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Facilitating Cross Border Transportation and Commerce
Kelly Johnston
CSG, August 3, 2011
One Company’s Experience
New Hope for the Future
2
What We’ll Cover
• Overview of Campbell and our integrated North American market
• How do we define “infrastructure,” and what are our experiences, frustrations and issues crossing the border
• Is the border a competitive advantage of disadvantage?
• What ideas does Campbell have or support to turn border into a competitive advantage?
• What’s the path forward?
3
Campbell Soup
• Founded in 1869, $7.8 Billion Global Food Manufacturer of Soup, Sauces, Broths and Simple Meals; Vegetable-Based Beverages, Baked Goods. Employ 18,000 Globally; 10,000 in North America.
• North America is a Single Market – 23 Facilities in 14 US States and Ontario (Toronto, Plus Network of Co-Manufacturers)
• Highly Integrated Supply Chain – Canadian Products Contain US Ingredients, and Vice Versa
• About 50% of Products Manufactured at our Toronto, Canada are Exported to the US
• About 7,000 Shipments Cross US-Canada Border Annually – Ingredients, Frozen and Shelf Stable Products – 80 Percent Shipped “Intracompany”
• 75% of Campbell shipments cross at Detroit-Windsor (Ambassador Bridge)
4
Toronto, ON
Sacramento,CA
Napoleon, OH
Paris, TX
Maxton, NC
Over 3,500 shipments in FY
2010
Campbell Soup from Canada Trade
5
Toronto
Sacramento,CA
Stockton, CA
Napoleon, OH
Paris, TX
Calgary
Marshall, MI
So. Plainfield, NJ
Milwaukee, WI
Everett, WA
Vancouver
Over 3,500 shipments in FY 2010
Campbell Soup to Canada Trade
6
Traversing the border is becoming more expensive
• Increased wait times as traffic resumes to pre-2008 levels, no infrastructure expansion
• Shipping food by rail prohibited (lack of inspection facilities at rail ports of entry)
• Direct fees for crossing the border
• Additional and duplicative border programs
• Additional costs for participating in trusted shipper and traveler programs
• Increased inspection times both personal and commercial
7
Campbell Soup’s Experiences Since 9/11
• Creation of US Dept. of Homeland Security – APHIS Transfer to New Agency Results in Massive Loss of “Human Infrastructure” – Retirements, Loss of Hours of Service.
• US Reaction to “Mad Cow” Disease – Mandatory Secondary Inspections – Even of “Trusted Shippers” Strain Infrastructure and Dramatic Increase in Border Delays
• Infrastructure Often Can’t Respond Well to Unannounced Changes at US Ports Frequent (e.g. Avian Flu)
• APHIS Fees and WHTI Mandates Added New Complexities
8
Complexity & RepetitivenessPaperwork Requirements to Export to US: More Stress on Infrastructure
1. Invoice
2. Manifest packing slip
3. Bill of Lading
4. Hazardous Materials Form1
5. OGA Form2
6. Customs Form 3461 – Release Document.
7. Customs Form 7501 – Customs Entry Form.
8. Canada Customs Export document.
9. NAFTA Certificate of Origin.
10. Marking Waiver3
11. Foreign Shipper’s Declaration4
12. Manufacturers Affidavit4
1 If exporting flammable/explosive materials2 If regulated product3 If not finished consumer good4 If goods originally purchased in US
10 minutes wasted time
per day=
1 week a year
9
Competitiveness – An Auto Industry Comparison
Germany -4,000
VehiclesNA -
Consumer
1 set of customs
documents
Canada - Steel
US – Forged Con Rod
Canada – Machined
Rod
Mexico – Power Pack
Canada – Short Block
US - Engine
Canada - Vehicle
US - Consumers
7 sets of customs invoices* x 4,000 vehicles = 28,000 potential sets of
customs documents
Urgent Need
For
Simplification
10
Practical impact of border delays on Campbell Soup
• Increased costs of shipping products, ingredients to US, especially frozen, perishable products that idle at US border.
• Possibility that third party shippers will again refuse business and/or impose new surcharges in anticipation of delays.
• Disadvantage Canadian suppliers and businesses vis a vis US and other foreign competitors of ingredients and commodities due to higher border-related costs, and unreliability of meeting “just in time” supply chains.
• Make North American products less competitive against Asian, EU competitors – Almost 80 percent of cross-border trade is intra-company.
11
Cost of Current System, Doing Nothing, and Fixing
• The Current price tag (US DOT, Taylor): Current border management system costs over $10.3 billion (US) annual cost to carriers, manufacturers and governments.
• The cost of delays (Ontario Chamber): Border delays cost $8.34 billion (CDN) per year, or $952,000 per hour.
• Doing nothing (Border Transportation Partnership): Lack of infrastructure investment between Ontario-Michigan will cost $6.68 billion (US) annually by 2020 due to impaired freight movement, lost productivity.
• The Fix: Bilateral Transportation Working Group: 224 projects identified at cost of $13.4 billion (US). US projects make up most of it ($11.3 billion)
12
Turning Border into a Competitive Advantage
• Remove, Reduce Stress on Current Infrastructure– “Pre-Clearance” Pilot Programs for C-TPAT certified manufacturers;
move some border processes back to manufacturing facilities (with conditions); consider use of rail for food manufacturers
• Build the new international trade crossing at Detroit-Windsor– Different crossings in different areas offer options to ensure timely
delivery of products, ingredients and supplies to our manufacturing facilities; helps protect supply chains from border closures due to weather, infrastructure delays, traffic backups, etc.
– Ambassador bridge continent’s busiest crossing: 27% of all US-Canada trade (its two lanes wide), 13 million crossings annually
• Expedite existing and planned infrastructure projects, such as redecking Peace Bridge (Buffalo)
• Consider new bilateral authority on border management – more coherent bi-national management, investment approach
13
“Beyond The Border” Initiative – A New Promise
• Two components – border security and facilitation, and regulatory cooperation
• Border effort led by Simon Kennedy in Canada. In US, Dan Restrepo (NSC)
• Four focus areas: threat assessments; entry/exit systems; trade, growth and jobs; and cyber security
• Also: Trusted traveler systems (open to agriculture); IT solutions; single window portals, etc. & use of pilot projects