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Cross-Border Flow Analysis Report 1: Case Study for Company 1 (Services Sector Involved in the Movement of Goods) strategic transportation & tourism solutions

Prepared for Industry Canada Prepared by InterVISTAS Consulting Inc. 8 July 2009


Cross-Border Flow Analysis Report 1: Case Study for Company 1 (Services Sector Involved in the Movement of Goods)

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Table of Contents 1.

Introduction........................................................................................................................ 1 1.1 1.2

Overview .............................................................................................................................1 Methodology........................................................................................................................2

2.

Firm Profile......................................................................................................................... 4

3.

Value Stream Map.............................................................................................................. 5 3.1 3.2 3.3

Value Stream Glossary .......................................................................................................6 Current State vs. Future State Maps...................................................................................6 Processes and Timing.......................................................................................................12

4.

Key Findings.................................................................................................................... 30

5.

Border Crossing Costs ................................................................................................... 34

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4.1 4.2 4.3

Summary...........................................................................................................................30 Findings.............................................................................................................................30 Quantitative Results ..........................................................................................................33


Report 1: Case Study for Company 1 (Services Sector Involved in the Movement of Goods)

1.

1

Introduction The purpose of this study is to determine and evaluate the experience of processing a transaction from initiation of an order to clearance at the U.S. border. This report will be followed by recommendations and alternatives to result in enhanced facilitation of trade from Canada to the United States. The data collected from this report will help to identify the underlying causes of border challenges that may impact the competitiveness of Company 1 from a number of perspectives: regulatory, logistic and security. The study examines, measures and reports upon the various logistics, security and compliance costs for the company at the border, including more detailed examinations of the frequency of secondary inspections and the issues that trigger such incidents (i.e. regulatory compliance vs. border protection imperatives). The following report is a case study for Company 1 - service provider involved in the movement of goods. This draft case study report is developed based on interviews and information received from the firm. While the findings reflect the issues faced by the individual organization, it is intended to demonstrate the challenges that other companies within the industry are faced with. The report includes the following: ƒ

Value stream maps of cross border processes

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Descriptions of process steps for shipping goods across the border

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Matrix of key findings

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Explanations of key findings

1.1 Overview This report provides an overview of the following information: 1: Shipping Steps / Wait Time 2: Regulatory Requirements/Issues 3: Logistics Related Issues 4: Security Issues 5: Existing Programs & Initiatives to Address Issues 6: Compliance Cost Data 7: Observations/Gaps

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Report 1: Case Study for Company 1 (Services Sector Involved in the Movement of Goods)

2

Information included in this report will support the identification and analysis of top issues leading to significant challenges at the Canada-U.S. border. Further, it will allow for a better understanding of how border issues affect the competitiveness of companies, enabling an assessment of their impacts on North American supply chains. This information will lead to the development/proposal of potential options and solutions to eliminate unnecessary costs and delays at the border.

1.2 Methodology Company 1 is a service provider involved in the movement of goods, with logistics, customs brokerage for all modes of transportation. The methodology used to develop this report is as follows: 1)

Company Selection - As a service provider located at the border, Company 1 has significant traffic volumes across the Canada-US border, both with respect to overall movements and their value. Its operations provide a fairly representative sample of other service providers within the industry, who deal with numerous transactions at the border each day.

2)

Data Collection - In depth data collection was performed to qualitatively and quantitatively characterize the cross-border shipment process and to identify border issues. In this case, the process steps for a basic border crossing transaction and 8 other product types involving other participating governmental agency requirements were traced. Personnel at the service provider (8 different people) and US Customs and Border Protection (CBP) officers were interviewed and data tables reviewed. The CBP commercial border crossing and a meat inspection house were toured in detail through all border processing steps. Data (i.e., Secondary inspection rates, wait times, release delays, etc.) for the tens of thousands of border clearance transactions per year (2008) were provided in aggregate format. As a representative border crossing point, these aggregate rates and average times were applied across all other case studies instead of conducting interviews and collecting data for each company’s most commonly used border crossing.

3)

Develop Value Stream Map - With the detailed processes outlined for the products, timing data and incident rates were associated to each step to develop the “current state� value stream maps.

4)

Detail and Categorize Border Issues - The challenges faced by the company providing services for the movement of goods across the border as identified by the company and through the value stream mapping process were documented and categorized into one of the seven columns as outlined in the findings matrix.

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Report 1: Case Study for Company 1 (Services Sector Involved in the Movement of Goods)

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This report is one of seven case studies developed with the value stream mapping methodology. For ease of reference, the six other companies are as follows: ƒ

Company 2 (Small to Medium-sized Enterprise)

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Company 3 (FAST Member)

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Company 4 (Food Processing Industry)

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Company 5 (Motor Vehicle Sector)

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Company 6 (Consumer Goods Industry)

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Company 7 (Chemicals Sector)

Companies in the study have typically provided data in confidence; as a result their names and descriptions are genericized and data collection results are provided in aggregate form only to protect commercial sensitivities. Companies 2, 4-7 deal with a more homogeneous mix of commodities compared to Companies 1 & 3. This is due to the nature of business in logistics and services that invariably arise due to the function of the company. For example, Company 1 will transport a range of commodities including electronics, food, rubber and plastics, paper, furs and textiles. This will vary considerably by time of the year, and year-over-year depending on the market demand from producers. For example, Company 1 cited a sizable increase in service requirements related to shipments potentially under the FDA rules recently introduced.

