By Keith Norbury

The Beyond the Border Action Plan and Regulatory Cooperation Council initiatives announced by Prime Minister Stephen Harper and President Barack Obama in February 2011 “were widely heralded by the business community as a huge move forward,” said a researcher with the Canadian Chamber of Commerce. In fact, the initiatives endorsed almost every recommendation in the Chamber’s 2010 report, “Strengthening Our Ties: Four Steps Toward a More Successful Canada-U.S. Partnership,” said Leah Littlepage, the Chamber’s Director of Canada-U.S. and transportation policy. “It sent a very strong signal that governments finally got it, and that they understand the importance of trade, the importance of it to the economy, to job creation,” said Ms. Littlepage, who authored that report. “I think it was more than just empty promises.”

Progress made with “low-hanging fruit”

Unfortunately, while the countries have made progress in certain areas, such as vehicle standards and other “low hanging fruit,” progress in other areas has been slow. A border contingency plan was a few months late, she said. Some Beyond the Border pilot programs have encountered difficulties and did not “move as smoothly as everyone would have hoped,” Ms. Littlepage said. “There have been delays in a number of areas for various different reasons but I do really believe they’re trying,” she added.

Areas in which the Chamber had asked for more movement – and which have been checked off as “achieved” on the Beyond the Border website – include joint border contingency plans, increased benefits under the Nexus program and simplification of application, simplifying cross-border screening of cargo and passenger baggage, pilot programs for the food processing sector, pre-clearance pilot projects, and harmonization of low-value shipment thresholds, Ms. Littlepage said in a follow-up email.

Trusted Trader costs prove problematic

Implementing trusted trader programs, which preceded Beyond the Borders, have also encountered hurdles. Not the least of those is the cost of certification, which can exceed $100,000. “For big companies, I’ve talked to some of them, and they just say it’s an embedded cost of doing business,” Ms. Littlepage said. “But when you start talking to smaller businesses, it’s really cost-prohibitive.” She and others familiar with the border initiatives, which include efforts to streamline border security, remain hopeful that all their promises will eventually be delivered. However, assessments of how well they have delivered so far vary widely.

It’s a “paradigm changer,” says border alliance CEO

“It is a sea changer. It is a paradigm changer,” said Jim Phillips, President and CEO of the Canada-U.S. Border Trade Alliance. Beyond the Border is 80 to 85 per cent complete with just a few sticky issues to work out, Mr. Phillips said. One sticking point remains the lack of a radio frequency identification chip, or RFID, companion card for Canadian passports. About 11 million of these cards have been issued in the U.S., Mr. Phillips said. They can be read from 30 feet away and are saving customs officer an average of 24 seconds per inspection. But so far only about half of one per cent of Canadians have such chips in Nexus cards and enhanced driver’s licences, he said. That’s significant because Canadians account for 73 per cent of border crossings in both directions.

“The U.S. is always accused of stiffening the border or causing problems,” said Mr. Phillips, who is based in New York state. “This passport companion card problem right now with 73 per cent of the trips … this is a big problem.”

Trucking alliance “quite disappointed”

The Canadian Trucking Alliance has even more problems with how Beyond the Border has been rolled out. “We were extremely supportive of Beyond the Border and we have maintained a certain level of optimism for Beyond the Border’s initiatives that were announced,” said Jennifer Fox, CTA’s Vice-President of Trade and Security. “But since then that optimism has certainly waned. As it stands now, I would say it’s fair to say that Beyond the Border has over-promised and under-delivered.”

In fact, CTA is “quite disappointed” with progress to date, especially since the industry’s priorities to improve cross-border trucking is also “low hanging fruit,” Ms. Fox said. Among those CTA priorities are enabling truckers to reposition empty trailers from one U.S. point to another; and restoring the ability of Canadian truckers to move domestic goods “in-transit” through the U.S. – taking a shortcut, in other words – without having those goods treated as U.S. imports.

The CTA trailer repositioning proposal was not included in the Beyond the Border perimeter action plan when it was published, Ms. Fox said. However, it was has been included in Regulatory Cooperation Council, a.k.a. RC2, which deals with issues that don’t directly affect border security.

U.S. no longer a short-cut for Canadian domestic goods

In-transit moves, however, “have from a practical perspective not been allowed through the United States since shortly after 9/11,” CTA President David Bradley said in an email message. The problem began in 2005 when the U.S. made electronic manifests mandatory for all trucks arriving at the U.S. border, Ms. Fox explained. But those eManifests don’t distinguish between shipments bound for a U.S. destination and those headed for a Canadian destination. That has meant these in-transit shipments are treated as bonded shipments, which requires a carrier’s bond so U.S. Customs and Border Protection can be satisfied the shipments are going to leave the country, Ms. Fox explained.

