Wednesday, May 22, 2013
By ADAM BELZ McClatchy Newspapers
MINNEAPOLIS - It sounded like a routine assignment for HRST Inc.: a quick trip across the Canadian border for repair work on a power plant.
The Canadian and American flags fly side-by-side outside the Valhalla Inn near the airport in Thunder Bay, Ontario. Delays at the border cost businesses in both countries.
Two engineers from the Eden Prairie, Minn.,-based company set out for southern Ontario to do the work. They flew to Detroit and drove toward the border crossing at Port Huron, Mich.
And that's as far as they got.
"The border guard thought that whatever work we were doing, the work could have been executed by Canadian workers," said Philip Novak, a systems engineer for the company.
Such roadblocks to commerce have become a significant problem for businesses that do work on both sides of the border. The Canadian government estimates that hangups of cargo and travelers at crossings cost $16 billion annually on that side of the border alone.
Vigilance at entry points to both Canada and Mexico borders is in part a response to real concerns about immigration and post-9/11 security. Yet there is a growing awareness that delayed shipments and other inefficiencies have an economic cost.
As a result, the U.S. and Canadian governments have launched initiatives to grease the wheels of commerce -- both by clearing border obstacles and aligning product regulations.
"A lot of companies just don't know what to do," said Bill Blazar, an executive at the Minnesota Chamber of Commerce. "They think it's like going to fish. It's not."
A lot of manufacturing takes place in a network that spiderwebs through the Twin Cities, Chicago, Detroit, Toronto, Winnipeg and Edmonton.
For instance, Winnipeg-based New Flyer Industries has factories in St. Cloud and Crookston, Minn., and a supplier network across the Upper Midwest.
The bus manufacturer buys hydraulic tubes from a company in Plymouth. Air conditioning components come from just outside Chicago and fabricated metal from North Dakota.
Such cross-border supply chains are most prevalent in the auto industry, which is "pretty much in Michigan and Ontario," said David Biette, director of the Canada Institute at the Washington-based Woodrow Wilson International Center.
But crossing the border adds 12 percent to 15 percent to the invoice cost of every shipment, said Birgit Matthiesen, senior U.S. adviser for the Canadian Manufacturers & Exporters.
That penalty is felt uniquely by U.S. and Canadian companies, because container ships from overseas get inspected only once.
The curve of the globe puts Ranier, Minn., along a major trade artery between Asia and the United States.
The North American port closest to Asia is Prince Rupert, British Columbia. The fastest route by train from there to Chicago runs through Ranier, a town of 145 people 2 miles east of International Falls.
More than 1,200 rail cars cross from Canada each day, and similar volume travels in the opposite direction.
Canadian customs inspects containers at Prince Rupert before the trains head east. U.S. customs inspects the containers again at Ranier.
If nothing is amiss, the freight train booms away into the Koochiching State Forest, carrying mostly coal and Asian goods destined for Chicago and points farther east.
If a rail car gets flagged, however, workers have to disconnect and set it aside for inspection. Disassembling and reassembling the train can take hours.
"You don't know what's going to get held up at the border and for how long," said Biette, at the Woodrow Wilson International Center.
Earlier this year, CN railroad installed a $6 million machine that pulls containers off rail cars and sets them aside for inspection. Its sole purpose is to avoid having to disconnect a car and reconnect the rest of the train at customs.
All this would be moot under proposals from the U.S. and Canadian governments to streamline the border, something called the Beyond the Border Action Plan.
The idea is to push security outward, to a shared perimeter, while opening the U.S.-Canada border for business.
U.S. customs officials would set up at Prince Rupert to eliminate the second inspection at the border.
Among other things, the U.S. and Canadian governments want to expand and harmonize programs that green-light trusted traders and travelers at border crossings.
The Canadian and U.S. governments also want to eliminate unnecessary differences in regulations governing transportation, small businesses, health, the environment, nanotechnology, and the production and marketing of food.
For example, Golden Valley-based General Mills must fortify Cheerios differently for the Canadian market than it does for U.S. consumers.
It's a difference no one would notice at the breakfast table.
"Really? Is it really that different?" said Biette. "There are a lot of niggly things like that."