Friday, August 29, 2008

Flaherty Warns of Bumps Ahead for Canadian Economy

(CEP News)

Canadian Finance Minister Jim Flaherty says Canada is well positioned to weather the current global economic downturn, but warns of more economic bumps on the road to recovery, “particularly in the auto sector.”

“We will have modest economic growth” in the remainder of this year, Flaherty told journalists in Toronto, but Canadians should anticipate more slowness in the economy, especially in Ontario’s beleaguered manufacturing sector.

Flaherty was reacting to the latest release of Canadian GDP numbers, which were lower than expected, but showed that Canada avoided the technical definition of a recession by posting a 0.3% annualized growth in Gross Domestic Product in the second quarter of 2008. Analysts had been looking for an increase of 0.6%.

Statistics Canada reported Friday that the economy edged up in the second quarter after slipping a revised 0.2% (-0.8% annualized) in the first three months of the year.

The second quarter’s growth came even as domestic demand grew 0.5% and foreign demand for Canadian goods and services registered a fourth consecutive decline.

Flaherty said although Canadian GDP figures released Friday fell short of economists’ expectations, Canada still boasts stable core inflation, a jobless rate that is at a 33-year low, a $1.7-billion dollar surplus as of June, and “a housing market [that] is sound.” Read the complete article.

Grace Period Set for Implementation of First Sale Declaration Requirement


A grace period that is being granted to importers with regard to the implementation of the First Sale Declaration Requirement established under section 15422(a) in the Food, Conservation and Energy Act of 2008, commonly referred to as the Farm Bill.

The First Sale Declaration Requirement refers to the requirement for importers to provide a declaration to CBP at the time of entry for all goods entered for consumption or withdrawn from warehouse whether the value was determined on the basis of price paid by the buyer in the first or earlier sale occurring prior to introduction of the merchandise into the United States.

To meet this requirement the First Sale Declaration Requirement requires that an importer of merchandise must enter an “F” next to the declared value at the line level on CBP Form 7501, or the electronic filing equivalent, when the declared transaction value of the imported merchandise is determined on the basis of the price paid by the buyer in a sale occurring earlier than the last sale prior to the introduction of the merchandise into the United States.

Under the Farm Bill, the First Sale Declaration Requirement is effective for a one-year period beginning August 20, 2008.

The interim rule describing the First Sale Declaration Requirement will be on public display at the Federal Register on August 20, 2008, but will not be published until after August 20, 2008.
Further, the Trade has advised CBP that, due to the complexity of the programming changes required, it will not be ready to comply with the First Sale Declaration Requirement on August 20, 2008.

Accordingly, in order to permit the trade sufficient time to comply with the requirements in the First Sale Declaration Requirement, and thereby ensure the integrity of the data collected on importations, CBP will delay the enforcement of the First Sale Declaration Requirement for 30 days.

Thus, CBP will commence the enforcement of the data collection requirements contained in the First Sale Declaration Requirement on September 20, 2008.

Entries subject to the First Sale Declaration Requirement made between August 20 and September 19 will not be rejected based on any First Sale Declaration requirements.

However, entries subject to the First Sale Declaration Requirement made between August 20 and September 19 will require amendment. Information describing how the amendments will be made will be forthcoming.

The Trade is, however, strongly encouraged to implement the requirements of the First Sale Declaration Requirement as soon as feasible before September 19, 2008

Thursday, August 28, 2008

U.S. GDP Rebounds with 3.3% Growth

(BBC News)

The U.S. economy grew at a revised 3.3% annually in the second quarter of 2008, the Commerce Department said, much higher than its first estimate of 1.9%. The rebound was linked to strong U.S. exports, helped by the weak dollar, while government tax rebates also boosted consumer spending.

GDP grew at a rate of 0.9% in the first quarter, after a 0.2% contraction in the last three months of 2007. The Federal Reserve has warned the economy will remain weak this year.

Exports grew at an annualised rate of 13.2%, higher than the government’s initial estimate of 9.2%. Imports fell at a rate of 7.6% as the U.S. economic slowdown reduced demands for goods made overseas. The improved trade balance added 3.1 percentage points to second-quarter GDP, the biggest since 1980.

The slowdown in the housing market was evident, as builders cut back and businesses reduced their spending. Consumer spending, boosted by the government’s $600 tax rebate payments, rose by 1.7%, slightly higher than the previous quarter’s 1.5%.

Participate in an Authoritative Report on Transportation Management, Benchmarks and Practices

(Canadian Transportation & Logistics)

All supply chain professionals have an opportunity to participate in the 4th annual CITA members’ confidential benchmarking survey and receive the comprehensive report – at no charge.

The survey has traditionally been offered each year as a value-added service to CITA members to help members better manage their transportation and logistics activities. CITA, however, is opening up participation to non members this year in order to expand the coverage of the survey in selected areas.

This year’s survey deals with a full range of important transportation management issues, including:

• Carrier service and quality
• Performance benchmarks
• Management practices
• Current issues, such as fuel surcharges, speed limiters, use of long combination vehicles (LCV’s), hedging of fuel charges
• In-depth review of rail carload value and service
• In-depth review of truckload value and service

This is an unusual opportunity to be part of this highly regarded group.

If you would like to participate, e-mail your request to Dr, Alan Saipe, President of Supply Chain Surveys, Inc. at the following address:

CBP Moves Forward on Trade Facilitation Strategy

(American Shipper – Eric Kulisch)

U.S. Customs and Border Protection plans to implement its enhanced trade strategy on Oct. 1, according to Brenda Smith, executive director, trade policy and programs.

On Monday, the Commercial Operations Advisory Committee, an industry sounding board, submitted comments on the 30-page draft policy to the border management agency.

CBP has followed several aspects of the strategy in the past, but is now sharing its strategy with the public for the first time. The broad themes for returning more focus to trade issues instead of just priority security matters were unveiled in May:

• Trade facilitation and enforcement.

• Modernizing trade processes.

• Using a multilayered approach, using risk-management principles for enforcement as is done for allocating resources for security inspections.

• Industry partnerships to enhance compliance.

• Collecting advance information from the supply chain.

• Reviewing customs documents for potential fraud away from the border so that cargo shipments are not unnecessarily delayed.

The Bush administration has cleared CBP to go ahead with its trade plan, Smith told COAC at its quarterly meeting in Seattle earlier this month. She asked the 20-member panel to identify new ways to implement the strategy and submit suggestions at COAC’s next meeting in November to help the agency build off the priority trade issues established for the 2009 fiscal year budget plan.

Government Set for Surplus, Conference Board Says

(The Canadian Press)

The federal government will easily manage to avoid slipping into a deficit position despite the slumping economy and will almost certainly record higher surpluses than forecast, says a new analysis by the Conference Board of Canada.

The private sector think-tank says higher- than-projected inflation, along with other factors, have boosted government revenues and almost completely countered the impact of slower growth and tax cuts that went into effect in January.

Finance Minister Jim Flaherty had forecast a $2.3-billion surplus this fiscal year and a slim $1.3-billion surplus in 2009-2010, but the Conference Board believes Ottawa will be able to better both targets.

“Federal revenues should have been down nearly $20 billion in the first quarter, given the measures set out in last fall’s economic statement,” said chief economist Glen Hodgson. “Instead, only a ($1.1 billion) reduction is showing up in the national accounts” for the first three months of the fiscal year. Read more.

Canada’s Current Account Surplus Widens on Commodity Prices

(Bloomberg – Alexandre Deslongchamps)

Canada’s current account, the broadest measure of international trade, grew to the highest in a year in the second quarter as prices for exported commodities such as oil and natural gas rose.
Receipts from outside Canada exceeded payments sent abroad by C$6.76 billion ($6.47 billion), after a revised C$4.46 billion first-quarter surplus, Statistics Canada said today [Thursday] in Ottawa.

Economists surveyed by Bloomberg forecast an C$8 billion surplus from April to June, the median of 20 estimates, after the initially reported first-quarter surplus of C$5.6 billion.

The report indicates commodity exports are helping the economy weather slower growth in the U.S., Canada’s main trading partner, so the central bank may be able to delay cutting interest rates to stimulate spending. Economic growth in Canada will be 1% this year, the slowest since 1992, the central bank said last month.

The surplus in goods trade grew to C$16.4 billion, the most since the fourth quarter of 2005, as oil and natural gas prices surged, Statistics Canada said. Natural gas appreciated 33 percent during the quarter, and oil gained 25%, boosting the value of sales even as they declined in volume terms. Sales of coal more than doubled on high global demand.

Canadian automotive exports fell for a fifth straight quarter to the lowest since the fourth quarter of 1996, Statistics Canada said today.

While companies’ sales abroad continue to be crimped by Canada’s high currency, the so-called loonie has weakened about 11% from a record 90.58 Canadian cents per U.S. dollar reached on November 7.

The deficit in travel narrowed for a second straight quarter to C$3.15 billion, as Canadians took fewer trips across the U.S. border.

The deficit in investment income widened for a second straight quarter to C$3.39 billion, the agency said.

Canada’s current account – the most complete measure of trade because it includes exports and imports of goods and services, transfers and investment income – has slumped from a record C$12.3 billion surplus two years ago.

Summary data and a link to the report are on the Statistics Canada website.

Zoom Airlines Shuts Down

(Brent Jang — Globe & Mail)

Zoom Cargo operations grounded.

Zoom Airlines said Thursday that it has halted flights and grounded its planes, leaving hundreds of passengers stranded and tempers flaring at airports.

