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The Cumulative Impact of the U.S. Land Border Customs and Security Measures on the Canadian Trucking Industry

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The Cumulative Impact of the U.S. Land Border Customs and Security Measures on the Canadian Trucking Industry. Presentation to Transportation Border Working Group June 2, 2005. Study Objectives.

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The Cumulative Impact of the U.S. Land Border Customs and Security Measures on the Canadian Trucking Industry

Presentation to

Transportation Border Working Group

June 2, 2005

study objectives
Study Objectives
  • To assess the cumulative impact of the U.S. land border and security measures on Canadian motor carriers operating into the United States
  • To assess the impacts on the three main trucking industry segments:
      • For-hire carriers
      • Private fleet operators
      • Owner-operators

Impact of U.S. Land Border and Security Measures

study scope
Study Scope
  • The goal was to be as representative as possible of:
      • Canada’s four major regions: Atlantic Canada, Quebec, Ontario, Western Canada
      • Motor carrier truck fleet sizes
      • Products transported/industries served (e.g. automotive, forest, food)
  • Research carried out in the January-March 2005 time frame

Impact of U.S. Land Border and Security Measures

approach and methodology
Approach and Methodology
  • Consultative process with a broad spectrum of industry stakeholders: motor carriers, shippers, industry associations, government
  • Literature review and review of applicable U.S. security measures
  • Structured interview process for each of the three trucking industry segments and for key shippers
  • Results of survey formed the basis for assessment of cumulative impact of U.S. security measures.

Impact of U.S. Land Border and Security Measures

key u s security measures
Key U.S. Security Measures
  • Advanced Electronic Presentation of Cargo Information (U.S. Trade Act)
  • Customs-Trade Partnership Against Terrorism (C-TPAT)
  • Free and Secure Trade (FAST)
  • Food and Drug Administration (FDA) prior notice arrival (Bio-Terrorism Act)

Impact of U.S. Land Border and Security Measures

fleet sizes of respondents
Fleet Sizes of Respondents

Impact of U.S. Land Border and Security Measures

for hire carriers sample profile
For-hire Carriers-Sample Profile
  • Total fleet size: 6,400 tractors
  • Total drivers: 7,000
  • Type of operation: 68% TL; 14% LTL; 18% mix of LTL/TL
  • Transborder revenue: 48% of total revenue
  • Transborder trips in 2004: 207,000

Impact of U.S. Land Border and Security Measures

u s cargo release mechanisms
U.S. Cargo Release Mechanisms
  • Regular Inspection
  • Pre-Arrival Processing System (PAPS)
  • National Customs Automation Program (NCAP)
  • Border Release Advanced Screening and Selectivity (BRASS)
  • In-bond transactions
      • QP/WP (customs broker in-bond transaction)
      • CAFES (Customs Automated Forms Entry System)

Impact of U.S. Land Border and Security Measures

u s customs procedures usage prior to pre notification
U.S. Customs Procedures Usage prior to pre-notification

Impact of U.S. Land Border and Security Measures

u s customs procedures usage after pre notification requirement
U.S. Customs Procedures Usage after pre-notification requirement

Impact of U.S. Land Border and Security Measures

fast approved status february march 2005
FAST Approved Status(February-March, 2005)
  • For-hire carriers:>80%
  • Drivers of for-hire carriers: 60%
  • Owner-operators: 50%
  • Clients of for-hire carriers: 10% on average (one-third of carriers had no clients who were FAST approved)

Impact of U.S. Land Border and Security Measures

cost impacts of u s security measures since 9 11
Cost Impacts of U.S. Security Measures (since 9/11)
  • Time delay: at border and inland due to pre-notification procedures
  • Driver costs: training, acquisition of FAST cards, bonuses for border crossings
  • Investments in installations to become C-TPAT compliant
  • Administration costs principally due to PAPS
  • Investments in computer systems software

Impact of U.S. Land Border and Security Measures

approach and methodology to estimate cost impacts
Approach and Methodology to estimate Cost Impacts
  • Limited to impacts on for-hire carriers
  • Sampled for-hire carriers represented about 5% of total Canadian for-hire one-way truck crossings in 2004
  • Each cost element treated either as an annual operating cost or an an investment depreciated over 5 years at a 7% cost of money
  • Use of minimum-maximum ranges to reflect “order of magnitude” cost assessment

Impact of U.S. Land Border and Security Measures

for hire carrier sample size
For-Hire Carrier Sample Size
  • Canadian for-hire carriers generated 3.85 million loaded one-way transborder trips or 57% of total one-way transborder trips of 6.73 million in 2004
      • 17% of truck trips are empty
      • 7.5% are private fleet trucks
      • 74.5% of trucks belong to Canadian carriers
  • Sampled for-hire carriers generated 207,000 transborder trips or 5% of the total loaded one-way for-hire transborder trips in 2004

Impact of U.S. Land Border and Security Measures

costs of time delay
Costs of Time Delay
  • Delay at border due to U.S. security measures estimated to range between one-half hour and one hour based on:
      • Responses of sampled carriers and shippers
      • Research project of Transport Canada’s Ontario Region measuring truck delay at six Ontario border crossings
  • Additional inland truck delay of one-half hour due to processing of invoices by CBP and customs brokers
  • Hourly cost of truck delay of between $60 to $75

Impact of U.S. Land Border and Security Measures

summary of cost impacts
Summary of Cost Impacts

Impact of U.S. Land Border and Security Measures

cost versus benefit impacts
Cost versus Benefit Impacts
  • Mid-range cost impact estimate of $290 million/annum on Canadian for-hire carriers
      • Represents approx. 4% of total Canadian for-hire, long distance transborder trucking expenses
  • Carriers have not yet experienced any concrete benefits from the U.S. security measures
      • Benefits may commence to emerge in the longer term

Impact of U.S. Land Border and Security Measures

conclusions and associated recommendations
Conclusions and associated Recommendations
  • Increased truck delay is the key cost impact factor of the U.S. security measures
      • Encourage pre-processing initiatives
      • Improve/standardize customs broker procedures for processing commercial invoices
  • The U.S. security measures are still in a period of evolution at this time
      • Update this study once the Automated Commercial Environment (ACE) program has been implemented in 2006 and the “dust has settled”

Impact of U.S. Land Border and Security Measures

conclusions and associated recommendations cont d
Conclusions and associated Recommendations (cont’d)
  • There is a serious lack of FAST approved shippers that is preventing Canadian carriers from taking full advantage of potential benefits from the U.S security regime
      • Develop appropriate strategies and programs for businesses to become C-TPAT compliant and FAST approved
  • The U.S. security measures are exacerbating the driver shortage in the transborder lanes
      • Accommodate/assist drivers to become FAST approved
      • Develop training programs for drivers re: the U.S. security procedures

Impact of U.S. Land Border and Security Measures

conclusions and associated recommendations cont d1
Conclusions and associated Recommendations (cont’d)
  • The measurement of truck delay and the associated carrier costs needs refinement
      • Encourage further rigorous research on the measurement of truck delay
      • Determine the true economic cost of time delay to carriers
  • The economic impacts of the U.S. security measures extend well beyond the trucking industry
      • Encourage all sectors of the Canadian economy to conform (i.e., become C-TPAT compliant and FAST approved) as soon as possible to the U.S. security measures

Impact of U.S. Land Border and Security Measures

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