Bug rule could cost Canadian exporters $300M

A U.S. proposal to stop the spread of wood pests could cost Canadian manufacturers $300 million a year, CBC News has learned.

The U.S. Department of Agriculture is proposing that all Canadian wood packaging material that crosses the border be heat treated to kill any pests.

Canadian goods shipped on wooden pallets are currently exempt from that treatment, as are similarly packaged goods that cross into Canada from the U.S.

Of particular concern to U.S. authorities is the brown spruce longhorn beetle that has plagued Nova Scotia for more than a decade.

"This action is necessary in order to prevent the dissemination and spread of pests via wood packaging material from Canada," says a summary of the proposed rule change posted to the department's website in December.

Blow to exporters

The Canadian Wood Pallet Association said meeting the treatment requirement would add $2 to the cost of each crate. With about 150 million such packages sent a year, that would add at least $300 million in shipping costs for goods crossing the border.

"I think it's going to be far higher than $300 million when you talk from coast to coast," said Herman Long, the owner of pallet manufacturer Scotia Pallets and a director of the Canadian Wood Pallet Association.

"In essence, everything that goes on a crate now will have to be heat treated, which is not necessarily a bad thing, except the administrative responsibilities to trace every piece of wood that's going everywhere," he said.

"That's the real issue and that's what's adding the extra costs."

The Canadian Manufacturers and Exporters Association is also concerned about the impact of the rule change.

"The result of this could be very dramatic, in terms of increased cost for the type of pallet used and ultimately impact the cost of goods," said vice-president Ann Janega.

She said the rule change is a blow to North American free trade. Stephen Harper met U.S. President Barack Obama in Washington Friday.

"Our prime minister is in the White House today, talking about these issues and it's another cut that hurts and really hits our sector the hardest," Janega said.

A decision is expected from U.S. authorities this spring.

The new cost could eventually apply to U.S. goods coming into Canada, too. In a notice sent to stakeholders on Dec. 16, the Canadian Food Inspection Agency predicted Canada would harmonize its rules with the U.S. this spring.

CFIA said that by summer 2012, shipments stopped at the border with uncertified packaging will be sent back to the shipper, with the shipper bearing the costs.