U.S. regulations require that bonded shipments have full commercial information, such as country of origin, HS codes, and the value of the goods. “Really detailed information that generally is not applied to movement of domestic freight,” Ms Fox said. Shippers balked at providing that information, because of the additional work, associated costs and headaches “for what is essentially a domestic shipment,” Ms. Fox said. Ms. Fox said some carriers do transit the U.S. but can only do so when shippers provide full commercial information. But that has generally happened only with carriers hauling full truckloads, with the extra costs and hassles of paperwork preventing Less than Truckload (LTL) carriers to take advantage of this possibility.

On the other hand, U.S. carriers wishing to take a shortcut through Canada, such as through Ontario between Detroit and Buffalo, can still do so. That’s because Canada does not treat those in-transit goods as “bonded” cargo, as does CBP, Ms. Fox explained.

New eManifest system faulted

Ms. Fox noted that before the U.S. mandated eManifest, carriers didn’t have to provide commercial information for these in-transit shipments. CTA has asked CBP to remove the requirement for commercial information, and replace it with a more limited data set, such as the manifest information that was required in the paper system. But so far, that proposal hasn’t received any traction.

“The two countries did apparently agree on the data requirements well over a year ago, although no official confirmation of what was agreed to has been shared with the industry,” Mr. Bradley said. “We have been told that implementation is not currently a priority – so we wait.”

It’s also not clear if the U.S. wants this detailed information for health, safety and security reasons or if it is simply an unintended consequence of automating eManifest, Ms. Fox said. If this information really is needed for security, then CTA is urging the Canadian government to demand the same data from U.S. truckers on their in-transit shipments through Canada. “At the end of the day, when this issue does get flushed out, if ever it gets flushed out, this will mean higher costs to shippers on both sides of the border,” Ms. Fox said.

So far it is costing Canadian shippers. Ms. Fox cited the case of carrier that is losing an estimated $65,000 a month from not being able to move in-transit shipments in the U.S.

“That’s just one carrier. Imagine the cost? It’s just astronomical,” Ms. Fox said.

U.S. and Canada still trade heavily

Despite the border constraints, the U.S. remains Canada’s largest trading partner by far. In 2012, for example, Canada exported $339 billion worth of goods to the U.S., or about 75 per cent of total Canadian exports of $454 billion, according to Industry Canada’s Trade Data Online search tool. China was a distant second with $19 billion of Canadian exports.

Imports from the U.S. meanwhile totalled $234 billion in 2012, which was 50.6 per cent of Canada’s total imports.

Nevertheless, the proportion of Canada’s trade devoted to U.S. exports and imports has dropped significantly since 2003. That year, exports to the U.S. of $327 billion made up 85.7 per cent of Canada’s total exports of $381 billion. U.S. imports of $204 billion also accounted for 60.6 per cent of Canada’s total imports of $336 billion in 2003.

The dollar value of Canada’s total imports and exports, as well as trade with the U.S., have rebounded since 2009 at the depths of the recession. However, they haven’t returned yet to the levels of 2008.

No accounting for user fees

Attempts to obtain information from the Canadian government about the status of Beyond the Border initiatives and the concerns raised were not successful. The 2010 paper from the Canadian Chamber of Commerce also noted that there are concerns on both sides of the border that “governments are relying upon user fees to cover the costs of the increasingly unwieldy border.”

To that Mr. Bradley responded: “As with virtually all government fees, there is no accounting for whether the programs can or should be managed more efficiently.” He cited the “egregious situation” in which animal plant health inspection service fees are assessed on every truck crossing the U.S. border – even for trucks not carrying agricultural products. “It makes no sense at all, but when agencies of government wrap themselves in the cloak of security, it seems they can pretty much do as they please,” he said.

Nothing cool about COOL rules

Another lingering problem that Ms. Littlepage noted in her 2010 report that remains an issue is U.S. protectionism in the form of Country of Origin labeling. Despite its COOL acronym, this causes uncool difficulties for meat producers. That’s because the industry on both sides of the border “is so integrated that a pig might be born in the United States, brought up to Canada just for feeding and to be raised and then slaughtered in the United States,” Ms. Littlepage said. Such tracking would be so problematic that Canada is fighting against COOL at the World Trade Organization.

Border issues a potential impediment to Foreign Investment

“We have also seen border security concerns used as an argument for more protectionist thinking,” Mr. Bradley said. “In terms of the threat to direct investment, it goes beyond what U.S. executives think. What Canada needs to be mindful of is the foreign investor who is looking to set up a facility in North America. If the border is not functioning properly, if it is inefficient or unpredictable, since most of what is produced in Canada is destined for the U.S. anyway, that foreign investor might decide it makes more sense to set up shop in the United States and avoid the whole border situation.”

Nevertheless, “we’re getting there”

On the whole, Beyond the Border addresses almost all the trade concerns that Littlepage raised in her 2010 report. Or it will address them once they are fully implemented.

Among those recommendations was a perimeter approach to security. However, movement on that has been “yes and no,” Ms. Littlepage said, noting that every once in a while a U.S. politician will propose a fence at the Canada-U.S. border. “We still have a long way to go to a true perimeter approach. But we’re moving towards it.”