Cross-Border Flow Analysis - Case Study for Food Processing Industry

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Cross-Border Flow Analysis Report 4: Case Study for Company 4 (Food Producer) strategic transportation & tourism solutions

Prepared for Industry Canada Prepared by InterVISTAS Consulting Inc. 8 July 2009


Cross-Border Flow Analysis Report 4: Case Study for Company 4 (Food Producer)

i

Table of Contents 1.

Introduction........................................................................................................................ 1 1.1 1.2

Overview .............................................................................................................................1 Methodology........................................................................................................................2

2.

Firm Profile......................................................................................................................... 3

3.

Value Stream Map.............................................................................................................. 4 3.1 3.2 3.3

Value Stream Glossary .......................................................................................................5 Current State vs. Future State Maps...................................................................................5 Processes and Timing.........................................................................................................9

4.

Key Findings.................................................................................................................... 16

5.

Border Crossing Costs ................................................................................................... 20

8 July 2009

4.1 4.2 4.3

Summary...........................................................................................................................16 Findings.............................................................................................................................16 Quantitative Results ..........................................................................................................19


Cross-Border Flow Analysis Report 4: Case Study for Company 4 (Food Producer)

1.

1

Introduction The purpose of this study is to determine and evaluate the experience of processing a transaction from initiation of an order to clearance at the U.S. border. This report will be followed by recommendations and alternatives to result in enhanced facilitation of trade from Canada to the United States. The data collected from this report will help to identify the underlying causes of border challenges that may impact the competitiveness of Company 4 from a number of perspectives: regulatory, logistic and security. The study examines, measures and reports upon the various logistics, security and compliance costs for the company at the border, including more detailed examinations of the frequency of secondary inspections and the issues that trigger such incidents (i.e. regulatory compliance vs. border protection imperatives). The following report is a case study for Company 4 - a food producer. This draft case study report is developed based on interviews and information received from the firm. While the findings reflect the issues faced by the individual organization, it is intended to demonstrate the challenges that other companies within the industry are faced with. The report includes the following:

Value stream maps of cross border processes

Descriptions of process steps for shipping goods across the border

Matrix of key findings

Explanations of key findings

1.1 Overview This report provides an overview of the following information: 1: Shipping Steps / Wait Time 2: Regulatory Requirements/Issues 3: Logistics Related Issues 4: Security Issues 5: Existing Programs & Initiatives to Address Issues 6: Compliance Cost Data 7: Observations/Gaps Information included in this report will support the identification and analysis of top issues leading to significant challenges at the Canada-U.S. border. Further, it will allow for a better understanding of how border issues affect the competitiveness of companies, enabling an assessment of their 8 July 2009


Cross-Border Flow Analysis Report 4: Case Study for Company 4 (Food Producer)

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impacts on North American supply chains. This information will lead to the development/proposal of potential options and solutions to eliminate unnecessary costs and delays at the border.

1.2 Methodology The methodology used to develop this report is as follows: 1)

Company Selection - Company 4 was selected as a food producer with much of its production crossing the Canada-US border. The case study is intended to show how typical food product shipments are made for those with and without meat ingredients.

2)

Data Collection - In depth data collection was performed to qualitatively and quantitatively characterize the cross-border shipment process and to identify border issues. In this case, the process steps for two product types (meat and non-meat) with differing requirements were traced. The staff tasked with preparing border compliance documentation, ensuring inspection certification took place and labelling product were interviewed; a facilities and operation tour was conducted; food shipment forms and documentation were reviewed; the service provider was also interviewed; and the shipment reports for one year (2008) were examined. The rationale for one-year’s worth of data was that the economic downturn was felt to skew results on representing actual issues faced by Company 4.

3)

Develop Value Stream Map - With the detailed processes outlined for the products, timing data and incident rates were associated to each step to develop the “current state value” stream maps.

4)

Detail and Categorize Border Issues - The challenges faced by the company in shipping food products across the border as identified by the company and through the value stream mapping process were documented and categorized into one of the seven columns as outlined in the findings matrix.