“We deeply regret the fact that we have been forced to cease all Zoom operations. It is a tragic day for our passengers and more than 600 staff,” Zoom co-founders Hugh and John Boyle said in a statement. “We are desperately sorry for the inconvenience that this will cause passengers and those who have booked flights.”

The Ottawa-based carrier took down its website Thursday afternoon, preventing consumers from making online bookings. Earlier in the day, a Zoom sales agent said bookings were still being accepted in the morning, despite dozens of travellers being stranded on various flights.

“We have done everything we can to support the airline and left no stone unturned to secure a refinancing package that would have kept our aircraft flying. Even as late as yesterday we had secured a new investment package but the actions of creditors meant we could not continue flying,” the Boyle Brothers said. Read the complete article. Announcement from Zoom Air here.

Wednesday, August 27, 2008

Travel Reminder for Labor Day Border Crossers in North Dakota

(U.S. CBP — Pembina)

U.S. Customs and Border Protection is reminding travelers planning trips across the border into the United States to make sure they have their proper documents and to anticipate heavy traffic during the celebration of the Labor Day holiday.

Labor Day is celebrated in both Canada and the United States as a federal holiday observed since the late 1880s on the first Monday in September originating as a day off for working laborers and is the symbolic end of summer. Border traffic volumes are expected to be greatly increased during this holiday weekend and all travelers are reminded of a few simple steps they can employ to cross the border.

1) Plan your trip and allow extra time for crossing the border. Consult the CBP website site to monitor border wait times and review the “Know Before You Go.”

2) Avoid peak travel times when at all possible. The heaviest traffic periods are typically between the hours of 7 a.m. and 7 p.m.

3) Be prepared to show proof of citizenship and identity to enter the United States. This can include a passport, trusted traveler program card (NEXUS), an enhanced driver’s license or a birth certificate with a conventional driver’s license. Travelers 18 and under can present just a birth certificate.

4) Travelers are advised to declare all agriculture products including firewood and kindling, and those who are transporting either are subject to additional inspection by CBP agriculture specialists. Agriculture specialists recently intercepted wood boring beetles at the Pembina port of entry. The beetles were discovered in firewood that a traveler was transporting from Canada into the United States. If your firewood and/or kindling is suspected to contain any harmful pests it will be refused at the border and you may be required to return it home or otherwise properly dispose of it. Failure to declare agriculture products, including firewood and kindling will result in delays and can incur on the spot civil penalties.

Contacts and further information from CBP available here.

Free Trade and the Presidential Race

(Wall Street Journal)

Wall Street Journal Washington bureau chief John Bussey talks with WSJ business reporter Kelsey Hubbard about how the presidential candidates will tackle the global economy and free trade.

Canadian Gas Prices Aren’t So Bad, Industry Expert Insists

(CBC News)

While Canadians complain about the soaring price of gasoline at the pumps, an oil industry spokesman says people in this country actually have it pretty good.

Peter Boag, testifying before a parliamentary committee on Tuesday, told MPs that fuel prices are lower in Canada than they are in every other Western country, except the United States.

And the fact that Canadian gas prices jump up and down from day to day is actually a good sign, he said.

“We do understand Canadians' frustration with fuel price volatility in particular, but at the same time in our view that's the best evidence of a well-functioning, competitive market,” said Boag, president of the Canadian Petroleum Product Institute.

His association represents Canadian fuel companies like Petro-Canada, Shell, Ultramar, Chevron, Husky and Imperial Oil.

“In our view, Canadians are well-served by a competitive marketplace and today they still pay the second-lowest price for fuel in the Western world,” he added.

He was one of three petroleum industry experts testifying before the Subcommittee on Oil and Gas and Other Energy Prices. The committee is investigating the reasons behind the high prices of fuel in the country.

Listeria Hysteria Can’t Hurt

(Globe and Mail – Sylvain Charlebois, University of Regina)

The latest listeria outbreak is a warning that cannot be ignored. It reminds us how vulnerable we are to threats generated from our food supply. And the simple fact is, our government-monitored food supply is no longer capable of protecting us.

It is chilling to read forecasts published in the past decade by food-safety experts. Some analysts suggest the next 9/11 will occur through our food supplies. Such a menace is particularly imaginable because our food-safety architecture is inadequate. It took seven months to find the source of contamination in the 2006 American spinach recall. Even worse, we still don’t know whether tomatoes were the culprit of the salmonella outbreak earlier this year. Our ability to track products in North America, let alone Canada, is highly deficient.

No individual organization is capable of meeting these challenges. In recent years, Canadians have had faith that government knows best when it comes to public health issues, and rightly so. Our public health system has served us so well that it has become unnatural to think that profit-driven organizations care for the common good. But while many Canadians believe we should rely solely on publicly funded authorities, the expanding scope of modern food systems is debunking such wishful thinking.

The food industry is a loose collective of organizations whose primary goal is to provide safe food. But its efforts are failing. Studies suggest that only 2% of everything we eat in Canada is audited by competent public authorities. The entire Canadian food industry represents more than $100-billion in annual revenue, so the scope of our food industry is barely riotous.

For the food industry to be capable of meeting its mandate, the private sector needs to play a pro-active role with public agencies in food-safety practices. Food-safety authorities need to build reliable partnerships to counter potential threats from the food supply, human induced or not. Accountability, transparency and responsiveness are key qualities we need to foster in order to manage risk.

With 5,000 on staff, the Canadian Food Inspection Agency has the capacity to investigate outbreaks, but it needs to modify its role as authority. Since its inception in 1997, the CFIA has matured into a competent organization that is willing to learn from the past. Nonetheless, markets and consumer behaviour are changing rapidly. The CFIA and provincial/municipal food-safety authorities cannot keep up, and public food-safety resources are overdrawn. The CFIA’s priority should be to promote shared interests among food-industry players.

We also need to redefine the geographical scope of our food-safety systems. We import more than $25-billion worth of food products every year in Canada. We need to include the Americans in our monitoring practices. Setting up a continentally based system would be challenging but necessary to manage future risks.

When developing food risk management strategies, it is crucial to consider how consumers evaluate risk practices. Pro-active consumer protection, for example, is often positively related to consumer evaluation of risk management quality. Pro-active measures include enhanced food traceability, education and awareness, surveillance, proper risk management certifications, and improved supply chain control. These responsibilities should be shared between the public and private sectors. Closer co-operation will help identify problems and anticipate threats.

The “us versus them” culture is too prevalent in the food business. We are faced with a threat - but also an opportunity to improve Canadian food safety. Rather than forcing government to play the role of industry enforcer, we must protect the rapport between consumers and the food industry before it is too late. See also this article in the Regina Leader-Post.

Food Inspection System Needs Revamping, Says PM

(Winnipeg Free Press – Gregory Bonnell, The Canadian Press)

Canada’s listeriosis outbreak is a tragic example of why the food inspection system should be revamped, Prime Minister Stephen Harper said yesterday as he spoke publicly about the crisis for the first time, offering condolences to those whose loved ones have died or fallen ill.

In Ontario – home to all six deaths conclusively linked to the outbreak, and a province that’s no stranger to serious health crises – Health Minister David Caplan expressed concern about reports the federal Tories intend to allow the food industry to police itself.

The outbreak, which has been linked to meat products recalled by Maple Leaf Foods, shows why Ottawa needs to act, Harper said during a news conference in Ottawa. “This is a serious concern. That’s why I indicated ... that it’s necessary to reform and revamp our food and product inspection regimes.”

An additional nine deaths across Canada – six in Ontario and one each in B.C., Saskatchewan and Quebec – remain under investigation for possible links to the outbreak. Two new confirmed cases in Ontario and one more in Quebec have brought the total of known cases with a definitive link to the outbreak to 29.

Food tracking system

Health Minister Tony Clement, in Denver for the Democratic National Convention, said he has legislation before Parliament in the hopes of creating a national food tracking system. “We can track a given food source, a given food supply (and) if there’s a problem, find out quickly, deal with the problem and make sure Canadians are protected,” Clement told the CBC.

Caplan, Clement’s counterpart in Ontario, expressed concern over the Conservative government’s proposed reforms.

Ontario’s previous Conservative government, in which Clement was a cabinet minister, removed safety protocols from the province’s water inspection system – a move a judicial inquiry found contributed to the E. coli water crisis in Walkerton that killed seven people in May 2000.

“I want to make sure that we have the highest public safeguards and safety nets in place. That’s where my focus has been,” Caplan said. “I would be concerned about any proposal which might weaken Ontario and-or Canadian safety guidelines.”

A secret federal cabinet document leaked last month suggested the Tories intend to hand responsibility for inspections over to the food industry. The government has neither confirmed nor denied details of its planned changes.

More than 220 meat products have been recalled by Maple Leaf or companies that used recalled meat, including yesterday’s announcement of three additional brands of ready-made sandwiches sold in the Maritimes and Ontario. Maple Leaf initiated its recall after the Listeria bacterium was detected in some of the goods produced in one of its Toronto plants, but eventually ordered the recall of all products made at the facility as the outbreak escalated. Maple Leaf’s stock has taken a pounding as a result of the recall, which the company estimates will cost about $20 million – not including the potential impact on sales down the road.

Meat Inspectors Stretched Too Thin: Union

(Canwest News Service – Sarah Schmidt)

The inspector stationed at the Toronto plant at the centre of a deadly food-borne outbreak is responsible for six other facilities under a new inspection system that’s drawn complaints that staff “are working off their feet.”

