Sunday, November 27, 2011

China's ban on poultry, logs from Va. costs ports millions

NORFOLK

The port of Hampton Roads doesn’t need this.

Cargo volume still hasn’t rebounded to pre-recession levels. And it’s vying with other East Coast ports to handle more Asian shipments once the Panama Canal expansion opens in 2014.

Yet China doesn’t want logs or poultry exported from Virginia.

In fact, it’s banned both: poultry since mid-2007 when a strain of bird flu was found in turkeys at a Shenandoah Valley farm and logs since April after bugs were found in multiple shipments.

It doesn’t matter if either one was grown in Virginia or another state or processed here or elsewhere; if it’s shipped from Virginia, it’s banned.

“I am very concerned by the drastic action recently undertaken by China that bans all log exports from Virginia and South Carolina,” wrote Todd Haymore, Virginia’s secretary of agriculture and forestry, in an April 6 letter to Ron Kirk, U.S. trade representative. “This unilateral action is an extreme action that negatively impacts many small, family-owned enterprises in two states that are following the same export protocols as wood products exporters from other areas of the country.”

Aside from hurting those industries and the people they employ, the bans also have cut into the port’s business, said Michael J. Quillen, chairman of the Virginia Port Authority’s board.

China’s ban on Virginia log exports has cost the port 4,000 to 5,000 standard 20-foot containers a month during the six peak months for such exports, said Tom Capozzi, vice president/global sales and customer service for Virginia International Terminals Inc., the private firm that runs the Virginia Port Authority’s facilities.

That may be just a small portion of a typical month’s cargo volume, but it “certainly was big business that we would like to get back,” Quillen said.

But there’s little the port – or even the state – can do about it. The matter is largely outside their jurisdiction, tied up in a “very complex negotiation with the Chinese” involving the U.S. Department of Agriculture, he said.

Progress is “almost glacial,” Quillen said.

Virginia’s congressional delegation sent a letter in May to the Chinese ambassador urging that the bans be lifted.

“Virginia currently ranks 12th, among U.S. states, in our agricultural exports to your country,” they wrote of the state’s $2.24 billion in agricultural exports in 2010. “Last year, the value of those exports reached $194 million, thus making the People’s Republic of China Virginia’s second-largest export customer.”

The letter came right before Gov. Bob McDonnell’s trade mission to China. During the May trip, the governor met with Chinese officials regarding both bans, seeking to reverse them.

McDonnell invited the Chinese to come to Virginia to see its logging industry from the sawmills to the port – an invitation the Chinese accepted verbally, said Haymore, who accompanied the governor on the trade mission.

The U.S. Department of Agriculture and the Chinese were to negotiate the details of a visit, Haymore said. Six months later, it hasn’t happened. But progress hasn’t been completely stalled, at least on logs.

On Oct. 31, the Chinese proposed new regulations for certifying U.S. log exports. In a teleconference Tuesday, U.S. Department of Agriculture officials reviewed the proposal with about 75 logging industry stakeholders from across the country.

Any breakthrough hinges on the U.S. response, followed by additional review by China, before the Chinese would set any timeline for lifting the log ban, USDA officials say.

China banned poultry exports from Virginia in July 2007. It cited evidence of low-pathogen bird flu in Virginia poultry later traced to a single farm in the Shenandoah Valley – a farm long since cleansed and overhauled.

It has similar bans on poultry exports from Arkansas, Minnesota, Pennsylvania and Texas.

Virginia’s poultry exports to China amounted to a roughly $10 million business in 2006, but it seemed poised to grow, state officials say.

Virginia is one of the nation’s top 10 poultry-producing states. A business estimated to be worth about $1 billion a year, it’s the state’s top agricultural sector, encompassing six processing companies employing about 10,000 people and nearly 1,100 family farms, according to the Virginia Poultry Federation’s website.

With a Chinese poultry export market valued at as much as $725 million a year, Virginia should have a nice percentage of it, Haymore said.

“It’s costing us jobs, it’s costing us export opportunities, and it’s hurting our processors in the Shenandoah Valley, it’s hurting our growers in the Shenandoah Valley, and it’s hurting all those businesses along the supply chain from the valley to the port,” Haymore said of the ban.