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Report 1: Case Study for Company 1 (Services Sector Involved in the Movement of Goods)

2.

4

Firm Profile Company 1 is a services provider based in the U.S. that can act as a customs broker for its customers, offer transportation services and provide inspection facilities for U.S. Customs and Border Protection (CBP) for the movement of goods into the U.S. Company 1 assists manufacturers, wholesalers, retailers and individuals in dealing with daily trade transactions with facilities at land borders across the Canada/U.S. border. The company has in-depth knowledge of transportation planning, warehousing, customs duties and procedures, country of origin determinations, and a myriad of other services to help their customers succeed while reducing costs related to the movement of goods into the U.S. Company 1 deals with all shipment types at the border that may be full truckloads (TL) or lessthan-truckload (LTL) and must comply with any number of other participating government agencies (PGAs) and their requirements. As such, Company 1 has a staff with expertise in each of these areas, offices physically located at the CBP plaza, and facilities that may be used for inspections within the port limits. Entry documentation and requirements are completed and submitted by personnel at Company 1 for all of its customers’ shipments to the U.S. and include the following: ƒ

eManifest

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Entry Data (CF3461)

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Entry Summary (CF7501)

Some shipments for products that are regulated by PGAs have additional documentation or processing requirements by Company 1. The typical shipment types that Company 1 encounters are as follows: ƒ

Explosives Regulated by the Bureau of Alcohol, Tobacco, and Firearms (ATF)

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Hazardous Materials: Toxic Substances, Hazardous Waste, and Radioactive Materials

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Steel Regulated by the Department of Commerce

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Softwood Lumber

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Products Regulated by the US Food and Drug Administration (FDA)

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Products Governed by the Animal and Plant Health Inspection Service (APHIS)

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Meat Products Regulated by the US Department of Agriculture (USDA) and the US Food and Drug Administration (FDA)

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Textile Products

Company 1 participates in a number of facilitation programs that are currently available to the industry. It maintains Tier II status in the Customs-Trade Partnership Against Terrorism (C-TPAT) program. The company and its drivers are members in the FAST program.

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Report 1: Case Study for Company 1 (Services Sector Involved in the Movement of Goods)

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5

Value Stream Map Value Stream Mapping (VSM) is a process analysis tool that is used to represent the interaction between processes, operations and information for bringing a product order (or request for service) through to delivery of it. The concept originated a number of years ago through the Toyota Production System and is a key technique used in Lean Manufacturing. VSM is used to determine the value added and non-value added elements of a system. It provides a high level picture of product and information flows in order to develop improvement suggestions. A value stream consists of the following elements: ƒ

Supplier (start of flow)

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Customer (end of flow)

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Physical flow of product being mapped

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Information used by process transformation steps

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Information flowing between process control, supplier and customer

Value stream maps can help visualize the process steps required to make a product or provide a service and any waste that exists in the processes. It provides a view of the entire system so that any improvements can be made to better the overall flow rather than a limited area within it. The symbols used in the value stream maps in this report are as follows: Customer or Supplier

Delay (non-value added)

Process (value added)

Flow of Product

Decision Point or Alternative

Flow of Information

Transport

Information System

Elapsed time Touch time

Timing Chart

The following section provides a glossary of terms used in the value stream maps.

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Report 1: Case Study for Company 1 (Services Sector Involved in the Movement of Goods)

3.1 Value Stream Glossary The following definitions are used in value stream maps and Lean principles. Term Elapsed Time

Definition The time it takes to complete the tasks to make a product or provide the service including delays and interruptions within the process. Also known as throughput, turnaround, flow or lead time.

Non-Value-Add (NVA) Any operation or activity that consumes time and/or resources but does not add value to the service provided or product sold to the customer. (Some are necessary - i.e., regulatory requirements - while others are unnecessary.) Queue or Delay Time

Non-value added time spent waiting for a process.

Takt Time

Average demand for product or service expressed in units of time. Sets the pace for the operation; all processes need to produce at rate of demand. The calculation of takt time is available work time per day / customer demand per day.

Touch Time

The total time spent performing tasks to complete the product or provide the service without delays or interruptions within the process.

Transport

Physical movement of goods from one place to another. If the company performs the transportation, queue time is not included in the transport time. Otherwise, delay time is included in transportation time.

Value-Add (VA)

Any operation or activity the customer values (and would be willing to pay for).

Waste

The elements of the process flow (or lack thereof) that add no value to the service provided.