Complaints of being stretched too thin have flooded in from some inspectors in “resource stressed” areas like Ontario and Alberta since March, when the Canadian Food Inspection Agency brought in a new compliance verification system (CVS), according to Bob Kingston, head of the agriculture unit of the Public Service Alliance of Canada, which represents food inspectors across Canada.

“They’re facing a choice of, ‘OK, do I concentrate more on doing a thorough inspection or do I concentrate more on getting the paperwork done that says I’ve been to that plant, I’ve looked at the records and that satisfies the legal requirement for international trade.”

The new inspection program resembles more of an auditing system and requires government inspectors to review a company’s records to monitor and verify food-safety practices at all critical points during production, including ventilation at the facility, equipment maintenance and calibration, personnel training, sanitation and pest control programs, and product code identification in case of recalls.

In correspondence to union officials provided to Canwest News Service, one inspector complained, “We do not have the same presence we used to have in the processing facilities.

When the cat is away the mice will play.” Another noted that, “We are not making the observations we used to make when we had more of a hands-on approach. We spend more time looking at paper than anything else.”

Another inspector was more blunt. “We’ve had all our authority taken away and now we are just paper pushers.”

The inspector stationed at the Maple Leaf Foods plant in Toronto is responsible for another two meat processing plants and four cold storage facilities. Storage facilities require less rigorous inspection processes.

CFIA said Tuesday the three meat processing facilities require daily visits, as does one of the cold storage facilities.

Richard Arsenault, who oversees meat inspection for the agency, said it’s “normal and usual” for inspectors to be responsible for more than one plant and this is not a new feature of the inspection system. Arsenault says the feedback he’s been getting about the new verification system has been positive. Read the complete article.

Scotiabank Mexico Signs Exclusive Guarantee Agreement with EDC for Mexican Market

(Canada NewsWire)

Export Development Canada (EDC) and Scotiabank Mexico today announced an agreement through which EDC will guarantee Scotiabank Mexico loans in Mexico to either importers of Canadian goods and services or subsidiaries of Canadian companies operating in Mexico. This is the first Guarantee Agreement that EDC has signed with a Financial Institution in Mexico.

“Scotiabank is extremely pleased to be exclusively partnering with EDC to assist companies in the importing of Canadians goods and services to Mexico and facilitating the establishment of Canadian subsidiaries in Mexico,” said Alberta G. Cefis, Executive Vice-President and Group Head, Global Transaction Banking, Scotiabank. “This new partnership will enable Scotiabank to provide customers in Canada and Mexico with end-to-end supply chain financing solutions.”

“EDC and Scotiabank’s interests in the Mexican market are very well aligned, and this agreement reflects our shared interest in doing more business there and growing the presence of Canadian companies in this vital market,” said Eric Siegel, President and CEO of EDC.

“EDC and Scotiabank have a long and strong relationship and this new exclusive partnership builds on our shared commitment to helping Canadian and Mexican companies involved in international trade,” said Nicole Reich de Polignac, President and CEO, Scotiabank Mexico. “This partnership with EDC is very exciting because it will help Canadian companies to enter Mexico and invest in this booming economy.”

Under the agreement, EDC will guarantee up to 75% of the loan amount, to a maximum of USD $5 million. EDC’s participation is predicated upon loans that support Canadian export contracts or facilitate Canadian capacity in Mexico. The agreement will provide for loans in U.S. dollars or in Mexican pesos.

Mexico is a key market for EDC, averaging CAD $2.3 billion in business volume since 2005, largely focussed on the extractive, transport, infrastructure, and information communication technology sectors. EDC has permanent representations in Mexico City and Monterrey that develop relationships with Mexican Companies, Canadian suppliers and Canadian subsidiaries operating in the country. In 2007 EDC served over 500 Canadian companies doing business with Mexico.

Through this exclusive partnership with EDC, Grupo Scotiabank seeks to increase its product offering and provide customers in Canada and Mexico with the best end-to-end supply chain financing solutions, designed to facilitate international trade and mitigate risk. Scotiabank Mexico serves 1.8 million customers in 635 branches throughout Mexico.

Developing Nations Trying to Break WTO Impasse: Minister

(Video: Wharton School • Story: Agence France-Presse)

Developing nations are working on a compromise which they hope can help break a deadlock in global trade talks, Indonesian Trade Minister Mari Pangestu said Wednesday.

The Group of 33 (G33) developing states’ secretariat was working to convene a meeting of officials to draw up a compromise, Pangestu said on the sidelines of an Association of Southeast Asian Nations (ASEAN) meeting in Singapore.

“We’re working hard to come up with a compromise which we think is doable,” she told reporters. Indonesia is coordinator of the G33. “The secretariat of G33 is working hard right now as we speak. There will be, probably beginning next week, the beginning of informal discussions between senior officials to find the technical compromise.”

The Doha Round of global trade negotiations broke down in Geneva last month after India and the U.S. failed to agree on a safeguard mechanism allowing for special tariffs on agricultural goods if imports surge or prices fall.

Washington rejected Indian proposals that developing nations should be allowed to boost duties by an additional 25% on farm products if imports surged by 15%. Washington insisted extra duties should be allowed only if imports rose by 40%.

Pangestu said a compromise was needed on the issue, adding the mechanism must be effective and easy to use, as requested by developing countries, but also “that this is not being abused, that there’s discipline to using it.” She said the technical discussions hope to make progress by September in order to get the World Trade Organisation ministers back to a meeting.

Indonesian President Susilo Bambang Yudhoyono has called on the leaders of fellow developing countries Brazil, China and India to help revive the stalled negotiations.

Pangestu said Yudhoyono and the other leaders were trying to “ensure that the political commitment and will to resume negotiations comes from the highest level.

The trade minister said the danger of countries backsliding towards protectionism was real. “When you have an economic slowdown as is being predicted in the US as well as Europe and Japan, then this is often the time when you have unilateral protectionism. We certainly would be very concerned about that,” she said. “The answer to that is to ensure that the multilateral trading system is preserved and that means again prioritising at the highest level of political commitment to resume negotiations as soon as possible.”

Singapore Prime Minister Lee Hsien Loong warned against reverting to protectionism when he opened the five-day ASEAN economic ministers meeting on Tuesday. He said a strong rules-based global trading regime remained the best option for the world economy.

What is the Tipping Point for Bringing Back Production to Domestic Market?

(Supply Chain Digest)

With the dramatic rise in fuel prices and thus transportation costs, there is growing evidence that some companies are relooking at the numbers and, in some cases, deciding to bring back production from Asia to domestic sources or “nearshore” low-cost countries, such as Mexico for the U.S. or Eastern European countries for Europe.

“For every company and product, there is of course a “tipping point” where rising logistics costs negate the unit cost advantages of China or other Asian countries,” says Dr. David Simchi-Levi of MIT, who has been doing research in this area.

Earlier this year, Simchi-Levi did an analysis for Supply Chain Digest that showed how rising transportation costs would impact optimal network design as the price of oil reached progressively higher levels. In one case, using real customer data, the analysis showed that as the price of oil went over $150 per barrel, triggering a corresponding increase in transportation costs, one consumer goods company should move a substantial amount of production volume from Mexico to a factory in Omaha to have the lowest total supply chain cost. Even though the U.S. unit manufacturing costs were higher, they were offset by lower shipping costs to customers.

“Now, what we are starting to see is that, what we predicted might happen then, actually beginning to occur,” Simchi-Levi said. He added that he has seen a number of companies that either put Asian offshoring plans on hold or, in some cases, brought production back to domestic or nearshore sources.

Simchi-Levi said he has been looking at a variety of macro-economic data for the past 4-5 years. He said that during that time, transportation costs have risen by about 40% – and not surprisingly, inventory carrying costs have also risen about 50%.

Why? In the constant trade-off between transportation and inventory costs, rising fuel costs ultimately mean it is cheaper on the margin to hold more inventory if doing so can reduce other logistics costs. Read the complete article (PDF).

Tuesday, August 26, 2008

Fuel Surcharge Hits Record Level in September

(Transport Weekly)

More recent easing of prices likely to bring down surcharges beginning in October; shipping lines hold firm on floating bunker contract terms.

Container lines in the Transpacific Stabilization Agreement (TSA) have confirmed that their floating bunker fuel surcharge, adjusted monthly according to a formula that tracks world fuel prices at key loading locations, will spike to a record level effective September 1. The higher surcharge reflects record fuel prices that topped $767 per ton in mid-July, up from $500 at the beginning of 2008 and $296 at the beginning of 2007.

Responding to questions that have been raised as to why the bunker charge is increasing at a time when fuel prices have been falling, N.Y.K. Line vice president and TSA revenue policy committee member Bill Payne emphasized that each month’s surcharge reflects average fuel prices during a reporting period 30-60 days earlier. This is done to comply with U.S. law requiring a minimum 30 days’ advance notice to the market in the event a particular rate or surcharge is to be raised. “Carriers pay the higher fuel costs out of pocket as those costs rise, cushioning the impact on shippers, and then must pass them through after the fact,” Payne said. “The good news with a floating formula is that, as prices fall, customers will start to see savings 30 to 60 days out.”

The TSA surcharge is posted by the carrier group as a guideline for the market, but service contracts with customers – including bunker surcharge terms – are addressed individually by the lines. APL senior vice president Bob Sappio, also an RPC committee member, noted that while carriers and shippers have made significant progress in agreeing on a floating fuel surcharge, much more work remains. “If people think the high price of fuel is temporary they are mistaken”, Sappio said. “The transpacific trade is simply not sustainable as it is presently constituted; carriers must recover a greater percentage of actual dollars spent on fuel.”

