Spring/Summer Issue
June 2005
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view the PDF version.
THE
CASE FOR CSA
Recent
border developments reinforce program benefits
Customs
Self Assessment (CSA) is not just for auto makers
anymore. More and more Canadian importers are
taking interest in the program, which provides
a streamlined approach to the clearance process,
where import data is reported after the fact
on a periodic basis rather than at the time of
arrival at the border.
 It
certainly sounds enticing to eliminate the
customs invoice for each clearance. When a
shipment arrives at the border, the driver
simply shows three barcodes: one for the importer,
one for the carrier and one for the driver.
The
importer relies on its own internal business
and back-end accounting systems to prepare
monthly statements to the Canada Border
Service Agency (CBSA) and remit any duties
and taxes payable. This
adds efficiency and accuracy to the administrative
processes that guide a company’s trade
function.
Qualifying for CSA,
however, is a serious undertaking. CBSA mandates
that participants have the necessary systems
to provide timely, accurate data while ensuring
an audit trail for post-release verification.
This involves a three part application process,
which includes a risk assessment, a full review
of the importer’s business systems and a “Client
Undertaking” document outlining the terms and
conditions of the program.
| "It
is certainly enticing to eliminate
the customs invoice for each clearance" |
As of January 2005,
164 importers had applied for CSA, of which 19
have completed the necessary approval process.
However as businesses come to appreciate the
potential Return On Investment (ROI), it is anticipated
that the number of importers on CSA will ultimately
increase. Since the
time CSA was first introduced, four major new
considerations have emerged that businesses should
take into account in their ROI calculations.
1.
Supply Chain Efficiency: Bottlenecks
at the border are increasingly a source
of grief and expense for many manufacturers,
particularly those operating in a Just-In-Time
environment and where speed to market is
considered a competitive advantage.
Tight
capacity in the trucking industry has enabled
many carriers to pass on some of the costs
of border delays, in the form of security surcharges
or other fees that can range from $8.00 to
$30.00 per shipment. Carriers,
after all, have to contend with reduced driver
and equipment productivity that results when
their trucks are in line at the border – when
they should be on route.
CSA,
however, is intimately tied to the Free And
Secure Trade (FAST) program, offering the potential
for expedited clearance at 12 major border
points, particularly those with a dedicated
FAST lane. CBSA intends to extend FAST to all
major crossings in the near future. Through
FAST, CSA can clearly provide a mechanism to
expedite the movement of goods across the border,
helping reduce delays (and their associated
costs) while adding certainty to a company’s
supply chain.
 2.
Improve Compliance and avoid AMPS: The
Administrative Monetary Penalty System
(AMPS) is another unwelcome expense related
to customs clearance. Typically assessed
at time of import due to a discrepancy
or omission on the customs invoice, AMPS
penalties are currently averaging nearly
$600 per infraction.
Periodic
reporting under CSA, however, gives the importer
the opportunity to be proactive in ensuring
that all imported goods are classified and
trade databases are accurate, thus avoiding
AMPS penalties. Data can be verified and any
discrepancies can be identified and corrected
prior to reporting import data to Customs.
3. Broader criteria for participation: Since
CSA came into effect in
December 2001, only imports from the U.S. have
qualified. Similarly, imports that were subject
to regulatory controls of Other Governmental
Departments (OGDs), such as agricultural products
or textiles, were excluded from the program.
CBSA,
however, is giving some consideration to making
CSA available to these previously excluded
groups. A number of major importers of overseas
goods have already expressed an interest in
participating in possible CBSA pilot projects,
anticipated in 2006.
4.
ACI is coming! Probably
the most significant factor why many
importers are reconsidering CSA is the
looming shadow of Advance Commercial
Information (ACI) and its accompanying
changes involving Mandatory HS Codes.
Although the implementation of ACI for
truck and rail-bound imports has been
postponed from Fall 2005 to some time
in 2006, importers are quickly taking
notice.
| "Probably
the most significant factor why importers
are reconsidering CSA is the looming
shadow of ACI." |
For
trucks, ACI will require all shipment data
to be transmitted electronically to CBSA
one hour prior to arrival at the border.
In addition to the operational and administrative
adjustments that will be necessary to ensure
that data is readily available
within the stipulated time frame, ACI will
also increase costs since service providers
are likely to introduce surcharges to cover
the extra costs of transmitting required
data to Customs.
