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FDA’S NEW ANTI-BIOTERRORISM POWERS TARGET IMPORTS
Importing food into the U.S. becomes increasingly complex

With the creation of the Department of Homeland Security (DHS), tougher Customs enforcement at the country’s ports of entry, and a multitude of new import and export regulations, shipping into the United States is growing in complexity.

But conspicuously left out of the massive DHS merger, the Food and Drug Administration (FDA) still has the primary responsibility for public safety concerning the nation’s food supply. As a result, agri-food traders face additional – even over-lapping – responsibilities when shipping to the U.S.

Concurrent with ongoing security measures driven by the Bureau of Customs & Border Protection (formerly U.S. Customs), the FDA is undertaking some far-reaching changes of its own. Understanding the scope of the proposed changes is critical to anyone involved in supply chain management in the agri-food industry.

The FDA’s newfound authority emanates from the Public Health Security and Bioterrorism Response Act of 2002 (“Bioterrorism Act”). In February 2003, the FDA set forth a series of proposals to implement the Bioterrorism Act. Final regulations are expected by October, with implementation scheduled for December 12, 2003.

Registration of food facilities – is your business affected?

The FDA wants to maintain a complete listing of all facilities involved in the nation’s food supply to improve its efficiency in regulating the industry and to help it respond more quickly to potential emergencies.

The proposal is ambitious, requiring registration by domestic and foreign companies of all facilities that process, pack or store food for consumption in the U.S. Estimates suggest that over 400,000 facilities will be affected. The registration process is intended to be fairly simple through an on-line system, and must be done by the facility itself or through a U.S.-based agent before December 12, 2003. However, the FDA will only accept registration after its rules are finalized, expected in October.

The FDA also seeks to require that all foreign food facilities have a U.S. resident agent. The FDA will communicate with that agent who, in effect, will proffer a U.S. presence for the foreign food facility. Many service providers, including PBB Global Logistics, are in a position for a fee to serve as an agent, a practical solution since they are already privy to shipment and trade details.

Businesses will need to familiarize themselves with the final regulation, since there will be a number of exemptions. Farms, retailers and restaurants are generally exempt, but there are some exceptions. Meat and poultry processors, which fall under the regulatory boundary of the U.S. Department of Agriculture (USDA), are likewise exempt. Otherwise, affected companies may be involved in manufacturing, processing, packaging and holding food, reflecting the FDA’s broad definition of “food”, which even includes anything that comes in direct contact with food or drink. The regulations list some examples, and manufacturers of bottled water, plastic film, dietary supplements, and paper plates might be surprised to find that they are producing “food” as defined by the FDA.

Prior notice – adjusting your supply chain

Much more onerous to the agri-food industry is the proposed requirement to provide prior notice before importing food products. Fewer exemptions exist beyond USDA-regulated products. Even shipments from farms are subject to prior notice.

The measure is deemed necessary to give the FDA sufficient information and time to determine whether a potential threat exists and whether shipment inspection might be warranted.

Under the proposal, the FDA must be notified by noon of the day before the food is to arrive at the port of entry, a period technically 12 to 36 hours long. Not surprisingly, of all the changes in the Bioterrorism Act, the prior notice rule is the one of greatest concern to the industry.

The agri-food industry argues that the notification period is unrealistic in many situations, particularly when the shipper is close to the border. Prior notice would slow down many supply chains, particularly disconcerting for fresh produce and other highly perishable shipments. Submissions from various industry groups recommend anywhere from a two hour notice period to a graduated system that takes into account mode of transportation, proximity to the border and other circumstances.

As originally proposed, the process was to be separate from Customs’ Automated Commer-cial System (ACS). Fortunately, both agencies have since announced streamlined measures enabling ACS to serve as the single system including FDA prior notice requirements.

But complicating the importing process is the potential level of detail the FDA would demand on all notices, substantially more comprehensive than required by either Customs or current FDA regulations. One amendment would be permitted, up to two hours before arrival at the border, as long as the nature of the food does not change (in which case a brand new submission must be made within the prescribed time period). If a shipment were to arrive more than an hour before, or three hours later than first indicated, the FDA would need to be notified accordingly.

