Saturday, August 23, 2008

Shipping Rules Would Kill Just-in-Time Trade

Security is important, but as The News reports, Detroit's automakers worry that a proposed new federal regulation requiring that additional information about cargo shipments to the United States be collected 24 hours before it is loaded in foreign ports could cost billions of dollars -- and could also be applied to land shipments from Canada. That could prove to be an economic disaster for this region.

Certainly, traffic in container cargo has risks, but U.S. manufacturers argue, reasonably, that they have already invested heavily in their own security for their supply lines of imported parts. And if the rule is applied to land shipments, Metro Detroit would suffer heavily.

Over $1 billion in goods crosses between the U.S. and Canada daily.

About $300 million of that are "just-in-time" parts shipments passing through the transportation corridor linking Detroit and Windsor, Ontario. Detroit to Windsor, the Detroit Regional Chamber notes, is the busiest trade corridor in the world.

U.S. manufacturers have told the federal government that the proposed shipping regulations could cost more than $20 billion annually, The News reports. The government's own estimate is that the cost would be $690 million, though that estimate is now under review.

Automakers have contended that the proposed requirement would result in the firms having to add several days of parts inventory, which would significantly increase their costs.

And if the regulations are applied to land shipments from Canada, notes Sarah Hubbard of the Detroit Regional Chamber, the amount of information required about the cargo couldn't be gathered in 24 hours. This is because, in many instances, parts are ordered and shipped within 24 hours.

The obvious effect would be to slow down the land shipments as well.

This, Hubbard adds, "would destroy any advantage related to manufacturing in Michigan."The proposed shipping regulations, the local business group has argued to the Bush administration, also ignore existing federal programs in which firms have already gained advance clearance as "trusted travelers" to ease shipping and border hassles.

The government wants to impose these regulations by November. Clearly, if the administration remains set on this course of action, it's time for this state's members of Congress to intervene and try to slow down the program.

Manufacturers that rely on carefully timed parts shipments are asking for at least a pilot program for the regulations to determine how well they work and whether the cost estimates of industry or the government are closer to the mark. That's not too much to ask of theBush administration -- and members of Michigan's congressional delegation shouldn't be shy about doing so.

Source : Detroit News - SeaRate - 21 August 2008