FAST
shipments are notably exempt from ACI. And
since CSA is a requirement for FAST, it is
understandable why CSA is worth another
look for businesses seeking to avoid the processes
and expenses associated with ACI.
Is
Customs Self Assessment for you? Some importers
may determine there is a strong ROI case for
participating in CSA, whereas others will find
it more logical to simply adjust to the realities
of ACI. When weighing the pros and cons of
the two basic clearance streams and determining
the best option for your business, consulting
with a customs and trade professional can be
an all important first step. After all, recent
– and upcoming – developments at the border
will undoubtedly have great impact on a business’
ROI analysis.
For
more information on ACI or other trade initiatives
derived from CBSA’s Customs Action Plan, visit www.pbb.com/cap/
ACQUISITION STRENGTHENS
PBB’S SOLUTIONS
Unicity
adds to customs and logistics expertise
PBB
recently enhanced its presence in the North
American trade and logistics industry by
acquiring Unicity Customs Services Inc. (UCS)
and Unicity Integrated Logistics Inc. (UIL).
“Our
acquisition of Unicity strengthens our ability
to deliver customized third party logistics
services, helping businesses manage the complexities
and risks of international trade,” said Ken
Chalmers, President & CEO, PBB Global
Logistics. “We have a strong outlook on demand
for the cross-border logistics component
of our global solutions, delivered in conjunction
with an expert customs and trade strategy.”
 In
business since 1978, UCS delivers expert
customs brokerage and compliance services
to a diverse customer base. According to
Michael Butterfield, former Chief Operating
Officer of UCS and now PBB’s Vice President,
Business Development, “Merging our business
with PBB is a natural step for us. We see
significant growth potential for our combined
businesses and people.”
The
acquisition combines the market coverage,
expertise and capabilities of two of Canada’s
largest brokerage operations, and complements
PBB’s status as one of the top customs filers
in North America. With six of its eight locations
in Western Canada, Unicity enhances PBB’s
presence in the region. The move also gives
customers of both companies the opportunity
to benefit from enhanced flexibility in customs
release locations.
Like
PBB, Unicity offers a full end-to-end solution
for Non Resident Importers, whereby U.S.
companies can access the Canadian marketplace
without having a physical presence in Canada.
This includes regulatory advice prior to
shipping, consolidation and transportation
services, the efficient clearance of goods
through Canadian customs and distribution
to the end customer.
UIL,
the logistics arm of Unicity, parallels PBB
as a pioneer in providing innovative third
party strategies that give clients a seamless
access to the North American market. “PBB
offers an excellent fit for our company,”
said Ken Kotowich, President & CEO of
UIL. “We believe our solution capability
and PBB’s global reach provide an opportunity
to offer a more comprehensive package of
logistics solutions to a broad customer base.”
Founded
in 1972, UIL has considerable experience in
consolidation, deconsolidation and onforwarding,
positioning it as a leader in cross-border
crossdocking, a cost-effective and practical
logistics solution for many Just-In-Time
shippers. The move adds some 300,000
sq. ft. of space to PBB’s existing network
of regional distribution centers across North
America, including new locations in Winnipeg,
Chicago and Tillsonburg, Ontario.
With
the addition of the two Unicity companies,
PBB employs approximately 1,300 people in
over 85 locations across North America. Within
a period of less than a year, during which
the company also acquired Clarke Logistics,
PBB’s workforce has increased by 50%.
C-TPAT
GUIDELINES NOW MANDATORY
As
was widely anticipated, Customs & Border
Protection (CBP) recently announced major
changes to its Customs-Trade Partnership
Against Terrorism (C-TPAT) program.
 While
C-TPAT will remain a
voluntary program, it now specifies minimum
security criteria that all participants must
adhere to, or surpass. Up until now, these
criteria were simply presented as guidelines.
New
applicants will have to ascertain that they
meet all the new standards (i.e. in each
of the three categories outlined below) before
being approved. However, the more than 9,000
businesses that are currently enrolled in
the program have been afforded a phased-in
timetable to comply:
Physical
Security (Deadline May 25, 2005)
Participants
must meet container security requirements
and make all necessary improvements
to their premises and facilities, including
lighting, fencing, alarms and video surveillance.
Internal
Procedural Security (Deadline
July 25, 2005)
Participants
will be expected to address internal standards,
including background checks for personnel,
security training, and measures to strengthen
the security of internal documentation, business
procedures and information technology.