3.2 Current State vs. Future State Maps Current state value stream maps are typically developed to document current process flows and identify potential points of improvement. Future state maps are developed from the current state maps to design a lean flow that eliminates waste and improves the process flow. There are three basic Lean principles that are applied when designing future state value stream maps: ƒ 8 July 2009

Eliminate Unnecessary Non-Value Added

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Report 1: Case Study for Company 1 (Services Sector Involved in the Movement of Goods)

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Reduce Necessary Non-Value Added

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Optimize Value-Added

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In general, these are targets for improvements that can be achieved six to nine months out. Some of the tactical actions that can be taken include: ƒ

Eliminate steps / handoffs

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Merge steps

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Create parallel paths

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Implement pull if flow is not possible

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Reduce / eliminate batches

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Improve quality

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Create standard work

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Create an organized, visual workplace

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Eliminate unnecessary approvals / authorizations

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Stop performing nonessential (NVA) tasks from the customer’s point of view

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Co-locate functions based on flow; create teams of crossfunctional staff

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Balance work to meet takt time requirements

The following diagrams show the current state value stream maps for Company 1 shipments going to the United States for which it provides services. Future state value stream maps are outside of the scope of this study and were not developed. Note also that the information provided in the following maps is much greater than the original scope of the study: the breadth of products shipped by Company 1 necessitated a higher volume of maps to identify key delay areas. Common themes are outlined on the following page, followed by commodity-specific diagrams.

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eManifest - 1 hr prior to arrival - ½ hr for FAST

Carrier

ACE Ultimate Consignee

OR Entry Data CF3461 Submit prior to arrival

Impending shipment

Importer of Record

ABI/ACS

Broker

PORT LIMITS – within 25 miles of border crossing

Arrive at border

I 30 min

Primary Processing (incl. cab check for non-FAST)

Result

75% of shipments are released after primary processing

Depart

Release NO

3 min.

When directed to VACIS

To Secondary Processing

VACIS A. Random B. Blitz C. Directed

I 1 hr

90 sec

Finding

YES

To Secondary Processing Redeliver 20%

I 1 hr

Change Data Make Payment 15 min. NO

I I 1 hr

Initial Determination 15 min.

I

Open Doors (5%)

30 min. Finding

1 hr

Conditional Release (may lead to Request for Redelivery)

30 min

VACIS

90 sec

Return to Canada

Refuse and Return

1 – 2 hrs 0 min

0 min

On-site Mitigation Return Property

YES

I

30 min

I

6 – 24 hrs

3 – 4 hrs

I

Hold for Compliance (at CBP compound)

I

Detain up to a max. of 30 days

Detain (Must be exported if no decision has been made after 30 days)

I 30 min

Hold for Compliance (At CFS – space constraint at CBP)

I

1 – 2 days

1 hr.

- pay fine

Seize Shipment CBP disposes On-site or off-site 0 min - destroy - donate - auction

0 min NO

I 15 min. (C-TPAT)

LTL (C-TPAT)

I

De-van (at CES)

Finding

YES

Demand for Redelivery to CBP

24 hrs 30 min.

Return to Canada

8 – 12 hrs.

I 1 – 2 days

0 min

Customs and Border Protection Basic Shipment (Truck) March 5, 2009


1 hr prior to arrival ½ hr for FAST Acceptance Carrier

Shipper

ACE

- 5 – 7 min response time (3% rejections) - (3 – 4 times per year, ACE is overloaded, and response time is 20 min – 2 hrs) - monthly, ACE is “down”; there is provision for a manual process

- driver info - conveyance info - cargo info

Primary Processing

I Delays - SCN do not match: 1 hr - no entry data filed: 1 – 2 hrs - multiple ACE manifests: 1 hr + 1 hr mandatory - port code change: 2 – 3 hrs + 1 hr mandatory if not accepted at specific port; some ports accept changes without delay; only for non-FDA goods; FDA goods must refile manifest - if ACE is down, driver leaves a paper copy of the ACE cover sheet; this may lead to request for redelivery

COMPANY 1 eManifest March 5, 2009


Canadian Importer of Record

OR

Notification of Shipment - SCNs - commercial invoice

Carrier

ABI/ACS Broker

Create Entry File Submit Prior to Arrival - IRS EIN of consignee - country of origin - HTS# - MID#

- Accept - Accept With Warning - Reject

CBP

- small number of rejections of submission (could be a concern if truck is under way)

COMPANY 1 Entry Data March 5, 2009


Not scheduled for liquidation - CBP may hold on to entry summary indefinitely; no action can be taken after 5 years

Broker

I

Accept or Accept with Warning 99.9%

ABI/ACS CBP

- submit up to 10 business days after release of goods by CBP

- review entry summary - 30 days

CBPF28 (within 30 days) - anti-dumping - valuation - country of origin - NAFTA - new shipper

Reject 0.1%

Scheduled for Liquidation - Liquidation is usually after 314 days

Review by CBP Specialist

Request for additional data

COMPANY 1 Entry Summary March 5, 2009


Report 1: Case Study for Company 1 (Services Sector Involved in the Movement of Goods)

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3.3 Processes and Timing 3.3.1

General Processes for All Imports

E-Manifest ƒ

The eManifest pertains to the trip number, driver and conveyance information, quantity and description of product being shipped.

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The eManifest must be filed by the carrier one (1) hour prior to arrival. For carriers registered with Free and Secure Trade (FAST), the FAST manifest must be filed ½ hour prior to arrival.

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The data is filed through the Automated Commercial Environment (ACE) portal.

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If the system is off-line for maintenance or a failure has happened, there is a manual process in place. The ACE Cover Sheet is presented at Primary Processing in this case.

