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UBC Theses and Dissertations

A study of highway sufferance warehouses Bayne, Kenneth Bruce 1979

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A STUDY OF HIGHWAY SUFFERANCE WAREHOUSES by KENNETH BRUCE BAYNE B.A., U n i v e r s i t y of B r i t i s h Columbia, 1971 A THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF SCIENCE IN BUSINESS ADMINISTRATION i n THE FACULTY OF GRADUATE STUDIES (Faculty o f Commerce) We accept t h i s t h e s i s as conforming to the r e q u i r e d standard The U n i v e r s i t y o f B r i t i s h Columbia A p r i l , 1979 © Kenneth Bruce Bayne, 1979 In presenting th i s thesis in pa r t i a l f u l f i lment of the requirements for an advanced degree at the Univers i ty of B r i t i s h Columbia, I agree that the L ibrary sha l l make i t f r ee l y ava i lab le for reference and study. I further agree that permission for extensive copying of th i s thesis for scholar ly purposes may be granted by the Head of my Department or by his representatives. It i s understood that copying or publ icat ion of th i s thesis fo r f i nanc i a l gain sha l l not be allowed without my written permission. Department of ' ; The Univers i ty of B r i t i s h Columbia 2075 Wesbrook Place Vancouver, Canada V6T 1W5 ABSTRACT A STUDY OP HIGHWAY SUFFERANCE WAREHOUSES Revenue Canada, Customs and E x c i s e i s g i v e n t h e r e s p o n s i b i l i t y f o r c o n t r o l l i n g t h e i m p o r t a t i o n o f f o r e i g n goods i n t o Canada by p r o v i s i o n s o f f e d e r a l l e g i s l a t i o n . The c o n t r o l i s e f f e c t e d by r e g u l a t i o n s r e q u i r i n g t h a t most im-p o r t e d goods pass t h r o u g h a s u f f e r a n c e warehouse t o be p r e -s e n t e d t o Customs, a l o n g w i t h approved d o c u m e n t a t i o n , f o r a p p r a i s a l and assessment o f a p p l i c a b l e d u t y and t a x e s . S u f -f e r a n c e warehouses have been a p p r o v e d f o r a l l modes c a r r y i n g f o r e i g n goods i n t o Canada w i t h t h e m a n i f e s t mode o f t r a n s p o r t d i c t a t i n g t h e s u f f e r a n c e mode. The s u f f e r a n c e warehouse.concept o r i g i n a t e d on t h e docks where goods a r r i v i n g by sea were d i s c h a r g e d f o r e n t r y i n t o C a n a d i a n m a r k e t s . T h i s was t h e n a t u r a l c l e a r a n c e l o c a -t i o n , b e i n g t h e f i r s t b r e a k b u l k p o i n t on C a n a d i a n s o i l t h e c l e a r a n c e f u n c t i o n c o u l d b e - u n d e r t a k e n w i t h minimum d i s r u p -t i o n t o t h e e f f i c i e n t f l o w o f goods. R a i l s u f f e r a n c e ware-houses were a u t h o r i z e d soon a f t e r r a i l , l i n e s c r o s s e d t h e C a n a d a - U n i t e d S t a t e s b o r d e r . R a t h e r t h a t r e q u i r i n g a p p r a i s a l and assessment o f i m p o r t c h a r g e s a t f r o n t i e r b o r d e r c r o s s i n g s Revenue Canada a u t h o r i z e d c r e a t i o n o f r a i l s u f f e r a n c e ware-houses, a t i n l a n d p o r t s where t h e normal b r e a k b u l k f u n c t i o n takes p l a c e . S i m i l a r f a c i l i t i e s have been a u t h o r i z e d f o r the a i r mode at a i r p o r t s a c r o s s Canada. U n t i l 1952, the t r a n s b o r d e r motor c a r r i e r i n d u s t r y was r e q u i r e d t o p r e s e n t shipments to Customs a t f r o n t i e r b o r der p o i n t s . In t h a t year, a n a t i o n a l r a i l s t r i k e put p r e s s u r e on t h e t r u c k i n g i n d u s t r y and on Customs, t o improve the d e l i v e r y system f o r t r a n s b o r d e r goods. Revenue Canada's response was e x t e n s i o n o f the i n l a n d s u f f e r a n c e warehouse concept to the highway mode.. A s e r i e s o f p r i v a t e l y - o w n e d warehouses were a u t h o r i z e d on a monopoly b a s i s w i t h i n each Customs p o r t area, through which a l l t r a n s b o r d e r motor c a r -r i e r s were r e q u i r e d t o c l e a r goods f o r Customs purposes. The highway s u f f e r a n c e warehouse system has accommo-dated the needs o f Customs, those o f the motor c a r r i e r s and those o f c o n s i g n o r / c o n s i g n e e s o f t r a n s b o r d e r goods by p r o v i d -i n g breakbulk f a c i l i t i e s f o r c a r r i e r s , adherence to the c l e a r ance p r o c e s s which Revenue Canada demands and a minimum o f d e l a y time and c o s t f o r the consignee and the Canadian t a x -payer . w i t h i n a c e n t r a l i z e d f a c i l i t y . In s p i t e o f the success complaints have been heard from motor c a r r i e r f i r m s f o r c e d to use the f a c i l i t i e s o p e r a t e d by the monopoly warehouse-keeper who i s o f t e n a c a r r i e r f i r m competing f o r t r a n s b o r d e r f r e i g h t t r a f f i c . These co m p l a i n t s are o f . i n e q u i t i e s i n the treatment o f c a r r i e r s . u s i n g the warehouse f a c i l i t i e s which the u n r e g u l a t e d monopoly power o f the o p e r a t o r p e r m i t s . S p e c i f i c a l l y , c a r r i e r s complain o f unequal p r o v i s i o n o f s e r v i c e s a t the warehouses, about e x c e s s i v e r a t e s and charges i v f o r space and s e r v i c e s and about the e f f e c t s . o f these f a c t o r s on i n t r a and i n t e r modal c o m p e t i t i o n . The t h e s i s examines the t r a n s b o r d e r motor c a r r i e r i n d u s t r y share o f the f r e i g h t market and the c l e a r a n c e p r o c e s s f o r imported goods. I t was found t h a t the t r u c k i n g i n d u s t r y h o l d s a s i g n i f i c a n t and i n c r e a s i n g share o f the market-— i n c r e a s i n g a t the expense o f the r a i l c a r r i e r s . The c l e a r a n c e procedures were found t o be c o m p l i c a t e d by e x c e s s i v e and c o n f u s i n g documentation requirements and, a l t h o u g h some sim-p l i f i c a t i o n has o c c u r r e d , changes which would s i m p l i f y t h i s major cause o f c l e a r a n c e d e l a y s are a d v i s a b l e . The a v a i l a b l e i n f o r m a t i o n about the highway s u f f e r a n c e warehouse sysrem i s p r e s e n t e d and i s supplemented by the r e s u l t s o f the 1976 Highway S u f f e r a n c e Warehouse Survey undertaken as a p a r t o f . t h i s study. The t h e s i s examines the s p e c i f i c , c o m p l a i n t s about the s u f f e r a n c e warehouse system and suggests t h a t they r e s u l t from a l a c k o f enforcement o f the e x i s t i n g r e g u l a t i o n s g o v e r n i n g warehouse o p e r a t i o n s by Revenue Canada. Both p u b l i c and p r i v a t e i n t e r e s t s are ser v e d when c o m p e t i t i o n i n the t r a n s b o r d e r f r e i g h t market i s encouraged and i n those i n s t a n c e s when p u b l i c s e c t o r i n a c t i o n d i s c o u r a g e s c o m p e t i t i o n changes are ne c e s s a r y . The t h e s i s c o n s i d e r s the U n i t e d S t a t e s system highway c l e a r a n c e system and suggests t h a t the problems i n Canada are not s e r i o u s enough t o r e q u i r e a d o p t i o n o f new procedures but c o u l d b e n e f i t from some ' f i n e t u n i n g 1 measures which would p l a c e w i t h Revenue Canada the r e s p o n s i b i l t y f o r r e g u l a t i n g the monopoly s u f f e r a n c e warehouse system. TABLE OF CONTENTS LIST OF TABLES LIST OF EXHIBITS INTRODUCTION 1 1. TRANSBORDER CARGO MOVEMENTS 7 (a) C a n a d i a n E x p o r t s t o t h e U.S. 10 (b) U.S. E x p o r t s t o Canada 15 (c) Movement o f Goods i n t o Canada by Road 23 2. IMPORTING GOODS INTO CANADA BY MOTOR CARRIER 46 (a) B o n d i n g T r a n s b o r d e r V e h i c l e s 5Q (b) P a c k i n g and Documenting Imported Goods 53 (c) Customs M a n i f e s t i n g 62 (d) R e p o r t i n g Imported Goods 65 (e) D e l i v e r y o f Goods t o I n l a n d Warehouse 69 (f) Customs E n t r y o f Imported Goods 71 (g) Customs Treatment o f O t h e r Modes 90 3. THE SUFFERANCE WAREHOUSE SYSTEM 97 (a) Customs Warehousing R e g u l a t i o n s 98 (b) C l a s s I I I Customs Warehousing: S u f f e r a n c e Warehouses 101 (c) The S u f f e r a n c e Warehouse Concept 117 4. THE 1976 HIGHWAY SUFFERANCE WAREHOUSE SURVEY (a) The Survey R e s u l t s 5. THE SPECIFIC COMPLAINTS 6. SOLVING THE PROBLEMS WITH THE HIGHWAY SUFFERANCE WAREHOUSE SYSTEM . (a) The U n i t e d S t a t e s C l e a r a n c e System (b) ' F i n e T u n i n g 1 t h e S u f f e r a n c e Warehouse System (c) Summary BIBLIOGRAPHY APPENDIX v i i L IST OF TABLES TABLE I Ca n a d a - U n i t e d S t a t e s Trade. 1964-65, 1974-75. TABLE I I Impo r t s from t h e U n i t e d S t a t e s by Re g i o n o f Customs Clearance.. 1975, TABLE I I I V a l u e o f C a n a d i a n E x p o r t s t o t h e U n i t e d S t a t e s by Mode o f T r a n s p o r t . 1964-65, 1974-75. 11 TABLE IV V a l u e o f C a n a d i a n I m p o r t s from t h e U n i t e d S t a t e s by Mode o f T r a n s p o r t . 1964-65, 1974-75. 17 TABLE. V Commercial T r u c k T r a f f i c Between t h e U n i t e d S t a t e s and Canada. .1975. 25 TABLE V I T r a n s b o r d e r C r o s s i n g s b y M a j o r Commodity Groups: U n i t e d S t a t e s t o Canada. 1975. 31 TABLE V I I T r a n s b o r d e r C r o s s i n g s by M a j o r Commodity Groups: U n i t e d S t a t e s t o A t l a n t i c P r o v i n c e s . 1975. 33 TABLE V I I I T r a n s b o r d e r C r o s s i n g s by M a j o r Commodity Groups: U n i t e d S t a t e s t o Quebec. 1975. 35 TABLE IX T r a n s b o r d e r C r o s s i n g s by M a j o r Commodity Groups: U n i t e d S t a t e s t o O n t a r i o . 1975. 37 TABLE X T r a n s b o r d e r C r o s s i n g s by M a j o r Commodity Groups: U n i t e d S t a t e s t o t h e P r a i r i e P r o v i n c e s . 1975 39 TABLE XI TABLE XII TABLE X I I I TABLE XIV TABLE XV Tra n s b o r d e r C r o s s i n g s by Major Commodity Groups: U n i t e d S t a t e s to B r i t i s h Columbia 1975 L o c a t i o n o f Highway S u f f e r a n c e Warehouses Ge o g r a p h i c a l D i s t r i b u t i o n o f Q u e s t i o n n a i r e R e p l i e s Square Footage o f Warehouses by Pr o v i n c e Rates and Charges a t Highway S u f f e r a n c e Warehouses L I S T OF EXHIBITS / i x E x h i b i t 1 M a j o r P o r t s o f E n t r y t o Canada from U n i t e d S t a t e s Number o f T r u c k C r o s s i n g s 1975 26 26 E x h i b i t 2 A T y p i c a l Customs E n t r y f o r Consumption 4 9 E x h i b i t 3 Customs I n v o i c e (Type M-A) two. p l a t e s 56 E x h i b i t 4 Customs I n v o i c e (Type N-A) two p l a t e s E x h i b i t 5 S p e c i a l E x p o r t e r s ' D e c l a r a t i o n 58 61 E x h i b i t 6 Customs M a n i f e s t (Form A-8-A/ Cargo C o n t r o l Document 64 E x h i b i t 7 D i s t r i b u t i o n o f Cargo C o n t r o l Document 67 E x h i b i t 8 C a n a d i a n I n t e r n a t i o n a l Trade C l a s s i f i c a t i o n Commodity Index E x h i b i t 9 The Customs T a r i f f , S c h e d u l e A 75 77 E x h i b i t 10 Customs Import E n t r y C o d i n g Form (B3) 83 E x h i b i t 11 The I n l a n d S u f f e r a n c e Warehouse Concept (Schematic) 118 1 INTRODUCTION E f f i c i e n c y and economy i n the t r a n s p o r t s e c t o r r e q u i r e s t h a t t h e r e be f r e e movement o f goods from o r i g i n s t o d e s t i n a -t i o n s ; any o b s t a c l e to t h i s f r e e flow r e s u l t s i n a d d i t i o n a l c o s t i n both time and money. In the movement o f goods a c r o s s i n t e r n a t i o n a l boundaries t h e r e i s another c o n s i d e r a t i o n b e s i d e s e f f i c i e n c y and economy. T h i s c o n s i d e r a t i o n i s t h a t n a t i o n a l governments have deemed t h e r e to be a need f o r some c o n t r o l over goods t h a t move i n t o t h e i r t e r r i t o r i e s from f o r e i g n c o u n t r i e s i n o r d e r to p r o t e c t p u b l i c h e a l t h and s a f e t y , p l a n t and animal l i f e and a v a r i e t y o f socio-economic, f a c t o r s . T h i s c o n t r o l has i n most cases become p h y s i c a l c o n t r o l o f the imported goods, p h y s i c a l c o n t r o l which p r e v e n t s the f r e e flow of goods.- One o f the problems i n i n t e r n a t i o n a l t r a d e i s how t h e r e can be a compromise between the need f o r a f r e e flow o f goods and the need f o r government c o n t r o l over imported goods. The Canadian s o l u t i o n to t h i s problem i s the Customs s u f f e r a n c e warehouse p o l i c y and system. Revenue Canada, Customs and E x c i s e Branch, the agency r e s p o n s i b l e f o r the c o n t r o l f u n c t i o n f o r goods b e i n g imported i n t o Canada, has e s t a b l i s h e d a p o l i c y which a l l o w s the movement o f imported goods, i n bond, t o t h e f i r s t n a t u r a l b r e a k - b u l k p o i n t i n t h e C a n a d i a n i n t e r i o r T h i s n a t u r a l l o c a t i o n i s a s u f f e r a n c e warehouse and most i n bond goods d e s t i n e d f d r C a n a d i a n markets by any mode o f t r a n s -p o r t must be e n t e r e d i n t o Canada f o r Customs p u r p o s e s t h r o u g h such a f a c i l i t y . Ocean v e s s e l s had t h e f i r s t s u f f e r a n c e warehouses a t d o c k s i d e w h i c h were a t t e n d e d by a l o c a l customs o f f i c e . The system was expanded t o i n c l u d e r a i l s u f f e r a n c e warehouses as t h e r a i l w a y e x p a n s i o n o f t h e l a s t c e n t u r y saw r a i l l i n e s c r o s s t h e C a n a d a - U n i t e d S t a t e s b o r d e r . The f i r s t highway s u f f e r a n c e warehouses were e s t a b l i s h e d i n 1952 a t P e t e r b o r o u g h , O n t a r i o . S e v e r a l f a c t o r s f a c i l i t a t e d i t s c o n s t r u c t i o n , i n c l u d i n g a r e c o g n i t i o n by Customs and E x c i s e t h a t t h e d e l a y s r e s u l t i n g from c l e a r i n g i m p o r t e d goods a t t h e i n t e r n a t i o n a l boundary were e x c e s s i v e . The i n l a n d s u f f e r a n c e warehouse system grew q u i c k l y d u r i n g t h e 1950's. The a t t r a c t i o n f o r t h e motor c a r r i e r i n d u s t r y was o b v i o u s ; t h e c a r r i e r w h i c h had a u t h o r i t y t o o p e r -a t e a s u f f e r a n c e warehouse a t h i s n o r m al b r e a k - b u l k l o c a t i o n w ould have a d e c i d e d advantage o v e r c o m p e t i t i v e c a r r i e r s . T here was, however, a c a t c h t o t h i s a p p a r e n t s o l u t i o n ; Customs a n d . E x c i s e would g r a n t o p e r a t i n g a u t h o r i t y t o o n l y one s u f f e r -ance warehouse i n each Customs p o r t a r e a . One warehouse was e s t a b l i s h e d i n each i n l a n d p o r t t o s e r v e a l l motor c a r r i e r f i r m s , and t h i s i s t h e s i t u a t i o n t o d a y ; 144 p r i v a t e l y - o w n e d and o p e r a t e d i n l a n d highway s u f f e r a n c e warehouses s e r v e t h e 3 needs o f s e v e r a l hundred t r a n s - b o r d e r motor c a r r i e r f i r m s . T h i s study o f the highway s u f f e r a n c e warehouse system was undertaken t o i n v e s t i g a t e the e f f e c t i v e n e s s o f t h i s c l e a r a n c e warehouse system f o r motor c a r r i e r s and to determine, i f any change i n Custom and E x c i s e p o l i c y i s warranted. The i n i t i a t i v e f o r the study was a s e r i e s o f com p l a i n t s from members o f the t r a n s b o r d e r motor c a r r i e r i n d u s t r y t h a t they were not be i n g g i v e n equ a l a c c e s s t o the c l e a r a n c e systems a t some s u f f e r a n c e warehouses. The com p l a i n t s were lodged about the ownership p o l i c y which a l l o w e d one motor c a r r i e r f i r m o p e r a t i n g i n t o a customs p o r t t o p r o v i d e c l e a r a n c e f a c i l i t i e s f o r i t s c o m p e t i t o r s , about the l a c k o f warehouse c a p a c i t y a t some f a c i l i t i e s , about the monopoly r a t e s f o r space and s e r v i c e b e i n g charged a t c l e a r a n c e f a c i l i t i e s and about the q u a l i t y o f s e r v i c e s b e i n g s u p p l i e d by both Customs and E x c i s e and the monopoly warehouse o p e r a t o r s . G e n e r a l l y , the study was unable t o conclude t h a t these c o m p l a i n t s were j u s t i f i e d . What the study d i d d i s c o v e r , however, was t h a t t h e r e are some problems w i t h the highway s u f f e r a n c e warehouse p o l i c y and i t s a d m i n i s t r a t i o n which c o u l d be improved by some ' f i n e - t u n i n g ' measures. Chapter One o f the r e p o r t i n t r o d u c e s the s u b j e c t o f the t r a n s b o r d e r movement o f goods and commodities. The major t r a f f i c groups are i d e n t i f i e d by t h e i r d o l l a r v a l u e and by t r a n s p o r t i n g mode. As the c e n t r a l c o n c e r n o f the study was the motor c a r r i e r i n d u s t r y , the r e p o r t then attempts t o i d e n t i f y the t r a f f i c moved 4 by truck into Canada and the trends to truck over a diverse range of commodity groups. The chapter also discusses the regulation which the transborder motor c a r r i e r industry faces on both sides of the i n t e r n a t i o n a l boundary. Chapter Two presents what can only be an overview of the complex entry procedure f o r goods being imported to Canada from the United States. By way of a flow-type discussion the chapter follows a shipment of goods by truck from a United States shipper to a Canadian receiver. A l l customs-related aspects of the move are considered including packaging, documentation, reporting and clearance procedures and release as duty-paid goods. What becomes c l e a r from t h i s chapter i s that i t i s not a simple matter to import, goods into Canada, i t . requires co-operation and understanding by a l l p a r t i e s concerned. Chapter Three introduces the concept of Customs ware-housing. There are.three d i s t i n c t types of customs warehouse including the Class I Canadian Government warehouses, the Class II Bonded warehouse and, the subject of t h i s report, the Class III Sufferance warehouse. In.addition to presenting a b r i e f h i s t o r y of the highway sufferance warehouse system, the chapter considers i n some d e t a i l the regulations and procedures which govern t h e i r establishment and operation. In undertaking this, study i t was soon discovered that there was no vast pool of information about the highway s u f f e r -ance warehouse system. In order to gather information about 5 t h e 144 warehouses, t h e I n l a n d Highway S u f f e r a n c e Warehouse  Survey was c o n d u c t e d i n 1976-1977. The s u r v e y c o n s i s t e d o f a q u e s t i o n n a i r e d e s i g n e d t o s o l i c i t i n f o r m a t i o n on o w n e r s h i p , s i z e and c a p a c i t y , a v a i l a b l e s e r v i c e s , r a t e s f o r space and s e r v i c e , t h r o u g h p u t and f i n a n c i a l p e r f o r m a n c e . The r e s u l t s o f t h e s u r v e y a r e p r e s e n t e d i n c h a p t e r f o u r . C h a p t e r f i v e d e a l s w i t h t h e s p e c i f i c c o m p l a i n t s from motor c a r r i e r f i r m s u s i n g t h e i n l a n d highway s u f f e r a n c e ware-house system. I f one a c c e p t s t h e p r e m i s e t h a t some form o f p h y s i c a l c o n t r o l by Customs and E x c i s e o v e r i m p o r t e d goods i s r e q u i r e d t h e n t h e s u f f e r a n c e warehouse seems t o work w e l l . The i n v e s t i g a t i o n does i d e n t i f y some p r o b l e m a r e a s w h i c h need t o be e l i m i n a t e d . These c o n c e r n t h e r e l a t i o n s h i p between Customs and E x c i s e and t h e motor c a r r i e r f i r m s and r e l a t e o n l y i n a r e g u l a t o r y sense t o t h e o p e r a t i o n o f t h e warehouse. C h a p t e r s i x p e r f o r m s two b a s i c f u n c t i o n s . F i r s t , i t p r e s e n t s an a l t e r n a t i v e method o f d e a l i n g w i t h i m p o r t e d goods. The U n i t e d S t a t e s system o f h a n d l i n g goods i m p o r t e d by highway i s d e s c r i b e d w i t h a v i e w t o i t s a c c e p t a b i l i t y as an a l t e r n a t i v e t o t h e C a n a d i a n system. W h i l e t h i s a l t e r n a t i v e has some c o n t r o l a d vantages o v e r t h e C a n a d i a n system t h e r e a r e f e a t u r e s w h i c h make i t more r e s t r i c t i v e t o t h e f l o w o f goods a c r o s s t h e i n t e r n a t i o n a l b o r d e r . Second, t h e c h a p t e r o u t l i n e s s e v e r a l 1 f i n e - t u n i n g ' t e c h n i q u e s w h i c h , i f implemented, c o u l d r e l i e v e t h e p r oblems i d e n t i f i e d i n c h a p t e r f i v e . The most i m p o r t a n t o f t h e s e i s a need f o r Customs and E x c i s e t o r e c o g n i z e t h a t 6 to an e f f i c i e n t t r a n s p o r t system the c l e a r a n c e procedure i s no more than an o b s t a c l e . While the Customs c o n t r o l f u n c t i o n i s important,, i t i s a l s o important t h a t t r a n s p o r t e f f i c i e n c y , i s encouraged. 7 CHAPTER ONE  TRANSBORDER CARGO MOVEMENTS I t i s a w e l l known f a c t t h a t Canada's major t r a d i n g p a r t n e r l i e s t o the south a c r o s s the 4 9 t h p a r a l l e l . The U n i t e d S t a t e s o f America has emerged as the l a r g e s t i n d u s t r i a l -i z e d n a t i o n i n the world, i n f l u e n c i n g the economics o f almost every c o u n t r y i n the f r e e world. The r e l a t i o n s h i p o f t h i s economic g i a n t w i t h i t s n o r t h e r n neighbour i s s t a g g e r i n g when one c o n s i d e r s the l a c k o f d i r e c t p o l i t i c a l t i e s between the two c o u n t r i e s . Before d e a l i n g w i t h the main s u b j e c t o f t h i s s t u d y — t h e Customs c l e a r a n c e o f goods a t i n l a n d highway s u f f e r a n c e warehouses--an a n a l y s i s o f the t r a d i n g p a t t e r n s between Canada and the U n i t e d S t a t e s w i l l be p r e s e n t e d w i t h s p e c i a l emphasis on the i m p o r t a t i o n o f goods by road. The a n a l y s i s i s int e n d e d t o g i v e i n f o r m a t i o n c o n c e r n i n g (a) the nature o f the commodity flows a c r o s s the i n t e r n a t i o n a l bound-a r y and, (b) the market shares enjoyed by each o f the modes o f t r a n s p o r t . What emerges i s evidence o f the e v e r - i n c r e a s i n g t r a n s p o r t share h e l d by the motor c a r r i e r i n d u s t r y i n t r a n s -border t r a d e and the cha p t e r concludes by d e t a i l i n g the nature o f the i n d u s t r y ' s r o l e . T h i s a n a l y s i s should p r o v i d e a good i n t r o d u c t i o n when the d i s c u s s i o n t u r n s t o the problems encoun-t e r e d by motor c a r r i e r s c a r r y i n g f o r e i g n goods i n t o Canada. T a b l e I below g i v e s n u m e r i c a l e v i d e n c e o f t h e r e l a -t i o n s h i p between t h e economies o f t h e U n i t e d S t a t e s and Canada i n terms o f t r a d e . TABLE I : Canada-- U n i t e d S t a t e s Trade C a n a d i a n Imports V a l u e o f V a l u e o f U.S. Imports "Imports U.S. Imports A l l I m ports ($000) ($000) ( P e r c e n t ) 1964 7,488,200 5,164,285 68% 1965 8,633,400 6,044,831 70% 1974 31,6 92,121 21,356,710 67% 1975 34,635,513 23,599,280 68% C a n a d i a n E x p o r t s V a l u e o f V a l u e o f U.S. E x p o r t s E x p o r t s U.S. E x p o r t s A l l E x p o r t s ($000) ($000) ( P e r c e n t ) 1964 8,303,500 4,271,059 51% 1965 8,766,700 4,840,456 55% 1974 31,674,496 20,762,490 65% 1975 32,325,043 21,029,639 65% T h i s d a t a shows t h a t Canada depends h e a v i l y on U n i t e d S t a t e s m a r k e t s as t h e p r i m a r y o u t l e t f o r i t s goods, be t h e y n a t u r a l r e s o u r c e s o r m a n u f a c t u r e d goods: 65 p e r c e n t by v a l u e o f a l l C a n a d i a n e x p o r t s go t o t h e U n i t e d S t a t e s w h i l e o n l y about 20 p e r c e n t o f a l l U n i t e d S t a t e s e x p o r t s end up i n Canad-i a n m a r k e t s . The comparable 1965 f i g u r e s show t h a t 51 p e r c e n t o f a l l C a n a d i a n e x p o r t s , by v a l u e , went t o t h e U n i t e d S t a t e s . T h i s i n c r e a s e i n the p r o p o r t i o n of Canadian goods g o i n g south between 1964 and 1974 g i v e s an i n d i c a t i o n o f the i n c r e a s i n g r e l i a n c e o f the Canadian economy on U n i t e d S t a t e s markets. Canadians a l s o l o o k t o the U n i t e d S t a t e s t o supply the goods which are used i n i n d u s t r y and as consumer goods. As much as 70 p e r c e n t by v a l u e o f a l l goods imported i n t o Canada come a c r o s s the U n i t e d States-Canada border. A decade e a r l i e r , i n 1964, the comparable f i g u r e was 68 p e r c e n t . T a b l e I I shows where i n Canada the U n i t e d S t a t e s ex-p o r t s c l e a r Canada Customs. While t h i s does not n e c e s s a r i l y show the f i n a l s e l l i n g p o i n t o f these goods i n Canada, i t does, i n d i c a t e where a l o n g the 3,000 p l u s m i l e s o f border the bulk o f import a c t i v i t y t a k e s p l a c e . TABLE I I : Imports from of Customs the U n i t e d S t a t e s C l e a r a n c e . 1975 by Region Value o f Value o f Imports Imports Rank ($0 00) (% ) A t l a n t i c 437 ,451 1. 7 5. Quebec 3,610 ,016 15. 0 2 O n t a r i o 15,582 ,520 66. 0 1 P r a i r i e s 2,388 ,495 10. 1 4 P a c i f i c 1,473 ,243 6. 2 3 Source: S t a t i s t i c s Canada, Catalogue 65-006 The t a b l e shows t h a t the import flows i n t o Canada from the U n i t e d S t a t e s f o l l o w a p r e d i c t a b l e p a t t e r n . O n t a r i o ' s 10 g e o g r a p h i c a l l o c a t i o n , a d j a c e n t t o the h e a v i l y i n d u s t r i a l i z e d , n o r t h - e a s t e r n U n i t e d S t a t e s , makes i t the most l i k e l y to r e c e i v e the bulk o f U n i t e d S t a t e s e x p o r t s to Canada. Access t o these markets has a s s i s t e d the p r o v i n c e o f O n t a r i o t o be-come the i n d u s t r i a l , b u s i n e s s and p o p u l a t i o n c e n t r e o f Canada and i t i s , t h e r e f o r e , not s u r p r i s i n g the t w o - t h i r d s o f U n i t e d S t a t e s e x p o r t s to Canada.enter through O n t a r i o . The remainder o f Canadian imports from the U n i t e d S t a t e s f o l l o w the same p a t t e r n as i n d u s t r i a l i z a t i o n i n the r e g i o n s o f Canada. T r a i l -i n g O n t a r i o by a l o n g margin i s Quebec (15 p e r c e n t ) , B r i t i s h Columbia (6.2 p e r c e n t ) , A l b e r t a (4.4 p e r c e n t ) , Manitoba (4.1 p e r c e n t ) , Saskatchewan (1.5 p e r c e n t ) , New Brunswick (0.9 p e r -cent) , Nova S c o t i a (0.6 p e r c e n t ) , and Newfoundland-Prince Edward I s l a n d (0.2 p e r c e n t ) . (a) Canadian E x p o r t s to. the U n i t e d S t a t e s T a b l e I I I shows the v a l u e o f Canadian e x p o r t s t o the U n i t e d S t a t e s by commodity group and mode o f t r a n s p o r t . The twenty-three commodity groups used i n the t a b l e were adapted from John Munro 1s book Trade L i b e r a l i z a t i o n and T r a n s p o r t a t i o n  i n I n t e r n a t i o n a l T r a d e 1 and r e p r e s e n t the bulk o f Canadian e x p o r t s t o the U n i t e d S t a t e s . The s t a t i s t i c s are g i v e n f o r 1964-65 and 1974-75 i n o r d e r t o r e v e a l not o n l y r e c e n t t r e n d s i n Canada-United S t a t e s t r a d e but t r e n d s which have developed over the l a s t decade. T h e ; t a b l e does have one i n h e r e n t problem which, w h i l e TABLE I I I Value of Canadian Exports to the United States  By Mode of Transport: 1964-65, 1974-75 Value Mode of Transport (Percent) ($000) Water Road R a i l A i r 1. Meat & Meat 1964 .34498 * 92 7 Preparations 1965 55860 * 94 5 1974 74993 * 97 * * 1975 56453 * 97 * * 2. Fi s h 1964 119010 34 56 10 * 1965 138971 36 54 10 * 1974 237577 25 70 4 * 1975 282217 24 72 4 * 3. A l c o h o l i c 1964 97033 * 65 35 * Beverages 1965 110744 * 62 37 * 1974 188560 * 72 27 * 1975 237428 * 84 15 * 4. Iron Ore and 1964 302265 96 * 4 Scrap 1965 291673 92 * 7 * 1974 370748 88 3 9 * 1975 450773 92 2 5 * 5. Ni c k e l Ore 1964 35424 *. 66 34 and Scrap 1965 39582 - 66 34 1974 95843 - 97 3 1975 67206 1 96 3 -6. Lead, Zinc and 1964 43294 * 21 79 Precious Metals 1965 53822 * 28 69 1974 121727 3 39 55 3 1975 99721 7 30 57 5 7. Radioactive Ore 1964 37263 * * 96 1965 19348 1 11 88 * 1974 47829 3 13 84 1975 49782 7 13 80 -8. Petroleum and 1964 360402 _ * * Natural Gas 1965 284498 * * 1974 100% TRANSPORTED BY PIPELINE 1975 9. Asbestos 1964 62996 4 4 92 1965 65195 6 5 89 * 1974 113856 3 16 80 * 1975 98680 3 23 73 Con 11 ... 12 TABLE I I I (Con't) Value (.$.0.0.0.) Mode of Transport (Percent) 10. Lumber 14. 15. 1964 1965 1974 1975 1964 1965 1974 1975 1964 1965 1974 1975 1964 1965 1974 1975 1964 1965 1974 1975 Primary and Manu- 1964 factured Iron and 1965 Stee l 1974 1975 11. Woodpulp 12. Paper 13. Chemicals F e r t i l i z e r 16. Aluminum and A l l o y s 17. Copper and A l l o y s 18. Lead, Zinc and Precious Metals 19. N i c k e l and A l l o y s 1964 1965 1974 1975 1964 1965 1974 1975 1964 1965 1974 1975 1964 1965 1974 1975 407805 412957 963996 812075 346017 371428 1060579 996567 698291 748432 1421328 1418451 43417 53577 250000 322831 67757 95598 341054 379480 134544 153689 586372 527237 118898 162124 273674 . 267639 69564 69497 253594 129190 43294 53822 312896 262802 140868 167186 332790 354436 Water Road R a i l A i r 18 7 75 * 19 9 73 * 20 18 62 * 20 19 59 * 11 1 81 * 12 1 80 * 6 3 82 * ? 3 83 * 40 5 55 * 39 5 56 21 8 70 * 21 12 66 -7 35 57 1 10 32 57 1 1 75 24 * 1 76 23 * 3 9 87 _ . 5 9 87 * 1 18 80 * 3 14 82 * 20 33 48 * 22 34 44 * 10 56 33 * 10 67 22 * * 6 94 * * 7 93 * * 11 88 * 8. 8 83 * - 14 86 * * 20 80 * * 30 70 _ 1 33 66 -* 21 79 * * 28 68 4 * 38 60 2 * 44 54 2 * 56 44 * * 52 48 * * 77 22 * * 70 30 * Con't 13 TABLE III (Con't) Value ($000.) 20. Agricultural 1964 120348 * 23 77 * Equipment 1965 134028 * 21 79 * 1974 267519 * 43 57 * 1975 345092 * 44 55 * 21. Motor Vehicles, 1964 96787 1 92 7 * Trailers and Parts 1965 231251 * 92 8 * 1974 5446547 * 62 38 * 1975 5854398 * 60 40 * 22. Aircraft and 1964 186475 * • 26 4 70 Parts 1965 163950 * 33 6 60 1974 417937 * 24 33 43 1975 387540 * 46 16 37 23. Communications & 1964 67033 * 60 11 29 Laboratory 1965 89805 * 58 8 33 Equipment 1974 340755 * 65 1 33 1975 348043 * 66 1 32 24. A l l Commodity 1964 3623152 21 17 47 4 Groups 1965 4065516 19 21 46 3 1974 13633645 8 43 47 2 1975 14458386 8 47 43 2 25. A l l Exports 1964 4271059 20 23 44 4 1965 4840456 18 27 43 3 1974 20762490 7 37 33 1 1975 21929639 8 37 32 1 * Indicates a share of less than 1 percent Source: John Munro, Trade Liberalization and Transportation in International Trade. Statistics Canada Catalogue 65-206, Exports Mode of Transport,1973-75. — 14 not s e r i o u s , s h o u l d be noted. Export .values f o r the 1974-75 data are based on commodity groupings which have been a l t e r e d s i n c e the 1964-65 data was produced. A l t h o u g h attempts have been made t o r a t i o n a l i z e the data, p e r f e c t a d a p t i o n i s not p o s s i b l e f o r a l l commodity groups. Included i n the t a b l e i s data which shows the modal shares f o r each commodity group f o r water,.road, r a i l and p i p e l i n e . The s t a t i s t i c s r e p r e s e n t the mode o f t r a n s p o r t by which commodities c r o s s e d the- i n t e r n a t i o n a l boundary and i t i s presumed t h a t t h i s i s the mode which predominated i n t h e i r movement from Canadian s e l l e r t o U n i t e d S t a t e s b o r d e r . The twenty-three commodity groups i n c l u d e d ' i n T a b l e I I I r e p r e s e n t a p p r o x i m a t e l y 85 o f 1964-65 e x p o r t s and, as a r e s u l t o f more d i v e r s i f i e d Canadian e x p o r t s t o the U n i t e d S t a t e s about 66% o f 1974-75 e x p o r t s . Taken as a whole, they r e f l e c t the same g e n e r a l t r a n s p o r t a t i o n p a t t e r n s t h a t e x i s t f o r a l l t r a d e between Canada and the U n i t e d S t a t e s . Comparison o f groups 24 and 25 i n the t a b l e i n d i c a t e s t h a t the commodity group data underestimates the highway mode share and o v e r e s t i m -a t e s the r a i l share. The t a b l e i l l u s t r a t e s t h a t , over the l a s t decade, the highway mode has made s i g n i f i c a n t i n c r e a s e s i n the share o f goods i t c a r r i e s from Canada t o the U n i t e d S t a t e s . F u r t h e r , these i n c r e a s e s appear t o have been made a t the expense o f the r a i l mode; a f a c t which would be expected i n the l i g h t o f 15 r e c e n t improvements i n the s e r v i c e c a p a b i l i t i e s o f f e r e d to s h i p p e r s by the motor c a r r i e r i n d u s t r y and by the f a c t t h a t r a t e d i f f e r e n t i a l s between r a i l and highway modes are not l a r g e . During times o f low p r o f i t s and r i s i n g c o s t s , many s h i p p e r s look f o r t r a d e - o f f s , such as h o l d i n g s m a l l e r i n v e n t o r i e s and. r e l y i n g on more and f a s t e r t r a n s p o r t a t i o n t o keep the market s u p p l i e d from fewer d i s t r i b u t i o n p o i n t s . A r a t h e r unexpected r e s u l t i s the s u b s t a n t i a l i n c r e a s e i n the s o - c a l l e d "bulk" c a r r i a g e by the motor c a r r i e r i n d u s t r y from 1964-65 t o 1974-75. Fo r example, f o r the group 5 commod-i t y ( n i c k e l ore and scrap) motor c a r r i e r s i n c r e a s e d t h e i r share from 66 p e r c e n t to i n excess o f 90 p e r c e n t and f o r the group 9 number commodity (asbestos) the highway mode's share rose from 5 p e r c e n t t o 23 p e r c e n t . The c i r c u m s t a n c e s surround-i n g such a s h i f t are d i f f i c u l t t o i n t e r p r e t from s t a t i s t i c s and no attempt w i l l be made but the important c o n c l u s i o n from these s t a t i s t i c s i s t h a t the motor c a r r i e r i s t a k i n g a l a r g e r percentage o f a growing t r a n s b o r d e r cargo market. Of the commodities sampled, the average percentage i n c r e a s e i n market share over the t e n year p e r i o d f o r the motor c a r r i e r i n d u s t r y was 75 p e r c e n t above the 1964 share. The same c a l c u l a t i o n f o r the r a i l w a y s showed an average decrease o f 22 p e r c e n t i n the average amount o f any commodity c a r r i e d . (b) U n i t e d S t a t e s - Exports, t o Canada T a b l e IV shows the v a l u e o f Canadian imports from the 16 U n i t e d S t a t e s i n twenty-nine commodity groups by mode o f t r a n s -p o r t . The 29 groups are a r a t i o n a l i z a t i o n o f the 33 groups 2 i d e n t i f i e d by John Munro , w i t h a l t e r a t i o n made ne c e s s a r y by changes i n r e p o r t i n g t e c h n i q u e s by S t a t i s t i c s Canada and the U n i t e d S t a t e s Bureau o f the Census. For s e v e r a l reasons the s t a t i s t i c s p r e s e n t e d i n t h i s t a b l e are not as a c c u r a t e as those f o r Canadian e x p o r t s . F i r s t , S t a t i s t i c s Canada produces no data on imports by mode o f t r a n s -p o r t r e s u l t i n g , i n the need f o r a 'round-about' method o f 3 d e t e r m i n i n g modal shares. T h i s method i n v o l v e s the use o f U n i t e d S t a t e s export s t a t i s t i c s which bear l i t t l e o r no r e l a -t i o n t o Canadian s t a t i s t i c s . The r e s u l t i s import commodity groups which are a r a t i o n a l i z a t i o n o f Canadian and U n i t e d S t a t e s commodity groups. The i n a b i l i t y t o p e r f e c t l y match Canadian and U n i t e d S t a t e s s t a t i s t i c s l e a d s d i r e c t l y t o another problem. In or d e r t o r a t i o n a l i z e the commodity groupings used here, i t i s important t h a t the v a l u e s i n both Canadian and U n i t e d S t a t e s s t a t i s t i c s are r e a s o n a b l y c l o s e . U n f o r t u n a t e -l y , t h i s i s e a s i e r s a i d than done, and i n some commodity groups l e s s than 80 p e r c e n t o f the Canadian v a l u e o f . i m p o r t s i s accounted f o r by the v a l u e o f U n i t e d S t a t e s e x p o r t s t o Canada. The g r e a t e s t d e f i c i e n c y i n t h i s t a b l e o c c u r s i n the area f o r which i t was p r i m a r i l y developed. The i d e n t i f i c a t i o n o f modal share o f imports i s i m p o r t a n t t o any a n a l y s i s o f Customs S u f f e r a n c e Warehouse P o l i c y and the l e s s r e l i a b l e the s t a t i s t i c s , the l e s s v a l u a b l e the a n a l y s i s . T h i s d e f i c i e n c y TABLE IV Value of Canadian Imports from the United States  by Mode of Transport; 1964-65, 1974-75 Value Mode of Transport (Percent) ($000) Water Road R a i l A i l 1. Meat and Meat 1964 27450 15 48 37 1 Preparations 1965 20465 1974 79964 * 94 6 1975 117526 2. Grain, Flour Meal 1964 187620 68 11 22 * & Cereal Prepara- 1965 197404 t i o n s 1974 227731 * 99 _ 1975 167547 3. Fresh & Frozen 1964 128913 1 25 74 * Vegetables 1965 140505 1974 447472 * 99 * 1975 517110 4. T e x t i l e s and 1964 62043 * * 100 * Fibres 1965 53363 1974 120646 2 97 * 1975 96718 5. Metal Ores and 1964 90807 70 11 19 * Scraps 1965 94190 1974 82385 35 65 * 1975 754055 6. Coal and Crude 1964 96554 81 7 12 * Petroleum 1965 144214 1974 309068 91 9 1975 582982 7. T e x t i l e F a b r i - 1964 43170 * 71 29 1 cated M a t e r i a l 1965 36032 1974 408169 * 98 * 1975 394431 8. Chemicals 1964 118901 11 17 71 1 1965 138572 1974 1166345 * 98 1975 1161727 9. Petroleum and 1964 42761 49 30 21 * Coal Products 1965 54384 1974 144974 52 47 * 1975 156333 Con't ... TABLE IV (Con't) Value Mode of Transport (Percent) ($000) Water Road R a i l A i r 10. Iron and Ste e l 1964 176695 2 36 62 1 1965 181291 1974 634899 4 96 -1975 455552 11. Non Ferrous 1964 34504 * 82 17 1 Metals 1965 42782 1974 152278 * 97 3 1975 94398 12. Lumber, Veneer 1964 40312 1 23 76 * and Plywood 1965 41494 99 1974 257096 * -1975 284340 13. P l a s t i c Products 1964 92725 * 83 16 1 1965 102490 1974 427874 * 99 1 1975 358572 14. Metal F a b r i - 1964 N/A cated M a t e r i a l s 1965 N/A 1974 421421 * 97 2 1975 457025 15. Non M e t a l l i c 1964' 43207 * 28 71 1 Mineral Basic 1965 46024 Products 1974 221552 * 98 * 1975 239638 16. General Purpose 1964 253325 * 97 3 Machinery 1965 309886 93 1974 628498 * 7 1975 734150 17. Conveying, 1964 N/A Ele v a t i n g , & 1965 N/A 99 Handling Equip- 1974 282403 * 1 ment 1975 294583 3 18. Special Industry 1964 464005 * 96 Machinery 1965 469486 1974 1234595. 