Notes From The GBD-NAM Jointly Sponsored Colloquium
On
FOCUS ON THE 49TH PARALLEL
The US-Canadian Border After September 11

December 4, 2001
Washington, DC

Note: GBD did not prepare, and is not equipped to prepare, a complete record of these proceedings. The following are simply the transcription of a few notes.

The NAM and the Canadian Manufacturers and Exporters have a joint task force on the US-Canada Border. My understanding is that, at this point, most of the work of that Task Force is prospective. Both organizations participated in the December 4 Colloquium. Mike Baroody, NAMÕs Executive Vice President, introduced the principal speaker, William Heffelfinger, who is Assistant to the Commissioner at the U.S. Customs Service and Executive Director of the Office of Border Coordination.

MIKE BAROODY, NAM Executive Vice President: In his brief remarks, Mr. Baroody referred to the events of September 11 Òan atrocity.Ó He expressed his and NAMÕs determination to make the border Òsafer and strongerÓ and said that US and Canadian business were now more united in their determination to make the border work for both countries.

WILLIAM HEFFELFINGER, Assistant to the Commission of Customs. His remarks included these quotes and observations:

ÒWe really want to increase our partnership with industry.Ó

Heffelfinger has been in his current position for just 14 months.

The Customs Service has been at a Level 1 Threat Level since September 11, and that situation continues today. This has meant closing some smaller ports and putting at least two officials (agents, inspectors, National Guard) at each port. The ports that remain open are staffed 24-hours per day, 7-days a week. This is putting a tremendous strain the system, as agents are having to work 12-16 days without respite. There is an urgent need for new innovations as well as more manpower.

There had been 10-hour waits and more at some ports (Ed: e.g., the Ambassador Bridge between Detroit, MI, and Windsor, Ontario.) The wait-time is down now, but that is, at least in part, a reflection of the fact that the traffic is down.

ÒThe Number One priority for the U.S. Customs Service is anti-terrorism. ThatÕs what we do.Ó This is a change from the principal missions of the service prior to September 11. These were the anti-drug smuggling effort on the U.S. southern border, and trade compliance on the U.S. northern border. Now supply chain security is a top priority on the northern border.

Heffelfinger had great praise for the Canadian Customs and Revenue Agency, CCRA, which is CanadaÕs counterpart to the U.S. Customs Service. He effusively thanked Denny Lefevre (sp?), his Canadian counterpart, for pledging to do whatever was necessary after September 11. As an example of what this means, Heffelfinger noted that CCRA is using its import screening to try to find people wanted by the authorities in the United States. ÒThey are looking for our targets,Ó he said.

Supply Chain Security. In expanding on this issue, Heffelfinger cited the example of BASC Ð the Business Anti-Smuggling Coalition Ð as an example of how the supply chain security system might work. The essence of it is that companies which can demonstrate that they have good supply chain security systems should be able to get expedited treatment for the shipments that need to clear Customs. Asked if he envisaged regulations on supply chain security, Heffelfinger said he thought it more likely that Customs would use a case by case approach. He said in effect Ð not quite a quote Ð that ÒYou know good security when you see it.Ó (Ed: Our understanding is that the BASC system, while not a matter of regulation, does involve a voluntary checklist, which is published by Customs and which companies are encouraged to use.)

Electronic Seals. Heffelfinger suggested one technique to be explored is Òelectronic seals,Ó i.e., a technique for demonstrating to customs inspectors that cargo has not been tampered with from the time it leaves the factory to the time it arrives at the border.

Other initiatives he mentioned were ones to: a) Òharden ports of entry,Ó b) enhance Customs ability to detect weapons of mass destruction, c) improve information exchange (between U.S. and Canadian customs officials), and d) provide fast-lane treatment for cooperating businesses.

National Guard. Asked about the 600 National Guard troops who have been assigned to the U.S.-Canada Border, Heffelfinger stressed that their job is to relieve some of the pressure from the existing Customs agents. It is just a temporary measure, he said. ÒIt is not militarizing the border.Ó He speculated that the National Guard might serve in this capacity for about six months to a year, which is approximately how long it will take to beef up the staff of the Customs Service with new agents.

