Crossborder Transport 2002: It's a Whole New Ballgame
Moving the products that make up billions of dollars in NAFTA trade poses new transportation challenges for shippers and carriers alike. Security enforcement and delays in this time of uncertainty are raising the bar on many compliance issues. How best to deal with it? Here's some advice.
New Year's Day marked the eighth anniversary of the North American Free Trade Agreement (NAFTA), which took effect Jan. 1, 1994. More trade—lots of it—is flowing more freely across North American borders today.
Take trade between the United States and Canada.
"Since NAFTA was implemented, trade between the United States and Canada has been growing at a compound average annual rate of 10.4 percent," according to Paul M. Tellier, president and CEO of Canadian National Railway Company, Montreal. "Last year, it amounted to more than $450 billion."
Moving the products that make up those billions of dollars poses unique transportation challenges, particularly since the terrorist attacks this fall. NAFTA transportation post-Sept. 11 is a whole new ballgame, says Roy Strickland, owner and president of CANUSAMEX, The Woodlands, Texas, a transportation brokerage that specializes in NAFTA shipments.
"It's like playing the first half of a football game by one set of rules, then coming out to play the second half under a whole different set of rules," he says.
Here's a look at NAFTA transborder transportation as we move into the new year.
The Same, But Different
NAFTA transportation "is different than domestic transportation," notes Ed Alderman, director of international development for FedEx Freight Corp., Memphis. But you can make NAFTA transportation look and feel the same as domestic if you—and your carriers—have the right infrastructure in place.
Here are some factors to consider regarding NAFTA transportation:
Border delays. In the aftermath of the Sept. 11 terrorist attacks, Bill White, traffic and warehousing supervisor for Wheelock Inc., is seeing some delays, particularly involving customs inspections. Wheelock, based in Long Branch, N.J., is a supplier of life safety notification, signaling, and communications products and systems.
"Those delays are part of business now," White says. Strickland anticipates that security will be beefed up at both the Mexican and Canadian borders. "Now, not only are we looking for drugs being smuggled into the United States, we're also looking for illegal explosives," as well as potentially harmful devices and biological weapons, he notes. "The tighter the Mexican and Canadian borders get, the greater the delays will be."
In addition, reports Brian Hickert, vice president of Mexico operations for Consolidated Freightways Corporation, San Antonio, Texas, some bridges between the United States and Mexico have been shut down several times due to bomb threats, resulting in additional delays.
Documentation. "With products sent to a foreign country, the documentation is more involved than it is with domestic transportation," White says. "Particularly now, you have to be absolutely clear about your product."
"If your documentation is adequate, your border crossing will not be a nightmare," says Ernesto Reyes, corporate logistics manager for AXA SA de CV, Monterrey, Mexico. AXA is a holding group that manages several other companies that ship products including light fixtures, transformers, wire, and cable into the United States.
"With a good packing list and accurate invoices that are on time when the material crosses, the shipment goes right through," he says.
Trouble may arise, however, when invoices are incomplete or incorrect. Mis-stating products and weights can lead to problems, especially with today's heightened security, Strickland warns.
"If what's in a truck, or how much is in a truck, is misrepresented, bells and whistles are set off at the border when the truck arrives," he says. "As security is tightened, you don't want to set off those bells and whistles," or do anything to give inspectors a reason to unload the truck.
Technology can help speed border crossing and streamline documentation. Canada's PARS (Pre-Arrival Review System), for example, enables Canadian Customs to review shipments destined to the border gateway while they are en route.
Nearly all the shipments moved into Canada by FedEx Freight operating companies Viking Freight and American Freightways (AF) take advantage of PARS. When the carriers pick up a shipment, they image the documents, then put the documents on either the FedEx AF or Viking system, Alderman says.
This means that "customs brokers can start pulling documents off the secure part of our web sites around 3:30 a.m., and prepare a PARS label before the shipment gets there."
Using PARS, crossing the Canadian border can take place in a matter of minutes, rather than hours.
Multiple handlings. Transborder loads are subject to multiple handlings, especially freight moving into Mexico. For example, "when freight arrives in Laredo, it's tendered to a customs broker who literally takes possession of the shipment," notes Randy Tutor, vice president of Redwood Systems, a third-party logistics provider managing more than one million square feet of warehousing space in Mexico.
Trailers that clear customs may be hauled across the international bridge via a bridge carrier. Then the shipment gets turned over to another carrier.
"This may be a Mexican partner, an extension of the U.S. carrier, or a Mexican carrier," Tutor explains.