1975 1428236 19. A g r i c u l t u r a l 1964 140479 * * Machinery 1965 148417 1974 333270 * * 1975 431826 Con't ... TABLE IV (Con't) Value Mode of Transport (Percent) C$000) . Water Road Rail Air 20. Tractors and 1964 149628 * . * Parts 1965 180597 1974 457493 * * 1975 643636 21. Motor Vehicles 1964 75416 * 81 19 * 1965 181458 1974 2596385 * 99 * 1975 3195166 22. Motor Vehicle 1964 631400 * 2 Parts 1965 813559 1974 3757945 * * 1975 4229409 23. Aircraft and 1964 118437 * 85 * 15 Parts 1965 174091 1974 631183 94 6 1975 652725 24. Communications & 1964 102919 * 81 19 Related Equipment 1965 125222 1974 583033 73 27 1975 542744 25. Heating & Air 1964 N/A Conditioning 1965 N/A Equipment 1974 203299 * 98 1 1975 187719 26. Medical, Optical 1964 99705 * 81 19 S Scientific 1965 120467 Equipment 1974 357383 * 67 33 1975 404604 27. Office Machines 1964 76456 * 87 5 9 and Equipment 1965 86753 1974 475973 78 22 1975 520243 28. Magazines, Peri- 1964 87716 1 98 1 odicals, News- 1965 101518 papers & other 1974 307036 1 96 3 Printed Matter 1975 354131 29. Photographic 1964 52173 * 94 6 Equipment 1965 68768 1974 245774 * 95 5 1975 248895 Con't .. . TABLE IV (Con't) Value ($000) 30. T o t a l Commodity Groups 1964 1965 1974 1975 3397981 4016985 17364100 19825295 8 3 51 94 37 3 3 31. T o t a l Imports 1964 1965 1974 1975 5164285 6044831 21356710 23559280 7 51 38 4 5 * Indicates share of l e s s than 1 percent. Source: - John Junro , o_p_. c i t . , Pages 38-41 S t a t i s t i c s Canada, Catalogue 65-65-006 Imports by Country, 1973-75. 21 i s u n a v o i d a b l e s i n c e no method of: o b t a i n i n g modal share i n the U n i t e d States-Canada t r a n s b o r d e r t r a n s p o r t a t i o n market i s a v a i l a b l e . The U n i t e d S t a t e s Bureau o f the Census p u b l i s h e s data on e x p o r t s t o Canada by water, a i r and o t h e r modes. The problem i s one o f b r e a k i n g the l a n d modes i n t o r a i l and highway shares. Some success can be accomplished toward t h i s end by u s i n g r a i l r o a d f r e i g h t s t a t i s t i c s and U n i t e d S t a t e s I n t e r s t a t e Commerce Commission f r e i g h t commodity c l a s s d ata. The imports which Canada r e c e i v e s from the U n i t e d S t a t e s are much more d i v e r s i f i e d than her e x p o r t s t o her southern neighbour. As a r e s u l t , 29 commodity groups are n e c e s s a r y t o r e p r e s e n t up t o 85 p e r c e n t o f the v a l u e o f Canad-i a n imports from the U n i t e d S t a t e s . Keeping i n mind t h a t changes i n the r e p o r t i n g t e c h n i q u e which o c c u r e d between Munro's 1960's data and the p r e s e n t d a t a , t h i s 85 p e r c e n t f i g u r e i s up from about 66 p e r c e n t f o r Munro's d a t a . T a b l e IV w h i l e not p e r f e c t l y a c c u r a t e does g i v e an i n d i c a t i o n o f the t r a n s p o r t a t i o n p a t t e r n s t h a t have developed over the l a s t decade. For a t l e a s t 17 o f the 2 9 commodity groups, modal s p l i t f o r f o u r modes has been developed. These 17 groups r e p r e s e n t 43 p e r c e n t of the t o t a l commodity groups f o r 1964 and 48 p e r c e n t f o r 1974. In terms o f t o t a l Canadian imports these account f o r 28 p e r c e n t and 40 -percent i n the r e s p e c t i v e y e a r s . The water mode predominated i n f o u r o f the 17 commodity 22 groups f o r which complete data i s a v a i l a b l e i n 1964. These were g e n e r a l l y the bulk commodity groups such as g r a i n , i r o n ore and s c r a p , c o a l and crude petroleum p r o d u c t s . Of these four.groups, o n l y i n the l a t t e r two was the water mode a b l e t o h o l d i t s share o f the market or i n c r e a s e i t by 1974: the former two groups were taken over by the l a n d modes. The net impact o f t h i s s h i f t was to drop the water modes share o f t o t a l im-p o r t s . The a i r mode was not predominant i n any commodity group i n e i t h e r 1964 o r 1974. The c o s t o f s h i p p i n g by a i r , and the p h y s i c a l l i m i t a t i o n s i n v o l v e d , has p r e v e n t e d the a i r mode from h a n d l i n g most d u r a b l e goods w i t h low u n i t . v a l u e s . In 1964, a i r t r a n s p o r t c a r r i e d s m a l l p r o p o r t i o n s o f the imports o f meat and meat p r e p a r a t i o n s , c h e m i c a l s , n o n - f e r r o u s metals ( p r e c i o u s stones and o r e s ) , magazines and o t h e r p r i n t e d : matter and p a r t s f o r a l l types o f machinery. In a d d i t i o n , the a i r mode c a r r i e d 15 p e r c e n t o f a l l a i r c r a f t and p a r t s , 19 p e r c e n t o f a l l commun-i c a t i o n s and r e l a t e d equipment arid m e d i c a l o p t i c a l and s c i e n -t i f i c equipment, 9 p e r c e n t o f a l l o f f i c e machinery and 6 p e r -cent o f a l l p h o t o g r a p h i c equipment imported i n t o Canada. By 1974, the a i r mode had made s i g n i f i c a n t g a i n s i n the market share o f some commodity groups imported i n t o Canada. Economics i n a i r t r a n s p o r t d u r i n g t h i s decade made t h i s mode more a t t r a c -t i v e t o s h i p p e r s a l r e a d y u s i n g i t and opened i t up t o many more commodities. The goods imported by a i r aire o f two b a s i c t y p e s : the p e r i s h a b l e goods such as f r e s h meat, f r u i t , vege-t a b l e s and f l o w e r s ; and, h i g h v a l u e goods such as e l e c t r o n i c 23 and communications equipment. The a i r mode i n c r e a s e d i t s market share i n the f o l l o w i n g commodity groups: meat and meat p r e p a r a t i o n s from 1 t o .6 p e r c e n t ; General Purpose Machinery from 3 to 7 p e r c e n t ; Communications and R e l a t e d Equipment from 19 t o 27 p e r c e n t : M e d i c a l , O p t i c a l and S c i e n t i f i c Equipment from 19 t o 33 p e r c e n t ; and, O f f i c e Machines and Equipment, from 9 t o 22 p e r c e n t . While these i n c r e a s e s seem s i g n i f i c a n t , i n terms o f t o t a l imports from the U n i t e d S t a t e s , the a i r mode has managed t o i n c r e a s e i t s t o t a l share o f the t r a n s p o r t a t i o n market by o n l y 1 p e r c e n t from 1964 to 1974; from 4 to 5 per-cent. (c) Movement o f Goods i n t o Canada by Road Durin g the decade 1965 t o 1975, t h e r e was a f o u r - f o l d i n c r e a s e i n the v a l u e o f Canadian imports from the U n i t e d S t a t e s . During t h i s same p e r i o d t h e r e was a v e r y n o t i c e a b l e s h i f t i n the market share o f t h i s t r a n s b o r d e r t r a f f i c from r a i l and water t o the highway mode. The expansion o f the t r a n s b o r d e r t r u c k i n g i n d u s t r y and the problems i t has c r e a t e d f o r Revenue Canada, Customs and E x c i s e i n m a i n t a i n i n g c o n t r o l our imported goods i s the s u b j e c t o f t h i s study but b e f o r e t u r n i n g to t h i s t o p i c the e x t e n t o f the t r u c k i n g i n d u s t r y p a r t i c i p a t i o n w i l l be c o n s i d e r e d i n more s p e c i f i c terms. I t would be d i f f i c u l t to determine the number o f motor c a r r i e r f i r m s i n v o l v e d i n t r a n s b o r d e r goods movements. Although a l l c a r r i e r s o p e r a t i n g a c r o s s t h e . i n t e r n a t i o n a l 24 boundary are l i c e n c e d by the v a r i o u s r e g u l a t o r y a g e n c i e s i n the two c o u n t r i e s , these are o n l y a p o r t i o n o f the f i r m s i n v o l v e d . Many o t h e r f i r m s , without through o p e r a t i n g p e r m i t s , have in t e r c h a n g e agreements w i t h c a r r i e r s a c r o s s the border which f a c i l i t a t e the movement o f goods and these f i r m s are not e a s i l y i d e n t i f i e d . While i d e n t i f i c a t i o n o f i n d i v i d u a l f i r m s i s d i f f i c u l t the number o f c r o s s i n g s made i n t o Canada from the U n i t e d S t a t e s by these f i r m s i s a v a i l a b l e . T a b l e V i n d i c a t e s the volume o f commercial t r u c k t r a f f i c between the U n i t e d S t a t e s and Canada i n 1975, i n terms o f the number o f c r o s s i n g s i n t o Canada. The data i s g i v e n by p r o v i n c e f o r the 12 0 p o r t s o f e n t r y a l o n g the i n t e r n a t i o n a l boundary. The l o c a t i o n o f major flows o f t r u c k t r a f f i c t o Canada are shown i n E x h i b i t 1. The t o t a l o f 1.9 m i l l i o n c r o s s i n g s i n c l u d e s a l l commercial v e h i c l e t r a f f i c , whether f o r - h i r e , c o n t r a c t or p r i v a t e c a r r i e r s and r e g a r d l e s s o f whether the v e h i c l e i s loaded o r empty. The volume o f c r o s s i n g s by p r o v i n c e o f f e r s few s u r -p r i s e s beyond what might be expected. I t was i n d i c a t e d i n T a b l e I I t h a t O n t a r i o , Quebec and B r i t i s h Columbia ranked i n t h a t o r d e r i n terms o f the v a l u e o f Canadian imports each r e c e i v e d from the U n i t e d S t a t e s . Based on t h i s p a t t e r n i t i s not unexpected t h a t the volume o f commercial t r u c k t r a f f i c from the U n i t e d S t a t e s to Canada would f o l l o w the same p a t t e r n - -and indeed i t does. O n t a r i o p o r t s of e n t r y l e a d a l l p r o v i n c e s i n the number o f c r o s s i n g s r e p o r t s , a t 57 p e r c e n t ; Quebec 25 TABLE V Commercial Truck T r a f f i c Between the U n i t e d S t a t e s and Canada 1975 Canadian R e g i s t e r e d V e h i c l e s U n i t e d S t a t e s R e g i s t e r e d V e h i c l e s TOTAL Nova S c o t i a * 1,455 1,870 3,325 New Brunswick 110,093 63,791 178,884 Quebec 167,606 154,733 322,339 O n t a r i o 577,568 496,880 1, 074,448 Manitoba 40,377 49,290 89,667 Saskatchewan 20,300 15,489 35,789 A l b e r t a 20,272 35,656 55,928 B r i t i s h Columbia 67,119 79,032 146,151 TOTAL 1,004,790 896,741 1, 901,531 * A r r i v i n g by barge a t Yarmouth, Nova S c o t i a . Source: S t a t i s t i c s Canada Catalogue 66-001 T r a f f i c Between The U n i t e d S t a t e s  and Canada, 1975 T a b l e 15 EXHIBIT l i Major P o r t s of Entry to Canada from United States cr, f o l l o w s w i t h 17 p e r c e n t . New Brusnwick ranks t h i r d i n the number o f c r o s s i n g s w i t h nine p e r c e n t : o f the f o u r A t l a n t i c p r o v i n c e s o n l y New Brunswick has a common bor d e r w i t h the U n i t e d S t a t e s so t h a t a l l t r u c k t r a f f i c d e s t i n e d f o r thes e p r o v i n c e s must e n t e r Canada through t h i s p r o v i n c e . Even w i t h t h i s under c o n s i d e r a t i o n , i t i s i n t e r e s t i n g t o note t h a t of a l l the A t l a n t i c r e g i o n accounts f o r l e s s than two p e r c e n t o f the v a l u e o f a l l Canadian imports from the U n i t e d S t a t e s y e t r e g i s t e r s n i n e p e r c e n t o f commercial v e h i c l e c r o s s i n g s . T h i s i n d i c a t e s t h a t , r e l a t i v e t o p a t t e r n s i n o t h e r p r o v i n c e s , the modal share f o r motor c a r r i e r s i s h i g h e r i n the A t l a n t i c r e g i o n . B r i t i s h Columbia r e c o r d e d seven p e r c e n t o f the c r o s s -i n g s f o l l o w e d by Manitoba ( f i v e p e r c e n t ) , A l b e r t a (three per-cent) and Saskatchewan (two p e r c e n t ) . The d i v i s i o n o f t h i s inbound, t r a n s b o r d e r commercial motor v e h i c l e t r a f f i c between v e h i c l e s r e g i s t e r e d i n Canada and the U n i t e d S t a t e s i s a l s o i n c l u d e d i n Table V. O v e r a l l , C a n a d i a n - r e g i s t e r e d equipment was i n v o l v e d i n 53 pe r c e n t o f a l l c r o s s i n g s d u r i n g 1975 and U n i t e d S t a t e s — r e g i s t e r e d equipment i n 47 p e r c e n t . O n t a r i o , Quebec and New Brunswick a l l r e p o r t e d t h a t the m a j o r i t y o f c r o s s i n g s from the U n i t e d . S t a t e s through p o r t s o f e n t r y i n t o t h e i r p r o v i n c e s were made by C a n a d i a n - r e g i s t e r e d v e h i c l e s ; Saskatchewan a l s o showed a m a j o r i t y o f C a n a d i a n - r e g i s t e r e d equipment. The o t h e r f o u r p r o v i n c e s showed more c r o s s i n g s by U n i t e d S t a t e s - r e g i s t e r e d v e h i c l e s . The n a t i o n a l i s t i c d i v i s i o n o f t r a n s b o r d e r t r u c k t r a f f i c i s not e s p e c i a l l y important f o r the purposes o f t h i s 28 study. The data i s i n t r o d u c e d to show t h a t c o m p l a i n t s by Canadian d o m i c i l e d motor c a r r i e r s o f d i s c r i m i n a t i o n a g a i n s t them by the I n t e r s t a t e Commerce Commission g e n e r a l l y are unfounded. As s t a t e d e a r l i e r , the I.C.C. seems t o d i s c r i m i n a t e a g a i n s t a l l new a p p l i c a t i o n s r e g a r d l e s s o f n a t i o n a l i t y . Fur- ; t h e r , i t s h o u l d be p o i n t e d out t h a t C a n a d i a n - r e g i s t e r e d v e h i c l e s i n c l u d e those owned by U n i t e d S t a t e s motor c a r r i e r s through Canadian s u b s i d i a r i e s and i n t h a t r e s p e c t not a l l Canadian t r u c k s are t r u l y Canadian. T h i s i s the e x t e n t o f c u r r e n t i n f o r m a t i o n about t r a n s -border t r u c k t r a f f i c p u b l i s h e d on a r e g u l a r b a s i s . In attempt to g a i n f u r t h e r p e r s p e c t i v e s o f these movements, the M i n i s t r y o f T r a n s p o r t undertook, i n 1974, a p i l o t p r o j e c t t o i n v e s t i g a t e t r a n s b o r d e r t r u c k movements. The I n t e r n a t i o n a l Truck T r a f f i c 4 Survey was undertaken t o determine i n f o r m a t i o n about the l o c a t i o n , d i r e c t i o n , n ature and magnitude o f t r a n s b o r d e r t r a f f i c f l o w s . The r e s u l t s from t h i s survey when a p p l i e d to the i n f o r m a t i o n i n T a b l e V widens c o n s i d e r a b l y the knowledge o f t h i s s u b j e c t . There i s one drawback t h a t use o f the I n t e r n a t i o n a l  Truck T r a f f i c Survey r e s u l t s e n t a i l s . The survey was an exper-iment des i g n e d t o determine the f e a s i b i l i t y o f an ongoing survey o f t h i s t y pe. The methodology was u n t r i e d , and a l t h o u g h some problems were encountered, the r e s u l t s g i v e an i n d i c a t i o n o f the magnitude o f t r a n s b o r d e r t r u c k t r a f f i c . The study was conducted over one week o n l y , d u r i n g March 1974, and o n l y a t 29 s e l e c t e d border c r o s s i n g s . The r e s u l t s a r e , t h e r e f o r e , o n l y a 'snap-shot' o f the t o t a l t r a f f i c e n t e r i n g Canada a n n u a l l y . There i s a c e r t a i n danger i n u s i n g such r e s u l t s on d a t a cov-e r i n g a much wider time h o r i z o n as i s done here, but i t i s done w i t h the u n d e r s t a n d i n g t h a t the f i n a l r e s u l t does not n e c e s s a r i l y r e p r e s e n t an a c c u r a t e p i c t u r e o f t r a n s b o r d e r t r u c k t r a f f i c . Warned o f the problems i n t h i s r e g a r d , and h a v i n g a c c e p t e d the g e n e r a l i t y which the r e s u l t s imply, c o n s i d e r a t i o n t u r n s to the t r a n s b o r d e r t r u c k movements i n t o Canada as a whole and i n t o each o f the r e g i o n s o f the c o u n t r y . 1. T r a n s b o r d e r Truck T r a f f i c : U n i t e d S t a t e s t o Canada The 1974 I n t e r n a t i o n a l Truck T r a f f i c Survey i n d i c a t e s t h a t , d u r i n g the one week survey p e r i o d , 56 p e r c e n t o f a l l t r u c k s c r o s s i n g from the U n i t e d S t a t e s to Canada were Canadian-r e g i s t e r e d v e h i c l e s . T h i s s t a t i s t i c does not d i f f e r s i g n i f i -c a n t l y from the 1975 s t a t i s t i c s p r e s e n t e d i n T a b l e V, which shows t h a t 53 p e r c e n t o f the c r o s s i n g s were by Canadian v e h i -c l e s . Of a l l the v e h i c l e s e n t e r i n g Canada a t the s e l e c t e d c r o s s i n g s , 16.5 p e r c e n t were empty and l e s s than o n e - h a l f o f t h e s e were Canadian.. A p p l i c a t i o n o f these s t a t i s t i c s t o the i n f o r m a t i o n p r e s e n t e d i n T a b l e V i n d i c a t e t h a t t h e r e were 1,004,8 00 c r o s s i n g s by Canadian v e h i c l e s , and t h a t 144,325 o f these were c r o s s i n g s by empty Canadian v e h i c l e s . The remain-der o f the c r o s s i n g s were, o f course, made by U n i t e d States-^ r e g i s t e r e d equipment. A l s o o f i n t e r e s t , i s t h a t o f a l l the c r o s s i n g s i n t o Canada from the U n i t e d S t a t e s , 17 p e r c e n t , o r 30 323,250 c r o s s i n g s i n v o l v e d an i n t e r c h a n g e o f equipment between U n i t e d S t a t e s and Canadian c a r r i e r s a t the i n t e r n a t i o n a l boun-dary. T a b l e VI g i v e s an i n d i c a t i o n o f the commodities c a r r i e d i n t o Canada by a l l motor c a r r i e r s as r e p o r t e d i n the 1974 t r u c k survey. The t a b l e a l s o shows t h i s data as a p p l i e d to the 1975 s t a t i s t i c s as p r e s e n t e d i n Table V. General f r e i g h t h e l d the l a r g e s t share of a l l c r o s s i n g s i n t o Canada f o l l o w e d by auto p a r t s , p e r i s h a b l e f o o d s t u f f s , auto and t r u c k c h a s s i s o r f i n i s h e d v e h i c l e s , metals and metal p r o d u c t s and f o r e s t p r o d u c t s . Canadian t r u c k s accounted f o r more than one h a l f o f a l l c r o s s i n g s i n 12 o f 17 commodity groups and l e s s than one h a l f o f the empty c r o s s i n g s . Outbound c r o s s i n g s f o r each of the commodity groups are a l s o shown i n T a b l e VI. For the one week p e r i o d i n March 1974, auto p a r t s h e l d the l a r g e s t share o f a l l e x p o r t commod-i t y groups c a r r i e d by motor v e h i c l e s a t 13 p e r c e n t . T h i s group i s f o l l o w e d by f o r e s t p r o d u c t s , w i t h 11 p e r c e n t , g e n e r a l f r e i g h t accounted f o r 10 p e r c e n t . There were a g r e a t e r per-centage o f empty t r i p s from Canada to the U n i t e d S t a t e s than i n the n o r t h e r l y d i r e c t i o n f i v i n g some i n d i c a t i o n o f the im-balance between the two c o u n t r i e s . Interchanges between Canadian c a r r i e r s and U n i t e d S t a t e s c a r r i e r s c h a r a c t e r i z e d . 10 pe r c e n t of a l l southbound t r u c k c r o s s i n g s , t h i s i s a r e s u l t o f the absence of the s u f f i c i e n t o p e r a t i n g a u t h o r i t i e s b e i n g g r a n t e d between the two c o u n t r i e s . 31 TABLE VI Transborder C r o s s i n g s by Major Commodity Groups 1975 COMMODITY UNITED STATES TO CANADA % o f Tru c k s „ _ „ • No. o f C a r r y i n g „ Commodity C r o s s i n g s CANADA TO UNITED STATES General F r e i g h t 16.6 315,653 9.6 Non-Perishable Food-s t u f f s 1.1 20,916 1.4 P e r i s h a b l e F o o d s t u f f s 7.6 144,516 4.2 Heavy Machinery . 3.7 70,356 3.4 Metals & Metal Products 6.4 121,697 7.8 Petroleum Products 2.6 316,414 7.1 Bulk L i q u i d s & Chemicals 1.9 36,129 2.5 Dry Bulk Chemicals & M i n e r a l s 2.0 38,030 6.0 F o r e s t P r o d u c t s "6.1 115,993 10.9 L i v e s t o c k 2.3 43,735 0.8 C o n s t r u c t i o n M a t e r i a l 2.1 39,932 2.8 Seed, Feed & Feed Products 2.3 43,735 1.4 T r a i l e r s & Mo b i l e Homes 0.6 11,409 -Household Goods 0.7 13,310 0.7 Auto & Truck C h a s s i s 7.5 142,614 3.4 Auto P a r t s 16.0 315,653 12. 8 Other 3.9 74,159 3.6 Empty 16.5 313,752 21.3 Source: T r a n s p o r t Canada, I n t e r n a t i o n a l Truck T r a f f i c  Survey. Ottawa, ]974. 32 2. T r a n s b o r d e r Truck C r o s s i n g s : U n i t e d S t a t e s t o A t l a n t i c P r o v i n c e s Truck c r o s s i n g s i n t o the A t l a n t i c p r o v i n c e s , mainly through the p r o v i n c e o f New Brunswick, r e p r e s e n t e d nine per-cent o f a l l c r o s s i n g s i n t o Canada i n 1975, or 173,880 c r o s s i n g s . Of these, 63 p e r c e n t were made by C a n a d i a n - r e g i s t e r e d v e h i c l e s . T a b l e V I I shows the p r o p o r t i o n o f c r o s s i n g s made by the major commodity groups b e i n g imported i n t o t h i s a r e a as w e l l as the number o f t r i p s these r e p r e s e n t . Canadian t r u c k s c a r r i e d 71 per c e n t o f a l l the f o r e s t p r o d u c t s b e i n g c a r r i e d i n t o the A t l a n t i c p r o v i n c e s , but o n l y 35 p e r c e n t o f the p e r i s h a b l e f o o d s t u f f s and 30 pe r c e n t o f the petroleum p r o d u c t s . U n i t e d S t a t e s c a r r i e r s h e l d v i r t u a l monopolies i n the t r a n s p o r t o f o t h e r goods. Major e x p o r t commodities from the A t l a n t i c p r o v i n c e s t o the U n i t e d S t a t e s i n c l u d e d p e r i s h a b l e f o o d s t u f f s a t 50 per-c e n t o f a l l c r o s s i n g s , b u l k l i q u i d s and c h e m i c a l s , 16 p e r c e n t , and f o r e s t p r o d u c t s , 13 p e r c e n t . I t should be p o i n t e d out t h a t seven p e r c e n t o f the exp o r t t r i p s from the A t l a n t i c prov-i n c e s to the U n i t e d S t a t e s were d e s t i n e d f o r p o i n t s i n o t h e r p r o v i n c e s i n Canada, m a i n l y O n t a r i o and Quebec, and were o n l y i n t r a n s i t through the U n i t e d S t a t e s . A l s o o f i n t e r e s t i s the f a c t t h a t empty v e h i c l e s r e p r e s e n t e d o n l y t h r e e p e r c e n t o f a l l v e h i c l e s from the A t l a n t i c p r o v i n c e s as opposed t o 35 pe r c e n t on the northbound t r i p . T h i s may r e p r e s e n t the f a c t t h a t t h e r e i s a g r e a t e r use of s p e c i a l i z e d equipment r e q u i r e d i n 33 TABLE V I I Tr a n s b o r d e r C r o s s i n g s by Major Commodity Groups: U n i t e d S t a t e s t o A t l a n t i c P r o v i n c e s , 1975 % o f Trucks C a r r y i n g Commodity Number of C r o s s i n g s F o r e s t P r o d u c t s 19.8 34,430 P e r i s h a b l e F o o d s t u f f s 13.2 22,950 General F r e i g h t 10.1 17,560 Metals and M e t a l Products 5.4 9,390 Heavy Machinery 4.9 8,520 Petroleum P r o d u c t s 3.9 6,780 Other 7.7 13,390 Empty 35.0 60,860 Source: T r a n s p o r t Canada, I n t e r n a t i o n a l ' Truck T r a f f i c  Survey. Ottawa, ]974 34 s h i p p i n g e x p o r t commodities from the area,than: f o r the import commodity groups. 3. T r a n s b o r d e r Truck C r o s s i n g s : U n i t e d S t a t e s to Quebec Truck c r o s s i n g s i n t o Quebec from the U n i t e d S t a t e s r e p r e s e n t 17 p e r c e n t o f a l l c r o s s i n g s i n t o Canada. As Canada's second l a r g e s t r e c e i v e r o f imported goods by v a l u e , i t seems n a t u r a l t h a t t h i s should be the case. Canadian p a r t i c i p a t i o n i n t h i s market was 52 p e r c e n t i n the c a l e n d a r year 197 5 account-i n g f o r 167,600 o f 322,330 t r i p s . T a b l e V I I I shows the p r o p o r t i o n o f inbound t r i p s accounted f o r by the major import commodity groups, as w e l l as the number o f t r i p s r e p r e s e n t e d . General F r e i g h t , w i t h 26 p e r c e n t o f a l l r e p o r t e d c r o s s i n g s , l e a d s the import commodity groups f o l l o w e d by f o r e s t p r o d u c t s a t 12 p e r c e n t and p e r i s h a b l e f o o d s t u f f s a t 12 p e r c e n t . Empty t r i p s r e p r e s e n t 23 p e r c e n t o f a l l inbound t r i p s t o Quebec. Outbound t r i p s from Quebec to the U n i t e d S t a t e s were 30 p e r c e n t accounted f o r by f o r e s t p r o d u c t s f o l l o w e d by g e n e r a l f r e i g h t , a t 10 p e r c e n t and auto-mobile p a r t s and c h a s s i s combined, a t 12 p e r c e n t . Empty t r u c k c r o s s i n g s i n t o the U n i t e d S t a t e s accounted f o r 16 p e r c e n t o f a l l c r o s s i n g s , i n d i c a t i n g t h a t some s p e c i a l i z e d equipment i s r e q u i r e d f o r the commodity groups b e i n g imported i n t o the p r o v i n c e o r perhaps t h a t many t r i p s i n t o Quebec are a u t h o r i z e d on a s i n g l e - t r i p a u t h o r i t y by Revenue.Canada and are not a u t h o r i z e d t o c a r r y goods on the r e t u r n t r i p . 35 TABLE V I I I Transborder C r o s s i n g s by Major Commodity Groups: U n i t e d S t a t e s to : Quebec, 1975 % o f Trucks C a r r y i n g Commodity. . Number of C r o s s i n g s General F r e i g h t F o r e s t Products P e r i s h a b l e F o o d s t u f f s M e t a l s and Metal Products Auto P a r t s Heavy Machinery C o n s t r u c t i o n M a t e r i a l s 25.8 12.4 11.9 3.6 3.3 3.0 2.6 83,160 3 9 , 97 0 38,360 11,604 10,640 9,670 8,380 Empty 23.3 75,100 Source: T r a n s p o r t Canada, I n t e r n a t i o n a l Truck T r a f f i c  Survey. Ottawa, 197 4. 36 4. T r a n s b o r d e r Truck C r o s s i n g s : U n i t e d S t a t e s to O n t a r i o T a b l e IX shows the import i n f o r m a t i o n f o r t r u c k c r o s s -i n g s by major commodity groups from the U n i t e d S t a t e s t o O n t a r i o . Of t h e s e t r i p s i n 1975, Canadian c a r r i e r s account f o r 57 p e r c e n t o r 577,560 o f 1.07 m i l l i o n commercial t r u c k c r o s s i n g s . The most f r e q u e n t l y c a r r i e d commodities were auto p a r t s (23 p e r c e n t o f a l l c r o s s i n g ) , g e n e r a l f r e i g h t (16 per-cent) , automotive c h a s s i s and f i n i s h e d v e h i c l e s (11 p e r c e n t ) , metals ( e i g h t p e r c e n t ) , and p e r i s h a b l e f o o d s t u f f s ( f i v e p e r-c n e t ) . The domination o f the automotive commodity c a t e g o r i e s (33 p e r c e n t o f the market) r e f l e c t s the f a c t t h a t the major automakers o f both c o u n t r i e s are l o c a t e d i n the D e t r o i t , Michigan-Toronto, O n t a r i o area and i s the r e s u l t of the exten-s i v e 'Auto Pact* t r a d e agreement i n e x i s t e n c e between the Canadian and U n i t e d S t a t e s governments. Empty t r u c k s c r o s s i n g i n t o O n t a r i o were 12 p e r c e n t of a l l the t r u c k c r o s s i n g s i n t h i s d i r e c t i o n . The l i s t o f commodities outbound from O n t a r i o t o the U n i t e d S t a t e s i n c l u d e s auto p a r t s a t 28 p e r c e n t , g e n e r a l f r e i g h t , a t 11 p e r c e n t , metals and metal p r o d u c t s , a t 10 per-cent, and petroleum and petroleum p r o d u c t s a t n i n e p e r c e n t . Other and v a r i e d export commodities i n c l u d e dry b u l k chemicals and m i n e r a l s , f o r e s t p r o d u c t s , p e r i s h a b l e f o o d s t u f f s , heavy machinery, c o n s t r u c t i o n m a t e r i a l s and b u l k l i q u i d s and chemi-c a l s . O n t a r i o e x p o r t s r e p r e s e n t almost the f u l l gamut o f Canadian e x p o r t s to the U n i t e d S t a t e s . Empty t r u c k s accounted TABLE IX Transborder C r o s s i n g s by Major Commodity Groups: 1975 U n i t e d S t a t e s t o O n t a r i o , o f Trucks Number o f C a r r y i n g Commodity T r i p s Auto P a r t s 23 247,120 General F r e i g h t 16 171,910 Auto C h a s s i s and F i n i s h e d V e h i c l e s 11 118,190 Meta l s and M e t a l Products 8 85,950 P e r i s h a b l e F o o d s t u f f s , 5 53,720 Empty 12 133,230 Source: T r a n s p o r t Canada, I n t e r n a t i o n a 1 Truck T r a f f i c Survey. Ottawa, ]974. f o r 18 p e r c e n t o f a l l southbound t r i p s . 38 5. T r a n s b o r d e r Truck C r o s s i n g s : U n i t e d S t a t e s to P r a i r i e P r o v i n c e s Goods movements by commercial motor v e h i c l e s t o the P r a i r i e P r o v i n c e s o f Canada r e f l e c t the nature o f t h i s area's economy. Alt h o u g h each o f these t h r e e p r o v i n c e s do not have e x a c t l y t h i s same economic base, a g r i c u l t u r e i s the common f a c t o r which makes i t p o s s i b l e t o c o n s i d e r them as one u n i t . C r o s s i n g s from the U n i t e d S t a t e s to the P r a i r i e P r o v i n c e s by commercial v e h i c l e s account f o r .10 p e r c e n t o f a l l c r o s s i n g s (Manitoba, f i v e p e r c e n t ; Saskatchewan, two p e r c e n t ; A l b e r t a , t h r e e percent) w i t h a t o t a l o f 181,380 c r o s s i n g s i n 1975. The p r o p o r t i o n o f t h e s e c r o s s i n g s which i n v o l v e Canadian c a r r i e r s d i f f e r i n each p r o v i n c e : Manitoba c r o s s i n g s were 45 p e r c e n t by Canadian motor v e h i c l e s ; Saskatchewan c r o s s i n g s were 56 p e r c e n t Canadian; and, A l b e r t a c r o s s i n g s were 36 p e r c e n t Canadian. Tab l e X shows the p r o p o r t i o n o f c r o s s i n g s i n t o the P r a i r i e P r o v i n c e s by motor v e h i c l e s c a r r y i n g the major import commodity groups. Seed, f e e d and feed p r o d u c t s r e p r e s e n t e d a l a r g e p o r t i o n o f the imported commodities i n Manitoba (21 per-cent) and Saskatchewan (12 p e r c e n t ) , but was t h i r d i n import-ance i n A l b e r t a ( s i x p e r c e n t ) . P e r i s h a b l e f o o d s t u f f s a l s o were among the more p o p u l a r imports i n t o the P r a i r i e P r o v i n c e s . Heavy equipment was imported by a l l t h r e e p r o v i n c e s w i t h the 39 TABLE X T r a n s b o r d e r C r o s s i n g s by Major Commodity Groups: U n i t e d S t a t e s t o P r a i r i e P r o v i n c e s / 1975 % of Trucks C a r r y i n g Commodity Manitoba Saskatchewan A l b e r t a . Seed, Feed and Feed p r o d u c t s 21 12 6 P e r i s h a b l e F o o d s t u f f s 11 8 15 Heavy Machinery 10 13 16 General F r e i g h t 7 7 4 L i v e s t o c k 6 — Empty 29 50 28 TOTAL TRIPS 89660 35790 55930 Source: T r a n s p o r t Canada, I n t e r n a t i o n a l Truck T r a f f i c Survey. Ottawa, ]974 40 h i g h e s t p r o p o r t i o n going t o A l b e r t a . Much o f t h i s equipment i s d e s t i n e d f o r the a g r i c u l t u r a l i n d u s t r y w h i l e some goes to the potash i n d u s t r y i n Saskatchewan and the petroleum i n -d u s t r y i n A l b e r t a . The low i n c i d e n c e o f g e n e r a l f r e i g h t mov-in g i n t o t h e s e p r o v i n c e s , as compared w i t h O n t a r i o , Quebec and B r i t i s h Columbia, r e f l e c t s the f a c t t h a t t h e r e i s l e s s i n d u s t r i a l i z a t i o n i n t h i s a r e a . Empty t r u c k t r i p s i n t o the P r a i r i e P r o v i n c e s were a h i g h e r p r o p o r t i o n o f a l l t r i p s than anywhere e l s e i n Canada d u r i n g the I n t e r n a t i o n a l Truck T r a f f i c  Survey, w i t h Manitoba r e g i s t e r i n g 30 p e r c e n t o f i t s t r i p s as b e i n g empty, Saskatchewan r e g i s t e r i n g 50 p e r c e n t empty t r i p s and A l b e r t a , 27 p e r c e n t . E x p o r t s from the P r a i r i e P r o v i n c e s to the U n i t e d S t a t e s a l s o r e f l e c t the nature o f the a r e a ' s economy. Dry Bulk Chem-i c a l s and M i n e r a l s i n c l u d i n g f e r t i l i z e r s , p otash and petroleum based chemical r e p r e s e n t e d l a r g e p o r t i o n s o f the e x p o r t s by t r u c k from a l l o f t h e s e p r o v i n c e s : Manitoba, s i x p e r c e n t ; Saskatchewan, 23 p e r c e n t ; and, A l b e r t a , 10 p e r c e n t . Other exported commodities i n c l u d e petroleum p r o d u c t s , l i v e s t o c k , p e r i s h a b l e f o o d s t u f f s and seed, feed and feed p r o d u c t s . Empty t r i p s out o f t h e s e p r o v i n c e s were: Manitoba, 46 p e r c e n t ; Sask-atchewan, 25 p e r c e n t ; and A l b e r t a , 39 p e r c e n t . 