This report is one of seven case studies developed. For ease of reference, the seven companies are as follows:

Company 1 (Services Sector Involved in the Movement of Goods)

Company 2 (Small to Medium-sized Enterprise)

Company 3 (FAST Member)

Company 4 (Food Processing Industry)

Company 5 (Motor Vehicle Sector)

Company 6 (Consumer Goods Industry)

Company 7 (Chemicals Sector)

Companies provided data in confidence; as a result their names and descriptions are genericized and data collection results are provided in aggregate form only to protect commercial sensitivities.

8 July 2009


Cross-Border Flow Analysis Report 4: Case Study for Company 4 (Food Producer)

2.

3

Firm Profile Company 4 is a large food producer located in Central Canada with a number of warehouse and distribution facilities throughout the United States and Canada. Company 4 processes and packages food for a number of product lines at this Canadian location and are generally not considered perishable or highly time-sensitive items. Orders for the product are generated to replenish stock at the warehouses that, in turn, are shipped to retailers. The individual products are small in size and are packaged in cases for retail sale with a number of cases per pallet. Company 4 ships truck loads of its product using a carrier selected by its service provider who also acts as its broker at the border. There are two types of products that are relevant to Company 4:

Non-Meat: These products contain no meat but are subject to Food and Drug Administration (FDA) as well as normal Customs and Border Protection (CBP) requirements.

Meat: In addition to FDA and CBP, these products must comply with U.S. Department of Agriculture (USDA) requirements.

Company 4 holds the status Customs-Trade Partnership Against Terrorism (C-TPAT) “Partner” since its U.S. parent attained C-TPAT Tier II status. Carriers and drivers are mandated to be registered with the Free and Secure Trade (FAST) program when shipping to the U.S.

8 July 2009


Cross-Border Flow Analysis Report 4: Case Study for Company 4 (Food Producer)

3.

4

Value Stream Map Value Stream Mapping (VSM) is a process analysis tool that is used to represent the interaction between processes, operations and information for bringing a product order (or request for service) through to delivery of it. The concept originated a number of years ago through the Toyota Production System and is a key technique used in Lean Manufacturing. VSM is used to determine the value added and non-value added elements of a system. It provides a high level picture of product and information flows in order to develop improvement suggestions. Due to the nature of the products from Company 4, it was already familiar with process analyses tools comparable to VSM. A value stream consists of the following elements:

Supplier (start of flow)

Customer (end of flow)

Physical flow of product being mapped

Information used by process transformation steps

Information flowing between process control, supplier and customer

Value stream maps can help visualize the process steps required to make a product or provide a service and any waste that exists in the processes. It provides a view of the entire system so that any improvements can be made to better the overall flow rather than a limited area within it. The symbols used in the value stream maps in this report are as follows: Customer or Supplier

Delay (non-value added)

Process (value added)

Flow of Product

Decision Point or Alternative

Flow of Information

Transport

Information System

Elapsed time Touch time

8 July 2009

Timing Chart


Cross-Border Flow Analysis Report 4: Case Study for Company 4 (Food Producer)

The following section provides a glossary of terms used in the value stream maps.

3.1 Value Stream Glossary The following definitions are used in value stream maps and Lean principles. Term Elapsed Time

Definition The time it takes to complete the tasks to make a product or provide the service including delays and interruptions within the process. Also known as throughput, turnaround, flow or lead time.

Non-Value-Add (NVA) Any operation or activity that consumes time and/or resources but does not add value to the service provided or product sold to the customer. (Some are necessary - i.e., regulatory requirements - while others are unnecessary.) Queue or Delay Time

Non-value added time spent waiting for a process.

Takt Time

Average demand for product or service expressed in units of time. Sets the pace for the operation; all processes need to produce at rate of demand. The calculation of takt time is available work time per day / customer demand per day.

Touch Time

The total time spent performing tasks to complete the product or provide the service without delays or interruptions within the process.

Transport

Physical movement of goods from one place to another. If the company performs the transportation, queue time is not included in the transport time. Otherwise, delay time is included in transportation time.

Value-Add (VA)

Any operation or activity the customer values (and would be willing to pay for).

Waste

The elements of the process flow (or lack thereof) that add no value to the service provided.