Health Officials Debate Standards for Food Allergy Warnings

(CBC News – The Canadian Press/AP)

Health officials in the U.S. and Canada are debating setting standards for food allergy warnings, amid increasing concern that consumers are so confused they’re starting to ignore the warnings.

It’s one of the biggest frustrations of life with food allergies: That hodgepodge of warnings that a food might accidentally contain the wrong ingredient.

The warnings are voluntary – meaning there’s no way to know if foods that don’t bear them really should. And they’re vague: Is “may contain traces of peanuts” more reliable than “made in the same factory as peanuts?”

“Really, the safest thing you can do is make all your food at home from scratch, period,” says Margaret Sova McCabe of Sanbornton, N.H., whose son Tommie, almost eight years old, is allergic to peanuts, dairy, wheat and five other ingredients.

But she doesn’t find that practical – and repeatedly has spotted longtime favourite “safe” foods suddenly bearing new warnings that accidental contamination is possible after all.

“Sometimes we buy the product anyway, and sometimes we don’t,” says McCabe, who is a law professor and questions how often the warnings signal liability protection rather than true risk. “What does this really mean? Can I count on it, as a consumer, to really have any meaning?” she asks.

The Food and Drug Administration will ask those same questions at a public hearing on September 16, a first step toward developing what it calls “a long-term strategy” to clear the confusion. Read more.

Privacy Group: US Border-Crossing Database Raises Concerns

(Grant Gross — IDG News Service/Networkworld)

A plan by U.S. Customs and Border Protection (CBP) to collect personal information on every traveler coming into the country and keep that information in a database for 15 years could have huge privacy implications for U.S. residents, one privacy group said.

The Center for Democracy and Technology (CDT), in comments filed Monday, said CBP's plan raises serious privacy concerns. CBP is part of the U.S. Department of Homeland Security.

The CBP proposal, published as a federal notice in late July, represents a “vast scope of data collection,” because data wasn't formerly kept for U.S. citizens crossing into the country by land, the CDT said.

In addition, the 15-year retention period for the data is “excessive,” wrote Gregory Nojeim, senior counsel at CDT. “It cannot be justified as necessary for determining whether the record subject is admissible or is dangerous or is the subject of an outstanding criminal warrant,” he wrote in the CDT filing.

The CBP plan also allows for the agency to share the information with other federal, state, local, tribal or foreign government agencies for a wide variety of reasons, Nojeim wrote. The CBP proposal allows information to be shared with government agencies responsible for investigating, prosecuting, enforcing or implementing a “statute, rule, regulation, order or license” when CBP believes that information would help the enforcement of civil or criminal laws or regulations.

In the past, CBP could only share information when it became aware of a violation or potential violation of laws or regulations, Nojeim noted. Read more.

Inventory’s New Dimensions

(Traffic World – William Hoffman)

Shippers and their service providers relied for years on low-cost transportation to help keep inventories lean. Now that higher energy prices have made pure shipping costs an item that can’t be taken for granted, more logistics planners are turning to advanced technology to manage inventories by matching the sophistication of supply chain strategies to the basics of day-to-day execution.

For shippers, the move to better inventory management tools has been the result of a shift over the last five years in the balance of costs throughout the supply chain to the point where, from a financial standpoint, it’s become more important than ever to keep inventory at a minimum. Industry studies such as the Council of Supply Chain Management Professional’s “State of Logistics” report show inventory carrying costs making a steady climb in recent years.

Inventory carrying rates last peaked in 1989, at 28.1%, hitting a low of 20.1% in 2003, before accelerating to 24.1% in 2007. Inventory as a percentage of GDP was 5.4% in 1985, the first year CSCMP started keeping track, hit its low of 2.8% in 2003, and rebounded to 3.5% in 2007.

“Inventory optimization is again a key issue,” said Rosalyn Wilson, the independent researcher and author of the CSCMP report. A bellwether of the new regime - the absolute volume of wholesale inventories exceeded that of retail inventories for the first time in December 2007, while inventory turnover rates that year began to fall.

“It seems like the more we evolve this (supply chain) industry, the more problems come back to the same key areas,” Wilson said in presenting her report in June. “Inventory optimization was paramount in the 1980s and 1990s, and we conquered it. Now it is at the forefront again, but the issues are much more complex and difficult to solve.”

The causes of the reversal in inventory management fortunes are not hard to find.

Fuel costs have more than tripled since the 1990s. Price and wage inflation in offshore production markets, especially but not exclusively in China, have eroded the competitive advantage shippers used to get by sourcing outside North America. A weak dollar and faltering U.S. economy mean unsold freight has accumulated across lengthy and increasingly brittle supply chains.

Obviously there is no alternative to reasserting control over supply chains to bring inventory costs back down, or at least to slow their advance. Yet technology vendors said the next steps in inventory management – already undertaken by savvy shippers and a small but growing cadre of logistics providers – will require participants to collaborate in an increasingly uncertain and even hostile macroeconomic environment. Read the complete article.

Canada’s Economy Doing Better Than GDP Numbers Suggest, Desjardins Economist Says

(CEP News – Geoff Matthews)

Canada’s economy is faring far better than the country’s gross domestic product numbers suggest, says Desjardins senior economist Benoit P. Durocher.

It is difficult to believe that Canada’s economy is currently on the verge of a recession, Durocher wrote in a research note for publication on the Desjardins website.

“Except for certain manufacturing industries, we get the impression that economic activity across the country is in pretty good shape,” he said. “The unemployment rate is hovering close to its historic low, wages are increasing rapidly, and consumer spending and investment are doing rather well despite a recent slowdown.”

The increase in prices for raw materials exported by Canada is boosting income while lower prices for imports, due in part to the loonie’s rise, are cutting expenses, he said. “In short, Canadians get more while paying less.”

Using gross domestic income (GDI) instead of GDP as the benchmark gives a more realistic view of the strength of the Canadian economy, Durocher said.

The real GDI takes into account changes in purchasing power and production, he said, and corrects exports and imports using the same price index.

This alternative benchmark seems to be gaining in popularity, Durocher said, noting that the most recent Monetary Policy Report Update issued by the Bank of Canada signalled that real gross domestic income increased by an annualized rate of 2.4% in the first quarter, owing to a further 8.1% improvement in Canada’s terms of trade.

Canada’s real GDI has grown by 21.4% since early 2003, compared to only 13.8% growth in the real GDP, he said. “In short, the real GDI has presented a much more positive picture of the Canadian economy for some time now.”

Durocher said Canada can’t abandon GDP as an economic measure, given its widespread global acceptance. However, using real GDI “still allows us to assess the health of Canada’s economy under a different angle that can be particularly useful in a context of widely fluctuating terms of trade, as is currently the case in Canada.”

By taking into account the wealth effect associated with sudden movements in trade terms, GDI “provides a more complete overview of the health of our domestic economy,” he added.

Real GDI also paints a much more optimistic portrait of Canada’s economy and collective well-being than the most recent real GDP would lead one to believe, Durocher said. “This observation does not favour additional key interest rate cuts from the Bank of Canada, unless the economic situation deteriorates further.”

Canada Concludes Free Trade Negotiations with Jordan


On August 25, 2008, the Government of Canada concluded negotiations on a free trade agreement (FTA) with Jordan, as well as on parallel agreements on labour cooperation and the environment. This year, the Government of Canada has also concluded FTA negotiations with Colombia and Peru.

“We welcome this opportunity to expand Canada-Jordan trade relations,” said the Honourable Michael M Fortier, Minister of International Trade. “This bilateral free trade agreement will open up significant opportunities for Canadian companies in this growing economy, as well as elsewhere in the Middle East and North Africa. It demonstrates our government’s continuing commitment to expand opportunities for Canadian exporters.”

An FTA with Jordan will improve market access for both agricultural products and industrial goods, and help to ensure a level playing field for Canadian exporters vis-à-vis competitors that already have preferential access to Jordan’s markets. Trade between the two countries totalled $76 million last year.

Upon implementation, this FTA will eliminate tariffs on the vast majority of current Canadian exports to Jordan, directly benefiting Canadian exporters. For example, in 2007, electrical machinery was subject to roughly $293,000 in duties (up to 30 percent on some products) on exports of $3 million to Jordan.

The parallel labour and environment agreements will help to ensure progress on labour rights and environmental protection.

“This labour cooperation agreement between Canada and Jordan will ensure that economic progress goes hand in hand with the rights of workers,” said the Honourable Jean-Pierre Blackburn, Minister of Labour and Minister of the Economic Development Agency of Canada for the Regions of Quebec. “The successful conclusion of these negotiations marks the beginning of a long-term cooperative relationship between our two countries.”

“The Canada-Jordan Agreement on the Environment marks another milestone in our two countries’ joint commitment to protecting our most vital of assets, our shared environment,” said the Honourable John Baird, Minister of the Environment. “We see this partnership as an opportunity to create and strengthen environmental laws and policies as a legacy for future generations.”

This FTA also demonstrates Canada’s support for a key partner in the pursuit of regional peace, security and stability. These negotiations follow on the successful conclusion of negotiations for a new bilateral air services agreement and a foreign investment promotion and protection agreement with Jordan.

Prime Minister Stephen Harper committed Canada to exploring the possibility of an FTA with Jordan when he met King Abdullah II in July 2007.

