Spring/Summer Issue
June 2005
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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.
|
