CBP wants to update the Customhouse Brokers role in the trade process
The Role of the Broker-Regulatory Revision Workgroup was established January 2011 by CBP in partnership with the National Customs Brokers and Forwarders Association of America (NCBFAA) to work collaboratively to develop solutions to meet the challenges of 21st Century commerce as it relates to their vital role. The key concepts of this initiative is to leverage broker relationships to extend the opportunity for small and medium enterprises to be recognized as trusted partners, while also allowing for established “best practices” within the industry. CBP is currently spearheading two projects to modernize the role of the broker, Broker Pre-Certification and Broker Regulation Redesign. Brief descriptions of these programs follow below:
Broker Pre-Certification
Brokers who apply and are accepted into the Importer Self-Assessment Pre-Certification Program (ISA-PC) will perform the comprehensive review of the ISA applicant’s package and evaluate the applicant’s readiness to self-govern and participate in the ISA program. The accredited broker will draft a final report on the applicant’s ISA readiness and submit it the Partnership Programs Branch for processing and validation. If there are no anomalies, the report will be scheduled for ISA Review Board approval/certification.
Broker Regulation Redesign
Current broker regulations have not kept up with advancements in technology and the facilitation goals of the agency. CBP is attempting to address this through amendments to the regulations that will-
Clarify brokers’ responsibilities related to importer validation and provide greater visibility of importers.
Modernize the regulations to align with current electronic capabilities and business practices. These modernizations could result in decreased administrative costs for both CBP and customs brokers.
Reinforce the broker’s responsibility to exercise due diligence in conducting business and to “professionalize” the customs broker by introducing a continuing education requirement.
All the practical implications of the Food Safety Modernization Act of 2011 (now Public Law 111-353) are not yet spelled out when it comes to the trucking industry. What is clear, however, is that the new law, if it withstands post-enactment efforts by opponents still seeking revisions and/or financing cuts, will further tighten federal control over the transportation of food – from equipment and procedures to traceability and accountability.
Section 111 of the new law, for instance, requires the Health and Human Services secretary to “promulgate regulations onsanitary transportation practices for the transportationof food,” and also requires theFDA (Food and Drug Administration) “to conduct a study on the transportation of food, including the unique needs of rural and frontier areas.”
Section 204 requires the Health and Human Services secretary to “improve tracking and tracing of processed foods and fruits and vegetables that are raw agricultural commodities in the event of a food-borne illness outbreak; and establish standards for the type of information, format, and time frame for persons to submit records to aid the secretary in such tracking and tracing.”
The Food Safety Modernization Act is, by no means, the first and only move to help assure that food remains safe to eat from farm to the fork. Shippers of some cargo, like perishable food and pharmaceuticals, have been asking fleets to step up and assume additional responsibility for the integrity and safety of their cargo for some time.
They are and have been requiring carriers to deploy technology to help assure the integrity and safety of their goods and, in the case of temperature-controlled food for instance, also help to reduce spoilage and loss. The shippers’ customers’ in this case are the ones holding the whip handle, according to Dr. John Ryan, president of Ryan Systems. Ryan has spent over 25 years implementing high-technology quality control systems and is credited with piloting the first farm-to-fork, Internet-enabled food traceability system using sensors and RFID technology to help get the job done.
“Mostly, the suppliers’ customers are the ones who want to know the data about the perishables they are paying for,” he says. “They are driving this because they are the ones on the front line facing the customer, the end user. Their message is plain: You are responsible for what you are shipping to me.”
The good news, according to Ryan, is that technologies are available that are equal to the task.
“Technology is actually pretty good,” he says. “You can use sensors to get temperature readings at the pallet level and you can use GPS to track the load and cellular technology to transmit the temperature data in real time. We can also use sensors to detect tampering or find explosives. There is a lot of new sensor technology coming on line now,” Ryan adds, “which will provide real-time visibility to a number of other variables.
It is not just food safety and liability issues that are driving the need for better cargo-specific information, he notes. Food spoilage in transit is also “a huge issue.” Approximately 5 to 7% of food is lost in transit. In this case, using technology to monitor temperature and to optimize cargo loading and routing can be a big help.
“Produce with the shortest shelf life should be delivered first and through the shortest route,” Ryan notes, “in order to give that retailer the most shelf life possible. Technology makes that doable.”
Ryan lists three primary technologies on his solutions list: “RFID (Identification, Location and Condition ), Global Positioning Systems (GPS), Geographic Messaging Service (GMS) and new sensing technologies, that can add real-time status reports in terms of “on-time delivery of goods, global positioning, in-transit temperatures, humidity, shock, acceleration, tampering, explosive detection, contamination detection, pre-notification for port authorities, while providing e-mail or cell phone alerts for out-of-control conditions.”
In his article called, “Quantum Traceability,” Ryan notes that, “These technological changes represent a major breakthrough for the food safety and food quality arenas in terms of reducing (or appropriately assigning) recall liabilities, providing longer shelf life and higher quality to buyers, while meeting governmental transportation control requirements.” These tougher standards will apply to food from home or from far away—food transported along local and relatively short supply chains or along global chains that wrap around the world.