Before signing the agreements and making them public, Canada and Jordan will undertake a detailed legal review of the FTA texts in English, French and Arabic. Following formal signature, the treaties will be tabled in the House of Commons for a period of 21 sitting days for Members of Parliament to review and debate. Following the 21-day period, the Canadian government will introduce draft legislation to implement the agreements.

Monday, August 25, 2008

Legislation May Have ‘Seller Beware’ Philosophy

(Law Times – Julius Melnitzer)

In its 2007 throne speech, the Conservative government promised to “introduce measures on food and product safety to ensure that families have confidence in the quality and safety of what they buy.”

With the introduction in May of bill C-51, which amends the Food and Drugs Act, and bill C-52, the proposed Consumer Product Safety Act, the government was well on its way to fulfilling that promise – in spades. The legislation, if enacted, will substantially change the regulatory regime for food, therapeutic products (including drugs, natural health products, and medical devices), cosmetics, and other consumer products.

The legislation has a very wide reach, with implications for pharmaceutical, medical-device and other health-product companies, food manufacturers, and anyone that manufactures, imports, advertises, or sells consumer products.

“The breadth of the legislation really does impact on everyone by adding an enormous level of infrastructure throughout the supply chain,” says Martha Healey of Ogilvy Renault LLP’s Ottawa office. “But it also goes so far as to affect individuals to the extent they give away or sell products at garage sales.”

Which means the legislation may be impacting on a host of organizations that don’t realize they’re affected until it’s too late.

“Under the present wording, even a product that is only occasionally used for non-commercial purposes could be covered,” says Elizabeth McNaughton of Blake Cassels & Graydon LLP’s Toronto office. “You could, for example, have a company that sells commercial stoves to restaurants with the occasional sale to a consumer, and that makes the stove a consumer product.”

Doubtless, the fact that product recalls and public notices of voluntary withdrawal are at a record high in Canada has made product safety and quality a leading issue for consumers and retailers.

Yet there are lingering questions about the scope of the legislation, namely whether all these effects were intended or whether the proposed laws are just another instance of legislative overkill.

“Everyone’s for child safety,” Healey says, “But it’s odd that someone could be held liable if they give their neighbour a used baby stroller that turns out to be defective and an injury occurs.”

Indeed, bill C-52 creates a general prohibition on manufacturing, importing, selling, or advertising any “consumer product” that poses a danger to human health or safety. “Consumer product” is very broadly defined as “a product, including its components, parts or accessories, that can reasonably be expected to be obtained by an individual to be used for non-commercial purposes, including for domestic, recreational and sports purposes.” Read the complete article.

Scrapping Food-Labelling Approval Is Dangerous, Says Food Industry

(Canwest News Service – Sarah Schmidt)

Industry leaders call the move dangerous, but the Conservative government is trying to sell a controversial decision to scrap a food-labelling approvals system as a way to help companies “take the lead in fulfilling their responsibility for consumer protection,” according to internal talking points obtained by Canwest News Service.

The decision to eliminate the Canadian Food Inspection Agency program requiring companies to get all labels approved for meat and processed fruit and vegetable products before they get to market was made quietly last November. Treasury Board also supported changes to the way meat is inspected as part of a strategic review of the agency.

Although no official announcement about eliminating the program was made, the agency in June prepared talking points “for internal distribution only.”

Robert de Valk, a food-regulation consultant specializing in labelling, says the reasoning doesn’t hold up. After reviewing details of the plan supported by Treasury Board, he said the decision to terminate the pre-market label approval for domestic and imported products is the “most dangerous part” because it undermines consumer confidence.

The former member of a food policy group advising the agriculture minister said “we are taking something that works and creating confusion in the consumer’s mind. When you create confusion in the consumer’s mind, their confidence drops, and that’s dangerous.”

De Valk, Canadian representative with the North American Meat Processors Association, joins a growing list of industry leaders opposing the move, even as the government tries to sell it as a business-friendly move to “reduce the regulatory burden by eliminating the requirements for mandatory label registration,” according to the taking points.

The Food Processors of Canada says the decision to cut the program is like “playing Russian roulette with the Canadian public.” President Christopher Kyte said the label review unit is composed of about eight people who play a vital role in food safety.

“They prevent mislabelling and unsafe products from ending up on store shelves. They catch things like illegal chemicals and misleading health claims. What we want to do is prevent these products from reaching the marketplace. To chase down these products in grocery stores doesn’t seem like a good use of our inspectors.”

In the talking points, the agency says ending the label registration program, which is expected to save $87,000 annually, is “in line” with other efforts to “refocus the available resources to ensure a greater level of compliance at distribution or retail level for the investments made.”

De Valk says this is a dubious argument. “It doesn’t make sense to do away with pre-market review to save $87,000,” he said, arguing it’s wiser to employ a handful of people to ensure labels are accurate instead of asking hundreds of frontline inspectors to review labels on store shelves. Read the complete article.

Turnabout on the Atlantic: As Volumes Soar, Exporters Pay More

(Shipping Digest – Peter T. Leach)

Freight rates on imports fall as volumes drop

The dramatic decline of the U.S. dollar against the currencies of its major trading partners in Europe over the last year continues to drive the reversal of fortune on the trans-Atlantic trade lanes, as U.S. products become more competitive in Europe, while European products grow more expensive in the U.S.

Eastbound ships are stacked to capacity with containers filled with U.S. goods bound for Europe, while westbound ships are only running a little more than 80% full. But the dollar’s decline appears to be leveling off, as major European economies stutter and the euro and the pound begin to lose steam. That could stem the decline in U.S. imports in the next year and slow U.S. export growth, but forecasters’ crystal balls are still a bit murky on this point.

The space shortage has eased a bit this month because much of Europe is on vacation. “So there’s not a lot of cargo moving in mid-August,” said Ron Bailey, manger of Brewster Lines, a St. Louis-based non-vessel-operating common carrier. In addition, the dollar has been getting stronger – on August 13, the exchange rate was $1.49 to the euro, compared to $1.59 at its weakest point.

“That’s starting to take a hit. So as a result, there’s more space available, more equipment, less demand,” Bailey said. That translates into shorter waiting times, but shippers may have to wait several weeks for a booking, depending on the origin and destination ports.

Beset by declining volumes and freight rates on the westbound leg of the trade in the first few months of the year, carriers have largely completed the reductions in vessel capacity they thought necessary to stabilize rates. They expect no further cuts. But even in the face of tight capacity on the eastbound, or backhaul leg, and expectations of some improvement in westbound volumes by the fourth quarter, carriers don’t plan to add capacity. Carriers plan further rate increases in the eastbound trade where demand is strong and supply is limited. Read the complete article.

Doha Post-Mortem: The Outlook for Trade After the Collapse of the WTO Talks

(World Trade Interactive)

Since the most recent collapse of the World Trade Organization’s Doha Round negotiations in late July, there has been much speculation about how the failure to secure a new trade liberalization agreement will affect the future of global commerce. Some say the talks effectively died years ago and that there are simply too many fundamental differences to overcome to achieve any type of meaningful agreement. The fallout, they say, could be a rise in anti-globalization sentiment that translates into not only greater economic protectionism but also a decline in international cooperation in general. Others counter that the talks merely faltered in Geneva over a technical issue, that a breakthrough agreement is in fact closer than ever, and that much like the Uruguay Round before it the Doha Round will pick up again in a year or two and come to a successful conclusion. The real news, they say, is how the rise of the advanced developing countries will affect trade policymaking in the years ahead.

Despite the hand-wringing over the outcome of the July 21-29 ministerial meeting, many participants said negotiators were close to a breakthrough on agriculture and non-agricultural market access that could have paved the way for a final agreement covering issues such as services, trade remedies and intellectual property rights as well. “We really made tremendous progress” during the meeting, U.S. Trade Representative Susan Schwab said as the ministerial ended. “We probably moved the ball further forward in the last 10 days than we have in the last eight years.” Virtually all involved have expressed an interest in preserving that progress somehow in hopes that formal negotiations will resume sooner rather than later. Click here for the complete article.

Saturday, August 23, 2008

Government Takes Further Action on Substances as Part of World-Leading Chemicals Management Plan

(Health Canada)

The Honourable Tony Clement, Minister of Health, and the Honourable John Baird, Minister of the Environment, today [Saturday] released preliminary findings for 19 chemical substances identified as high priorities for action under Batch 3 of the Chemicals Management Plan.

Out of the 19 substances assessed, four are proposed “toxic” to human health. In addition, the Government is also proposing to create a provision for four other substances so that any proposed new use of these substances (which are no longer used or are used in extremely low quantities in Canada) would be subject to notification of the federal government. With this provision the government would be able to set conditions or prohibit the use of these substances if their use would increase exposure to Canadians or environmental organisms.

Following the extensive assessment, the 11 remaining substances are proposed “not toxic.”

The notices containing summaries of draft screening assessment reports for all Batch 3 substances will be published in Canada Gazette, Part I on August 23.

Public summaries, which contain information about how all Batch 3 substances are used in Canada are available on the new Chemicals At A Glance Web page. draft screening assessments as well as risk management scope documents for Batch 3 substances proposed “toxic” can be found on the Chemicals Management Plan website. Interested parties can submit comments on these documents until October 23, 2008. Final screening assessments for Batch 3 substances will be published on or before February 21, 2009.

Friday, August 22, 2008

Restocking the Loading Dock

(Traffic World – John Gallagher)

Truckload carriers forced to reassess their business as they work through one of the longest freight downturns in decades are finding renewed appreciation for the non-asset side of the trucking industry.

