For a mode that sells itself as the transport of choice for transborder hauls, it should come as no surprise that Canadian motor carriers are facing some of their toughest challenges to date. The continuing push since the terrorist attacks of September 11, 2001 to tighten border security has carriers concerned about their ability to maintain their customary service levels for transborder shipments and fretting about the mounting cost of remaining legally compliant.
It’s a situation likely to get worse, particularly if the U.S. carries through on its threat to attack Iraq, and it spells trouble for shippers who have become accustomed to relatively quick cross border service at very competitive rates in recent years.
The most immediate threat comes from U.S. legislation that strikes at the heart of some carriers’ abilities to continue moving freight across the border in their customary manner. Take for example the recent alarm over the U.S. government’s announcement that under its National Security Entry Exit Registration System (NSEERS) it now requires all non-immigrants to the United States born in Iran, Iraq, Libya, Sudan and Syria to be fingerprinted and photographed at the border regardless of Canadian citizenship.
The Canadian Trucking Alliance knew about the intended measure but since few Canadian truck drivers come from these countries it didn’t foresee major disruptions for cross-border hauls. But when it came to light that the process was also to include Canadian citizens born in other countries, principally Pakistan, it added an entirely new dimension to the issue: Thousands of Pakistani-Canadians are truck drivers.
While it was expected that a number of commercial drivers would obtain prescreened security clearance under a new border security program dubbed Free and Secure Trade (FAST), the program was not expected to be fully operational until the end of the year and there was no assurance that U.S. officials would accept FAST cards as a substitute for NSEERS.
"Every day, 36,000 truck drivers cross the border into U.S. and many are immigrants to Canada," said David Bradley, who heads the Canadian Trucking Alliance. "Our concern is that drivers with dual citizenships that are from the countries identified by the (U.S. Immigration) will be unnecessarily and unfairly detained. This could have a toll not only in human terms, but it could also create congestion at border crossings, a shortage of drivers crossing into the U.S., possible diversion of freight to other border locations and economic loss," explained Bradley.
After the association enlisted the help of Federal Foreign Affairs Minister Bill Graham it did receive assurances from U.S. authorities that anyone, regardless of where they were born, traveling on a Canadian passport will be treated as Canadians when entering and exiting the U.S. and would not be required to register at the border and submit to fingerprinting and a photograph, unless there is some reason other than birthplace to raise security concerns. While in retrospect the issue may simply indicate a case of miscommunication between two trading nations, it does point to the kind of legal atmosphere motor carriers have been operating under for the past year.
Nor are government efforts to introduce programs that will expedite border crossings for carriers free of troubles. Customs services on both sides of the border have been registering carriers for the FAST program since September. FAST participants can expect shipments to be cleared at the border with greater speed and certainty through reduced information requirements; dedicated lanes for Customs clearance; reduced border examinations; and compliance verifications away from the border. But to gain entry into FAST, enrolment in another program, Customs Self-Assessment, is a prerequisite. This means carriers must have a track record free of major Customs infractions and be able to show that their books and records form an audit trail through streamlined accounting and payment processes for imported goods. In addition, they must be capable electronically or by transponder to transmit all Customs documentation, business and cargo information for verification prior to arriving at the border. They must also enter into an agreement with Customs’ Partners in Protection program, which requires participants to complete a self-assessment of security measures throughout their operations.
Aside from the obvious investment required with the self assessments, the ability to transmit information electronically and associated training costs, there is also a valid concern whether the FAST program can work for less-than-truckload carriers, who must contend with multi-origins and multi-destinations because they carry many different shipments within each trailer.
"With FAST, you have to have the shipper onside, the consignee onside, the carrier onside and the individual driver onside. If you’ve got 15 consignees of 15 exporters on one truck, and fourteen of the fifteen customers on that truck are registered with FAST, while one isn’t everybody is now processed to the weakest link on the vehicle. The truck can still be held up at the border for quite awhile. It only works for truckers who are carrying high-volume, low-risk commodities such as car manufacturers," points out Jeffrey Cullen, CEO of Rodair International, a major freight forwarder.
Lisa MacGillivray, President of the Canadian Industrial Transportation expands on the carrier’s point of view: "[Under FAST], you’ve got the cargo and the shipper tied to a particular truck and a particular driver. This isn’t a problem until the driver gets sick or the truck has a mechanical failure," she says. "Truckers may have to change the way they operate in this regard. They’ll have to make sure all their drivers are registered and that all their sub-contractors are CSA-approved and on the FAST program. That will come at fair expense. The upside is that some of the carriers will view it as a marketing strategy. Your shipment is guaranteed to get through. We’ve got everyone and their mother registered."
That’s if Customs can keep up with the demand for registration into the program. There are over 100,000 truck drivers hauling goods into the U.S. at the moment. Yet with FAST, the sign up is about 15,000 drivers a year. Between Canada and the U.S., it will take us seven years to sign them all up," points out Jim Wiser, Executive Vice President in charge of Operations for PBB Global Logistics Inc.
Of course, the cost to the carrier of being part of such programs cannot be ignored and will likely have an impact on trucking rates.
"Very definitely there are costs andthere will be charges that will be coming forth in the industry," comments Allan Robison, President and CEO of Reimer Express Lines, one of Canada’s largest motor carriers. "We 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."
In what is likely a sign of things to come for much of the trucking industry, just as this issue of CT&L was going to press Con-Way Transportation Services, Inc., announced that effective January 2, 2003 the company’s four less-than-truckload (LTL) operating units will apply an $8 per shipment Homeland Security Surcharge on all shipments moving across the Canada / U.S. border (both northbound and southbound).
Company officials cited the September 11, 2002 attacks and the subsequent cost of government-mandated changes in freight security at the border as the reason for the surcharge. As a result of the changes the time to cross the border has increased, tying up equipment and lengthening trip times, the company said. Additional time is also spent in preparing shipments for customs clearance.
“September 11 brought many changes t
o our lives. 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,” said Douglas W. Stotlar, Executive Vice President and COO of Con-Way.
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