3.2 Current State vs. Future State Maps Current state value stream maps are typically developed to document current process flows and identify potential points of improvement. Future state maps are developed from the current state maps to design a lean flow that eliminates waste and improves the process flow. There are three basic Lean principles that are applied when designing future state value stream maps: 8 July 2009

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Cross-Border Flow Analysis Report 4: Case Study for Company 4 (Food Producer)

Eliminate Unnecessary Non-Value Added

Reduce Necessary Non-Value Added

Optimize Value-Added

6

In general, these are targets for improvements that can be achieved six to nine months out. Some of the tactical actions that can be taken include:

Eliminate steps / handoffs

Merge steps

Create parallel paths

Implement pull if flow is not possible

Reduce / eliminate batches

Improve quality

Create standard work

Create an organized, visual workplace

Eliminate unnecessary approvals / authorizations

Stop performing nonessential (NVA) tasks from the customer’s point of view

Co-locate functions based on flow; create teams of crossfunctional staff

Balance work to meet takt time requirements

The following diagrams show the current state value stream maps for Company 4 for two different types of food shipments: non-meat and meat. Future state value stream maps are outside of the scope of this study and were not developed. Company 4 uses a third-party logistics registered with the Free and Secure Trade (FAST) program. The firm has a very robust method of tracking trade and border compliance issues and this was used to generate the following maps.

8 July 2009


MRP 1st notice

REQUIREMENTS REPORT

PLAN ORDER - 15 min. - check SAP for available product (or walk to warehouse), and enter order - create line-up (Excel)

eManifest

CARRIER

ACE

Fax appointment, load info, driver info

US Warehouse

FDA

Firm shipment notice

email

NOTIFY - 5 min. - email to warehouse manager: - Shipment date - PO # - B/L # - product code - quantity - 1st notice to carrier (impending shipment)

- 10 min. - B/L#

To

Warehouse

CONVEYANCE INFO

STAGE IN SAP

- 30 min. - check product, and print pick-list

- 30 min. - use delivery # to assign pallets in SAP

lif t

tru

ck

dr

ive

ABI/ACS

Entry data

- 15 min. - carrier info - commercial invoice (NAFTA Form 1) x 3 - VICS B/L x 1 - pallet sticker - blank FDA pre-arrival notice form

Telephone or email: Order complete

CREATE & PRINT PICK-LIST

BROKER

PREPARE DOCUMENTS

ORDER TRAILER

- trailer # - seal # - Signatures of shipper and driver on shipping docs - gate pass with driver signature

Place copy in cab

r

PICK AND STAGE - 30 min. - scan each pallet when staged - day shift only (6am – 2:30pm)

To gate

I 1–4 hrs

LOAD - 30 min. - load truck - driver signs bolt seal form - warehouse manager signs gate pass

GATE CHECK & SEAL - 15 min. - security checks truck and gate pass - bolt seal is affixed

I

To Border

- city driver takes load to terminal - wait until appointment made by carrier with FDA (may be overnight) - long-haul driver takes load to border

CBP & FDA PROCESS - see separate map - 2 hrs allotted due to FDA process

Transport time: 2 – 6 hrs. 1 – 4 hrs 30 min.

12 hrs + 2 – 6 hrs 45 min.

Queue time: 13 – 16 hrs 120 min.

Touch time: 195 min. COMPANY 4 Food (Non-Meat) Shipment March 5, 2009


eManifest - 1 hr prior to arrival - ½ hr for FAST

Carrier

ACE Ultimate Consignee

OR Entry Data CF3461 Submit prior to arrival

Impending shipment

Importer of Record

Broker

ABI/ACS

PORT LIMITS – within 25 miles of border crossing

Arrive at border

I 30 min

Primary Processing (incl. cab check for non-FAST)

Result

77% of shipments are released after primary processing

Depart

Release NO

3 min.

When directed to VACIS

To Secondary Processing

VACIS A. Random B. Blitz C. Directed

I 1 hr

90 sec

Finding

YES

To Secondary Processing Redeliver

I

20%

15 min.

iHouse (meat inspection) 5 min. - 2 hrs NO

I I 1 hr

Initial Determination 15 min.

I 1 hr

I 30 min

Open Doors (3%) 3 – 4 hrs

30 min. Finding

90 sec

Hold for Compliance (at CBP compound)

I 30 min

I 1 – 2 hrs

6 – 24 hrs

Return to Canada

Refuse and Return 0 min

0 min

On-site Mitigation Return Property

YES

I VACIS

Conditional Release (may lead to Request for Redelivery)

Detain up to a max. of 30 days

Detain (Must be exported if no decision has been made after 30 days)

I 30 min

Hold for Compliance (At CFS – space constraint at CBP)

I

1 – 2 days

1 hr.