Savannah, Ga., the second-largest East Coast port after New York/New Jersey, is the leading U.S. container port for poultry. In its latest fiscal year, it exported more than $804 million of containerized poultry, the bulk of it going to Hong Kong, according to the Georgia Ports Authority.

In late September, the Georgia authority announced a $4.75 million project to expand its refrigerated container storage by 45 percent, positioning it for more poultry exports.

Refrigerated exports from the port of Hampton Roads are up as well, Capozzi said, but that’s mostly to other markets around the world.

“In China, we’re clearly at a disadvantage and China’s a huge market,” he said. “For us, as a port, we send more stuff to China than any other country. We also import more stuff from China than any other country.”

The port has largely adjusted to the 4-year-old poultry ban, Capozzi said, but “this log thing is relatively recent, so that’s really hurting.”

Wood ranks among the port’s top 10 exports. Last year, Virginia’s exports of hardwood and softwood logs to China were worth more than $34 million.

Then came the “pinewood nematode,” little wormlike critters discovered in some log shipments traced to Virginia and South Carolina.

In April, China banned log exports from both states.

“It is huge; it is having a huge impact,” said Curtis Struyk, vice president of TMX Shipping in Morehead City, N.C.

“That’s all I do is export lumber logs” to countries such as India, Vietnam, Italy and Turkey, as well as China, he said.

TMX Shipping’s volume hasn’t suffered, but costs have risen because the company has had to find other ways of getting logs out of the country. Struyk now ships logs through ports such as Baltimore and Wilmington, N.C., and through inland facilities in cities such as Columbus, Ohio, from which they’re railed to West Coast ports.

“This is so stupid and it makes no sense; it’s crazy,” said Struyk, adding that the certification processes in Virginia aren’t different from anywhere else. “It’s some kind of retaliation.”

Every shipment of U.S. log exports must be inspected by the U.S. Department of Agriculture, which issues a “phytosanitary certificate,” a kind of stamp of approval, assuring foreign importers that the logs are free of pests.

The certificates are issued by agricultural officials who oversee the log exports. Some are issued at local fumigation facilities, if the logs are being fumigated, or at various other locations, but all are done by Agriculture Department officials.

Coniferous logs, susceptible to pinewood nematode infestation, must be tested by taking wood-core samples, which are sent to labs.

Depending on the type of logs and whether they’ve been stripped of bark or not, some are required to be treated with chemicals.

Hampton Roads has two fumigation facilities – Royal Fumigation and Western Fumigation – that treat logs and other agricultural exports. Both are in Suffolk and owned by companies with similar facilities serving other East Coast ports.

Capozzi said he’s concerned about the impact on either company if the log ban continues much longer.

“The log fumigation is really their bread and butter, what they make their money off of,” he said. “I’m just afraid one of these guys is going to go out of business. When the ban comes off, we might not have enough capacity to fumigate.”

In a statement, Western Fumigation, a unit of Atlanta-based Rollins Inc., said it was dealing with the situation.

“We service other local commodities such as tobacco so the Chinese government’s ban on imported logs has had only a moderate impact on our business overall,” wrote Martha Craft, a Rollins spokeswoman, in an email.

An executive with Royal Fumigation, a smaller firm with revenue of about $10 million a year, said Capozzi’s concerns were well-founded.

“It’s not just logs that Virginia needs to be able to fumigate,” said Anne Bookout, vice president and general counsel with Royal Pest Solutions, Royal Fumigation’s Delaware-based parent firm.

Every country has a list of “quarantine pests” it doesn’t want because they lack natural predators and could do huge damage to agriculture and forestry, Bookout said. “Any port that wants to be competitive has to have a fumigation capability for material going out and for material coming in,” she said.

Customers who had been sending their wood to China through Royal Fumigation’s Suffolk facility have found other ways of getting it there, through other ports.

“We are losing money on a daily basis at our facility,” Bookout said. “This is a conversation that we have very frequently. How much longer can we go on?”

Robert McCabe, (757) 446-2327, robert.mccabe@pilotonline.com

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