Supply
Chain Partner Security (Deadline
September 25, 2005)
Participants
must obtain written and verifiable evidence
that their foreign business partners – manufacturers,
suppliers, carriers, ports, terminals, brokers,
etc. – are also meeting the minimum security
criteria set out under C-TPAT.
Complete
details can be found on CBP’s website at www.customs.gov
Click
on “C-TPAT” in the “QuickLinks” menu on
the right of the screen.
International
Clearance Times
As
international trade volumes continue to increase,
the length of time it takes
to clear goods through customs is an important
consideration in a business’ overall supply
chain.
 The
world’s developed countries, have the best
record, clearing air shipments in 1.3 days
on average and ocean containers in 2 days.
Among developing economies, many Asia Pacific
countries appear to be making the most progress
in streamlining their customs clearance processes.
The table below compares average clearance
times observed in a sample of major trading
nations:
Average
Days for Customs Clearance
|
|
|
|
Sea
|
|
|
Sea
|
|
|
Air
|
LCL
|
FCL
|
|
Air
|
LCL
|
FCL
|
|
North
America
|
|
|
|
Asia
|
|
|
|
|
U.S.A.
|
2
|
3
|
3
|
China
|
4
|
30
|
5
|
|
Mexico
|
4
|
7
|
4
|
India
|
8
|
10
|
12
|
|
|
|
|
|
Hong
Kong
|
2
|
4
|
3
|
|
Europe
|
|
|
|
Malaysia
|
4
|
4
|
4
|
|
France
|
1
|
4
|
2
|
Philippines
|
4
|
5
|
3
|
|
Germany
|
1
|
1
|
1
|
Singapore
|
2
|
3
|
3
|
|
Netherlands
|
1
|
2
|
2
|
Taiwan
|
4
|
10
|
7
|
|
Russia
|
10
|
12
|
15
|
Thailand
|
5
|
5
|
5
|
|
|
|
|
|
Vietnam
|
5
|
7
|
7
|
|
Latin
America
|
|
|
|
|
|
|
|
|
Argentina
|
7
|
15
|
12
|
Africa
|
|
|
|
|
Brazil
|
10
|
10
|
10
|
Mozambique
|
5
|
8
|
8
|
|
|
|
|
|
|
|
|
|
|
Source:
International Exhibition Logistics
Associates; World Bank
|
IT’S
STILL A JIT WORLD
The
benefits of Just-In-Time (JIT) are well known:
by “building-to-order” manufacturers can reduce
inventory costs, free up working capital and
maximize production efficiencies.
Yet
the decision to adopt a JIT strategy has never
been a simple one. Today’s business environment
has changed considerably in the 20 years since
North American businesses first began experimenting
with JIT principles coming out of Japan.
Low
interest rates, for example, can partly mitigate
one of the primary benefits of a JIT strategy.
When rates were in the double digits two decades
ago, the motivation to reduce the capital costs
involved in holding inventory was much more
urgent than today.
Security
concerns and border delays – plus the threat
of a complete closure of the border in the
event of a terrorist strike in the United States
– is another factor leading many manufacturers
to reconsider JIT principles.
 Furthermore,
with ever-mounting fuel costs, security surcharges
and driver shortages placing enormous pressures
on bottom lines, some manufacturers worry that
any JIT-related savings will be overwhelmed
by additional transportation costs.
These
concerns are legitimate, but businesses who
neglect to ask themselves “how much inventory
do we really need” could be missing out
on a potential competitive advantage. In a
number of ways, despite some common perceptions,
the case for JIT is stronger than ever:
Technology: Advances
in technology – both on the supply chain management
side and production side – have greatly improved
all aspects of JIT manufacturing. The ability
to place and follow orders in real-time over
the Internet brings considerable efficiencies
and reduces risk, while being much more cost-effective
than older EDI-based systems.
Labor
Stability: The
threat of labor stoppages somewhere along
the supply chain was always a powerful deterrent
of moving to a JIT system. With North American
unionization rates at an all-time low
and work stoppages less frequent and less
disruptive than 20 years ago, JIT businesses
face a much lower risk of production interruptions
caused by labor unrest.
Rise
of 3PL: The
emergence of the third-party logistics (3PL)
industry has allowed many JIT manufacturers
to focus on their core operations and processes
while outsourcing complex supply chain functions
to 3PL providers. Many 3PLs even offer specialized
services, such as crossdocking, labeling
and reverse logistics, tailored specifically
to JIT manufacturers.
| "Even
reducing stock to a week rather than
a month can add considerably to the
bottom line." |
“Re-engineering
your production processes to accommodate a
JIT strategy is a critical decision that can
be somewhat risky, yet with risk comes reward,”
says Ken Kotowich, President & CEO of Unicity
Integrated Logistics Inc. “What makes sense
for one business may not be practical for another.