If adequate prior notice is not provided, the FDA will refuse admission into the United States and shipments will be held at the port of entry or in a nearby secure facility, with transportation and storage costs at the expense of the purchaser, owner, importer or consignee. There may also be the potential for penalties.

Food will be held until proper prior notice is submitted and accepted by the FDA. Only then, barring FDA inspection or outstanding Customs entry issues, would the shipment
be released.

New recordkeeping requirements

Finally, the Bioterrorism Act also authorizes the FDA to mandate the type of records that businesses will need to create and maintain for up to two years. This will affect manufacturers, processors, packers, carriers, distributors, receivers, storage facilities and importers alike, while exempting farms and restaurants. The intention is to improve the FDA’s ability to follow up on credible threats and investigate any food-related disease outbreaks.

How can you prepare for December 12, 2003?

In light of the proposed rules and the breadth of the FDA’s new regulatory requirements, any business operating directly or indirectly in the agri-food industry is wise to familiarize itself with the changes to come, particularly after final regulations are published in October.

Registration of facilities and recordkeeping requirements will place additional administrative burdens upon food companies, but the most significant impact will stem from prior notice regulations. Depending on the nature of your supply chain, adjustments may be necessary to comply, especially if the FDA does not significantly reduce the length of the prior notification period.

Inevitably, these new administrative and logistics burdens will force agri-food businesses to incur additional costs. Companies should analyze the overall financial impact before or shortly after implementation to determine whether increased costs warrant any revisions in pricing.

It is also important to ensure that trading partners – vendors, carriers, third party logistics providers – are up-to-date. Foreign companies should look into finding a U.S. resident agent as soon as possible. Also, prior to the new regulations, all parties should come to agreement about financial and logistical responsibilities in the event a shipment is refused entry.

As with the numerous security initiatives underway with the Bureau of Customs & Border Protection, the new FDA framework is the reality of supply chain management today. As any shipper with experience in new Customs regulations can attest, advance preparation is the key to avoiding unpleasant and costly surprises.

NON-RESIDENT IMPORTER STRATEGY OPENS CANADIAN MARKET TO U.S. EXPORTERS

Ten years after NAFTA, many forward thinking companies look at the continent as a single market, as evidenced by the massive volume of trade between Canada and the U.S. Currently, Canada buys 19 percent of all U.S. exported goods and services, and supplies 16.5 percent of all U.S. imports of goods and services.

The elimination of the old tariff walls opened the Canadian market and spelled the end of the branch plant economy. Today, there is no longer the need for a physical presence to service Canadian customers, especially with the advances in supply chain management in the past decade.

Non-Resident Importer: the ideal exporting model in a free trade environment

Many American manufacturers are implementing a Non-Resident Importer (NRI) strategy, where the company can supply the entire Canadian market from its U.S. facilities, relying on sales, customer service representatives and agents in the field.

NRI status provides efficient and cost-effective access to Canadian markets, allowing a company to become an importer of record. Goods are sold in Canada on a delivered basis, including all charges in Canadian dollars. To the customer, there is no perceived difference between goods produced locally or those imported from the U.S.

It is a simple procedure to register with Canada Customs Revenue Agency as an NRI, although proper planning is required to comply with marking and labelling requirements as well as product regulations from various governmental bodies. Companies must also consider whether or not to register for the Goods and Services Tax (GST), which is applied to almost all goods imported and sold in Canada.

The logistics of NRI

The importance of a solid logistics strategy cannot be overestimated. The biggest mistake is to fulfill small orders individually from existing U.S. distribution centers. This can result in substantial transportation costs and delivery delays.

Instead, businesses should consolidate shipments whenever possible in order to take advantage of the lowest possible transportation rates. Product should be line hauled directly to a Canadian regional distribution centre to clear Customs efficiently. By placing the goods closer to consumers, companies can reduce the time involved from order to delivery. By partnering with a Canadian third-party logistics provider (3PL), the NRI will have access to strong regional distribution and delivery capabilities, minimizing transportation costs and delivery times and maximizing customer service. All without bricks and mortar expenses.

