Facilitating Cross Border Transportation and Commerce

Kelly Johnston

CSG, August 3, 2011

One Company’s ExperienceNew Hope for the Future

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What We’ll Cover

• Overview of Campbell and our integrated North American market

• How do we define “infrastructure,” and what are our experiences, frustrations and issues crossing the border

• Is the border a competitive advantage of disadvantage?

• What ideas does Campbell have or support to turn border into a competitive advantage?

• What’s the path forward?

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Campbell Soup

• Founded in 1869, $7.8 Billion Global Food Manufacturer of Soup, Sauces, Broths and Simple Meals; Vegetable-Based Beverages, Baked Goods. Employ 18,000 Globally; 10,000 in North America.

• North America is a Single Market – 23 Facilities in 14 US States and Ontario (Toronto, Plus Network of Co-Manufacturers)

• Highly Integrated Supply Chain – Canadian Products Contain US Ingredients, and Vice Versa

• About 50% of Products Manufactured at our Toronto, Canada are Exported to the US

• About 7,000 Shipments Cross US-Canada Border Annually – Ingredients, Frozen and Shelf Stable Products – 80 Percent Shipped “Intracompany”

• 75% of Campbell shipments cross at Detroit-Windsor (Ambassador Bridge)

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Toronto, ON

Sacramento,CA

Napoleon, OH

Paris, TXMaxton, NC

Over 3,500 shipments in FY

2010

Campbell Soup from Canada Trade

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Toronto

Sacramento,CA

Stockton, CA

Napoleon, OH

Paris, TX

Calgary

Marshall, MI

So. Plainfield, NJMilwaukee, WI

Everett, WA

Vancouver

Over 3,500 shipments in FY 2010

Campbell Soup to Canada Trade

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Traversing the border is becoming more expensive

• Increased wait times as traffic resumes to pre-2008 levels, no infrastructure expansion

• Shipping food by rail prohibited (lack of inspection facilities at rail ports of entry)

• Direct fees for crossing the border• Additional and duplicative border

programs• Additional costs for participating in

trusted shipper and traveler programs• Increased inspection times both

personal and commercial

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Campbell Soup’s Experiences Since 9/11

• Creation of US Dept. of Homeland Security – APHIS Transfer to New Agency Results in Massive Loss of “Human Infrastructure” – Retirements, Loss of Hours of Service.

• US Reaction to “Mad Cow” Disease – Mandatory Secondary Inspections – Even of “Trusted Shippers” Strain Infrastructure and Dramatic Increase in Border Delays

• Infrastructure Often Can’t Respond Well to Unannounced Changes at US Ports Frequent (e.g. Avian Flu)

• APHIS Fees and WHTI Mandates Added New Complexities

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Complexity & RepetitivenessPaperwork Requirements to Export to US: More Stress on Infrastructure

1. Invoice

2. Manifest packing slip3. Bill of Lading4. Hazardous Materials Form1

5. OGA Form2

6. Customs Form 3461 – Release Document.7. Customs Form 7501 – Customs Entry Form.8. Canada Customs Export document.9. NAFTA Certificate of Origin.10. Marking Waiver3

11. Foreign Shipper’s Declaration4

12. Manufacturers Affidavit4

1 If exporting flammable/explosive materials2 If regulated product3 If not finished consumer good4 If goods originally purchased in US

10 minutes wasted time

per day=

1 week a year

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Competitiveness – An Auto Industry Comparison

Germany -4,000

VehiclesNA -

Consumer

1 set of customs

documents

Canada - Steel

US – Forged Con Rod

Canada – Machined

Rod

Mexico – Power Pack

Canada – Short Block

US - Engine

Canada - Vehicle

US - Consumers

7 sets of customs invoices* x 4,000 vehicles = 28,000 potential sets of

customs documents

Urgent Need For

Simplification

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Practical impact of border delays on Campbell Soup

• Increased costs of shipping products, ingredients to US, especially frozen, perishable products that idle at US border.

• Possibility that third party shippers will again refuse business and/or impose new surcharges in anticipation of delays.

• Disadvantage Canadian suppliers and businesses vis a vis US and other foreign competitors of ingredients and commodities due to higher border-related costs, and unreliability of meeting “just in time” supply chains.

• Make North American products less competitive against Asian, EU competitors – Almost 80 percent of cross-border trade is intra-company.

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Cost of Current System, Doing Nothing, and Fixing

• The Current price tag (US DOT, Taylor): Current border management system costs over $10.3 billion (US) annual cost to carriers, manufacturers and governments.

• The cost of delays (Ontario Chamber): Border delays cost $8.34 billion (CDN) per year, or $952,000 per hour.

• Doing nothing (Border Transportation Partnership): Lack of infrastructure investment between Ontario-Michigan will cost $6.68 billion (US) annually by 2020 due to impaired freight movement, lost productivity.

• The Fix: Bilateral Transportation Working Group: 224 projects identified at cost of $13.4 billion (US). US projects make up most of it ($11.3 billion)

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Turning Border into a Competitive Advantage

• Remove, Reduce Stress on Current Infrastructure– “Pre-Clearance” Pilot Programs for C-TPAT certified manufacturers;

move some border processes back to manufacturing facilities (with conditions); consider use of rail for food manufacturers

• Build the new international trade crossing at Detroit-Windsor– Different crossings in different areas offer options to ensure timely

delivery of products, ingredients and supplies to our manufacturing facilities; helps protect supply chains from border closures due to weather, infrastructure delays, traffic backups, etc.

– Ambassador bridge continent’s busiest crossing: 27% of all US-Canada trade (its two lanes wide), 13 million crossings annually

• Expedite existing and planned infrastructure projects, such as redecking Peace Bridge (Buffalo)

• Consider new bilateral authority on border management – more coherent bi-national management, investment approach

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“Beyond The Border” Initiative – A New Promise

• Two components – border security and facilitation, and regulatory cooperation

• Border effort led by Simon Kennedy in Canada. In US, Dan Restrepo (NSC)

• Four focus areas: threat assessments; entry/exit systems; trade, growth and jobs; and cyber security

• Also: Trusted traveler systems (open to agriculture); IT solutions; single window portals, etc. & use of pilot projects