A stronger focus on dedicated fleet operations, more reliance on intermodal rail, and freight brokering are keeping big and small fleets from skidding too far off the road as fuel costs continue to take a large bite out of profits.

“We’re seeing some of the freight indicators going up slightly, and at the same time there’s the impact of carriers going out of business” on capacity, said Duff Swain, president of Trincon Group, an industry consulting firm.

“In dry freight, we’re seeing dedicated continue to grow. It’s very strong right now, because shippers are moving into more stable relationships with their carriers. They realize that when the economy comes back there’s going to be less capacity in the marketplace, as well as a shortage of drivers. If the economy improves by the fourth quarter, there’s going to be an upswing in supply and demand as we move from a buyer’s to a seller’s market.” Read the complete article.

Revised Memorandum: D15-2-35


Memorandum D15-2-35: Certain waterproof footwear and bottoms of plastic or rubber originating in or exported from the People’s Republic of ChinaApplication of anti-dumping duty

1. This memorandum refers to the application of anti-dumping duty to importations of certain waterproof footwear and bottoms of plastic or rubber originating in or exported from the People’s Republic of China.

2. The memorandum is divided into 12 sections under “Guidelines and General Information.”

3. A description of the goods is provided.

4. The milestone dates of the investigation are provided, along with the applicable classification numbers.

5. Information regarding the normal value of subject goods and anti-dumping duties is provided.

6. This memorandum replaces and supersedes Memorandum D15-2-35, dated February 20, 2007.

Full Document available here.

First Sale Declaration Requirement


U.S. Customs and Border Protection’s trade office on Thursday advised the trade community of new reporting requirements to ensure that importers comply with the new declaration requirements passed in the Farm Bill related to transaction value of imported merchandise.

Effective August 20, importers are required to provide CBP with an “F” indicator next to the declared value at the line level on CBP Form 7501, or the electronic equivalent, when the declared transaction value of the imported merchandise is determined on the basis of the price paid by the buyer in a sale occurring earlier than the last sale prior to the introduction of the merchandise into the United States. This element must be submitted for each line on the entry summary, CBP form 7501. Under the Farm Bill, the declaration requirement is effective for a one year period.

Due to the complexity of the programming changes required, CBP is delaying the reporting of the First Sale Declaration Requirement for 30 days to allow the Trade time for software programming changes. However, entries subject to the First Sale Declaration Requirement that were not reported between August 20 and September 19, will require amendment. CBP will provide further guidance describing the amendments shortly. Additional information is available here.

Japan to Mandate Carbon Labelling

(The Age, Melbourne)

Japan is to enforce carbon footprint labelling on food packaging and other products in an ambitious scheme to persuade companies and consumers to do more to reduce their greenhouse gas emissions.

The labels will appear on food, drink, detergents and electrical appliances from next year, providing detailed breakdowns of each product’s carbon footprint under a calculation and labelling system being formulated by the Trade Ministry.The ministry said the labels would show emissions produced by the manufacture, distribution and disposal of each product.

To promote the scheme, the ministry released details of the carbon footprint of a packet of chips. One bag produces 75 grams of carbon dioxide: 44% from growing potatoes, 30% in production, 15% from the packaging, 9% during delivery and 2% from disposal.

Last month, the Government vowed to reduce total carbon emissions by up to 80% by 2050.

RAND: Railroads May Not Be Able to Handle Increased Freight

(American Shipper)

The volume of U.S. freight is expected to double over the next 30 years, and a new study said while railroads have improved productivity in recent decades, continued incremental improvements may be insufficient to handle freight volume increases.

The study by nonprofit research organization RAND Corp. said, “Increased use of rail freight is seen as a way to accommodate increased volumes while minimizing congestion on the highway system. However, the U.S. railroad network consists of many fewer track miles than it did several decades ago, and there is concern that it has become congested and incapable of handling additional volume.”

“Concern about railroad capacity constraints appears to be justified. However, capacity is determined by many factors, including operating practices, signaling technology, and car availability, in addition to miles of track,” RAND said. “Given the complexity of the system, there isn’t enough information available today to determine whether rail performance is now stable, declining or improving.”

The report three areas for further research:

• Improved reporting and public dissemination of railroad system and performance statistics to support transportation policy.

• Continued examination of public and private cost tradeoffs between shipping freight by truck and by rail.

• Development of a national freight strategy that balances the private interests of the shippers and the railroads with the public interest associated with the relative social costs of different modes of freight transportation.

The study, The State of U.S. Railroads: A Review of Capacity and Performance Data, is available online at the RAND website.

Customs Clearance to be Simplified in Japan

(CIFFA eBulletin – ITJ)

The Japanese ministry of Finance is currently holding discussions with the USA and the European Union. The talks aim to simplify customs clearance procedures for all participants that have been granted the internationally valid status of authorized economic operator (AEO).

Japan hopes to come to an agreement with the USA and EU by March next year. Such a pact could accelerate European exporters’ traffic with Japan by a day.

Weakness from Within in South Korea

(Export Development Canada – Peter G. Hall)

The story is getting all too familiar: yet another economy joining the ranks of those succumbing to the slowdown that began in the large economies. Scoping the reach of the slowdown has turned a lot of attention to bellwether trading economies in the Asia-Pacific zone. In this context, recent softening in South Korea shouldn’t be surprising – is it just a rerun of the unfolding global story?

Trade plays a huge role in the South Korean economy. Exports accounted for 61% of economy-wide output in 2007, a share that has swelled in recent years from just 24% in the mid-1990s. Imports are also a large share of activity, but South Korea’s real trade surplus has surged from a deficit position in the mid-1990s to a whopping 11% of economic output in 2007. The bulk of the surge occurred in the post-2002 period, when trade chipped in half of the economy’s total growth.

Such trade-dependence sounds like a prescription for a shake-up in today’s environment. But so far, South Korea is bucking the global trend in a big way. Real export growth has risen steadily since 2005, clocking 16% annualized growth in the April-June period. Monthly exports were up 37% in July compared with a year ago, in spite of much slower activity to the US and Eurozone markets. Surging shipments to top customer China, and also Japan, Southeast Asia and the GCC region, more than made up for the weaker destinations. In sum, export activity remains robust.

Even so, trade’s overall contribution seems to be faltering. Recent import growth has also accelerated, knocking South Korea’s nominal trade balance into deficit last December, where it remained in July. Normally an indication of potentially dangerous red-hot growth in the domestic economy, this turn of events is more about high commodity prices. As a large importer of commodities, South Korea’s import tab has taken a big bite out of the export bonanza.

Oddly, South Korea’s internal economy is where the key concern lies. Domestic demand slowed to a crawl in the second quarter as plunging consumer confidence halted spending activity abruptly. Moreover, difficulties in the housing market put the brakes on investment spending. Increased government outlays were not significant enough to offset weakness in the other categories. As such, in spite of the vigorous export picture, overall growth slowed to a 3.4% annualized pace in the second quarter, down from 5% in 2007.

The mix of growth is not comforting. It has become increasingly difficult for larger economies – particularly trade-dependent ones – to dodge the bullet of slowing global growth. While the spread of weakness has been more protracted than expected, it has been persistent. And the wave now seems to be hitting Japan, China and other key South Korean customers. With the bulk of pundits now expecting world economic problems to continue in 2009, hopes for a timely, rapid reversal of the current trend are fading. In this context, South Korean exporters will find it difficult to pass on rising input costs to customers, putting the squeeze on corporate profits.

The bottom line? The current source of South Korean weakness is surprising. With export activity soon likely to feel the effects of the softer global slowdown, and no domestic economy to fall back on, South Korea’s economy is highly vulnerable to a swift change in its fortunes.

Politics Builds a Border Roadblock

(Detroit Free Press – Steve Tobocman)

Steve Tobocman of Detroit represents the 12th District in the Michigan House and is the majority floor leader.

Michigan’s economic recovery is not just one of the top issues facing our state; it’s the only issue. The Detroit-Windsor international trade route represents one of our state’s most important assets in growing our economy. With more than $160 billion in annual cross-border trade, the Michigan-Ontario connection is twice as valuable as all U.S. exports to Japan. No other land border in the United States is even half as valuable as Detroit-Windsor.

When it comes to fighting for special interests and political donors, however, U.S. Reps. Joe Knollenberg, R-Bloomfield Township, and Carolyn Cheeks Kilpatrick, D-Detroit, have put helping their friends and donors at the Ambassador Bridge ahead of growing the Michigan economy.

On July 13, 2007; April 21, 2008; and May 30, 2008, the Kilpatrick-Knollenberg duo weighed in with letters to U.S. Secretary of Transportation Mary Peters on the Detroit River International Crossing (DRIC) study without checking in with southeast Michigan’s businesses and job producers.

In short, the Kilpatrick-Knollenberg team has joined forces to ensure that the Ambassador Bridge’s monopoly on Detroit-Windsor international trade’s truck traffic is continued. Reps. Kilpatrick and Knollenberg appear committed to protecting this monopoly no matter how much it hurts job growth in Michigan.

Given the critical nature of international border trade, it is shocking that the July 2007 Kilpatrick-Knollenberg letter would demand that Secretary Peters direct the Federal Highway Administration and the Michigan Department of Transportation “to cease participation in the DRIC (study),” while the April and May 2008 joint letters would seek a six-month delay in the study.

