Solid Wood Packaging Material Issues within the United States and Its Effect on European Exporters
As an exporter of goods transported using solid wood packaging material (“SWPM”), it is critically important that your company understands how the U.S. deals with improperly treated and/or improperly marked SWPM, as well as the extent to which your customers hold you liable for the costs and expenses associated with SWPM violations.
The treatment and marking of SWPM involves measures put in place to prevent the spread of invasive insects and disease in international transportation. The International Plant Protection Convention created the International Standards for Phytosanitary Measures Number 15 (“ISPM-15”) which outlines acceptable treatment methods and corresponding marking of SWPM. SWPM is defined as solid wood and solid wood products used for supporting, protecting, or carrying cargo including packing cases, dunnage, crates, pallets, cable drums, spools/reels, and pieces of wood used for blocking and/or bracing. Products that are exempt from the ISPM-15 standard include, but are not limited to, engineered wood such as plywood, and packing material manufactured from alternative materials such as plastic, paper, metal, etc.
To be compliant with ISPM-15 and corresponding country-specific laws, SWPM must be heat-treated or fumigated with methyl bromide and include a permanent and legible mark that certifies the wood as having received the proper treatment to eradicate pests.
The United States has increased rigorous enforcement of SWPM compliance for imports. Importers (e.g. your customer receiving the goods) are the primary party held responsible by the U.S. government for improperly treated or marked SWPM. As the responsible party, the importer may be assessed both penalties and liquidated damages as a result of violations of the SWPM requirements, with the amounts generally beginning at the entered value of the shipment.
There are three categories of violations for enforcement of SWPM compliance for U.S. imports:
Once an ISPM-15, SWPM violation is discovered, the importer will receive an Emergency Action Notification outlining the violation and steps required to address that violation.
Emergency Action Notification Issued for the Attempted Entry of Non-Compliant SWPM
Importers that have a shipment in violation of ISPM-15 guidelines with infested, unmarked, or inappropriately marked SWPM into the U.S., will be issued an Emergency Action Notification (“EAN”). An EAN is the written notification issued by the U.S. Department of Agriculture that the SWPM included in the shipment is either unmarked, inappropriately marked, includes evidence of the presence of, or is infested with, a named quarantine pest, disease, or, has other quarantine issues. A copy of a blank EAN is included for your ready reference.
Once an EAN is issued, entry of the shipment will be denied, and the immediate re-exportation of the shipment will be mandated by the deadline set forth in the EAN. All costs and charges associated with the inspection and immediate re-exportation of the non-compliant SWPM are the responsibility of the importer. In most cases the entire shipment, not just the offending SWPM, will be required to be returned to origin at the importer’s expense. Post-importation fumigation and other remediation methods are very rarely allowed.
Assessment of Penalties and Liquidation Damages Claims
There are two types of monetary assessments that can be issued against the importer after an EAN has been issued for violation of the ISPM-15 SWPM requirements:
1) Penalties for attempted entry of non-compliant SWPM into the U.S.; and/or
2) Liquidated damages for failure to comply with the required action items specified in the EAN.
The total value of the penalties assessed for these violations is up to and including the entered value of the goods shipped to the U.S. The total value of the claims for liquidated damages for failure to comply with all requirements specified by an EAN shall be issued at three times (3x) the entered value of the merchandise but no greater than the import bond amount.
Importers can request mitigation of the penalties and any liquidated damages. That process, though, is time-consuming, requires expert advice, and, may often only result in a minimal reduction (e.g. reduction of a penalty to between 1%-10% of the original for a first offense), depending on mitigating and aggravating factors. The possible reductions in penalties or liquidated damages decreases with the number of violations.
U.S. importers will invoke all contractual obligations imposed in the terms and conditions of the contracts and/or purchase order(s) between the parties to ensure the full recovery of all penalties and/or claims for liquidated damages imposed on the U.S. importer, including the costs of the inspection and re-exportation of shipments containing non-compliant SWPM noted above.
Exporters should thoroughly review all terms and conditions with any U.S. customers to verify the extent of their contractual liability imposed for any costs or expenses assessed for matters pertaining to ISPM-15. Going forward, exporters should seek to limit the liability imposed by these terms and conditions as much as possible, to ensure their protection. It is also advisable to institute a plan to assess the purchase, treatment, marking, storage, and use of all SWPM for export purposes.
We are ready to assist you with all of your ISPM-15 compliance and contract drafting/review needs. Contact us today for a free consultation.