Exclusive Border Report: Washington Scraps Its Proposal for Pre-Entry Notification
March 1, 2003
WASHINGTON, D.C. - After a tremendous wave of industry protest, the U.S. Customs Service has backtracked on a proposal that would have required motor carriers to provide information about their loads ...
March 1, 2003
Lou Smyrlis, James Menzies & Dean Askin
HIGH ALERT: As the U.S. prepares for a possible war in Iraq, security is tight for cross-border carriers. Truck News explores several key issues facing truckers who haul into the U.S.
STILL WAITING: Border wait times are unpredictable but the ‘straw man’ proposal could have made them a nightmare.
WASHINGTON, D.C. – After a tremendous wave of industry protest, the U.S. Customs Service has backtracked on a proposal that would have required motor carriers to provide information about their loads four hours in advance of crossing the U.S. border.
Just as Truck News was going to press, representatives from the Ontario and B.C. Trucking Associations confirmed that the “straw man” proposal had been taken off the table and U.S. Customs was to begin meeting again with key industry stakeholders to discuss alternatives.
“U.S. Customs received a tremendous wave of protest from key stakeholders such as FedEx and UPS and that’s when they started to listen. They have taken it back and will look at it again to see if they can find a more palatable solution,” says George Kuhn, executive director of the Canadian International Freight Forwarders Association, a group that has been closely monitoring the situation. “There is, supposedly, to be a proactive dialogue going on with industry.”
Food shipments, however, will still be affected by a Food and Drug Administration proposal that requires advanced notification of food shipments that are entering the U.S.
Industry representatives were critical of the plan from the get-go, insisting the proposal was completely unworkable and a threat to just-in-time (JIT) shipping and inventory systems and trade. In addition to demanding four hours advance notice for U.S. bound trucks, the proposal called for Canadian-bound trucks to provide U.S. Customs with 24 hours notice.
Although OTA spokesperson Stephen Anderson told Truck News the proposal was so off base, the industry did not think it would be passed into law, there was good reason to believe U.S. Customs was serious about its intentions. After all, at the beginning of February U.S. Customs had begun enforcing its rule requiring 24 hours notice before cargo is loaded on a U.S. bound vessel anywhere in the world.
Similar to the truck proposal, there was widespread opposition to the move by the marine carrier industry and containerized marine cargo movements are just as crucial to the growth of world trade as truck cargo movements are to transborder trade.
Yet Customs put the rule into effect anyway with very minor changes and announced that it had issued 13 “No-Load” directives for violations of cargo description requirements of the 24-hour advance manifest regulation during the first week of enforcement. A “No-Load” directive means that U.S. Customs has instructed an ocean shipping line not to load a container at a foreign port for delivery to the U.S.
Another indication that U.S. Customs was prepared to ram through the advance reporting for other modes, despite industry opposition, was that it initially gave industry just 10 days to comment on the proposals.
The proposed advanced reporting rule for trucks was part of a package of proposals that also called for electronic cargo declaration information eight hours in advance of loading for U.S. inbound shipments by air courier; 12 hours for other inbound air cargo; and eight hours for inbound rail traffic. The proposed notification period for outbound cargo was 24 hours.
All these proposals appear to have been taken off the table along with the truck proposal. Customs Commissioner Robert Bonner publicly is allowing that there might have been a big misunderstanding and U.S. Customs is looking to the Treasury Department’s Advisory Committee on Commercial Operations, a group of 20 private sector individuals entrusted to advise the department on Customs issues, for help in drafting a better plan. That’s a marked change from the tight schedule and closed-door decision making approach employed to this point.
Does this reflect a true change of heart from U.S. Customs or is it, as some industry analysts fear, just a tactical retreat before Customs brings in similarly tough rules?
“One way or the other, reporting prior to departure will somehow become the norm,” says Kuhn. “The key is when. But when is very critical in the sense that if you load the truck and you prep your manifest and then place the information at the disposal of whichever authorities require it that is an acceptable thing to industry. However, if they want four or two hours notice prior to departure, that doesn’t make much sense because very often you only know what’s going to go on the truck once you’ve finished loading.”