6. Transborder Truck C r o s s i n g s : U n i t e d S t a t e s to B r i t i s h Columbia Truck c r o s s i n g s i n t o B r i t i s h Columbia d u r i n g 1975 numbered 146,150, a seven p e r c e n t share o f the t o t a l Canadian c r o s s i n g s . S l i g h t l y l e s s than one h a l f (46 percent) o f the c r o s s i n g s were by Canadian r e g i s t e r e d v e h i c l e s i n 1975, t h i s accounted f o r by the domination o f the f o r - h i r e market by U n i t e d S t a t e s c a r r i e r s . T a b l e XI shows the c r o s s i n g s by majo import commodity groups as a p r o p o r t i o n o f a l l t r i p s i n t o the p r o v i n c e from the U n i t e d S t a t e s . F o r e s t p r o d u c t s c a r r i e d by commercial v e h i c l e s accounted f o r 19 p e r c e n t o f the c r o s s i n g s these b e i n g mostly f i n i s h e d goods such as plywood made from B r i t i s h Columbia t r e e s a t U n i t e d S t a t e s p l a n t s . P e r i s h a b l e f o o d s t u f f s accounted f o r 15 p e r c e n t o f the c r o s s i n g s f o l l o w e d by g e n e r a l f r e i g h t , 13 p e r c e n t ; metal and metal p r o d u c t s , s i x pe r c e n t ; heavy machinery, f i v e p e r c e n t ; and, c o n s t r u c t i o n m a t e r i a l s , f o u r p e r c e n t . Empty t r u c k t r i p s i n t o B.C. were 15 p e r c e n t o f the t o t a l . B r i t i s h Columbia e x p o r t s t o the U n i t e d S t a t e s were predominated by f o r e s t p r o d u c t s i n so f a r as movements by commercial t r u c k s was concerned, a c c o u n t i n g f o r 19 p e r c e n t o f a l l t r u c k c r o s s i n g s . T h i s commodity group i s f o l l o w e d by c o n s t r u c t i o n m a t e r i a l s , metals and metal p r o -d u c t s , and p e r i s h a b l e f o o d s t u f f s , a l l w i t h f i v e p e r c e n t o f the market. Empty t r i p s accounted f o r 40 p e r c e n t o f a l l B.C. U n i t e d S t a t e s c r o s s i n g s . The above a n a l y s i s g i v e s a guarded i n d i c a t i o n o f the t r a n s b o r d e r commercial motor v e h i c l e market f o r 1975 by a l l types o f c a r r i e r s . I t i s p o s s i b l e to say something about the share o f c r o s s i n g s made by the t h r e e g e n e r a l c l a s s e s o f TABLE XI T r a n s b o r d e r C r o s s i n g s by Major Commodity Groups: U n i t e d S t a t e s to B r i t i s h Columbia, 1975 % of Trucks C a r r y i n g Commodity Number o f T r i p s F o r e s t P r o d u c t s 19 27,770 P e r i s h a b l e F o o d s t u f f s 15 21,920 Ge n e r a l F r e i g h t 13 19,000 . M e t a l & Metal Products 6 8,77 0 Heavy Machinery 5 7,300 C o n s t r u c t i o n M a t e r i a l s 5 5,850 Other 23 33,614 Empty 15 21,920 Source: T r a n s p o r t Canada, I n t e r n a t i o n a l Truck  T r a f f i c Survey. Ottawa, ]974. 43 motor c a r r i e r s , namely f o r - h i r e , p r i v a t e and household goods movers. As w i t h the above i n f o r m a t i o n , i t s h o u l d be kept i n mind t h a t the d i s t r i b u t i o n i s based on l i m i t e d i n p u t d a t a , and, t h e r e f o r e , i s o n l y a g e n e r a l r e p r e s e n t a t i o n . The I n t e r n a t i o n a l Truck T r a f f i c Survey i n d i c a t e s t h a t of a l l c r o s s i n g s , i n both d i r e c t i o n s , a c r o s s the i n t e r n a t i o n a l boundary, one t h i r d were made by p r i v a t e r a t h e r than f o r - h i r e o p e r a t o r s and t h a t l e s s than one pe r c e n t were made by house-h o l d goods movers. A p p l i e d t o the 1975 c r o s s i n g data i n Table V, p r i v a t e c a r r i e r s account f o r app r o x i m a t e l y 650,000 o f - t h e inbound t r u c k c r o s s i n g s , w h i l e f o r - h i r e v e h i c l e s made up the bulk o f the remaining 1,300,000. Empty t r i p s by p r i v a t e c a r r i e r s and by f o r - h i r e c a r r i e r s were almost equal w i t h 20 pe r c e n t o f the former b e i n g empty and ap p r o x i m a t e l y 22 p e r c e n t of the l a t t e r . T h i s r e s u l t g i v e s l i t t l e support t o the assumption t h a t p r i v a t e c a r r i e r s have a g r e a t e r frequency o f empty runs than f o r - h i r e c a r r i e r s but says n o t h i n g o f the ex t e n t to which 'non-empty' t r u c k c a p a c i t y i s u t i l i z e d . To t h i s p o i n t , t h e r e has been l i t t l e d i s c u s s i o n o f the problems which the t r a n s b o r d e r motor c a r r i e r i n d u s t r y , and indeed a l l modes, encounter w i t h r e g a r d t o c r o s s i n g the i n t e r n a t i o n a l boundary between Canada and the U n i t e d S t a t e s . Both c o u n t r i e s have e r e c t e d b a r r i e r s t o the f r e e flow o f goods between -them i n the form o f Customs laws and r e g u l a t i o n s which must be adhered t o by c o n s i g n o r / c o n s i g n e e s and c a r r i e r i n o r d e r t o move goods from one coun t r y t o the o t h e r . I t might 44 be expected t h a t t h e r e would be some c o - o r d i n a t i o n i n the e s t a b l i s h m e n t o f customs r e g u l a t i o n s between the two c o u n t r i e s but, t o date, l i t t l e has been i n ev i d e n c e . The prime concern here are the Canadian r e g u l a t i o n s and procedures r e q u i r e d o f the commercial motor c a r r i e r i n d u s -t r y i n t r a n s p o r t i n g goods i n t o Canada from the U n i t e d S t a t e s . Every t r u c k l o a d o f goods e n t e r i n g Canada from the south must b e . c l e a r e d f o r e n t r y by Canada Customs and E x c i s e . To f a c i l -i t a t e t h i s requirement, Customs and E x c i s e has e s t a b l i s h e d a system o f c l e a r a n c e warehouses a t which a l l goods e n t e r i n g , Canada by motor c a r r i e r must be p r e s e n t e d f o r Customs a p p r a i s a l . These warehouses, which are c o n s i d e r e d more f u l l y i n c h a p t e r t h r e e , are o f two t y p e s : the f r o n t i e r examining warehouse, l o c a t e d a t the f r o n t i e r b o rder p o i n t ; and, the i n l a n d highway, s u f f e r a n c e warehouse, l o c a t e d a t Customs p o r t s i n l a n d from the i n t e r n a t i o n a l boundary a c r o s s Canada. The g e n e r a l ' s u f f e r -ance' procedure f o r having goods c l e a r e d a t these f a c i l i t i e s i s the t o p i c o f chapter two. 45 FOOTNOTES - CHAPTER 1 1 John M. Munro, Trade L i b e r a l i z a t i o n and T r a n s p o r t a t i o n i n I n t e r n a t i o n a l Trade. P u b l i s h e d f o r the P r i v a t e P l a n n i n g A s s o c i a t i o n o f Canada by U n i v e r s i t y o f Toronto P r e s s . Toronto, 1969, p.33. 2 I b i d . , p.38-41. 3 I b i d . , see f o o t n o t e s 6, p.42-43 f o r the method used by Munro and here f o r determing modal shares. 4 Canada, T r a n s p o r t Canada. I n t e r n a t i o n a l Track T r a f f i c Survey. Ottawa, August 1974. 46 CHAPTER TWO IMPORTING GOODS INTO CANADA BY MOTOR CARRIER A l l f o r e i g n goods b e i n g imported i n t o Canada are sub-j e c t t o s c r u t i n y by Revenue Canada, Customs and E x c i s e (Customs) under a u t h o r i t y g r a n t e d by the f e d e r a l Customs A c t . ^ Customs and E x c i s e e n f o r c e s laws which are in t e n d e d t o p r o t e c t p u b l i c h e a l t h and s a f e t y , p l a n t and animal l i f e , as w e l l as a v a r i e t y of socio-economic f a c t o r s c o n s i d e r e d t o be important t o Cana-d i a n s . T h i s enforcement r e s p o n s i b i l i t y extends t o c o n t r o l over the c l e a r a n c e o f f o r e i g n goods f o r e n t r y i n t o Canada t o ensure payment o f duty and taxes p r e s c r i b e d by the Customs 2 3 4 T a r i f f A c t , the E x c i s e Tax A c t , and the Anta-Dumping A c t , as w e l l as compliance w i t h o t h e r f e d e r a l a c t s w h i c h , c o n t r o l , p r o h i b i t or r e g u l a t e the import (or export) o f s p e c i f i c commod-i t i e s . To e f f e c t t h i s r o l e , goods a r r i v i n g a t p o r t s o f e n t r y t o Canada are p l a c e d i n customs bond u n t i l c l e a r a n c e i s com-p l e t e d by Customs a u t h o r i t i e s . The e n t r y procedure f o r f o r e i g n goods i n c l u d e s submission o f the goods a l o n g w i t h a s e r i e s o f i n v o i c e s , c e r t i f i c a t e s and d e c l a r a t i o n s f o r a p p r a i s a l by Customs o f f i c i a l s . Upon a c q u i t t a l o f the e n t r y ( c l e a r a n c e ) , a l l duty and taxes are p a i d o r guaranteed and the goods are r e l e a s e d from bond f o r d e l i v e r y t o the co n s i g n e e / i m p o r t e r . T h i s procedure d e l a y s the d e l i v e r y of goods i n Canada, and although they need not be lo n g , the d e l a y s are r e q u i r e d by the Customs A c t to a l l o w Revenue Canada to c a r r y out i t s enforcement r o l e . T h i s c h a p t e r p r e s e n t s an i n t r o d u c t i o n t o the documen-t a t i o n , procedures and r e g u l a t i o n s of the e n t r y p r o c e s s f o r goods b e i n g imported i n t o Canada by motor c a r r i e r . These procedures and r e g u l a t i o n s are s i m i l a r f o r a l l modes i n v o l v e d i n c a r r y i n g goods i n t o Canada; t h e r e i s l i t t l e which d i f f e r -e n t i a t e s the procedures f o r motor c a r r i e r s from those f o r any o t h e r mode. T h i s d e s c r i p t i o n o f the e n t r y p r o c e s s i s not complete i n t h a t i t does not c o n s i d e r a l l a s p e c t s of e n t e r i n g goods i n t o Canada. What i s c o n s i d e r e d here i s the b a s i c e n t r y p r o c e s s f o r goods c a r r i e d by f o r - h i r e motor c a r r i e r s of g e n e r a l commodities and by p r i v a t e c a r r i e r s , e i t h e r by l e s s - t h a n -c a r l o a d o r by f u l l c a r l o a d l o t s . The d e s c r i p t i o n e x c l u d e s the movement of goods by f r e i g h t forwarders and c o n s o l i d a t o r s u s i n g commercial motor v e h i c l e s ; these procedures d i f f e r i n t h a t forwarders use t h e i r own premises t o c l e a r imported goods. The f i r s t t o p i c of d i s c u s s i o n i s the r e g u l a t i o n s w i t h r e g a r d t o the t a r i f f s and bonding requirements f o r commercial motor c a r r i e r s e s t a b l i s h e d by Revenue Canada. Not a l l commercial motor c a r r i e r s have equal s t a t u s under the t a r i f f laws of Canada; t h e r e are r e s t r i c t i o n s on the o p e r a t i o n of these c a r r i e r v e h i c l e s which op e r a t e d u t y - f r e e a c r o s s the Canada-United S t a t e s b o r d e r . Bonding r e g u l a t i o n s f o r motor c a r r i e r s are a l s o important i n c a r r y i n g goods t r a n s - b o r d e r 48 i n t o Canada. Revenue Canada has e x t e n s i v e s e c u r i t y requirements f o r a l l such c a r r i e r s which are de s i g n e d t o make the c a r r i e r r e s p o n s i b l e f o r goods b e f o r e c l e a r a n c e by Customs. F o l l o w i n g c o n s i d e r a t i o n o f these r e g u l a t i o n s , a des-c r i p t i o n o f the e n t r y p r o c e s s i s g i v e n . T h i s i n c l u d e s the packaging and documentation of goods f o r shipment t o Canada; Customs m a n i f e s t i n g o f goods by a u d i t c a r r i e r s o p e r a t i n g under the 'Cargo E n t r y P r o c e s s i n g and C o l l e c t i o n ' (CEPAC) procedures and by non-audit c a r r i e r s ; t he d e l i v e r y o f goods t o c l e a r a n c e warehouses; and, the p r e p a r a t i o n o f the e n t r y documents f o r submission t o Customs. A l a r g e p a r t o f the e n t r y p r o c e s s does not i n v o l v e the movement o f the goods themselves but r a t h e r the movement of documentation f o r c o n s i d e r a t i o n and a p p r a i s a l by Customs. The con s i g n e e / b r o k e r must e s t a b l i s h the type o f e n t r y which w i l l be made f o r the goods, the t a r i f f treatment they s h o u l d r e c e i v e and the a p p r o p r i a t e charges which w i l l be due upon a c q u i t t a l o f the e n t r y . Each of thes e i s c o n s i d e r e d here, a l o n g w i t h the c l e a r a n c e methodology and document d i s t r i b u t i o n r e q u i r e d by Customs i n d e a l i n g w i t h the e n t r y . F i n a l l y , upon a c q u i t t a l o f the e n t r y and payment of a l l a p p l i c a b l e duty and t a x e s , the goods are r e l e a s e d as d u t y - p a i d goods f o r con-sumption i n Canada. In t r a c i n g the procedure f o r c l e a r a n c e o f imported goods by Canada Customs, t h r e e flows can be i d e n t i f i e d . F i r s t , Customs Documents Prepared DOCU Wl SHIP MENTS TH MENT Goods packed and marked . for Customs purposes DOCUMENTS BY MAIL Ca r r i e r Prepares Cargo Control Document to w E-i < E-i LO Q W & H Z D EXHIBIT 2 A Typ i c a l Entry for Consumption Consignee Receives Documents A r r i v a l Advice Note Issued to Consignee Consignee Customs Prepares Appraises Entry and Acquits Entry Goods reported to Customs and Excise on Cargo Control Document Goods Delivered to Clearance Warehouse Truckload l o t s remain i n detention compound LTL l o t s loaded unload into Clearance Goods Delivered to Consignee < a < z < u DUTY and taxes paid by Consignee 50 t h e r e i s the movement o f the goods themselves from the time and p o i n t of s a l e i n the f o r e i g n c o u n t r y t o the consignee i n Canada. Secondly, the documentation flow r e q u i r e d by Customs r e g u l a t i o n s which t r a n s f e r s the i n f o r m a t i o n (required: f o r the e n t r y t o be completed) from the f o r e i g n c o n s i g n o r to the Canadian consignee. L a s t l y , the movement of the goods i n t o Canada and t h e i r Customs c l e a r a n c e b r i n g s about f i n a n c i a l flows between the importer and Customs. An attempt to r e p r e s -ent the r e l a t i o n s h i p between these flows i n a g r a p h i c form i s made i n E x h i b i t 2 . (a) Bonding Tran s b o r d e r V e h i c l e s In the p r e v i o u s c h a p t e r c o n s i d e r a t i o n was g i v e n to the r e g u l a t i o n of motor c a r r i e r s o p e r a t i n g on t r a n s b o r d e r r o u t e s . I t was p o i n t e d out t h a t f o r - h i r e motor c a r r i e r s were s u b j e c t to more r e g u l a t o r y c o n t r o l than p r i v a t e and a g r i c u l t u r a l c a r r i e r s . The c a r r i e r which i s a b l e to a t t a i n o p e r a t i n g a u t h o r i t y i s f a c e d w i t h another s e t of r e g u l a t i o n s , those o f the Customs s e r v i c e s i n each c o u n t r y . Revenue Canada, Customs and E x c i s e has p u b l i s h e d the r e g u l a t i o n s under which t r a n s -5 border c a r r i e r s must o p e r a t e i n Canada . The Canadian opera-t i o n s of these c a r r i e r s depend e n t i r e l y on the type of oper-a t i n g a u t h o r i t y g r a n t e d by Revenue Canada, the t a r i f f s t a t u s of the highway equipment employed and the s e c u r i t y which i s posted w i t h the Crown. In o r d e r to t r a n s p o r t goods i n bond by commercial motor 51 v e h i c l e , a c a r r i e r must have a l i c e n c e from the a p p r o p r i a t e r e g u l a t o r y a g e n c i e s , as w e l l as a u t h o r i t y g r a n t e d by Customs. Customs o p e r a t i n g a u t h o r i t y i s a v a i l a b l e e i t h e r as a g e n e r a l a u t h o r i z a t i o n f o r c a r r y i n g goods i n t o Canada on a c o n t i n u i n g b a s i s o r as a s i n g e - t r i p a u t h o r i z a t i o n f o r a one-time movement. Such a u t h o r i z a t i o n i s a v a i l a b l e upon a p p l i c a t i o n and p r e s e n -t a t i o n o f a s e c u r i t y bond i n an amount deemed a c c e p t a b l e t o Revenue Canada. Customs does not a l l o w i n bond movement o f goods i n Canada by commercial motor v e h i c l e w i t h o u t proper a u t h o r i t y . The t a r i f f s t a t u s o f the equipment used by motor c a r r i e r f i r m s o p e r a t i n g i n t o Canada has some b e a r i n g on the e x t e n t o f t h e i r o p e r a t i o n s . The r e g u l a t i o n s c o n t a i n e d i n Memorandum D3 r e s t r i c t the movement of v e h i c l e s on which no duty or s a l e s tax has been p a i d i n Canada i n an attempt t o c o n t r o l t h e i r use and t o p r o t e c t the d u t y - p a i d equipment o p e r a t e d by Canadian c a r r i e r s . S e c t i o n 7 o f the Memorandum r e s t r i c t s t he equipment used i n c a r r y i n g goods commercially between Canada and the U n i t e d S t a t e s t o d u t y - p a i d motor v e h i c l e s and t o t h e v e h i c l e s of c a r r i e r s o p e r a t i n g under departmental permit o r the 'Cargo E n t r y P r o c e s s i n g and C o l l e c t i o n system' (CEPACs). Motor v e h i c l e s which a r e not d u t y - p a i d must d i s c h a r g e goods o n l y a t the Canadian l o c a t i o n shown on the m a n i f e s t and may o n l y l o a d goods f o r non-stop t r i p s t o the U n i t e d S t a t e s . These duty-f r e e v e h i c l e s may not c a r r y goods between p o i n t s i n Canada u n l e s s the move i s i n c i d e n t a l t o the i n t e r n a t i o n a l movement of the v e h i c l e . 52 The bonding requirements f o r commercial motor c a r r i e r s a re a l s o o u t l i n e d i n Memorandum D3. A motor v e h i c l e o p e r a t o r who d e s i r e s t o become a bonded c a r r i e r f o r the t r a n s p o r t a t i o n o f goods i n bond i n Canada can apply t o Customs and E x c i s e f o r such bonding. The r e q u i r e d bond i s c a l c u l a t e d on the b a s i s of $1,000 per v e h i c l e w i t h a minimum bond o f $3,000 and a maximum bond o f $25,000. Duty and t a x - p a i d , bonded commercial v e h i c l e s are allowed t o c a r r y goods i n bond v i r t u a l l y un-r e s t r i c t e d , w h i l e v e h i c l e s on which no duty or taxes have been p a i d are r e s t r i c t e d , r e g a r d l e s s of a bond b e i n g h e l d by Customs. In the case of a motor c a r r i e r which has has bond posted w i t h Revenue Canada t h e r e a r e t h r e e o p t i o n s a v a i l a b l e when c a r r y i n g f o r e i g n goods i n t o Canada. B e f o r e a r r i v a l i n Canada, a s i n g l e - t r i p a u t h o r i t y may be a p p l i e d f o r from t h e D i s t r i c t C o l l e c t o r o f Customs and an a p p r o p r i a t e bond po s t e d which w i l l a l l o w the c a r r i a g e o f the goods. I n t h i s case, the bond i s c a l c u l a t e d on the e s t i m a t e d v a l u e of duty and taxes a p p l i c a b l e on the goods. A l t e r n a t i v e l y , the non-bonded c a r r i e r may t r a n s f e r the goods to the equipment o f a bonded motor c a r r i e r f o r f u r t h e r shipment i n Canada upon a r r i v a l a t the Canadian b o r d e r . The t h i r d a l t e r n a t i v e , f o r t h i s type of c a r r i e r i s t o have these goods c l e a r Customs a t the f r o n t i e r b o r d e r c r o s s i n g . In t h i s case, the goods are c l e a r e d f o r domestic consumption a t the f r o n t i e r examining warehouse m a i n t a i n e d a t the border p o r t of a r r i v a l by Revenue Canada. Where the nature o f the shipment makes c l e a r a n c e a t t h i s p o i n t i m p r a c t i c a l o r i m p o s s i b l e Customs may o r d e r the goods e s c o r t e d by a Customs 53 o f f i c e r t o the n e a r e s t i n l a n d c l e a r a n c e f a c i l i t y , a t the expense of the c a r r i e r . The bond which Customs demands of motor c a r r i e r s f o r the r i g h t t o c a r r y goods i n bond i n Canada makes the c a r r i e r r e s p o n s i b l e f o r the goods. From the time the goods are r e p o r t e d t o Customs a t the f r o n t i e r p o r t of a r r i v a l and are p l a c e d i n bond, the c a r r i e r i s r e s p o n s i b l e t o the Crown f o r the duty and taxes deemed due on the goods. T h i s r e s p o n s i b i l i t y c o n t i n u e s u n t i l the warehouse o p e r a t o r a t the i n l a n d s u f f e r -ance warehouse r e c e i v e s the goods i n t o h i s c a r e . (b) Packing and Documenting Imported Goods To speed the movement of goods through the Customs e n t r y p r o c e s s on a r r i v a l i n Canada, c l o s e c o - o p e r a t i o n between the c o n s i g n o r i n the f o r e i g n c o u n t r y and the Canadian consignee i s r e q u i r e d . The c o n s i g n o r must be aware o f a l l r e g u l a t i o n s g o v e r n i n g the e n t r y because he has the i n i t i a l r e s p o n s i b i l i t y o f packaging, marking and documenting the goods. Done i n c o r r e c t l y , these p r e p a r a t i o n s may cause c o n s i d e r a b l e d e l a y s and expense t o the co n s i g n e e . In o r d e r t o f a c i l i t a t e the Customs e n t r y of goods imported i n t o Canada, a l l packages are r e q u i r e d t o be marked l e g i b l y and numbered on the o u t s i d e . Packages are c o n s i d e r e d to be c l e a r l y marked and numbered when each bears a unique, l e g i b l e mark, symbol or number d i s t i n g u i s h i n g i t from every 54 6 o t h e r package i n the shipment. In a d d i t i o n , every package sh o u l d be marked w i t h the f u l l name and address of the con-s i g n e e . Once packaged and marked i n accordance w i t h Revenue Canada r e g u l a t i o n s , the goods must be documented. Goods e n t e r i n g Canada must be accompanied by f o u r documents: a c a r r i e r ' s b i l l o f l a d i n g ; a commercial i n v o i c e ; a Customs I n v o i c e o f the type and i n a form approved by Revenue Canada; and, i n the case o f goods v a l u e d i n excess o f t e n thousand d o l l a r s ($10,000 CAN), a Form B31 S p e c i a l E x p o r t e r ' s D e c l a r a t i o n . The c a r r i e r ' s b i l l o f l a d i n g a c t s as the c o n t r o l docu-ment f o r each shipment c a r r i e d by the t r a n s p o r t i n g mode. From t h i s document the c a r r i e r i s a b l e t o d i r e c t the goods from the c o n s i g n o r t o the consignee, by the s t i p u l a t e d r o u t i n g and, when the movement i s complete, t o a s s i g n payment of charges f o r the s e r v i c e t o the c o r r e c t p a r t y . On moves i n t o Canada from f o r e i g n c o u n t r i e s , the b i l l o f l a d i n g p l a y s another r o l e , t h a t o f 'cargo c o n t r o l document' f o r Customs purposes. . A commercial i n v o i c e t o the consignee s h o u l d a l s o accompany the goods. Although not r e q u i r e d i n the c l e a r a n c e procedure, a copy o f the commercial i n v o i c e can a i d i n e x p e d i t i n g the c l e a r a n c e o f goods through the Customs c l e a r a n c e p r o c e s s . The i n f o r m a t i o n i t c o n t a i n s a s s i s t s the consignee or h i s agent t o determine what t a r i f f treatment the goods sho u l d r e c e i v e , or what the v a l u e of the goods i s f o r purposes 55 o f c a l c u l a t i n g duty and t a x e s . When pr e s e n t e d t o the Customs the commercial i n v o i c e s can a s s i s t i n v e r i f y i n g the d e c l a r e d substance and v a l u e o f the goods. A copy o f t h i s document should a l s o be sent t o the consignee by o t h e r means. A customs I n v o i c e completed by the c o n s i g n o r / e x p o r t e r 7 must a l s o accompany the goods i n t o Canada. Each shipment must be l i s t e d on sepa r a t e Customs I n v o i c e , completed i n t r i p l i c a t e and c e r t i f i e d i n w r i t i n g by the e x p o r t e r . In 197 8, a new s i m p l i f i e d document i s t o be i n t r o d u c e d t o r e p l a c e the s i x documents now i n use. T h i s s t a n d a r d i n v o i c e should reduce the frequency o f c l e a r a n c e d e l a y s r e s u l t i n g from c o n f u s i o n over which o f the p r e v i o u s l y used documents i s a p p r o p r i a t e f o r a p a r t i c u l a r shipment. As a r e s u l t , f a s t e r c l e a r a n c e w i l l mean l e s s f r e q u e n t t r a c i n g o f goods and documents and more e f f i c i e n t use o f p r e s e n t s u f f e r a n c e warehouse space. At pr e s e n t t h e r e are s i x forms o f the Customs I n v o i c e . For goods e n t e r i n g Canada from the U n i t e d S t a t e s , the a p p r o p r i a t e documents are the M-A o r N-A I n v o i c e ( E x h i b i t s 3 and 4). The M-A I n v o i c e d e t a i l s a l l goods s o l d by the ex-p o r t e r p r i o r t o i m p o r t a t i o n i n t o Canada, w h i l e the N-A I n v o i c e i s used f o r goods which e n t e r Canada on consignment from the e x p o r t e r . The 'A' d e s i g n a t i o n i n d i c a t e s the goods are e n t i t l e d to t a r i f f treatment a v a i l a b l e under the 'Most-Favoured-Nation ' t a r i f f c l a s s i f i c a t i o n . Each i n v o i c e must i n c l u d e the date and p l a c e o f purchase, the name and address o f both the c o n s i g n o r / e x p o r t e r and the co n s i g n e e / i m p o r t e r , EXHIBIT 3 Customs I n v o i c e (type M-A) (M-A) F O R M O F I N V O I C E A P P R O V E D B Y C A N A D I A N C U S T O M S (1959) F O R G O O D S S O L D B Y E X P O R T E R P R I O R T O I M P O R T A T I O N , F O R E N T R Y A T M O S T F A V O U R E D N A T I O N T A R I F F R A T E S PREPARE INVOICE IN AT LEAST FOUR COPIES P l o e . and Dot. ?M.?.alS-°J.. JiIf.^?..^J.cj!.5.» 1 9 7 4 l n v o i « ofj.^.t"?"..}}?.6^ p u , c h a , . d by Prairie; ..Hardware,.. In?.? A^ ar0.. .£^JJLk „?t.Jl..Vanc^^ f r o m Midwest Distributors, Inc. 0{ 927 So. Indiana St. Chicago, 111. USA to b. , h i p p * J from....9M.=a.60.»....I.1.L:...^.*._ per M5g»felJnited _ Torm«:._ 15 lQ...daya „ _ _ _ U. S. A. t COUNTRY WHERE AT LEAST 5 0 % OF MANUFACTUR ING COST OCCURRED U> IU AMD NmiiiM QUANTITIES AND DESCniPTION O F OOOD8 Vmlr *aJu* at tlma and p laca of • hipfnant in cur-•ncy o4 country of • sport ( Sa« [elauaaa 5 to • ofl cert l f lcata of | « Tilu* haraon) # 1 Ctn. #2 Ctn. #3 Box! 1 CONTENTS MUST 2 #2234 Steel Valves 3 #225 Steel Bushings 100 #4123 Gaskets 4 #104 Steel Plugs 4 #142 Handles L ALWAYS INDICATE UNIT PRICE AND KIND OF UNIT IF DOZ-, CROSS. ETC. Less Trade Discount 25% WHERE APPLICABLE, TRADE DISCOUNT AS ALLOWED IN HOME MARKET SHOULD BE DEDUCTED IN BOTH COLUMNS I IF USED MERCHANDISE, REFER TO PARAGRAPH U O N OPPOSITE PAGE SaLUr« Prtea to t h * P u r e h » a r In Canada. (Specify currency of aattlaoianf) NOTE: -Tbe following facts must be shown: Amount of: Freight, if any, prepaid and charged Freight, if any, prepaid and not charged * "1 Freight, if any, allowed to be deducted ^ by importer on settlement * * If aoy freight is pre-paid by the exporter and act c h a f f e d , or ia al lowed to be deducted by the importer o  aenlem*f i t , a a ta i rawm most be made oo t h i i invo ice tod ( c i l i a * whether ot not tbe pract ice it cons istent with tbe eKportei ' s d o w i t i c market fre i fbt po l icy. (Over ) EXHIBIT 3 p l a t e two The following is the full form, combining the Certilicate of Value (M) and of Origin (A), prescribed lo be written, printed or stamped on Invoice* of \ ; n r l e« for entry in Canada, under the Most Favoured Nation Tariff when the goods have been sold by the exporter prior to importniion. In cases where the vendor dar.s noi reside in the country of export or for other reasons the vendor is unable to sign the certificate both as to value and origin, a separate certificate of origin in prescribed form signed by the exporter in the country of export, be arm a a full description of the goods and the marks and numbers of the packages, so that it mav be identified with the shipment, will be accepted. INSERT TITLE A N D FIRM NAME FORM M-A EXPOlTPW^ S DECLARATION (M) I. the undersigned, -io^iereby certify as follows: — 1. That 1 «D the Traffic.Manager _ o t „.Midwe st. Distributor s insert official capaciry oirae ot exporter exporter of the goods described in the within invoice; 2. That the said invoice is in all respects correct and true; 3. That the said invoice coalaios a true and full statement showing the price actually paid or to be paid for the said roods, the actual quantity thereof and all charges thereon; 4. That there is included in the said invoice the true value of all cartons, cases, crates, boxes and coverings of any kind and ail charges and expenses incident to placing the said goods in condition packed ready for shipment to Canada; 5. Thai the said invoice also exhibits the fair market value, at the time when and place from which the goods were shipped directly to Curana. of like goods when sold in the same or substantially the same quantities for home consumption in the ordinary course of trade under competitive conditions to purchasers located at that place with whom the vendor deals a* arm's length and who are at the same ot substantially the same trade level as the importer, 6. Thai where like goods are not aold for home consumption in the circumstances described io the preceding section but where the goods shown on this invoice are similar to those sold for home consumption, the fair market value exhibited thereon is not less than the aggregate of (a) the cost of production of the goods exported; and (b) an amount that ia the same percentage of the cost of production of the goods exported as the gross profit on the similar goods ia of the cost of production of the similar goods; 7. That the said fair market, value is without (a) any discount or deduction not shown, allowed and deducted on invoices covering sales for home consumption in the country of export in the ordinary course of trade; (b) any deduction on account of any subsidy or drawback of Customs duty that has been allowed by the Government of any other country, or an account of any so-caJied royalty, rent or charge for use of any machine or goods of any description, that the seller or proprietor does or would usually charge thereon when the same are «old or leased or rented for use in the country of export; or (c) any discount or deduction on account of the amount of consideration or money value of any special arrangement between any persona interested therein, because of the exportation or intended exportation of such goods, or the right to territorial limit a for the sale or use thereof; 8. That if the fair market value of the said goods described in this invoice is other than the value thereof as above specified, such fair market value bam, to the best o f my knowledge and belief, been fixed and determined under the authority ot the Customs Act at the valua exhibited ia this invoice; 9. That no different invoice of the goods mentioned in the said invoice baa been or will be furnished to any one by me or on my behalf; 10. That no arrangement or understanding affecting tbe purchase price of the said goods baa been or will be made or entered into between the said exporter and purchaser or by any one on behalf of either of them other than as shown on tbe said invoice, either by way of discount, rebate, salary, compensation or in any other manner whatsoever; (A) That each article on this'invoice is »oaa fid* the produce or manufacture of the country specified on the invoice aa its Co on try of Origin; That each manufactured article oo the invoice in its present form ready for export to Canada bas been finished in anch specified country of origin, and notitess liiail 'uuchaif ibe'aost of production of each such article bas been produced throngs the industry of *. — _ — .....entitled to the benefits of treaty o r_ convention rates or the British Preferential Tariff. Dated at Chicago. Illinois. U. S, A. 1 \ (Signature) 1 d ' y ° f M a r C h • X 9 ?A | SIGN EACH COPY IN INK f ' Not**.—When invoicing goods which have been finished in a country specified on the invoice as its country of origin from materials originating in a conn try or countries entitled to the benefits ot the Most Favoured Nation Tariff or the British Preferential Tariff, the names of tbe countries contributing to one-half the cost of production should be shown in the space provided in the certificate. In the calculation of the coat of production for the purpose of determining the qualification for entry under the Most Favoured Nation Tariff none of the following items are to be incloded or considered, viz:— 1. Outside package a and expenses of packing thereinto. -2. Manufacturer's or exporter's profit or the profit or remuneration of any trader, broker, or other person dealing in the article in its finished manufactured condition. 3- Royalties. 4. Customs or excise duty or tax paid or payable on imported materials. 5* Carriage, insurance, a te , from place of production or manufacture to port of shipment. 6* Any other -charges inenrrad or lo be incurred subsequent to the completion of tbe manufacture of the goods. Insert her* e a s e of country oz countries . 58 EXHIBIT 4 Customs I n v o i c e (type N-A) (N-A) F O R M O F I N V O I C E A P P R O V E D B Y C A N A D I A N C U S T O M S ( 1 9 5 ? ) F O R G O O D S S H I P P E D O N C O N S I G N M E N T W I T H O U T S A L E B Y E X P O R T E R P R I O R T O I M P O R T A T I O N , F O R E N T R Y A T M O S T F A V O U R E D N A T I O N T A R I F F R A T E S PREPARE INVOICE IN AT LEAST FOUR COPIES Chicago, I l l i n o i s Ploco and Dot. .Mar.ch...5., Invoic. of Iype...^..Mod«a..lD^ consion.d b y Midwest..MsS^ .l:!?.?.??.?*...?:?.?.?. 0f....9.2.7...So.,...Indlaria...S.t....^  t o Prairie.. Hardware t i n c . 0r..l65.Q..F.«urth..jSt^..y*ncfluYBX,..Jlrltlsh..ColvjaibiA.. . , .. j , Chicago, I l l i n o i s „,,, to be l h i D D e d from .9....' Vn n.... Ringsby United U.S. A. COUNTRY WMERI AT LEAST 3 0 % OF MANUFACTUR ING dn COST OCCURREC Nuntb... #1 Ctn. #3 Box Quantlt iaa mad Da aeription of Coeds 2 #2234 Steel Valves 3 #225 Steel Bushings 100 #4123 Gaskets 4 #104 Steel Plugs 4 #142 Handles Fa i r Market Va lua at Ttma and PIKI of Shtpmant In Currency of Country of Export (Saa C louaaa 6 to 9 of Car t l f ieata of V a l u * haraon) NUMoJEK A N D CONTENTS MUST ALWAYS K S H O W N A " ALWAYS INDICATE UNIT PRICE A N D KIND OF UNIT IF DOZ.. CROSS. ETC. Less Trade Discount 25% IF USED MERCHANDISE, REFER TO PARAGRAPH 14 O N PAGE 8 10. 00 5.00 . 10 2. 00 2.00 20.00 IS. 00 10. 00 8. 00 8. 00 61. 00 15.25 45. 75 59 EXHIBIT 4 p l a t e two The following is the foil declaration,combining the Certificate of Value (N) and ol Origin (A),pre«-cribcd Lo be written, printed or stamped on invoice* of articles for entry in Canada under the Most Favoured Nation Tariff when the Rood* have been shipped on consignment without sale by the exporter prior to importation, fn cases where the vendor does not re«ide in the country of export or for «*thef reasons the vendor is unable to sign the certificate both as to ' 'H I 'JR and origin, a Rppa-rate certificate of origin in prescribed form signed by the exporter io the country of export, bearing a full description of the goods and the marks and numbers of the packages, so that it may be identified with the shipment, will be accepted. FORM N-A —to be made in British countries before a Collector of Customs, Justice of tbe Pence, Not or)- Public or any official authorized to administer oaths; and in other countries before a British or other Consul. Notary Public or olhrr official autho-rized to administer oaths. EXPORTER'S DECLARATION (Nj | Jokn_J. Doe _ _ o t Chicagot Illinois U.S.A. same of p*rry aubaciibioe to lhi* declaratioa aty or rt>*-o and country da solemnly and truthfully declare as follows:— 1. That l am...Vi.£.e-p.r.esijdfi^ a member of ihe firm of (giving ibe name of ibe firm when tbe ibipmeni is raade by J firm), or so officer, dirtcter oi aintfter ol (giving tbe u a e of the corporation when tbe shipment ia made by * corporation) t h . o - » c o ( ike good, .hipped oo coo.ignmoa. to. Pr air i.e.. HardIwar e,... Ltd, «v?