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Delays at the border can happen in the following instances: o No filing – one to two (1 - 2) hour delay o The Shipment Control Number (SCN) provided by the broker does not match the trip number filed by the carrier – one (1) hour delay o Multiple eManifest filings (for several ports, when it is not clear which port will be used) – one (1) hour delay + one (1) hour mandatory delay o Port code change (when the port is changed, and the universal port code is not accepted; for FDA shipments, port code change is not allowed) – two to three (2 – 3) hours delay + one (1) hour mandatory delay

Entry Data (CF3461) ƒ

The Entry Data pertains to the value and tariff aspect of the product being imported.

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The Entry Data must be filed by the broker prior to arrival of the shipment at the border. There is no specific time limit on the filing, but problems can occur if the filing is rejected and cannot be corrected in time

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The data includes the following: o Shipment SCN o Commercial invoice o IRS Employer Identification Number (EIN) or consignee social security number o Country of origin of goods o The Harmonized Tariff Schedule number (HTS#) o Manufacturer’s Identification Number (MID#)

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Report 1: Case Study for Company 1 (Services Sector Involved in the Movement of Goods)

Entry Summary (CF7501) ƒ

The data pertains to the value and tariff aspect of the product being imported, but is more extensive than the Entry Data

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This form must be filed within 10 days of the physical release of goods by CBP

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May be filed simultaneously with entry data

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The Entry Summary is usually scheduled for liquidation after 314 days

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CBP can retain the data indefinitely, but cannot take action on it after 5 years

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13


Broker

Copy

Form ATF 6 or 6a (permit for each shipment) (black powder only)

US Importer of Record - Explosives business license - ATF permit to import

Original

Carrier

Permit in cab

Shipper

Primary Processing

I - CBP officer looking for ATF6 or 6a, when not required - 1 day

COMPANY 1 Alcohol, Tobacco and Firearms Regulated Explosives Shipment March 5, 2009


Radioactive

Entry Data

Broker

ABI/ACS

- NRC Number (provide 24 hrs in advance) - by appointment Canadian Importer of Record

ACE

TSCA (Hazardous Materials)

eManifest

Certificate

CAS (hazardous waste)

Carrier

Certificate + statement of end use

MSDS (Safety guidelines in truck cab) Paperwork in cab

Shipper

I 24 hrs (nuclear)

Primary Processing

COMPANY 1 Hazardous Materials Shipment Hazardous Waste Shipment Radioactive Materials Shipment March 5, 2009


ABI/ACS Canadian Importer of Record

Mill Test

Broker

Submit cert at the same time as the Entry Summary

By mail

DOC

Steel License (Ch. 72 and ½ of Ch. 73 of United States International Trade Commission – Harmonized Tariff Schedule of the United States) At Entry Summary For: Each shipment Each Manufacturer Each HTC - Tariff code - Weight - Transport - Fax number - Shipper - Importer of Record - Manufacturer - Country of Origin

Shipper

Primary Processing

COMPANY 1 Customs and Border Protection / Department of Commerce Steel Shipment March 5, 2009


Canadian Importer of Record

Shipment Notice

Canadian Broker of Record

Resubmit

ABI/ACS

Trade for/ buy additional quota ACCEPT

Quota

REJECT

No Shipment

Softwood Lumber Permit - broker tracks quota and determines if shipment can proceed - shipper prints permit prior to crossing

Carrier

Maritime Lumber Permit - must have original

In cab

Shipper Primary Processing

COMPANY 1 CBP Softwood Lumber Shipment March 5, 2009


Importer of Record FD-0 Some will file Prior Notice directly with FDA

- regulated by FDA - no data collected

FD-1 - regulated by FDA - OASIS possible

Broker

ABI/ACS

HSC Code Flag

FD-2

Prior Notice Data to FDA - min. 5 minutes - av. 30 minutes - 2 hrs if FDA system overloaded

- regulated by FDA - OASIS required

FDA FD-3 - regulated by FDA - OASIS required - PNSI possible

FD-4 Carrier - regulated by FDA - OASIS required - 2 hr PNSI req’d FDA Documents

Shipper

In cab

“May Proceed” 75%

Primary Processing

Release

99%

Secondary Processing

I

FDA Takes Sample

Conditional Release

Sample Result - “High Priority”: 3 business days - “Low Priority”: 4 – 6 weeks

Hold Intact at Consignee

1%

Demand for Redelivery Or Destroy - FDA allows 90 days for redelivery - destruction under CBP/FDA supervision

COMPANY 1 FDA Regulated Shipment March 5, 2009


APHIS Hand Deliver

Canadian Importer of Record

Broker

APHIS Documents - original documents with signature only

Carrier

In cab

Shipper

100% Document Inspection 90% Skip Inspection

Primary Processing 10%

- APHIS officers available from 8am – 12 am during weekdays - CBP officers have been trained to carry out APHIS inspections, but not all feel comfortable with this task

Release

I 1 day

Secondary Processing

Hold or Refuse (1%)

- wrong docs - officer unwilling to act as inspector

COMPANY 1 Animal and Plant Health Inspection Service Regulated Shipment March 5, 2009


