Collaboration on the southern border

   “We’re not thinking as independent countries, but thinking already as a region. That will be an economic driver” for North American competitiveness, Ricardo Treviño, the administrator general of Mexican Customs, said during a dialogue at U.S. Customs and Border Protection’s Trade Symposium in Baltimore on Nov. 4.

   Clearing cargo in advance is designed to relieve pressure on ports of entry that are often congested during peak traffic periods because of limited physical space or personnel. Trade experts and government officials say that speeding up cargo flows creates more efficiency for businesses and incentivizes them to increase their level of international trade, which will benefit the Mexican and U.S. economies.

   Last year, two-way trade between the United States and Mexico reached $592 billion, six-times greater than when the NAFTA trade deal went into effect in 1993. Cross-border shipments are expected to grow even more as Mexico increasingly becomes a manufacturing destination for automotive, appliance, aerospace and other companies concerned about rising costs and quality issues associated with Chinese production.

   On Oct. 15, Homeland Security Secretary Jeh Johnson and Mexican officials signed a memorandum of understanding formalizing the demonstration program and allowing U.S. and Mexican customs officers to work side by side for the first time enforcing their respective trade and security regulations on each other’s soil.

   The objective is to reduce customs processing times and transactional costs by allowing joint export and import inspections of shipments at customs facilities of the exporting country.

   The MOU establishes that the laws of the host country prevail over those of the visiting customs administration.

   The cargo pre-inspection demonstrations involved more than two years of planning and project design, but a key prerequisite for going forward was finally reached in May when the Mexican legislature took the unprecedented step of changing the law so CBP officers can carry firearms in Mexico. The measure limits the carriage of firearms, as well as munitions and intermediate force instruments, to the customs facilities, and only during hours of service. Officers are also granted functional immunity from being prosecuted by the host government.   

   Since May, teams on both sides have been hard at work finalizing standard operating procedures related to inspections, resolving non-compliant shipments and how officers are to conduct themselves in the partner country. The pilot programs are all different and therefore require different standard procedures, according to Ana Hinojosa, deputy assistant commissioner for international affairs at CBP.

   Facilities were designed and built in each of the three locations to accommodate partner officers. Upgrades include new technologies, inspection booths and security equipment.

   The first pilot has been operating since mid-October at the Laredo, Texas international airport, where Mexican Customs officers are physically located and pre-screen air cargo shipments by looking at advance shipment information and the manifest. Suspicious cargo can be pulled for inspection prior to loading. Previously, Mexico required that all air cargo be cleared in Mexico City and then trucked or flown to other cities. Under the pre-screening test program, commodities such as automotive parts can be flown directly to eight approved airports (Chihuahua, San Luis Potosi, Querétaro, Guanajuato, Toluca, Guadalajara, Hermosillo and Ramos Arizpe). The program also eliminates the need for double inspections, once by CBP on the outbound leg and then by Mexican authorities at the destination airport.

   Another pilot is scheduled to go live in early 2016 at the Otay Mesa crossing connecting San Diego and Tijuana. CBP officers and agriculture specialists will be stationed in the Mexican compound to inspect agriculture products moving on trucks to the United States. They will clear fruits and vegetables under authority delegated to Customs by the Department of Agriculture. 

   The National Agriculture Release Program (NARP) provides a method for evaluating high-volume agriculture products that are low risk for the introduction of plant pests and diseases. To be eligible for NARP, commercial shipments in the same truck must contain a single commodity or mix of commodities on the approved list. The commodities may be inspected at reduced rates. Non-NARP products go through the regular clearance process at the U.S. compound.

   But now, instead of referring problems to USDA, officers will send tainted shipments back to the supplier. That can help reduce losses because the shipper can redirect them to another market that might have less stringent requirements than the United States, Hinajosa said in an interview. Normally, it takes so long to turn a shipment around when a compliance problem is discovered that perishable items are no longer viable for resale once returned.

   The goal is to identify any compliance issues early on.

   “This is an opportunity to test whether pre-inspection for these agriculture products actually gives more facilitation and reduces the shrinkage of the commodity because of tolerances that our market has versus another one,” she said.

   In the event of any security issues, CBP officers will notify their Mexican counterparts and turn the shipment over to them.

   About 70 trucks per day are expected to be processed at the start, but the volume could increase to 225 trucks per day, Treviño said in a session with reporters.

   The third site is planned for San Jerónimo, Chihuahua, just outside the city of Juarez, and adjacent to the Santa Theresa, N.M. checkpoint. The plan is to jointly inspect shipments originating from, and arriving at, the giant maquiladora assembly plant operated by Taiwanese contract manufacturer Foxconn for Dell and other major electronics retailers. Raw materials from the United States will be cleared at the facility, as well as electronic goods heading to market north of the border, Hinajosa said.

   All the U.S. importers served by Foxconn are Tier 3 members of the Customs-Trade Partnership Against Terrorism, meaning they have been certified as having very strong supply chain security protocols in place for all sections of their international shipping process. C-TPAT members tend to have their shipments inspected less frequently, which is especially important for companies that require quick cycle times.

   Officials say they must wait to start the pilot until a roadway can be built from the plant to the inspection station, but hope that all infrastructure improvements will be completed by the first quarter of 2016. Trucks will travel on the secure corridor without any ability to divert in any other direction.

   The authorities plan to test whether they can expedite the movement of highly compliant shipments by co-locating customs officers from both countries in one facility, instead of conducting checks at the small cargo facility in Santa Theresa.

   The pilots are scheduled to run for six months, but could be expanded to other commodities and ports of entry, depending on the results, Treviño said

   “This program sends a very strong message about the level of cooperation between the two countries and the intent of our customs authorities to facilitate trade,” he said, adding that it not only saves time and costs for the private sector, but also merges the risk assessment criteria both customs authorities use to narrow down which shipments to physically inspect.

