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December 20, 2004

Border patrol | Early results from a UMaine study show increased costs from new import-export regulations

By Sean Donahue
Anyone who's stood in a long security line before boarding an airplane has felt the effects of security regulations introduced after the Sept. 11 terrorist attacks. Businesses that rely on imported goods from Canada, and the trucking companies that haul them ˆ— including many in Maine ˆ— know that cargo has faced a similar increase in scrutiny.

Over the past few years, the U.S. Customs Department has introduced several new cargo regulations ˆ— such as requiring trucks to submit a manifest one hour before arriving at the border and requiring food suppliers to register with the Food and Drug Administration before shipping goods into the United States ˆ— aimed at making commercial supply chains more secure. It stands to reason, though, that businesses may be experiencing side effects from those rule changes, including the burden of additional paperwork, delays at the border or the need to retrain staff to handle new procedures.

To uncover those potential impacts, University of Maine assistant professor of management and Canadian studies Marie-Christine Therrien, along with assistant professor of economics and Canadian studies Georges Tanguay and graduate student Victorya Sadlovska, recently surveyed a group of U.S. and Canadian businesses to determine just what effect the new cargo security regulations were having on cross-border commerce. "The reason we did the survey is that we were hearing anecdotes, but we wanted to verify what was happening and who was really impacted," says Therrien.

Therrien and her colleagues sent questionnaires to 64 businesses, 53% of which are located in Canada and 47% of which are in the northeast United States, that fall into three major categories: manufacturing; agriculture, forestry, fishing and hunting; and wholesale and retail. On average, the respondents said they import $3.4 million worth of goods, while exporting $2.5 million worth of goods.

Though the researchers are still preparing a report of their conclusions to be released early next year, they've now put a number on that anecdotal evidence: About a third of businesses shipping goods across the U.S.-Canadian border say they've experienced increased transportation costs and longer delays.

Among companies shipping goods into the United States from Canada, 39% said their transportation costs have gone up. At the same time, 30% of companies shipping from the United States to Canada reported higher transportation costs. (Therrien did not ask for specific cost increases, believing that companies would be less likely to answer the survey if they had to disclose financial information.)

Agriculture and other food-related companies shipping goods from Canada saw the largest increase, with 57% reporting higher costs. Still, Maine companies that rely on food products from Canada say the regulatory burden is largely on their suppliers across the border. Oak Island Seafood in Rockland, for example, said it only had to apply for a "prior notification number" with the FDA, which its suppliers ˆ— mostly scallop dealers in Canada ˆ— must use for every shipment, along with a host of other new reporting rules. "We haven't seen any impact, but my suppliers say it's a massive paperwork headache," says Al Wochomurka, quality control manager for Oak Island Seafood.

The survey also found that 29% of all companies experienced longer wait times at the border, whether shipping into or out of the United States. But 41% of companies shipping goods from Canada said they had experienced longer waits. Still, delays at the border haven't translated into a rash of late shipments or supply chain disruptions, says John Heckman, president of the Merchant Shippers Cooperative Association in Augusta, which arranges freight for 1,500 Maine businesses. That's because most large trucking companies prepared for the new rules in advance, says Heckman. Trucking companies "worked behind the curtain very hard so people like me, representing hundreds of clients, don't notice any change."

And despite added costs and increased delays, most survey respondents said that even those impacts haven't hurt their bottom lines: About 83% of companies reported no effect on profits. That response seems to verify the impression among businesses and trade experts here in Maine that importers, exporters and transportation companies have adapted smoothly to the new regulations. "I have not talked to any Maine companies that say, 'These homeland security rules are really hurting my business,'" says Wade Merritt, director of the Canada Desk at the Maine International Trade Center in Bangor. "But they're aware of the new environment they're operating under, and they're finding that they have to deal with it."

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