Annex Form 1 Beef & Veal - age - slaughterhouse

USDA

9540-1 Application to Import Meat By Fax

Importer of Record

Broker

Appointment for inspection Max 72 hrs in advance - date - port location - time

Signed and Stamped Meat Certification CF4546

After Inspection

Carrier

US Meat Certificate (CF4546) In cab

Shipper

CBP PROCESS

USDA Inspection within Port Limits (25 mi) Hrs of operation - Mon – Fri 2 pm – 10:30 pm - Sun after 4 pm (over time; request must be filed by Fri 12pm) - 2 hrs per inspection - 100% document inspection

10%

Physical Inspection

1%

Return/Destroy

99%

Release

90% Skip Inspection

COMPANY 1 United States Department of Agriculture Regulated Meat Shipment March 5, 2009


Canadian Importer of Record

Broker

Pre-Review filed and accepted by CBP at border (Quota Only)

ABI/ACS

By telephone

Check with CBP prior to shipment - e.g. textiles from China

Entry Summary (Quota Only) - name and address of mfg - country of origin - certificate of eligibility for free duty - or qualifies for NAFTA

Carrier

Paperwork In cab

Shipper

Primary Processing - issues found are primarily marking

COMPANY 1 CBP Textile Shipment March 5, 2009


Report 1: Case Study for Company 1 (Services Sector Involved in the Movement of Goods)

3.3.2

22

Special Processes for Selected Regulated Products

Import of Explosives Regulated by the Bureau of Alcohol, Tobacco, and Firearms (ATF) Product flow ƒ

Form ATF6 or ATF6a must be presented at Primary Processing when carrying black powder.

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CBP officers are authorized by the Bureau of Alcohol, Tobacco and Firearms to inspect loads of explosives.

ƒ

Delays may occur when an officer is expecting to see Form ATF6 or 6a, but the product is not black powder (but some other form of explosive). A delay of one day is sometimes required to clear up this confusion.

Information flow ƒ

The importer must be licensed to be in the explosives business.

ƒ

The importer must possess a license to import explosives.

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In the case of importation of black powder, Form ATF6 or ATF6a must be provided for each shipment.

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Only the standard one (1) hour prior notice applies to all shipments.

Import of Hazardous Materials: Toxic Substances, Hazardous Waste, And Radioactive Materials Product flow ƒ

At Primary Processing, the driver must present a certificate covering the particular product on board: o Toxic substances are covered by the Toxic Substances Control Act (TSCA). o Hazardous waste needs a certificate issued by the Chemical Abstract Service, as well as a statement of the intended end use. o Radioactive substances are controlled by the US Nuclear Regulatory Commission (NRC).

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In all cases of the transport of hazardous materials, the carrier must provide a Material Safety Data Sheet (MSDA) for each substance carried, which must be kept in the cab of the truck.

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See also case study in Company 7 for more detail on chemical producers.

Information flow ƒ

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In the case of radioactive substances, an appointment with CBP is necessary for crossing the border. It must be filed 24 hours in advance. All other shipments only require the standard one (1) hour prior notice.


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Import of Steel Regulated by the Department of Commerce Product flow ƒ

At the border, steel shipments are not treated differently from any other product shipment.

ƒ

No special paperwork is included with the shipment.

Information flow ƒ

Prior notice is the standard one (1) hour.

ƒ

Steel imports are regulated according to Chapter 72, and the first half of Chapter 73 of the United States International Trade Commission – Harmonized Tariff Schedule of the United States.

ƒ

There are no quotas.

ƒ

It is necessary to have a license from the Department of Commerce to import steel. It is presented at the same time as the Entry Summary. Included in the Entry Summary, for each shipment, for each manufacturer whose product is included in the shipment, and for each harmonized tariff code, is a mill test. Also provided is relevant information on the producer and shipper.

Import of Softwood Lumber Product flow ƒ

At Primary Processing, a permit to import softwood lumber must be shown.

ƒ

Shipments from the Maritime provinces require the original of the permit

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Shipments from all other regions only need a copy of the permit.

Information flow ƒ

Prior notice is the standard one (1) hour.

ƒ

The Canadian Broker of Record tracks the importers quota level.

ƒ

An application to ship is filed through ABI/ACS, which determines whether a shipment is acceptable or not.

ƒ

The broker is responsible for arranging for a trade or purchase of an additional quota allocation, if the importer has exhausted the current quota, and the application to ship is rejected. The broker can then resubmit the application to ship.

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Report 1: Case Study for Company 1 (Services Sector Involved in the Movement of Goods)

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Import of Products Regulated by the US Food and Drug Administration (FDA) Product flow ƒ

In addition to Primary Processing, the FDA inspector at the port inspects the shipment. This is usually just a document inspection. 75% of shipments receive a “May Proceed” decision at Primary Processing.

ƒ

When the FDA inspector is not present1 a requirement to hold the shipment intact at destination will be placed. This is typically lifted after the FDA inspection takes place the next working day.

ƒ

The FDA may choose to collect samples for testing. The truck is diverted to Secondary Processing. High Priority testing is complete in three (3) days; Low Priority testing can take four to six (4 – 6) weeks. The shipment must be held intact while testing takes place, and is released, or a demand for redelivery or destruction is issued. In cases of redelivery, the FDA allows up to 90 days for this to take place.

Information flow ƒ

Where an FDA inspection is required, two (2) hours prior notice is required. Otherwise, the standard one hour prior notice suffices.