The use of a 3PL provider enables businesses to offer landed cost pricing and to invoice in Canadian dollars, providing a definite competitive advantage. Some providers, including PBB Global Logistics, also provide hassle-free inventory management and returns management, helping to minimize carrying costs. Providers should also be thoroughly versed in ever-changing Customs regulations and new technologies needed to expedite the clearance of goods on both sides of the border. PBB’s Trade & Regulatory Services experts and its e-globallogistics.comÔ on-line supply chain management tools ensure these critical functions for its NRI customers.

For American manufacturers using an NRI strategy, exporting to Canada is as easy as supplying their own domestic market. Canada’s population of 31.5 million can be a lucrative new market for companies, whether new or experienced in the export business.

For more information about growing your business as an NRI, contact PBB at 1-866-820-0340, e-mail info@pbb.com or visit the “Global Solutions - Canada” section of our Web site at www.pbb.com.

ACCESS CHINA PROGRAM TO LINK WITH TOP FOREIGN DIRECT INVESTMENT EVENT

PBB will serve as an official Canadian coordinator for next year’s China International Fair for Investment & Trade (CIFIT), in Xiamen, China. The annual event, designed to help promote foreign direct investment (FDI) around the world, involves 10,000 participants and around 100 countries and investment regions. Last year’s event led to over 1,000 signed contracts.

Although dates have yet to be finalized for 2004, the event is expected to take place over four days in September. CIFIT offers a comprehensive seminar series, with dozens of topics relevant to foreign investment opportunities in China and other developing countries.

Through PBB’s Access China program, Corporate Travel specialists will facilitate all aspects of the 2004 show for Canadian delegates and participants. This includes making travel and accommodation arrangements, as well as planning “matchmaking” sessions for firms seeking one-on-one meetings with potential Chinese partners.

PBB’s Access China program helps North American businesses access key resources and services specializing in the Chinese market. For more information visit www.pbb.com/china/index.html or www.chinafair.org.cn.

ADVANCE FILING REGULATIONS TAKE SHAPE

Six months after its controversial “Straw-man” proposals were shelved, Customs & Border Protection (CBP) has issued new rules for advance filing of shipping data. Up to now, only ocean freight imports have been subject to such a requirement (24 hours notice prior to loading).

The new rules cover all modes of transport and include both import and export freight. In developing the new regulations, CBP has been responsive to the business community’s concerns about how advance filing would impact Just-in-Time supply chain systems and other time-sensitive freight. The pre-scribed time periods for notification, as follow, have been modified considerably from the earlier proposals in January 2003:

Pending any final revision, the rules will become effective in October 2003. Within 90 days of the publication of this requirement as a final rule in the Federal Register, all carriers will be required to electronically transmit advance manifest information to CBP through an approved data interchange.

• Inbound Vessels - Automated Manifest System (AMS);
• Inbound Aircraft - Air Automated Manifest System (Air AMS);
• Inbound Rail - Rail Automated Manifest System (Rail AMS);
• Inbound Road - Free and Secure Trade (FAST), Pre-Arrival Processing System (PAPS), Border Release Advanced Screening and Selectivity (BRASS), Customs Automated Forms Entry System (CAFES) or ABI in-bond reporting;
• Exports - Automated Export System (AES).

Ports of entry that are unable to receive or transmit electronic data through the CBP-approved interchange system will eventually be automated. Carriers will then be required to transmit to CBP, the advance information on or after 90 days from the date that CBP publishes notice in the Federal Register that the approved interchange system is operational in that port.

Meanwhile, Canada Customs and Revenue Agency (CCRA) has proposed similar rules on advance filing of manifest data, to be effective in April 2004:

Importers and exporters should take the time to review any operational challenges resulting from the advance filing requirements in both the U.S. and Canada. New shipping procedures may be needed to accommodate the earlier release of shipment information. Finally, food-related businesses must also consider the impact of separate prior notice regulations pro-posed by the FDA.