As a general rule, most citizens don’t presently worry much about the safety of eating every pickle and chip, each salad and crust. At home or away, Americans graze unfazed on food from around the globe. There is asparagus from Peru, coffee from Africa and farm-raised shrimp from Bangladesh. Ginger makes its way from China to meet up with onions and peppers from Mexico in a tasty stir fry with lamb from New Zealand. Although dinner may have traveled farther than the diner will in a lifetime, it goes unremarked.
One reason diners don’t usually have to be concerned is because so many others have been doing the fussing for them, watching over temperatures and worrying about contamination (accidental or intentional). Motor carriers involved in the transport of food, however, may find still more responsibilities on their plates in the future. It is definitely something to chew on.
Department will work more with trade partners to share information, manage risks
Homeland Security Secretary Janet Napolitano said Monday that security efforts will rely heavily on risk management and information sharing with trade partners to secure the movement of goods and people.
“Good, thoughtful, sensible security by its very nature facilitates lawful travel and legitimate commerce,” Napolitano said. “Simply put, our homeland security and our economic security go hand-in-hand.”
“The key to evaluating potential risk is information — by sharing and leveraging information, we can make informed decisions about how to best mitigate risk,” Napolitano said. “And the more we know, the better we become at providing security that is seamless and efficient.”
Napolitano said the department had more than doubled the size of the Border Patrol to protect the border between ports of entry. Now DHS will work on improving infrastructure at border crossings to make them more efficient. The department spent $400 million of stimulus funds to improve facilities on the Canadian border, and expansion of the ports of Nogales, Ariz., and San Ysidro, Calif.
“These efforts are not only speeding legitimate trade, but they are also stopping illegal goods from entering the country — goods that can undermine domestic businesses that play by the rules,” Napolitano said. She said the U.S. is working closely with the Canadian and Mexican governments to expand trusted shipper and traveler programs.
Within the next year, Laredo officials say local custom brokers could begin operating under more flexible rules for the creation of duty-free zones that would allow more rapid shipment of goods.
City staff is preparing an application with the U.S. Foreign Trade Zones Board to reorganize Laredo’s Foreign-Trade Zone No. 94 as a county-wide alternative site framework.
Customs brokers currently must operate within seven designated zones or undertake a months-long application process to approve a site elsewhere.
Under the proposed arrangement, designating a warehouse a foreign trade zone site would take a matter of weeks.
A foreign trade zone allows merchandise to enter the United States free of duties as long as it remains within that location.
“The product never actually enters the economy of the United States,” explained Tim Franciscus-Timm, Laredo Airport marketing director.
Foreign Trade Zone 94, which was established in Laredo nearly three decades ago, designated seven sites.
Those locations include: Laredo International Airport, the Tex-Mex railroad switching yard, Killam Industrial Park, Unitech Industrial Park, Embarcadero Industrial Park, a site at Colombia Solidarity Bridge and the still-undeveloped La Barranca Ranch.
Four other trade locations outside of those sites have been established through a time-consuming process called temporary boundary modification.
The most recent boundary modification approved in the city created a Foreign Trade Zone site for Sony Corporation in East Point Industrial Park.
After receiving priority assistance from the city, the site was approved in 45 days by the Foreign Trade Zones Board, part of the International Trade Administration.
That was the fastest approval for a temporary boundary modification so far.
Others have taken between eight and nine months for approval.
The alternative site framework would allow a company to apply to be an operator within the trade zone and be approved within two weeks, Franciscus-Timm said.
“If you want to set up a warehouse anywhere in Webb County, it is a much shorter process, it’s a much simpler process … to set up a foreign trade zone,” he said.
Guillermo Aguilar, owner of Infinito Global Logistics, currently operates out of Unitech Industrial Park Foreign Trade Zone.
The new arrangement would not provide any advantage to his business, but he said it would be good for the community as a whole.
He said the customs process allows goods to leave a foreign trade zone location at high speed compared with manual inspection at bonded warehouses.
The largest commodity to flow through Laredo is automotive goods.
Aguilar said a plant shutdown could cost hundreds of thousands of dollars, so a flexible and quick moving supply chain is critical for the industry.
Foreign trade zones allow Laredo warehouses to operate as distribution centers, shipping parts originally from Asia to a manufacturer in Mexico at a moment’s notice, he said.
“They can have a ready supply here in Laredo that can hit Monterrey in three hours, San Luis Potosi in eight or Mexico City in a day,” Aguilar said.
Fifty-four communities have already converted foreign trade zones to an Alternative Site Framework, including five in Texas.
Eighteen more have applications pending approval.
Tucson and San Diego are the only border cities to establish the new framework.
Laredo City Council authorized city staff to move ahead with the application process at its Jan. 17 meeting.
The city’s bid will call for the foreign trade zone to cover all of Webb County, the most common type of application.
Tim Truman, a spokesman for the International Trade Administration, said the approval process for alternative site frameworks typically lasts about six months.
Customs and Border Protection would continue to bear responsibility for inspecting and verifying the goods leaving the foreign trade zone.
And the input of the local Customs port director will be a large factor in the board’s approval of the application.
The new framework could help foster competition in the foreign trade business in Laredo, said Victor Gonzalez, president of the Laredo Licensed U.S. Custom Brokers Association.