PERRIN BEATTY, President and Chief Executive Officer
Canadian Manufacturers & Exporters:

The US does more trade with Canada across the Ambassador Bridge than it does with any other country in the world. Looking at the larger picture, the flow of goods between Canada and the United States moves at a rate of $1 million per minute.

The expressions of support for the United States by Canadian in the wake of the September 11 attacks have been remarkable. Shortly after the event, there was a gathering of 100,000 people on Parliament Hill in Ottawa in a demonstration of support of the U.S. Throughout Canada, Canadian homes flying the American flag are a common sight.

None of the 19 terrorists who hijacked the four planes involved in the September 11 attacks came through Canada. ÒNone of us lives in a fireproof house,Ó however. Canada should work to ensure that it does not become the target of terrorist attacks nor the staging area for them.

The Coalition for Secure and Trade-Efficient Borders is the broadest business coalition ever in Canada, including as it does more than 45 businesses and associations. On December 3, the Coalition released Rethinking Our Borders: A Plan For Action, with 77 recommendations to address security and border management issues. A copy of the press release announcing this report is attached. The report itself is available on the CME website at www.cme-mec.ca/coalition. Mr. Beatty said that the border was not working effectively prior to September 11; that it was characterized, even then, by too much uncertainty, delays that upset just-in-time business deliveries, and general infrastructure problems that need to be addressed.

Sovereignty. Noting that U.S.-Canadian cooperation is sometimes seen as weakening Canadian sovereignty, Beatty said, ÒThis sort of cooperation is an expression of sovereignty.Ó With respect to the border, terrorism and terrorists, he said that the challenge is to Òshrink the size of the haystack in which we are looking for the needle.Ó In other words, the challenge is to move clearly legitimate goods quickly so that the focus can be on the suspect. He noted that this is not just a big company issue and cited the example of the 1,000 Canadian nurses who daily cross the border in order to work in Detroit hospitals.

His recommendations included:
Fast-track identification cards with photographs (and possibly other identifiers/biometrics); Changing the primacy of inspection so that it occurs, not in the country being entered, as is currently the case, but in the country of departure. This is already done for certain air travel from Canada to the United States. Put Canadian police at the border to provide back-up force, should be it be needed, for U.S. Customs agents in Canada.

ALEKSANDER KOBYLECKI, Manager, Global Customs, Material and Logistics:

The situation at the border has become more stable since September 11, but it is slow. With every truck having to be checked, it is difficult to keep company supply chains in tact.

Over the last couple of decades company after company has adopted just in time (JIT) inventory systems, a.k.a., synchronous material flow. It is a system that has numerous benefits, including lower costs and better quality. But it is a different system. The space that used to be allocated for inventory is now used for other things. The personnel used to manage the two system are different. In short, Òyou canÕt just shut offÓ a just-in-time inventory system.

Under the current system, there is a material manager for each facility. ÒIf product stops, that person goes through a lot of grief.Ó

JIT relies on numerous shipments arriving throughout the day. And for the integrated North American automobile industry it assumes a smooth flow of product across the border. For example, only 2 minutes is budgeted for passage through Customs of parts coming from the Canada to the United States. That is a hard schedule to keep when Customs is doing level one inspections.

Manufacturers are adjusting by putting redundancies Ð more inventory Ð back into the supply chain, but it is difficult to assess how much cost these are going to add.

RECOMMENDATIONS:
Low risk importers need to be given more predictability with respect to the treatment of their shipments. Reverse inspections should be considered, i.e., inspections done on the exporting side of the border, possibly in the plant.

There needs to be more sharing of best practices vis-ˆ-vis those processes which affect customs.

JEFFREY ASHFORD, House Committee on Appropriations, Treasury Subcommittee, noted the profound difference between the way the U.S. has traditionally handled its southern border with Mexico in comparison with the handling of the northern border with Canada. The Mexican border work has for years centered around anti-drug trafficking, for which nearly $20 billion is budgeted annually. The Canadian border work has been about trade. Now it is also about defense. In terms of recent Congressional actions, he noted that, in the context of the Defense Appropriations bill, the Congress recently provided $28.1 million for additional Customs inspectors and $33 million for inspection technology. [Ed: I think that is what he said, but I havenÕt traced the matter to bill language or otherwise reconfirmed it.]

R. K. Morris
December 7, 2001
Tel: 202-463-5075
Email: rkmorris@gbdinc.org ÐGBDÐ

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