Drawing attention to the often-overlooked risks that non-compliant wood packaging material (WPM) can pose to international cargo shipments.
In a new guidance paper, IUMI examines the insurance implications of failing to comply with International Standard for Phytosanitary Measures No. 15 (ISPM 15), the international standard governing the use of wood packaging such as pallets, crates and dunnage in global trade.
Under ISPM 15, non-compliant wood packaging can be detained, destroyed or rejected at the border by the importing country, regardless of the condition of the cargo it contains.
For marine cargo insurers, the main exposure is often not physical loss or damage to the insured goods, but the operational and financial disruption that can result from a regulatory rejection. These consequences can include cargo detention, emergency fumigation or re-treatment, repacking, destruction or replacement of packaging, as well as delays and related contractual penalties.
While ISPM 15 is primarily a plant-health measure, its enforcement can create significant operational and financial consequences for the marine cargo sector. When non-compliant WPM is identified, authorities can detain shipments, require emergency treatment or fumigation, order repacking or destruction of the packaging, or require the consignment to be returned to its origin.
Lange, further explained that the key message for marine insurers is that in the great majority of cases, the cargo itself will be undamaged – ISPM 15 non-compliance is usually not about physical damage to the cargo, it is about the disruption and costs that can arise when a regulatory authority intervenes.
Risk overview: operational and financial consequences
The exposure ISPM 15 creates for cargo insurers is, in most cases, not physical damage to the insured goods – the packaging is typically the problem, not the cargo inside it. When wood packaging material is found non-compliant, the importing authority’s response is directed at the packaging: detention, removal of the offending material, re-treatment, destruction, or return of the whole consignment to origin.
Each of these carries its own cost, and they compound quickly on a time-sensitive or high-value shipment.
- Detention, storage and demurrage while the consignment is held.
- Emergency re-treatment, fumigation or repacking costs, usually at short notice.
- Destruction or return-freight costs where the packaging cannot be corrected in place or where the authorities do not allow reconditioning at destination (e.g. USA).
- Delay-driven costs: contractual penalties, lost sales, and disputes over who bears the costs.
- Fraud exposure: a live-pest finding on marked WPM is often treated by regulators as a potential fraudulent-marking matter, not a no-fault packaging failure. The US Animal and Plant Health Inspection Service (APHIS) cites penalties up to US$100,000 and felony convictions.
WPM marking is not difficult to forge and where authorities find a marked WPM to be infested, many will treat the marking itself as fraudulent rather than simply non-compliant. In some jurisdictions, notably the USA, cases have resulted in large civil penalties and even felony convictions
Causation
A live-pest finding usually points to WPM treatment that failed or was never applied, though not always: some wood-boring families include species that attack seasoned timber, not only fresh wood, and USDA/APHIS typically acts at the family level rather than species. For Cerambycidae (longhorn beetles), the largest category of US pest interceptions, that distinction can affect both inherent vice and recovery, and the answer usually turns on documentation the insured did not necessarily generate or retain: treatment certificates, batch records, and NPPO registration proof.
Recovery
The treatment-and-marking chain behind a single pallet often runs through a timber supplier, an independent treatment provider and a separate manufacturer before it reaches the packer. Where the WPM has been reused or repaired, it may carry the history of an earlier life besides. Identifying a party against whom recovery can realistically be pursued depends on tracing that chain, which is only possible where documentation remains available.
Coverage disputes
Concepts such as inherent vice, regulatory action and delay are commonly engaged by ISPM 15 losses, in the same way as in any other cargo claim raising those issues. Whether and how they apply is fact- and wording-specific, and a question for the claim’s handler and legal advisers on the individual case. This briefing does not, and is not intended to, generally resolve that question.
Three key takeaways
- It is about disruption, not damage, and increasingly, potential fraud. Detention, re-treatment, repacking and delay drive the cost; a live pest on marked WPM can also trigger a fraud inquiry.
- The paper trail matters as much as the package, in every market. Responsibility starts with the shipper/packer, but the treatment chain runs further back. Rejections are not confined to a handful of well-known jurisdictions.
- Prevention is cheap relative to the loss. Registered treatment providers and a pre-loading mark and packaging condition check on every component, in every market are the highest-value, lowest-cost controls available.
In most cases ISPM 15 non-compliance is not about physical damage to insured cargo, it is about operational disruption such as detention, fumigation, repacking and delay cost. Although responsibility for compliant WPM typically rests with the shipper or packer, insurers should be aware that the supply chain behind a single pallet is often longer than it appears, which may complicate attribution and recovery.
Dubois also noted that, simple, low-cost preventive measures such as the use of registered treatment providers and verifying IPPC marks and the package condition before loading can meaningfully reduce the likelihood of a rejection.