ƒ

FDA required information includes: o Product description o FDA Product Code o MID# o Shipper o Country of origin

ƒ

Optionally, a shipper may include an affirmation of compliance, as well as quantity and value, as this will help speed the review process and is more likely to result in “May proceed”

ƒ

Products are classified into five categories, and when entry data is transmitted through ABI, ACS checks the HTS number submitted for other government agency (OGA) flags: o FD0 – The commodity is regulated, however, FDA has waived the requirement of entry notification o FD1 - Some products MAY require FDA data, other’s may not. Filers must either submit FDA data, or DISCLAIM the product o FD2 - All products within the tariff category require FDA data submission through the Operational and Administrative System for Import Support (OASIS). o FD3 – All products within the tariff category require FDA data submission and MAY be subject to prior notice requirements through the Prior Notice System Interface (PNSI).

1

FDA working hours are eight (8) hours daily, usually from 8am to 4pm, Monday to Friday

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Report 1: Case Study for Company 1 (Services Sector Involved in the Movement of Goods)

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o FD4 - All products within the tariff category require FDA data submission and ARE subject to PNSI requirements.

Import of Products Governed by the Animal and Plant Health Inspection Service (APHIS) Product flow ƒ

At Primary Processing, only original APHIS documentation with a signature, is acceptable.

ƒ

APHIS officers are available from 8am to midnight, Monday through Friday. Regular CBP officers have been trained to carry out APHIS inspections.

ƒ

The usual inspection is 100% document inspection, and about 90% of physical inspections are “skip inspection.”

ƒ

Diversion to Secondary Processing is usually the result of presenting incorrect documentation, or a CBP officer unwilling to act as APHIS inspector. Delays of about one day can result.

Information flow ƒ

No special prior notice is required beyond the standard one (1) hour.

ƒ

The broker must hand deliver documentation to the APHIS office located in the port.

Import of Meat Products Regulated by the US Department of Agriculture (USDA) and the US Food and Drug Administration (FDA) Product flow ƒ

The truck must arrive within the 72 hour window set, when the application to import meat into the US was made.

ƒ

At Primary Processing, the driver must present USDA Form 9540-1, the Application to Import Meat, as well as the US Health Certificate.

ƒ

In the case of beef and veal, USDA Annex Form-1, a certificate of age and which slaughterhouse processed the animal, must also be presented.

ƒ

The truck must proceed to the USDA inspection house, which is within port limits. All shipment documents are inspected visually. Physical inspection ranges from skip inspection, to complete inspection and sampling.

ƒ

Inspection hours are typically 2pm – 10:30pm, Monday to Friday. By special arrangement, inspections can be done on Sundays after 4pm.

ƒ

The completed USDA Meat Certificate, Form 4546, is presented for the inspector’s signature and stamp.

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Report 1: Case Study for Company 1 (Services Sector Involved in the Movement of Goods)

Information flow ƒ

The broker faxes USDA Form 9540-1, making an appointment for an inspection of a meat product.

ƒ

When the inspection is complete, the Canadian exporter receives USDA Form 4546, the Certificate of Inspection.

Import of Textile Products Product flow ƒ

The Tariff Preference Level (TPL) document is presented at Primary Processing

ƒ

Textile shipments subject to quotas can only cross between 8:30am and 2:30pm

ƒ

Most textile shipments are diverted to Secondary Processing due to the complexity of textile importation

ƒ

Delays are in the range of 30 to 90 minutes

ƒ

Longer delays are usually the result of mistakes in marking. Correction can be done at a Container Freight Station (CFS) within the port limits.

Information flow ƒ

A textile shipment must be pre-cleared with CBP, usually via telephone

ƒ

Additional information pertains to: o Name and address of manufacturer (cut and finish) o Country of origin of material, yarn, and fibre used

ƒ

8 July 2009

The standard eManifest is used, and prior notice is the standard one (1) hour

26


Arrive at border

I

1. Basic border crossing process 30

Queue time = 30 min 3

2. Basic border crossing process + directed to VACIS (random, blitz, or directed)

Arrive at border

I

Release

Primary Processing

Primary Processing

Touch time = 3 min.

I 60

30

Queue time = 90 min 1.5

3

3. Basic border crossing process + Correct data or pay fee

Arrive at border

I

Primary Processing

30

I

Arrive at border

I

60

Primary Processing

30

5. Basic border crossing process + Open doors + Detain

I

15

I

I

Initial determination 60

Primary Processing

30

Initial determination

60 3

Open Doors

Touch time = 258 min.

I Detain Up to 43200

60 15

I

Queue time = 150 min 240

I

Release

Open Doors

60

I

30

Arrive at border

I

15

3

6. Basic border crossing process + De-van (nothing found)

Touch time = 18 min.

Initial determination

60

Primary Processing

Release

Queue time = 90 min

3

Arrive at border

Touch time = 4.5 min.

Correct data Pay fee

3

4. Basic border crossing process + Open doors (tailgate inspection) – no finding

Release

VACIS

I Detain Up to 43200

Decision to Detain

I

Touch time = 258 min.