^c.0^Y^rr...?.r.it.i^J:°l,snbl£ same of eoasicoee is Canada and described'on the annexed invoice; 2. That tbe said invoice is a complete and true invoice of all the goods included in this shipment; .l.That the said goods are properly described in the said invoice; 4. That there is included io the said invoice the true value of all cartons, cases, crates, boxes and coverings of any kind sod all charges and expenses incident to placing the said goods in condition packed ready for shipment to Canada; 5. That none of the said goods have been sold by or on behalf of the owner to any person., firm or corporation in Canada: 6. That the said invoice also exhibits the fair market value, at the time when and place from which the goods were shipped directly to Canada, of like goods when sold in the same or substantially the same quantities for home consumption in tbe ordinary course of trade under competitive conditions to purchasers located at that place with whom the vendor deals at arm's length and who are at the same or substantially the same trade level as the importer; 7. That where like' goods are not sold for home consumption in the circumstances described in the preceding section but where tbe goods shows on this invoice are similar to those sold for home consumption, the fair market value exhibited thereon ia not less than the aggregate of (a) the cost of production of tbe goods exported; and (b) aa amount that is the same percentage of the cost of production of the goods exported as the gross profit on the similar goods ia of the coat of production of the similar goods; 8. That the said fair market value is without (a) any discount or deduction not shown, allowed and deducted on invoices covering sales for home consumption in tbe country of export in tbe ordinary course of trade; (b) any deduction on account of any subsidy or drawback of Customs dnty that has been allowed by the Government of any other country, or on account of any so-called royalty, rent or charge for use of any machine or goods of any description, that the seller or proprietor does or would usually charge thereon when the same are sold or leased or rented for use iu the country of export; or (c) any discount or deduction on account of the amount of consideration or money value of any special arrange-ient between the exporter and the importer, or between any persona interested therein, because of the export Mi on or intended exportation of such goods, or the right to territorial Limits for the sale or use thereof; 9. That if the fair market value of the said goods described in this invoice i s other than the value thereof as above specified, such fair market value has, to the beat of my knowledge and belief, been fixed and determined under the authority of the Customs Act at tbe value exhibited in this invoice; (A) That each article on this invoice ia loan fldn the produce or manufacture of tbe country specified on tbe invoice as its Country of Origin. That each manufactured article on tbe invoice in its present form ready for export to Canada has been finished in such specified country of origin, and not less than one-half the cost of production of each such article has been produced through . . . i a II S A COUNTRY OP ORIGIN I . , . . , the industry of * V. . • — — . . . • I _ „ entitled to the benefits of treaty or convention rates or the British Preferential Tariff. ( Declared at Chicago, Illinois U.S.A. this 1 day of March 1974 before me (Signature SIGN EACH COPT IN INK A Commiasionei, etc Notf).— When invoicing goods which have been finished in a country specified on the invoice ss Its country of origin from materials originating in a country or countries entitled to the benefits of the Most Favoured Nation Tariff or the British Preferential Tariff, the names of the countries contributing to one-half tbe cost of production should be shown in the space provided in the certificate. In tbe calculation of the cost of production for the purpose of determining the qualification for entry under tbe Most Favoured Nation Tariff none of the following items are to be included or considered, vix:— 1. Outside packages and expenses of packing thereinto. 2. Manufacturer's or exporter's profit or the profit or remuneration of any trader, broker, or other person dealing in the article in Its finished manufactured condition. 3. Royalties.' 4. Customs df excise duty or lax paid or payable on imported materials. 5. Carriage, insurance, etc., from place of production or manufacture to port of shipment, 6. Any other charges incurred or to be incurred subsequent to the completion of the manufacture of the goods. * lasert here name of country or countries. 60 the p o r t o f ex p o r t and the name of the c a r r i e r t r a n s p o r t i n g the goods. The body of the i n v o i c e c o n t a i n s space f o r a " s u f f i c i e n t and complete" d e s c r i p t i o n of the goods i n proper commercial terms, i n c l u d i n g the marks and numbers i d e n t i f y i n g each package i n the shipment. In r e s p e c t o f goods s o l d by the e x p o r t e r , a column t o show the " f a i r market v a l u e " o f the goods i n the c u r r e n c y o f the co u n t r y of ex p o r t , a t the time and p l a c e o f ex p o r t i s p r o v i d e d as w e l l as a se p a r a t e column t o show the a c t u a l p r i c e a t which the goods have been s o l d t o the consignee, and an i n d i c a t i o n o f the coun t r y of o r i g i n , manufacture or p r o d u c t i o n o f each a r t i c l e . To enable Customs o f f i c i a l s t o determine the a c t u a l s e l l i n g p r i c e t o the importer f o r Customs purposes, the i n v o i c e must show the amount o f any f r e i g h t charges p r e p a i d on the goods and the amount of any f r e i g h t allowances made t o the purch a s e r i n Canada. To c e r t i f y the i n f o r m a t i o n c o n t a i n e d on the Customs I n v o i c e s , the e x p o r t e r must complete the d e c l a r a t i o n on the i n v o i c e , d a t i n g and s i g n i n g each copy w i t h o r i g i n a l s i g n a t u r e s i n i n k . I t i s wise f o r the e x p o r t e r t o send a d d i t i o n a l c o p i e s o f t h i s document t o the importer by a i r m a i l . The f o u r t h , and l a s t , document r e q u i r e d o f the e x p o r t e r i s the Form B31, S p e c i a l E x p o r t e r ' s D e c l a r a t i o n ( E x h i b i t 5 . ) T h i s d e c l a r a t i o n i s r e q u i r e d t o be completed i n s i n g l e copy and s i g n e d f o r a l l shipments o f goods t o Canada which are d e c l a r e d t o have a v a l u e i n excess o f $10,000 (CAN). I t must be a t t a c h e d t o the a p p r o p r i a t e Customs I n v o i c e and a v a i l a b l e a t the time o f e n t r y . 61 EXHIBIT 5 S p e c i a l E x p o r t e r ' s D e c l a r a t i o n 3 31 SPECIAL EXPORTERS' DECLARATION 8/72 Name and mailing address of exporter: Name and mailing address of importer: 1. Is your company or any other company entitled to a reduction, deferral or exemption from Corporate Income Taxes in respect of income earned on exports that would be payable if the goods had been sold for home consumption? Yes No. (see Note 3 below) 2. If the answer to Question 1 is "Yes" please indicate whether this has resulted in changes in the transfer or selling price of any or all items included in this shipment, (see Note 4 below) 3. If transfer or selling prices have changed, please specify each of the items involved, and by how much, (see Note 4 below) 4. If the answer to Question 1 is "Yes", please specify the name and address of the party or parties entitled to the benefit. 5. Specify the name and address of the producer of the goods contained in this shipment. 6. To the best of my knowledge and belief the foregoing is a true statement of the facts. Signature Name Title Date THIS SPACE FOR USE BY THE DEPARTMENT OF NATIONAL REVENUE Entry No. Port Date Stamp Notes to Exporter 1. This declaration is reauired to be completed in single copy only and signed by a duly authorized official of the exporter for all shipments of goods to Canada where the declared fair market value or the selling price of those goods is $10,000, or more, Canadian funds, (see the currency guide attached to Memorandum D31-1 for determining the equivalent of {10,000 Canadian funds in various currencies) 2. The declaration should be attached to the form of invoice approved by Canadian Customs (original copy) so that it may be presented by the importer at the time of entry. 3. Notes re Question 1 (a) Question 1 refers only to the shipment covered by the Customs Invoice to which the special exporters' declaration relates. (b) "Any other company" refers to any other company involved in the production or distribution of the goods contained in the shipment. 4. Notes re Question 2 and 3 (a) Pricing charges are those that have taken place since July 28, 1972. (b) If additional space is required, please attach additional pages. (c) Customs M a n i f e s t i n g 62 The r e g u l a t i o n s i n f o r c e r e q u i r e t h a t a l l goods e n t e r i n g Canada be m a n i f e s t by the c a r r i e r and r e p o r t e d t o Canada Cus-toms a t the p o r t o f i m p o r t a t i o n on an a c c e p t a b l e cargo c o n t r o l document which c o n t a i n s the f o l l o w i n g i n f o r m a t i o n : a) C a r r i e r ' s code number a s s i g n e d by Revenue Canada; b) unique consignment number (manifest no., p r o b i l l no.); c) name and address o f consignee; d) name of s h i p p e r ; e) number of packages i n the shipment; f) d e s c r i p t i o n o f the goods; g) weight o f the shipment; h) name o f any c o n n e c t i n g c a r r i e r s . The number of packages must corr e s p o n d t o the a c t u a l number o f packages i n the shipment and each shipment must l e a v e the s h i p p i n g p o i n t complete on one cargo c o n t r o l document. Customs has developed a system c a l l e d 'Cargo E n t r y Pro-c e s s i n g and C o l l e c t i o n ' based on the 'cargo c o n t r o l document'. T h i s system f a c i l i t a t e s the movement and r e l e a s e o f imported goods, minimizes the c o s t s o f i n e f f i c i e n t equipment and ware-house u t i l i z a t i o n and al l o w s q u i c k access by end-users t o imported goods. The cargo c o n t r o l document i s t h e key to e f f e c t i v e o p e r a t i o n o f t h i s system and i t s p r e p a r a t i o n i s important i f d e l a y s are t o be avoid e d . The cargo c o n t r o l document i s produced by the c a r r i e r i n a format approved by Revenue Canada. For Customs purposes, t r a n s b o r d e r cargo c o n t r o l documents must c o n t a i n t h e s e c o p i e s : 63 a) Longroom copy; b) Customs d e l i v e r y a u t h o r i t y copy; c) warehouse keeper's c h e c k i n g r e c o r d ; d) m a i l copy, and, where goods e n t e r a motor c a r r i e r ' s system i n Canada w h i l e s t i l l i n bond: e) s t a t i o n copy. There are two formats f o r the cargo c o n t r o l document used by c a r r i e r s : once f o r c a r r i e r s u s i n g the CEPACS procedures and another f o r c a r r i e r s not u s i n g t h i s system. The p o s t a u d i t c o n t r o l procedures under CEPACS a l l o w s Customs-audit o f the c a r r i e r ' s revenue a c c o u n t i n g r e c o r d s and subsequent v e r i f i c a t i o n a g a i n s t Customs r e c o r d s t o ensure t h a t a l l goods c a r r i e d i n t o Canada a r e r e p o r t e d and t h a t a l l charges l e v i e d a g a i n s t such goods are c o l l e c t e d . I n t r o d u c t i o n of these procedures reduced the need f o r d e t a i l e d Customs examination of loads moved by c a r r i e r s o p e r a t i n g under t h i s system. A u d i t e d c a r r i e r s u t i l i z e a combined b i l l o f l a d i n g / c a r g o c o n t r o l docu-ment, i n a format approved by Customs. Each i s numbered con-s e c u t i v e l y and p r e f i x e d by a - c a r r i e r code number which i s a s s i g n e d by Revenue Canada. For c a r r i e r s not o p e r a t i n g w i t h i n the CEPACS procedures, goods c a r r i e d on a v e h i c l e e n t e r i n g Canada must be m a n i f e s t on Customs Form A8A Cargo M a n i f e s t ( E x h i b i t 6 ) , which s e r v e s as the cargo c o n t r o l document. In the case of l e s s - t h a n -t r u c k l o a d shipments, each consignment on a v e h i c l e must be m a n i f e s t on a s e p a r a t e Form A8A. T h i s cargo m a n i f e s t must EXHIBIT 6 Customs M a n i f e s t (Form A-8-A/ Cargo C o n t r o l Document). fOCM M L CUSTOMS MANIFEST (LONG ROOM COPY) C O N S I G N E E . S T R E E T A D D R E S S «ao D E S T I N A T I O N T NO S H I P P E R , N A M E AMD A O O R C S S UmOmt ham tat ol w m N O . O i tat a t N o . H f l L Onaintitm «nd Mvts KM* C e « « t T O B E D E L I V E R E D B Y C O N S I G N E E T O C U S T O M S c o n t a i n a l l the c o p i e s l i s t e d above, as w e l l as the ' s t a t i o n copy' and a 'checking r e c o r d c o p y 1 . (d) R e p o r t i n g Imported Goods Once the goods are p r o p e r l y packed t o w i t h s t a n d normal t r a n s p o r t a t i o n h a n d l i n g , and the r e q u i r e d documentation i s completed, the motor c a r r i e r may t r a n s p o r t them t o Canada. The motor c a r r i e r f i r m must be sure t h a t adequate m a n i f e s t i n g of a l l goods on the v e h i c l e i s i n the hands of the v e h i c l e o p e r a t o r f o r d e l i v e r y t o Customs a t the f i r s t p o r t of a r r i v a l t o Canada. I t i s a t t h i s p o i n t — t h e f i r s t l a n d i n g o f the imported goods on Canadian s o i l — t h a t Canadian Customs o f f i c i a have f i r s t c o n t a c t w i t h the goods. For goods moving by h i g h -way the p o r t of a r r i v a l i s the f r o n t i e r b o rder c r o s s i n g a t the i n t e r n a t i o n a l boundary where Customs m a i n t a i n s o f f i c e s . Upon a r r i v a l a t the f r o n t i e r c r o s s i n g , Canada Customs checks a l l documentation accompanying the v e h i c l e . I t i s , t h e r e f o r e , important t h a t the r e q u i r e d documents are i n c l u d e d i n the package of documents accompanying the shipment and t h a t they are complete and l e g i b l e , so t h a t o f f i c i a l s have no d i f f i c u l t y i n r e a d i n g them. Absence of i n f o r m a t i o n , incompleteness or i l l e g i b i l i t y o f any of t h i s i n f o r m a t i o n may r e s u l t i n d e l a y o f c l e a r a n c e of the goods u n t i l the problem i s remedied. For c a r r i e r s under CEPACS procedures, the v e h i c l e o p e r a t o r s u r r e n d e r s the 'mail copy' of the b i l l o f l a d i n g / cargo c o n t r o l document. The Customs o f f i c i a l stamps t h i s copy w i t h the date and p o r t of e n t r y number and forwards i t to the computer i n p u t t e r m i n a l s e r v i n g the p o r t , where the i n f o r m a t i o n i s e l e c t r o n i c a l l y forwarded to the m a n i f e s t p o r t of e n t r y . For c a r r i e r s not under CEPACS procedures, the cargo c o n t r o l document takes the form o f the Form A8A Cargo M a n i f e s t . At the p o r t of i m p o r t a t i o n , the v e h i c l e o p e r a t o r s u r r e n d e r s the s i x c o p i e s of t h i s m a n i f e s t to the Customs o f f i c i a l s who number i t from a s e r i e s of numbers a s s i g n e d to the p o r t of e n t r y . The ' s t a t i o n copy' and 'mail copy' are p o r t and date stamped and the remainder of t h e c o p i e s are r e t u r n e d to the c a r r i e r . The 'mail copy' goes to the m a n i f e s t p o r t of e n t r y w h i l e the ' s t a t i o n copy' i s f i l e d n u m e r i c a l l y a t the p o r t of a r r i v a l . E x h i b i t 7 shows the d i s t r i b u t i o n of the cargo c o n t r o l document up to the p o i n t o f a c q u i t t a l of the e n t r y . During p r e s e n t a t i o n o f these documents at the f r o n t i e r border c r o s s i n g , the goods remain aboard the c a r r i e r ' s v e h i c l e and u n t i l the goods have been r e p o r t e d to Customs i n the manner d e s c r i b e d , they cannot e n t e r Canada. Once r e p o r t e d the goods become ' i n bond' goods u n t i l they are c l e a r e d f o r e n t r y and a l l duty and taxes are p a i d . In d e t e r m i n i n g the completeness of the documentation, the Customs o f f i c i a l s have the r i g h t t o examine the goods m a n i f e s t on the cargo c o n t r o l document and, a t t h e i r d i s c r e t i o n , may p l a c e Customs s e a l s on the v e h i c l e EXHIBIT 7 D i s t r i b u t i o n o f Cargo C o n t r o l Document F r o n t i e r E n t r y P o i n t CLEARANCE WAREHOUSE Warehouse Keeper Consignee/ Broker Customs & E x c i s e Upon A c q u i t t a l o f E n t r y 1 M a i l 2 Longroom Copy 3 Customs D e l i v e r y A u t h o r i t y 4 Warehouse Keepers Checking Record t o CEPACS i n p u t r A r r i v a l \ A d v i c e ) Note to / Consignee F i l e d as check a g a i n s t e n t r y a p p l i c a t i o n to Customs asy p a r t of d e c l a r a t i o n package -» d e s t r o y e d •> f i l e d by cargo c o n t r o l number a t Customs to v e h i c l e o p e r a t o r A r r i v a l A d v i c e Note > stamped and r e t u r n e d t o consignee as r e l e a s e docu-ment 5 S t a t i o n 6 Customs Checking Record h e l d as p o r t o f e n t r y r e c o r d a s s i g n e d c a r -go c o n t r o l no by Customs f i l e d as r e c o r d o f e n t r y by cargo c o n t r o l number -> d e s t r o y e d 6 8 w h i c h r e q u i r e d e l i v e r y t o t h e p o r t o f e n t r y w i t h t h e s e a l s i n t a c t . Revenue Canada, Customs and E x c i s e , Memorandum D3, c o n t a i n s t h e r e g u l a t i o n s g o v e r n i n g t h e movement o f goods i n bond i n Canada. Only c a r r i e r s who have f i l e d s e c u r i t y bond-w i t h Revenue Canada a r e p e r m i t t e d t o c a r r y goods i n bond between p o i n t s i n Canada. A l l c a r r i e r s o p e r a t i n g under t h e CEPAC System a r e Canada Customs Bonded C a r r i e r s and a r e e n t i t l e d t o move i n bond goods between any p o i n t s i n Canada t h e y a r e a u t h o r i z e d t o s e r v e . O t h e r bonded c a r r i e r s , whether t h e bond i s a g e n e r a l bond o r s i n g l e - t r i p a u t h o r i t y , have e q u a l p r i v i l e g e s b u t a r e under more c o n s t a n t o b s e r v a t i o n by customs o f f i c i a l s . E x c e p t f o r a s m a l l l i s t o f goods, i n c l u d i n g a l c o h o l i c b e v e r a g e s and t o b a c c o p r o d u c t s b e i n g d e l i v e r e d f o r m a n u f a c t u r e , a l l goods b e i n g i m p o r t e d i n t o Canada by motor c a r r i e r must be d e l i v e r e d t o e i t h e r a highway f r o n t i e r e x a m i n i n g warehouse o r t o an i n l a n d highway s u f f e r a n c e warehouse f o r Customs e n t r y t o be c o m p l e t e d . The c h o i c e o f f a c i l i t y a t w h i c h e n t r y w i l l be made i s up t o t h e c a r r i e r o f t h e goods. Goods c l e a r e d a t t h e highway f r o n t i e r f a c i l i t y a r e r e l e a s e d from bond and a r e d e l i v e r e d i n Canada as d o m e s t i c goods w h i l e goods c a r r i e d t o an i n l a n d highway s u f f e r a n c e warehouse move i n bond and remai n so u n t i l c l e a r a n c e i s c o m p l e t e d . The r e g u l a t i o n s g o v e r n i n g t h e use o f highway s u f f e r a n c e warehouses a l l o w Customs e n t r y a t any such f a c i l i t y d e s i g n a t e d as t h e m a n i f e s t p o r t o f e n t r y on the cargo c o n t r o l document. T h i s enables shipments b e i n g imported a t any f r o n t i e r c r o s s i n g t o be c l e a r e d a t the s u f f e r a n c e f a c i l i t y c l o s e s t t o t h e i r f i n a l d e s t i n a t i o n , thereby a v o i d i n g f u r t h e r h a n d l i n g w i t h i t s a s s o c i a t e d d e l a y s and expense. The c l e a r a n c e procedures i s the same a t the f r o n t i e r examining warehouse or a t an i n l a n d highway s u f f e r a n c e ware-house but because the m a j o r i t y o f goods b e i n g imported i n t o Canada by motor c a r r i e r are e n t e r e d a t the l a t t e r type of f a c i l i t y , t h i s p r o c e s s w i l l be c o n s i d e r e d here. (e) D e l i v e r y of Goods t o I n l a n d Highway S u f f e r a n c e Warehouse Revenue Canada 'Customs S u f f e r a n c e Warehouse Regula-8 t i o n s ' p r o v i d e f o r two types of space a t each i n l a n d s u f f e r -ance warehouse. F i r s t , t h e r e i s a p u b l i c a r e a where the warehouse keeper p r o v i d e s space and s e r v i c e s t o c a r r i e r s i n the amount they need and when they need i t , c h a r g i n g o n l y f o r what i s used. T h i s i s the most common type o f f a c i l i t y f o r warehousing i n bond goods p r i o r t o c l e a r a n c e through the highway s u f f e r a n c e warehouse system. The r e g u l a t i o n s a l s o r e q u i r e s u f f e r a n c e warehouse keepers t o p r o v i d e space which may be l e a s e d t o c a r r i e r s f o r t h e i r e x c l u s i v e use i n ware-housing i n bond goods. The c a r r i e r e n t e r s i n t o a f i x e d l e a s e w i t h the warehouse f a c i l i t y and becomes, i n e f f e c t , a s u f f e r -ance warehouse keeper w i t h i n the l a r g e s u f f e r a n c e warehouse complex. Upon d e l i v e r y of the i n bond goods to the s u f f e r a n c e warehouse, the c a r r i e r i s s u e s two documents a d v i s i n g o f the 9 a r r i v a l . The consignee or h i s agent i s a d v i s e d by means o f the 'longroom' and 'Customs d e l i v e r y a u t h o r i t y ' c o p i e s of the cargo c o n t r o l documents. T h i s a d v i c e w i l l a l s o i n c l u d e the package of Customs documentation which accompanies the goods. C a r r i e r s d e l i v e r i n g goods t o the p u b l i c area o f the warehouse must a l s o i s s u e an a r r i v a l a d v i s e note t o the a u t h o r i z e d warehouse keeper by means of the 'warehouse keeper c h e c k i n g r e c o r d ' copy of the cargo c o n t r o l document. While the goods remain i n bond i n the f a c i l i t y the warehouse keeper i s r e s p o n s i b l e t o the Crown f o r the s a f e k e e p i n g o f the goods and i s l i a b l e f o r a l l charges deemed payable on e n t r y o f the goods. Where goods b e i n g imported are of a c l a s s which need not be e n t e r e d through a c l e a r a n c e warehouse the 'warehouse keeper's c h e c k i n g r e c o r d ' i s f i l e d a t the Customs o f f i c e a t the p o r t of e n t r y . The cargo c o n t r o l document used by c a r r i e r s not under CEPACS procedures i n c l u d e s a 'Customs c h e c k i n g r e c o r d ' copy which i s p r e s e n t e d t o the Customs o f f i c e a t the p o r t of e n t r y T h i s c h e c k i n g r e c o r d a l l o w s Customs o f f i c i a l s t o v e r i f y t h a t goods brought i n t o Canada by non-audit c a r r i e r s a re c l e a r e d as domestic goods and t h a t a l l duty and taxes are p a i d . 71 Many of the goods imported i n t o Canada are e n t e r e d by a u t h o r i z e d agents of the consignee. These agents, i n the form of Customs House B r o k e r s , are l i c e n s e d and bonded under regu-l a t i o n s i s s u e d by Revenue Canada, i n Memorandum D11. Any co n s i g n e e / i m p o r t e r of goods e n t e r i n g Canada may engage a cus-toms brok e r t o a c t on h i s b e h a l f by f i l i n g a Form E65 Power  of A t t o r n e y w i t h the l o c a l C o l l e c t o r o f Customs. The f u n c t i o n of the Customs Broker i s t o guide the goods and documentation r e q u i r e d through Customs e n t r y procedures and t o take respon-s i b i l i t y f o r the payment of a l l e n t r y charges on b e h a l f o f the c o n s i g n e e / i m p o r t e r . (f) Customs E n t r y o f Imported Goods The f o l l o w i n g s e c t i o n d e a l s w i t h the procedures i n v o l v e d i n c l e a r i n g the goods through Canada Customs and i s concerned w i t h the p r i n c i p l e s o f the e n t r y procedure and the movement of documentation r e q u i r e d f o r c l e a r a n c e . During the p e r i o d i n which the consignee or b r o k e r i s u n d e r t a k i n g t h i s t a s k , and u n t i l the e n t r y i s a c q u i t t e d by Customs, the goods remain i n bond i n the s u f f e r a n c e warehouse. Customs seldom r e q u i r e s an examination o f the goods a r r i v i n g a t s u f f e r a n c e warehouse f a c i l i t i e s . T h i s i s p a r t i c u -l a r l y t r u e i n cases where the shipment i s c l e a r e d by a l i c e n c e d and bonded Customs-House Broker. Brokers must po s t a s e c u r i t y bond w i t h Revenue Canada g u a r a n t e e i n g t o work w i t h i n the laws gover n i n g imported goods and where wrong-doing i s d e t e c t e d by 72 Canada Customs o f f i c i a l s , t h i s bond may be f o r f e i t e d and t h e l i c e n c e suspended o r r e v o k e d . Goods e x a m i n a t i o n s a r e u s u a l l y r e s t r i c t e d t o s i t u a t i o n s where t h e Customs a p p r a i s e r c a n n o t f u l l y comprehend t h e n a t u r e and/or a p p l i c a t i o n o f t h e goods w i t h o u t a v i s u a l i n s p e c t i o n . T h i s , o f c o u r s e , does n o t r u l e o u t t h e p o s s i b i l i t y o f s p o t c h e c k s w h i c h a r e o f t e n under-t a k e n . Upon r e c e i p t o f t h e a r r i v a l a d v i c e n o t e from t h e c a r r i e r , t h e c o n s i g n e e o r h i s b r o k e r can b e g i n t h e c l e a r a n c e p r o c e d u r e . The f i r s t s t e p i s t o check t h a t a l l r e q u i r e d Customs documen-t a t i o n i s a v a i l a b l e , l e g i b l e , and c o m p l e t e . S u f f e r a n c e ware-house o p e r a t o r s i n d i c a t e t h a t t h e most common d e l a y i n h a v i n g goods c l e a r e d by Customs i s t h e absence o f c o r r e c t o r c o m p l e t e documentation.^''" Where adequate documents do n o t accompany t h e goods t h e c o n s i g n e e / b r o k e r must a w a i t t h e i r a r r i v a l from t h e c o n s i g n o r . Where d o c u m e n t a t i o n i s i n c o r r e c t t h e c o n s i g n e e must have c o r r e c t i o n s made b e f o r e p r e s e n t a t i o n t o Canada Customs. The b r o k e r must a l s o e s t a b l i s h s e v e r a l i m p o r t a n t c h a r -a c t e r i s t i c s o f t h e goods w h i c h w i l l a s s i s t i n p r e p a r i n g t h e e n t r y . The m a t e r i a l n a t u r e o f t h e goods and t h e end-use t o w h i c h t h e y w i l l be p u t i n Canada must be d e t e r m i n e d so t h a t t h e goods r e c e i v e t h e a p p r o p r i a t e t a r i f f t r e a t m e n t . The c o u n t r y o f o r i g i n , t h e c o u n t r y o f e x p o r t and t h e shipment r o u t i n g a r e a l l r e q u i r e d t o d e t e r m i n e t h e t a r i f f s t a t u s o f t h e goods. A l s o t o be d e t e r m i n e d i s t h e t y p e o f e n t r y w h i c h t h e c o n s i g n e e / i m p o r t e r wishes f o r the goods and whether the documentation i n hand i s a p p r o p r i a t e f o r t h i s type o f e n t r y . 1. Types of E n t r i e s There are two g e n e r a l c l a s s e s o f e n t r i e s which can be made f o r f o r e i g n goods b e i n g imported i n t o Canada. For goods which w i l l be put to immediate use once i n Canada, t h e r e are a s e r i e s of e n t r y types i n c l u d i n g the e n t r y f o r home consump-t i o n , temporary admission p e r m i t s , e x h i b i t i o n p e r m i t s and A.T.A. Carnets among o t h e r s . The entry-for-home-consumption i s the most common of the e n t r i e s . The home consumption e n t r y i s made on the Form B3: Canada Customs E n t r y Coding Form and i s known simply as a . 'B3 E n t r y ' . The e n t r y i s made by the c o n s i g n e e / b r o k e r who pays a l l d u t i e s and taxes due upon a c q u i t t a l o f the e n t r y by Canada Customs. The goods are then r e l e a s e d from Customs bond and a re t r e a t e d as domestic goods. O f t e n the s i t u a t i o n a r i s e s i n which an importer can r e a l i z e s u b s t a n t i a l s a v i n g by making f o r e i g n purchases which he does riot want r e l e a s e d i n the Canadian market immediately. In such c a s e s , and f o r many o t h e r s , Canadian t a r i f f law a l l o w s importers t o warehouse f o r e i g n goods i n Canada i n approved C l a s s I I Bonded Warehouses (see Chapter 3). Warehousing i n bond goods i n Canada i n t h i s manner a l l o w s the importer t o d e f e r payment of import duty and taxes f o r a p e r i o d o f up to "74 two y e a r s , d u r i n g which the goods may remain warehoused. The importer i s all o w e d access t o the goods under Customs super-v i s i o n , f o r the purpose o f i n s p e c t i o n , r e p a c k a g i n g , sampling, r e s a l e t o o t h e r w h o l e s a l e r s , t r a n s f e r between C l a s s I I Bonded Warehouses or r e - e x p o r t without payment of import charges. At any time, the i n bond shipment, o r any p o r t i o n o f i t , may be ent e r e d i n t o the Canadian market by f i l i n g o f the a p p r o p r i a t e import e n t r y document and payment of a l l duty and taxes a p p l i -c a b l e a t the time o f r e l e a s e . A l l warehouse e n t r i e s a re made on Form B6: Canada Customs Warehouse E n t r y Coding Form. 2. The Canadian Commodity Code Index Regar d l e s s of the type o f e n t r y which i s made f o r f o r e i g n goods e n t e r i n g Canada, the co n s i g n e e / b r o k e r must e s t a b l i s h the c o r r e c t commodity code. T h i s code i s taken from the Canadian I n t e r n a t i o n a l Trade C l a s s i f i c a t i o n Commodity Index ( E x h i b i t 8 ) , a l i s t of a l l p r o d u c t s which might be imported to Canada. The use of the index number on a l l e n t r i e s o f goods i n t o Canada enables S t a t i s t i c s Canada t o keep r e c o r d s of the types and q u a n t i t i e s o f goods imported f o r s a l e i n domestic markets. 3. The Canadian Customs T a r i f f : A l s o t o be determined by the br o k e r i s the t a r i f f treatment which the goods s h o u l d r e c e i v e . The Customs T a r i f f A c t i s the o f f i c i a l source o f charges on goods e n t e r i n g EXHIBIT 8 Canadian I n t e r n a t i o n a l Trade C l a s s i f i c a t i o n Commodity Index CLT.C COMMOOrnr CODE I N D E X D E S C R I P T I O N V A N S P R O D U C T I O N B R O A D C A S T I N G , T V A N D F O I V A N Z C E Z P H D U S T R I A L F U N G I C I D E , V A P O N A M S E C T O O E D I C H L O R O V I N Y L P H O S P H A T E V A P O R B A R R I E R . F O L C L A O B U T - O I N G P A P E R V A P O R U T E R A E L E C T R C D O M E S T I C V A P O U R I Z E R S R U B B E R M E D I C A L V A R C U M R P - 1 4 W S P E T R O L E U M H Y D R O C A R B O N R E 5 M V A R C U M 4 7 J 7 P E T R O L E L N H Y D R O C A R B O N R E S I N V A R F I L S L E E V I N G E L E C T R I C A L I N S U L A T I O N V A R G L A S S L E E V M C E L E C T R C A L I N S U L A T I O N V A R H C S V A R O A S E F A 8 R M O L V T K : E N T V M E S V A M O H W E S Y N C M R O G E A R M O T O R S E L E C T R I C V A R K 3 V N E U N I T S . E L E C T R I C M O T O R S V A R I S P E E D T Y P E D R I V E UNfT. P O W E R T R A N S VARtSTORS V A R T T E X G L A S S T A R N V A R T T V P E R C O M P O S I N G M A C H M E S V A R N I S H B A S E P R E P S I N O C H E M S P E C I A L T I E S V A R N I S H P R E P A R A T I O N S V A R M S H R C S O Z S F O R M U L A R C N P A I N T V E H I C L E V A R M S H R C 7 4 7 F O R M U L A T I O N P A J N T V E H C L E V A R M S H R C 3 0 S • F O R M U L A T I O N P A I N T V E H I C L E V A R M S H R C 6 0 2 0 P O L Y E S T E R R E S I N I N S O L V E N T V A R M S H R L 3 2 7 4 ' F O R M U L A T I O N P A M T V E H I C L E V A R M S H U G 5 9 1 0 . F O R M U L A T I O N P A J N T V E M O . E V A R M S N E S . A R T I S T S A N D S T U D E N T S V A R N C M S U P E R O U T V F I R E C L A Y F M E B R C K V A S C O S U P R E M E B A R S V A S C O X t 8 A R 3 V A S C C U E T 1 0 0 0 S T E E L B A R S V A S E S A R T 1 D E C O R W A R E . C H M A A N D P O R C E L A M V A S E S . D E C O R A T I V E . G L A S S V A S E S . E A R T H E N W A R E V A S C O L A T C R 3 V A S O T O M N E P M E P H R M E V A T B R L U A M T B L U E 4 G V A T D Y E V A T B R O W N S G P A S T E V A T O Y E S T U F F V A T O Y E S T U F F S T C L U O W G M C 4 F O V A T V A T O Y E S T U F F S - B L U E V A T O Y E S T U F F S . B R O W N V A T O Y E S T U F F S G R E E N V A T O Y E S T U F F S G R E Y V A T O Y E S T U F F S N E S V A T O Y E S T U F F S R E D V A T O Y E S T U F F S Y E L L O W V A T S B R E W E R Y V A T S M I A A N D C R E A M O A K Y V A U L T I N G H O R S E S . G Y M N A S I U M E O U I P M E N T V A U L T S . B U R I A L V A U L T S D O O R S F O R V A I 3 - 3 0 S O - 4 2 S Y N R E S M R O S M B A S E V C L U 141 C L E A R P V C S H E E T S C R Y S T A P L E X V E A L P A T T I E S F R E S H O H C H H . L E O V E A L P A T T I E S F R O Z E N V E A L . B O N E W F R E S H O R C H L L E O V E A L . B O N E - I N F R O Z E N V E A L B O N E L E S S F R E S H O R C H C L E D V E A L B O N E L E S S F R 0 2 E N V E A L . C A N N E D V E C T O R C A R O O G R A P H V E C T O R S C O P E V E E B L O C K . M E T A L W O R K W G . B E N C H F L O O R T Y P E V E G F I B - H O R S E H A A M I X . P R O C E S S E D F O R B R O O M S V E G F e * O R S E H A « Mix. P R O C E S S E O F O R B R U S H E S V E O F « N E S C U T T O L E N G T H F O R B R O O M MFR VEG F W NES CUT T O L E N G T H F O R B R U S H M A K N G V E G Ffl N E S D R E S S E D F O R B R O O M 1 B R U S H M F R vCa FlB N E 3 D Y E D F O R B R O O M A N D B R U S H MFR V E G A S U P C R O U T Y SLCA F I R E B R C K V E G E T A B L E B A G S . P A P E R V E G E T A B L E B A S K E T S O F S L C E D O R P E E L E D W O O D RM* toCuMoma T«rtt la c*io* iar*l ctsnrfic*Dcr>i una K> TARIFF ITEMS COMMONLY APPLIED 9 5 0 0 5 0 ) 4 3 5 4 0 1 S 0 I 1 8 1 0 0 0 1 ' 9 3 0 0 0 1 & 2 T O 0 0 I 76 Canada. I t s c o n t e n t s a r e t h e c o l l e c t i o n o f r e g u l a t i o n s w h i c h come from t h e v a r i o u s f e d e r a l a c t s r e s p e c t i n g i n t e r n a -t i o n a l i m p o r t s , f r o m t r a d e agreements and f r o m d i s c r e t i o n a r y powers o f t h e M i n i s t e r o f N a t i o n a l Revenue. The o f f i c i a l Customs T a r i f f c o n t a i n s t h r e e s c h e d u l e s d e a l i n g w i t h goods e n t e r i n g Canada. S c h e d u l e A i s a l i s t o f a l l t h e t a r i f f i t e m s under w h i c h e v e r y p r o d u c t e n t e r i n g Canada must be c l a s s e d , and t h e c o r r e s p o n d i n g r a t e s o f d u t y under t h r e e t a r i f f s : t h e ' B r i t i s h P r e f e r e n t i a l ' t a r i f f ; t h e 'Most F a v o u r e d N a t i o n ' t a r i f f ; and, t h e ' G e n e r a l ' t a r i f f . I n a d d i t i o n , S c h e d u l e A shows t a r i f f r a t e s a p p l i c a b l e under any s p e c i a l t r a d e agreements i n t o w h i c h t h e C a n a d i a n government has e n t e r e d w i t h i t s t r a d i n g p a r t n e r s , and r a t e s under t i m e - l i m i t e d , i n t e r n a t i o n a l agreements i n a i d o f u n d e r - d e v e l o p e d c o u n t r i e s , known as t h e ' G e n e r a l P r e f e r e n t i a l ' t a r i f f s . S c h e d u l e B l i s t s t h e goods on w h i c h d o m e s t i c o r home consumption drawbacks a r e a l l o w e d . Drawbacks a r e r e f u n d s o f a l l , o f a p o r t i o n o f , d u t y and t a x e s on i m p o r t e d goods a l l o w e d under s p e c i a l c i r c u m s t a n c e s . S c h e d u l e C i s a l i s t o f goods w h i c h a r e , f o r v a r i o u s r e a s o n s , p r o h i b i t e d e n t r y t o Canada. Such goods, i f i m p o r t e d by motor c a r r i e r , w o u l d n o t l i k e l y be a l l o w e d beyond t h e f r o n t i e r Customs o f f i c e a t t h e b o r d e r c r o s s i n g . U s i n g t h e f r e i g h t c l a s s i f i c a t i o n d i c t i o n a r y i n S c h e d u l e A, t h e b r o k e r d e t e r m i n e s t h e t a r i f f i n d e x number w h i c h d e s c r i b e s th e m a t e r i a l n a t u r e and end-use o f t h e goods. F o r t h e 77 EXHIBIT 9 The Customs T a r i f f , 1 Schedule A. 78 e x p e r i e n c e d b r o k e r t h i s i s not u s u a l l y a d i f f i c u l t t a s k , e s p e c i a l l y i f the c o n s i g n e e / i m p o r t e r r e g u l a r l y imports such goods. Schedule A i s so arranged t h a t , once the t a r i f f index number and d e s c r i p t i o n are e s t a b l i s h e d , the c o r r e s p o n d i n g r a t e of duty under each t a r i f f c l a s s i f i c a t i o n i s e a s i l y found. A sample page from the Customs T a r i f f Schedule A appears i n E x h i b i t 9. 