Kuhn adds that since most trucks are loaded a considerable distance away from the border and take at least an hour to arrive at the border, getting the manifest to Customs within half an hour after loading should provide sufficient time for Customs to do its checks.
“We appreciate that’s a short period of time,” he says. “But Customs can stop the truck at the border. That’s our argument.”
Couriers and providers of expedited transport services would have been particularly hard hit by the proposal.
“Four hours becomes a 24-hour delay. That, in essence, eliminates the expedited industry, both ground and air,” says David Miller, a spokesperson for Con-Way Transportation Services.
Auto makers and carriers that haul automotive shipments, who often work on a four-hour turnaround time, were also incensed with the four-hour pre-notification proposal.
“For the automotive industry a lot of our feed in Oshawa is within a 100 to 200 mile radius of Detroit. That would never work for us,” says Mark Verspeeten, operations supervisor at the family-owned Verspeeten Cartage Ltd. in Ingersoll.
He says the proposed truck shipment rule could really have affected his company’s business because 85 per cent of it is JIT hauling for Chrysler and General Motors.
“The JIT delivery is incredible. We don’t have that (much) time to tell them,” says Elly Meister, vice-president of Public Affairs for the Canadian Trucking Alliance (CTA). “That’s what JIT delivery is all about.”
Clayton Gording, vice-president of operations for Reimer Express lines, says that the proposed rules would have presented a logistics nightmare for the trucking industry.
It’s a situation where “You’ve got all this freight piling up in warehouses and you can’t load it until you get approval back. There could be something in the load they say they don’t like,” he says.
Norm Mackie, vice-president of Mackie Moving Systems, says his firm does about 150 loads a day out of the U.S. Mid-west, and he can see the need for a clerk in Detroit for 24 hours a day just doing data entry work to keep up with JIT shipments under the proposed rules. He called the straw man proposal “almost unmanageable.”
“There’d have to be some major pre-planning. A lot of the business we do is right out of Michigan two times a day. How could you give 24 hours notice (for shipments out of the U.S.)?” he says.
Verspeeten fears such rules could mean U.S. customers that depend on JIT shipments will eventually only deal with domestic suppliers and shippers because of all the procedures being put in place at the border. “I fear Ontario is in jeopardy. Sooner or later the U.S. is going to say it’s not worth it,” he says.
Gordon agrees that the pre-notification isn’t good for shipments to retail customers that depend on JIT delivery.
Basically, the proposed rule – and any future pre-notification requirements – meant that every carrier in Canada that does any shipping to the United States would have to tie into the U.S. Customs Service Automated Commercial Environment (ACE) computer system. Gording says that won’t be so much of an issue for carriers that are already using EDI systems with Canada Customs and Revenue (CCRA), but it could be a major hurdle for carriers who have to “start from scratch.”
David Bradley, chief executive officer of the CTA, says implementing technology to link into ACE would be “enormously expensive for all carriers, and would be prohibitive for many smaller carriers.”
Nobody can pin a figure on exactly what would be required and how much it would cost “because we’re not there yet,” says Meister.
It should also be noted, however, that U.S. Customs’ own lack of will to enforce technological upgrades has contributed t
o the lackadaisical approach. U.S. Customs Service announced at the Border Vision Conference held in Toronto in 1997 that submitting electronic transmissions in advance of cargo crossing into the U.S. would be mandatory as of Jan. 1, 2000. Jan. 1 came, and nothing happened. And then came 9/11 and now the need for security is driving change.
Further complicating the pre-notification process is the increased detail that may be expected. For ocean carriers, for example, the 15 data elements included a precise description of the cargo, the shipper, the U.S. consignee, the container number and the number of the seal that is attached to the container after it is loaded. More detailed documentation was to be required for land and air shipments.