“It just makes it a lot more easy to activate their current facilities (as foreign trade zones) wherever they may be,” he said.
“It helps businesses be more flexible.”
Franciscus-Timm said the city would also use the designation to promote Laredo as a destination for international commerce.
If the application is approved, it would be included in the city’s pitch to the industry at the annual Foreign Trade Zones Board conference in September in San Diego.
By Jeff Berman, Group News Editor
January 25, 2012
For every shipper, the topic of supply chain security is always top of mind. That is why I was not entirely surprised to see today that the White House has issued what it’s calling the “National Strategy for Supply Chain Security.”
In describing this strategy, the White House highlights the fact that “International trade has been and continues to be a powerful engine of United States and global economic growth. In recent years, communications technology advances and trade barrier and production cost reductions have contributed to global capital market expansion and new economic opportunity. The global supply chain system that supports this trade is essential to the United States’ economy and security and is a critical global asset.”
It also cites the myriad global and domestic supply chain disruptions that have occurred in recent years, including: Hurricane Katrina in 2005, the eruption of the Eyjafjallajokull volcano in Iceland in 2010, and the Japan earthquake and tsunami of 2011; failing infrastructures such as the I-35 bridge collapse in 2007; terrorist attacks such as 9/11, and more recent plots involving air cargo shipments filled with explosives shipped via Europe and the Middle East to the United States.
Because of unfortunate incidents like this, the White House points out that even localized disruptions can escalate rapidly and impact U.S. interests and the broader global community, adding that the U.S needs to address challenges created by these threats and take steps to augment its national and international policies as needed.
At the heart of this effort are two primary goals:
1-to promote efficient and secure movement of goods; and
2-to foster a resilient supply chain
The White House said that the U.S Departments of State and Homeland Security will endeavor on a six month engagement period with the international community and industry stakeholders to solicit feedback and specific recommendations for how to implement the strategy in a cost effective and collaborative manner, with a focus on things like refining the nation’s understanding of global supply chain threats and risks over land, air, and sea, among others.
There is more to the plan than what has been written, and LM will take a deeper dive in an online news story very soon. But given the relevance and scope of this plan, I felt the need to get it “out there” as soon as I saw it. On the surface, this plan appears to have very good intentions that transcend party lines—and that is a good thing. I am definitely looking forward to see what happens with the National Strategy for Supply Chain Security.
The following article was published in Homeland Security Today and written by Jim Giermanski. His credentials appear at the end of the article. I don’t agree with most of Dr. Giermanski’s remarks and my comments appear in ITALICS/BOLD below.
Cross-Border Drayage And US Security
January 17, 2012
As taken from an article that appears in the publication HOMELAND SECURITY TODAY.
By: Jim Giermanski
It’s well documented that commercial truck traffic entering the United States from Mexico as is currently practiced poses a serious threat to America’s security.
There is always a threat regardless of the origin of goods entering the U.S.
There are many weaknesses in the system designed and controlled by Mexican citizens with the blessing of the US government, but the most serious flaw may be the resultant drayage, or transfer system, of crossing commercial cargo. The drayage system is just one of the many related security risks.
But a necessary one for the most part.
The risks also include drop lots, or pensiones as they are called in Mexico, that are monopolized by Mexican customs brokers on the border, and the less-than-truck load (LTL) motor carrier crossings that are reliant upon the drayage system.
I know few Mexican Customs Brokers who own drop lots or pensiones.
The general Mexican motor carrier system and its cross-border component, drayage and LTL, are all cross-border cargo activities that pose inherent security weaknesses that US Customs and Border Protection (CBP) accepts as normal.
See my response in paragraph #1
Mexican motor carriage into the US
The Mexican shipper contacts the Mexican long-haul carrier to pick-up cargo destined for the United States. Since the carrier is not responsible for customs documentation, all shipping and any customs documentation is sent to a Mexican customs broker before the carrier even arrives.
Documents are sent to both Mexican and U.S. Customhouse Brokers most of the time simultaneous
In Mexico, the long-haul or line-haul motor carrier who picks up the goods from the shipper destined for the US does not actually take the goods directly to the United States. Instead, it takes the goods to the border where it drops them and returns to its originating terminal. The carrier is merely the means of moving cargo from Mexican origin to its destination: the Mexican side of the border.
The Mexican long-haul or line-haul motor carrier brings the load from the originating shipper in Mexico and this trailer is dropped of in most cases at their company owned terminal at the border. These loads are not release from their lot until Mexican Customs clearance documents (Pedimento de Exportacion), U.S. Customs Inward Cargo Manifest and U.S. Customs E-Manifest are prepared. In most cases the E-Manifest is prepared by the Mexican Carrier or Drayage company from information prepared by the U.S. Customhouse Broker on the Inward Cargo Manifest. There are now many Mexican long haul carriers who have their own drayage trucks to do their own drayage. This eliminates the need to contract this part out to a third party drayage company. Many U.S. carriers now have exclusive interchange agreements with reputable Mexican long haul carriers, making the supply chain more secure.
