News Focus: just-barely-in-time-shipping?

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Just-in-time transport (JIT) carriers and the U.S. Bureau of Customs and Border Protection (CBP) are both acutely aware of time. One is looking to reduce its time in crossing the border; the other is looking to gain a little time to root out potentially nefarious activities.

When U.S. Customs introduced its so-called strawman proposal in January, calling for automated pre-notification of freight crossing the Canada-U.S. border four hours prior to loading, they asked for an industry response. Protests from trucking and shippers’ associations on both sides of the border led to the CBP’s July 23rd proposal. These new standards call for, among other things, Free and Secure Trade (FAST) approved motor carriers hauling FAST-approved shipments to pre-notify Customs 30 minutes ahead of arrival at the border. Non-FAST-approved shipments are to report one hour prior to arrival. (The final ruling from CBP on pre-notification was to be made by Oct. 1 but as Motortruck was going to press just days prior to that date, executives at the American Trucking Associations were indicating that CBP would not be able to meet this deadline and that Oct. 31 was more likely.) A truck using FAST lane processing must be Customs-Trade Partnership Against Terrorism (C-TPAT) approved, carrying qualifying goods from a C-TPAT approved manufacturer or importer and the driver must possess a valid FAST Commercial Driver Card. This harmonized clearance procedure is already in place at a number of U.S.-Canada ports and was to expanded to the Mexican border this fall.

Although the new U.S. Customs proposals calling for 30-minute electronic advance cargo reporting for FAST-approved shipments and one-hour for non-FAST shipments have been received by the trucking industry as more “livable than the initial offering,” both the Canadian Trucking Alliance (CTA) and Canadian Manufacturers & Exporters took up the CBP’s invitation for another industry response.

“The major point — there’s a number of technical issues and other recommendations — but the major over-lying issue is to reduce the FAST time to 15 minutes and 30 minutes for non-FAST,” says Elly Meister, vice-president public affairs at the CTA. The CTA presented the CBP a five-page letter of critique, questions and recommendations. “We also hope that the two federal agencies [CBP and the Federal Food and Drug Agency (FDA)] work together to try and have one set of data to comply with their rulings rather than two parallel regimes.”

The Canadian Manufacturers & Exporters presented a similar letter calling for the same time frames.

One feature of the proposal that particularly concerns smaller carriers is the requirement of electronic filing. With almost 60% of Canadian carriers currently presenting their cargo information in paper form at the border, according to a study conducted by CBP, mandatory electronic reporting will prove costly to some. Evan MacKinnon, CEO of MacKinnon Transport and chairman of the Canadian Trucking Alliance, suggests this rule may put some carriers out of business. Others, he says, “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… It is survival of the fittest in the market.”

As for Allan Robison, president and CEO of Reimer Express Lines, that’s what he likes about the new rules. “We’ve always spent the money and we’re well ahead of this. We’re usually working with Customs, developing these things. So we’ll have no difficulty. All of our paperwork is sent electronically to our border offices as well as to the Customs people. By the time we arrive there, which is going to be a couple hours later, all the paperwork is ready… Right now, we average about 14 minutes going through the border because of our information systems. That’s an average because sometimes — which happens whether we are electronically cleared or not — Customs says, Hey, pull over, we want to inspect your load. And that will slow us down.”

It stands to reason that specifically JIT carriers may be less challenged by the electronic filing requirement than other crossborder haulers, given the importance of information systems to this form of logistics. When moving freight to some manufacturing plants that keep no more than four hours’ worth of parts on hand, a JIT carrier can have as little as a 15-minute delivery window in which to arrive and unload. This sort of punctuality, which is not uncommon in the JIT industry, is essential to manufacturers that may schedule their production to a supply of parts from a plant thousands of kilometers away. An army of dispatchers and customer-service reps predict and work around traffic tie-ups, weather problems and border hassles. The type of work they do requires the latest technology — computers and onboard satellite systems, which inform customers how far their shipments are from home. The consequences of delays can be as severe as forcing a plant shutdown until the deliveries are back on track. On the way to the theoretical target of zero inventory, the trucks act, as Mark Verspeeten, operations manager of the family business that runs 500-plus trucks in JIT deliveries says, as the warehouses.

Martin Burnham, President of Hercules Forwarding Inc. points out some of his concerns with the proposed CBP rules: “Some JIT carriers are on the FAST program and some are not. Some are ineligible. It’s like the CSA system in Canada, which is restricted to specific importers… An LTL carrier who has a broad spectrum of importers cannot participate. Also, with these programs you have the U.S. requiring the information be sent by third party. The carriers themselves are not sending the information. The carrier has to rely on a broker to do that. So did the broker do it? The carrier just sends the truck manifest, not the import information. So if Customs doesn’t have the other part, the trucker runs into a wall. The importer or the broker may not have done their job or they may have done it improperly. Well, who does the customs official have a hold of? The penalties of bad communication are with the driver, but the problem is elsewhere.”

Last August’s electrical blackouts in the East also bore out the need for back-up Customs clearance procedures. “We have two units this morning that we can’t move across the border. We’re set up to send this information electronically and we can’t do it because of the black outs. Redundancy in the system — they don’t seem to have it. If Ottawa goes down, what can we bring up?” Developing adequate back-up measures to deal with the inevitable problems in border clearance technology, as well as dealing with haulers that, for whatever reason, arrive at the border with incomplete information will be essential to efficient border crossing. These and other technical issues have been well represented in the CTA and Canadian Manufacturers & Exporters letters to the CBP.

But how likely is it that Canadian concerns will be weighed into the final rule making?

“We’re hopeful. Certainly the spirit in which they invited input was one of cooperation and our experience to date has been pretty good,” says Perrin Beatty, president & CEO of Canadian Manufacturers & Exporters. He adds, “The goal should be to make the border transparent to legitimate commerce and people crossing it. By and large, the systems worked well.”

Also, while there is apparently no leniency on the October 1st deadline by which Congress expects the ruling, the details themselves in terms of the duration of the phase-in period, the ruling’s openness to revision, the possibility of special concessions to certain Canadian ports of entry — may prove to have considerable flexibility. That said, considerable U.S. political momentum is behind making America’s borders more secure. In further diluting the current proposed standards, the CBP risks being perceived as making only a token effort at targeting terrorism. Considering that the American Trucking Association (ATA) is not particularly concerned with the proposed ti
meframes, it’s probably a good thing that the current CBP proposal is considered by the Canadian trucking industry as livable. Martin Rojas, director of crossborder operations at the ATA says, “We did not get any specific comments back from our carriers saying that 30 minutes [for FAST-approved shipments] would be too long. Fifteen minutes would be great, but we did not put in for a change on the 30 minutes that Customs proposed down to 15.”

If the proposal is legislated as written, the CTA expects to see significant border disruptions. Depending on how it is phased in, this may be the short -term case. But it is difficult to make a case for long-term adverse consequences. Not unlike a 100 km-h highway speed sign or any number of other regulatory limitations, it will become part of the logistical landscape that JIT carriers, manufacturers and exporters will have to accommodate. “Will it hurt trade? In the long run, no,” says Paul Lobas, Canadian International Freight Forwarders Association Director, Western Canada. “It’s another hurdle the industry will have to step up to. Freight forwarders may fill the gap in helping the smaller carriers clear Customs. Some technology providers may jump on the bandwagon and come up with an Internet-based solution for the small shipper who needs to clear customs.”

As Burnham puts it, “It’s like putting in a new computer system. Once we get down the road and get past the grief, it should get better. Overall, it’s going to make the customs agencies more efficient. If it will enhance their targeting, which it will, the legitimate stuff should move.”

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