Canadian Wood Packaging Certification Program

1. Canadian Wood Packaging Certification Program Client Base Risk Analysis September 6, 2013

2. CWPCP SURVEY METHODOLOGY

3. Registered Facilities Profile Analysis Facility Demographics • 74% of CWPCP registered facilities are small manufacturers with staff of ten employees or less. • 125 facilities are crating departments within larger businesses. • 101 of these 125 facilities have less than 10 employees in their crating departments. • 3% key staff turnover • 29 facilities use lumber from a regulated area

4. Risk Factor: Heat Treatment • Analysis of CWPCP Kiln Facilities • Only 22 out of 474 registered facilities are engaged in heat treatment. • 3 facilities are in the process of adding a kiln to their operations • 5 facilities heat treat packaging only • 3 facilities heat treat lumber only • 14 facilities treat both packaging and lumber • The total volume in kiln charges for twelve facilities reporting was 7,824,267 bf which amounts to an average of 652,022 bf per facility.

5. Risk Factor: Recycling • Only 23% or 107 out of 464 registered facilities do WPM repairs • Most facilities do not re-certify what they repair, they sort out stamped pallets for international shipment and use other non-stamped and repaired pallets for domestic use. • Only 8 facilities report re-certifying repaired WPM. • Only 6 facilities use reclaimed HT lumber for repairs

6. Risk Factor: Segregation of lumber • Between Jan.-May 2013 there was 94 M bd ft of HT lumber and 23M bd ft of Non-HT lumber purchased • On a 12 month basis this represents 225M bd ft of HT lumber and 55M bd of non-HT lumber purchased with 75 % of registered facilities reporting • 28 facilities bought no HT lumber (5 are kilns, 16 bought no lumber during survey period) • 81% or 290 of 358 facilities responding indicated they purchased less that 250,000 bd ft of HT lumber over the last five months

7. Risk Factor: Segregation of lumber • 76% or 274 of 358 facilities reporting lumber consumption indicate no non –HT lumber purchases over last five months . • The non-HT lumber consumed appears to be 20% of all lumber purchased over the last five months but less than half (42%) of registered facilities report using non HT lumber in their operations. • Non-HT lumber is characterized as rough mill run or hardwood as opposed to softwood D4S KD lumber inside the yards of registered facilities

8. Risk Factor: Performance • The blue line in the adjoining graphs represent the clients inherited when CWPCA took over the program. The surge in non-conformances represent the work necessary to convert quality manuals to the current format in order to meet the new requirements of D-01-05. • As demonstrated, facilities who have subsequently joined the program have not received a significant amount of non-conformances in general, nor in their first three years of registration.

9. Survey Results • Survey results indicate that the majority of CWPCP’s registered facilities are low risk based on the following: • 74% have 10 employees or less • Only 21 facilities have heat treatment capabilities • Only 23% do repairs, most do not re-certify what they repair • Only 6 facilities use reclaimed HT lumber in their repairs • Only 42% of facilities use raw (green) lumber in their operations • Non-HT lumber represents only 20% of green lumber purchased • The low level of risk and low likelihood supports a lower frequency of inspection • The data on non-conformances does not support the need for a three year probation period • The graphs demonstrate that the majority of non-conformances do not occur within the first three years of certification • Compliance has improved significantly over time • 81% of facilities registered in the last four years have yet to receive a non-conformance