The Michigan-Canadian border is our nation’s and continent’s most important international trade infrastructure asset. That is why every single U.S. private sector advocacy organization that has weighed in on the matter, except for the Ambassador Bridge, supports completing the DRIC study and moving forward with a plan to ensure Michigan has adequate capacity to facilitate growing international trade and to meet the homeland security needs of a post-9/11 world.

In fact, according to Sen. Michael Fortier, Canada’s Minister for International Trade, the DRIC study represents the most important infrastructure investment for economic development in Canada.

It could be the isolation of working inside the Beltway that is affecting Knollenberg and Kilpatrick. Or it could be the thousands of dollars of personal political donations they have received from executives of the privately owned Ambassador Bridge. But Knollenberg and Cheeks-Kilpatrick forgot to ask the Detroit Regional Chamber of Commerce, Automation Alley, Ford, Chrysler, General Motors, the United Auto Workers, the Michigan Department of Transportation, the Michigan Manufacturing Association, the Automotive Alliance or, even, Oakland County Executive L. Brooks Patterson, Michigan’s most ardent private sector business advocate, for their thoughts on the matter.

Let’s hope that Knollenberg and Kilpatrick use this current in-district work period to talk to the job makers in southeast Michigan and get the straight story on the DRIC.

‘The Longer We Put It Off,’ the Worse Things Will Get

(New Brunswick Business Journal – Matt McCann)

Key pieces of Canada’s infrastructure are crumbling, and a $200-billion investment is needed to maintain our standard of living, says a public policy researcher.

In a paper released today by the Institute for Research in Public Policy, James Brox, an economics professor at the University of Waterloo, said facilities such as roads, highways, bridges, ports, and water systems need the money – $72 billion for new facilities and $123 billion to repair and upgrade those already built – as soon as possible.

Add to that a sustained, 10% annual increase in infrastructure spending, and manufacturing unit production costs could be reduced by five per cent per year, he said, the equivalent of a five per cent increase in productivity.

The funding increase, Brox said, would help narrow the Canada-U.S. manufacturing productivity gap, and enhance the manufacturing sector’s competitive profile.

“New Brunswick’s a bit better off because the infrastructure is more recent, but in a few years it’ll be in the same position Ontario’s in,” Brox said. “The longer we put it off, the worse things are going to get,” he said, adding that the more systems wear down, the more they cost to repair.

Since the 1970s, responsibility for these infrastructure projects has gradually been shifted down to the municipal level.

But cities, Brox said, rely heavily on property taxes for money, an area that’s difficult to increase, and as such, infrastructure has gone neglected or is not even built in the first place.

“Right now, the municipalities don’t have a stable, long-term source of revenue that’s sufficient to fund the infrastructure that they’re really required to provide if we’re going to effect the productivity of the country,” he said.

In addition to lower costs and higher productivity, Brox said infrastructure investments could also translate into a 0.6% increase in jobs relative to baseline trends. David Plante, vice-president of Canadian Manufacturers and Exporters for New Brunswick and Prince Edward Island, said investments in infrastructure are essential to New Brunswick. It is the most export-dependent province, with 75% of its GDP relying on domestic and international exports.

“We’re in a situation where some of our existing infrastructure is deteriorating, but by the same token, we don’t have the same level of infrastructure in much of the rest of Canada and in the United States.” Plante said that every $1 spent on public infrastructure equals 17 cents in cost savings for manufacturers. Those savings translate into a 0.2% increase in GDP.

Citing figures from Statistics Canada, Plante said that all of the money spent on public infrastructure between 1961 and 2000 was responsible for 18% of all business productivity gains. “Infrastructure has to be a clear priority for the federal government,” he said.

Thursday, August 21, 2008

It’s Time to Strengthen the Ties That Bind Us – EU Commissioner

(Embassy – Benita Ferrero-Waldner, European Commission)

Benita Ferrero-Waldner is the member of the European Commission in charge of external relations and European neighbourhood policy.

The next EU-Canada Summit, which will be held in Montreal on October 17, will be an opportunity for the leaders of Canada and the EU, represented by the Presidency, currently France, and the European Commission and Council, to agree to move forward in a number of areas, such as trade and investment, where both sides want to strengthen our economic partnership.

In preparation, we have undertaken a joint study to set out the parameters of such an economic partnership. If we decide to launch a new economic agreement with Canada, the EU would hope for an ambitious agenda going far beyond a classic trade agreement – one that can help us both address the challenges of the new globalized economy of the 21st century.

As a first step towards strengthening our bilateral economic relations, at the end of last year we launched negotiations for an EU-Canada “Open Skies” Air Services Agreement. Our goal is to sign an agreement with Canada whereby any airline could fly from anywhere in Canada to anywhere in the European Union, and vice versa. Our experience within Europe has demonstrated that such an agreement would open up new destinations and routes to both EU and Canadian airlines, while increasing efficiency and reducing fares.

The EU is fully committed to this process and we are prepared to conclude the Open Skies Agreement as soon as possible. It is an agreement where the travelling public will see immediate and tangible results.

At the summit in Montreal, we will also compare notes on climate change, one of the big challenges of our time, which must be addressed – and with all countries on board. Despite the high costs and the sacrifices, we have made significant progress in Europe, and we have an exemplary and operational carbon-trading scheme in place.

As well, we will discuss global stability, security and our military missions, including Afghanistan, where both the EU and Canada are working closely to bring peace, stability and prosperity to the region. In addition to the military missions, under NATO, the EU – in close co-operation with Canada – is actively engaged in the reconstruction of Afghanistan, as well as in humanitarian endeavours, in order to improve the lives of the people of Afghanistan.

I would like to express our appreciation to Canada, which provides the largest contingent of police to the EU-led police mission to Afghanistan, which is training and assisting the local Afghan police forces.

Our efforts to bring peace, security and prosperity to Afghanistan come naturally, as that has been our goal in Europe since we established our common institutions and policies in Europe in the period after the Second World War.

From six countries in the early 1950s, the European Union has now grown to 27 Member States, in the process creating not just peace, security, stability and prosperity, but an integrated economic and political entity. Also, the European Union as such has gradually become a major international actor, both economically as the largest trading bloc and politically.

We act in partnership with countries such as Canada, which share our values of democracy, freedom, economic enterprise, justice and the rule of law.

Lastly, I would like to emphasize how much the European Union appreciates Canada lifting the visa requirements for our new Member States in Central and Eastern Europe. These countries suffered much during the Second World War and were then subjected to a totalitarian Communist regime behind the Iron Curtain for 40 years. Today they are free, members of the EU, and have the highest growth rates in Europe. I hope the citizens of Bulgaria and Romania too will soon also enjoy visa free travel to Canada.

In conclusion let me extend my congratulations on the 400th anniversary of the founding of Quebec City this year. Mes sincères félicitations!

Wednesday, August 20, 2008

GAO Says 100% Scanning Threatens Global Cargo Security Efforts

(World Trade Interactive)

A new Government Accountability Office report argues that the statutory requirement for 100% scanning of U.S.-bound container cargo by 2012 could threaten efforts to fashion international supply chain security standards and may actually provide a lower level of security than the current risk management approach.

According to the report, U.S. Customs and Border Protection has been at the forefront of efforts to develop and implement the World Customs Organization’s Safe Framework of Standards to Secure and Facilitate Global Trade. The SAFE Framework in large part internationalizes the concepts first promulgated under CBP’s Container Security Initiative and Customs-Trade Partnership Against Terrorism. As in CSI, the standards in the customs-to-customs pillar of the SAFE Framework state that members should use a risk-management system to target and identify potentially high-risk cargo. Member customs administrations are urged to provide for joint targeting and screening, the use of standardized sets of targeting criteria and compatible communication and information-exchange mechanisms. In addition, as with C-TPAT, the WCO customs-to-business pillar provides that customs administrations should design validation processes for their respective authorized economic operator programs that offer incentives to participating businesses.

Widespread acceptance of the core principles of the SAFE Framework and implementation of its standards could have numerous benefits, the report states.

• the focus of international customs administrations would be shifted from primarily revenue collection to include enhanced security

• cooperation between customs administrations would be strengthened, improving their capability to detect high-risk cargo

• port shopping by terrorists or smugglers looking for seaports with more lax or nonexistent security standards could be reduced

• programs for ensuring that customs administrations are free of corruption could be improved

• CSI-like customs security practices could be implemented at non-CSI foreign seaports and customs administration reform and modernization could be enhanced

• companies could avoid the burden of addressing different sets of requirements as a shipment moves through the supply chain in different countries

However, the report warns, these benefits are being threatened because of the focus on 100% scanning under the 9/11 Commission Act of 2007, which runs counter to the risk management approach employed by the SAFE Framework, CSI and C-TPAT. WCO officials are concerned that 100% scanning could have an adverse impact on several of the organization’s core instruments, which include not only the SAFE Framework but also the Revised Kyoto Convention, an international customs agreement to which the U.S., the European Union and 52 others have acceded. Some countries are reluctant to implement AEO programs since they believe such programs would not be necessary with 100 percent scanning, and some companies are reluctant to join AEO programs since one of the main benefits of membership, a reduced likelihood of examination, would no longer apply if all containers are required to be scanned.

In addition, the report states, CBP, WCO and EU officials assert that 100% scanning may actually provide a lower level of security than existing programs. The risk management approach directs resources to where they are most needed, officials say, whereas 100% scanning directs too many resources to one activity and diminishes the focus on those container shipments that pose the highest risk. Customs officers currently review the scanned images of high-risk containers in a very thorough and detailed manner, one WCO official said, but reviews may not be as thorough if all containers are scanned due simply to the sheer volume of work, leading to a degradation of security. In addition, a European customs official noted, 100% scanning could have a negative impact on the flow of international commerce, which under the 9/11 Act may be grounds for granting a two-year, renewable extension to the 100% scanning requirement at individual seaports.

