Arizona HB 2168 and the Failure of Pallet Theft Legislation

The problem of pallet theft. My running buddy likes to tell a story about being on the subway in Tokyo. Someone had dropped a wallet on the floor of the car, and nobody touched it. People just stepped around it. Perhaps this represents a different culture than we experience in the Americas, where it is hard enough to hang onto a wallet that is in your pocket, let alone one lying on the ground.

Then we have all of those pallets and containers in the unprotected Trader Joe’s parking lot, or leaning against the outside back wall at Liberty Wine.

It is a tough spot for asset owners who simply do not have the room to safeguard their assets at many retail locations, and find themselves victimized to the tune of hundreds of millions of dollars annually by pallet and container theives.

In Arizona, businesses are said to be losing up to $3 million a year from the theft of plastic and wooden pallets used by wholesale suppliers to deliver a variety of goods to grocery stores, according to the Arizona Business Gazette. If we think about Arizona as roughly 2% of American population, that extrapolates to about $150 million nationally, which is no small change. In Arizona, fines up to $30,000 for pallet theft are being considered, as part of that state’s new approach.

Arizona has introduced HB 2168. Starting this summer, if a recycler purchases 10 or more wood pallets or five or more plastic pallets at a time from an individual, he is required to collect identification information from the seller, and maintain it for a year to allow for police inspection. (It is a best practice to maintain seller information, and is already practiced by many firms across the country. It is a practice endorsed by ISRI as part of its program).

One Arizona legislator, Rep. Jim Weiers, R-Phoenix, does not understand why  recyclers should be allowed to buy old pallets at all, if they are stolen. Of course it isn’t that simple. Many aren’t stolen, and “pallet pickers” can perform a valuable service to business owners and cities by picking up unwanted pallets that pile up in alleys or lie sometimes in the middle of traffic. It is the pallets that they aren’t authorized to pick up that are at issue. And then there are all of those “grey” pallets, the ones where the picker asks the minimum wage store clerk if they can be taken, and the clerk doesn’t know any better, or does, but accepts a few bucks to unofficially sanctify the deal.

Rep. John Fillmore also was critical, calling it a “nanny bill.” He owns a chain of retail stores selling fireplaces and evaporative coolers, and has goods delivered on wooden pallets. He gives them away or sells them himself. In other words, the pallets are of little value to him, and he is happy to be rid of them. This is the case for many retailers, unfortunately, who have no financial commitment to asset management.

For many of these unmotivated retail outlets, however, there are suppliers who feel the pain of asset loss, and they legitimately feel caught between a rock and a hard spot. The sales team doesn’t want anything to do with a deposit system. Sure it would motivate the retailer to safeguard the pallet for return, but it might cost the company the account if Bubba Fizz Cola, for example, starts charging a deposit while Fulla Phizz does not. And I’ve certainly experienced myself and heard elsewhere where delivery drivers just aren’t motivated to pick up their empty pallets, or that they are overly motivated and take back their own plus all of the competitors’ as well, so when the Bubba Fizz Cola truck pulls up, his pallets are already long gone back to the Fulla Phizz depot.

Then we have the industry lobby. the Arizona Beverage Association, which is raising awareness about the issue. Good on them for that. Recyclers should be recording scavenger information. They shouldn’t be accepting brand name pallets from persons not clearly in authorized possession.

But while I have some sympathy for the plight of reusable pallet and container owners, given current system design limitations, I also feel outrage. Why do we insist on burdening the political system with the inability of business to address its own asset protection problem? If I was a police officer or lawmaker, I would be mightily vexed that I had to waste my valuable time trying to stop crime made possible by sloppy asset management practices that leave valuable property uncontested on the side of the road.

There is the need for some degree of legislation. Rep. Weiers doesn’t have it all wrong. Why indeed do we allow unauthorized people to be in possession of reusables. For example, at first blush I tend to be in favor of Oregon’s HB 3695, which now requires drivers delivering scrap to have a transportation certificate. Maybe some sort of certification or licensing is required for scavenging in general, including metals, plastics and pallets.

The problem involves changing behavior of many stakeholders, and the current round of legislation only targets a small slice of the problem. We need to think bigger thoughts. As Kim Jeffery, CEO and president of Nestlé Waters North America Inc. said recently to the Plastics News, “If we want to collect multiple streams of material and get all reusable packaging back, we need to think further out into the continuum and envision a system that does that,” said Jeffery. “It requires us to think more broadly about a lot of options. We have to rethink the recycling challenge.” He was talking about reusables and recycling across the board, but the message is the same. We have to look differently, and look forward.

If I was a legislator, I would stick with the sizable fine for illegal possession, but how something along the lines of a cost recapture penalty from retailers who waste policing resources by leaving valuable assets exposed and vulnerable to theft, or from beverage companies who refuse to institute deposit systems because of deliberate sales policy not to do so, or from businesses who refuse to track their assets, or who refuse to clearly brand them. And more importantly, how about not re-electing officials who don’t have the foresight to look beyond the immediate gratification of lobby groups toward more enduring, sustainable solutions that would help grow the stature of reusables more broadly in industry. How about that?

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