Tighter borders are expected to raise the costs of shipments

Pressure tests, X-rays add to time, expense

September 30, 2001|By BLOOMBERG NEWS

WASHINGTON - Caterpillar Inc., Deere & Co. and other big importers together might 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 estimates that 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 might be as great as $4.3 billion.

Manufacturers also will have to hold larger inventories of nondomestic 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.

The U.S. Customs Service is on its highest level of alert, stepping up scrutiny of goods and people entering the country.

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 higher in areas with the most traffic, such as El Paso, Texas, and Port Huron, Mich.

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 is a vice president at Vastera Inc., a Virginia trade management company whose clients include Ford Motor Co. and Visteon Corp.

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.

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