- pay fine Seize Shipment CBP disposes On-site or off-site 0 min

- destroy - donate - auction

0 min NO

I

De-van (at CES)

Finding

YES

Demand for Redelivery to CBP

24 hrs 8 – 12 hrs.

Return to Canada

I 1 – 2 days

0 min

COMPANY 4 Customs and Border Protection Truck Process July 8, 2009


Cross-Border Flow Analysis Report 4: Case Study for Company 4 (Food Producer)

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3.3 Processes and Timing 3.3.1 #

Non-Meat Shipment Step

Observations

Timing

Product Flow 1 Pick and stage All US bound shipments are held in the warehouse until a pick order is issued. Order is picked and staged in the shipping area by the designated bay door. Each pallet is scanned during staging.

30 min.

2 Wait

Wait for trailer to arrive. All trailer drops must be before the end of the day shift (2:30pm), to ensure that authorized personnel are available during loading, for security processes.

1 – 4 hrs.

3 Load

Load trailer. Sign gate pass, hand paperwork to driver, and provide bolt seal.

30 min.

4 Gate check and seal

At gate, security checks the truck. The driver seals the trailer.

15 min.

5 Drive to border

Load is usually taken to terminal by city driver. A long-haul 2 – 6 hrs. driver takes the load to the border. An appointment with the Food and Drug Administration (FDA) is made prior to driving to the border. Depending on port selection and time of day, it can take anywhere from 2 to 6 hours before the truck arrives at the border.

6 CBP and FDA processes

A food shipment must be inspected by the FDA under bioterrorism regulations. Due to FDA working hours, the trailer may wait over-night before departing (12 hours). The border crossing process usually takes 2 hours.

2 - 14 hrs.

Information Flow

8 July 2009

1 Plan order

Planner gets requirements report from Material Requirements Planning (MRP) system, and checks availability in SAP. Use Excel to line up individual shipments. Email file to transportation Coordinator.

15 min.

2 Notify

Transportation Coordinator notifies third party logistics of impending shipment. Sends an email to the Warehouse Supervisor with line-up and planned shipping time.

5 min.


Cross-Border Flow Analysis Report 4: Case Study for Company 4 (Food Producer)

#

Step

Observations

10

Timing

3 Create and print pick list

Warehouse Supervisor uses the warehouse system to create and print a pick list. A lift truck driver is assigned to pick an order.

30 min.

4 Stage in SAP

As the order is picked, the lift truck driver scans each pallet. Once picked, the load is staged in SAP, thus removing it from available product.

30 min.

5 Order trailer

The Transportation Coordinator is notified that the order is complete. The third party logistics provider is notified to deliver a trailer; the bill of lading number is provided.

10 min.

6 Prepare documents

Once loaded, conveyance information is transmitted to the 15 min. Transportation Coordinator. The Transportation Coordinator prepares the required paperwork: - Carrier and trailer information - Seal number - Commercial invoice (NAFTA Form 1) x 3 copies - VICS bill of lading x 1 copy - A blank FDA pre-arrival form (which the carrier will use to schedule an appointment with the FDA for inspection at the border) - A pallet sticker (for Instruments of International Trade (IIT) purposes) to be placed on the bill of lading. The relevant information is faxed to the carrier and broker, for preparation of entry data and eManifest, and scheduling of an appointment with the FDA for inspection. Relevant documents are printed and given to the driver, for presentation at the border. Timing Summary

8 July 2009

1 Touch-time

195 minutes, including 120 minutes at the border

2 Queue time

1 – 4 hours, depending on when a trailer is available

3 Transport time

2 – 18 hours, depending on which port is chosen, and when the trailer is loaded. If the FDA is not available for inspection, the trailer will be held at the terminal over-night.

4 Delay

The FDA working hours are responsible for delays at the terminal, as well as for the inspection time at the border – minimum 2 hours, up to 16 hours.