Mainly because of Mexico’s tax code, the Mexican long-haul motor carrier normally carries a completed bill of lading to the shipper because the Mexican tax code requires the motor carriers’ bill of lading be printed by an entity authorized to do so by the Mexican Department of Treasury. The Mexican carrier is legally responsible to the tax authorities to show the following taxable charges:
Freight charges;
Declared value surcharge;
Tollway charges, if any;
IVA (value added tax); and
Carriers’ Tax Identification Number
But because the Mexican long-hauler is not carrying an international shipment of goods to any place other than a domestic location in Mexico, it seems more concerned with its Mexican tax reporting responsibility than any other shipping instructions, logistics information or content verification.
Shipping instructions are in addition to the bill of lading, which is the actual contract for carriage. Thus, Mexican line-haul carriers are not concerned about customs data or verifying the actual content because they merely haul to the border, drop the trailer/container or LTL cargo at drop lots or Mexican truck terminals on the border where the drayage carrier picks it up and physically brings the goods into the United States. Both the long-haul and drayage carriers – which often are unrelated – simply claim to be carrying what the shipper said was in the container.
With the advent of the Customs and Trade Partnership against Terrorism (C-TPAT) program in 2002, many Mexican long haul carriers and drayage carriers have revamped their operations and have made great strides in complying with C-TPAT requirements. With pressure from exporters and importers alike, the Mexican carriers now must go through a very complete check list before any shipment is moved from the exporter premises. This includes review of all export documentation; seal verification, product verification, 18 point trailer inspection list, and most importantly know who the exporter is and require that they too are partners in C-TPAT.
Drayage
After the goods arrive at border drop lots or truck terminals, the Mexican customs broker handles all the documentation that’s necessary to bring the goods into the US. In effect, the Mexican customs broker releases, or “frees,” the goods for entry into the US by filing a document called the Pedimento de Exportacion.
The Mexican customs broker does not handle the documentation necessary to bring the goods into the US. He handles the paperwork to export the goods from Mexico. All documentation necessary to import the goods into the United States commerce are prepared by a licensed United States Customhouse Broker.
The Mexican customs broker also works with a US customs broker to coordinate the US customs entry. Compared to the shipper and original line-haul carrier, the drayage carrier really knows the least about the contents of the trailer or container. Nonetheless, the drayage carrier files documentation into CBP’s Automated Commercial Environment (ACE) portal through a third party that has authority to file, but who knows less about the cargo.
The Mexican long haul carriers or drayage company, in their efforts to efficiently cross the shipments into the United States, in most cases prepares the Electronic Manifest (e-manifest) from information they receive from the U.S. Customhouse Broker and information listed on the Inward Cargo Manifest. The e-manifest calls for information on the driver, tractor, plates, and cargo description. The main reason most drayage companies or Mexican long haul carriers prepare the e-manifest is that they can assign the loads to a driver who is ready to cross the loads immediately. If the U.S. Customhouse Broker prepares the e-manifest (and many do) he must be given the drivers name and information on the crossing tractor and plates. If for some reason that particular driver is busy crossing another loads the carriers can go into the ACE portal and change the driver and tractor information if they were the ones that prepared the original e-manifest.
Importers of Record can file their own entries in ACE and US brokers can file entries in ACE for their Importers of Record as long as they have a properly executed Power of Attorney.
(Yes)
In Mexico, the Mexican customs broker is held responsible for what is presented to Mexican customs based upon current Mexican law. Regardless of the total number of shipments on the trailer’s manifest, only one Mexican customs broker can be represented on the manifest. No comingling of brokers is allowed. This means that regardless of whether something illegal was placed into the load, the Mexican customs broker will most likely be the party initially held accountable if found by CBP at the border crossing port of entries. The drayage driver will be detained as part of a CBP investigation.
The initial part of this comment is correct in that Mexican law does not allow for comingling of loads from several brokers, but the end statement that the Mexican broker will most likely be the party initially held accountable is totally false and the accountable party on the onset is the driver as “the captain of the ship”, and the accountable party will be addressed by CBP after a thorough investigation is completely done on all parties involved.
And that means that the transfer carrier who makes multiple trips per day with multiple cargo dropped by unrelated long-haulers (not true, very general) at unsecure drop lots (not true, very general) files official entries through a 3rd party that has an ACE account and authorized to do so by CBP.
Not true very general
It should be noted that the party filing the manifest into ACE is taking the word of the entity that originally created the documentation. In addition, after the drayage carrier picks up the goods, there is no certainty that the driver will bring the goods directly into the United States or proceed to a location where the trailer/container is illegally accessed for the purposes of inserting contraband into the conveyance or shipment. If the drayage carrier utilizes a pickup truck or flat bed/stake truck, the ability to secure the conveyance with a CBP Customs Trade Partnership Against Terrorism (C-TPAT) compliant seal is not possible, thus leaving open the possibility of contraband being introduced into the load.
The party filing the e-manifest via ACE is getting the information from the Inward Cargo Manifest sent to him by the U.S. Customhouse Broker. The drayage carrier is released the load from the Mexican line haul carrier who notes the time the load leaves the carriers yard (all C-TPAT procedures). There is a “window” of time in which the driver has to get to the crossing point once he leaves the carriers yard. Under C-TPAT guidelines if this window of time goes over the allotted limits it is the Mexican Carriers responsibility to advise CBP. Many C-TPAT drayage carriers now have GPS or satellite tracking systems which shows if the driver veers off his authorized route or goes over the allotted time limit to cross the load into Mexico, thus making it very difficult for them to insert contraband into his conveyance.