4. Charges on Imported Goods There are f o u r p o s s i b l e charges which may be a p p l i e d a g a i n s t goods e n t e r i n g Canada: duty, s a l e s t a x , e x c i s e tax and anti-dumping charges. Unless s p e c i f i c a l l y exempt, a l l goods e n t e r i n g Canada are s u b j e c t t o import duty as s p e c i f i e d i n Schedule A of the Customs T a r i f f . Three types o f duty might a p p l y : 'ad valorem' duty i s a charge c a l c u l a t e d ; as a percentage of the v a l u e of the goods; ' s p e c i f i c ' duty i s a charge based on a s p e c i f i e d u n i t of measure such as per g a l l o n or per ton; and, 'compound' duty i s a combination of these two (eg. 15 p e r c e n t o f the v a l u e - f o r - d u t y p l u s $0.10 per pound). S a l e s tax i s imposed under the a u t h o r i t y o f the E x c i s e 12 Tax A c t which s t i p u l a t e s a t s e c t i o n 27 t h a t : (1) There s h a l l be imposed, l e v i e d , and c o l l e c t e d a consumption or s a l e s t a x . o f twelve (12) p e r c e n t on the s a l e s • p r i c e of a l l goods; (a) produced or manufactured i n Canada... (b) imported i n t o Canada... The consumption or s a l e s tax r a t e i s a p p l i e d t o the ' d u t y - p a i d -v a l u e ' o f the goods, which i s e q u a l to the ' v a l u e - f o r - d u t y ' p l u s the a p p l i c a b l e duty. On s p e c i f i c commodities manufactured i n Canada, or imported i n t o the c o u n t r y , Revenue Canada imposes an e x c i s e 13 tax under the a u t h o r i t y o f the E x c i s e Tax A c t . E x c i s e t a x -a t i o n i s a form of d i s c r i m i n a t o r y t a x a t i o n undertaken f o r two s p e c i f i c r e a s o n s : sumptuary or r e g u l a t o r y . A sumptuary tax i s one which d i s c r i m i n a t e s , on moral or e t h i c a l grounds, a g a i n s t some commodity (or s e r v i c e ) , the consumption o f which i s not deemed d e s i r a b l e . On t h i s b a s i s , the E x c i s e Tax A c t imposes a tax on c o s m e t i c s , j e w e l l e r y , tobacco p r o d u c t s and c o i n - o p e r a t e d amusements. A r e g u l a t o r y tax has the d i r e c t purpose o f r e d u c i n g the consumption of some pr o d u c t s and Revenue Canada imposes e x c i s e tax on a l l imported e l e c t r o n i c s equipment and watches and c l o c k s as p r o t e c t i o n f o r Canadian based i n d u s t r y . The F e d e r a l S a l e s and E x c i s e Tax R e g u l a t i o n s l i s t a l l the p r o d u c t s t o which e x c i s e tax a p p l i e s and the a p p l i c a b l e tax r a t e . The f o u r t h charge which can be a p p l i e d to goods b e i n g imported i n t o Canada comes under the a u t h o r i t y of the A n t i -14 Dumping A c t . The r e g u l a t i o n s g o v e r n i n g charges under t h i s A c t are based on the anti-dumping code agreed on a t the Kennedy Round Trade t a l k s (GATT) i n the e a r l y 1960Vs. S e c t i o n 3 of the Act s t a t e s : There s h a l l be l e v i e d c o l l l e c t e d and 80 p a i d upon a l l dumped goods e n t e r e d i n t o Canada, i n r e s p e c t of which the T r i b u n a l has made an o r d e r o f f i n d i n g , b e f o r e e n t r y o f the goods, t h a t the dumping of goods o f the same d e s c r i p t i o n (a) has caused, i s c a u s i n g or i s l i k e l y t o cause m a t e r i a l i n j u r y t o p r o -d u c t i o n . i n Canada of l i k e goods, or (b) has m a t e r i a l l y r e t a r d e d or i s m a t e r i a l l y r e t a r d i n g the e s t a b -l i s h m e n t o f the p r o d u c t i o n i n Canada o f l i k e goods, an a n t i dumping duty i n an amount equal to the margin of dumping of the e n t e r e d goods. T h i s 'margin-of-dumping' i s the amount by which the normal v a l u e o f the goods i n the c o u n t r y of o r i g i n exceeds the e x p o r t p r i c e (up t o a maximum of f i f t y p e r c e n t of the d u t i a b l e v a l u e ) . The Anti-Dumping T r i b u n a l , e s t a b l i s h e d under the A c t , w i l l take a c t i o n o n l y upon a p p l i c a t i o n o f an i n d u s t r y segment, such as an i n d u s t r y t r a d e a s s o c i a t i o n or Board o f Trade; i t w i l l not a c t on the a p p l i c a t i o n of a s i n g l e f i r m . There are t h i r t e e n types of goods exempt from t h i s A c t , i n c l u d i n g . c o n s i g n m e n t shipments, goods s u b j e c t t o e x c i s e t a x a t i o n and goods whose export p r i c e r e f l e c t s d e f e r r e d q u a n t i t y a l l o w a n c e s , f r e i g h t allowances or cash d i s c o u n t s . 5. Value f o r Duty P r e v i o u s l y , the concept of ' v a l u e - f o r - d u t y ' was i n t r o -duced w i t h no e x p l a n a t i o n . Of a l l p r i n c i p l e s which form p a r t of the Customs e n t r y p r o c e s s , v a l u e - f o r - d u t y i s l i k e l y the most important. I t i s upon t h i s base t h a t a l l e n t r y charges are l e v i e d and the r e g u l a t i o n s which govern i t s c a l c u l a t i o n 81 l e a v e n o t h i n g t o the d i s c r e t i o n of the c o n s i g n e e / i m p o r t e r or the Customs a p p r a i s e r . S e c t i o n s 35 to 43, of the Customs A c t and Revenue Canada, Memorandum D43 c o n t a i n the r e g u l a t i o n s 15 which govern i t s c a l c u l a t i o n . S e c t i o n 36(1)...the v a l u e f o r duty s h a l l , n o t w i t h s t a n d i n g any i n v o i c e or a f f i d a v i t t o the c o n t r a r y , be the f a i r market v a l u e a t the time when and p l a c e from which the goods were shipped d i r e c t l y t o Canada', of l i k e goods when s o l d (a) t o p u r c h a s e r s l o c a t e d a t t h a t p l a c e w i t h whom the vendor d e a l s a t arm's l e n g t h and who are a t the same or s u b s t a n t i a l l y the same t r a d e l e v e l as the i m p o r t e r , and (b) i n the same, or s u b s t a n t i a l l y the same q u a n t i t i e s f o r home consumption i n the o r d i n a r y course of t r a d e under c o m p e t i t i v e c o n d i t i o n s . The ' f a i r market v a l u e • , where l i k e goods are not s o l d f o r home consumption i n the f o r e i g n c o u n t r y , must be S e c t i o n 37 ...the aggregate of (a) the c o s t of p r o d u c t i o n o f the goods imported; and, (b) an amount t h a t i s the same percentage of the c o s t of p r o d u c t i o n of the goods imported as the gross p r o f i t on s i m i l a r goods i s of the c o s t of p r o d u c t i o n of the s i m i l a r goods. Almost w i t h o u t e x c e p t i o n , the " f a i r market v a l u e a t the time and p l a c e o f shipment" i s the p r i c e f o r which the goods a r e s o l d to the p u r c h a s e r i n Canada, f r e e - o n - b o a r d a t the e x p o r t e r ' s warehouse. S i t u a t i o n s do a r i s e where the amount f o r which the goods are s o l d t o the Canadian pur c h a s e r i s h i g h e r than the ' f a i r market v a l u e ' as c a l c u l a t e d above. In such c a s e s , the 'net s e l l i n g p r i c e ' becomes the v a l u e - f o r - d u t y . The 'value-f o r - d u t y ' i s the h i g h e r of the ' f a i r market v a l u e 1 as c a l c u -l a t e d a c c o r d i n g to s e c t i o n s 36 and 37 o f the Customs A c t or 82 t h e 'net s e l l i n g p r i c e 1 t o p u r c h a s e r s i n Canada. There a r e c e r t a i n c h a r g e s w h i c h , when a p p l i e d a g a i n s t th e goods a f t e r t h e p o i n t t h e y b e g i n t h e i r c o n t i n u o u s j o u r n e y t o Canada, a r e n o t d u t i a b l e . Such expenses as f r e i g h t c h a r g e s , i n s u r a n c e , c a r t a g e , s t o r a g e , i n l a n d f r e i g h t , l i g h t e r a g e , h a n d l i n g c h a r g e s , s e l l i n g c o m m i s s i o n s , t r a d e d i s c o u n t s , f o r e i g n i n t e r n a l t a x e s and e x p o r t t a x e s and d u t i e s c h a r g e d t o C a n a d i a n b u y e r s a r e n o t d u t i a b l e when t h e goods e n t e r Canada. D u t i a b l e expenses i n c l u d e a l l m a t e r i a l s used i n d o m e s t i c and e x p o r t p a c k a g i n g ( d u t i a b l e under t h e i r own t a r i f f i t e m number and r a t e s ) , b u y i n g c o m m i s s i o n s , r o y a l t i e s , c a s h d i s c o u n t s , f o r e i g n i m p o r t d u t i e s and f i n a n c i a l and i n t e r e s t c h a r g e s i n c l u d e d i n th e p r i c e o f t h e goods, r e g a r d l e s s o f when t h e s e c h a r g e s a r e a p p l i e d t o t h e goods. 6. F i l i n g t h e E n t r y H a v i n g d e t e r m i n e d t h e a c c e p t a b i l i t y o f a l l t h e documen-t a t i o n accompanying t h e goods, t h e c o r r e c t commodity code, t h e t a r i f f t r e a t m e n t and s t a t u s o f t h e goods, t h e b r o k e r c o m p l e t e s th e a p p r o p r i a t e e n t r y document ( i . e . , Form B3 f o r home consumption e n t r i e s , Form B6 f o r warehouse e n t r i e s ) . E x h i b i t .10 shows a c o m p l e t e d e n t r y c o d i n g form f o r t h e con s u m p t i o n e n t r y . The B3 e n t r y f o r home consump t i o n must be c o m p l e t e d i n f u l l , w i t h a l l columns c o n t a i n i n g t h e r e q u i r e d i n f o r m a t i o n and th e c h a r g e s as o u t l i n e d above computed and shown. The Form B6 must a l s o be c o m p l e t e d b u t no c a l c u l a t i o n o f c h a r g e s i s B3 DNR APPROVED 22/5/75 CANADA CUSTOMS IMPORT ENTRY CODING FORM DOUANES DU CANADA - FORMULE DE CODAGE DE DECLARATION D'IMPORTATION 1 TYPE 2 P A G E N O . N O O E P A G E A A BROKER'S REFERENCE 3 IMPORTER NUMBER/NAME, ADDRESS NUMERO/NOM, ADRESSE DE L' IMPORTATEUR CAEA 618 9,0-.^ HANDY; GRAFTl SALES LTD. 102 LONG" STREET TORONTO, ONT. PACIFIC CUSTOMS BROKE US (AIRPORT) LTD. 203-484 MILLER ROAD, VANCOUVER, AMF V7B 1T9 PHONE (604) 273-3941 4 CARGO CONTROL NO. NO CONTROLE DE FRET 014-69803016 5 C.C. QUANTITY QUANTITE C F . 42 6 ACCOUNT/SECURITY NO. NO DE COMPTE/GARANTIE 7 PORT BUR. 809 g VENDOR NAME NOM DU VENDEUR A&J DISTRIBUTORS CO. LI 10 INVOICE QTY. Q T E F A C T U R E •D. 42 11 CTRY EXPORT PAYS EXP. 154 12 CTRY ORIGIN PAYS OR. 167 13 OIR SHIP EXP. DIR. A 14 TARIFF TREAT. TR. TARIF 2 8 ENTRY NO. . NO DE DECL. 15 IMM.REL.NO. NO MAINL. IMM. 24920 1 TARIFF ITEM NO TARIF EARTHENWARE VASES 28800-1 8673260 13 216 20 12 12000 , , • - '•-IGMJkX'lOM PORCELAIN VASES 8672850 13 64 1600. iiGNATSON l/WE THE UNDERSIGNED H A V E AUTHORIZED MOUS, SOUSSIGNES, AUTORISONS PAR LES PRESENTES TO PRESENT THIS ENTRY TO THE * REMETTRE LA PRESENTE OECLAR COLLECTOR OE CUSTOMS AND AT ION AU R^ECE VELm^DES^DOUANES SIGNATURE AGENT JE SOUSSIGNE. C.B. HANDY PLEASE PRINT NAME—LETTRESS MOULEES S.V.P. Attorney for Pacific Customs Brokers (Airport) Ltd. OF Attorney for the Importer . DE IMPORTER/AGENT—IMPORTATEUR/AGENT D E C L A R E T H E P A R T I C U L A R S Of T H I S E N T R Y T O B E T R U E A N D C O M P L E T E A N D T H A T A N Y G O O D S E N T E R E D F R E E . O R A T L O W E R R A T E O F D U T Y T H A N W O U L D O T H E R W I S E B E C H A R G E A B L E . W I L L B E U S E D I N A C C O R D A N C E W I T H T H E S P E C I F I C P R O V I S I O N S ! O F T H E T A R I F F I T E M I S I U N D E R W H I C H E N T E R E D . r,ir, « „ F O U F L E S D E T A I L S O E C E T T E D E C L A R A T I O N S O N T V R A I S E T C O M P L E T S E T Q U E T O U T E S L E S M A R C H A N D I S E S D E O O U A N E E S E N F R A N C H I S E O U A U N P L U S B A S T A U X D E D R O I T S D U E C E L U I Q U I S E R A I T A U T R E M E N T "POSTSERONJUm" E ? ES CONFO-TEMENT i " S! A U X D ^ O S I T I O N S S P E C F I O U E S O U O U D E S N U M E R O S T A R I F A I R E S A L A F A V E U R D U O U E L O U D E S O U E L S E L L E S O N T E T E , » P O R T E E S . Sept 3 0 1974  —-r—ticw, 26 £ X D A T E 27 28 V A L U E FOR DUTY 29 O A T E DU C H A N G E CRCY (CAN. DOLLARS) R E G U L A R D U T Y CODE V A L E U R 1MPOSABLE D R O I T O R D I N A I R E D J M O M DEVISE (DOLLARS CAN.) ; 23 09 154 3312.42 36 T O T A L F M V 37 CRCY. F M V T O T A L E CODE CODE B DEVISE 13600. , 154; TIME LIMIT: FILL IN NUMBER OF MONTHS APPLICABLE DELAI: M E T T R E LE NOMBRE DE MOIS APPLICABLE SALES T A X T A X E DE VENTE EXCISE T A X T A X E DIACCISE 662.48 3974.90 476.99 IMPORTERS USE ONLY RESERVE A L'IMPORTATEUR CENTRAL PAYMENT PAIEMENT CENTRAL LOCAL PAYMENT PAIEMENT LOCAL HOLD FOR PAYMENT RETENIR POUR PAIEMENT 42 DUTY—DROITS 662.48 43 SALES T A X — T A X E DE VENTE 476.99 44 EXCISE T A X - T A X E D'ACCISE 0.00 45 TOTAL 1139.47 • SUBJECT TO AMENDMENT KEYSTONE BUSINESS FORMS LID-VANCOUVER 84 n e c e s s a r y as none are t o be p a i d a t the time of f i l i n g the e n t r y . Each form i s completed i n s i x or seven c o p i e s , a l l of which are p r e s e n t e d to Customs f o r a p p r a i s a l . With the E n t r y documentation completed, the b r o k e r puts t o g e t h e r the d e c l a r a t i o n package f o r p r e s e n t a t i o n t o Customs. T h i s 'package' i n c l u d e s : the ' 1longroom 1 and 'Customs d e l i v e r y a u t h o r i t y ' c o p i e s of the cargo c o n t r o l document; the commercial i n v o i c e accompanying the goods; any o t h e r support documents a v a i l a b l e , such as p r e v i o u s d e c l a r a t i o n f o r l i k e goods, Customs r u l i n g s or correspondence r e g a r d i n g the v a l u e , m a t e r i a l nature or end-use of the goods; the Customs I n v o i c e s completed and s i g n e d by the c o n s i g n o r / e x p o r t e r ; the Form B31 S p e c i a l E x p o r t -e r ' s D e c l a r a t i o n , where a p p l i c a b l e ; and, the completed B3 or B6 E n t r y Coding Form. During t h i s time, the goods remain i n Customs bond a t the f r o n t i e r highway examining warehouse or the i n l a n d highway s u f f e r a n c e warehouse. T r u c k l o a d shipments are l i k e l y t o remain on the motor c a r r i e r ' s v e h i c l e i n the d e t e n t i o n compound a t the s u f f e r a n c e warehouse f a c i l i t y . V a l u a b l e time and expense can be saved by not warehousing these shipments u n l e s s and u n t i l a Customs examination i s r e q u i r e d . Shipments a r r i v i n g a t the s u f f e r a n c e warehouse i n l e s s - t h a n - t r u c k l o a d l o t s are more l i k e l y t o be unloaded a t the f a c i l i t y r e g a r d l e s s o f the n e c e s s i t y of Customs examination. For l e s s - t h a n - t r u c k l o a d shipments, the s u f f e r a n c e warehouse becomes the i n i t i a l break-bu l k p o i n t f o r goods c a r r i e d i n t o Canada. 7. A c q u i t t a l of the E n t r y 85 The d e c l a r a t i o n package i s d e l i v e r e d t o the Customs by the b r o k e r . Customs a p p r a i s e r s then d e a l w i t h the e n t r y ; the time i n v o l v e d b e f o r e a p p r a i s a l depending on the volumn of b u s i n e s s i n the p a r t i c u l a r o f f i c e . F o r the e x p e r i e n c e d a p p r a i s e r , a c q u i t t a l of the e n t r y i s not a c o m p l i c a t e d t a s k . U s i n g the Customs A c t , the Customs T a r i f f and o t h e r support documents, the a p p r a i s e r e s t a b l i s h e s the a p p l i c a b i l i t y of sev-e r a l important f a c t o r s about the e n t r y . The a c c e p t a b i l i t y of the 1 v a l u e - f o r - d u t y ' as computer by the c o n s i g n e e / b r o k e r i s the most important f a c t o r , s i n c e i t i s upon t h i s base t h a t a l l charges due the Crown are c a l c u l a t e d , e i t h e r now as on a consumption e n t r y , or a t some f u t u r e date, as on a warehouse e n t r y . E q u a l l y important i s the t a r i f f treatment g i v e n the goods and the t a r i f f s t a t u s which determines the r a t e of duty. The d i s t r i b u t i o n o f documentation f o r the two types of e n t r i e s c o n s i d e r e d here i s s l i g h t l y d i f f e r e n t . The e n t r y f o r domestic consumption (B3 Entry) r e q u i r e s the f o l l o w i n g d i s t r i -b u t i o n . Upon c l e a r a n c e of the e n t i r e shipment, the 'longroom 1 copy of the cargo c o n t r o l document i s compared w i t h the i n f o r m a t i o n c o n t a i n e d i n the p r e v i o u s l y r e c e i v e d 'mail copy'. I f the i n f o r m a t i o n i s comparable, the 'mail copy' i s d e s t r o y e d and the 'longroom copy' i s f i l e d i n sequence by cargo c o n t r o l number. I f a d i s c r e p a n c y e x i s t s , the a p p r a i s e r f i l e s b oth c o p i e s u n t i l a Customs o f f i c e r can account f o r the d i s c r e p a n c y . The 'Customs d e l i v e r y a u t h o r i t y ' copy of the cargo c o n t r o l document becomes the c o n s i g n e e / b r o k e r ' s r e l e a s e a u t h o r i t y and, upon c l e a r a n c e , i s p o r t and date stamped and r e t u r n e d t o the consignee/broker a l o n g w i t h any documents d e l i v e r e d as support f o r the d e c l a r a t i o n . The Form B3 Import E n t r y Coding Form c o n s i s t s of s i x o r seven c o p i e s . The o r i g i n a l copy i s the 'port copy' which i s f i l e d as a r e c o r d f o r the p o r t of e n t r y . There i s a l s o a 'departmental copy' which goes t o Revenue Canada as a r e c o r d copy. The s t a t i s t i c a l branch o f Revenue Canada a l s o gets a copy from which s t a t i s t i c s on a l l imports can be taken. The f o u r t h copy of the document i s the ' r e c e i p t copy' which i s r e t u r n e d t o the b r o k e r as a r e c e i p t f o r payment of duty and t a x e s . There are l i k e l y t o be t h r e e d u p l i c a t e c o p i e s which may be used f o r any r e q u i r e d purpose, such as a f i l e copy i n the b r o k e r ' s r e c o r d s or f o r the i n f o r m a t i o n o f the c o n s i g n e e / i m p o r t e r . Having determined the a c c e p t a b i l i t y of the d e c l a r a t i o n f o r home consumption, the Customs a p p r a i s e r stamps the d e c l a r -a t i o n as a c c e p t e d and d i s t r i b u t e s the documents as i n d i c a t e d above. Where an i n d i v i d u a l i s making a p p l i c a t i o n f o r c l e a r -ance, a l l t a r i f f and t a x charges must be p a i d by cash or c e r t i f i e d cheque p r i o r t o the r e l e a s e o r d e r b e i n g d e l i v e r e d . With the p o r t and date stamped and Customs s i g n e d 'Customs d e l i v e r y a u t h o r i t y ' copy o f the cargo c o n t r o l document, the c o n s i g n e e / i m p o r t e r can make arrangements f o r the goods to be 87 removed from the s u f f e r a n c e warehouse a t which time they a r e c o n s i d e r e d t o be domestic goods. In cases where the goods are c l e a r e d by a l i c e n c e d Customs b r o k e r , a c t i n g as an agent f o r the c o n s i g n e e / i m p o r t e r , the goods may be r e l e a s e d from bond w i t h o u t p r i o r payment o f duty and taxe s . The Broker i s r e q u i r e d to post a bond w i t h Revenue Canada as a guarantee t h a t a l l charges i n c u r r e d by i t s c l i e n t s w i l l be p a i d . The goods are r e l e a s e d from the c l e a r -ance warehouse w h i l e the a c t u a l payment of the charges due may not be made by the b r o k e r u n t i l b i l l e d by Revenue Canada through the p o r t o f e n t r y longroom. The consignee i s then b i l l e d by Revenue Canada through the p o r t o f e n t r y longroom. The consignee i s then b i l l e d by the brok e r f o r the duty and taxes p a i d on h i s b e h a l f and the s e r v i c e charge of the br o k e r . The e n t r y f o r bonded warehouse (B6 Entry) i s t r e a t e d d i f f e r e n t l y than the e n t r y f o r home consumption. As w i t h the l a t t e r type o f e n t r y the documentation i s d e l i v e r e d t o the Customs o f f i c e by the Broker, completed as p r e v i o u s l y d e s c r i b e d . The Customs a p p r a i s e r c o n s i d e r s the e n t r y as t o the a c c e p t a -b i l i t y o f the v a l u e - f o r - d u t y and the t a r i f f treatment a f f o r d e d the goods. S i n c e no payment of duty or taxes i s t o be made a t t h i s time, no c a l c u l a t i o n of these charges a re made al t h o u g h the e n t r y form l i s t s the duty, r a t e s a p p l i c a b l e . Checks are made t o ensure t h a t no d i s c r e p a n c i e s e x i s t between the 'mail copy' of the cargo c o n t r o l document and the e n t r y documents. Any d i s c r e p a n c i e s must be removed b e f o r e the goods can be 88 c l e a r e d f o r d e l i v e r y , i n bond, t o a C l a s s I I Bonded Warehouse. The document i s then p l a c e d i n a f i l e c r e a t e d f o r each e n t r y a t the Customs longroom a t the r e c e i v i n g p o r t . At any time, Customs o f f i c i a l s may r e q u i r e the warehouse o p e r a t o r t o produce the goods d e t a i l e d as b e i n g s t o r e d i n h i s f a c i l i t y . B e f o r e any goods can be r e l e a s e d from bonded s t o r a g e , an 'Ex-Warehouse' e n t r y must be made t o Customs and the duty and taxes due a t the time o f r e l e a s e must be p a i d or guaranteed by a bond. 8. Refunds and Drawbacks O c c a s i o n a l l y , the s i t u a t i o n a r i s e s where the Customs a p p r a i s e r i s not s a t i s f i e d w i t h the d e c l a r a t i o n , o r f e e l s an e r r o r has been made i n r e s p e c t o f the imported goods. In t h i s case, the d e c l a r a t i o n documents a r e r e t u r n e d t o the i m p o r t e r / b r o k e r f o r amendment. The r e t u r n e d documents a r e accompanied by a Form T32, which i s an o f f i c i a l demand t h a t the o r i g i n a l e n t r y be amended. The b r o k e r , upon r e c e i v i n g t h i s demand, must submit an amended e n t r y , and make arrangements t o pay a d d i t i o n a l duty and/or taxes due. The amending e n t r y i s a l s o used i f the bro k e r d i s c o v e r s an e r r o r a f t e r the goods are d u t y - p a i d and wishes t o amend the e n t r y , e i t h e r by p a y i n g the a d d i t i o n a l duty and taxes o r by c l a i m i n g a r e f u n d o f o v e r p a i d amounts. G e n e r a l l y , a l l claims- f o r refunds must be made w i t h i n n i n e t y days.of the date of the o r i g i n a l e n t r y , but s p e c i f i c s e c t i o n s of the Customs A c t d e a l w i t h each type of c l a i m a l l o w e d . The q u e s t i o n of r e a p p r a i s a l o f an e n t r y i s a l s o d e a l t 89 w i t h i n the Customs A c t a t s e c t i o n s 46 and 47 which o u t l i n e the r e g u l a t i o n s g o v e r n i n g t a r i f f c l a s s i f i c a t i o n and v a l u a t i o n . The importer has the r i g h t t o appeal any d e c i s i o n made by the a p p r a i s e r . Any appe a l o f an a p p r a i s e r ' s r u l i n g must be supported by documentary evide n c e which g i v e s j u s t i f i c a t i o n f o r r e v i e w i n g the d e c i s i o n . R e a p p r a i s a l i s not r e s e r v e d f o r the importer; Revenue Canada may demand r e a p p r a i s a l o f any e n t r y f o r a p e r i o d o f up t o two years from the o r i g i n a l e n t r y date. E a r l i e r , the s u b j e c t o f drawbacks was d i s c u s s e d b r i e f l y i n r e s p e c t t o the Customs T a r i f f . A drawback i s a r e f u n d o f a l l , or a p a r t o f , duty and taxes on imported goods a l l o w e d under s p e c i a l c i r c u m s t a n c e s . Goods s u b j e c t t o drawback are l i s t e d i n Schedule B of the Customs T a r i f f and the r e g u l a t i o n s governing them appear i n Revenue Canada Memorandum D17. Draw-backs are allowed on t h r e e c l a s s e s o f goods. For goods imported i n t o Canada but never used b e f o r e b e i n g r e t u r n e d f o r c r e d i t , the c l a i m f o r drawback o f 90 p e r c e n t o f duty and 100 p e r c e n t d f taxes may be made f o r up to two years from the date o f the o r i g i n a l e n t r y . For goods imported i n t o Canada and then exported t o another c o u n t r y , or f o r goods imported which have been f u r t h e r p r o c e s s e d o r manufactured i n Canada b e f o r e e x p o r t a t i o n , the c l a i m f o r drawback o f 99 p e r c e n t o f duty and 100 p e r c e n t of taxes may be made f o r up t o t h r e e y e a r s from the date o f the o r i g i n a l e n t r y . Most drawback c l a i m s a re made on Form K32: Drawback C e r t i f i c a t e , p r e s e n t e d i n t r i p l i c a t e . (g) Customs Treatment of Other Modes The r e g u l a t i o n s a p p l y i n g t o the c a r r i a g e o f goods i n t o Canada by motor c a r r i e r , g e n e r a l l y apply t o every o t h e r mode. The a u t h o r i t y granted t o Revenue Canada, Customs and E x c i s e under f e d e r a l l e g i s l a t i o n a re u n i v e r s a l and grant a u t h o r i t y over goods imported by any method or mode. A l l modes c a r r y i n g goods i n t o Canada must do so i n equipment which meets t a r i f f r e q u i r e -ments and a l l c a r r i e r s must be bonded by s e c u r i t y p o s t e d w i t h Revenue Canada. The packaging and documenting requirements of a l l goods b e i n g imported i s e x a c t l y the same r e g a r d l e s s o f mode, i n c l u d i n g the requirement t h a t the c a r r i e r m a n i f e s t a l l goods b e i n g e n t e r e d i n t o Canada on a l l approved cargo m a n i f e s t . The Cargo E n t r y P r o c e s s i n g and C o l l e c t i o n System (CEPACS) out-l i n e d f o r the motor c a r r i e r i n d u s t r y , a p p l i e s t o each of the ot h e r modes as w e l l . C a r r i e r s o f a l l modes are r e q u i r e d t o r e p o r t the a r r i v a l of f o r e i g n goods t o Customs, as w e l l as t o : the c o n s i g n e e / b r o k e r , a t the p o r t o f e n t r y . Every mode has i t s s u f f e r a n c e warehouse system e s t a b l i s h e d under the r u l e s i n Memorandum D20-3 Customs S u f f e r a n c e Warehouse R e g u l a t i o n s . F i n a l l y , every Customs a p p r a i s e r , r e g a r d l e s s o f which mode he s e r v i c e s , i s bound by the same s e t o f r u l e s f o r a p p r a i s i n g , a c q u i t t i n g and r e l e a s i n g the i n bond goods f o r use i n Canada. There are some p r o c e d u r a l d i f f e r e n c e s i n the e n t r y p r o c e s s f o r each mode, most of which a r i s e s because of d i f f e r e n c e s i n the c h a r a c t e r i s t i c s o f each. These d i f f e r e n c e s do not, however, change the g e n e r a l procedure f o r c l e a r i n g 91 goods as d e s c r i b e d f o r the motor c a r r i e r i n d u s t r y i n t h i s c h a p t e r . The p r o c e d u r a l d i f f e r e n c e s f o r each mode w i l l be c o n s i d e r e d here t o f a c i l i t a t e an a n a l y s i s o f thes e d i f f e r e n c e s w i t h r e g a r d t o i n t e r m o d a l c o m p e t i t i o n i n a l a t e r c h a p t e r . The a i r mode i s a c a r r i e r o f goods d e s t i n e d mainly f o r consumption so t h a t the B3 e n t r y f o r home consumption i s the most common a t a i r s u f f e r a n c e warehouses. Goods a r r i v i n g by a i r from i n t e r n a t i o n a l o r i g i n s must be o f f - l o a d e d a t d e s i g n a t e d i n t e r n a t i o n a l o r commercial a i r p o r t s , o f which 31 are l i s t e d i n Memorandum D9: L i s t o f Customs O f f i c e s . At thes e l o c a t i o n s the goods are s t o r e d i n the s u f f e r a n c e warehouse i n space l e a s e d by i n d i v i d u a l a i r c a r r i e r s o r by t h e a i r f r e i g h t f o r -warder or c o n s o l i d a t o r . As w i t h o t h e r modes, goods must be ma n i f e s t on a c c e p t a b l e cargo c o n t r o l documents ( i n t h i s case the a p p r o v a l TATA W a y b i l l ) which are f i l e d by c a r r i e r s oper-a t i n g under CEPACS proce d u r e s . Copies o f t h i s document con-s t i t u t e the a r r i v a l n o t i c e which goes t o the co n s i g n e e / b r o k e r . Non-audit a i r c a r r i e r s must p r e s e n t a m a n i f e s t o f a l l goods a r r i v i n g on t h e i r . f l i g h t s t o Customs a t the p o i n t o f i n i t i a l l a n d i n g i n Canada. Few c l e a r a n c e d e l a y s a re encountered a t a i r cargo s u f f e r a n c e warehouses. The c l e a r a n c e of goods and t h e i r r e l e a s e from Customs bond can take p l a c e w i t h i n hours o f the i n i t i a l a r r i v a l i n Canada. B a r r i n g documentation o r Customs d e l a y s , the time between a r r i v a l and r e l e a s e of i n bond goods depends on f a c t o r s under the e x c l u s i v e c o n t r o l o f the a i r c a r r i e r and the customs broker involved. 92 Upon a r r i v a l i n Canada, goods imported by sea must be reported to Customs by the ship's master on an approved inward cargo report which l i s t s shipments inbound to Canada and shipments onboard the vessel which are i n t r a n s i t . When the goods are to cl e a r Customs at the port of discharge, before inland forwarding, the shipping agent must n o t i f y the consignee, or his broker, of the a r r i v a l of the shipment by an advise note con s i s t i n g of the c a r r i e r ' s b i l l of lading and a Custom's mani-f e s t . Because most voyages to Canada are completed under single-voyage a u t h o r i t i e s , rather than under general a u t h o r i t i e s , the bonding requirements are d i f f e r e n t than for the other modes. For marine c a r r i e r s no cargo may be discharged from the vessel u n t i l a security, i n an amount equal to the estimated duty and taxes applicable on the goods, i s posted with Revenue Canada. Within the marine mode the cargo container has become a popular form of packaging. Due to the i n f l u x of marine container operations i n Canada, and the necessity to move these r a p i d l y to inland ports, s p e c i a l procedures for handling these units have been made by Customs. Upon a r r i v a l at a Canadian seaport, the master or his agent reports a l l cargo which i s to be off-loaded at the port/ The container may then be transported by any Customs bonded c a r r i e r chosen by the agent and may be manifest to the sufferance warehouse of any mode, but an a p p l i c a t i o n to move goods over land i n bond must 93 i n c l u d e the name o f the c a r r i e r and the s u f f e r a n c e f a c i l i t y a t which the goods w i l l be c l e a r e d . The r e s p o n s i b i l i t y f o r i n bond goods remains w i t h the s h i p p i n g company or h i s agent to the p o i n t a t which the goods are d e l i v e r e d t o the s u f f e r -ance warehouse. R a i l carriers,«because o f the d i v e r s i f i c a t i o n o f t h e i r r a i l o p e r a t i o n s , have e x t e n s i v e r e g u l a t i o n s w i t h r e s p e c t t o Customs procedures. A l l t r a i n s and cargo must be r e p o r t e d a t Customs a t the f r o n t i e r c r o s s i n g . The r e p o r t must i d e n t i f y each p i e c e o f o p e r a t i n g equipment and the cargo i t c a r r i e s . Customs o f f i c i a l s do not v i s u a l l y check every t r a i n e n t e r i n g Canada so t h a t d e l a y s a t border c r o s s i n g s are no g r e a t e r f o r t h i s mode than f o r motor c a r r i e r s . Cargo r e p o r t i n g requirements f o r r a i l shipments d e s t i n e d f o r Canada are the same as f o r motor c a r r i e r s . Each f r e i g h t shipment o r c a r l o a d must be documented on an approved cargo c o n t r o l document showing a l l the i n f o r m a t i o n : r e q u i r e d by every mode—the i n f o r m a t i o n o u t l i n e d i n the motor c a r r i e r cargo c o n t r o l document r e g u l a t i o n s . Two c o p i e s o f the document are d e l i v e r e d t o the Customs a u t h o r i t i e s a t the p o r t o f i m p o r t a t i o n . Upon a r r i v a l a t the d e s t i n a t i o n p o r t , the l o c a t i o n ( r a i l yard) where the goods are s t o r e d i s noted on the cargo c o n t r o l docu-ment and the cons i g n e e / b r o k e r i s a d v i s e d o f the a r r i v a l o f the goods. The ' s u f f e r a n c e ' p o i n t f o r the r a i l mode may be a warehouse where l e s s - t h a n - c a r l o a d shipments are o f f loaded f o r d i s t r i b u t i o n , o r a r a i l w a y y a r d o r team t r a c k where c a r l o a d 94 l o t s are held pending clearance. Where a consignee has private s i d i n g p r i v i l e g e s or the consignee holds a r a i l sufferance warehouse licence, the r a i l car and i t s cargo may be delivered d i r e c t l y to that s i d i n g , at which point they become the res-p o n s i b i l i t y of the consignee. The net r e s u l t of these regula-tions i s that the rules governing t h i s mode are more f l e x i b l e than those for other modes. Many r a i l cars and loads do not go through a sufferance warehouse and where Customs examinations are required they are effected away from such f a c i l i t i e s . In recent years, railways have offered t r a i l e r - o n - f l a t car service to highway motor c a r r i e r s . Goods i n bond, c a r r i e d by railways on behalf of a highway c a r r i e r are covered by the type of cargo control document applicable to the f r e i g h t charges on the i n d i v i d u a l shipments, i . e . where the highway c a r r i e r i s responsible for c o l l l e c t i o n of charges, i t becomes the manifest mode and the r a i l r o a d need not include the ship-ment (s) on i t s entry form. Customs and Excise has also established procedures f o r bonding and 'post audit c o n t r o l ' of those i n t e r n a t i o n a l r a i l f r e i g h t forwarders operating regular pool car services into Canada. Forwarders purchase transportation service i n bulk from r a i l r o a d or trucking firms and s e l l portions of the space to small shippers. The forwarder consolidates the i n -d i v i d u a l shipments and d e l i v e r s them to a de-consolidator at the destination f o r d i s p e r s a l to i n d i v i d u a l consignees. Con-solidated shipments i n r a i l c a r s or piggyback units enter Canada under t r a i l e r - o n - f l a t c a r procedures and are c l e a r e d a t the s u f f e r a n c e f a c i l i t i e s o p e r a t e d by the d e - c o n s o l i d a t o r . There i s one f a c t o r which c h a r a c t e r i z e s the c l e a r a n c e procedures f o r goods b e i n g c a r r i e d i n t o Canada by any mode, and i t i s o f t e n the cause o f d e l a y s . There are few d e l a y s i n the c l e a r a n c e procedures w i t h r e s p e c t t o a c t u a l customs a p p r a i s a l and a c q u i t t a l o f e n t r i e s . Customs makes every e f f o r t t o e x p e d i t e the c l e a r a n c e o f goods t o minimize the e f f e c t s o f t h i s p r o c e s s on the o v e r a l l flow o f goods. Customs o f f i c i a l s , however, are not r e s p o n s i b l e to the consignee and t h e i r i n t e r e s t i s not i n how f a s t goods are c l e a r e d but i n f u l f i l l i n g t h e i r d u t i e s as agents o f the Crown. O f t e n the p e r s o n a l i t i e s o f p a r t i c u l a r Customs o f f i c i a l s , o r the g e n e r a l environment i n a Customs o f f i c e can make the c l e a r a n c e o f goods a d i f f i c u l t and time consuming j o b . There a r e a g r e a t e r number o f d e l a y s caused by the o t h e r p a r t i e s i n v o l v e d i n the i m p o r t a t i o n o f goods than by Customs o f f i c i a l s . Lack o f docu-mentation r e q u i r e d f o r e n t r y , i n e f f i c i e n c i e s i n p r e s e n t i n g goods t o Customs by consignees o r br o k e r s and c a r r i e r d e l a y s are the main causes o f the d e l a y s i n having goods c l e a r e d . Customs procedures have been, and co n t i n u e t o be, improved, but the e f f e c t o f the r e s u l t a n t e f f i c i e n c y i s l o s t i n the o v e r a l l c l e a r a n c e procedures by those who are most r e s p o n s i b l e f o r e x p e d i t i n g the c l e a r a n c e , namely the c o n s i g n o r , the c a r r i e r and the consignee/broker. 96 FOOTNOTES - CHAPTER 2 1 Canada, S t a t u t e s . Customs A c t . R.S.C. 1970, c.51. 2 Canada, S t a t u t e s . Customs T a r i f f A c t . R.S.C. 1970. c.60. 3 Canada, S t a t u t e s . E x c i s e Tax A c t . R.S.C. 1970. c.100. 