Border costs reaching ‘tipping point’: Report

OTTAWA — A myriad of U.S. and Canadian border security measures since 9/11 have not impacted the volume of goods hauled between the two nations, but Canadian companies are forced to pick up most of the tab, according to a new study released by the Conference Board of Canada.

The new border security environment has raised the cost of access to the U.S. market significantly for many companies, as transportation service providers and shippers to their best to absorb and pass as many costs down.

“Trade volumes have not changed because companies appear to be doing whatever they must to get goods to market. But Canadian companies are bearing higher costs as a result,” said Danielle Goldfarb, Principal Research Associate. “And even small cost increases could cause companies to reach a ‘tipping point’ at which it is less advantageous for production to locate here in Canada.”

Sights like this at the border are no longer common since 9/11.
But that doesn’t mean it’s no longer a pain to head south.

In addition to direct costs of complying with new border policies, companies are dealing with indirect costs, such as higher cross-border shipping costs or increased uncertainty about new border policies.

In the highly competitive global operating environment, even small new border costs can have important negative economic consequences, and could prompt companies to locate their production in the larger U.S. market and avoid border-crossing entirely, speculates the report. Some companies said that they are not yet getting the full benefits of FAST-crossing lanes for pre-approved traffic, even though they made significant up-front investments to become pre-approved.

Trucking carriers, however, argue that many companies in fact have not made any effort to become C-TPAT approved, which would give their freight priority access via FAST lanes at the border.

There’s is hope though. With the right approach, Canada could be positioned as a preferred place for companies to serve the U.S. market, concludes the report. Programs to separate pre-approved and trusted cargo from unknown-risk cargo — if implemented more effectively — could get goods to market efficiently and securely.

Additionally, governments need to: “keep new rules simple and predictable and provide better, one-stop information access to companies.”

… and “provide adequate infrastructure, including a new crossing at Windsor-Detroit, possibly dedicated only to Free and Secure Trade (FAST)-approved traffic; and move towards greater alignment between Canadian and U.S. programs to pre-approve cargo for border fast-tracking.”