Release

De-Van

1440 0

15

Queue time = Up to 43350 min 0

240

Release

Decision to Release

Queue time = 43350 min 720

Touch time = 738 min. On-site Mitigation Return Property

7. Basic border crossing process + De-van + Seize

Arrive at border

I

Primary Processing

30

I

Initial determination

60 3

15

I Detain Up to 43200

Decision to Detain

I

De-Van

1440 0

I

Decision to Seize

60 360

CBP disposes On-site or off-site Queue time = up to 44790 min

0

COMPANY 1

Touch time = 378 min. Timing Charts March 5, 2009


Report 1: Case Study for Company 1 (Services Sector Involved in the Movement of Goods)

3.3.3 #

28

Possible (Typical) Delays at Port of Entry Step

Observations

Timing

Typical Delays

8 July 2009

1 Primary Processing

Non-FAST drivers present citizenship and identity document(s), the bill of lading and the customs invoice. The CBP officer accesses ACE, and ensures that all information is present and correct. The driver’s status is checked. If no issues are found, the truck is released. For FAST drivers, citizenship, identity and low risk status are pre-determined using RFID vicinity technology and no document presentation at Primary Processing is required.

3 min.

2 VACIS Exam

The truck may be sent through the Vehicle and Cargo Inspection System (VACIS) based on random searching, directed inspection, or if there is a blitz in progress.

1.5 min.

3 Secondary Processing

When a problem is found at Primary Processing, the truck 75 min. is directed to Secondary Processing. In most cases (about 20% of all loads), paperwork needs correction, or a fee needs to be paid (when a carrier chooses to pay by entry instead of annually). Lineup at the counter is usually 60 minutes. Paperwork is usually corrected in 15 minutes; fees are paid in 5 minutes. FAST drivers have head of line priority.

4 Open Doors Examination

If the initial determination leads to a decision to inspect the shipment, this usually takes the form of a tailgate or open doors inspection. The trailer doors are opened (the seal is cut by CBP), and in some cases one or two pallets up to entire contents are off loaded. In addition to the 60 minute wait at the counter, the inspection may take up to four hours, depending on congestion.

300 min.

5 Detain

When further problems are found, CBP may choose to detain the shipment, while further investigation takes place. If there has been no resolution after 30 days, the shipment must be re-exported to Canada.

30 days


Report 1: Case Study for Company 1 (Services Sector Involved in the Movement of Goods)

#

Step

6 De-van

8 July 2009

Observations

29

Timing

When CBP chooses to carry out a complete examination, 1.5 days on suspicion of contraband being on board, it will carry out a de-vanning. This can go as far as taking the load and vehicle apart, to examine it in detail. This is usually done at a Container Examination Station (CES), a secure facility within the port limits. Depending on congestion, the truck can wait for a day, and the de-vanning will take up to 12 hours. Seizure will result if contraband is found. This will lead to one of several outcomes: (1) On-site Mitigation (usually a fine) and return of the property to Canada; or (2) CBP destroying or auctioning the goods, or perhaps donating them to institutions, such as jails and other public entities.


Report 1: Case Study for Company 1 (Services Sector Involved in the Movement of Goods)

4.

30

Key Findings

4.1 Summary 1) Shipping Steps / Wait Time

2) Regulatory 3) Logistics 4) Security Requirements/ Related Issues Issues Issues

ƒ CBP Officer ƒ Lacey Act Training, Experience and Port Inconsistency ƒ Intra-Supply Chain Problem with Carrier Hesitating to Supply Shipper with SCN

ƒ FDA Shipments Restricted from Changing Ports

ƒ None noted

5) Existing Programs & Initiatives to Address Issues

6) Compliance Cost Data

7) Observations / Gaps

ƒ FAST and C-TPAT Programs Effective ƒ IRS Personal Tax Identification Number ƒ ACE Messaging

ƒ SCN ƒ Shipper Does Duplicates Not Take Heed PAPS Code of Advice of Causing Service Provider Conflict and ƒ FDA Hours of Delay Operations ƒ Inconsistency between CBP Ports ƒ Implementation of APHIS Fee from Canada into U.S. ƒ Universal Port Code Not Working

4.2 Findings The following are the key findings and issues identified by the project team.

4.2.1

Shipping Steps / Wait Time

CBP Officer Training, Experience and Port Inconsistency Experienced border users find that individual officers are not conversant or familiar with a number of policies and procedures, and therefore result in extended discussions and delays in which the border user is correct. It is apparent that training of new officers can be improved. Port management varies with respect to utilization of standard policies and procedures.

Intra-Supply Chain Problem with Carrier Hesitating to Supply Shipper with SCN The carrier is held responsible and often wants to remain in the mainstream of the transaction, and therefore some are hesitant to provide the SCN to the shipper.

8 July 2009


Report 1: Case Study for Company 1 (Services Sector Involved in the Movement of Goods)

4.2.2

31

Regulatory Requirements/Issues

Lacey Act The Lacey Act (part of U.S. Farm Act) requires labelling of genus, species, and country of origin of every wood product. This goes in effect April 1, 2009 for Lumber and Furniture; July 1, 2009 for Pulp, Paper, Paper Products, Musical Instruments; September 30, 2009 for Oil Seeds, Cork, Toys, Games, Sports Equipment.