TRADE WITH MEXICO FLOURISHES UNDER NAFTA, DESPITE TRUCKER RESTRICTIONS

The ten years of NAFTA have seen Mexico surpass Japan to become America’s second largest export market. Trade between Canada and Mexico has also flourished, having increased at an annual rate of 14 percent since NAFTA’s inception.

The border crossing at Laredo, Texas – the busiest along America’s southern border – is evidence of this upsurge in trade. In the 1990s, truck and rail traffic increased 300 and 323 percent, respectively. Air cargo through Laredo International Airport increased a phenomenal 897 percent (this dropped considerably after September 11, 2001 but is recovering slowly).

Yet behind these astonishing figures, trade complexities still linger. For both U.S. and Canadian companies, reaching markets south of the Rio Grande is not quite as easy as managing northbound trade.

Symptomatic of the challenges of trading between Mexico and the U.S. are the restrictions placed on truckers from driving in each other’s jurisdictions. As a result, carriers frequently hand off trailers to other carriers right at the border, creating traffic and delays. Furthermore, many trucks are unable to backhaul, increasing overall logistics costs. The right cross-border trucking partnership, however, can help alleviate the frequency of empty loads.

“Mexico’s transportation environment is truly unique, but certainly manageable,” says Gary Vince, Vice President, Logistics Operations, PBB Global Logistics. “Expertise, attention to details and good communication are qualities to look for in a logistics provider when it comes to handling your Mexican freight.”

PBB offers complete logistics services for NAFTA freight, including truck, air and ocean transportation. With the help of a strong strategic Mexican partnership, PBB provides an efficient streamlined and seamless service specializing in southern border trade.

For freight quotes or information on shipping to Mexico, please contact mexico@pbb.com.

PBB HONORED AT TRANSPORTATION MARKETING AWARDS EVENT

PBB Global Logistics recently won six prestigious Transportation Marketing awards from the Transportation Marketing & Communications Association (TMCA), beating out competition that included several Fortune 500 companies. The “Tranny” awards were presented during the TMCA’s Annual Conference in South Carolina. PBB received the largest number of awards handed out this year and was a winner for the third consecutive year.

“An organization’s work must go through intense critique through a rigorous judging process,” said Brian Everett, Executive Director, TMCA. “The fact that PBB received six awards by judging teams throughout North America speaks volumes to the quality of its marketing and communications.”

PBB was recognized for its integrated marketing communications program, Solutions newsletter, Web site (www.pbb.com), Initial Public Offering investor presentation, Executive Briefing seminar series and China Trade Mission.

“PBB’s innovative and successful marketing program combines all aspects of print, digital and electronic marketing tactics,” said Mike Scott, President & CEO, PBB Global Logistics. “We are proud to receive recognition for our efforts from such an esteemed organization for the third year in a row.”

The TMCA awards program recognizes the best communications practices in the transportation and passenger transit industries. It is sponsored by the U.S.-based TMCA, which is the only association dedicated to serving marketing and communications professionals in all modes in the North American transportation industry.
The annual awards are considered among the
industry’s most prestigious honors.

“It is an honor to be recognized for marketing excellence by our peers in the industry,” said John Ferguson, Vice President, Sales & Marketing, PBB Global Logistics. “PBB’s marketing strategy is focused on positioning our company as an expert in global integrated logistics solutions and receiving
these awards is a testament to the efforts of our very dedicated PBB employees.”

PBB RECOGNIZED FOR SUPPLY CHAIN INNOVATION

PBB was recently recognized for its supply chain management innovations by the Supply Chain & Logistics Canada (SCL), a leading association dedicated to educational, research and networking opportunities for logistics professionals.

SCL’s annual Innovation Award honors professionals and businesses that have promoted strong industry partnerships and advanced the logistics and supply chain profession.

PBB’s advances in Internet-based supply chain management was a key factor in winning the award. Its suite of integrated supply chain management solutions, e-globallogistics.comÔ, provides clients with Web access to shipments and transactions, allowing increased visibility and control over the entire logistics process. In addition to tracking their shipments, clients have access to a wide range of Customs and trade documentation, can conduct on-line ordering and inventory management functions, and create and manage purchase orders via an efficient paperless system.