4 Canada, S t a t u t e s . Anti-Dumping A c t R.S.C. 1968-69. c.10. 5 Revenue Canada, Customs and E x c i s e . Memorandum D3, Commercial Motor V e h i c l e (Customs) R e g u l a t i o n s . November 1975. 6 Revenue Canada, Customs and E x c i s e . Memorandum D43, I n f o r m a t i o n f o r E x p o r t e r s t o Canada. June 1975. s.2-7. 7 I b i d . , s.8. 8 Revenue Canada, Customs and E x c i s e . Memorandum D20-3, Customs S u f f e r a n c e Warehouse R e g u l a t i o n s . J u l y 1974. 9 Revenue Canada, Customs and E x c i s e . Memorandum D3, Commercial Motor V e h i c l e (Customs) R e g u l a t i o n s . November 1975. 10 Revenue Canada, Customs and E x c i s e . Memorandum Dl-1 L i c e n c i n g o f Customs-House Brok e r s . A p r i l 1960. 11 see r e s u l t s o f Highway S u f f e r a n c e Warehouse Survey pr e s e n t e d i n Chapter 4. 12 Canada, S t a t u t e s . E x c i s e Tax A c t . R.S.C.1970, c.100, s.27. 13 I b i d . 14 Canada, S t a t u t e s . Anti-Dumping A c t . R.S.C.1968-69, c.10. 15 Canada, S t a t u t e s . Customs A c t . R.S.C.1970, c.51, x.36-43 and Revenue Canada, Customs and E x c i s e . Memorandum D4 3, Inf o r m a t i o n f o r E x p o r t e r s t o Canada. June 1977. 16 Revenue Canada, Customs and E x c i s e . Memorandum D2 0-3. Customs S u f f e r a n c e Warehouse R e g u l a t i o n s . J u l y 1974. 97 CHAPTER THREE  THE SUFFERANCE WAREHOUSE SYSTEM In the previous chapter the ro l e of sufferance warehouses was introduced and the cargo clearance procedure was discussed for the highway mode. This chapter w i l l consider the s u f f e r -ance warehouse system and i t s basic function i n more d e t a i l — i n the context of Customs warehousing i n general. The f i r s t section of the chapter w i l l be an introduction to Customs warehousing, including discussion of the authority to e s t a b l i s h Customs warehouses, the reasons for the warehousing system, and f i n a l l y , consideration of Class I Canadian Government Warehouses and Class II Bonded Warehouses. The second section w i l l be devoted to Class III Sufferance warehouses. A d e s c r i p t i o n of sufferance warehouses and the purpose they serve i n the Customs system w i l l be followed by a discussion of the evolution of the sufferance warehouse system i n Canada with p a r t i c u l a r emphasis on the development of the present f a c i l i t i e s f or the highway mode and of the regulations under which the system currently operates. F i n a l l y , the chapter examines the inland sufferance warehouse idea on a conceptual l e v e l . The system o f f e r s p o t e n t i a l benefits to those d i r e c t l y involved with the importation of foreign goods and i t i s important that these be i d e n t i f i e d since l a t e r discussion of the system w i l l show that many of these benefits have never been f u l l y r e a l i z e d . 98 (a) Customs Warehousing R e g u l a t i o n s The f e d e r a l Customs A c t i s one o f s e v e r a l s t a t u t e s which a f f e c t goods b e i n g imported t o Canada. The A c t g i v e s the G o v e r n o r - G e n e r a l - i n - C o u n c i l e x t e n s i v e powers t o r e g u l a t e a l l m atters under the A c t . S e c t i o n 273 (g), (h) and (i) o f the A c t o u t l i n e the powers w i t h r e s p e c t t o Customs warehousing: S e c t i o n 273 The Governor-General-i n - C o u n c i l may...make r e g u l a t i o n s f o r o r r e l a t i n g :to the f o l l o w i n g purposes and m a t t e r s : (g) a u t h o r i z i n g the appointment o f warehouses and r e g u l a t i n g the s e c u r i t y which s h a l l be taken from warehouse keepers, the forms and c o n d i t i o n s s u b j e c t t o which goods are t o be warehoused- the mode o f keep i n g goods i n warehouse, and o f removing goods therefrom, and the amount o f warehouse r e n t o r l i c e n c e f e e s ; (h) e x t e n d i n g e i t h e r by g e n e r a l r e g u l a t i o n o r by s p e c i a l o r d e r , the time f o r c l e a r i n g warehoused goods, and f o r the t r a n s p o r t o f goods i n bond from one p o r t o r p l a c e t o another; (i) r e g u l a t i n g the form i n which t r a n s f e r s o f goods i n warehouse o r bond from one person t o another s h a l l be e n t e r e d ; ! The r e g u l a t i o n s i s s u e d on t h i s a u t h o r i t y appear i n Customs and 2 E x c i s e Memorandum D20, Customs Warehousing R e g u l a t i o n s . The most r e c e n t r e g u l a t i o n s were e s t a b l i s h e d under the a u t h o r i t y o f O r d e r - i n - C o u n c i l P.C. 1968-857 on May 2, 1968. For the purpose o f these r e g u l a t i o n s , "...a 'warehouse' means any p l a c e approved o r ap p o i n t e d by the Deputy M i n i s t e r 99 i n which imported goods may be deposited, kept, or secured pending Customs clearance and includes any area designed by 3 the c o l l e c t o r as a Queen 1s Warehouse or Outside Customs Area." The present Customs warehousing system was designed and established to allow Revenue Canada to f u l f i l l the enforcement rol e described i n the l a s t chapter. This r o l e i s accomplished through the control over goods entering Canada which the warehouse requirements allow and by making sure a l l i n bond goods are the r e s p o n s i b i l i t y of some party at a l l times u n t i l the entry process i s completed and duty and taxes are paid. The warehouse system which provides for t h i s control i s a series of Customs warehouses operated by, or licenced and bonded by, Revenue Canada. There are three classes of ware-houses under these regulations: Class I Canadian Government Warehouses, Class II Bonded Warehouses, and Class II Sufferance Warehouses. Class I warehouses consist of f i v e subclasses, each of which i s operated by Revenue Canada on Canadian government property or property approved by the department. These f a c i l -i t i e s , because they are government operated, post no secu r i t y and they are subject to the rates and charges outlined i n Revenue Canada Memorandum D20, Schedule A. Warehouses included i n the Class I designation are: (a) Customs Express Branch Warehouses, through which goods imported by r a i l or a i r express are cleared by Customs; (b) Examining Warehouses, which are general clearance f a c i l i t i e s ; (c) Highway Fr o n t i e r Examining 100 Warehouses, which are Canadian government f a c i l i t i e s used t o c l e a r goods a r r i v i n g a t the Canada-United S t a t e s border by commercial motor c a r r i e r ; (d) Ou t s i d e Customs Area, which i s any a r e a d e s i g n a t e d f o r c l e a r a n c e o f goods too heavy o r too l a r g e to be warehoused; and, (e) Queen's Warehouses, which are warehouses p r o v i d e d by the Crown f o r the s a f e k e e p i n g o f unclaimed, abandoned, s e i z e d o r f o r f e i t e d goods. The d i s t i n c t i v e f a c t o r about t h i s c l a s s o f warehouse i s t h a t a l l are owned and o p e r a t e d by Revenue Canada on government owned o r approved p r o p e r t y . The warehouses are s u b j e c t t o common o p e r a t i n g r u l e s and u s e r s are a s s e s s e d r a t e s and charges i n accordance w i t h a c e n t r a l l y - p u b l i s h e d t a r i f f . I t can be expected, t h e r e f o r e , t h a t each user w i l l r e c e i v e equal treatment a t such a f a c i l i t y . The. C l a s s I warehouse s u b c l a s s which i s most p e r t i n e n t here i s the Highway F r o n t i e r Examining Warehouse. C l a s s I I Bonded Warehouses are d e s c r i b e d i n Memorandum D20 as c o n s i s t i n g o f "...warehouses o p e r a t e d o r owned by persons o t h e r than the Crown and used f o r the s t o r a g e o f imported goods 4 a f t e r e n t r y . " S e c t i o n s 17 t o 26 o f the Memorandum d e a l wxth the r e g u l a t i o n s g o v e r n i n g the s e c u r i t y , l i c e n c i n g , Customs s e r v i c i n g and o p e r a t i o n o f these warehouses but t h e r e are no r e g u l a t i o n s s p e c i f y i n g the r a t e s t o be charged by the warehouse keeper f o r the s e r v i c e s p r o v i d e d a t the f a c i l i t y . I t i s a t t h i s c l a s s o f warehouse t h a t goods which e n t e r 101 Canda on a B6 e n t r y f o r warehouse may be s t o r e d f o r up t o two ye a r s without payment o f duty and t a x e s . Such goods remain i n Customs bond as o u t l i n e d i n Chapter 2, and are the d i r e c t r e s p o n s i b i l i t y o f the warehouse keeper. Under normal c i r c u m -stances the f a c i l i t y i s a p a r t o f a g e n e r a l warehouse complex oper a t e d by the warehouse keeper. (b) C l a s s I I I Customs Warehousing: S u f f e r a n c e Warehouses The C l a s s I I I Customs warehouse i s most c r u c i a l t o the enforcement o f Canadian customs law. I t i s here t h a t Customs i n t e r c e p t s a l l goods being imported i n t o Canada f o r i n s p e c t i o n , a p p r a i s a l and l e v y i n g o f duty and t a x e s . T h i s c l a s s o f ware-house, known as s u f f e r a n c e warehouses, i s d e a l t w i t h s p e c i f i -c a l l y i n s e c t i o n 278 o f the Customs A c t and i n Revenue Canada, Customs and E x c i s e , Memorandum D20-3 Customs S u f f e r a n c e Ware-House R e g u l a t i o n s : S e c t i o n 278 (1) The G o v e r n o r - i n -C o u n c i l may make such r e g u l a t i o n s as are c o n s i d e r e d a d v i s a b l e , f o r the appointment o f s u f f e r a n c e wharves and warehouses a t which goods a r r i v i n g by v e s s e l s i n t r a n s i t . . . m a y be landed and a f t e r w a r d s s t o r e d b e f o r e e n t r y , . . . (2) The G o v e r n o r - i n - C o u n c i l may make r e g u l a t i o n s f o r the appointment o f s u f f e r a n c e warehouses i n which goods a r r i v i n g by r a i l w a y , highway or a i r t r a n s p o r t may be s t o r e d b e f o r e e n t r y , when such goods have been d u l y r e p o r t e d . (6) No goods s h a l l be s t o r e d b e f o r e .entry i n any p l a c e o t h e r than a s u f f e r - ^ ance warehouse a p p o i n t e d under t h i s s e c t i o n . 102 By t h i s p r o v i s i o n , a l l imported goods must e n t e r Canada through s u f f e r a n c e f a c i l i t i e s a u t h o r i z e d by the Governor-i n - C o u n c i l . I t i s a t t h i s p o i n t i n the t r a n s p o r t a t i o n stream t h a t Customs i n t e r c e p t s a l l goods f o r the purpose d e t a i l e d i n the Customs A c t . The o p e r a t i n g r e g u l a t i o n s a p p l i c a b l e t o s u f f e r a n c e ware-houses appear i n Memorandum D20-3. These are p u b l i s h e d by the deputy m i n i s t e r , Revenue Canada, Customs and E x c i s e , under a u t h o r i t y g r a n t e d by O r d e r - i n - C o u n c i l P.C. 1974-1663. Under t h i s o r d e r the deputy m i n i s t e r i s empowered t o a p p o i n t such warehouses f o r the l a n d i n g , s t o r a g e , s a f e k e e p i n g , t r a n s f e r , examination, d e l i v e r y and f o r w a r d i n g o f imported goods b e f o r e e n t r y . The c u r r e n t r e g u l a t i o n s w i l l be c o n s i d e r e d under a subsequent heading. C l a s s I I I warehouses a r e p r i v a t e l y - o w n e d , p u b l i c l y -l i c e n c e d and bonded warehouses and should not be co n f u s e d w i t h C l a s s I I Bonded Warehouses; the r e l a t i o n s h i p between them i s merely a c a s u a l one. A C l a s s I I warehouse i s one i n which imported goods may be s t o r e d , upon a p p l i c a t i o n t o Revenue Canada, f o r p e r i o d s o f up to two y e a r s , w ithout payment o f duty and taxes or u n t i l the goods are removed f o r domestic consumption o r r e - e x p o r t . S u f f e r a n c e warehouses, on the o t h e r hand, are f a c i l i t i e s , d e s i g n a t e d as temporary h o l d i n g p o i n t s i n the t r a n s p o r t a t i o n stream where goods b e i n g imported may be a p p r a i s e d f o r Customs purposes and a p p l i c a b l e duty and taxes may be a s s e s s e d . 103 1. O r i g i n - H i s t o r y o f the S u f f e r a n c e Concept i n Canada The q u e s t i o n o f where i n the t r a n s p o r t a t i o n stream goods sho u l d be i n t e r c e p t e d f o r a p p r a i s a l by Customs has two p o s s i b l e answers. One would suppose t h a t the i d e a l s i t u a t i o n , w i t h r e s p e c t t o Customs e n t r y , would be t o have the imported goods c l e a r e d a t the border c r o s s i n g o r a t the f i r s t p o i n t o f e n t r y to Canada. U n f o r t u n a t e l y , one o f the e s s e n t i a l requirements f o r an e f f i c i e n t and r e a s o n a b l e c o s t t r a n s p o r t a t i o n system i s to r e s t r i c t , as much as p o s s i b l e , the h a n d l i n g and d i v e r s i o n o f goods. These two opposing f a c t o r s were r e c o g n i z e d by the de v e l o p e r s o f the s u f f e r a n c e warehouse concept and i t was a compromise between these needs which saw the f i r s t o f these warehouses developed. The c l e a r a n c e o f goods a t doc k s i d e l e d t o the c r e a t i o n o f the f i r s t s u f f e r a n c e warehouses and i n t h i s case, both the i d e a l s i t u a t i o n and the e c o n o m i c a l l y - p r a c t i c a l s i t u a t i o n c o i n -c i d e d . Not o n l y were the goods c l e a r e d a t the p o i n t where they f i r s t reached Canada, but i t was an e c o n o m i c a l l y p r a c t i c a l p o i n t a t which t o a p p r a i s e the goods f o r e n t r y t o Canada. The Customs procedures a t t h i s i n i t i a l break-bulk p o i n t served the be s t i n t e r e s t s o f the Crown, the c a r r i e r and the consignee. From d o c k s i d e on, a l l goods moved i n Canada as domestic goods. As r a i l t r a f f i c from the U n i t e d S t a t e s t o Canada i n c r e a s e d , the s u f f e r a n c e warehouse, i d e a was extended t o the r a i l mode. The precedent i n t r o d u c e d w i t h the marine mode, t h a t 1 0 4 goods c l e a r e d Customs a t the i n i t i a l b reak-bulk p o i n t , l e d to the e s t a b l i s h m e n t o f s u f f e r a n c e warehouses i n r a i l w a y sheds a c r o s s the c o u n t r y . As the number o f l o c a t i o n s f o r r a i l b reak-bulk s e r v i c e s i n c r e a s e d so d i d the number o f r a i l s u f f e r a n c e warehouses. E v e n t u a l l y , s u f f e r a n c e warehouses were i n e x i s t e n c e i n v i r t u a l l y e very town i n which a r a i l w a y had a s t a t i o n or shed and, i n many cases, were a u t h o r i z e d f o r each o f two o r more major r a i l w a y s i n each c e n t r e . There was l i t t l e i n c o n venience to the r a i l w a y s i n p r o d u c i n g goods to Customs; the s u f f e r a n c e p o i n t s were the r a i l company's normal break-bulk p o i n t s . The s u f f e r a n c e system responded t o the needs o f the t r a n s p o r t a t i o n system a t the expense o f the i d e a l c o n t r o l s i t u a t i o n f o r Customs. In more r e c e n t y e a r s , the movement o f goods by a i r i n t o Canada from i n t e r n a t i o n a l p o i n t s r e s u l t e d i n the e s t a b l i s h m e n t o f a system o f a i r s u f f e r a n c e warehouses a t i n t e r n a t i o n a l a i r -p o r t s a c r o s s Canada. Imported goods are o f f - l o a d e d i n t o the s u f f e r a n c e warehouse at t h e i r d e s t i n a t i o n , c l e a r e d f o r e n t r y and p r o c e s s e d f o r d e l i v e r y i n Canada as domestic goods. Again, as w i t h the marine and r a i l modes, the c l e a r a n c e p r o c e s s t a k e s p l a c e a t the a i r modes' n a t u r a l b reak-bulk p o i n t . The s u f f e r a n c e f a c i l i t i e s a u t h o r i z e d by the Crown f o r these t h r e e modes have one common c h a r a c t e r i s t i c ; each has been developed a t a p o i n t i n the t r a n s p o r t a t i o n system which i s a n a t u r a l and normal break-bulk p o i n t . For i n d i v i d u a l c a r r i e r s i n v o l v e d i n i n t e r n a t i o n a l goods movements i n t o Canada, t h e r e 1 0 5 have been few problems i n p r e s e n t i n g imported goods f o r Customs e n t r y a t s u f f e r a n c e f a c i l i t i e s a t t h i s p o i n t . F u r t h e r -more, the placement o f these f a c i l i t i e s i n the t r a n s p o r t a t i o n stream a l l o w s f o r the minimum o f c o s t l y d i v e r s i o n and e x t r a h a n d l i n g o f the goods. The 194 0s and 1950s saw the highway t r a n s p o r t a t i o n mode come i n t o i t s own as a t r a n s p o r t e r o f goods. Up t o t h i s time, the t e c h n o l o g y was not a v a i l a b l e t o produce a highway t r a n s p o r t v e h i c l e which c o u l d compete w i t h the r a i l w a y s f o r s h i p p e r s ' a l l e g i a n c e over l o n g d i s t a n c e s . World War I I p r o v i d e d the tech n o l o g y and the i n f r a s t r u c t u r e f o l l o w e d , and soon motor c a r r i e r s were o f f e r i n g a s e r v i c e advantage o v e r the r a i l mode which has changed the face o f l o n g d i s t a n c e goods movement. The t r a n s p o r t a t i o n u s e r ' s d o l l a r d i c t a t e d t h a t the motor c a r r i e r would be the prime c a r r i e r o f l e s s - t h a n - t r u c k l o a d shipments and, w i t h i n t h i s twenty year span, the r a i l r o a d s s h i f t e d t h e i r emphasis t o c a r l o a d shipments l e a v i n g the motor c a r r i e r t o p i c k up the s l a c k . I t was speed and f l e x i b i l i t y which allowed the motor c a r r i e r i n d u s t r y t o grow and the demand f o r speed was met w i t h f a s t e r equipment and b e t t e r s e r v i c e . The p r o v i s i o n o f t h i s s e r v i c e was demanded by s h i p p e r s and was p r o v i d e d by the motor c a r r i e r i n d u s t r y not as a matter o f c h o i c e , but on an 'or e l s e ' b a s i s . For motor c a r r i e r s , the problem o f t r a n s b o r d e r goods movements became acute i n t h e e a r l y 1950s. Dur i n g the e a r l y development o f the i n d u s t r y a l l motor c a r r i e r s a r r i v i n g a t the 106 Canada-United S t a t e s border were r e q u i r e d t o have the goods on board c l e a r e d f o r Customs e n t r y i n t o Canada a t t h a t p o i n t , so t h a t duty and taxes were p a i d and the goods were d e l i v e r e d i n Canada as domestic goods. By the e a r l y 1950s, the volume o f goods a r r i v i n g a t some border c r o s s i n g s was becoming so heavy t h a t , d u r i n g normal b u s i n e s s hours, Customs o f f i c i a l s c o u l d not c l e a r a l l e n t r i e s . Goods not c l e a r e d had t o be r e t u r n e d t o the U n i t e d S t a t e s and attempts made t o c l e a r them the f o l l o w i n g day. The c l e a r a n c e system was ov e r t a x e d and the r e s u l t was severe d e l a y s a t many border c r o s s i n g s , e s p e c i a l l y i n O n t a r i o . S e v e r a l problems i n h e r e n t i n t h a t system prevented any improvement from b e i n g made: 1. The Canadian government appeared u n w i l l i n g t o commit the c a p i t a l r e q u i r e d i n o r d e r t o p r o v i d e the f a c i l i t i e s n e c e s s a r y a t the border c r o s s i n g s t o a l l e v i a t e the d e l a y s a t the f r o n t i e r examining warehouses. 2. Customs i n s p e c t o r s and Customs Brokers were unable t o handle peak p e r i o d s . P h y s i c a l s e p a r a t i o n o f c l e a r a n c e f a c i l i t i e s c r e a t e d problems i n b a l a n c i n g a v a i l a b l e s t a f f t o workloads. 3. C l e a r a n c e p o i n t s were not geared t o match motor c a r r i e r o p e r a t i o n s . O v e r n i g h t s e r v i c e r e q u i r e d c a r r i e r s t o e n t e r Canada a f t e r normal b u s i n e s s hours when no e n t r i e s were accepted. T h i s r e s u l t e d i n i d l e equipment and h i g h e r c o s t s o f p r o v i d i n g s e r v i c e . 4. There were no demurrage charges a t the c l e a r a n c e warehouses o p e r a t e d by the Department o f N a t i o n a l Revenue, and l i t t l e i n c e n t i v e f o r some s h i p p e r s t o move t h e i r goods out o f overcrowded warehouse space q u i c k l y . 5. E x t r a h a n d l i n g o f goods a t border p o i n t s i n v i t e d undue breakage and p i l f e r a g e and added t o the c o s t s o f d e l i v e r y . 107 These problems were compounded in.1952 by a n a t i o n a l r a i l s t r i k e which e f f e c t i v e l y suspended t r a n s b o r d e r r a i l movements and p l a c e d e x t r a p r e s s u r e on the motor c a r r i e r i n d u s t r y and the overburdened f r o n t i e r examining warehouses s e r v i n g i t . The s u f f e r a n c e warehouse concept had not been extended to the highway t r a n s p o r t mode a l t h o u g h the Department o f N a t i o n a l Revenue had e n v i s a g e d t h i s e x t e n s i o n , and i n Memor-andum D130 had s e t down the p r o v i s i o n s under which motor c a r r i e r f i r m s c o u l d c a r r y goods to i n l a n d s u f f e r a n c e warehouses. The memorandum s t a t e d t h a t : ...any person, o r group o f persons, may make a p p l i c a t i o n i n w r i t i n g t o the Customs ; and E x c i s e D i v i s i o n o f the Department, through the C o l l e c t o r o f the P o r t , f o r the e s t a b l i s h m e n t o f a s u f f e r a n c e warehouse f o r the storage and s a f e k e e p i n g o f imported goods a r r i v i n g by highway b e f o r e e n t r y a t Customs.7 The f i r s t highway s u f f e r a n c e warehouse a u t h o r i z e d under these r e g u l a t i o n s was opened a t the Smith T r a n s p o r t L i m i t e d T e r m i n a l a t Peterborough, O n t a r i o i n May 1952. T h i s opening was f o l l o w e d by s u f f e r a n c e warehouses a t Oshawa, O n t a r i o ( J u l y 1952), M o n t r e a l , Quebec (August 1952) and a t Toronto, O n t a r i o (January 1953). Customs s t r i c t l y c o n t r o l l e d the o p e r a t i o n s o f these warehouses, and a l t h o u g h the o p e r a t o r s were r e q u i r e d to p o s t s e c u r i t y w i t h the Department of N a t i o n a l Revenue, to assure p r o t e c t i o n o f the Crown's revenues, they were l o c k e d w i t h Customs l o c k s when no Customs o f f i c i a l was p r e s e n t . 108 The i n l a n d highway s u f f e r a n c e warehouse system p r o v i d e d welcome r e l i e f a t border c r o s s i n g s f o r both Customs o f f i c i a l s and the motor c a r r i e r s . C a r r i e r s were now a b l e to b r i n g t h e i r equipment i n t o Canada, i n bond, and proceed t o a break-bulk p o i n t where the goods c o u l d be c l e a r e d w h i l e the c a r r i e r went about i t s b u s i n e s s . There were few g u i d e l i n e s a f f e c t i n g the a u t h o r i z a t i o n o f highway s u f f e r a n c e warehouses. The apparent advantages o f having a c l e a r a n c e f a c i l i t y a t t h e i r normal break-bulk p o i n t r e s u l t e d i n a p p l i c a t i o n s f o r o p e r a t i n g a u t h o r i t y from many c a r r i e r s . The l a c k o f department p o l i c y d e a l i n g w i t h l o c a t i o n , and the number o f a p p l i c a t i o n s from motor c a r r i e r f i r m s t o e s t a b l i s h s u f f e r a n c e warehouses, caused a dilemma f o r the Department o f N a t i o n a l Revenue. With more than 2,000 motor c a r r i e r f i r m s i n the market, the department f e a r e d t h a t a p p r o v a l o f a l l a p p l i c a t i o n s would r e s u l t i n a warehouse system which was too p r o l i f e r a t e d f o r Customs t o c o n t r o l and too expensive f o r the taxpayer t o support. These f e a r s l e d to i n t r o d u c t i o n o f a p o l i c y c a l l i n g f o r s u f f e r a n c e f a c i l i t i e s o n l y w i t h i n d e s i g n a t e d Customs p o r t s and f u r t h e r , l i m i t i n g the number o f warehouses t o one i n each p o r t a r e a . T h i s p o l i c y remains i n e f f e c t today, w i t h the e x c e p t i o n o f Toronto, O n t a r i o and M o n t r e a l , Quebec, where the volume o f b u s i n e s s and s i z e o f the p o r t a r e a d i c t a t e d the need f o r a d d i t i o n a l a p p r a i s a l p o i n t s . I t became c l e a r t h a t economics had p l a c e d the motor c a r r i e r f i r m s a t a disadvantage r e l a t i v e t o the r a i l mode by f o r c i n g c l e a r a n c e a t an i n t e r m e d i a t e l o c a t i o n r a t h e r than a t 109 a normal break-bulk p o i n t . The disadvantage on an in t e r m o d a l b a s i s was not the o n l y one many c a r r i e r s had t o f a c e . The a u t h o r i t y t o operate the o n l y highway s u f f e r a n c e warehouse i n a p o r t area gave the motor c a r r i e r f i r m a d i s t i n c t advantage over o t h e r motor c a r r i e r s . By c h a r g i n g f o r the use o f space and s e r v i c e s g i v e n o t h e r c a r r i e r s f o r c e d t o c l e a r goods a t the monopoly f a c i l i t y , the warehouse o p e r a t o r was a b l e to o f f s e t the f i x e d c o s t s o f i t s own t e r m i n a l . In a d d i t i o n , t h e r e were no c o s t l y d i v e r s i o n s f o r goods t r a n s p o r t e d by the o p e r a t o r - c a r r i e r , w h i l e the c o m p e t i t i o n was f o r c e d t o an i n t e r m e d i a t e l o c a t i o n b e f o r e r e a c h i n g i t s normal t e r m i n a l p o i n t . The warehouse keeper a l s o c o n t r o l l e d the l e v e l o f s e r v i c e g i v e n o t h e r motor c a r r i e r s u s i n g the f a c i l i t i e s and the s e l f - i n t e r e s t o f many o p e r a t o r - c a r r i e r s r e s u l t e d i n com p l a i n t s from u s e r - c a r r i e r s o f poor s e r v i c e and u n f a i r treatment. These co m p l a i n t s l e d t o new r e g u l a t i o n s g o v e r n i n g h i g h -8 way s u f f e r a n c e warehouses i n 1958. The new p o l i c y was to r e j e c t f u t u r e a p p l i c a t i o n s from motor c a r r i e r s , g i v i n g a p p r o v a l s o n l y t o p r i v a t e companies not i n v o l v e d i n highway t r a n s p o r t . F u r t h e r , these r e g u l a t i o n s c o n t a i n e d p r o v i s i o n s which i n d i c a t e d t h a t the department was to take an i n t e r e s t i n the r a t e s charged a t the highway s u f f e r a n c e f a c i l i t i e s . S e c t i o n 5(1) s t a t e d t h a t the f a c i l i t y must be "...made a v a i l a b l e t o a l l a u t h o r i z e d bonded c a r r i e r s a t such r a t e s as may be approved by the 9 M i n i s t e r from time t o time." P r i o r t o t h i s time, the 110 department had not concerned i t s e l f w i t h the r a t e s charged a t s u f f e r a n c e f a c i l i t i e s , but the s p e c i a l problems o f a monopoly warehouse keeper s e r v i n g many motor c a r r i e r f i r m s had l e d t o some monopoly p r i c i n g which r e q u i r e d a t t e n t i o n . The r e g u l a t i o n s were f o l l o w e d i n 1960 by f u r t h e r regu-l a t i o n s aimed a t f o r c i n g the e x i s t i n g warehouse o p e r a t o r s t o . g i v e e q u a l treatment t o a l l c a r r i e r s . From t h a t date, r e g u l a t i o n s r e q u i r e d a l l s u f f e r a n c e warehouse o p e r a t o r s t o l e a s e space i n the f a c i l i t y t o any c a r r i e r f o r i t s e x c l u s i v e use g i v i n g the. o p p o r t u n i t y f o r every c a r r i e r t o ope r a t e i t s own t e r m i n a l and s u f f e r a n c e f a c i l i t y w i t h i n the grounds o f the a u t h o r i z e d s u f f e r a n c e warehouse.^ 0 In e f f e c t , e v e r y c a r r i e r was p l a c e d i n a p o t e n t i a l l y e q u a l p o s i t i o n and many o f the comp l a i n t s were s a t i s f i e d . These r e g u l a t i o n s remained i n t a c t through t o 1974 when the department i s s u e d - t h e f i r s t s e t o f s u f f e r a n c e warehouse r e g u l a t i o n s s e p a r a t e l y from the r e g u l a -t i o n s f o r o t h e r government warehouses. The s h i f t i n g p a t t e r n s t h a t appeared i n the t r a n s p o r t a -t i o n i n d u s t r y as the modes competed f o r the t r a n s p o r t a t i o n u s e r ' s d o l l a r were h i g h l i g h t e d by the b i r t h o f a new type o f s h i p p e r — t h e c o n s o l i d a t o r . With the i n t r o d u c t i o n o f f a s t and i n e x p e n s i v e motor c a r r i e r movements, s h i p p e r s s h i f t e d t h e i r a l l e g i a n c e from r a i l t o t r u c k and the motor c a r r i e r i n d u s t r y c o n t i n u e d t o grow a t the expense o f the r a i l w a y s , p r o v i d i n g f a s t and i n e x p e n s i v e s e r v i c e t o s h i p p e r s o f l e s s - t h a n - c a r l o a d l o t s . Many times equipment was u n d e r - u t i l i z e d and as t h e ' c o s t I l l o f t h i s s e r v i c e began t o c l i m b many s h i p p e r s went l o o k i n g f o r cheaper t r a n s p o r t a t i o n . The d e s i r e f o r a l t e r n a t i v e t r a n s p o r t a t i o n p r o v i d e d room i n the market f o r the c o n s o l i d a t o r . By c o n s o l i d a t i n g s e v e r a l l e s s - t h a n - c a r l o a d shipments i n t o one c a r l o a d l o t , and s h i p p i n g by r a i l , c o n s o l i d a t o r s . p r o v i d e d s a v i n g s which were a s u f f i c i e n t t r a d e - o f f a g a i n s t the speed o f f e r e d by the motor c a r r i e r . F r e i g h t c o n s o l i d a t o r s e n t e r e d the market, buying c a r l o a d r a i l t r a n s p o r t a t i o n on b e h a l f o f groups o f s h i p p e r s and s h i p p i n g the goods under t h e i r own l o a d and count. The r a i l w a y s looked f o r ways t o a t t r a c t more o f t h i s type o f b u s i n e s s , and soon i n t r o d u c e d t r a i l e r - o n - f l a t c a r s e r v i c e . TOFC shipments reduced the time d i f f e r e n t i a l between r a i l and motor c a r r i e r movements and made the r a i l w a y s almost as f l e x i b l e as the c o m p e t i t i v e mode. As the i n d u s t r y grew, Customs found i t i n c r e a s i n g l y d i f f i c u l t t o handle c o n s o l i d a t e d s h i p -ments a t r a i l s u f f e r a n c e warehouse f a c i l i t i e s . The r a i l warehouses were not capable o f d e a l i n g w i t h d e c o n s o l i d a t i o n s and so Revenue Canada i n t r o d u c e d the C l a s s I I I (c) S u f f e r a n c e Warehouse, i n t e n d e d t o be oper a t e d s t r i c t l y by c o n s o l i d a t o r s , who moved goods on a r a i l m a n i f e s t , i n f u l l c a r l o a d o r t r u c k -l o a d l o t s , t o move the goods t o c l e a r a n c e warehouses a t t h e i r normal break-bulk l o c a t i o n s . 2. The Pr e s e n t R e g u l a t i o n s Governing S u f f e r a n c e Warehouses The c u r r e n t r e g u l a t i o n s g o v e r n i n g the o p e r a t i o n o f the 112 s u f f e r a n c e warehouse system were made under O r d e r - i n - C o u n c i l P.C. 1974-1663, on J u l y 23, 1974. These r e g u l a t i o n s a r e pub-l i s h e d i n Customs and E x c i s e , Memorandum D20-3. The i s s u a n c e o f t h i s memorandum r e p r e s e n t s the f i r s t time t h a t s u f f e r a n c e warehouse r e g u l a t i o n s had been t r e a t e d s e p a r a t e l y from the g e n e r a l t o p i c o f 'Customs Warehousing R e g u l a t i o n s ' (Memorandum D20) and they a p p l y t o a l l s u f f e r a n c e warehouses r e g a r d l e s s o f the mode f o r which they a r e developed. The memorandum d e s c r i b e s the o r g a n i z a t i o n o f the p r e s e n t s u f f e r a n c e warehouse system: S u f f e r a n c e warehouses c o n s i s t s o f the f o l l o w i n g s u b c l a s s e s o f warehouses f o r the l a n d i n g , s t o r a g e , s a f e k e e p i n g , t r a n s f e r , examination, d e l i v e r y and fo r w a r d i n g o f import goods b e f o r e e n t r y : (a) a warehouse o p e r a t e d or p r o v i d e d by a r a i l w a y , express, a i r l i n e o r s h i p p i n g company; (b) a warehouse f o r i n bond goods a r r i v i n g by commercial motor v e h i c l e ; and, (c) a l l s u f f e r a n c e warehouses not d e s c r i b e d i n paragraph (a) o r (b). . A p p l i c a t i o n s f o r the e s t a b l i s h m e n t o f C l a s s I I I (c) s u f f e r a n c e warehouses are to be approved o n l y f o r t h i r d p a r t y i n t e r e s t s , i . e . f r e i g h t f o r warders, c o n s o l i d a t o r s , p o o l c a r o p e r a t o r s , harbour commissions.H . In e f f e c t , the t r a n s p o r t a t i o n system i s served by a s e r i e s of unimodal s u f f e r a n c e f a c i l i t i e s . S i n c e the f i r s t s u f f e r a n c e f a c i l i t y was a u t h o r i z e d , the r e g u l a t i o n s p r o v i d e d t h a t the m a n i f e s t mode would d i c t a t e the s u f f e r a n c e mode. Motor c a r r i e r 113 f i r m s t r a n s p o r t i n g goods i n t o Canada are r e s t r i c t e d t o d e l i v e r i n g those goods t o a C l a s s I I I (b) highway s u f f e r a n c e warehouse f o r Customs e n t r y , and each mode i s so r e s t r i c t e d . T h i s r e s u l t s i n d u p l i c a t i o n o f s e r v i c e a t s e v e r a l s u f f e r a n c e p o i n t s w i t h i n each Customs p o r t . There have been no attempts by Revenue Canada t o i n t r o d u c e i n t e r m o d a l i t y i n t o the s u f f e r -ance warehouse system, a s i t u a t i o n which may be ne c e s s a r y f o r the system t o respond e f f i c i e n t l y t o in t e r m o d a l goods move-ment i n the f u t u r e . A l l a p p l i c a t i o n s f o r a u t h o r i t y t o operate a s u f f e r a n c e warehouse must be made on Canada Customs Form E20, A p p l i c a t i o n  t o T r a n s a c t Bonded O p e r a t i o n s , t o the R e g i o n a l C o l l e c t o r o f Customs f o r the p o r t i n q u e s t i o n . The a p p l i c a t i o n must i n c l u d e the f o l l o w i n g support documents: a) a p l a n o f the e n t i r e b u i l d i n g ; b) a s i t e p l a n o f the p r o p e r t y ; c) e x t e r i o r photographs of the b u i l d i n g ; and, d) a map o f the c i t y o r town showing the l o c a t i o n o f the proposed s u f f e r a n c e warehouse. The i n i t i a l r e s p o n s i b i l i t y t o sc r e e n a l l s u f f e r a n c e warehouse a p p l i c a t i o n s i s taken by a S u f f e r a n c e Warehouse A d v i s o r y Committee, a board e s t a b l i s h e d under the 1974 r e g u l a t i o n s . T h i s committee c o n s i s t s o f the persons h o l d i n g the p o s i t i o n s o f : a) C h i e f , T r a n s p o r t a t i o n , Headquarters O p e r a t i o n s ; b) the R e g i o n a l C o l l e c t o r having j u r i s d i c t i o n over the p o r t where the a p p l i c a t i o n i s made; c) C h i e f , O p e r a t i o n s S e r v i c e s ; and, d) a person to be app o i n t e d by the deputy m i n i s t e r . T h i s committee was made r e s p o n s i b l e f o r a d v i s i n g and making recommendations to the deputy m i n i s t e r i n a l l matters c o n c e r n i n g 114 s u f f e r a n c e warehouses. The appointment of t h i s committee c o i n c i d e d w i t h the i n t r o d u c t i o n o f new r e g u l a t i o n s o u t l i n i n g the c r i t e r i a by which s u f f e r a n c e warehouses were to be approved. P r i o r to the i n t r o d u c t i o n o f these c r i t e r i a , t h e r e were no p u b l i s h e d r e g u l a t i o n s d e a l i n g w i t h how a p p l i c a t i o n s f o r new f a c i l i t i e s would be c o n s i d e r e d . Now t h e r e were t h r e e c r i t e r i a which had t o be met, i n the view o f the S u f f e r a n c e Warehouse A d v i s o r y Committee, b e f o r e the a p p l i c a t i o n c o u l d be approved: a) the volume and nature o f the b u s i n e s s i n the a r e a or r e g i o n i n which i t i s t o be l o c a t e d i s such t h a t a s u f f e r a n c e warehouse i s needed; , b) the warehouse w i l l be l o c a t e d w i t h i n a r e a s o n a b l e d i s t a n c e o f major t r a n s p o r t a -t i o n r o u t e s and Customs p o r t f a c i l i t i e s ; and, c) the s t r u c t u r e o f the warehouse and the f i n a n c i a l r e s o u r c e s o f the a p p l i c a n t are such t h a t he w i l l be a b l e to p r o v i d e the f a c i l i t i e s , equipment, s e r v i c e s and p e r s o n n e l . . . 