Form 9540 faxed night before arrival to USDA Inspection Facility eManifest FDA appointment

MRP

ACE

Fax Form 9540

CARRIER Firm shipment notice

REQUIREMENTS REPORT 1 notice

CFIA VETERINARIAN

NOTIFY

PRINT HEALTH CERTIFICATES

st

ASSIGN HEALTH CERTIFICATE NUMBER

PLAN ORDER - 15 min. - check SAP for available product (or walk to warehouse), and enter order - create line-up (Excel)

CREATE & PRINT PICK-LIST

FDA

BROKER

PREPARE & PRINT DOCUMENTS

SHIPMENT ORDER

- 1 – 2 hrs - courier Health Certificate to CFIA veterinarian for signature

- 5 min. - email to warehouse manager: - Shipment date - PO # - B/L # - product code - quantity - indicate meat shipment - 1st notice to carrier (impending shipment)

- 5 min. - assign Health Certificate # to truck load

3 hrs. to return

- 10 min. - B/L#

Entry Data

US Warehouse

ABI/ACS

- 20 min. - carrier info - commercial invoice (NAFTA Form 1) x 3 - VICS B/L x 1 - pallet sticker - blank FDA pre-arrival notice form - Annexes (bovine, chicken) - US Health Cert. - Form 9540 notification of meat shipment

Email or telephone Order complete

CFIA - 30 min. - check product, and print picklist - give to lift-truck driver

- inspector unlocks

SIGN & STAMP DOCUMENTS

PRINT STICKERS

- CFIA Health Certificate - Form 9540 - Annexes for bovine, mutton, chicken, etc. - USDA health certificates

Warehouse - 80 min. - print 1/case + 1 for Health Cert.

CONVEYANCE INFO - trailer # - seal # - Signatures of shipper and driver on shipping docs - gate pass with driver signature

COMPLETE

PICK AND STAGE ORDER

I

STICKER

I

CFIA INSPECTION

I

- 30 min. - scan each pallet when staged - day shift only (6am – 2:30pm)

1 day

- 240 min. - place a sticker on each case

1 day

- 15 min. - sticker present - cert# is identical for all cases - paperwork is correct

0 hrs.

STAGE - 30 min.

I 3 – 4 hrs Incl. wait for vet sign-off

LOAD

Place in cab

To gate

- 30 min. - load truck - driver signs bolt seal form - warehouse manager signs gate pass

GATE CHECK & SEAL - 15 min. - security checks truck and gate pass - bolt seal is affixed

To border

I 12 hrs.

2 – 6 hrs.

CBP & FDA PROCESS - 2 hrs. - see separate maps

To inspection

I-HOUSE

15 min.

- 240 min. - USDA meat inspection - sign & stamp Health Cert. - fax copy to exporter Transport time: 2.25 – 6.25 hrs

24 hrs. 30 min.

24 hrs. 240 min.

0 hrs 15 min.

1 – 4 hrs 30 min.

12 hrs. 45 min.

+

0.25 hr

2 – 6 hrs 120 min.

Queue time: 61 – 64 hrs 240 min

Touch time: 690 min.

COMPANY 4 Food (Meat) Shipment March 5, 2009


Cross-Border Flow Analysis Report 4: Case Study for Company 4 (Food Producer)

3.3.2 #

12

Meat Shipment Step

Observations

Timing

Product Flow 1 Pick and stage All US bound shipments are held in the warehouse until a pick order is issued. Order is picked and staged in inspection area. Each pallet is scanned during staging. 2 Wait

The CFIA inspector is only available for ½ hour around 24 hrs. 7am. To print the necessary stickers, the inspector must unlock the CFIA computer, and allow the stickers to be set up, and the print job sent to the appropriate printer.

3 Sticker

A typical shipment of about 3,000 cases takes 240 minutes to sticker and check.

240 min.

4 Wait

The shipment waits until the following morning, when the inspector is once again available.

24 hrs.

5 CFIA inspection

The inspection consists of checking that the sticker has been applied to each case, that all stickers for a shipment have the identical Health Certificate number, and that the paperwork has been correctly filled out.

15 min.

6 Wait

Depending on lift truck availability, the completed shipment waits for movement to the staging area. Product waits up to 3 hours for veterinary signature to return.

3 hrs.

7 Stage

The shipment is staged in a designated area by the assigned shipping bay door.

30 min.

8 Wait

Wait for trailer to arrive. All trailer drops must be before the end of the day shift (2:30pm), to ensure that authorized personnel are available for security processes.