Industry also charged that the proposals undermined recent ground gained by the Free and Secure Trade (FAST) program, the Customs-Trade Partnership Against Terror (C-TPAT) and the 30-Point Smart Border Action Plan.
“Now items are coming up under Homeland Security and the U.S. Trade Act of 2002 under Customs that really circumvent and reduce the expedition that has gone through,” says Meister.
Many carriers on both sides of the border have spent considerable effort and cost to comply with C-TPAT and FAST, security programs which were to reward them with priority clearance. Yet the proposals would have required the same advance warning of all carriers. According to reports, some carriers in anger and frustration offered to send back to U.S. Customs their hard-earned security program approvals. Some offered to stage a one-day mock test of the four-hour advance warning rule to show the government just how crippling it would prove to be for JIT delivery.
How could such key proposals, brought forth by experienced and high-ranking U.S. officials, have ended up so far off the mark?
“Obviously there was suddenly the perceived need for immediate action,” observes Kuhn. “Customs, confronted with new requirements and demands by Homeland Security and mandated by Congress without the proper legal footing to suddenly implement incredible security measures, rightly or wrongly, possibly didn’t have the time they wanted to consult.”
It’s also likely that Customs, considering the enormity of making a mistake in such a situation concerning public safety, will try to build in a buffer beyond what it truly needs to safely check inbound cargo.
“I definitely believe that has very much to do with it. Almost by nature, you ask for more than you think you can get. And if something happens you can always fall back on the position of ‘I told you so.’ I really think that plays a part in the whole equation here,” says Kuhn.
He adds a better approach may be to certify the entire supply chain.
“Start where we ought to start – at the manufacturer’s place, the point of packing. Because it’s very simple to put a smart bomb into a box meant for, say, a computer and simply marked carton, and loaded with other bona fide boxes. However, if you have a certification and security arrangement with the exporter, the manufacturer, etc. and you certify them and the trucker who takes it to the next point, and the rail and then the port, then you have more security assured than right now. Because all U.S. Customs can do right now is manifest information and look for unusual patterns,” he says.
Not everyone believes pre-notification would have such a negative effect.
Todd Spencer, executive vice-president of the Grain Valley, Mo.-based Owner-Operator Independent Drivers Association doesn’t see how advance notification would strangle cross-border trade. “The method to the madness is to have a way to get things moving across the border timely and efficiently as well as to provide security,” he says.
“You have to assume that JIT has a specific time for loading and delivery,” he says, so pre-notification should be a “simple process.”
Con-Way’s Miller explains an obvious benefit to electronic communication being demanded. “We can take out significant costs from our supply chain if we can get people to use electronic commerce capabilities…and we should certainly move forward to adopting Web services.”
Nor should the ability of shippers and carriers to adjust to new circumstances be discounted, Kuhn advises.
“We as an industry live by what we have learned; by the standards we have developed. Now certain parameters are changing and we will need to learn to judge things based on new parameters. Ultimately a supply chain can adjust to all that and that’s probably the way it’s going to be,” he observes.
Of more immediate concern, however, is timing. U.S. Customs will have to go back to the drawing board and do a much better job of determining how much time it will need to receive cargo manifest data to assess risk and notify the carrier of a suspect shipment. The new timetable for comments may be as long as 60 days. But the Trade Act of 2002 requires Customs to submit the proposed regulations to Congress by Sept. 15, 2003, and to put the new regulations into action – with an appropriate grace period – by Oct. 1.
To get to that point, the final rulemaking will have to go through inter-agency consultations and mandatory reports to at least five Congressional committees. And there is no indication Washington has any plans to deviate from those deadlines.
Then there is the very real possibility of another terrorist attack in the U.S. to contend with. Such an event would more than likely cause U.S. authorities to revert to even more drastic measures, regardless of their ramifications for shippers and carriers alike.
“If we had another terrorist incident next week, the government would formulate new rules and say ‘sorry, we’re going to do that now, we don’t want to know about your problems,'” says Phil Cahley, executive director of the Canadian Courier and Messenger Association.