1 * These new r e g u l a t i o n s were Revenue Canada's response to con-t i n u e d a p p l i c a t i o n s from p a r t i e s i n t e r e s t e d i n e s t a b l i s h i n g a d d i t i o n a l highway s u f f e r a n c e warehouses a t Customs p o r t s a c r o s s Canada. The r e g u l a t i o n s were l i k e l y d e s i g n e d t o improve the a p p l i c a t i o n p r o c e s s by removing the p o s s i b i l i t y o f i n c o n -s i s t e n t a c t i o n s by those g i v e n the a u t h o r i t y to c o n s i d e r a p p l i c a t i o n s . 115 There are minimum b u i l d i n g requirements f o r s u f f e r a n c e warehouses, designed t o ensure adequate space f o r Customs 13 o f f i c i a l s t o complete the a p p r a i s a l p r o c e s s . A Customs o f f i c e having an a r e a o f a t l e a s t 120 square f e e t must be p r o v i d e d a l o n g w i t h f u r n i t u r e and u t i l i t i e s . An examining a r e a o f a t l e a s t 150 square f e e t i s r e q u i r e d f o r examination of imported goods. As w e l l as t h i s space, a minimum area o f 750 square f e e t must be p r o v i d e d e x c l u s i v e l y f o r the st o r a g e of i n bond shipments w i t h a c c e s s from the o u t s i d e p r o v i d e d by a f r e i g h t door. In a d d i t i o n t o the s e minimum requirements, the warehouse o p e r a t o r i s r e q u i r e d t o p r o v i d e space i n the warehouse, f o r l e a s e , t o any bonded c a r r i e r who r e q u e s t s i t and needs space 14 f o r h i s e x c l u s i v e use i n warehousing i n bond goods. Customs House Brokers are a l s o e n t i t l e d t o o f f i c e space i f they need i t , and i f i t i s r e a s o n a b l y p r a c t i c a b l e t o p r o v i d e such 15 space. O u t s i d e the warehouse b u i l d i n g , the warehouse keeper must p r o v i d e a d e t e n t i o n compound o r p a r k i n g area where goods i n bond i n v e h i c l e s may be s a f e l y h e l d pending unloading.^" The warehouse o p e r a t o r must p o s t a bond w i t h Revenue Canada t o ensure the s e c u r i t y o f a l l goods h e l d i n bond p r i o r 17 to c l e a r a n c e by Customs o f f i c i a l s . The s e c u r i t y f o r s u f f e r a n c e warehouses i s based on an amount c a l c u l a t e d a t $1,000 f o r each 1,000 shipments or r e l e a s e s per year d e s t i n e d t o the warehouse f a c i l i t y , w i t h a minimum bond o f $20,000 and a maximum o f $100,000. The bond must be: 116 a) o f a guarantee company approved by the T r e a s u r y Board; and, b) i n a form approved by the M i n i s t e r o f N a t i o n a l Revenue. C a r r i e r s who l e a s e space f o r t h e i r e x c l u s i v e use as a s u f f e r -ance warehouse w i t h i n the f a c i l i t y , must pos t a s e c u r i t y by bond i n the same manner and on the same b a s i s as the warehouse owner. The 1968 r e g u l a t i o n s a f f e c t i n g s u f f e r a n c e warehouses were the f i r s t attempt made by the Department o f N a t i o n a l Revenue t o e x e r c i s e some c o n t r o l over the r e l a t i o n s h i p between highway s u f f e r a n c e warehouse o p e r a t o r s and the motor c a r r i e r f i r m s u s i n g t h e i r f a c i l i t i e s . In a d d i t i o n t o the changes d i s c u s s e d e a r l i e r , the new r e g u l a t i o n s attempted t o i n f l u e n c e the r a t e s and charges a t the s u f f e r a n c e f a c i l i t i e s . The 1974 memorandum co n t i n u e d these r e g u l a t i o n s , r e q u i r i n g t h a t l e a s e d space, and space and s e r v i c e s i n the p u b l i c area o f the ware-house, be p r o v i d e d a t a 'reasonable charge'. The i n t e n t i o n o f the department was t o d e t e r those c a r r i e r f i r m s o p e r a t i n g s u f f e r a n c e warehouses from s e e k i n g t o extend the c o m p e t i t i v e advantage they had over c a r r i e r s u s i n g the f a c i l i t i e s through monopoly p r i c i n g . The r e g u l a t i o n s , however, f a i l e d t o p r o v i d e any g u i d e l i n e s as t o 'reasonableness' and made no allowance f o r c o n s i d e r a t i o n o f the r a t e s by the Department o f N a t i o n a l Revenue. 117 (c) The S u f f e r a n c e Warehouse Concept The f r e i g h t c l e a r a n c e problem which e x i s t e d a t the f r o n t i e r border c r o s s i n g s i n 1950 i s shown s c h e m a t i c a l l y i n E x h i b i t 3-1. The problems were c r i t i c a l enough f o r the Department o f N a t i o n a l Revenue t o c o n s i d e r a l t e r n a t i v e s t o the system which had p r e v i o u s l y been i n f o r c e f o r the t r a n s -border motor c a r r i e r i n d u s t r y and the success o f the i n l a n d s u f f e r a n c e warehouses f o r the r a i l mode made i t appear the be s t a l t e r n a t i v e f o r a l l those w i t h an i n t e r e s t i n the importa-t i o n o f goods. On a c o n c e p t u a l l e v e l the a d o p t i o n o f the i n l a n d c l e a r a n c e warehouse system o f f e r e d many b e n e f i t s t o Customs, the motor c a r r i e r i n d u s t r y , and t o the c o n s i g n e e - b r o k e r s o f imported goods. Shipments a r r i v i n g a t the f r o n t i e r b o rder c r o s s i n g s , aboard the equipment o f bonded motor c a r r i e r f i r m s , would be r e p o r t e d t o Customs o f f i c i a l s and p l a c e d ' i n bond' f o r d e l i v e r y t o the i n l a n d highway s u f f e r a n c e warehouse i n d i c a t e d on the c a r r i e r ' s cargo m a n i f e s t . The r e p o r t o f i n bond goods en rou t e would be forwarded t o the s u f f e r a n c e ware-house Customs o f f i c e as a c h e c k i n g r e c o r d t o ensure t h a t they are p r e s e n t e d t o Customs f o r examination, a p p r a i s a l and pay-ment o f duty and t a x e s . Upon a r r i v a l a t the c e n t r a l i z e d c l e a r -ance warehouse the motor c a r r i e r would be a b l e f u l f i l l i t s break-bulk requirements and go about i t s b u s i n e s s w h i l e the consignee or h i s broker arranged c l e a r a n c e and the goods were d e l i v e r e d t o t h e i r d e s t i n a t i o n . The e n t i r e p r o c e s s would be a c h i e v e d as EXHIBIT 11 TOTAL TRAFFIC TOTAL TRAFFIC Imported goods are cleared at a number of f r o n t i e r border crossings anyone of which may receive a l l the t r a f f i c and become badly overloaded. One inland sufferance warehouse l o c a t i o n at each customs port geared to handle a l l goods des-tined to the l o c a t i o n and responsive to change i n t r a f f i c volume. THE FREIGHT CLEARANCE PROBLEM THE INLAND SUFFERANCE WAREHOUSE CONCEPT an i n t e g r a l p a r t o f . t h e n a t u r a l t r a n s p o r t a t i o n stream. In a d d i t i o n to p r o v i d i n g a c e n t r a l c l e a r a n c e l o c a t i o n w i t h i n the p o r t areas o f Canada, the highway s u f f e r a n c e ware-house system would ope r a t e i n c o n j u n c t i o n w i t h the f r o n t i e r examining warehouses a l r e a d y i n e x i s t e n c e a t border c r o s s i n g s : motor c a r r i e r f i r m s would have the c h o i c e o f p r e s e n t i n g goods f o r c l e a r a n c e a t e i t h e r l o c a t i o n . C a r r i e r f i r m s would be encouraged t o use the i n l a n d c l e a r a n c e l o c a t i o n s for~ shipments c a r r i e d i n l e s s - t h a n - t r u c k l o a d l o t s because o f the convenience and s a v i n g s a v a i l a b l e from h a v i n g the c l e a r a n c e and break-bulk f u n c t i o n s c a r r i e d out a t one l o c a t i o n . For t r u c k l o a d shipments which r e q u i r e d no break-bulk s e r v i c e b e f o r e d e l i v e r y t o the consignee, the c a r r i e r would be f r e e t o have c l e a r a n c e e f f e c t e d a t the border c r o s s i n g w i t h a minimum o f d e l a y and with no c o s t l y d i v e r s i o n t o the i n l a n d c l e a r a n c e warehouse necessar y . The implementation o f t h i s concept was advantageous t o the Department o f N a t i o n a l Revenue which r e a l i z e d some s o l u t i o n t o the c o n g e s t i o n problems a t border c r o s s i n g s had t o be found. Some o f these advantages are the f o l l o w i n g : (1) Movement o f the c l e a r a n c e f u n c t i o n i n t o the m a n i f e s t p o r t areas enabled the department t o e l i m i n a t e the p r e s s u r e which r e s u l t e d from d e l a y s and poor s e r v i c e a t f r o n t i e r c r o s s i n g s . At the same time, the department was a b l e t o m a i n t a i n e f f e c t i v e c o n t r o l over the flow o f imported goods. 120 (2) The department would be f r e e from the l a r g e c a p i t a l o u t l a y s r e q u i r e d t o expand the f r o n t i e r c l e a r a n c e f a c i l i t i e s . The onus would be s h i f t e d t o the p r i v a t e s e c t o r t o p r o v i d e the n e c e s s a r y c l e a r a n c e f a c i l i t i e s a t the i n l a n d p o r t s . (3) The system would ensure t h a t p r o v i s i o n o f c l e a r a n c e s e r v i c e s a t the i n l a n d p o r t s would be o f no a d d i t i o n a l expense t o the department. O f f i c e space, f u r n i s h i n g s and u t i l i t i e s would be p r o v i d e d t o the department a t no charge by the warehouse o p e r a t o r . (4) C l e a r a n c e a t i n l a n d p o r t areas would ease the work l o a d problems which the department faced a t the f r o n t i e r c l e a r a n c e warehouses. The flow o f goods i n t o a p a r t i c u l a r p o r t area are more e a s i l y f o r e c a s t than the volume o f goods a r r i v i n g a t s e v e r a l f r o n t i e r c r o s s i n g s , and are l i k e l y more s t a b l e . More s t a b l e and p r e d i c t a b l e demand would a l l o w b e t t e r b a l a n c i n g o f p e r s o n n e l w i t h workload and r e s u l t i n more e f f i c i e n t o p e r a t i o n of the customs f u n c t i o n . The c e n t r a l i z e d c l e a r a n c e o f imported goods would p r o v i d e b e n e f i t s t o o t h e r s b e s i d e s the Department o f N a t i o n a l Revenue. The bulk o f goods b e i n g imported i n t o Canada are consigned to a bonded and l i c e n c e d Customs House Broker f o r the purpose o f p r e s e n t i n g the goods t o Customs f o r examination and a p p r a i s a l . The b e n e f i t s t o the c o n s i g n e e / b r o k e r are as f o l l o w s : (1) The i n l a n d c l e a r a n c e concept would a l l o w the broker t o c e n t r a l i z e h i s s e r v i c e s w i t h i n the p o r t he served, e l i m i n a t i n g d u p l i c a t i o n o f s e r v i c e s a t s e v e r a l b o rder c r o s s i n g l o c a t i o n s . (2) C e n t r a l i z a t i o n would mean more s t a b l e work-l o a d c o n d i t i o n s and b e t t e r s t a f f b a l a n c i n g . One o f f i c e a t a c e n t r a l l o c a t i o n w i t h e x p e r i e n c e d s t a f f would be a b l e t o s e r v i c e a l l goods m a n i f e s t f o r the p a r t i c u l a r p o r t a r e a . 1 2 1 (3) C e n t r a l i z e d c l e a r a n c e would r e d u c e t h e d e l a y s as a r e s u l t o f s p e c i a l c l e a r a n c e p r o b l e m s . The c l o s e p r o x i m i t y o f t h e goods, t h e motor c a r r i e r f i r m , Customs and E x c i s e o f f i c i a l s and t h e b r o k e r would e l i m i n a t e t h e d i s t a n c e s i n v o l v e d w i t h c l e a r a n c e a t f r o n t i e r c r o s s i n g s . The s h i f t i n g o f t h e c l e a r a n c e f u n c t i o n t o i n l a n d ware-house complexes would mean s a v i n g s t o t h e motor c a r r i e r i n d u s t r y w h i c h would be r e f l e c t e d i n t h e s e r v i c e t o t h e u s e r . These b e n e f i t s i n c l u d e : ( 1 ) D e l a y s and poor s e r v i c e a t t h e f r o n t i e r c r o s s i n g s would be e l i m i n a t e d . C a r r i e r s t r a n s p o r t i n g goods i n t o Canada would be r e q u i r e d t o s t o p a t t h e b o r d e r f o r no l o n g e r t h a n i t t o o k t o r e p o r t t h e goods t o Customs and E x c i s e . I n r e t u r n f o r assuming r e s p o n s i b i l i t y f o r t h e goods t h e c a r r i e r f i r m w ould be f r e e d from t h e c o s t s o f d i v e r s i o n and e x t r a h a n d l i n g o f t h e goods a t t h e f r o n t i e r b o r d e r c r o s s i n g s . ( 2 ) E l i m i n a t i o n o f t h e d e l a y s a t f r o n t i e r c r o s s i n g s would reduce equipment u t i l i z a t i o n p r oblems w h i c h were becoming c r i t i c a l f o r some c a r r i e r f i r m s . I n bond goods c o u l d be d e l i v e r e d t o t h e i n l a n d c l e a r a n c e ware-house i n t h e m a n i f e s t p o r t t o a w a i t c l e a r a n c e w h i l e t h e c a r r i e r f i r m ' s equipment c o n t i n u e d t o be u t i l i z e d . I n a p r e v i o u s s e c t i o n o f t h i s p a p e r , t h e r e q u i r e m e n t s o f an e f f i c i e n t t r a n s p o r t a t i o n s ystem were s t a t e d t o i n c l u d e t h e need f o r as few d i v e r s i o n i n t h e t r a n s p o r t a t i o n s t r e a m as p o s s i b l e . The c l e a r a n c e o f goods a t t h e f r o n t i e r b o r d e r c r o s s i n g s c o n s t i t u t e d a s e r i o u s d i v e r s i o n i n t h e highway t r a n s p o r t a t i o n s t r e a m . 122 (3) In moving the clearance l o c a t i o n i n l a n d the c a r r i e r f i r ms would b e n e f i t from the e f f i -c i e n c y of having goods c l e a r e d at what was a normal break-bulk l o c a t i o n . By e s t a b l i s h i n g t h e i r break-bulk f a c i l i t i e s at s u f f e r a n c e warehouses, c a r r i e r firms c o u l d r e t a i n c o n t r o l over the goods from consignor to consignee while f u l f i l l i n g the requirement t h a t goods be c l e a r e d before e n t e r i n g domestic consumption. The i n l a n d s u f f e r a n c e warehouse complex would not d i s c r i m i n a t e a g a i n s t motor c a r r i e r firms by the volume of goods they c a r r y i n t o a port area. For c a r r i e r firms r e q u i r i n g i t , space would be a v a i l a b l e through which they c o u l d warehouse t h e i r own goods. For low volume and i t i n e r a n t c a r r i e r s , a p u b l i c area i n the s u f f e r a n c e warehouse would provide a l l warehousing s e r v i c e s at a "reasonable" charge to the c a r r i e r f i r m . In t h i s manner a l l c a r r i e r s could enjoy the b e n e f i t s of c l e a r i n g imported goods at i n l a n d p o r t s . (4) The i n l a n d s u f f e r a n c e warehouse complexes would be geared to the o p e r a t i o n s of the motor c a r r i e r f i r m s . E f f i c i e n t h a n d l i n g and warehousing systems^ would i n c r e a s e the e f f i c i e n c y of the c l e a r a n c e f u n c t i o n . There i s an a d d i t i o n a l b e n e f i t from the i n l a n d s u f f e r -ance warehouse system which would accrue to a l l p a r t i e s i n v o l v e d i n the movement of f o r e i g n goods i n t o Canada by road. C e n t r a l i z e d clearance p o i n t i n each p o r t area would l o c a t e each of these p a r t i e s — the goods, the motor c a r r i e r f i r m , the consignee/broker and Customs o f f i c i a l s with-i n easy reach of each other. When the motor c a r r i e r d e l i v e r s the goods to the i n l a n d 123 sufferance warehouse, a l l the necessary i n g r e d i e n t s are a v a i l a b l e to e f f e c t a quick c l e a r a n c e . The motor c a r r i e r has access t o e f f i c i e n t h a n d l i n g and warehous-i n g s e r v i c e s . The a r r i v a l advice note i s d e l i v e r e d to the consignee/broker with no need to cover great d i s t a n c e s . The con-signee/broker, who must prepare and pre-sent the entry to Customs, has immediate access to the goods, the motor c a r r i e r and Customs. The Customs a p p r a i s e r , who deals with the entry on b e h a l f of the Crown, a l s o has easy access to the goods. There i s no need f o r the a p p r a i s e r to make t r i p s between the Customs o f f i c e and some d i s t a n t ware-house or, a l t e r n a t i v e l y , f o r the consignee to provide a sample of the goods to some d i s t a n t Customs o f f i c e . With a l l the components l o c a t e d w i t h i n the same complex the chance of delays i n the clearance of the goods i s minimized and where s p e c i a l problems are encountered, face to face i n t e r a c t i o n between Customs o f f i c i a l s and consignee/broker i s p o s s i b l e to q u i c k l y deal with the problems and have the goods r e l e a s e d . On a conceptual l e v e l the i n l a n d highway suff e r a n c e warehouse system o f f e r s many b e n e f i t s to the o r d e r l y and e f f i c i -ent flow of goods on' a transborder b a s i s . The f a c i l i t i e s p rovide a l l the s e v i c e s necessary f o r the quick clearance of the imported goods a t one l o c a t i o n i n each Customs p o r t . The main p a r t i c i p a n t s i n the goods movement and clearance process have easy access to one another and deal with each other on a d a i l y and more i n f o r m a l b a s i s than would be the case i f these p a r t i e s were separated by g r e a t e r d i s t a n c e s . These b e n e f i t s help ensure t h a t the amount of time and the p o t e n t i a l delays i n c l e a r i n g the goods through Customs are minimized. 123a T h i s i s not to imply t h a t there are no inherent d i s -advantages i n the i n l a n d highway suff e r a n c e warehouse i d e a . The system appears never to ahve been c o n c e p t u a l i z e d on a multi-modal b a s i s . Assuming t h a t such a clearance warehouse system i s r e q u i r e d f o r Revenue Canada to maintain the c o n t r o l i t d e s i r e s over imported goods, and th a t e f f i c i e n c y i n the t r a n s p o r t a t i o n stream i s an important f a c t o r , i t would be appropriate to have a system of m u l t i modal' f a c i l i t i e s . Under the present system there i s not p r o v i s i o n f o r such intermod-a l i t y ; the manifest mode at the f r o n t i e r r e p o r t i n g s t a t i o n i s considered to be the suffe r a n c e mode and i n t e r l i n i n g be-tween modes a t highway suff e r a n c e warehouses i s not p o s i b l e , even a f t e r the goods are c l e a r e d . T h i s , o f course, does not c o n s t i t u t e a problem to the motor c a r r i e r f i r m r e s p o n s i b l e f o r the goods s i n c e i t s i n t e r e s t i s i n r e t a i n i n g business, not i n a l l o w i n g i t to t r a n s f e r to competitive firms o r modes f o r f i n a l d e l i v e r y . On t h i s b a s i s the concept o f unimodal warehouses does not always provide the g r e a t e s t e f f i c i e n c y f o r the consignee and the domestic consumer of f o r e i g n goods. When considered as an a l t e r n a t i v e to the f r o n t i e r c learance system i n e f f e c t at the time, the i n l a n d highway sufferance warehouse system was a welcome change o f f e r i n g few disadvantages which could outweigh the p o t e n t i a l b e n e f i t s a v a i l a b l e from c e n t r a l i z e d clearance of goods. U n f o r t u n a t e l y however, the system has f a l l e n short o f p r o v i d i n g a l l these b e n e f i t s and some of the s p e c i f i c complaints of c a r r i e r s f o r c e d to use i t w i l l be the subject o f chapter f i v e . 123b FOOTNOTES - CHAPTER 3 1 Canada, S t a t u t e s . Customs Act. R.S.C.1970, c.51, s.273. 2 Revenue Canada, Customs and E x c i s e . Memorandum D2 0, Customs Warehousing Regulations. October, 1974. 3 I b i d . , s.2 (m) . 4 I b i d . , s.16. 5 Canada, S t a t u t e s . Customs Act R.S.C.1970, c.57, s.278 (1) (2) (6) 6 Revenue Canada, Customs and E x c i s e . Memorandum D20-3 Customs Sufferance Warehouse Regulations. J u l y 1974. 7 Canada, Department o f N a t i o n a l Revenue, Customs and E x c i s e , Memorandum D2 0, Customs Warehousing Regulations. May 1958. 8 I b i d . 9 I b i d . , 'Sufferance Warehouses f o r the Storage o f Goods A r r i v i n g by Highway.' s.50. 10 Canada, Department of N a t i o n a l Revenue, Customs and E x c i s e . Memorandum D20, Customs Warehousing Regulations. June 1968, s.30 (1). 11 I b i d . 'General Information', s . l and 2. 12 Revenue Canada, Customs and E x c i s e . Memorandum D20-3, Customs Sufferance Warehouse Regulations. J u l y 1974, s . 6 ( l ) . 13 I b i d . , 'General Information', s.5. 14 I b i d . , ' R e s p o n s i b i l i t y o f Warehouse Keeper, s . 7 ( c ) . 15 I b i d . , s.7(d). 16 I b i d . , s.7(b). 17 I b i d . , ' S e c u r i t y ' , s . l l and 'General Information', s.17. 124 CHAPTER FOUR  THE 1976 HIGHWAY SUFFERANCE WAREHOUSE SURVEY From the o u t s e t o f t h i s p r o j e c t i t was apparent t h a t l i t t l e i n f o r m a t i o n i s a v a i l a b l e about the highway s u f f e r a n c e warehouse system. The purpose o f t h i s c h a p t e r w i l l be t o summarize the i n f o r m a t i o n a v a i l a b l e from c o n v e n t i o n a l sources and to i n t r o d u c e i n f o r m a t i o n c o l l e c t e d as a r e s u l t o f the 197 6 Highway S u f f e r a n c e Warehouse Survey conducted as p a r t o f t h i s study. Customs and E x c i s e , Memorandum D9 L i s t o f Customs  O f f i c e s l i s t s the l o c a t i o n s o f 144 highway s u f f e r a n c e ware-houses i n Canada.^ These are l o c a t e d i n 12 Customs r e g i o n s a c r o s s the co u n t r y as i n d i c a t e d i n T a b l e X I I . In a d d i t i o n t o these f a c i l i t i e s designed f o r the c l e a r a n c e o f g e n e r a l commodities, t h e r e are t h i r t e e n warehouses a u t h o r i z e d t o handle f r e s h f r u i t and v e g e t a b l e s e x c l u s i v e l y . There appear t o be two main f a c t o r s g o v e r n i n g the l o c a t i o n o f highway s u f f e r a n c e warehouses. F i r s t , t h e r e i s a Revenue Canada r e g u l a t i o n t h a t a l l s u f f e r a n c e warehouses be l o c a t e d w i t h i n a Customs p o r t a r e a . T h i s r e g u l a t i o n i s designed t o a l l o w easy enforcement o f the Customs laws. The second f a c t o r i s p u r e l y economic; those areas which have a 125 TABLE X I I L o c a t i o n o f Highway Sufferance 1 Warehouses General F r u i t and S u f f e r a n c e V e g e t a b l e Warehouse Warehouses A t l a n t i c Region 13 8 Quebec Region 27 -Montreal Region 8 -Ottawa Region 16 -Toronto Region 19 -Hamilton Region 10 -London Region 16 -Windsor Region 3 -Winnipeg Region 4 -Saskatchewan Region 6 -A l b e r t a Region 6 -P a c i f i c Region 17 5 Source: Revenue Canada, Customs and E x c i s e . Memorandum D9 ' L i s t o f Customs O f f i c e s ' . 1974 126 h i g h demand f o r imported goods tend to have a g r e a t e r number of highway s u f f e r a n c e warehouses. N a t u r a l l y , t h e r e must be adequate t r a n s p o r t a t i o n i n f r a s t r u c t u r e t o handle incoming motor c a r r i e r t r a f f i c i n the a r e a , and f o r the most p a r t , the l o c a t i o n o f the highway s u f f e r a n c e warehouses has been near these major r o u t e s . There are 120 l o c a t i o n s on the Canada-United S t a t e s border a t which Revenue Canada m a i n t a i n s f r o n t i e r border o f f i c e s . F o r t y - s e v e n o f these c r o s s i n g s accounted f o r 75 p e r c e n t o f a l l commercial motor v e h i c l e s e n t e r i n g Canada i n 1975: Ontario, w i t h 19 c r o s s i n g s , had 1,074 ,448 commercial motor v e h i c l e s e n t e r from the U n i t e d S t a t e s ; and, Quebec, w i t h 28 border c r o s s i n g s r e p o r t e d 322,339 c r o s s i n g s . New Brunswick, w i t h a rank o f seventh i n the v a l u e o f U n i t e d S t a t e s e x p o r t s r e c e i v e d , r e g i s t e r e d nine p e r c e n t o f commercial motor v e h i c l e s e n t e r i n g Canada as p a s s i n g through i t s 20 border c r o s s i n g s , i n d i c a t i n g t h a t a h i g h e r p r o p o r t i o n o f the v a l u e o f t h i s p r o v i n c e ' s imports a r r i v e from the U n i t e d S t a t e s by road than i s the case i n o t h e r p r o v i n c e s . B r i t i s h Columbia ranked f o u r t h i n the number o f motor v e h i c l e s e n t e r i n g Canada w i t h 72 p e r c e n t of these e n t e r i n g a t t h r e e border c r o s s i n g s south of Vancouver. The t h r e e p r a i r i e p r o v i n c e s complete the l i s t w i t h Manitoba (5 p e r c e n t ) , A l b e r t a (3 percent) and Saskatchewan (2 percent) a c c o u n t i n g f o r the remainder o f commercial t r u c k t r i p s i n t o Canada. The h i g h e s t c o n c e n t r a t i o n o f highway s u f f e r a n c e 127 warehouses o c c u r s i n the N i a g a r a P e n i n s u l a o f southern O n t a r i o and a l o n g the St. Lawrence R i v e r from M o n t r e a l to Quebec C i t y . T h i s i s not s u r p r i s i n g g i v e n the economic r e a l i t y o f the a r e a : these two areas are the c e n t r e o f Canadian secondary i n d u s t r y and p o p u l a t i o n and n o r t h and west o f these areas i s a concen-t r a t i o n o f p r i m a r y i n d u s t r y . Both l e v e l s o f i n d u s t r i a l a c t i v i t y r e l y on the U n i t e d S t a t e s markets as a source o f goods and the p o p u l a t i o n r e l i e s on t h i s market as a source f o r many of the consumer goods which i t demands. The highway s u f f e r a n c e warehouse system p r o v i d e s i n l a n d c l e a r a n c e p o i n t s f o r the goods c a r r i e d t o t h i s demand by motor c a r r i e r . L i t t l e e l s e i s known about the highway s u f f e r a n c e ware-house system and no apparent attempts have been made t o r e s e a r c h the i n d u s t r y u n t i l the '1976 Highway S u f f e r a n c e Warehouse Survey', i n i t i a t e d as p a r t o f t h i s study. The Survey R e s u l t s The v o i d o f i n f o r m a t i o n about the highway s u f f e r a n c e warehouse system r e s u l t e d i n the 1976 Highway S u f f e r a n c e  Warehouse Survey. The purpose o f the q u e s t i o n n a i r e survey was t o o b t a i n data about the warehouse system which c o u l d be used to a n a l y s e i t s performance r e c o r d i n the p a s t and t o make some comment about i t s o p e r a t i o n . The t o p i c s which were of p a r t i c u l a r i n t e r e s t i n d e s i g n i n g the q u e s t i o n n a i r e were: who owned the f a c i l i t i e s ; who made use o f the f a c i l i t i e s and how; what i s the c a p a c i t y o f the f a c i l i t i e s and was t h e i r 128 performance adequate f o r the needs of the t r a n s p o r t a t i o n system; what were the r a t e s and charges a p p l i c a b l e a t highway, s u f f e r a n c e warehouses; what was the f i n a n c i a l s t r u c t u r e and p r o f i t p i c t u r e o f the i n d u s t r y ; and l a s t l y , what d i d the i n d u s t r y t h i n k o f the s u f f e r a n c e warehouse concept and i t s own r e c o r d i n s e r v i n g the needs o f t r a n s b o r d e r highway c a r r i e r s . The q u e s t i o n n a i r e was sent t o the 144 highway s u f f e r -ance warehouse o p e r a t o r s i n Canada which r e p r e s e n t the f a c i l -i t i e s l i c e n c e d to handle i n bond goods e n t e r i n g Canada from the U n i t e d S t a t e s . I t excluded the f a c i l i t i e s r e s e r v e d f o r f r e s h f r u i t and v e g e t a b l e s o n l y . The response t o the survey was s m a l l e r than o r i g i n a l l y a n t i c i p a t e d but was s u f f i c i e n t t o make some o b s e r v a t i o n s . Of the 144 q u e s t i o n n a i r e s , f i f t y -t h r e e were r e t u r n e d : 44 o p e r a t o r s completed the. q u e s t i o n n a i r e s , a l t h o u g h most chose not to r e p l y t o the q u e s t i o n s a s k i n g f o r f i n a n c i a l i n f o r m a t i o n ; f i v e warehouse o p e r a t o r s answered the q u e s t i o n n a i r e but f a i l e d t o i n c l u d e r a t e s and charges i n f o r m -a t i o n ; and, 4 q u e s t i o n n a i r e s were r e t u r n e d unanswered. Tabl e XIII i n d i c a t e s the g e o g r a p h i c a l d i s t r i b u t i o n o f the 49 u s a b l e q u e s t i o n n a i r e r e p l i e s . In each Customs r e g i o n , w i t h the e x c e p t i o n o f Toronto/Hamilton (8 o f 28) and the A t l a n t i c r e g i o n (2 o f 13), the number o f responses r e p r e s e n t s a t l e a s t o n e - t h i r d of the o p e r a t i n g warehouses. In a d d i t i o n , the responses r e p r e s e n t highway s u f f e r a n c e warehouses from c i t i e s o f a l l s i z e s a c r o s s Canada. The major c e n t r e s i n a l l p r o v i n c e s are r e p r e s e n t e d among the r e p l i e s , except f o r TABLE X I I I G e o g r a p h i c a l D i s t r i b u t i o n o f  Q u e s t i o n n a i r e R e p l i e s R e p l i e s Warehouses A t l a n t i c 2 13 Quebec 11 35 O n t a r i o 22 64 Manitoba 2 2 Saskatchewan 4 6 A l b e r t a 2 6 P a c i f i c 6 17 130 C a l g a r y and Edmonton, A l b e r t a . S m a l l e r c e n t r e s make up the bulk o f the r e p l i e s s i n c e the m a j o r i t y o f highway s u f f e r a n c e warehouses serve communities away from l a r g e p o p u l a t i o n c e n t r e s . Each o f the 2 0 q u e s t i o n s which made up the Highway S u f f e r a n c e Warehouse Survey w i l l be c o n s i d e r e d i n t u r n . The g e n e r a l purpose o f the q u e s t i o n w i l l be d i s c u s s e d and the tr e n d s e s t a b l i s h e d by the responses w i l l be c o n s i d e r e d . F i n a l l y , some g e n e r a l comments w i l l be made based on the f i n d i n g s o f the survey. The q u e s t i o n n a i r e i s i n c l u d e d as an Appendix t o the r e p o r t . Question 1: Name and address o f warehouse company. Question 2; Name and p o s i t i o n o f respondent. Question 3; Date f a c i l i t y e s t a b l i s h e d . Question 4: O u t l i n e any expansions o f the f a c i l i t y . These q u e s t i o n s were desi g n e d t o determine the name and address o f the f a c i l i t y and the date on which i t was e s t a b l i s h e d . A l s o r e q u e s t e d was i n f o r m a t i o n about expansion of the f a c i l i t y s i n c e i t opened. The response i n d i c a t e s t h a t the highway s u f f e r a n c e warehouse system has developed i n response t o the i n c r e a s e s i n demand f o r such s e r v i c e s . F u r t h e r , a d d i t i o n s t o e x i s t i n g p l a n t s have been i n those areas e x p e r i e n c i n g the l a r g e s t 131 t r a f f i c growth-—the major c e n t r e s i n southern O n t a r i o , i n the p r a i r i e r e g i o n and i n the Vancouver a r e a . Question 5: I n d i c a t e any motor c a r r i e r f i r m s which p a r t i c i p a t e i n the ownership o f the s u f f e r a n c e warehouse and i n d i c a t e t h e i r ownership share. The response t o t h i s q u e s t i o n d i d not p r o v i d e the a c c o u n t i n g o f warehouse ownership which was d e s i r e d . While some respondents d i d not h e s i t a t e t o i n d i c a t e who owned the warehouse, many o t h e r s l e f t t h i s q u e s t i o n unanswered. The i n f o r m a t i o n from the q u e s t i o n n a i r e was b o l s t e r e d w i t h t h a t 2 from Customs and E x c i s e which i n d i c a t e d whether the h o l d e r o f the o p e r a t i n g a u t h o r i t y was a " t r a n s p o r t " company. The dat a p r e s e n t e d here on a Customs r e g i o n b a s i s i s from these combined so u r c e s . There are 13 t r u c k s u f f e r a n c e warehouses o p e r a t i n g i n the A t l a n t i c r e g i o n . The ownership o f t h r e e o f these ware-houses i s shown as ' t r a n s p o r t ' company. In a d d i t i o n , the St. John, New Brunswick f a c i l i t y i s owned and op e r a t e d by Border Broker L i m i t e d , a l a r g e Customs-House Brokerage f i r m headquartered i n Toronto. The Montreal/Quebec C i t y r e g i o n has a system o f 35 s u f f e r a n c e warehouses t o serve the highway mode. Of th e s e , 20 are i d e n t i f i e d as b e i n g owned by ' t r a n s p o r t ' companies, 132 seven o f which r e p l i e d t o the q u e s t i o n n a i r e . For the most p a r t , the respondents r e p r e s e n t s m a l l t r a n s p o r t companies, some o f them l o c a l moving and s t o r a g e companies, s u b s i d i z i n g t h e i r o p e r a t i o n s w i t h a s m a l l , s u f f e r a n c e warehouse s e r v i c e . The e x c e p t i o n i s the M o n t r e a l Truck S u f f e r a n c e Warehouse which i s 100 p e r c e n t owned by a p a r e n t company which a l s o owns a l a r g e t r a n s b o r d e r motor c a r r i e r f i r m o p e r a t i n g i n O n t a r i o and Quebec. T h i s f i r m , M a i s l e n I n d u s t r i e s o f M o n t r e a l , a l s o owns Toronto S u f f e r a n c e Truck T e r m i n a l L t d . i n Toronto, O n t a r i o . The l a r g e s t number o f highway s u f f e r a n c e warehouses operate i n the p r o v i n c e w i t h the h i g h e s t p r o p o r t i o n o f Canadian i m p o r t s — O n t a r i o . There are 64 t r u c k s u f f e r a n c e warehouses i n t h i s p r o v i n c e , d i v i d e d among f i v e Customs r e g i o n s . The q u e s t i o n n a i r e i n d i c a t e s t h a t nine of the 22 f i r m s r e s p o n d i n g are owned i n f u l l o r i n p a r t , by a ' t r a n s p o r t ' company. In a d d i t i o n , Customs and E x c i s e i n d i c a t e s t h a t an a d d i t i o n a l 13 highway s u f f e r a n c e warehouses are o p e r a t e d by ' t r a n s p o r t ' companies. Three o f these t e r m i n a l s are owned by Dominion-C o n s o l i d a t e d F r e i g h t L i n e s and two by S t a r T r a n s p o r t L t d . The l a r g e s t o f the highway s u f f e r a n c e warehouses i n O n t a r i o which responded to the q u e s t i o n n a i r e i s M i d c o n t i n e n t Truck T e r m i n a l s L t d . o f Toronto. T h i s warehouse c o n s i s t s o f 185,000 square f e e t o f warehouse space and d a i l y p r o c e s s e s $3.5 m i l l i o n worth of f r e i g h t c a r r i e d from the U.S. by about 55 c a r r i e r f i r m s . T h i s f a c i l i t y , which i s one o f the two 133 l a r g e s t highway s u f f e r a n c e warehouses i n Canada, d i d not i n d i c a t e t h a t any motor c a r r i e r f i r m s p a r t i c i p a t e s i n i t s ownership. Other s u f f e r a n c e f a c i l i t i e s i n O n t a r i o are owned by Customs House Brokerage f i r m s . Border Brokers L i m i t e d , a s u b s i d i a r y o f Greyhound C o r p o r a t i o n , owns and o p e r a t e s a t l e a s t two f a c i l i t i e s , w h i l e A.T.W. Customs House Brokers and B & B Customs House Brokerage Co. L t d . oper a t e one each. The p r a i r i e p r o v i n c e s comprise t h r e e Customs r e g i o n s . The Winnipeg r e g i o n has f o u r highway s u f f e r a n c e warehouses, two o f which are a c t u a l l y i n western O n t a r i o . Of thes e f o u r the l a r g e s t i s i n Winnipeg and i s owned by Glendenning L t d . , a f i r m w i t h motor c a r r i e r i n t e r e s t s . Saskatchewan has s i x highway s u f f e r a n c e warehouses, f o u r o f which are owned and opera t e d by S o o - S e c u r i t y Motorways, a s u b s i d i a r y o f Canadian Motorways, o f Winnipeg. The remaining two are owned by s m a l l t r a n s p o r t - r e l a t e d companies. N e i t h e r o f the