As in any situation, the more parties involved in a transaction, the greater the potential for delays and errors.
Service. "Pricing is very important; so is delivery time," White says. "But I've used several different carriers, and they're all pretty close to the same."
That's why NAFTA carriers, like other carriers, strive to differentiate themselves on their ability to serve the customer.
What to Look for in a NAFTA Carrier
When considering carriers for crossborder freight, do the usual due diligence—check customer service, on-time delivery performance, and references. But don't stop there. Carefully evaluate potential carriers' reputation, longevity, and financial stability, advises Canusamex's Roy Strickland.
Yes, you'd look for these factors in a domestic carrier, but they are even more important when moving freight across borders. Strickland anticipates more carriers will go bankrupt in the new year, especially as the impact of increased security costs is added to the drop in freight caused by a soft economy.
"Be very careful when selecting carriers," Strickland warns. Make sure they're financially viable. Otherwise you may get stuck with a carrier that suddenly and unexpectedly goes out of business.
Look for carriers with equipment pools and availability that enable them to handle unforeseen difficulties—such as equipment tied up in border delays—without affecting service, suggests Brian Hickert.
You may facilitate your ability to get product delivered on time by working with carriers that have multifunctional capabilities, he says, such as the ability to ship delayed freight on an expedited schedule or via air.
Look into insurance requirements, especially in Mexico, advises Herb Schmidt, president, Contract Freighters Inc., Joplin, Mo. "Mexican carriers have limited liability under Mexican law," he says. If you transport high-value shipments, you may want to get supplemental service.
For U.S. carriers, liability begins at the border. "Don't assume that insurance is the same once you cross the border into either Mexico or Canada," says Alderman.
"Find out the carrier's insurance requirements," adds Redwood's Tutor. "You need to know the different limits of liability, and who covers what. "Negotiate the levels of liability and have those protected through certificates of insurance or bonds with whoever you do business with," he suggests. "Otherwise you may find the carrier has lost a million-dollar trailer but can only pay you $10,000 for your loss."
Look for a carrier that you can turn your shipment over to, so you don't have to worry about it, Tutor advises. "You're looking for risk-free, timely delivery of your goods; not every carrier can do this." He advises finding a partner who will take responsibility of your shipment from dock to dock.
Seek out experienced carriers. This is especially true when moving freight into or out of Mexico, says Alderman. "Mexican border processes, procedures, infrastructure, and economic environment are different from those of Canada. If you give your freight to a carrier that has never done business at the border, your shipment is liable to sit for awhile."
CFI's Herb Schmidt agrees that NAFTA experience is crucial. Years of experience enable U.S. carriers to build solid relationships with partners in Canada and Mexico.
"Experienced carriers," Schmidt says, "also know the process they need to go through to get duties paid," as well as details such as holidays and border closings. This on-the-ground knowledge pays off in smooth operations.
For example, "when a holiday is coming up, and we know we won't have enough southbound traffic, we deadhead drivers with empty trailers to the border to take care of those imbalances," Schmidt explains. "Carriers with no experience don't do that," which can result in spotty service.
Consider carriers with online track-and-trace tools and onboard communications, suggests Tutor. Ability to track and trace shipments via the Internet can vary substantially from carrier to carrier. "Some are much better and easier to deal with than others," says White.
"One of the major problems NAFTA carriers face is losing sight of their loads and assets once they cross the Mexican border," says Michael Brown, director of product development for @Track Communications, Richardson, Texas. "This presents many challenges to carriers in efficiently and predictably managing business into and out of Mexico."
@Track's untethered trailer-tracking solution, TrackWare, gives trucking companies that haul freight into Mexico and Canada the ability to track their trailer fleets even when those trailers are handed off to other carriers at the U.S. border.
Check out the carrier's business model and partners. Some U.S. carriers have chosen to partner with a carrier or carriers in Canada and/or Mexico. Viking Freight and American Freightways, for example, have established a partnership with Canadian trucker Day and Ross.
"Day and Ross brings everything southbound to our facility in the United States, and picks up at our U.S. facilities going northbound," according to FedEx's Ed Alderman.
Consolidated Freightways owns a 50-percent share in its Mexican partner, Transportes CF Alfri-Loder. "We elected to enter into a partnership rather than acquire 100-percent interest," Hickert explains. "We wanted the ability to be involved in the day-to-day management of the trucking company."
Contract Freighters Inc., on the other hand, chose to partner with Mexican carriers rather than make a neutral investment in them. This ensures that partner carriers don't see CFI as a potential competitor, explains Herb Schmidt.
