Regulations set stage for environmental action
WEB EXCLUSIVE
Daniel W. Gottlieb -- Purchasing, 12/8/2005
Starting this fall a flurry of environmental and energy regulations and tax incentives with significant implications for purchasing and supply chain operations will be coming into effect. Here is a brief summary of some of those regulations:
Nonroad Diesel Vehicles and Diesel Fuel Last year EPA set on course a staged tightening of sulfur emissions from nonroad vehicle engines to virtually zero and parallel reduction in the sulfur content of diesel fuel for nonroad vehicles beginning in 2007. (Highway truck engines come under the new fuel standard starting in June of 2006). For industrial purchasing, the main equipment buy affected is diesel-powered forklifts. Forklifts are just a portion of the 600,000- plus nonroad vehicles (including construction and other moving equipment) whose engines will require new technologies to burn cleaner. In testimony to Congress, Jed Mandel, President of the Engine Manufacturers Association (EMA) says that "applying these technologies to nonroad engines will be a huge engineering challenge to nonroad engine and equipment manufacturers." Mandel explained that installing the newer engines in nonroad equipment "will undoubtedly result in the need for costly and complex equipment redesign." The reason, he says, is that space in these non-road vehicles is often very limited. The new low-sulfur fuel burning engines start phasing in with the 2011 model year, according to EMA spokesman Joe Suchecki .(See chart for effective dates and fuel sulfur standards). The cost impact on truck and other large vehicle engines will be significant, Suchecki says, perhaps in the range of $10,000-15,000 per vehicle. EPA, however, estimates the extra margin on most categories of nonroad equipment to be one to three percent of the total purchase price. Gary Cross, counsel to the Industrial Truck Association, says that the principal concern of forklift manufacturers is to make sure the engines fit into their product. Purchasing departments, Cross says, will face decisions in buying diesel powered forklifts whether to retrofit the new engine or buy a new forklift. "Each end user will have to face that kind of question based on the profile of its fleet." Closely tied to the new engine standards are new EPA standards requiring sulfur reductions in diesel fuel. The permitted level will be 500 parts per million, the same as currently for highway diesel the second, starting in 2010, the maximum will be lowered to 15 ppm. EPA estimates the cost of producing the ultra-clean diesel will rise seven cents per gallon, but that lower engine maintenance expenses should reduce it to four cents per gallon. Pallets and wood packaging As of September 15 this year, all wood packaging material (both coniferous and non-coniferous) coming into the United States must be certified as treated to prevent importation of harmful pests. The regulation (International Standard for Phytosanitary Measure 15, or ISPM 15) adopted by the U.S., is being phased in from now through July next year. Approved treatments are fumigation with methyl bromide or heating to a core temperature of 56 degrees C for 30 minutes. Goods shipped into the United States on pallets or other packaging must have an official stamp indicating compliance (see box) on the pallet or container. If the wood packing cannot be separated from the merchandise, it will be shipped back to its origin, according to the U.S. Customs and Border Protection (CBP) agency of the Department of Homeland Security. Importation of non-certificated pallets (for use by U.S. shippers) is also forbidden. Exempted are manufactured wood, such as fiberboard, plywood, polywood, whisky and wine barrels, strand board, and veneers. The standard is being enforced by the CPB and the Animal and Plant Health Inspection Service of the U.S. Department of Agriculture (USDA). The overall impact on logistics and cost of goods is uncertain, since only about 20 percent of the imported pallets come from countries other than Canada, according to USDA’s regulatory impact analysis. Canada and the U.S. already have an agreement covering pest control in wood products, and according to USDA’s analysis pallet supply is fairly elastic . Dr. Edgar Diamano of the National Wooden Pallet and Container Association says that "the most obvious impact is the added cost of treatment, which on the high side is $1 to $1.50 per pallet." Most of the U.S. and developed country manufacturers are aware of the requirements and already comply, he says. "It’s the manufacturers coming from developing countries that have a lot to do. They may not have the capabilities and therefore will have a harder time complying."
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