New Prenotification Rules Make Electronic Reporting Mandatory

by Ingrid Phaneuf and Lou Smyrlis

WASHINGTON, D.C. – Mandatory electronic reporting for prenotification of transborder shipments to the U.S., though necessary for border security, could put some carriers out of business, says David Bradley, head of the Canadian Trucking Alliance.

“There will no doubt be some economic impact,” Bradley acknowledged in an interview with Truck News. “But that’s the price we have to pay to keep the border open.”

No less than 60 per cent of Canadian carriers currently present their cargo information in paper form when they arrive at border crossings, according to a study conducted by the U.S. Bureau of Customs and Border Protection.

The study was conducted to examine the impact of the new prenotification rules, published July 23 in the Federal Register, which will make electronic prenotification for goods being exported to the U.S. mandatory.

The proposed rules would require Free and Secure Trade (FAST)-approved motor carriers hauling FAST-approved shipments to prenotify U.S. Customs 30 minutes ahead of arrival at the border and those involved in the Pre-Arrival Processing System (PAPS) program to report one hour prior to arrival. (For more details on the U.S. rules as well as Canada’s response, see the accompanying sidebar.)

Given the current state of the industry, mandatory electronic reporting will be a challenge, Bradley admits.

“Obviously this is going to require some investment on the part of some carriers,” he says.

Carriers prepared

“But I believe our members have long been well aware of the coming changes and are prepared to do what’s necessary.”

Evan MacKinnon, CEO of MacKinnon Transport and chairman of the Canadian Trucking Alliance, says carriers working for any of the major multinational shippers or 3PLs are likely already into EDI and should be able to manage it any additional systems work required.

But carriers not up to speed technologically, whatever their size, are going to have a tough time, he warns.

“Some of them may have to think about whether they wish to continue to try and compete in the transborder market. This obviously will be a hard decision for some of those carriers and no doubt it will be painful,” MacKinnon says.

“But, these programs must apply to everyone in order to have a level playing field. If at the end of the day some are forced or decide to leave that market, those that are able to comply will see it as an opportunity to pick up some business. It is survival of the fittest in the market.”

Much confusion surrounding interim systems

Much confusion surrounds the reporting mechanism motor carriers must use while U.S. Customs builds its much anticipated Automated Commercial Environment (ACE) – now expected to be ready by mid 2004.

In the meantime, carriers will have to get by using several existing release systems: FAST, PAPS, Border Release Advanced Selectivity System (BRASS) and the Customs Automated Forms Entry System (CAFES).

But sometimes the existing systems actually conflict, negating the efficiencies they are supposed to create.

Sandra Scott, trade advocate for Roadway Express, provides the following example:

When customs brokers use the PAPS system fax release data in bar code form at border stations the inspectors scan the information and clear the truck to proceed.

But if a truck has more than five PAPS shipments (and five bar codes) it’s diverted to a secondary area so that the inspectors working the primary booths are not slowed down by scanning too many bar codes.

If a FAST-approved carrier is involved, the process becomes even more problematic.

FAST-approved carriers are rated low risk and are supposed to get expedited treatment through Customs’ primary areas.

But if a FAST-approved carrier is also carrying several PAPS items and as a result is diverted to a secondary area, the expedited privilege they’ve worked so hard to earn is wasted.

As for load brokers, they aren’t even accounted for in FAST. To participate in FAST, the importer, trucking company and driver must first qualify for the Custom-Trade Partnership Against Terrorism (C-TPAT) program.

Load brokers, however, cannot participate in C-TPAT to date. So if a U.S. importer wants to use a broker to contract a freight movement, the shipment could theoretically end up in Customs’ slow lane even if the carrier is FAST-approved.

Asked whether FAST will somehow account for load brokers, one CBP official (who asked not to be identified) admitted to not even being aware that load brokers existed.

What about the brokers?

