CANADA-UNITED STATES LAW INSTITUTECANADA-UNITED STATES LAW INSTITUTEANNUAL CONFERENCE 2008ANNUAL CONFERENCE 2008

THE WORLD’S LONGEST UNDEFENDED BORDER:THE WORLD’S LONGEST UNDEFENDED BORDER:GATEWAY OR CHECKPOINT?GATEWAY OR CHECKPOINT?

Paul VandevertInternational Trade AttorneyOffice of General Counsel

The Canada-US Supply Chain in the Era of Global Economic Competitiveness

April 17, 2008

Overview: Ford & the Auto Industry Depend on an Open Border

Between US & Canada

Brief History of Ford in US & Canada History of Free Trade between US & Canada Factual Profile of Ford as Trader in US & Canada Trade & Security Security Measures: Which Are Most Effective?

April 17, 2008

Ford Motor Company: A Brief History

Ford Motor Company founded in the United States in 1903; began business in Canada in 1904

Today Ford has four recognized brands in addition to “Blue Oval”

Manufactures vehicles on six continents and all major automotive markets

Ford brands family distributes vehicles in over 100 countries.

April 17, 2008

Free Trade Between Canada & the US

The Auto Industry Pioneered and Enjoys Benefits of Free Trade between Canada and the US

Automotive Products Trade Agreement of 1965 (APTA) Conditional free trade for automotive industry imports to be used for production of

new motor vehicles. Recognized close integration of supply base and OEM customers in Canada and

the US and facilitated growth in automotive industry

Canada-US Free Trade Agreement (1989) Expanded free trade from automotive sector to all sectors Free trade in qualifying goods immediately for auto sector – conditions dependent

on use eliminated All US and Canadian qualifying goods duty free in 1998

North American Free Trade Agreement (NAFTA 1994) Expanded free trade to Mexico Recognized and facilitated complete integration of auto industry in North America

as a single market Duty free trade for all qualifying goods in all 3 countries in 2004

April 17, 2008

Ford as Trader in Canada & US

Ford makes over 200,000 entries a year into US Ranks in top 5 US importers by entry volume Over 163,000 entries from Canada Over 156,000 entries through two US ports: Detroit & Port

Huron 20 Canadian suppliers account for over 92,000 of Ford’s entries

Ford’s total entered value per year more than US$15 Billion Ranks in top 5 US importers by entered value Nearly US$8 Billion of entered value comes from Canada

April 17, 2008

Of Trade and Security

TRADE In all of North America, Ford saves* over $1 Billion in duties

every year under NAFTA* Volume of trade would not exist without NAFTA

Effective duty rate for Ford on goods from Canada is 0.1%, Ford effectively claims duty free imports under NAFTA on

over 99% of all entries made

SECURITY Ford was one of the original 7 “charter” members of C-TPAT

Signed MOU with US Customs in February 2002 Recently revalidated as a Tier III importer in C-TPAT Ford carriers participate in C-TPAT & FAST

Through Industry trade groups Ford has supported SPP and other North American security initiatives

April 17, 2008

Security Measures: Risk Assessed v Non-Discriminatory?

Risk Based Assessments In risk based assessments, Customs will make security threat

determination based on level of security risk posed by shipper, importer or shipment C-TPAT lays the foundation for risk based assessment of security

threat In C-TPAT, importers such as Ford provide Customs with data and

information on their entire supply chain, which Customs validates. Information provided covers importer, suppliers, carriers and other

supply chain service providers who may handle shipment (freight forwarders, consolidators, Customs brokers)

Based on validated data from C-TPAT participants, Customs could systemically rate security risk of inbound shipments and segregate low risk shipments, leaving higher risk shipments for additional scrutiny

April 17, 2008

Security Measures: Risk Assessed v Non-Discriminatory?

Non-Discriminatory Assessments Non-discriminatory security assessment methods treat all importers,

shippers and shipments the same Proposed Importer Security Filing rule (aka “10+2”) is non-

discriminatory security assessment method. All importers, regardless of risk posed, required to file same amount of

data with CBP 24-hours in advance of loading of shipment. ISF threatens to close border without adequate evidence that security

will be enhanced While rule would initially apply only to ocean shipments, CBP has

already announced that ISF rule will be expanded very soon to all modes of border crossing.

Significant number of Ford’s suppliers are within 30 minutes of the border