§1Model wording
1.1 Index. "Index" means the Producer Price Index for Wood pallets and pallet containers, series WPU084101, not seasonally adjusted, published by the U.S. Bureau of Labor Statistics.
1.2 Base. The Prices in Schedule A correspond to the Index value for [base month and year] (the "Base Index").
1.3 Review. On the first day of each calendar quarter, the Buyer shall compare the Index value for the second month before that quarter (the "Review Index") with the Base Index, using the values published as of the 15th day of the review month.
1.4 Adjustment. If the Review Index differs from the Base Index by more than [3]%, each Price shall be adjusted to: Price × (1 + [share]% × (Review Index ÷ Base Index − 1)). The adjusted Price applies to orders placed in that quarter, and the Review Index becomes the new Base Index.
1.5 Revisions and discontinuance. Later revisions of a published Index value do not reopen a completed adjustment. If BLS discontinues or rebases the Index, the parties shall use the successor series BLS designates, rescaled to the Base Index; if none, they shall agree a replacement in good faith within 30 days.
Values in [square brackets] are yours to set. Have counsel review before use; this is not legal advice.
§2Negotiation notes
The share matters more than the band. Lumber is a large part of a new wood pallet's cost, but not all of it; suppliers will argue for a higher share in rising markets and buyers for a lower one. Agree it once, in a calm market.
Use a two-month lag (1.3) because recent PPI months are preliminary and BLS can revise them for up to four months after first publication.
For recycled pallets, consider whether this index tracks your supplier's costs at all; core supply drives recycled prices too.
§3Variants
- Monthly review with a narrower band for high-volume programs.
- Cap and floor: no single adjustment above [x]%.