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Canadian Pacific - Transborder Operations & Border Issues facing the Rail Industry . Winnipeg October 28, 2009. Canada-United States Transportation Border Working Group (TBWG). Agenda. Canadian Pacific - Corporate Overview Importance of Transborder Trade to Canadian Pacific

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canadian pacific transborder operations border issues facing the rail industry

Canadian Pacific - Transborder Operations & Border Issues facing the Rail Industry

Winnipeg

October 28, 2009

Canada-United States Transportation Border Working Group (TBWG)

agenda
Agenda
  • Canadian Pacific - Corporate Overview
  • Importance of Transborder Trade to Canadian Pacific
  • Border Points and Traffic Patterns
  • Border Environment – Pre 9/11
  • Border Environment – Post 9/11 – Infrastructure
  • Border Environment – Post 9/11 – Regulatory
  • Current Issues Threatening Border Fluidity
  • Moving Forward
  • Summary
canadian pacific corporate overview
Canadian Pacific - Corporate Overview
  • Canadian Pacific (CP) was incorporated in 1881 and is one of Canada’s oldest corporations and was North America’s first transcontinental railway.
  • Employee over 15,000 people that operate over a 15,500 mile network serving the principal business centers of Canada, from Montreal, Quebec, to Vancouver, British Columbia, and the US Midwest and Northeast regions.
  • Annual Revenues in excess of $4.5 Billion
  • CP provides rail and intermodal freight transportation handling bulk commodities like grain, coal, potash, sulphur; merchandise traffic comprised primarily of automotive, forest and industrial and consumer products, and domestic and international intermodal traffic.
  • One of six major North American Railroads CP has established alliances and connections with other major Class I railways, to provide competitive services and access to markets across North America beyond our own rail network.
importance of transborder trade to canadian pacific
Importance of Transborder Trade to Canadian Pacific
  • CP handles about 800,000 transborder shipments annually representing about 30%of overall traffic.
  • Significant growth since NAFTA with trend projected to continue to increase.
  • Most of this growth in the International intermodal segment of the rail business.
  • Significant investments across our network to support the capacity and security related demands of this business
  • CP is an active participant in supply chain security programs
    • U.S. Customs and Border Protection (CBP) Programs Customs Trade Partnership Against Terrorism (C-TPAT)
    • Canada Border Services Agency (CBSA) Programs Partners in Protection (PIP)
  • CP encourages rail shippers to participate in C-TPAT and PIP as a means of securing their own supply chain and reducing the possibility of border delay
border points and traffic patterns
Border Points and Traffic Patterns
  • CP crosses the border either directly or through interline connection at 7 locations along the Canada / U.S. border
  • The majority of traffic moves through two gateways:
    • Windsor ON / Detroit MI
    • North Portal SK / Portal ND
  • Major cross border traffic flows include:
    • Marine traffic originating in Asia and Europe moving in-transit through Canada to the U.S
    • Marine traffic originating in Europe moving in-transit through the U.S. to Canada
    • Domestic intermodal moving between Canada and the U.S. ; the U.S. to Canada
    • Bulk and merchandise traffic moving between Canada and the U.S.; U.S. and Canada; and traffic moving in-transit through the U.S. to Mexico
    • U.S. Mid-Western origin grain moving in-transit through Canada to the U.S. Pacific Northwest

Traffic flows highlight the international nature of rail traffic

and the need for effective and efficient borders

border environment pre 9 11
Border Environment - Pre 9/11
  • The railways worked with both Canada and US Customs to create and install electronic manifest systems with aim to reduce paper processes and increase fluidity at the border
    • Early 1990’s – transmission of electronic manifest information to Canada Custom’s ACROSS system.
    • Mid 1990’s – transmission of electronic manifest information to US Customs Rail AMS system.
    • The cost to build these systems was significant, but have brought countless benefits by expediting traffic flows.
  • We worked closely with customers to improve data integrity.
  • Railway regulatory vision pre 9/11 was to push inspections to the North American perimeter and conduct compliance (trade) inspections inland.