CFI maintains a close relationship with its Mexican carrier partners. "We communicate very closely with them regarding where the carrier is en route, so that we can update the Internet site," Schmidt says. CFI proactively tracks whether freight is going into or coming out of the country, and whether a trailer is loaded, unloaded, or sitting empty at a customer site.
Evaluate the equipment. Depending upon where you're shipping, you may want to check into the carrier's equipment.
"If you're shipping into Mexico on a carrier that does not have air-ride equipment, look closely at your packaging procedures," Schmidt advises. Because shipping on spring-ride equipment may result in increased damage, consider implementing increased packing and packaging standards, Schmidt says—as well as supplemental insurance—if you select a carrier that doesn't use air-ride equipment.
When choosing carriers to haul goods across North American borders, "most large shippers look for a carrier with a good presence, good equipment, and a good communications platform," says Hickert.
"If you use a serious trucking line that has been around for awhile and is financially secure, if you can find out where your material is at any time, if the documentation is adequately completed and on time, then it's no sweat moving shipments across borders," says Ernesto Reyes.
"Don't put all your eggs in one basket, however," advises Roy Strickland. Have multiple avenues available to move your products. If you use the services of just one carrier, you may make a major logistical error during this period of uncertainty.
4 Steps to a Smart, Secure Border
Here are four suggestions to increase security and improve the efficiency of U.S.-Canada border crossings, according to Paul M. Tellier, president and CEO of Canadian National Railway Company, Montreal.
- Align American and Canadian customs policies, incorporating the best practices from each country's customs system.
- Provide pre-qualification for all people, freight, and carriers that have a proven record of being low-risk and law-abiding. Doing so will free up customs agents so they can focus on higher-risk candidates.
- Harmonize the Canada and U.S. computer systems. This would include both countries sharing their databases, with carriers, shippers, importers, and brokers feeding information into one system. Customs agencies would get more accurate and complete information, and a joint intelligence and enforcement tool.
- Move some customs activities away from the border. By performing inspections at origin or destination terminals, customs authorities would increase the security of the system. Doing so would also speed inspections and reduce delays.
NAFTA Intermodal Options
Rail and motor carriers have targeted NAFTA traffic.
This summer, The Burlington Northern and Santa Fe Railway company (BNSF) launched Mexi-Modal, an intermodal service that creates a seamless transportation network connecting major markets in Mexico, the United States, and Canada. BNSF coordinates the entire transborder shipping process door-to-door, cooperating with Canadian National Railway Company (CN), CSX Intermodal (CSXI), Transportacion Ferroviaria Mexicana (TFM), and several Mexican trucking companies.
Mexi-Modal offers three products:
- MidBridge, which allows freight to be moved by rail in the United States and Canada, and by truck in Mexico. Purchase of products occurs at the "middle of the bridge" between Laredo, Texas, and Mexico.
- Laredo, where importers/exporters can move full truckload freight from the United States or Canada by rail to or from a designated warehouse in Laredo.
- MexiStack, an all-rail service. North of the Mexican border, freight is moved by BNSF or Canadian National, and in Mexico by TFM. This service allows importers/exporters to purchase goods at the origin or destination, whether U.S., Canadian or Mexican.
Consolidated Freightways Joins Fight for Tighter Border Security
In a bilateral effort to beef up security along the 3,000-mile U.S.-Canada border, Consolidated Freightways (CF) has joined the Canada Customs and Revenue Agency, making it the first heavy-freight carrier to directly partner with the Canadian government on security issues.
The Canadian government asked CF to become its partner as part of the World Customs Organization's global push to develop solidarity between key carriers and the customs officials charged with border security. CF typically moves hundred of trucks across the U.S.-Canada border every week.
The program, which the Canadian Customs office calls "Partners in Protection," is primarily designed to reduce or eliminate contraband smuggling. Other illegal activities, however, will come under scrutiny by the trained CF transportation professionals who become part of the effort.
After training, Consolidated Freightways drivers, terminal workers, operators, and dispatchers will play essential, active roles in keeping the border closed to smuggling and other illegal activities.
"As a result," says Dennis Freeman, CF manager of customs compliance, "CF will generate highly confidential information and communicate daily with government officials in a partnership that we believe will raise safety standards and security along the entire border."
Over time, Freeman says, CF freight will tend to move more smoothly across the border because confidence in carrying low-risk freight will increase as a result of its close work with the Canada Customs and Revenue Agency.