“PBB has always been at the forefront of emerging supply chain technologies, and our integrated marketing communications plan was strategically developed to position these services as cutting edge within the industry,” said Mike Scott, President & CEO, PBB Global Logistics. “We are committed to facilitating the movement of goods as quickly and efficiently as possible on behalf of our clients. To receive recognition from such an esteemed organization is a testament to this philosophy and the best-practices we have put into place through many of our supply chain management tools.”

PBB HOSTS TOP AGRICULTURE MARKETING OFFICIALS

PBB recently welcomed dozens of representatives from NAAMO (North American Agricultural Marketing Officials), who were in Niagara Falls for their annual conference and had previously approached PBB to conduct an information session as part of their agenda. PBB staff hosted a tour of the company headquarters and Peace Bridge border operations, including a presentation on the latest Customs and trade issues of relevance to the agricultural industry.

NAAMO’s primary goal is to promote education, communication and cooperation among members, and thereby enhance worldwide market opportunities for North American agricultural products. The organization consists of director-level state, provincial and federal government agricultural marketing officials.

PBB NEWS BRIEFS

Sarnia Office Wins Prestigious Chamber Award

PBB’s Sarnia office was recognized at the Sarnia-Lambton Chamber of Commerce awards ceremony, winning the Business Advocacy Award and the prestigious Business Excellence Award.

The Business Advocacy award was given for PBB’s ongoing efforts to promote international trade throughout the Great Lakes area and beyond. By winning the Business Excellence Award, the local Chamber’s top business award, PBB automatically becomes eligible for the Ontario Chamber of Commerce Awards in October 2003.

FSIS Issues New Registration, Recordkeeping Proposal

The U.S. Department of Agriculture’s Food Safety and Inspection Service (FSIS) has issued a policy proposal to enforce the registration and record-keeping requirements contained in meat and poultry inspection legislation.

Affected businesses will have to register, or re-register, by March 24, 2004 using a new registration form. The policy statement also contains information on the types of records that must be retained, as well as the length of time involved.

White Papers Available On-line

All of PBB’s popular White Papers are now available free of charge at www.pbb.com/whitepapers.html. Each paper offers timely insight and analysis into key logistics issues and new regulations that affect the trading community. Unclear about the impact of new government proposals on your supply chain? Make www.pbb.com/whitepapers.html your first stop for answers!

KEY VP PROMOTIONS AT PBB

PBB is pleased to announce the recent promotion of four senior managers to the level of Vice President, where they will bring their logistics expertise, strategic vision and leadership skills to the company’s executive group. The quartet possesses a wealth of knowledge thanks to over 80 years of combined experience in the logistics industry.

The individuals involved in the new appointments are:

John Ferguson, Vice President, Sales & Marketing
Mr. Ferguson joined PBB in 1987. Formerly Director, Sales & Marketing, he has been the recipient of the 2000 Ontario Global Traders Award and had a pivotal role in PBB receiving TMCA “Tranny” awards for three consecutive years. Mr. Ferguson holds a degree in business and economics and is a Certified Canadian Customs Specialist.

Mark Lidkea, Vice President, Customs Operations
Mr. Lidkea joined PBB in 1985. He is a Licensed Professional Canadian Customs Broker and a Certified Canadian Customs Specialist. Mr. Lidkea is also an executive board member with the Air Courier Conference of America’s “International Committee”. He previously held the position of Director, Western Operations with PBB.

Joe Morinello, Vice President, Finance & Administration
Mr. Morinello’s career with PBB has spanned more than 15 years in both the Canadian and U.S. accounting departments. He earned his Certified Management Accounting designation in 1992 and most recently held the position of Director Accounting, Canadian Operations. Mr. Morinello now assumes the position of Vice President, Finance & Administration.

Gary Vince, Vice President, Logistics Operations
With 20 years in the logistics industry, Mr. Vince, P.Log, joined PBB in 1998 and most recently held the position of Director, International Freight. He has now been appointed Vice President, Logistics Operations, where he will oversee PBB’s inter-national freight and North American transportation services, as well as its Third Party Logistics (3PL) solutions.