09/27 16:31 U.S. Border Measures May Cost Importers $4 Billion (Update1) By Blair Pethel

Washington, Sept. 27 (Bloomberg) -- Caterpillar Inc., Deere & Co. and other big U.S. importers together may face as much as $4 billion a year in extra costs as the government tightens border- security rules, the world's largest air-freight company said.

``We're telling our customers to expect additional procedures and regulations, and with those, additional costs,'' said Reg Kenney, vice president for sales and marketing at Danzas AEI Intercontinental, a unit of Danzas Holding AG whose clients include the two farm-equipment companies. Caterpillar and Deere declined to comment.

Danzas AEI reckons mandatory X-rays would add 6 percent to 9 percent to the price of a shipment. Pressure tests, used to detect voids in cargo too big to X-ray, would run between 8 percent and 12 percent more. The cost of shipping and insuring U.S. imports was almost $36 billion last year, according to the Commerce Department, so additional costs may be as great as $4.3 billion.

Manufacturers also will have to hold larger inventories of non-domestic parts to ensure supplies, analysts say, undermining just-in-time management, in which components are shipped to arrive the same day they're to be used in the assembly process.

Customs Alert

The U.S. Customs Service is on its highest level of alert, stepping up scrutiny of goods and people entering the country. James Michie, a Customs spokesman, said that while this is causing delays, national security must be the focus after terrorists crashed jetliners into the World Trade Center and the Pentagon.

``We are moving goods and people through as quickly as possible,'' Michie said.

The waiting time for trucks crossing the borders from Canada and Mexico, the two largest U.S. trading partners, ranges from one to four hours. It's even higher in areas with the most traffic, such as El Paso, Texas, and Port Huron, Michigan.

The waiting has diminished from last week, as hundreds of additional Customs officers have been deployed, said Dean Boyd, another Customs spokesman. He added that the service expects to have border-crossing times to cargo back to pre-attack lengths sometime next week.

Delays at airports can add 24 hours or more to shipping times because of X-raying or pressure testing, said George Weise, a former Customs Service commissioner who's now a vice president at Vastera Inc., a Virginia trade-management company whose clients include Ford Motor Co. and Visteon Corp.

Biggest Threat

Regulations may be strengthened to forbid customs brokers from accepting shipments from ``unknown'' consignors and force them to reject others for substandard documentation, Weise said. X- rays and pressure testing, already mandatory in the U.K., may become required in the U.S. as well, he said.

The rules will also change the way perishable goods are handled, potentially curtailing the flow of flowers, fruit, vegetables and fish into the U.S., he said.

``Because perishables were given expedited treatment they became the vehicle for smuggling narcotics,'' Weise said, citing contraband inside fresh-cut flowers from Colombia as one of the ``biggest threats.''

``Perishables are risky products,'' he said. ``There's clearly no product that's going to get through as quickly today as it did'' before Sept. 11.

That means delays for businesses such as Fiordo Blanco SA, a Chilean company that ships 10,000 metric tons of fresh salmon to the U.S. each year, and the Peruvian exporter Procesadora SA, which sells asparagus, artichokes, red peppers and mangoes.

Extreme Measures

``If the security measures become extreme, then a longer shipping process could affect the quality of the goods,'' said Alfonso Velasquez, head of Procesadora.

For Ford, the world's second-largest automaker, increased Customs scrutiny also threatens a manufacturing process designed around just-in-time deliveries into the U.S. of components from Canada, Europe and Japan.

Five U.S. assembly plants were idle last week because of parts shortages and only resumed production on Monday, said Ed Lewis, a spokesman. Ford gets engines and power-train components for 1.1 million vehicles a year from Canadian plants, he said.

``Backups have eased somewhat, but it will take some time before Customs operations and transportation stabilize,'' Lewis said.

The automaker is considering contingency plans, such as holding greater inventories of some parts and relying on alternative transportation, including a greater focus on suppliers that can deliver over land, he said.

`Comfort Level'

Ford, Microsoft Corp. and other companies with a network of long-term suppliers should be able to adapt to changes that Customs and the Federal Aviation Administration make, said Larry Christensen, Vastera's vice president for international trade content.

Vastera, which had $33 million in sales last year, will advise clients on what management systems and tracking technology to use, then invite Customs to review the setup so the service can ``feel a high comfort level'' with a company's shipments, Weise said. Microsoft wouldn't comment on shipping changes.

Yet Danzas AEI's Kenney said he's concerned about the future of freight shipped on U.S. airlines. More than half the company's air shipments fly in the bellies of passenger planes, he said.

With airlines such as AMR Corp.'s American, UAL Corp.'s United and Continental Airlines Inc. slashing flight schedules, space may become a concern and force price increases as freight firms compete for it.

``We're worried about the condition of our airline partners,'' Kenney said. ``What happens with them will have a major impact on not just our business but that of our customers.''

-- Guy Daley (guydaley1@netzero.net), September 27, 2001

Answers

I hate to say this but I think the terrorist organization is laughing at all the kinks, delays, screw-ups, and confusion they have implanted in our economic system. That was the prime purpose, no doubt. And, it worked.

-- Uncle Fred (dogboy45@bigfoot.com), September 27, 2001.

No doubt about it, all of this will have ringing, lastng consequences to the ecnonomy.

-- Wayward (wayward@webtv.net), September 27, 2001.

---snip--- The rules will also change the way perishable goods are handled, potentially curtailing the flow of flowers, fruit, vegetables and fish into the U.S., he said.

``Because perishables were given expedited treatment they became the vehicle for smuggling narcotics,'' Weise said, citing contraband inside fresh-cut flowers from Colombia as one of the ``biggest threats.''

``Perishables are risky products,'' he said. ``There's clearly no product that's going to get through as quickly today as it did'' before Sept. 11.

That means delays for businesses such as Fiordo Blanco SA, a Chilean company that ships 10,000 metric tons of fresh salmon to the U.S. each year, and the Peruvian exporter Procesadora SA, which sells asparagus, artichokes, red peppers and mangoes.

---end snip---

If there is a silver lining to all of this, it might be for the American farmers. With foreign imports slowed down at the borders, it will be easier for local farmers to ship from within the Lower 48 more quickly and with less waste. The rules are changing again.

-- Margaret J (mjans01@yahoo.com), September 28, 2001.