks must be removed. According to APHIS, recycled pallets must be completely re-treated even if only one board is replaced. APHIS anticipates that 2/3rds of the United States’ trade partners will adopt the IPPC standard over the next several years.

Jan Holt of Hogan & Hartson, the NWPCA’s general counsel, spoke on the various court cases involving third party leasing companies, such as CHEP. Jan pointed out that none of the cases involving CHEP had reached a decision on the merits. Most have been dismissed because of a technicality or settled/plea-bargained before court deliberations. Jan predicted that courts will likely side with recyclers on the compensation issue, especially in cases where recyclers come in contact with proprietary-marked pallets in the course of normal business practices.

The ownership of proprietary-marked pallet that have leaked out of the system is a less clearcut issue according to Jan. She predicted that CHEP will try to avoid any unfavorable ruling on the ownership issue and would move to settle if the company anticipated an unfavorable precedent. The lawsuit in Ohio between Buckeye Recyclers and CHEP could set a significant legal precedent. Currently, the case is set to be heard in May of 2003.

Jan encouraged pallet companies to keep accurate records of all interaction and correspondence with third party leasing companies. In the event that recyclers are awarded compensation for services provided to third party leasing companies, accurate documentation will make it easier for recyclers to claim payment. Depending on state law, pallet companies may not have to allow CHEP asset protection staff on their property without a court order. Jan warned that CHEP’s new reimbursement program may be considered a contractual obligation depending on what is written on the back of the check and how the courts interpret it.

"What CHEP has on its side is size," Jan said. "A united front is probably the best way to deal with a big company like CHEP."

In private conversations, many recyclers discussed the announcement on the Pallet Board (www.palletenterprise.com/forum) about the launching of CORE, a grassroots organization geared at protecting the interests of pallet recyclers against unfair competitive practices. Recyclers wanted to know more about CORE’s plans and several expressed interest in supporting legal efforts to receive fair compensation from third party leasing companies.

Dr. Marshall (Mark) White, director of the Sardo Pallet & Container Research Lab at Virginia Tech, spoke on the latest version of the Pallet Design System (PDS) – software developed to assist in designing new and remanufactured pallets. Version 3.2 features a model for predicting the performance of remanufactured pallets and combo pallets. Version 3.2 is

currently available for lease through the NWPCA. During his research, Mark discovered that there was not a big difference in species mix from the East Coast to the West Coast for recycled pallets. As expected, recycled components are stronger than new, green components due to the moisture content. "Water is one of the worst things that ever happened to a pallet," said Mark.

The recycling meeting ended with a panel of industry veterans discussing challenges facing recyclers. Issues from wood scrap disposal to insurance illustrate how the industry continues to become more complex. The next major NWPCA event is the Annual Leadership Conference and Expo in Marco Island in late February.