NA Customs Challenges

Nov. 1, 2000
Border Crossing Conditions in North and South Highlight Both Successes and Unmet Promises of NAFTABORDER-CROSSING issues remain a key concern for chemical

Border Crossing Conditions in North and South Highlight Both Successes and Unmet Promises of NAFTA

BORDER-CROSSING issues remain a key concern for chemical companies and transporters operating throughout North America, and there is general agreement that clearance delays make it difficult to fully benefit from the North American Free Trade Agreement (NAFTA). Customs choke points need to be removed.

These concerns were among the customs issues discussed during a workshop at the 3rd North American Chemical Transportation & Distribution Conference September 26-28 in Ottawa, Ontario, Canada. The conference was sponsored by the American Chemistry Council (ACC), the Asociacion Nacional de la Industria Quimica (ANIQ), and the Canadian Chemical Producers Association (CCPA).

Changes are underway to smooth the border-crossing process, and one of the most dramatic programs of change has been initiated by the Canada Customs and Revenue Agency. It has the potential to revolutionize the way customs services function in North America.

"With 10 to 12 million shipments a year crossing the US-Canada border, customs can't be seen as a barrier to free trade," said Oryst Dybynsky, Canada Customs. "Seven thousand trucks a day cross the border at Winsor, Ontario, and Canada is generating $1.5 billion (Canadian) in trade every day.

"We looked at what industry needed, and we realized that we had to modernize the Canadian customs process. We're moving to a risk-management approach in an effort to be more business-like. We're going to start with a handful of companies and build from there."

Customs Action Plan The program is called the Customs Action Plan, and it consists of five parts that will be implemented over the next three years. The first steps in the new program will be launched in April 2001.

Elements of the Customs Action Plan are:

CANPASS permit programs that will allow low-risk travelers to enter Canada without routine questioning, unless they are stopped for a spot check. Truck drivers will be registered under the Commercial Driver Registration Program. The registration will be portable, which means drivers can take it with them from one employer to another. Following a background check, the driver will be issued a bar-coded identification card.

Carriers will be evaluated for their ability to comply with a self-assessment. Canada Customs will look at chain-of-custody factors and the level of responsibility shown by each carrier. Areas that will be reviewed include bills of lading, internal security, and driver training.

Customs Self-Assessment will allow pre-approved importers to bring in low-risk goods quickly, unless stopped for a spot check, and use their own systems to send trade data and revenue reports to Canada Customs. Carrier Reengineering will require that mandatory information be provided electronically for non-Customs-Self-Assessment goods before they arrive at the border. The Administrative Monetary Penalties System will provide a way to fairly, but effectively, penalize noncompliance.

Appropriate Procedures Companies wanting to participate must be able to show that they have appropriate procedures in place with regard to purchase orders, payment, and product handling. Outsourced services, such as customs brokers, will have to be integrated into the process.

"We will not mandate specific systems or processes, but companies do have to meet basic requirements," Dybynsky said. "If any needed element is missing, the crossing process goes back to the old system. Companies that qualify will gain certain privileges. We will give more time to submit data and pay duties. We will eliminate monthly notices from Canada Customs."

Electronic data handling will be a key part of the program as Canada Customs gears up for the G7 customs procedures harmonization program. In 2003, Canada Customs will stop handling paper and will require electronic data transactions for everything.

Southern Challenges Customs clearance is far less advanced down south on the US-Mexico border, and movement in either direction often slows to a crawl. Conditions there were described by Alfredo Romero, logistics and distribution manager for Celanese Mexicana.

For chemical companies wanting to do business on either side of the border, the first step is to find a qualified carrier. In most cases, this is going to be a trucking company, because 80% of the commerce between the United States and Mexico is by truck.

The process is complicated by the fact that US tank truck carriers can't operate independently in Mexico and vice versa. Chemical shippers have two options. They can contract with a licensed and bonded international transportation broker that works with both US and Mexican carriers. Or, they can choose a US or Mexican carrier that has a partner in the other country.

Having the right transportation arrangement helps, but it doesn't fully eliminate the challenges. When southbound cargo arrives at the US side of the border, it is handed off by a US freight forwarder, which often is a subsidiary of a Mexican customshouse broker.

Document Focus The US freight forwarder is responsible for checking the accuracy of the paperwork and physically inspecting the cargo. Export documentation is then delivered to the consignee's designated Mexican customshouse broker, who prepares the import documentation and arranges payment of duties and customs user fees.

Romero cautioned that documentation must be in perfect order. Mexican customs authorities pay close attention to the documentation.

Once the duties are paid, a transfer carrier moves the trailer and cargo from the US side of the border to the Mexican side. Mexican customs authorities determine by a random computer program where the cargo and trailer will be inspected. Penalties are assessed on the spot for any discrepancies found during the inspection.

The vehicle will be impounded until discrepancies are resolved and the penalties are paid. Any overages are confiscated as contraband.

After customs clearance is completed, the trailer is delivered to the Mexican linehaul carrier's yard, and the importation documents are handed over. The Mexican carrier must obtain a bond on the US trailer before the shipment can be dispatched to its final destination.

Romero said he hopes the clearance process will be simplified somewhat when the US-Mexican border is finally opened up as called for under the North American Free Trade Agreement. He believes this could be accomplished in 2001.