BrainTrust Query: How are increased border security measures on merchandise shipments affecting U.S. consumers?
By
James Tenser, Principal, V•S•N Strategies
Roughly
two weeks ago, I was a passenger in a van traveling south on Rte. 15 toward
Hermosillo, Sonora, Mexico. About 100 kilometers south of the border city
of Nogales, Arizona, we spied a line of 18-wheelers stopped in the northbound
lanes. They were waiting for inspectors in military uniforms to clear them
for the trip further north.
At
our destination, the Sonora Spring Grape Summit, Marco Antonio Camou,
undersecretary of agriculture for Sonora’s state department of agriculture,
said the backup we had witnessed stretched for “16 or 17 kilometers,”
causing delays of approximately 10 hours duration.
Mr. Camou showed some photos of a just-completed security inspection
facility on the highway designed to process 180 trucks per hour, using
sophisticated x-ray machines and other gear. It was scheduled to open before
the end of April, with a full-time complement of up to 180 Mexican military
personnel barracked on the premises. Their primary mission: Find and stop
contraband, especially drugs.
After
my return to Tucson, I did some fact-checking and quick math:
- An
average 18-wheeler is 60 feet long; so about 85 trucks, parked end to end,
cover a mile. - 16
kilometers is almost exactly 10 miles; so the line we witnessed encompassed
about 850 trucks.
If
we assume each truck carries legitimate cargo valued at an average of $50,000,
then we saw $43 million worth of goods sitting idle, for an average of
10 hours, adding a full day to the time of transport.
- Cost
of capital? $43,000,000 x five percent per year/365 days = about $6,000
per day - Cost
of loss of product freshness? Assuming an average of 0.1 percent per day
= $43,000/day - Cost
of driver down time? At $50/driver/day = $50 x 850 = $43,000/day - Cost
of diesel fuel burned by idling trucks? Assuming 30 gallons/truck/day x
$3.00/gal. x 850 trucks = $77,000/day
In
other words, the line-up we witnessed added nearly $180,000 to the cost
of goods moving through that inspection point. In one day.
Mind
you, these internal security checkpoints (they are located on most major
highways in northern Mexico) are in addition to the U.S. Customs inspection
points the same trucks must pass at the border. The Mariposa station between
Nogales, Sonora and Nogales, Arizona, reportedly handles almost 300,000
trucks crossing into the United States annually. All of them wait in line
too. To try to improve this bottleneck on the U.S. side, a new facility
expansion has been authorized here, at a cost of $200 million over the
next 3-4 years.
For my new friends in
Hermosillo who grow, pack and ship more than 10 million boxes of table
grapes to American markets each spring, the improved inspection facilities
should save time, money and product freshness. Sadly, the cost and complexity
introduced by realistic security measures on both sides of the border is
unavoidable and shared by all of us.
Discussion Questions:
How are increased border security measures on merchandise shipments affecting
U.S. consumers? Are the costs truly justified? How can they be better
controlled?
It’s not just Mexico. Canadian border crossings are also impacted by US inspectors looking for drugs or “materials that could be used for terrorist activities.”
While protecting one’s homeland is important, let’s try to keep in mind that stifling the economy to do so is somewhat counter productive.
Perhaps the US government needs to look in its own backyard before looking to other nations as the source of it’s security issues.
Perhaps I am missing something. Why would there be a need to inspect a truck more than once? Just do a good job one time.
Certainly, inspections are necessary and the idea of increased technology is a good one. How about if the U.S. inspects merchandise going into the U.S. and Mexico inspects for merchandise (guns and money) going into Mexico?
I suspect the Mexican inspection is a result of pressure put on them by the U.S. which only costs money and gives no additional security at all. One wonders if the supplier of the new sophisticated x-ray machines and other gear has a great lobbying effort going on in Washington.
So much about our borders and our “entry rules” (for people and product) are broken. While I’m no expert on homeland security, I have to believe that we are a long way from being effective in terms of really knowing who and what is going in and out. As planned, the introduction of more sophisticated technology into what seems like an antiquated system should benefit everyone involved. As long as truckers don’t have to take off their shoes like we all do at the airport. There’s a piece of technology I could do without.
At the Canadian border, waits of 10-12 hours are not uncommon. The added costs for transport and additional inspection expenses increase costs directly.
Canadian consumers are used to paying 10-15% more for similar products across the border, hence the rush from Toronto to Buffalo on weekends, despite a lower exchange. The number of out of stocks and limited selection likely also reflects the border bottleneck. At a minimum, it discourages both import and export. Since CPG companies in Canada are primarily US owned, as well as many other manufacturing companies–there are no winners here.
No one is suggesting we don’t need strong border defenses–supply chain is very vulnerable just due to the volume of products. With the number of government agencies involved in border crossing on both sides, the promises of speedy pre-clearance, harmonized documentation and inspection service, etc, are still developing after years of discussion.
It’s encouraging to learn that there really are some efforts being taken to improve border security. The length of the wait for trucks is of little consequence in relation to the potential harm that can be caused by terrorist attempts to infiltrate this country in my view. What is the alternative, to allow unchecked goods into our country from Mexico and Canada?
It’s a shame that we can’t do as good a job stopping illegal immigrants access to this country.
It’s interesting that the U.S. and FDA can quickly rally the resources, justifiably so, to protect consumers from swine flu and tainted produce, yet we read how drugs and smugglers flow freely across our borders. Maybe everyone should wait in the same line?
Money is fungible. It doesn’t go away. When costs are paid, such as the costs Jim enumerated, somebody somewhere receives that money for honest business practices. Whether it’s diesel fuel, or driver overtime, or (questionably calculated) “freshness,” or cost of capital, money is spent and money is received. What’s wrong with that? Who could deny the diesel sellers or truck drivers the extra money to provide better for their families? Who could deny the investors–with their many low-income stakeholders–the opportunity to make money on their investment? And who could deny the growers compensation for lost product (doesn’t happen in just one day in reefer trucks, by the way)?
What goes around comes around. Customers supposedly paying more for products because of border delays are also employed by companies (or distantly related companies) making money due to the delays. I don’t see a problem.
Prohibition failed. It doesn’t pay to make the same mistake. As for terrorists, they can source explosives within the US. They don’t need to buy explosives in Mexico or Canada. Wars are expensive and wasteful, whether they’re against drugs or terrorism or another country.
Think the truck delays are expensive and wasteful? One fighter jet can cost over $100 million. One.
Many thanks to all the commentators here. My eyes were opened by both the truck inspection line-up and the pragmatic discussion about this challenge by the Mexican business community. I don’t choose to analyze this in terms of politics, although others are free to do so. I prefer to approach the problem as one of economics. Security measures exact a price on both Mexican and American well-being. Our two countries have a common interest to ensure safety and economic well-being for our citizens on both sides of the border.