Pre-Clearance. Canadian Style. Meanwhile, implementation of pre-clearance on the northern border has been on hold because of the recent Canadian election. 

   In March, the U.S. and Canadian governments signed a legal framework for customs officers to pre-inspect passengers and cargo across all modes in the host country. It spells out the scope of customs officers’ authority when stationed abroad, including the ability to carry firearms, defensive tools, and restraint devices to the same extent that host country officers are equipped. The document also established a new criminal liability regime to govern the conduct of pre-clearance officers. The sending country will generally be allowed to exercise primary criminal jurisdiction for acts committed by its officers in the performance of official duties in the host country. 

   The agreement also lets the United States and Canada explore the idea of co-locating customs personnel in a single plaza at small and remote land ports. 

   It took more than a decade for both nations to overcome jurisdictional, legal and diplomatic issues associated with pre-clearance.

   Pre-clearance dates back several decades in the airline sector and has been formalized several times since, most recently in 2001. The new agreement updates that arrangement to reflect changes in today’s operating environment. CBP officers now conduct advance clearance on about 11 million passengers per year at eight Canadian airports, which reduces wait times upon arrival and often the number of connections required because travelers can go directly to non-international airports.

   As in Mexico, the process involves CBP officers working on foreign soil to make admissibility decisions, rather than upon arrival at the U.S. port of entry.

   A pilot program for pre-inspecting truck cargo at the Peace Bridge crossing in Buffalo, N.Y., and Fort Erie, Ontario, ended last January. CBP officers were stationed at the Canadian checkpoint to do primary inspections, which helped vehicle flow at the cramped U.S. compound. Trucks received a green light when they reached the U.S. side of the bridge or were directed to a cargo lot for secondary inspection.

   An evaluation of the program to determine whether it should be extended or applied elsewhere was suspended during the two-month election campaign in Canada and the transition from a conservative government to one led by Liberal Party Prime Minister Justin Trudeau. The Canadian parliament did not conduct legislative business between June and early December, and, since taking office Nov. 4, Trudeau’s administration has been busy putting together a budget and participating in four major international summits.

   One of the lessons learned from the Peace Bridge pilot is that trucks can save more than two minutes in processing by giving them prepaid decals instead of paying cash each trip for tolls, according to industry and government officials familiar with the process.

   CBP Commissioner Gil Kerlikowske said his agency plans to phase out the use of cash in favor of transponders as a way to increase capacity without having to build more traffic lanes.

The Big Picture. The cargo pre-inspection program is one of several outcomes from the 21st Century Border Management Initiative launched by the Obama administration and the Mexican government in 2010 to restructure how the border is managed for more modern times. The primary focus is collaboration on infrastructure improvements, security protocols, and facilitation of legitimate trade and travel.

   In the fall of 2014, CBP and Mexican Customs completed a mutual recognition agreement that will link their industry partnership programs on security: the Customs-Trade Partnership Against Terrorism and Mexico’s Alliance for Secure Commerce.

   In August, officials inaugurated a rail crossing between Brownsville, Texas, and Matamoros—the first new rail crossing constructed between the United States and Mexico in more than 100 years. The bridge is expected to provide much needed capacity to handle growing volumes of trade.

   It took more than a decade for the bridge to be studied, negotiated and built. The new bridge follows the opening of a new U.S. port of entry facility at Nogales, Ariz., which is able to handle about 4,000 trucks per day compared to about 1,600 before.

   Meanwhile, planning is underway to design, build and operate a single U.S.-Mexican customs facility. A shared compound would reduce investment costs and increase efficiency by having joint cargo and passenger inspections, shared X-ray and radiation detection equipment for vehicles, reversible lines for northbound and southbound traffic, and interchangeable lanes for cargo and passengers, depending on volume, Treviño said.

   A CBP and Mexican Customs technical group is expected to complete the initial design in the first quarter of 2016, leading to the start of construction later in the year, Jesus Contreras Cantu, a spokesman for Mexico’s Tax Administration, said in an e-mail.

   By far the most ambitious facilitation effort is to align respective “single window” platforms, including Canada’s, to create a networked North American customs capability for sharing import and export data. 

   CBP’s Automated Commercial Environment—the backbone for trade processing and risk management activities—is in the homestretch of development. It consolidates and automates border processing and provides a single access point to connect Customs, partner government agencies and the trade community. ACE will be the pipeline enabling connectivity between agencies. The resulting International Trade Data System, also slated for completion in a year, will let traders file import and export documents in one place and have visibility into the approval or rejection of entries by relevant regulatory agencies, such as the Consumer Product Safety Commission.  

   Mexico, in fact, has had a single window system in place since 2011 and Canada is developing its own. The job will then be to link these systems, starting out by agreeing on the common data elements all parties need for clearing shipments and conducting security screening.

   Traders say that harmonizing information will reduce bureaucratic requirements in each country and make trade simpler and more affordable.

   The long-term vision of many customs authorities is for regional, or even global, interoperability so that one country’s export data can be used by the importing country to check for regulatory compliance and collect duties without requiring the shipper to resubmit similar information again. 

   The World Customs Organization’s Data Model provides a rough international standard for single-window harmonization, but significant implementation challenges related to information technology, culture, language, and the different missions of customs authorities around the world remain, according to Brenda Smith, CBP’s assistant commissioner for international trade. 

   The building blocks for such an interoperable model, however, must come from bilateral efforts such as those between the United States and Mexico. 

   Another efficiency being considered by the United States and Mexico is a single rail manifest so that industry would only need to provide the data once and it could be used by both countries.