Drayage companies are normally not participants in C-TPAT, and their truck drivers are not always vetted as part of CBP’s Free and Secure Trade (FAST) Driver Card program. FAST cards are Western Hemisphere Travel Initiative (WHTI) compliant documents for entry into the US by land or sea and afford expedited release to approved commercial truck drivers making fully-qualified FAST trips between the US and Canada, or to the US from Mexico. The use of these cards allows the driver entry into the US without the need of a passport or other legal entry document
. I can only address this by saying that at the main ports of entry on the southern border, over 30% of all shipment imported into the United States utilize the FAST lanes where only the complete secure supply chain (exporter, Mexican long haul carrier, drayage carrier, and importer) are all C-TPAT certified or validated. At the port of Laredo, TX over 1100 truck per day are processed using the FAST lane. In order for a driver to obtain a FAST card, he must go through a rigorous process, finger printed, background check and have a complete data base on file for CBP to grant him this privilege,
LTL shipments are carried to the border by a Mexican long-hauler after combining smaller quantities of cargo from multiple shippers. These multiple shipments are then combined into a single trailer at the origin terminal. The cargo is then off-loaded and left for pick-up by the drayage carrier after all of the export requirements are met for Mexico and the entry is completed by a US customs broker. In the case of smaller quantities or unusually configured cargo, the cargo may be carried in the drayage company’s unsecured pickup trucks or flatbeds for the cross-border move into the United States; enhancing the ability to introduce contraband into these shipments.
All loads are subject to CBP examination whether they are by intrusive or non-intrusive means.
Conclusion
Mexican truck load (TL) long-haul carriers pick up trailers sealed at the shipper’s facility somewhere in Mexico – taking the word of the shipper for its contents – and then take it to the border for entry into the US. Mexican LTL carriers take cargo already packaged, comingle it with other cargo in a trailer or on a flatbed truck, and take it to the border. Both types of carriers drop their cargo at a border drop lot or truck terminal/warehouse on the Mexican side of the border. Security is virtually non-existent at these drop lots, and drop lot personnel don’t know what is in the trailer or container or otherwise packaged shipment.
Eventually, a drayage firm about which we know little to nothing, employing unvetted drivers about whom the US also knows little about, picks up the trailer or container and the LTL cargo for crossing into the US. From the time of pick-up until it crosses the border, the whereabouts of the crossing conveyance is unknown.
These drayage firms now use a 3rd party that also knows nothing about the content, but reports the nature and quantity of the content and other required items to CBP through the ACE system. In effect, only the shipper, or LTL company if it did the original packaging, knows what was put into the container/trailer at Mexican origin. Even the shipper doesn’t know what arrived at the drop lot, and certainly doesn’t know what ultimately left the drop lot.
By the time the conveyance or cargo arrives in the US, multiple parties have been involved in reporting the contents of the conveyances that have been available for surreptitious entry while moving to the border drop lots, while at the drop lots and while under the control of the drayage companies that transferred the cargo to the US from the drop lots. Yet, CBP seems not to care about this system; instead, placing its trust in those who enter customs shipment data electronically through ACE. But without looking inside, or under the tarp, CBP also knows nothing about the content.
What a great system!
It is very clear that Dr. Giermanski does not have his facts in order. Or more precisely his information is very archaic and he is out of touch. His broad statements and exaggerations concerning Mexican long-haul carriers and drayage companies are an injustice to an industry that has been evolving thanks to great CBP outreach programs like C-TPAT, FAST and others that help the import process and at the same time allows for free and most importantly safe and secure trade.
Take a similar supply chain and compare a container of plastic footwear stuffed in a plant in Seoul Korea and exported through the Port of Pusan on its route to enter the Port of Long Beach, California with final destination Phoenix, Arizona. If you think like the good Doctor, you would expect for the driver locating the empty container at the exporter’s facility in Seoul to be the same driver delivering the goods in Phoenix. It’s impossible. This involves supply chain and every link doing their part as effectively, economically, safely, securely and timely as possible.
I do agree that the fewer components in the supply chain the better. We are now seeing U.S. based carriers like Swift, Celadon, Stevens Transport, and others taking a bigger stake in Mexico and teaming up with Mexican based carriers to form a more secure supply chain and doing their own company controlled drayage. This eliminates the independent third party drayage mentioned by Dr. G
The outreach programs that CBP has in place with the importing and exporting public assist us all and at the same time makes their job of securing our borders while at the same time allowing for a free flow of trade much easier. It’s a difficult balancing act, but we can all do our part in trying to make it better.
What a great system!
Chairman of Powers Global Holdings, Inc.,Dr. Jim Giermanski is a former Air Force Col. who, as a Special Agent in the Air Force Office of Special Investigations, concentrated on counterintelligence and clandestine base penetrations. He also is a former FBI agent and worked with Customs and Border Protection on drug intelligence development.