A comprehensive Return On Investment (ROI)
analysis factoring in key trends in finance,
production, IT, logistics and risk management
can be a revealing exercise.”
Eliminating
inventory altogether may not be feasible for
certain businesses. Still, many will conclude
that improvements are well within reach, despite
today’s lower interest rates, increased border
security and higher transportation costs. Strategic
supply chain enhancements – perhaps reducing
stock to a week rather than a month, or two
days rather than a week – can lower inventory
costs, speed up cycle time, free working capital
and add considerably to the bottom line.
China
Trade Mission Set For October
 Following
last year’s highly successful trade mission,
PBB and Canadian Manufacturers & Exporters
(CME) are teaming up once again this fall.
The China Trade & Technology Mission 2005
will take place from October 12 to 26, and
will visit six major business centers: Hong
Kong, Guangzhou, Shanghai, Nanjing, Wuxi and
Beijing.
With
each stop, PBB’s Access China professionals
carefully match mission delegates with well-qualified
potential business partners for one-on-one
meetings and discussions. With a combined 40
years of experience in China, PBB and CME can
provide immediate access to a comprehensive
network of Chinese business and government
contacts.
Representing
the fifth delegation since 2000, the mission
has a proven track record helping North American
businesses source products, gain insight into
modern Chinese manufacturing technology, meet
buyers and identify potential joint venture
partners. For companies looking to do business
in China, the mission is an excellent way to
fast-track their strategic plans.
The
2005 mission will also attend the Canton Fair
– China’s largest trade event – and go “behind-the-scenes”
with CME’s unique Innovation Insights program,
which allows participants to observe advanced
manufacturing processes and best practices
in an international setting.
 NEWS
BRIEFS
Ken
Chalmers takes the helm of PBB
Earlier
this Spring, PBB announced the appointment
of Ken Chalmers as President & CEO, following
the retirement of Mike Scott.
Mr.
Chalmers has been involved with PBB for over
20 years, initially serving as legal advisor.
He joined PBB’s executive team in 2002 and
has played a key role in the strategic growth
of the company, highlighted by the successful
acquisitions of Carrier Connection International,
Clarke Logistics, Unicity Customs Services
and Unicity Integrated Logistics.
“By
building on our competitive strengths, and
by continuing to focus on our customers’ needs,
we look forward to a period of unprecedented
growth and success at PBB,” said Mr. Chalmers.
PBB
launches new web site
PBB
has launched its next generation web site at
www.pbb.com. The revamped site gives PBB an Internet
presence that is fresh and innovative, specifically
designed with the needs of today’s shipper in
mind. In developing the new site, particular
emphasis was placed on user-friendliness and
interactivity, with an easy navigation system
and an ultra-fast search engine.
The
site continues to offer many of the resources
that thousands of
shippers have come to rely on, including a
searchable database of 2005 Canadian H.S. codes,
a library of downloadable trade document forms,
a comprehensive logistics and customs FAQ section
and a Daily News Brief feature. The Clients
Only section of the site also offers PBB customers
a number of highly-secure supply chain management
tools.
MEETING
THE CHALLENGE
PBB’s
Bob Armstrong on today’s importer and exporter
Bob
Armstrong recently joined PBB as Senior Vice
President, Government Affairs, from his previous
position as President & CEO of I.E.Canada
(formerly the Canadian Association of Importers
and Exporters), which he headed since 1997.
It has been an eventful period for importers
and exporters with the fall and rise of the
Canadian dollar, customs modernization, supply
chain security, bottlenecks and the emergence
of China as an economic powerhouse. Recently,
we sat down with Mr. Armstrong to get his insight
on the state of international trade
today:
 Q:
What is the most serious threat to North
American manufacturers, and what is the most
significant opportunity?
A: I
see China ultimately as a good opportunity,
just as I see the recent emergence of India.
The North American marketplace is always
looking for new, exciting products at the
lowest costs. Manufacturers looking to lower
production costs to remain competitive at
home and abroad are searching for new, foreign
sources of supply.