4.2.3

Logistics Related Issues

FDA Shipments Restricted from Changing Ports FDA shipments are limited to arrive at the CBP Port of Entry specifically submitted in eManifest. In situations of weather, accidents or extensive queues at a particular port, a carrier may want to divert to an alternative port but cannot do so if carrying an FDA shipment.

4.2.4

Security Issues

No security issues were noted by Company 1 at the Canada/U.S. border.

4.2.5

Existing Programs & Initiatives to Address Issues

FAST and C-TPAT Programs Effective Company 1 found both FAST and C-TPAT programs to be very effective.

IRS Personal Tax Identification Number The CBP requirement for an IRS tax identification number to be provided on commercial invoices functions appropriately with the Employer Identification Number (EIN) assigned to a business. However, when the ultimate consignees are not businesses, their personal social security is demanded. This is a situation which results in the majority of individuals refusing to supply this information (understandably so, with identity theft as a major concern). This results in refusal of business without this information.

ACE Messaging The Automated Commercial Environment (ACE) program being developed does not communicate efficiently with the Automated Commercial System (ACS) on which the legacy system currently continues to operate. When downtime occurs, effective alternatives to facilitate border crossing have not yet been perfected.

8 July 2009


Report 1: Case Study for Company 1 (Services Sector Involved in the Movement of Goods)

32

When an ACE message is received that a truck shipment has not met the one hour pre-arrival notice and cannot proceed to the border, the message does not reflect what segment of the supply chain (shipper, broker, carrier, or driver) must act to resolve the situation.

4.2.6

Compliance Cost Data

Shipper Does Not Take Heed of Advice of Service Provider The service provider noted, on occasion, giving shipper specific proper information to follow and the shipper chooses not to do so, resulting in problems at the border.

FDA Hours of Operations The stringent requirements for FDA inspection involvement at the border results in shipments being delayed or detained if trucks arrive at the border outside of FDA’s limited hours of operation (typically 9:00am to late afternoon, Monday through Friday).

Inconsistency between CBP Ports Company 1 providing shipment services to various CBP ports found differing requirements for the same shipments. This is representative of a number of incidents in which the same shipping situation arriving at one port is treated differently than at another.

Universal Port Code is Not Working Under the ACE initiative, the intended outcome was that once a trip code was inputted into the system, it could arrive at essentially any commercial U.S. port of entry (Universal Port Code). This was a top priority of border users, was highly anticipated and extremely cost effective. Unfortunately, the Universal Port Code is not accepted at some ports and results in carriers inputting multiple eManifests for different ports for the same shipment. Upon arrival by the carrier, it leaves orphaned eManifests that must be removed and reconciled at a cost to the broker. Further, if a truck arrives at a port different than what is stated in the system, it is very costly in time entry and, in some cases, entry is denied. Company 1 indicated that it had several full-time employees dedicated to correcting orphaned manifests and SCNs.

Implementation of APHIS Fee From Canada into U.S. The Animal Plant Health Inspection Service fee is being collected at the physical border rather than an off border charge or budget line for CBP.

4.2.7

Observations

SCN Duplicates PAPS Code Causing Conflict and Delay PAPS codes assigned to service providers are valid for 4 years and are sometimes duplicated by SCNs. These cause conflicts and delays. 8 July 2009


Report 1: Case Study for Company 1 (Services Sector Involved in the Movement of Goods)

33

4.3 Quantitative Results Company 1 is privately held and cannot disclose total shipments in its US-Canada logistics business. The scale for Company 1 is within the top 5 of its type of business and the volumes are in the millions a year. Description

Frequency per Year

Shipments to the U.S. served

Millions

To CBP Secondary with Release (24%)

Millions

To CBP Secondary with Inspection (1%)

Tens of thousands

Unaccounted for (“lost�) shipments

8 July 2009

40,000


Report 1: Case Study for Company 1 (Services Sector Involved in the Movement of Goods)

5.

34

Border Crossing Costs Border-related costs, which are quantified on an annual basis for Company 1, can be categorized into one of two groups: compliance costs and other costs (i.e., due to delays, certification/ maintenance for facilitation programs, etc.). Compliance costs consist of the number of full-time equivalents (FTEs) employed by Company 1 to comply with all basic border crossing requirements. Other costs are associated with reconciling “lost” shipments. These are for goods shipments that are processed through CBP, are approved for “conditional release” and arrive at the importer’s location but are never released by CBP. Company 1 employs staff specifically to identify which shipments are “lost” and bring them to the attention of CBP to receive full release of these items.

Category Compliance

Cost Drivers

FTEs

Although Company 1 has numerous staff employed specifically for compliance, it is a service provider for border processing. While employing FTEs is a cost, an increased number of transactions for compliance actually results in net revenue to Company 1 and is not counted as a cost.

Other Employees specifically assigned to address Reconciling shipments that arrive but are not released by “Lost” Shipments CBP. Annual Total * The assumed cost of an FTE for Company 1 is $80,000.

8 July 2009

Cost* Not applicable

3.5

$280,000

3.5

$280,000


Prepared by InterVISTAS Consulting Inc. Airport Square – Suite 550 1200 West 73rd Avenue Vancouver, BC Canada V6P 6G5 Telephone: 604-717-1800 Facsimile: 604-717-1818 www.intervistas.com


Cross-Border Flow Analysis - Case Study for Services Sector Involved in Movement of Goods