J.O. Alvarez is a licensed United States Customhouse Broker and president of J.O. Alvarez, Inc. and B2B Transport Market LLC, with offices at the main ports of entry on the U.S. southern border with Mexico.
U.S. Customs and Border Protection has posted to its Web site additional information about the centers it is establishing to speed the processing of imported goods. The first two – the Center of Excellence and Expertise – Electronics in Los Angeles and the Center of Excellence and Expertise – Pharmaceuticals in New York – were created last October, and others are anticipated in 2012. Each CEE will seek to increase the uniformity of practices across ports of entry, facilitate the timely resolution of trade compliance issues nationwide and further strengthen CBP knowledge on key industry practices.
Scope of CEEs. CBP states that each CEE will address an entire industry and provide a single point of contact for questions or concerns related to that industry. This will enable CBP trade personnel to specialize in a key industry, building advanced knowledge in the intricacies of particular business practices, processes and products. CEEs also will serve as a ready source of clear and definitive information for trade and government partners on CBP requirements and best practices. As the CEEs expand they will provide “one-stop” processing for trusted traders in a particular industry, processing entry summaries and subsequent activities (e.g., post-entry amendments, protests) for trusted traders.
The trade community can contact CEEs for assistance in the following areas: technical guidance on covered imports, clarification of CBP policies and procedures, assistance with CBP requests for information/action (CF-28s, CF-29s, etc.), assistance with lengthy cargo holds, and information regarding counterfeit/substandard imports.
Trusted Traders. For the moment, a trusted trader is an importer that is Customs-Trade Partnership Against Terrorism certified (tier 3 or 2) and a member of the Importer Self-Assessment program. As the CEEs expand CBP will look for opportunities to work with industry on expanding the definition of a trusted trader.
Import Processing. CBP states that the process flow for entries and entry summaries will not change and that the location of CBP processing for post-release aspects of trusted trader shipments will simply be moved from ports of entry to the appropriate CEE. For example, an electronics importer may currently import through 60 ports of entry, with post-release processing being done at each location. Once the CEEs are fully staffed and have necessary trade functionality they will handle such processing, leading to greater uniformity in decision making.
Training. CEEs will develop and foster training initiatives for both agency personnel and members of the trade community. This may include collaborative efforts with the private sector to enhance agency understanding of the industry at large. CEEs can also serve as an important resource for small and medium-sized importers who may not have large compliance departments.
Other Government Agencies. CEEs will be expected to partner with OGAs and promote the adoption of risk management and segmentation practices that will result in even greater facilitation of legitimate trade and enhanced enforcement activities. CBP would welcome OGA participation and staffing in the CEEs whose industries are regulated by those agencies.
Expansion. CBP plans to establish additional CEEs over the next three years and to have all imported commodities covered by CEEs by the end of that time.
Account Managers. All trusted partners within a CEE-covered industry will continue to have account managers assigned to them.
Cargo Security. CBP states that cargo security aspects will remain within the current organizational elements but that CEEs will play an integral role in enhancing the link between security and trade functions as they evaluate the impact of security efforts on their specific industries and accounts.
Laredo’s trade with the world rose to $198,121,876,927 through the first 11 months of 2011, according to a WorldCity analysis of the latest U.S. Census Bureau data. That’s 16.82 percent increases the Customs district’s total trade during the same time period last year. The district’s exports increased 17.90 percent while imports rose 15.98 percent.
Through November the district’s top trade partners were No. 1 Mexico, No. 2 China, No. 3 Malaysia, No. 4 Italy and No. 5 Japan. Through the first 11 months of the last year, top five spots were held by Mexico, China, Malaysia, Japan and Canada, respectively.
Taking a closer look at the leading trade partners with Laredo:
No.1 Mexico’s trade rose 17.25 percent to $189,855,949,633.
Exports rose 17.66 percent to $87,031,800,587. Imports rose 16.91 percent to $102,824,149,046.
No.2 China’s trade fell -11.14 percent to $2,488,184,380.
Exports fell -34.62 percent to $15,547,018. Imports fell -10.94 percent to $2,472,637,362.
No.3 Malaysia’s trade rose 11.46 percent to $776,136,733.
Exports fell -91.98 percent to $750,803. Imports rose 12.87 percent to $775,385,930.
No.4 Italy’s trade rose 193.17 percent to $592,194,312.
Exports fell -14.75 percent to $67,534. Imports rose 193.26 percent to $592,126,778.
No.5 Japan’s trade fell -3.58 percent to $588,481,749.
Exports rose 495.54 percent to $30,530,347. Imports fell -7.81 percent to $557,951,402.
Laredo’s top five trading partners through November accounted for 98.07 percent of its trade with the world. The U.S. average for the same period was 51.65 percent.
Laredo had trade surpluses with 53 countries and deficits with 101 through November. That compares with 59 surpluses and 98 deficits for the same period one year earlier. The top three surpluses through November of this year were with Panama, $177,678,478; Guatemala, $88,325,455; and Netherlands Antilles, $43,845,315. The top three deficits were with Mexico ($15,792,348,459), China ($2,457,090,344) and Malaysia ($774,635,127).