1 – 4 hrs.

9 Load

Load trailer. Sign gate pass, hand paperwork to driver, and provide bolt seal.

30 min.

At gate, security checks the truck. The driver seals the trailer.

15 min.

10 Gate check and seal

8 July 2009

30 min.


Cross-Border Flow Analysis Report 4: Case Study for Company 4 (Food Producer)

#

Step

Observations

13

Timing

11 Drive to border

Load is usually taken to terminal by city driver. A long-haul 2 – 6 hrs. driver takes the load to the border. An appointment with the FDA is made prior to driving to the border. Due to FDA working hours, the trailer may wait over-night before departing. Depending on port selection and time of day, it can take anywhere from 2 to 6 hours before the truck arrives at the border.

12 CBP and FDA processes

A food shipment must be inspected by the FDA. The border crossing process usually takes 2 hours.

120 min.

13 Drive to I-house

The USDA meat inspection facility must be within the port limits. Limits vary somewhat by geography, but are generally within 25 miles of the actual border crossing. The drive generally takes 15 minutes.

15 min.

14 USDA I-house

After leaving the CBP compound, the truck must go to the 240 min. designated USDA meat inspection facility. The Health Certificate will be stamped and signed, and faxed to the exporter. Many inspections are “skip inspections”, but there is an allowance of 4 hours for a complete inspection. Information Flow

8 July 2009

1 Plan order

Planner gets requirements report from MRP system, and checks availability in SAP. Use Excel to line up individual shipments. Email file to Transportation Coordinator.

15 min.

2 Assign Health Certificate number

Each truck load has a unique Health Certificate number assigned.

5 min.

3 Notify

Transportation Coordinator notifies third party logistics of impending meat shipment. Sends an email to the Warehouse Supervisor with line-up and planned shipping time.

5 min.

4 Create and print pick list; stage in SAP

Warehouse Supervisor uses the warehouse system to 60 min. create and print a pick list. A lift truck driver is assigned to pick an order. As the order is picked, the lift truck driver scans each pallet. Once picked, the load is staged in SAP, thus removing it from available product.


Cross-Border Flow Analysis Report 4: Case Study for Company 4 (Food Producer)

#

Step

Observations

14

Timing

5 Print stickers

Printing of the stickers takes about 80 minutes. One 80 min. sticker is printed per case, and one additional is printed for the Health Certificate.

6 Print Health certificates

The CFIA Health Certificate and other documents are printed, and the load sticker is applied.

60 – 120 minutes

7 Sign and stamp documents

The CFIA inspector signs and stamps the inspection signoff sheet. Included in the inspection paperwork are Form 9540, Annexes pertaining to bovine, chicken, and other meats, and US Certificates. The Health Certificate is sent by courier to a CFIA appointed veterinarian for a signature. It usually takes 3 hours to get the signed document back

3 hours

8 Order trailer

The Transportation Coordinator is notified that the order is complete. The third party logistics provider is notified to deliver a trailer; the bill of lading number is provided.

10 min.

9 Prepare documents

Once loaded, conveyance information is transmitted to the 15 min. Transportation Coordinator. The Transportation Coordinator prepares the required paperwork: - Carrier and trailer information - Seal number - Commercial invoice (NAFTA Form 1) x 3 copies - VICS bill of lading x 1 copy - A blank FDA pre-arrival form (which the carrier will use to schedule an appointment with the FDA for inspection at the border) - Form 9540 Notification of Meat Shipment - US Health Certificate - A pallet sticker (for IIT purposes) The relevant information is faxed to the carrier and broker, for preparation of entry data and eManifest. The carrier schedules appointments with the FDA and USDA. A copy of the paperwork is also handed to the driver. Timing Summary

8 July 2009

1 Touch-time

680 minutes, of which 600 are for stickering and border inspections (CBP, FDA, USDA)

2 Queue time

49 – 52 hours, including 48 hours spent waiting for the availability of the CFIA inspector


Cross-Border Flow Analysis Report 4: Case Study for Company 4 (Food Producer)

#

8 July 2009

Step

Observations

15

Timing

3 Transport time

2.25 – 18.25 hours, depending on which port is chosen, and when the trailer is loaded. If the FDA is not available for inspection, the trailer will be held at the terminal over-night.

