1. Canadian Wood Packaging Industry: Challenges and Opportunities

2. Association Overview • Canadian Wood Pallet & Container Association : • Since 1968 with 165 members • Manufacturers, Pallet Pools and Associate members • Impact of the recession has been severe • Focus: • Rebuild membership levels • Establish Sustainability Program • Non-Dues Paying Revenue • Third Party Service Provider for the Canadian Wood Packaging Certification Program with 474 registered clients

3. Market Challenges • Our Markets: Grocery & Hardware • The Canadian Pallet Council (CPC) is struggling with declining membership, revenue and pallet purchases • Canada’s largest retailer announced it had withdrawn from the CPC pallet exchange program and accept PECO & CHEP on a “one –way” basis • CPC member providing rental and logistics services acquired by pallet pooler • Plan is for the CPC to continue into 2014 with a significant reduction in cost structure • Costco continues to push for block pallets only on a “one-way” basis

4. Market Challenges • Other Markets: • Use of plastic Returnable Produce Containers (RPC) making inroads into retail supply chain • Brewing industry- hardwood block pallet • Petrochemical industry-hardwood stringer pallet • Construction industry- white stringer pallet • Export packaging and custom crating sectors

5. Supply Chain Challenges • Timber Supply : • Price volatility with wide swings in pricing driven by US housing market and China demand particularly for industrial grade lumber • Lumber exports is a C$5.5B a year business • Mills have had a very difficult past 4 years and looking forward to sustained demand • Exports of fuel pellets progressing very slow • Biofuel from wood residue not a serious threat to fiber supply

6. Timber Supply

7. Pest Management Challenges • Regulated Forest Pests • Emerald Ash Borer (EAB) continues to spread across Eastern North America • Asian Long Horn Beetle has returned • Brown Spruce Long Horned Beetle in decline

8. EAB Threat In Canada

9. EAB Threat in North America

10. Regulatory Challenges • Canadian Heat Treatment Program : • Canadian Food Inspection Agency (CFIA) regulatory body • Priorities to provide Plant Protection and Market Access • Export Programs - CWHTCP for Lumber and the CWPCP for Wood Packaging • Quality Management Systems approach • Alternative Service Delivery- Canadian Lumbers Standards Accreditation Board ,Quebec Wood Export Bureau and CWPCA are program auditors • CFIA audits performance of third party auditors • Multi-step process- very successful at intercepting pests

11. Revenue Opportunity • Canadian Wood Packaging Certification Program(CWPCP) • Primarily clients in the Wood Packaging Industry • Only supplier offering a national “set fee” program • 474 clients/registered facilities • CWPCP has 11 field based inspectors -1000 plus inspections per annum • Inspection team is ISO certified • Three year renewable agreement signed this year • Operated on a “Not for profit” basis

12. Regulatory Challenges • Canadian Heat Treatment Program Modernization: • Change Drivers • Federal Government Deficit Reduction Action Plan (DRAP) to constrain costs and provide incentives for operating efficiencies in the delivery of government programs • Lumber industry is a C$ 5.5B a year export industry with most of the trade going to the US • Harmonization with US levels on facility inspections • Designed improve the effectiveness of the current program & bring in more competition

13. Regulatory Challenges • Key Changes • Performance based system with measurable outcomes – more accountable with penalties for poor performance • Risk based approach depending on the product manufactured

14. Regulatory Challenges • Status of the Removal of US /Canada ISPM-15 Bi-lateral Exemption on Wood Packaging Material (WPM): • Canadian Food Inspection Agency (CFIA) and US department of Agriculture - American Animal and Plant Health Inspection Service (APHIS) handle negotiations • Removal of the ISPM-15 Bi-lateral exemption between Canada and US is still under review • Border agencies beginning to make their own determinations on what is acceptable and what is not

15. Summary • Opportunity • Our Association has an alternative source of stable funding • Now better positioned to promote the wood pallet and container manufacturing industry • More responsive to needs of wood packaging industry especially on dealing with regulatory issues • Must learn how to better collaborate with regulatory agencies

16. Thank You Canadian Wood Pallet and Container Association Association canadienne des manufacturiers de palettes et contenants