While
the opportunities are exciting, challenges
have surfaced in buying from and selling to
China. The escalating costs of manufacturing
inputs coupled with the rising and uncertain
costs related to imports are the number one
concern of North American exporters and importers. Another
significant threat is the uncertainty in delivering
goods at home and in the export market due
to logistics infrastructure and supply chain
challenges.
Q:
Overall, are North American importers and
exporters in a stronger or weaker position
today than they were 10 years ago?
A: They
are only in a weaker position if they have
not properly managed the change to security
and compliance. Businesses clearly have more
responsibility than they experienced 10 years
ago. 9/11 has changed everything. Security
is a huge issue, and a costly one. Companies
must apply more internal and external resources
to ensure the integrity and security of their
international supply chain – and they must
know all their partners in this global supply
chain.
Q:
How do the issues facing shippers along the
Mexican-U.S. border compare with those along
the U.S.-Canadian border?
A: Increasingly,
there are a number of similarities, especially
concerning security and trade-efficient borders.
These issues are now quite similar as the respective
customs administrations in all three countries
have the same mandate of security and compliance
with emphasis on who and what is crossing the
border.
Q:
What kind of strategies should North
American importers and exporters consider
in addressing today’s challenges?
A: Today’s
North American importer and exporter must develop
an entirely new and strategic approach to managing
their own global supply chain. Clear guidelines
on responsibility and accountability are extremely
important. You really must know all about the
partners in your global supply chain and know
what they are doing. Importers and exporters
need to have effective information systems
and be very cognizant about their role in ensuring
compliance with all pertinent countries and
their customs rules and regulations. As a start,
I always advise businesses to consult with
their service providers in developing a chart
of “Roles & Responsibilities” – and to
review it on an annual basis.
Q:
How well are the business community and government
working together to come up with long term
solutions?
A: Consultations
between industry and government are very common
on all issues, but the business community really
must “drive the bus” by presenting new solutions
to simplify processes, while ensuring compliance.
Too often the business community reacts rather
than being proactive with government. Overall
though, industry and governments are working
together much better and more often than 10
years ago.
MEXICO: ROAD
OR RAIL?
China’s
recent meteoric rise on the global manufacturing
scene may have overshadowed Mexico’s progress
since NAFTA came into effect over a decade
ago. Yet despite China’s superiority in labor
costs, Mexico remains a formidable global competitor
thanks to two major advantages: its strategic
location next to the world’s largest market
and its network of free-trade agreements. Recent
transpacific infrastructure bottlenecks may
even encourage U.S. and Canadian businesses
to look to Mexico as a less risky source for
manufactured imports.
Truck
transportation dominates logistics in Mexico,
accounting for nearly 90 percent of its domestic
freight and over 60 percent of its international
trade (of which 80 percent crosses at Laredo).
The trucking industry, however, is somewhat
behind Canada and the U.S., facing poorer highway
conditions, weaker multi-modal integration
and higher theft rates.
Truck-bound
shipments crossing the border also face certain
challenges, particularly going into Mexico.
Customs regulations require brokers to take
physical possession of the shipment for review
and assessment, an inefficient process. Furthermore,
infrastructure limitations and new security
requirements affect clearance times on both
sides of the Rio Grande.
 Increasingly,
shippers are looking to rail as an alternative
to truck. In many cases, rail is more cost-effective,
while delivering additional benefits such as
enhanced security.
Shortly
after NAFTA, Mexico started privatizing its rail
system, generating new investment and improved
efficiencies. Three major railroads dominate
the market (TFM, Ferromex and Ferrosur), along
with a series of shortlines where track segments
were deemed too important to consign to one of
the major players.
The
rail advances in recent years have been impressive.
Improvements could still be made with continued
investment in Mexico’s intermodal infrastructure,
in order to increase rates of containerization
throughout the supply chain and to expand northbound
capacity.
Pressure
to continue improving Mexico’s logistics infrastructure
can be attributed to the supply chain demands
of multinational manufacturers that have invested
billions of dollars in the country since NAFTA,
particularly the major automakers. Competition
from low-cost competitors in China and Asia
Pacific also represents a strong impetus for
regulatory reform and infrastructure investment.
Such attention will ultimately allow Mexico
to maximize the opportunities under NAFTA and
continue to be an attractive sourcing region
for U.S. and Canadian business.
From
a logistics perspective – whether it involves
rail, road, air or ocean – companies that take
the time to fully understand the country’s
logistics realities, and those that work with
supply chain partners well versed in Mexico,
are the most likely to succeed.
|