4 Delay

Delays are caused by the various mandatory activities and inspections, and it can be as long as 64 hours.


Cross-Border Flow Analysis Report 4: Case Study for Company 4 (Food Producer)

4.

16

Key Findings The following are the categorized key findings from interviews and other data collected from Company 4.

4.1 Summary 1) Shipping 2) Regulatory Steps / Wait Time Requirements/ Issues

3) Logistics Related Issues

Duplication of Meat Compliance Food Documentation Inspection Inspection in Appears to be Precludes Canada and Excessive and the Use of U.S. Sometimes Rail Lacey Act Duplicative FDA Requirements Applying Shipments Stickers to Meat Restricted Shipment from Cases vs. Changing Pallets Ports CFIA Inspection Process Requires Company 4 to Obtain a Veterinary SignOff of the Onsite CFIA Inspector CBP Officer Training, Experience and Port Inconsistency

4) Security Issues

5) Existing Programs & Initiatives to Address Issues

6) Compliance Cost Data

7) Observations / Gaps

No Significant Issues Noted

FAST Adjustments Inter-Agency Communication Drivers to Comply Compatibility is Very with FDA Non-Existent Successful Requirement FDA Hours of DFAIT $15 Fee for Processed Operations Fruit and Universal Vegetables Port Code is Not Working

4.2 Findings 4.2.1

Shipping Steps / Wait Time

Compliance Documentation Appears to be Excessive and Sometimes Duplicative Programs continue to experience add-ons that require additional compliance documents. In some instances the same data must be communicated to two separate agencies that have respectively different authority at the border. 8 July 2009


Cross-Border Flow Analysis Report 4: Case Study for Company 4 (Food Producer)

17

Applying Stickers to Meat Shipment Cases vs. Pallets Company 4’s internal information system incorporates the ability for full traceability for every container, case, batch, and pallet. Previously a sticker/placard was placed on a pallet to denote manufacture country, facility and shipment. Apparently US agencies being concerned with pallets being broken down during distribution subsequently required each individual case to have stickers. The stickering process is extremely costly to Company 4 and a review should be held to return to a single sticker/placard per pallet coupled with the full traceability. The justification for stickering each case should be determined from USDA.

CFIA Inspection Process Requires Company 4 to Obtain a Veterinary Sign-Off of the Onsite CFIA Inspector This takes 3 hours and requires a 2-way courier service from Company 4 to the CFIA veterinary office for every meat shipment.

CBP Officer Training, Experience and Port Inconsistency Experienced border users find that individual officers are not conversant or familiar with a number of policies and procedures, and therefore result in extended discussions and delays in which the border user is correct. It is apparent that training of new officers can be improved. Port management varies with respect to utilization of standard policies and procedures. On occasion, a CBP officer will inadvertently take the meat certificate from a driver’s packet and retain it. When the driver reaches the inspection house, the shipment is at a trade stop for a minimum 24 hour delay that requires the company to acquire an “in-lieu of” certificate signed by the veterinarian and couriered to the border to allow truck to proceed. (Extremely rare; last occurrence was over two years ago.)

4.2.2

Regulatory Requirements/Issues

Duplication of Food Inspection in Canada and U.S. CFIA inspects at the plant and is inspected six hours later by USDA at the border inspection house after it has been transported on a security bolt sealed trailer where no intrusion has occurred. Company 4’s internal record-keeping provides complete traceability. Why is a duplicate inspection required?

Lacey Act Requirements The Lacey Act (part of U.S. Farm Act) requires labelling of genus, species, and country of origin of every wood product. This goes in effect April 1, 2009 for Lumber and Furniture; July 1, 2009 for Pulp, Paper, Paper Products, Musical Instruments; September 30, 2009 for Oil Seeds, Cork, Toys, Games, Sports Equipment. 8 July 2009


Cross-Border Flow Analysis Report 4: Case Study for Company 4 (Food Producer)

4.2.3

18

Logistics Related Issues

Meat Inspection Precludes the Use of Rail Authorized meat inspection houses are solely located at highways near border locations precluding the use of rail as an alternative mode of transportation.

FDA Shipments Restricted from Changing Ports FDA shipments are limited to arrive at the CBP Port of Entry specifically submitted in the eManifest. In situations of weather, accidents or extensive queues at a particular port, a carrier may want to divert to an alternative port but cannot do so if carrying an FDA shipment.

