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A Conversation with Renate Jalbert
Managing Director, Customs Regulatory Affairs, FedEx Express Canada
This interview is the second in a two part series. The first of this two-part series was published in LQ Volume 12 Issue 3 (July).
Companies often have resource constraints that make it challenging to address the incremental emphasis that is being placed on security and compliance. Companies will outsource some of these activities, and there are consultants and 3PLs that offer these types of consulting services. More companies are looking for dynamic resources that they can manage directly, but only for a finite period of time as processes are defined and deployed. What 'dynamic resource' offerings are the 3PL industry building to meet this call for short-term resources?
FedEx has entered into an agreement with the Export Development Corporation (EDC) that will help companies and contribute to the support of dynamic resource requirements in the supply chain. EDC provides loans and a list of authorized service providers for companies interested in being compliant with C-TPAT and PIP. These loans are for capital improvement to facilities; for example, fencing, secure access mechanisms and to assist in the funding of consultancy services that assess supply chain security gaps. This program is based on the fact that EDC understands the critical importance of C-TPAT and PIP to ensure the successful growth of Canadian business engaged in international trade. In order to be C-TPAT compliant, U.S. Customs and Border Protection must conduct a verification visit to a Canadian exporter to ensure their facilities, their personnel and their manufacturing processes are secure as required under the regulations of this program.
The rationale for EDC's funding program is that some companies have gaps in their supply chain that have been identified under new requirements, and they have been unable to obtain funding from traditional Canadian banks to close those gaps. As a result, as part of their exporter development program, EDC is implementing this program to provide funding.
Presently, there are three service providers who are authorized to verify supply chain security under the auspices of this EDC program.
FedEx, which is one of them, conducts extensive customer forums on supply chain security. Often, the participants in our conferences ask us how they should proceed in order to comply with new customs requirements. The EDC program can now cover some of the consulting fees needed to perform a verification and validation of a client's location. In summary, EDC can approve funding to help facilitate certification under this program, which ultimately helps to facilitate trade.
Is the EDC program unique in helping to facilitate trade and assist shippers? The Americans may wish to look at this idea. I think it is a wonderful idea to move forward to provide support to Canadian exporters to be certified.
However, even with this dynamic resource offering, you should be aware that once you are committed to these programs as a company, you are committed for the long term. So the resources to identify your gaps may be dynamic, but as an importer/exporter, you must maintain compliance with those programs. You can contract out the gap analysis, the application process and supporting certification documentation, but as an importer/exporter you must remain committed to maintaining and ensuring that this higher supply chain security philosophy is embedded in your organization.
When FedEx completed the certification process, we joined the CBSA to create a video about the PIP program. The goal was to get the message to our front-line employees and show them exactly what FedEx and CBSA responsibilities were under the program, what we expected from our employees, how they were expected to work with the port-level PIP liaison and, most importantly, how they could report unusual or suspicious activity. Security is everyone's business. It is not simply a customs matter - security must be integrated within your supply chain. FedEx has been a member of Partners in Protection since 2001.
Please elaborate on the scope of this process.
PIP and C-TPAT are supply chain security initiatives. The first step in the process is to understand your complete supply chain: Who are your trade partners, vendors, transportation providers; these are all key questions to ask. The C-TPAT-PIP consultant will review and document the process. Are your facilities secured? Do you have access controls? Are your company windows locked? How do you secure your employees? Do you conduct criminal record background checks? Do you challenge employees or visitors who may not be authorized to enter a warehouse? How do you ensure that nothing can be introduced into a container or trailer that has not been authorized at your facility? Can your company's manufacturing line be interrupted at some point to introduce some illegal goods? Can you verify your vendors' security practices?
Is this an affordable option for mid-size companies?
Absolutely. You can apply online without cost, to both governments for C-TPAT and PIP certification. You can fill out the security questionnaire yourself. The challenge is, do you have someone available to do that assessment for your security questionnaire? Do you have someone to identify what those gaps are? And how should you remedy those gaps?
Many companies have sufficient security measures in place, but they may be reluctant to deal directly with Homeland Security or CBSA. CBSA and CBP have client representatives available to assist companies and they are very helpful. After all, their goal is to have as many partners certified in the program as possible.
However, it is not a question of whether security is affordable or not; you simply cannot expect to compete into today's global environment without investing in supply chain security.
It all relates to a perspective on compliance, whether this involves a package or a person. As a company engaged in transborder or international trade, you must have knowledge. For example, you know that if you are going to fly to Paris, France or drive across the border at Buffalo and come to Canada, you will need to know what is required for those trips. You wouldn't think of going to Europe or Asia without knowing that you need a passport, or perhaps a visa if you are visiting Australia, for example. When a visitor comes to Canada, they have the same expectations, and similarly for a package; you require specific information in order to use FAST or ACI. Consider FAST as the NEXUS card for your shipment and ACI a passport and visa.
If you don't have knowledge of what and when information is required to move your goods across the border, your shipments or truck will be delayed. Regardless of what clearance or reporting option you are using, the "passport" must be valid.
What about the status of the known versus the unknown importer?
Even if you have been shipping for a hundred years, if you are not part of the FAST program your profile in custom's system will reflect this and each transaction crossing the border will be dealt with on a transactional level instead of using the designation afforded to members of C-TPAT and FAST.
Many duties have been eliminated in the telecommunications industry as a result of the Information Technology Agreement (ITA). This agreement is unconditional and based solely on the harmonized classification. The intent is to reduce the duty in this industry, but United States' importers still collect a Merchandise Processing Fee (MPF). The MPF is removed for other duty reduction programs, such as NAFTA. (For example, if claimed under NAFTA, then it's duty-free and MPF free.) What activity is either underway or can be undertaken to have all U.S. import duty free programs eliminate the MPF?
This was factored into the NAFTA Agreement. NAFTA's goal was to eliminate trade barriers and reduce duties and facilitate the movement of goods. NAFTA did not achieve all of these things, but it eliminated the Merchandise Processing Fee for goods that qualify under the NAFTA program. So it has reduced the cost of those goods.
Additional reductions or elimination of the MPF requires pressure from industry to identify MPF as non-tariff trade barrier. There may be opportunity to further impact the MPF under the harmonization plans of the Security and Prosperity partnership.
Canada does not have similar fee, but it has the Goods and Services Tax (GST). The MPF is an administrative fee to cover customs expenses.
For information about the following terms and programs, please visit our custom's page.