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on Tuesday, 29 March 2016
in Business in China

Pallets from China can pose risks to supply chains

Many U.S. importers regard procurement cost and pallet vendor selection as the shippers' burden, but this is risky and exposes an importer to severe supply chain disruptions should their pallets not be compliant with local requirements and face rejection by border officials. In addition, U.S. importers are missing an easy opportunity to improve their supply chain and their costs. Here is an outline of what is available in the market and their respective benefits and drawbacks.

 

Solid Wood Pallets

  1. Risk of Beetles - The U.S. Department of Agriculture's Animal and Plant Health Inspection Service conducts inspections of inbound containers at U.S. Ports of Entry. If they find evidence of wood-boring beetles in the solid wood pallets (even if the bugs are long-dead), then your entire container gets rejected and will be sent back to China. I know this for a fact, as we dealt with such a situation a few years back and it was costly!

  2. Preventative Measures - The Asian long-horned beetle is a threat to North American forests. The established methods to destroy the families of beetles whose larvae or adult forms eat and destroy wood are well accepted and include either heat-treating or fumigating (using methyl bromide) the solid wood pallet. The International Plant Protection Convention sets the standards and there is an approved international mark on the pallet itself, which certifies the treatment.

  3. Problems in China - There indeed are reputable solid wood pallet suppliers in China who do properly either fumigate or heat-treat the solid wood pallets in order to eliminate this pest. However, I know from first-hand experience that there are also some solid wood pallet providers who are either incompetent, or who take short cuts, resulting in solid wood pallets that are noncompliant. So, at minimum, if you prefer solid wood pallets because of their durability, you should do your due diligence and actually audit the solid wood pallet supplier. Because regardless if your supplier procures the pallet, YOU, the U.S. importer, are actually paying for it as the costs are built in to your free on board cost and YOU are the one incurring the risk.

 Alternative Pallets

There are various descriptions of Particle Boards — Press Wood, Plywood, Chip Board, Flake Board, Wafer Board, etc. The advantage of using this type of pallet is that on your Bill of Lading you can state "Shipment Contains No Solid Wood Packing Material" and thus avoid associated risks and costs of solid wood pallets.

However, these pallets may not be as durable as solid wood pallets. Typically, they'll be fine for single use from China to your first U.S. destination, but if your customer wishes to reuse that pallet, the bottom stringers are more likely to break off or the composite wood blocks are more likely to break free than with the solid wood alternatives. Other alternatives include Slip Sheets and even TELLAP Bag, a patented type of bulk bag with a sleeve for fork lifts built in to its bottom. So far, our own experiments with either plastic pallets or metal pallets have not proven either cost effective or practical to use. And that brings us to…

Cost Factor

Obviously, your own sensitivity to absorbing the cost of a more expensive pallet will vary, depending on whether you are shipping higher-end electronic goods or cheaper commodities. In general, we've found pallet costs range from $25 (plastic), $15 (solid wood) to $10 (press wood). In summary, your vendor in China likely does not even realize the impact of the pallets they use — they are most likely just buying the least expensive option that they can find. However, the U.S. importer has every right to dictate minimum standards and runs the risk of making a costly mistake if they do not do so.

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