4.2.4

Security Issues

No significant security issues were noted at the Canada/U.S. border.

4.2.5

Existing Programs & Initiatives to Address Issues

FAST Drivers Very Successful The carriers used are registered FAST members with FAST drivers and results in essentially all trucks being cleared at Primary.

4.2.6

Compliance Cost Data

Adjustments to Comply with FDA Requirements Company 4 had a primary team of 9 full-time people for 3 year period to convert company systems to comply with Bioterrorism Act requirements. The continuing additions to or adjustments of U.S. regulations affecting the border related to the trusted shipper programs require extensive additive costs.

FDA Hours of Operations The stringent requirements for FDA inspection involvement at the border results in shipments being delayed or detained if trucks arrive at the border outside of FDA’s limited hours of operation (typically 9:00am to late afternoon, Monday through Friday). In the instance of Company 4 and its shipping schedule, every FDA shipment is detained at the border resulting in 24-hour delays in delivery.

8 July 2009


Cross-Border Flow Analysis Report 4: Case Study for Company 4 (Food Producer)

19

Universal Port Code is Not Working Under the ACE initiative, the intended outcome was that once a trip code was inputted into the system, it could arrive at essentially any commercial U.S. port of entry (Universal Port Code). This was a top priority of border users, was highly anticipated and extremely cost effective. Unfortunately, the Universal Port Code is not accepted at some ports and results in carriers inputting multiple eManifests for different ports for the same shipment. Upon arrival by the carrier, it leaves orphaned eManifests that must be removed and reconciled at a cost to the broker. Further, if a truck arrives at a port different than what is stated in the system, it is very costly in time entry and, in some cases, entry is denied.

Implementation of APHIS Fee from Canada into U.S. The Animal Plant Health Inspection Service fee is being collected at the physical border rather than an off border charge or budget line for CBP.

4.2.7

Observations

Inter-Agency Communication Compatibility is Non-Existent The U.S. international trade data system (ITDS) is not fully operational and the other governmental departments (OGD) initiative in Canada is in the early stages only.

4.3 Quantitative Results As noted previously, the data review for the value stream map was based on one year (2008) of data associated with shipments: Description

Frequency per Year

Shipments to the U.S. (trucks at full truck load)

300

Individual product to the U.S. (product in cases on pallets in trucks)

185 million

Non-meat shipments (no delays)

240

Meat shipments (meat certificate and inspection facility delays)

60

8 July 2009


Cross-Border Flow Analysis Report 4: Case Study for Company 4 (Food Producer)

5.

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Border Crossing Costs Border-related costs, which are quantified on an annual basis for Company 4, can be categorized into one of two groups: compliance costs and other costs (i.e., due to delays, etc.). Compliance costs consist of the number of full-time equivalents (FTEs) employed by Company 4 to prepare skids of food product for shipment. Company 4 employs staff to complete documentation, for export coordination and to physically label every single case (not pallet) of its product in order to comply with U.S. border and food safety requirements. This excludes the cost of the service provider for when the goods physically arrive at the border. Fortunately, Company 4 ships mostly full truck load and less than five shipments per truck if less than truck load (i.e., proportionally small number of shipments given the volume of product shipped). Other costs have been incurred to adjust to U.S. Bioterrorism Act requirements. A number of staff has spent several years to adjust to the requirements and to set up the system for CFIA inspections and appropriate documentation and labelling. Virtually no border delays have been reported at inspection facility at the border with all documentation, certificates and labelling completed correctly so that trucks can be waved through.

Category Compliance

Cost Drivers Company 4 has a number of employees to complete border crossing documentation, export coordination and product labelling.

Other - Adjusting This has taken approximately three years of for Bioterrorism 4-5 personnel’s time. Act requirements Annual Total * The assumed cost of an FTE for Company 4 is $70,000.

8 July 2009

FTEs

Cost*

3

$210,000

4.5

$315,000

7.5

$525,000


Prepared by InterVISTAS Consulting Inc. Airport Square – Suite 550 1200 West 73rd Avenue Vancouver, BC Canada V6P 6G5 Telephone: 604-717-1800 Facsimile: 604-717-1818 www.intervistas.com


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