Be that as it may, while some of the larger carriers may have no quarrel with this backhanded removal of the “middle man” in freight movements, many smaller carriers and O/Os rely heavily on load brokers.

American importers as well, not wanting to deal with many small carriers, prefer to work through load brokers.

The Transportation Intermediaries Association estimates brokers managed 300,000 truckloads between the U.S. and Canada last year, about five per cent of the total transported between the two nations.

Time to work out the bugs

Fortunately, there is still time to work out the bugs.

The proposed rules are subject to a 30-day comment period, followed by another 90 days before the final rules are published October. 1 of this year.

“And even then, they may not be implemented for who knows how long,” Bradley says.

“The fact is, many border crossings don’t even have FAST lanes yet, much less the infrastructure necessary for electronic reporting of data to customs brokers. This is going to take some time to implement.”

Carriers who do attempt to beat the system by going out of their way to avoid crossings where FAST lanes and electronic reporting infrastructure do exist should be forewarned however, says Frank Bowen.

While Bradley represented the CTA, Bowen represented the Private Motor Truck Council at the Commercial Operations Advisory Committee to the U.S. Customs Service when the prenotification rules were being discussed.

“If, when the rule is implemented, a driver did go out of his or her way to get to a crossing where there is no electronic reporting or FAST lane available, I think there’s a fair chance the customs officer would notice,” Bowen says.

“If I were a customs officer, I would first ask ‘Who is this guy and why is he trying to beat the system?” then I would ask myself ‘What is he trying to hide?’ And then I would unload his truck.”

Neither Bowen nor Bradley were surprised by the fact carriers will be required to file cargo reports electronically, but they were aware that not all carriers do so to date.

“Certainly one of the reasons the lines are so long sometimes at crossings is that the drivers have to go though the paperwork with the brokers,” Bowen points out.

Adds Bradley: “Even if the new security measures weren’t part of the reason for this, we would have had to eventually start filing electronically…The hope is that filing electronically will actually reduce wait times.”

Going electronic

Bowen, who also just happens to be the marketing mastermind behind Viasafe, a company that supplies secure electronic data transmission services for import/export use, couldn’t agree more.

Chances are, once carriers realize they have to go completely electronic or go bust, services such as Viasafe will be a hot commodity.

“Basically what Viasafe does is help a company manage its electronic information, and make sure it gets to the right person at the right time,” says Bowen.

Viasafe software also lets carriers know when vital information is missing from their cargo reports.

“That way you don’t find out you’re missing information when you get to the border.”

Bowen admits hiring an outside service provider isn’t absolutely necessary for a company to begin reporting electronically, but it helps.

“There are other ways of reporting and there are other companies, but the point is, if carriers don’t go electronic soon they won’t survive,” Bowen says.

“All of those companies that waited and said it wouldn’t happen
are getting a wake-up call now.”

What the proposed rules say

The new prenotification rules, published in the U.S. Federal Register on Wed. July 23, are as follows:

Imports: 30 minutes to 1 hour before arrival, depending on which release system is used.

Exports: One hour prior to arrival at the border using AES.

“The days are over of showing up at our border with a truckload of goods without first having notified us in advance,” says Homeland Security chief Robert Bonner. Both David Bradley, the CEO of the Canadian Trucking Alliance, and Frank Bowen, who represented the Private Motor Truck Council at the Commercial Operations Advisory Committee to the U.S. Customs Service are glad the original “strawman” proposal of four hours prior to loading prenotification was dumped. Meanwhile, Canada Customs and Revenue has come out with its own prenotification rule proposals, set to be published, passed and implemented at an as yet undetermined time. Under the newly proposed Canadian rules, carriers bringing goods into Canada will be required to provide electronic cargo data to Customs within the following time frames:

Highway – (for non-FAST shipments) – one hour prior to arrival;

Highway – (for FAST shipments) – no advance reporting requirement – Canada bound;

The new regulations and an implementation schedule governing mandatory advance cargo reporting will be introduced later this year.

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