Meanwhile, total U.S. trade increased to $3,376,543,451,474, up 16.18 percent compared to the same period last year. The nation’s exports climbed 6.65 percent to $193,171,426,449 as imports rose 9.54 percent to $277,164,337,456. The nation’s top five trade districts so far this year, by value, are New York City, Los Angeles, Houston, Detroit and New Orleans. The overall trade deficit was $-669,172,252,732, up compared to the same period of last year when the deficit was $-585,179,341,725.
Laredo’s top five exports by value through November were motor vehicle parts; landline, cellular phone equipment; motor vehicles for transporting people; oil, not crude; and polymers of ethylene, in that order. Those accounted for 21.45 percent of its total outbound trade. The value of the district’s top five imports, motor vehicle parts, motor vehicles for transporting goods, landline, cellular phone equipment and motor vehicles for transporting peopletractors and , accounted for 31.70 percent of all inbound shipments.
Looking more closely at Laredo exports:
Motor vehicle parts rose 28.06 percent compared to last year to $9,789,560,172.
Landline, cellular phone equipment rose 10.37 percent compared to last year to $3,145,537,187.
Motor vehicles for transporting people rose 11.95 percent compared to last year to $2,241,430,362.
Oil, not crude rose 43.90 percent compared to last year to $2,164,044,407.
Polymers of ethylene rose 8.74 percent compared to last year to $1,458,832,248.
On the import side:
Motor vehicle parts rose 18.62 percent compared to last year to $10,261,333,323.
Motor vehicles for transporting goods rose 12.51 percent compared to last year to $8,054,022,992.
Landline, cellular phone equipment fell -10.96 percent compared to last year to $7,201,568,908.
Motor vehicles for transporting people rose 12.43 percent compared to last year to $5,760,684,951.
Tractors rose 40.28 percent compared to last year to $3,744,312,027.
Last year the Laredo district posted total trade with the world of $185,387,411,306. The district’s deficit was $-22,844,573,930. At year end, the region’s top five partners were Mexico, China, Malaysia, Japan and Canada. Exports totaled $81,271,418,688 and imports came to $104,115,992,618.
President Proposes to Consolidate Six Federal Trade Agencies
President Obama announced Jan. 13 a proposal to consolidate six federal trade agencies into one department whose function will be to “promote competitiveness, exports and American business.” The agencies affected are the Department of Commerce (core business and trade functions), the Office of the U.S. Trade Representative, the Export-Import Bank, the Overseas Private Investment Corporation, the U.S. Trade and Development Agency and the Small Business Administration, along with “other related programs.” The current multi-agency structure is “redundant and inefficient,” a White House fact sheet said, and has resulted in business owners “confused about where to go for assistance and often … unaware of services that would help them, particularly those trying to break into the export market for the first time.” Instead, the president is proposing to establish “one department where entrepreneurs can go from the day they come up with an idea and need a patent, to the day they start building a product and need a warehouse, to the day they are ready to export and need help breaking into new markets overseas.”
Initial reaction to the proposal included a healthy dose of skepticism. Former trade officials disapproved of the idea of combining USTR and DOC because of their different roles in trade policy, and Inside US Trade noted that key lawmakers such as Senate Finance Committee Chairman Max Baucus and House Ways and Means Committee Chairman Dave Camp have come out against such a move. Other observers noted that the proposal could harm international trade negotiations by demoting the U.S. trade representative from a Cabinet-level official with ambassadorial rank. The Washington Post cited one former official as saying the president’s proposal does not include many other agencies also involved in trade policy and that those agencies that are included “aren’t high on the list of ones that businesses typically complain about as inefficient or a source of burdensome regulation.”
The president said he would also ask Congress to reinstate authority given to past presidents to reorganize and consolidate the federal government, which he said he would only use “for reforms that result in more efficiency, better service and a leaner government.” The White House added that this proposal “would initiate new accountability by mandating that any plan must reduce the number of government agencies or save taxpayer dollars.”
KANSAS CITY SOUTHERN RAILWAY LEADS THE WAY IN NORTH AND SOUTHBOUND RAILROAD TRAFFIC ON THE MEXICAN BORDER
Written by
ALEX KOWALSKI
Bloomberg News
Kansas City Southern railcars are rumbling over the Rio Grande as record trade between Mexico and the U.S. buffers the railroad from a slowing global economy.
Escalating shipping and labor costs in world manufacturing centers such as Asia have encouraged companies including Nissan Motor Co. and DuPont Co. to shift capital spending to Mexico. Many of the goods produced by their investments will head to the U.S., the destination for about 80 percent of Mexico’s exports.
Cross-border merchandise trade totaled $341 billion by the end of September, about 18 percent higher than it was at the same point in 2010, according to the most recent data from the Bureau of Transportation Statistics in Washington. The increase will help Kansas City Southern, the only U.S. railroad with a wholly owned Mexican subsidiary, weather the effects of a possible European recession as the 125-year-old company seeks to take business away from trucks traversing the border.
“This is the best organic growth story in the U.S. rail network,” said Matt Troy, an analyst at Susquehanna Financial Group in New York. He estimates Kansas City Southern revenue will rise two to three times faster than similar regional railroads for “several years.” “The combination of bringing manufacturing capacity back from Asia and the potential for highway share conversion creates a very strong one-two punch.”
