Cross-border selling

A new program allows for smooth trade with the U.S. should a security scare freeze the border.

Thousands of companies rely on the smooth flow of goods across the American border. Canada alone ships $30 billion worth of exports to the U.S. in an average month, more than 80% of our total export trade. But that flow is always just one security scare away from seizing up completely. After the 2001 terrorist attacks on New York and Washington, the U.S. border snapped shut, clogging border crossings with 50-kilometre lineups or more and wait times of half a day as border guards stepped up vehicle searches. A fresh crisis on either side of the border would again snarl traffic and halt commerce.

While it may seem crass to focus on business when the threat to people is all too real, some industry watchers are touting a U.S. Customs security program known as the Customs-Trade Partnership Against Terrorism, or C-TPAT, as an insurance policy of sorts for Canadian exporters that need to keep their goods moving across the border.

Introduced by U.S. Customs and Border Protection in the wake of 9-11, the C-TPAT bargain is simple: private companies that can prove to customs they are low security risks get to move their goods across the border faster, and their cargo is inspected four to six times less often than non-participants. “[Customs] have said they'll lock down the borders and only open it to C-TPAT members,” says Terry Nusyna, president of TN Security Group, a security consulting firm based in Thornhill, Ont., that advises exporters on becoming C-TPAT compliant. “That's a competitive advantage, and you want to use that as a marketing tool to increase your customer base in the U.S.”

Starting with just a handful of companies, the C-TPAT program now includes several thousand exporters worldwide — and competitive pressures are making C-TPAT certification look more and more attractive to Canadian exporters who depend on cross-border trade.

“Today, border security is the No. 1 issue in the U.S.,” said Brian McKenzie, an import specialist with U.S. Customs, at a recent conference on customs and security compliance for Toronto-area manufacturers and exporters. “While the C-TPAT program is not mandatory, it's a good thing to get involved in now, because it's the wave of the future.”

It's a wave few Canadians have caught so far. Just 3% of Canadian firms doing business with U.S. companies are certified under C-TPAT. That's not surprising given the onerous procedures participants must follow. That can make the often long and expensive certification process a hard sell to senior management, says Nusyna, because the benefits are hidden as long as the border remains open to trade.

Essentially, companies wanting C-TPAT certification must prove they are doing everything they can to prevent their businesses from becoming conduits for terrorism. That means security has to be tight along the entire length of the supply chain, including suppliers, carriers, brokers and individual employees. The guidelines (which are available at state that companies must:

  • Screen all employees carefully and demand photo ID from visitors to their facilities
  • Fence in their properties and properly lock all doors and windows
  • Password-protect all software, and install security cameras

Security-conscious companies may already be doing that, but the guidelines go even further. Companies must also have a paper trail for each and every shipment in and out of their buildings, and they are expected to show that they have procedures in place to screen their suppliers and even their customers.

In short, businesses must prove that they are just as vigilant against terrorism as an American border guard would be. “Getting prepared to export now starts when you're producing the goods, long before they get to the border,” says Bob Glandfield, CEO of the Innovation Synergy Centre in Markham, Ont., a government-supported advisory service that co-hosted the conference.

Some of the managers at the conference seemed less than convinced. “I think it's a good program,” says Maureen McAuley, finance manager of Toronto-based Formnet Inc., which makes steel automotive parts and does a sizable portion of its business in the U.S. “But it's very expensive to do. We'd have to fence in our whole facility.” And the low uptake among Canadian businesses so far means the competitive advantage of getting certified remains small. McAuley says that her American clients aren't yet asking for their Canadian partners to get C-TPAT certification: “We've had no pressure to do it.”

But Hal Miller, senior business development adviser for Export Development Canada, the Crown corporation that provides advice and financing for Canadian exporters, says the export market is evolving faster than many companies realize. “This is probably the largest business initiative that has been launched in the U.S. since the Second World War,” says Miller. “We're seeing significant changes in the marketplace. We're seeing U.S. buyers putting out requests for proposals that say you can only respond if you're C-TPAT compliant. Clearly, this has been identified as an emerging issue for exporters.”

To help Canadian manufacturers get certified, EDC has launched a pilot project providing up to $150,000 in loans to assist businesses that need to make C-TPAT-related upgrades. For small- and medium-sized Canadian companies that haven't traditionally had to worry about such tight security, the rules might seem strict, even absurdly so. But Miller says that Canadian exporters need to prepare now so they don't lose out on commercial opportunities down the road. “There is no price for security in the U.S.,” Miller says. “Whatever it takes, they'll do. This program will continue to be tweaked, the criteria will continue to be tightened, but the program will not disappear.”

Unfortunately, it will probably take another border closure — or two — to put C-TPAT to the ultimate test. In the meantime, most Canadian exporters will likely just keep going with the flow, and only worry when the flow stops. By then, it will be too late.