US / Canada Border Issues

William CookSenior Manager, Corporate CustomsDaimlerChrysler CorporationApril 30, 2004

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Agenda

1.1. Automotive Industry OverviewAutomotive Industry Overview

2.2. Automotive Trade OverviewAutomotive Trade Overview

3.3. Automotive Border ExpectationsAutomotive Border Expectations

4.4. RecommendationsRecommendations

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Automotive Industry Overview

US In 2002• Built 73% of NAFTA vehicles• Built 12 million vehicles• Sold 16.8 million vehicles• Employs

• 770,000 directly• 1,001,000 indirectly

• Spends annually• $500 Billion in US on parts• $21 billion on R&D• 7.5 billion on health care

CanadaIn 2002• Built 16% of NAFTA vehicles • Built 2.6 million vehicles• Sold 1.7 million vehicles• Employs

• 50,000 directly• 550,000 indirectly

• Accounts for• 16% of manufacturing• 20% of all exports• $27 billion in trade

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Automotive Trade Overview

• $18.1 B cars & trucks• $26.5 B parts & engines

• $46.8 B cars & trucks• $16.6 B parts & engines

Source: Statistics Canada, DesRosiers 2003Figures are in $US

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Major Automotive Border Crossings

Bluewater Bridge

Ambassador Bridge& Detroit/Windsor Tunnel

Peace Bridge

Queenston-Lewiston Bridge

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International Highway Traffic Volumes between US & Canada

• 43% of total volume between S.W. Ontario and S.E Michigan• 26% of total volume at Ambassador Bridge in Windsor/Detroit

• DCX is 14% of volume with approx 1000 truckloads daily

Automotive Sector Traffic Volumes• 34% of total volume• 68% of shipments occur at Detroit or Port Huron

Automotive Cost Implications• Plant shutdowns costs $1.5 million/hour in lost revenue

Automotive Trade Overview

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Just-In-Time Delivery Process

Kautex Textron

Jefferson North Assembly Plant

OntarioMichigan

Daily Ship WindowsMON 04:00MON 07:00MON 10:00MON 13:00MON 16:00MON 19:00

Delivery WindowsMON 06:00MON 09:00MON 12:00MON 15:00MON 18:00MON 21:00

15 Minutes15 Minutes 90 Minutes

Ambassador Bridge

• Supplier located in Windsor, Ontario• 6 daily shipping windows• 2 hours total transit time• Supplier submits ASN upon shipment

• JNAP located in Detroit, Michigan• 3 hours total inventory on hand

Supplier issues 856 Advanced Shipping

Notice (ASN)

CHAMPS monitors, analyzes and updates

supplier shipment / delivery performance

CHAMPS data populates CNACS

and UPIPS with import shipments

Broker accesses USIPS to retrieve shipment data for entry information

Broker sends pre-shipment and

entry information to US Customs

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Automotive Border Expectations

JIT (just in time) inventory requires:

• Seamless border crossingsSeamless border crossings (i.e. minimal paperwork and crossing delays)

• Consistent treatmentConsistent treatment of shipments at every port

• Predictable border crossingsPredictable border crossings necessary to meet JIT delivery

• Expedited low risk shipmentsExpedited low risk shipments for qualified importers

• Improved infrastructureImproved infrastructure to manage traffic efficiently and allow clear access for authorized traffic

• Modern technologyModern technology to enhance and simplify processes

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Border Delays Do Not Support JIT!

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Automotive Border Expectations

DCX has been a leader in developing and promoting the use of optimal border management systems

• Examples::

• CSA/FAST CSA/FAST • NEXUSNEXUS• Partners in Protection/CTPATPartners in Protection/CTPAT

DCX needs recognition that:• We are low risklow risk

• Our shipments, drivers and carriers are securesecure and compliantcompliant

Efficient Borders are critical critical to our business

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Recommendations

Border ManagementBorder Management• Improve efficiency of driver registration process• Clarify benefits for CBP/CBSA programs to promote

participation• Increase focus on unknown or high risk freight• Simplify requirements with common US/Canada

processes

TechnologyTechnology• Optimize technology to improve operations and

integrated solutions• Implement intelligent transportation systems

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Recommendations

InfrastructureInfrastructure• Improve facilities to optimize capacity• Improve border access for low risk importers• New border crossing to meet increasing demands

FundingFunding• US

• Establish separate border program as part of the reauthorization of the Surface Transportation Bill

• Allocate funding to border states based on relative volume of trade

• Canada • Proceed with prioritizing and spending of $300M allocated