Gunfighter generation
Traffic at the company founded in 1887, the same year American gunfighter Doc Holliday died, increased 9.2 percent in 2011 through mid-December, Troy said, citing data from the Association of American Railroads. That’s about two to three times the growth at other North American railroads, he said, adding that car loadings at Kansas City Southern have exceeded their pre-recession peak in 2006, unlike the rest of the industry.
Risks for Kansas City Southern include a possible recession in the U.S. or new federal regulations. A reduction in volume on its rails due to any prolonged weakness in the economy would leave the company vulnerable because a unionized workforce makes cost-cutting difficult, Troy said
Also, “there’s increasing sensitivity toward pricing power,” Troy said. “The risk would be if Washington were to take a more proactive role in examining how rails price their business.” Drug-related violence in Mexico hasn’t affected Kansas City Southern’s operations, Chief Financial Officer Michael Upchurch said at a Sept. 13 conference in Chicago.
The company’s shares have gained 18 percent since June 30, while the Standard & Poor’s Railroads Index has fallen 1.6 percent in the same period. Troy, who has a “positive” rating on Kansas City Southern, said “you can check the box for every type of investor.”
As its plans in Mexico progress, the carrier has more room to grow, can increase profitability and will probably soon offer a dividend, he said.
Mexico accounted for about 45 percent of Kansas City Southern’s $1.57 billion in revenue in the first nine months of 2011, according to company filings. The company’s Mexican carloads increased 15 percent to mid-December from the beginning of 2011, Troy’s data show.
The fifth-largest U.S. railroad by revenue can cross the border without having to hook up to a new engine, as is the case with trucks, because of its counterpart, Kansas City Southern de Mexico.
It also owns the rail bridge at Laredo, Texas, where the largest share of goods flow across the border between the two countries. The railroad provides the only service at the Port of Lazaro Cardenas on the west coast of Mexico, which is scheduled to be expanded to compete with California.
Union Pacific
Union Pacific Corp., the largest U.S. railroad by revenue, also carries goods to and from Mexico, using Ferrocarril Mexicano SA de CV, of which it owns a portion. It relies on Kansas City Southern, which moves almost half of Union Pacific’s Mexican shipments, according to company reports.
Traffic should continue to pick up as America’s southern neighbor boosts factory output, according to Neal Deaton, an analyst at BB&T Capital Markets in Charlotte, North Carolina, who has a “buy” rating on Kansas City Southern. Almost 80 percent of shipments cross the border by land, the transportation bureau’s data.
“There’s been a strong manufacturing renaissance in Mexico over the last four to five years, and it’s only getting stronger,” Deaton said in a phone interview.
Producers are seeking to move supply chains closer to end markets as transportation costs rise and because they’ve seen how much disasters like Japan’s tsunami can set back business, he said. Cheap manufacturing and a growing number of engineers also support the renewed pickup, according to Mexican Economy Minister Bruno Ferrari in an Aug. 19 interview.
Wage differences
While China’s wages are still below those of some other developing nations, they’ve been increasing at a faster rate. Chinese manufacturing labor compensation rose 106 percent from 2004 to 2008 on a U.S. dollar basis, data from the U.S. Labor Department show.
Mexican factory wages rose 23 percent in the five years through 2008, and were lower than that year-end peak in 2010. The Labor Department says the figures for China “are not directly comparable with estimates for other countries” because the country’s published statistics on wages often don’t follow international standards.
“Mexico is eclipsing China as a very attractive source of imports into the U.S. and what we’re seeing is that labor costs between Mexico and China are converging,” Kansas City Southern treasurer Michael Cline said at a Dec. 2 finance conference in Orlando, Florida.
Mexico attracted more than $400 million in investment each from automakers Yokohama-based Nissan, Germany’s Volkswagen AG, Japan’s Mazda Motor Corp. and Detroit-based General Motors Co. in 2011. Honda Motor Co. in August announced plans to build an $800 million factory in the central Mexican city of Celaya.
DuPont, the world’s biggest maker of titanium-dioxide pigment, said last year that it will spend $500 million to boost production of the ingredient used in paints. The Wilmington, Delaware-based company said some of the increase will come from an expansion in Altamira, Mexico, around 2014.
As more goods originate in Mexico, Kansas City Southern is trying to poach a bigger share of the $260 billion worth of goods that crossed the border by truck in 2010. Auto parts are second only to grain as the biggest commodity it moves across the border, and Kansas City Southern expects to get business through greater shipments of vehicles and shipping containers, Patrick Ottensmeyer, executive vice president of sales and marketing, said in a phone interview.
Between 2.5 million and 3 million trucks cross the border into markets that Kansas City Southern could serve in the eastern half of the U.S., Ottensmeyer said. The company currently handles about 1 to 2 percent of that market, he said.
The railroad is rehabilitating the Victoria-Rosenberg line, a 90-mile stretch of track in Texas that offers a more direct route from across the border. And it has invested in the Meridian Speedway, which connects the eponymous town in Mississippi with Dallas, along with a logistics center near Houston.
“We have invested to build a franchise,” Ottensmeyer said. “We’re having very good conversations with almost every railroad, and they all want to participate in the growth that’s happening in Mexico. They really have to use us to do that.”
