Special Report: Canadian carriers take a ‘wait-and-see’ approach to security surcharges
March 1, 2003
FORT ERIE, Ont. - Two months after Con-Way Transportation Services Inc. began levying a Homeland Security Surcharge on all transborder less-than-load (LTL) shipments, no Canadian carriers have yet fol...
FORT ERIE, Ont. – Two months after Con-Way Transportation Services Inc. began levying a Homeland Security Surcharge on all transborder less-than-load (LTL) shipments, no Canadian carriers have yet followed suit but the president of the Freight Carrier Association of Canada (FCA) believes it’s just a matter of time.
“I’d say that Canadian carriers will start to charge one. The costs are real. But it might be a harder sell up in Canada than in the U.S.,” says Dave Sirgey, president of the FCA.
“We’ve heard that (Canadian) carriers are discussing this, but at this point we don’t know of any carriers that have levied a surcharge,” Elly Meister, vice-president of public affairs for the Canadian Trucking Alliance (CTA), tells Truck News.
In an exclusive recent interview with sister publication Canadian Transportation & Logistics, the respected Allan Robison, president and chief executive officer of Reimer Express Lines commented: “There will be charges that will be coming forth in the industry. You will see charges for border crossings, and increased charges for dangerous goods that hadn’t been there before because the new rules are so much more onerous than before and require a lot of work to ensure we do it right…”
He goes on to say, “We (Reimer Express) learned a long time ago that if we have to obey these laws, we have to be able to charge for the things that are required of us. We have to pass these charges on because there is no way that we can absorb them because they were costs that we didn’t invite.”
On Jan. 2, Ann Arbor, Mich.-based Con-Way Transportation Services implemented a US$8 surcharge on LTL shipments crossing the border in either direction.
The company cited new freight and border security programs that have been implemented since the September 11, 2001 terrorist attacks on New York and Washington as the reason for the surcharge.
Con-Way says it has seen increased operating costs as a result of needing to register every piece of equipment and driver that crosses the border; making sure drivers have proper border-crossing documents, changes to security inspections, longer waiting times at the border that tie up equipment and make trip times longer, and spending more administrative time preparing shipments for customs clearance.
The company also estimated it would have to spend US$15 to US$20 million setting up facilities, systems and procedures to comply with minimum physical security standards established for LTL carriers under the new Customs Trade Partnership Against Terrorism (C-TPAT) program.
The program launched by the U.S. Customs Service requires importers to develop new practices that tighten security in their entire supply chain, including cargo transport.
Companies that apply to participate in C-TPAT can send their shipments through a dedicated commercial lane at certain border crossings, and face fewer cargo inspections.
“The need and concern for security is a goal we can all support, but it is having an impact on our operating costs. As government agencies on both sides of the border have continued to formulate and modify security plans, the increased cost impact has become a constant within our operations. It’s now time to begin to recover these costs,” Douglas Stotlar, Con-Way’s executive vice-president and chief operating officer, said in a statement released to the media last November when Con-Way announced it would start levying a surcharge in 2003.
Con-Way hasn’t drawn any outrage from customers paying the new security surcharge.
“They understand the charge and why we implemented it,” says Joe Deluca, a Con-Way spokes person, when asked about customer response to the new security surcharge on shipments.
The FCA’s Sirgey says he received numerous calls during January from carriers who in addition to having other border-issue concerns, were contemplating the implementation of a surcharge similar to the one being levied by Con-Way.
“I think Canadian carriers are taking a wait-and-see attitude,” he says.
But he believes that they’ll start implementing some sort of surcharge “whether you call it a homeland security surcharge, a border-crossing fee or an administrative fee.” That would likely happen within “the next six months or so,” Sirgey predicts.
He believes surcharges will start to be worked into contracts as carriers start to renew their agreements with shippers.
Sirgey says a border surcharge is inevitable in the LTL sector because LTL carriers have until now been undercharging for their services.
“The LTL guys have been giving up quite a bit for free,” and hurting their profitability, he says.
“Certainly the United Parcel Services of the world charge for everything that they do. If you do charge for all your services, you improve your bottom line.”