WTO Case Against EU Duties on High-Tech Products Advances

(World Trade Interactive)

A World Trade Organization case against the European Union’s tariffs on certain information technology products moved forward this week when the U.S., Japan and Taiwan requested that the WTO establish a dispute settlement panel to examine the matter. The Office of the U.S. Trade Representative reports that the three countries took this step after consultations with the EU in June and July failed to resolve the dispute. The panel request will be taken up by the WTO Dispute Settlement Body at its next meeting Aug. 29.

The U.S. case alleges that the EU has violated its obligations under the WTO’s Information Technology Agreement by imposing new duties on cable boxes that can access the Internet, flat-panel computer monitors and certain computer printers that can also scan, fax and/or copy. The U.S. believes these products are covered under the ITA and should therefore receive duty-free treatment when imported into the EU. However, the USTR states, the EU “claims it can now charge duties on these products simply because they incorporate technologies or features that did not exist when the ITA was concluded.” This approach threatens to “impair continued technological development in the information technology industry and raise prices for millions of businesses and consumers,” the USTR adds.

New Study Highlights Supply Chain Risks

(Canadian Transportation & Logistics)

A new study by the Aberdeen Group research firm has revealed that 99% of companies surveyed have suffered a supply chain disruption over the past year.

Those disruptions resulted in financial losses in 58% of the cases, the study found. As a result, Aberdeen says there are major risk management gaps within the supply chain.

“Growing global operations are forcing companies to more proactively evaluate and address their supply chain risks. Companies are sourcing from and selling to more new regions, often adding new carriers, forwarders, logistics, and distribution partners to their network. At the same time, customers are continuously demanding improved service levels,” said Viktoriya Sadlovska, research analyst, Aberdeen. “These trends, coupled with increased security concerns that have imposed a new level of regulation on global shippers, are driving firms to increase their focus on supply chain risk management and adopt new processes and technologies to make their supply chains more risk-resilient.”

The most frequent types of supply chain disruptions were: supply capacity didn’t meet demand, 56%; raw material price increases/shortages, 49%; unexpected changes in customer demand, 45%; and shipment delayed/damaged/misdirected, 39%.

The study found that best-in-class companies were much more likely than average companies (or laggards), to manage and assess: logistics congestion and capacity; risk profile of suppliers; fuel prices; risk profile of countries; and non-environmental catastrophic events. To read the full report, go here.

Tuesday, August 19, 2008

Globalization and the Costs of International Trade: 1870 to the Present

(Resource Investor – David Jacks et al.)

Analysts suggest that rising oil prices will sharply reduce international trade. This article argues to the contrary, noting that transport costs constitute a limited share of trade costs. Moreover, evidence from the first wave of globalisation suggests that higher shipping costs are unlikely to significantly dampen international commerce – only protectionism would seriously threaten trade.

Most countries trade more on international markets today than ever before – both in absolute terms and as a proportion of their national output. How can we explain this phenomenal increase in international trade over the past few decades? Will the recent rise in oil prices reverse this trend of globalisation?

History provides us with a natural comparison. Beginning in the nineteenth century, the world saw a remarkable rise in international trade that came to a grinding halt during World War I and later on in the wake of the Great Depression. This “first wave of globalisation” from about 1870 until 1913 led to a degree of international integration – measured by trade-to-output ratios – that many countries only achieved again in the mid-1990s.

Taking a comparative perspective, we juxtapose the first wave of globalisation from 1870 to 1913 and the second wave after World War II. We also study the retreat of world trade during the interwar period from 1921 to 1939. We are interested in the driving forces behind these trade booms and trade busts. Was it changes in global output or changes in trade costs that explain the evolution of international trade? Read the complete article.

Relax Trade Barriers and Reap Rewards, Prentice Tells Americans

(The Canadian Press – Steve Rennie)

Industry Minister Jim Prentice touted Canada’s “stable” supply of oil and gas to an audience of American politicians and heads of industry Monday as he called for a relaxing of barriers that hinder cross-border trade.

Speaking at the Americas Competitiveness Forum in Atlanta, Ga., Prentice said freer trade is vital to economic prosperity in the Western Hemisphere. Otherwise, he warned, there’s a risk the Americas will be left out while others prosper. “We need to make trade logistics and border infrastructure a priority in the short term or lose opportunities to other global competitors who are better organized to facilitate trade,” he said.

Prentice echoed the findings of a Canadian government-appointed panel of experts which released a major report in June calling for, in part, the elimination of all internal barriers to trade.

The industry minister lauded the North American Free Trade Agreement as a model that can be adopted both regionally and across the hemisphere.

His remarks come as the Republican and Democrat hopefuls for the White House send mixed signals on the future of NAFTA.

Barack Obama, the presumptive nominee for the Democrats, said in March he would renegotiate NAFTA if elected U.S. president. He now says he supports free-trade agreements, albeit with stronger worker and environmental protections. Republican presidential nominee John McCain has vowed to strengthen NAFTA and has called for harmonization of Canada-U.S. energy policies.

Prentice said NAFTA has helped Canada’s energy exports to the United States total close to $100 billion each year. “On oil alone, Canada has been the largest supplier to the U.S. since 1999 – not Saudi Arabia, not Kuwait, nor any other producer from the Organization of the Petroleum Exporting Countries,’’ he said. “Canada is a stable supplier of energy to the U.S. – whether it is gas and oil in the west or integrated electricity grids in the east. And being close means lower delivery costs than most other power suppliers.”

Oil tumbled last week to its lowest price in three months after the U.S. greenback surged and OPEC forecast demand for oil will slump next year its lowest point since 2002. On Monday, crude oil for September delivery fell to $113.20 a barrel on the New York Mercantile Exchange.

Also attending the two-day conference in Atlanta are Colombian President Alvaro Uribe, Research in Motion co-chief executive officer Jim Balsillie, and Eduardo Castro, president of Wal-Mart Stores U.S.A.

Monday, August 18, 2008

Clarification of Import Requirements for Pet Food

(Canadian Food Inspection Agency)

Recently, there has been a change in the animal health status of Brazil and Chile. Both Countries’ classification has changed from negligible risk to a controlled risk for Bovine Spongiform Encephalopathy (BSE) and Foot and Mouth Disease (FMD). As a result, pet food, some pet chews and pet treats from these countries require an import permit.

It has come to our attention that product of Brazil in particular is being imported to Canada via the United States without the proper documentation. It is therefore important to clarify certain issues regarding country of origin:

• If an animal product such as pet food is legally imported into the United States from a third country and is released into commerce in the U.S., the pet food cannot be considered a U.S. product.

• Repackaging and re-labelling a product originating in a country other than the U.S. and shipping to Canada does not qualify as product of the U.S.

• To qualify as a product of the U.S., the item must undergo sufficient processing in the U.S. Sufficient processing means a significant change, such as re-processing the product. Sections 41.1(1) and 52.(1) of the Health of Animals Regulations refer to sufficient processing “in such a manner that it would not introduce and spread exotic animal diseases in Canada”.

• Any product originating in a third country and transhipped through the U.S. requires an import permit and must meet all the import requirements of Canada with regard to the entry of the product.

Please consult the Automated Import Reference System (AIRS) for import requirements. AIRS can be accessed here.

Saturday, August 16, 2008

Seals on Maritime Containers Must Meet ISO/PAS 17712 Standard


The purpose of this notice is to inform you that the requirement for Container Seals on Maritime Cargo was published in the Federal Register on August 7, 2008 and will become effective on October 15, 2008. The statute requires all containers to be sealed with a seal meeting the International Organization for Standardization Publicly Available Specification 17712 (ISO/PAS 17712), Freight Containers-Mechanical Seals. This specification addresses seal strength and durability so as to prevent accidental breakage, early deterioration, detect tampering, as well as advises each seal be clearly and legibly marked with a unique identification number. All containers (maritime) in transit to the United States must be sealed with an ISO/PAS 17712 mechanical seal no later than October 15, 2008.

The statutory requirement applies to loaded containers, including freight remaining on board, arriving by vessel at U.S. ports of entry. Exceptions, however, include tanks, non-standard containers (such as open top containers), and those containers incapable of being affixed with such a seal. U.S Customs and Border Protection (CBP) will ensure compliance with this new requirement as part of normal seaport container inspection activities and does not envision new activities aimed simply at seal verification.

Vessel carriers are reminded, pursuant to 19 CFR 4.7(b) (2) and 4.7a(c) (4) (xiv), to transmit via the Vessel Automated Manifest System all seal numbers to CBP 24 hours before cargo is laden aboard a vessel at a foreign port. In addition, enforcement action in accordance with 19 CFR Section 4.7 concerning Advance Filing of Cargo Declaration Requirements for failure to transmit accurate information, remains in effect.

Vessel carriers are advised that CBP will begin the phasing in of penalty assessments for violation of the container sealing requirements. CBP will consider 6 U.S.C to be violated if a loaded container that is subject to the sealing requirements arrives by vessel at a port of entry in the United States on or after October 15, 2008, either with no seal, or with a seal that fails to meet the ISO/PAS 17712 standard. CBP may assess a civil penalty against the party responsible for the violation of 6 U.S.C. § 944 under 19 U.S.C. Section 1595a (b) for the attempted introduction of merchandise into the United States contrary to law.