The border world was relatively simple!

border environment post 9 11 infrastructure
Border Environment – Post 9/11 - Infrastructure
  • Since 9/11, Canadian Pacific has spent million of dollars on infrastructure to support cross border trade.
    • US Customs has installed five VACIS (Vehicle and Cargo Inspection System) machines at our busiest rail crossings.
    • 100% of all rail cars/cargo gets inspected.
    • CP has installed and now provides infrastructure to support increased post VACIS inspections (track, de-stuff facilities, specialized equipment & labour).
    • At our Windsor crossing, we have installed a “secure corridor” camera and fence system. Four miles of high tech digitized cameras and software augmented by high security fencing, to ensure that VACIS’ed cargo remains “sterile” before entering the US.
  • An on-going stream of border related IT initiatives:
    • CBP’s Automated Commercial Environment (ACE) Multi Modal initiative.
    • CBSA’s Automated Commercial Information (ACI) initiative
    • Huge initiatives intended to manage electronic data in a multi modal environment.
    • There will be significant costs for the railways to participate.
border environment post 9 11 regulatory
Border Environment – Post 9/11 - Regulatory
  • Post 9/11 border regulations and program implementations have resulted in the re-engineering of transborder movement processes
  • These regulations and programs are far reaching and impact every aspect of what we do:
  • U.S. Customs and Border Protection (CBP)
    • Doubling of US CBP Officers on northern border
    • Trade Act of 2002
    • Customs Trade Partnership Against Terrorism (C-TPAT)
    • Vehicle and Cargo Inspection System (VACIS)
    • Automated Targeting System (ATS)
    • CBP’s Container Security Initiative (CSI)
    • FDA Bioterrorism “Prior Notice” rules
    • U.S. Census Bureau Automated Export System ITN Reporting
    • CBP COBRA Fee increases & USDA APHIS User Fees
  • Canada Border Services Agency (CBSA)
    • Partners in Protection Program (PIP)
    • CBSA Canadian Automated Export Declaration (CAED) Export Reporting

Significant Increase in Regulatory Activity since 9/11

current issues threatening border fluidity
Current Issues Threatening Border Fluidity
  • Amendments to Lacey Farm Bill of 2008 intended to prevent illegal logging activities
  • Proposed Termination of ISPM No. 15 Exemption for Wood Packaging Material (WPM) moving between Canada and the United States
  • Canada bound VACIS inspections.
  • USCBP residue empty container rule requiring:
    • Actual residue weight calculation and valuation
    • Manifest creation and reporting to USCBP
    • Broker Entry
  • Residue empty container ruling will be costly to implement and difficult to manage for carriers and customers alike
    • Customers have no means to measure the amount of residue remaining in a rail car or truck
    • Residue that cannot be measured cannot be accurately reported or valuated
    • Residue that cannot be pumped out of a rail car has no commercial value and the true origin of the residue cannot be determined
    • Who will assume the role of the U.S. Importer and pay brokerage fees
    • Failure to properly report will result in border set off’s additional, costs, and an increase in empty rail car cycle times
  • Rail along with other organizations have proposed an alternative means to manage and are awaiting CBP response
moving forward
Moving Forward
  • Expect on-going complications at the border resulting from a continued security / enforcement focus and further laying of compliance related requirements
  • U.S. agencies continue to look for new revenue streams to fund inspection activities at land border locations and U.S. ocean ports
    • Expect more Customs and APHIS User Fee like programs
    • Canada considering U.S. like model to support CBSA activities
  • CP will continue to work with U.S. Customs and Border Protection, and the Canada Border Services Agency to:
    • Promote the flow of legitimate trade
    • Reduce border congestion
    • Improve process and equipment fluidity
    • Ensure that new initiatives work in the rail environment
  • CP would ask that regulatory agencies involve us early in the process so that we have an opportunity to understand the requirements and make changes on a realistic timeline.
  • CP will continue to work closely with customers to satisfy border regulatory requirements and maintain shipment fluidity
summary
Summary
  • The world has changed…significant change in the last eight years.
  • CP has spent (and likely will continue to spend) millions to facilitate cross border trade.
  • We continue to be a good corporate citizen and work with Customs Agencies and other government departments…we are part of the solution.
  • Early discussion of regulatory concepts with the carriers is important. We don’t want to read it in the Federal Register.
  • Enforcement needs to balanced with Trade.

We are partners in cross border trade!