respondents from A l b e r t a highway s u f f e r a n c e warehouses i n d i c a t e d any motor c a r r i e r involvement i n t h e i r ownership; one f i r m , however, i s i n the c a r t a g e b u s i n e s s . The l a r g e r s u f f e r a n c e warehouses i n A l b e r t a d i d not r e t u r n the q u e s t i o n n a i r e and t h e i r ownership i s undetermined. The B r i t i s h Columbia or P a c i f i c r e g i o n has 17 l i c e n c e d highway s u f f e r a n c e warehouses, o n l y s i x o f which responded t o the q u e s t i o n n a i r e . These responses and Customs and E x c i s e 134 i n f o r m a t i o n i n d i c a t e t h a t 11 o f the o p e r a t o r s are i n the motor c a r r i e r b u s i n e s s and one, the B r i t i s h Yukon N a v i g a t i o n Co. L t d . , a d i v i s i o n o f the White Pass and Yukon Route o f Whitehorse, Yukon, i s a multi-modal t r a n s p o r t a t i o n company. The l a r g e s t of the highway s u f f e r a n c e warehouses i n the P a c i f i c r e g i o n i s U n i t e d Truck T e r m i n a l s L t d . i n Vancouver. T h i s f a c i l i t y i s o p e r a t e d as a j o i n t v e n t u r e by two l a r g e t r u c k i n g f i r m s , Canadian Freightways L t d . and Time-DC L t d . which t o g e t h e r h o l d a p p r o x i m a t e l y 55 p e r c e n t o f the inbound t r a n s b o r d e r f r e i g h t market to B r i t i s h Columbia. Question 6: L i s t here a l l motor c a r r i e r s t h a t l e a s e space f o r t h e i r e x c l u s i v e use a t your s u f f e r a n c e warehouse. T h i s q u e s t i o n was i n t e n d e d t o d i s c o v e r the e x t e n t to which u s e r - c a r r i e r s have taken advantage o f the r e g u l a t i o n r e q u i r i n g warehouse o p e r a t o r s to p r o v i d e l e a s e space i n the warehouse t o motor c a r r i e r f i r m s . O v e r a l l , the p r a c t i c e o f l e a s i n g space w i t h i n highway s u f f e r a n c e warehouse complexes does not appear to be wide-spread. Of the 49 r e p l i e s to the highway s u f f e r a n c e ware-house survey, o n l y n i n e f a c i l i t i e s i n d i c a t e d t h a t space was l e a s e d to motor c a r r i e r s and o f t h e s e , two motor c a r r i e r s which l e a s e d space were not l i c e n c e d to use i t f o r the storage o f i n bond goods. Of the t h r e e l a r g e s t volume f a c i l i t i e s r e s ponding t o the q u e s t i o n n a i r e , two l e a s e d space t o motor 135 c a r r i e r s , w h i l e the t h i r d d i d not. The m a j o r i t y o f s u f f e r a n c e warehouse o p e r a t i o n s r e s p o n d i n g t o the q u e s t i o n n a i r e are l o c a t e d i n s m a l l p o p u l a t i o n c e n t r e s where the demand f o r t r a n s b o r d e r motor c a r r i e r t r a n s p o r t a t i o n i s not l a r g e enough to warrant maintenance o f t e r m i n a l space a t s u f f e r a n c e f a c i l i t i e s . Where i n bond goods a r e c a r r i e d t o the s e c e n t r e s a t a l l , the p u b l i c area o f the f a c i l i t y i s adequate f o r c l e a r -ance o f goods. Que s t i o n 7: I n d i c a t e the number o f motor c a r r i e r s which u t i l i z e the p u b l i c warehouse area r e g u l a r l y . L i s t the names o f the major c a r r i e r s u s i n g t h i s area o f the f a c i l i t y . T h i s q u e s t i o n was in t e n d e d t o c o n f i r m not o n l y t h a t the l a r g e s t and most r e g u l a r l y used s u f f e r a n c e warehouses are l o c a t e d i n h i g h d e n s i t y i n d u s t r i a l and p o p u l a t i o n areas but a l s o t h a t these f a c i l i t i e s were o f t e n used as c l e a r a n c e and d i s t r i b u t i o n p o i n t s f o r c a r r i e r s moving goods t o f i n a l d e s t i n -a t i o n s f u r t h e r i n l a n d . S i n c e most c a r r i e r s moving goods i n t o Canada have major break-bulk f a c i l i t i e s i n these p o r t s t h i s i s not a s u r p r i s i n g f i n d i n g . In f a c t i n many cases goods are c l e a r e d a t s u f f e r a n c e warehouses f u r t h e r i n l a n d than t h e i r f i n a l d e s t i n a t i o n d e s p i t e the e x i s t e n c e o f a c l e a r a n c e f a c i l i t y a t the f i n a l d e s t i n a t i o n . M i d c o n t i n e n t Truck T e r m i n a l s L t d . , i n Toronto, i n d i c a t e d 136 t h a t up t o 55 motor c a r r i e r f i r m s use i t s f a c i l i t i e s on a r e g u l a r b a s i s and t h a t 275,000 shipments were c l e a r e d through the warehouse complex i n 1975. While the Toronto area was the f i n a l d e s t i n a t i o n f o r many o f these shipments, o t h e r s were d e s t i n e d t o consignees l o c a t e d throughout the N i a g a r a P e n i n s u l a . The warehouse a t Acton, O n t a r i o , t h i r t y m i l e s from Toronto, s e r v i c e s t e n c a r r i e r on a r e g u l a r b a s i s , w h i l e a t Paory Sound, 100 m i l e s n o r t h o f Toronto and away from major t r a n s p o r t a t i o n r o u t e s , o n l y one c a r r i e r r e g u l a r l y uses the s u f f e r a n c e f a c i l i t y . S i m i l a r s i t u a t i o n s e x i s t elsewhere i n Canada; f o r example, i n the P a c i f i c Region many shipments d e s t i n e d f o r c e n t r a l and n o r t h e r n B.C. c l e a r Customs a t Vancouver d e s p i t e the e x i s t e n c e of c l e a r a n c e f a c i l i t i e s f u r t h e r n o r t h . As one moves away from the i n d u s t r i a l and p o p u l a t i o n c e n t r e s the demand f o r these s e r v i c e s d e c r e a s e s f a s t e r than the number o f m a n i f e s t shipments. Question 8; L i s t the names o f any Customs-House Brokers which l e a s e space i n your s u f f e r a n c e warehouse. The i n t e n t i o n o f t h i s q u e s t i o n was to determine how many Customs-House Brokers l e a s e o f f i c e space a t highway s u f f e r a n c e warehouses and, i n d i r e c t l y , t o g a i n some i n s i g h t i n t o the e x t e n t to which Customs House Brokerage f i r m s have spread a c r o s s Canada. The response to the q u e s t i o n n a i r e i n d i c a t e s t h a t the l e a s i n g o f o f f i c e space to Customs House Brokers .at highway 137 s u f f e r a n c e warehouses i s l i m i t e d almost e x c l u s i v e l y to l a r g e r volume f a c i l i t i e s . Twelve o f the respondents to the q u e s t i o n -n a i r e i n d i c a t e d t h a t t h e r e was a t l e a s t one Customs House Broker as a tenant i n t h e i r f a c i l i t i e s , the s m a l l e s t o f these c l e a r e d a volume i n excess o f two thousand e n t r i e s i n 197 5. M i d c o n t i n e n t Truck T e r m i n a l s i n Toronto, which c l e a r e d 275,000 e n t r i e s i n 1975, had f i f t y - f o u r r e s i d e n t Customs House Brokerage f i r m s . There are s e v e r a l reasons which might e x p l a i n the absence of Customs House Brokerage f i r m s a t highway s u f f e r a n c e warehouses. F i r s t , few o f the f a c i l i t i e s f o r c l e a r i n g goods have a volume o f b u s i n e s s which can support a r e s i d e n t Customs brok e r . In most i n s t a n c e s , brokerage f i r m s have chosen to e s t a b l i s h o f f i c e s which are c o n v e n i e n t t o handle e n t r i e s a r r i v i n g by any o f the modes. Si n c e t h e r e i s a p h y s i c a l s e p a r a t i o n o f the s u f f e r a n c e f a c i l i t i e s f o r each mode, the most popu l a r l o c a t i o n i s one c l o s e to the c e n t r a l Customs o f f i c e . For those Customs-House Brokers which have o f f i c e space a t a highway s u f f e r a n c e warehouse, a f u r t h e r problem e x i s t e d . The r e g u l a t i o n r e q u i r i n g t h a t warehouse o p e r a t o r s l e a s e space to these f i r m s has o n l y been i n f o r c e s i n c e J u l y , 1974 and no such o b l i g a t i o n e x i s t e d b e f o r e t h a t date. As a r e s u l t , where o f f i c e space was not a v a i l a b l e w i t h i n the s u f f e r a n c e complex, the brokerage f i r m s e s t a b l i s h e d o f f i c e s near the f a c i l i t y , as had been the p r a c t i c e a t the f r o n t i e r examining warehouse b e f o r e the i n l a n d c l e a r a n c e procedure was i n t r o d u c e d . Another 138 method used by brokerage f i r m s t o serve i t s c l i e n t s a t highway s u f f e r a n c e warehouses i s to have another b r o k e r r e p r e s e n t them a t the f a c i l i t y , e l i m i n a t i n g the n e c e s s i t y o f e x t r a o f f i c e space where the broker does not o t h e r w i s e need i t . The second purpose o f t h i s q u e s t i o n was t o determine the e x t e n t t o which the o p e r a t i o n s o f any Customs House Brokerage f i r m had expanded i n the market. U n f o r t u n a t e l y , the responses t o the q u e s t i o n n a i r e d i d not r e p r e s e n t enough, f a c i l i t i e s which l e a s e space t o brokerage f i r m s f o r any d e f i n i t i v e a n a l y s i s to be made. W i t h i n the responses t o the q u e s t i o n , o n l y one broker was mentioned more than once. Border Brokers L i m i t e d o f Toronto were shown as l e a s e r s o f space a t Mi d c o n t i n e n t Truck T e r m i n a l s i n Toronto, M o n t r e a l Truck S u f f e r a n c e Warehouse, O a k v i l l e S u f f e r a n c e Warehouse L t d . , and U n i t e d T e r m i n a l s L t d . i n Vancouver. As w e l l , t h i s f i r m was i d e n t i f i e d as owners o f s e v e r a l highway s u f f e r a n c e warehouses i n the A t l a n t i c r e g i o n , and O n t a r i o making i t the l a r g e s t Customs House Brokerage f i r m i n Canada. The second g e n e r a l heading under which q u e s t i o n s were asked i n the 1976 Highway S u f f e r a n c e Warehouse Survey, r e l a t e d to the s i z e o f the warehouse f a c i l i t y . The i n t e n t i o n here was to make an i n v e n t o r y o f the highway s u f f e r a n c e warehouses which have been e s t a b l i s h e d i n Canada. The respondents were asked to answer t h i s s e r i e s o f q u e s t i o n s f o r t h r e e a r e a s : o f t h e i r warehouse f a c i l i t i e s ; f o r space used by motor c a r r i e r f i r m s 139 t h a t are f u l l o r p a r t owners o f the s u f f e r a n c e warehouse; f o r space l e a s e d by motor c a r r i e r s f o r t h e i r e x c l u s i v e use; and, f o r the p u b l i c area o f the s u f f e r a n c e warehouse. The purpose o f t h i s q u e s t i o n was t o d i s c o v e r any b i a s e s o f the warehouse keeper i n p r o v i d i n g s e r v i c e s to motor c a r r i e r s u s i n g any o f these areas o f the warehouse. There a r e some problems w i t h t h i s methodology which should be p o i n t e d out b e f o r e any g e n e r a l statement o f the f i n d i n g s i s made. As f a r as the f i r s t purpose i s concerned the o n l y method o f c o m p l e t i n g an i n v e n t o r y o f a l l s u f f e r a n c e warehouses i s to r e c e i v e a response from a l l such f a c i l i t i e s . While the i n t e n t i o n was t o a c h i e v e r e t u r n s o f one hundred p e r c e n t , a r e a l i s t i c approach t o the survey i n d i c a t e d t h a t t h i s l e v e l o f r e t u r n would not be a c h i e v e d , r e s u l t i n g i n o n l y a p a r t i a l i n v e n t o r y o f the highway s u f f e r a n c e warehouse system. The second purpose i n t e n d e d f o r t h i s q u e s t i o n — t o d i s c o v e r warehouse b i a s toward c a r r i e r s u s i n g the d i f f e r e n t s e r v i c e s a v a i l a b l e a t s u f f e r a n c e w a r e h o u s e s — p r e s e n t s even more d i f f i -c u l t i e s . The r e l a t i o n s h i p between the warehouse keeper and the motor c a r r i e r f i r m s cannot e a s i l y be determined by the a s k i n g o f a few q u e s t i o n s from a d i s t a n c e , as was done i n the survey. I t would be r e a s o n a b l e t o expect t h a t t h i s r e l a t i o n s h i p would depend on s e v e r a l f a c t o r s i n c l u d i n g the ownership o f the warehouse, i . e . whether a motor c a r r i e r f i r m was i n v o l v e d i n the ownership, the market c o n d i t i o n s f o r t r a n s b o r d e r motor c a r r i e r s i n the area and the a v a i l a b i l i t y o f a l t e r n a t e , 140 c o m p e t i t i v e s u f f e r a n c e f a c i l i t i e s i n the a r e a . One might expect, f o r i n s t a n c e , t h a t area-monopoly s u f f e r a n c e ware-houses owned by a motor c a r r i e r which competed w i t h o t h e r motor c a r r i e r s on s i m i l a r r o u t e s might tend to d i s c r i m i n a t e a g a i n s t these o t h e r c a r r i e r s i n the p r o v i s i o n o f space and s e r v i c e s , and i n the a p p l i c a t i o n o f r a t e s and charges. A l l of these f a c t o r s should be c l e a r b e f o r e any d e f i n i t i v e s t a t e -ments are made. Question 9: What i s the square footage o f the warehouse f a c i l i t y ? Q u e s t i o n 10: How many docks are t h e r e a t the warehouse f a c i l i t y ? Q u e s t i o n 11: What i s the s i z e o f the warehouse s t a f f ? The responses i n d i c a t e t h a t a g r e a t many o f the highway s u f f e r a n c e warehouses are s m a l l , having l e s s than 5,000 square f e e t d e s i g n a t e d as the s u f f e r a n c e a r e a . Many o f the f a c i l i t i e s are a c t u a l l y l a r g e r than t h i s , but the a d d i t i o n a l space i s used f o r o t h e r purposes by warehouse keepers and c a r r i e r s . T a b l e . XIV i n d i c a t e s the s i z e d i s t r i b u t i o n of the warehouses which responded t o t h i s q u e s t i o n on the q u e s t i o n n a i r e . The l a r g e s t o f the f a c i l i t i e s r e s ponding t o the survey were the M o n t r e a l Truck S u f f e r a n c e Warehouse, owned and oper-a t e d by M a i s l i n T r a n s p o r t L t d . w i t h 195,000 square f e e t ; M i d c o h t i n e n t Truck T e r m i n a l i n Toronto, w i t h 167,000 square 141 TABLE XIV Square Footage o f Warehouses by P r o v i n c e P r o v i n c e 1,000 S q . f t . 1,000 2,000 . . Sq.ft.. 2,000 5, 000 S q . f t . 5,000 10,000 S q . f t . . 10,000 S q . f t . B.C. 3 1 1 - 1 A l b e r t a - 2 - - -Saskatchewan - 1 1 - -• Manitoba - 1 - - 1 O n t a r i o - 8 7 3 2 Quebec - 5 2 1 2 A t l a n t i c - - 2 - — TOTAL 3 18 13 4 6 Source: 1976 Highway S u f f e r a n c e Warehouse Survey 142 square f e e t ; O a k v i l l e S u f f e r a n c e Warehouse L t d . i n O a k v i l l e , O n t a r i o a t 27,000 square f e e t ; Highway Customs Warehouse. L t d . i n Winnipeg, Manitoba a t 40,000 square f e e t ; and U n i t e d T e r m i n a l s L t d . i n Vancouver, B.C. w i t h 153,000 square f e e t . , These l a r g e r f a c i l i t i e s a re l o c a t e d i n a r e a s c l o s e t o the major n o r t h - s o u t h t r a n s p o r t a t i o n a r t e r i e s between the U.S. and Canada. Questions 10 and 11 were completed by few o f the respondents t o t h e q u e s t i o n n a i r e , making any a n a l y s i s d i f f i c u l t . G e n e r a l l y , the l a r g e r warehouses had a g r e a t e r number o f f r e i g h t doors and more dock space than the s m a l l e r f a c i l i t i e s . Many of the warehouse complexes used f o r o t h e r purposes as w e l l as f o r s u f f e r a n c e purposes i n d i c a t e d they d i d not have a s e p a r a t e p h y s i c a l area o r s e p a r a t e doors f o r i n bond goods but p r o v i d e d s e r v i c e s f o r these goods on the same b a s i s as domestic goods. The l e v e l o f a c t i v i t y o f i n bond goods move-ments at any time appeared to be the main determinant o f the s i z e o f space, the number o f doors and the number o f employees a v a i l a b l e f o r h a n d l i n g these goods. Qu e s t i o n 12: P l e a s e e s t i m a t e the number of shipments c l e a r e d through your s u f f e r a n c e warehouse i n 1975. Q u e s t i o n 13: P l e a s e e s t i m a t e the tonnage o f shipments c l e a r e d through your f a c i l i t y i n 1975 and e s t i m a t e the percentage o f t h i s t o t a l which was LESS-THAN-TRUCKLOAD. 143 These two q u e s t i o n s were i n c l u d e d t o p r o v i d e i n f o r m a -t i o n about the volume o f i n bond goods moving through the highway s u f f e r a n c e warehouse system. T h i s volume i s measured i n terms o f the number o f shipments c l e a r e d w i t h the tonnage o f these shipments d i v i d e d between t r u c k l o a d and l e s s - t h a n -t r u c k l o a d l o t s . The resonse t o q u e s t i o n 12 w i t h r e g a r d s t o the number of shipments c l e a r e d o f f e r s few s u r p r i s e s beyond what might be expected. The h i g h e s t volume warehouses are l o c a t e d i n the areas i n which the l a r g e s t volume o f i n bond goods a r r i v e . In B r i t i s h Columbia, f o r i n s t a n c e , U n i t e d T e r m i n a l s L t d . of Vancouver handles the bul k o f a l l import movements to B.C. a l t h o u g h i t i s o n l y one o f seventeen a u t h o r i z e d f a c i l i t i e s i n the P a c i f i c Customs r e g i o n . The reasons are o b v i o u s : Vancouver i s the d e s t i n a t i o n f o r much o f the imported goods e n t e r i n g a t the major border c r o s s i n g a t P a c i f i c Highway j u s t 30 m i l e s from the c i t y and i s the main B.C. t e r m i n a l l o c a t i o n f o r most t r a n s b o r d e r c a r r i e r s . The same i s t r u e a c r o s s the r e s t o f Canada. In the Winnipeg r e g i o n , the one s u f f e r a n c e warehouse c l e a r s about s i z e m i l l i o n tons o f f r e i g h t a n n u a l l y as compared t o a l l o t h e r warehouses i n the r e g i o n which c l e a r an average t o t a l o f 450 tons. O n t a r i o o f f e r s f u r t h e r e v i d e n c e . The N i a g a r a P e n i n s u l a has the l a r g e s t number of highway s u f f e r a n c e warehouses of any area i n Canada t o s e r v i c e the l a r g e s t volume o f imports by v a l u e and weight of any ar e a i n Canada. The 4 6 s u f f e r a n c e 144 f a c i l i t i e s i n t h i s area handle the bulk o f a l l highway t r a n s p o r t e d i n bond goods from the U n i t e d S t a t e s f o r d e l i v e r y to O n t a r i o and southern Quebec. Que s t i o n 13 asked the warehouse keeper to e s t i m a t e what p r o p o r t i o n of the tonnage o f f r e i g h t t h a t went through h i s f a c i l i t y a r r i v e d i n l e s s - t h a n - t r u c k l o a d l o t s . I t was expected t h a t the r a t i o would favour l e s s - t h a n - t r u c k l o a d l o t s s i n c e much o f the t r u c k i n g i n d u s t r y ' s market share had been b u i l t on f a s t , i n e x p e n s i v e s e r v i c e to s m a l l s h i p p e r s . On the o t h e r hand, one might expect t h a t i n h i g h volume t e r m i n a l s l e s s expensive t r u c k l o a d shipments would p r e v a i l , e s p e c i a l l y w i t h i n c r e a s i n g volumes o f i n d u s t r i a l p r o d u c t s which are c a r r i e d by t r u c k . The l a r g e r warehouses i n d i c a t e d t h a t any-where up to 80 p e r c e n t o f shipments c l e a r e d a n n u a l l y are t r u c k l o a d shipments and the l a r g e r the warehouse i n terms of shipments c l e a r e d the h i g h e r the p r o p o r t i o n o f t r u c k l o a d shipments. The lower volume warehouse o p e r a t i n g p r i m a r i l y i n s m a l l communities e x p e r i e n c e d a t r u c k l o a d / l e s s - t h a n - t r u c k l o a d s p l i t i n favour o f the l a t t e r . . These a r e , however, o n l y t r e n d s : M o n t r e a l Truck S u f f e r a n c e Warehouse, which c l e a r e d i n excess o f 200,000 shipments i n 1975, i n d i c a t e d a 65/35 — p e r c e n t r a t i o i n f a v o u r o f l e s s - t h a n - t r u c k l o a d shipments. There might be s e v e r a l reasons f o r t h i s r e s u l t such as the nature o f t r a f f i c h e l d by c a r r i e r s u s i n g t h i s f a c i l i t y r e g u l a r l y b e i n g predominantly l e s s - t h a n - t r u c k l o a d o r , perhaps, t h i s p a r t i c u l a r f a c i l i t y , which i s one o f two i n the M o n t r e a l a r e a , o f f e r s b e t t e r s e r v i c e and/or r a t e s . t o l e s s - t h a n - t r u c k l o a d 145 c a r r i e r s . Q u e s t i o n 14; From t h e i r time o f a r r i v a l a t the p u b l i c area o f the s u f f e r a n c e warehouse, what percentage o f TRUCKLOAD shipments , are n o r m a l l y r e l e a s e d i n l e s s than one day % one t o two days % more than two days % Que s t i o n 15: From t h e i r time o f a r r i v a l a t the p u b l i c area o f the s u f f e r a n c e warehouse, what percentage o f LESS-THAN-TRUCKLOAD shipments are n o r m a l l y c l e a r e d i n l e s s than one day % one t o two days % more than two days % These q u e s t i o n s were meant t o measure the d e l a y i n c l e a r i n g goods through highway s u f f e r a n c e warehouses f o r both t r u c k l o a d and l e s s - t h a n - t r u c k l o a d shipments. The r e s u l t o f the survey i n d i c a t e d t h a t , g e n e r a l l y , a t a l l highway s u f f e r -ance warehouses, t r u c k l o a d shipments are c l e a r e d f a s t e r than l e s s - t h a n - t r u c k l o a d shipments. T h i s was not unexpected s i n c e the treatment of these two k i n d s o f shipments are d i f f e r e n t at most warehouses. L e s s - t h a n - t r u c k l o a d shipments are u s u a l l y unloaded i n t o the warehouse and s t o r e d b e f o r e c l e a r a n c e by Customs which r e s u l t s i n a d d i t i o n a l u n l o a d i n g , h a n d l i n g and r e l o a d i n g o f these goods which i s unnecessary f o r c l e a r a n c e of t r u c k l o a d shipments. These l a t t e r l o a d s are u s u a l l y l e f t on the c a r r i e r ' s v e h i c l e u n t i l c l e a r e d by Customs, s u b j e c t , of c o urse, t o r e q u i r e d examination o f the shipment by Customs o f f i c i a l s . 146 Response to the q u e s t i o n n a i r e i n d i c a t e d t h a t on average t r u c k l o a d shipments a r e a t l e a s t 80 p e r c e n t c l e a r e d by the second b u s i n e s s day a f t e r a r r i v a l . Many f a c i l i t i e s were a b l e t o have 90 p e r c e n t o f these shipments c l e a r e d on the day o f a r r i v a l . The speed w i t h which shipments are c l e a r e d i s a f f e c t e d by the volume o f b u s i n e s s a t the f a c i l i t y and the a b i l i t y o f the warehouse o p e r a t o r , and Customs, to handle the e n t r i e s . L e s s - t h a n - t r u c k l o a d shipments were not c l e a r e d as f a s t as t r u c k l o a d shipments a t any o f the s u f f e r a n c e warehouses responding t o the q u e s t i o n n a i r e . There appears to be no p a t t e r n to the v a r y i n g amounts o f time i t takes t o c l e a r l e s s -t h a n - t r u c k l o a d shipments. Some l a r g e warehouses c l e a r up to 80 p e r c e n t o f these shipments w i t h i n one b u s i n e s s day o f a r r i v a l , w h i l e many sm a l l warehouses were unable t o match t h i s performance. In g e n e r a l , few warehouses r e p o r t e d d e l a y s of more than two b u s i n e s s days i n c l e a r i n g l e s s - t h a n - t r u c k l o a d shipments f o r which a l l Customs documents were i n o r d e r . Question 16: P l e a s e rank the f o l l o w i n g i n o r d e r o f importance i n d i c a t i n g what you b e l i e v e are the major causes o f d e l a y i n c l e a r i n g goods through Customs. ( ) motor c a r r i e r d e l a y s ( ) i n s u f f i c i e n t s t a f f ( ) Customs Broker problems ( ) Canada Customs d e l a y s ( ) customer e r r o r s The knowledge of the l e n g t h o f d e l a y s i n having goods 147 c l e a r e d by Customs means l i t t l e w ithout some i n d i c a t i o n o f what causes the d e l a y s and t h i s q u e s t i o n gave the warehouse o p e r a t o r the o p p o r t u n i t y to i n d i c a t e them. In o r d e r t o encourage o p e r a t o r s t o answer the q u e s t i o n , f i v e g e n e r a l f a c t o r s which c o u l d cause d e l a y s were l i s t e d and the o p e r a t o r s were asked to rank them. In a d d i t i o n , the q u e s t i o n gave each respondent the o p t i o n o f adding h i s own reasons f o r d e l a y s . Not a l l respondents t o the q u e s t i o n n a i r e answered t h i s q u e s t i o n and, o f those who d i d , not a l l i d e n t i f i e d a l l the f a c t o r s as reasons f o r the d e l a y i n c l e a r a n c e o f the goods. For t h i s reason no attempt can be made to t a l l y the v o t e s and compare them to the number o f responses t o the survey. In examining the f o l l o w i n g d a t a i t should be remembered t h a t the warehouse o p e r a t o r s were the ones answering the q u e s t i o n and t h i s might r e s u l t i n c e r t a i n b i a s i n the answers. For example, no warehouse o p e r a t o r would be expected to c i t e some f a c t o r over which he has c o n t r o l as the cause of c l e a r a n c e d e l a y s . The warehouse o p e r a t o r s i n d i c a t e d the most f r e q u e n t cause o f d e l a y i s the absence o f c o r r e c t customs documentation a t the time the goods a r r i v e a t the s u f f e r a n c e warehouse. Documentation problems are f o l l o w e d c l o s e l y by 'customer e r r o r s ' , as the major cause o f d e l a y . Many o p e r a t o r s i n d i c a t e t h a t customer e r r o r s i n c l u d e the f a i l u r e o f the c o n s i g n o r to i n c l u d e the c o r r e c t documentation. 'Customer e r r o r s ' a l s o p o l l e d n i n e second-ranked v o t e s from the warehouse o p e r a t o r s . 'Customs Broker problems' r e c e i v e d f i v e v o t e s as the 148 major cause of delays, as well as nine second-place votes which, i n most instances, were second to 'document' and 'customer e r r o r s ' . Customs Broker problems might reasonably be expected to occur as the r e s u l t of missing documents required for clearance, the supply of which i s not under the d i r e c t control of the broker. This i s not to say that a l l brokers work as quickly as they might but they do have a vested i n t e r e s t i n c l e a r i n g goods quickly as a service to t h e i r c l i e n t s . 'Motor c a r r i e r delays' was the fourth most popular reason for clearance delays as seen by the warehouse operators. The votes received by t h i s factor were generally ranked lower than the three factors noted above. Few warehouse operators indicated that Customs was d i r e c t l y responsible for clearance delays. Since the i n i t i a t i v e to supply the correct clearance documentation and information i s on the consignee/broker one might expect that, i f these are complete, Customs delays would be n e g l i g i b l e , except for the delays caused by volumes the Customs s t a f f cannot quickly handle. In summary, the major reason for the delays experienced in the clearance, of i n bond goods through highway sufferance warehouses, as seen by the warehouse operators, i s r e l a t e d to the high incidence of customer-oriented err o r s . The most common of these errors i s the absence of complete and correct Customs documentation at the time the goods a r r i v e at the sufferance f a c i l i t y . This problem could be corrected by education of the consignee/exporter responsible for completing 149 them and by encouraging the i n c l u s i o n o f these documents w i t h shipments t o Canada. Customs might a l s o work t o s i m p l i f y the documentation r e q u i r e d f o r c l e a r a n c e . Question 17: I f your f a c i l i t y o f f e r s space t o c a r r i e r s on a l e a s e b a s i s , what i s the charge f o r t h i s space? Question 18: Pl e a s e p r o v i d e a schedule o f r a t e s f o r s e r v i c e s p r o v i d e d i n the p u b l i c area o f the warehouse. The purpose o f these q u e s t i o n s was t o determine the l e v e l o f r a t e s a t highway s u f f e r a n c e warehouses a c r o s s Canada f o r two types o f s e r v i c e : space l e a s e d t o c a r r i e r s f o r t h e i r e x c l u s i v e use w i t h i n the highway s u f f e r a n c e warehouse complex and f o r s e r v i c e and space used by motor c a r r i e r f i r m s i n the p u b l i c area o f the complex. With these r a t e s and charges on hand, i t was in t e n d e d t o make a c o m p a r i t i v e a n a l y s i s o f these r a t e s on a nation-wide b a s i s . The responses t o the q u e s t i o n -n a i r e p r o v i d e d r a t e s and charges i n f o r m a t i o n f o r 45 highway s u f f e r a n c e warehouses. I t i s i n t e r e s t i n g t o note t h a t a l t h o u g h s u f f e r a n c e warehouse r e g u l a t i o n s r e q u i r e warehouse o p e r a t o r s to supply r a t e s and charges i n f o r m a t i o n t o any person r e q u e s t i n g them, t w o - t h i r d s o f the f a c i l i t i e s i n Canada f a i l e d t o do so when asked i n the survey. The t a r i f f s a t the highway s u f f e r a n c e warehouses i n the 10 Customs r e g i o n s a c r o s s Canada from which responses t o the Highway S u f f e r a n c e Warehouse Survey were r e c e i v e d a re s t r u c t u r e d 150 i n a s i m i l a r manner. The r a t e s a r e i n f o u r groups: warehous-i n g and h a n d l i n g ; shipments not warehoused; use o f d e t e n t i o n compound; and, storage Group 1 i n c l u d e s warehousing charges and r a t e s f o r the » h a n d l i n g o f i n bond goods o f f and on the motor c a r r i e r ' s v e h i c l e . Warehousing charges are f o r the use o f f l o o r space o n l y and a p p l y t o a l l shipments moved through the warehouse. Charges f o r h a n d l i n g i n c l u d e the c o s t o f l a b o u r and m a t e r i a l h a n d l i n g equipment r e q u i r e d to move the goods from the t a i l -gate o f the v e h i c l e i n t o the warehouse and from the warehouse onto the t a i l g a t e o f the v e h i c l e . Some s u f f e r a n c e warehouse o p e r a t o r s show these charges as separate amounts i n t h e i r t a r i f f s w h i l e o t h e r s quote one i n c l u s i v e p r i c e f o r warehousing and h a n d l i n g . Every t a r i f f shows t h a t t h e r e i s a minimum charge f o r each o f these charges. Group I I r a t e s are those charged f o r shipments which do not r e q u i r e warehousing a t the s u f f e r a n c e warehouse. T h i s r a t e group i n c l u d e s , but i s not r e s t r i c t e d t o , f u l l l o a d s c l e a r i n g on a t r a i l e r , p a r t i a l l o a d s c l e a r i n g on a t r a i l e r , f u r n i t u r e vans and v e h i c l e s such as automobiles, vans and t r u c k s e n t e r i n g Canada. Group I I I r a t e s are those a s s e s s e d f o r use o f the d e t e n t i o n compound which i s s u p p l i e d by r e g u l a t i o n a t every highway s u f f e r a n c e warehouse. Some warehouse f a c i l i t i e s have one or two f r e e n i g h t s b e f o r e these charges are a s s e s s e d 151 w h i l e many o t h e r s b e g i n charges a t the c l o s e o f the b u s i n e s s day the v e h i c l e a r r i v e s . F r e e days such as weekends and h o l i d a y s are seldom a l l o w e d under t h i s item. Storage charges are the l a s t type o f charges common to highway s u f f e r a n c e warehouses and shipments h e l d pending compliance o f Customs r e g u l a t i o n s , o r because o f a d e l a y caused by the c a r r i e r , i m p o rter or h i s agent are s u b j e c t to t h i s charge. The charge begins a t the c l o s e o f the Customs b u s i n e s s day and i s e x c l u s i v e o f Saturday, Sunday and s t a t -u t o r y h o l i d a y s . There i s a grace p e r i o d a l l o w e d a t a l l h i g h -way s u f f e r a n c e warehouses b e f o r e the charge b e g i n s , the l e n g t h of which v a r i e s by f a c i l i t y . The s h o r t e s t grace p e r i o d r e p o r t e d was 24 hours, the l o n g e s t 96 hours w h i l e the m a j o r i t y of f a c i l i t i e s a l lowed a t l e a s t 48 hours f o r the goods to be c l e a r e d and removed from the warehouse b e f o r e the charges begin. There i s another charge which a p p l i e s a t some s u f f e r a n c e warehouses: a charge f o r d i s t r i b u t i o n o f Form A8A Customs, Cargo M a n i f e s t to the a p p r o p r i a t e p a r t i e s . Where i t i s a p p l i e d , t h i s charge i s a nominal one. U n i t e d T e r m i n a l s L t d . i n Vancouver has the h i g h e s t charge o f a l l f a c i l i t i e s a t $2.50 per m a n i f e s t i s s u e d and $1.00 f o r d i s t r i b u t i o n o f each m a n i f e s t . The m a j o r i t y o f f a c i l i t i e s do not p r o v i d e t h i s d i s t r i b u t i o n s e r v i c e and a t those f a c i l i t i e s which show a charge i n t h e i r t a r i f f s i t appear to be d e s i g n e d to d i s c o u r a g e the p r a c t i c e . 152 By u n d e r t a k i n g .a comparative a n a l y s i s o f r a t e s i n e f f e c t a t highway s u f f e r a n c e warehouses a c r o s s Canada, i t i s not meant t o imply t h a t the r a t e s should be equal a c r o s s the country o r even i n the same ranges. The nature o f the h i g h -way s u f f e r a n c e warehouse system i n d i c a t e s t h a t t h e r e are no two warehouses which f a c e the same se t o f o p e r a t i n g o r f i x e d c o s t s , a l t h o u g h one might expect t h a t the types of expenses i n c u r r e d by a l l o p e r a t o r s would be s i m i l a r . The c o s t o f l a n d , c o n s t r u c t i o n and c a p i t a l v a r y from l o c a t i o n . t o l o c a t i o n a c r o s s the c o u n t r y , as do the c o s t o f l a b o u r and o t h e r o p e r a t i n g expenses, r e q u i r i n g t h a t each warehouse must e s t a b l i s h i t s r a t e s on s l i g h t l y d i f f e r e n t bases. T a b l e XV i n d i c a t e s the range o f r a t e s and charges which ap p l y a t highway s u f f e r a n c e warehouses a c r o s s Canada, by Customs r e g i o n , as s u p p l i e d by the warehouse o p e r a t o r s responding to the 1976 Highway S u f f e r a n c e Warehouse Survey. The r a t e s are d i v i d e d i n t o the f i v e b a s i c types d e s c r i b e d above and are shown as a range w i t h i n the Customs r e g i o n . Included w i t h the per-u n i t r a t e s under each heading i s the minimum charge f o r each shipment. The a p p l i c a t i o n o f the warehousing and h a n d l i n g charges are not u n i f o r m a c r o s s Canada. At some f a c i l i t i e s the charge f o r warehousing i n c l u d e s an allowance f o r h a n d l i n g the shipment i n t o and out o f the warehouse b u i l d i n g w h i l e a t o t h e r s separate h a n d l i n g charges are a p p l i c a b l e . In the A t l a n t i c r e g i o n ware-housing r a t e s ranged from $.25 to $.3 0 per hundredweight, w i t h TABLE XV Rates and Charges at Highway S u f f e r a n c e Warehouses Warehousing & Hand l i n g C/cwt Shipments not Warehoused $/ Ton Use of Detention Compound $/Day Storage^ Charges $/cwt/Day P a c i f i c $.50 Minimum $3.75-$4.60 $.75-$1.00 $2.50-$15.00 $5.00-$7.50 $.25-$.38 $3.00-$5.00 A l b e r t a $.50 Minimum $2.75 $.70/ton $14.00 $5.00 $.25 Saskatchewan $.50 Minimum $3.00 $.80/ton $15.00 $5.00 $.30 $2.50 Winnipeg $.60-$.90 Minimum $4.25-$5.75 $.80/ton $15.00 $10.00 $.30 Windsor $.25 Minimum $2.50-$3.25 $.50/ton $6. 00 $2.50 $.20 London $.22-$.25 Minimum $2.00-$4.00 $.55-$.65 $8.00-$11.00 $5.00 $.25 $1.00-$3.00 Toronto/Hamilton $.20-$.55 Minimum $3.00-$3.50 $.50-$.75 $7.50-$12.50 $3.00-$12.00 $.25-$.50 $3.00 Ottawa $.22-$.35 Minimum $4. 00-15.. 00 $ .50-$.75 $8.50-$15.00 $5.00 $.25-$.35 $2.50-$4.00 Montreal/Quebec $.25-$.40 Minimum $6.00-11.50 $.60-$.72 $10.00-$15.00 $.14/cwt Minimum $5.00 $.20-$.40 $3.00-$5.00 A t l a n t i c $.25-$.30 Minimum $5.00-6.50 $.75/ton $10.00-$15.00 $3. 00 $.30-$.35 $2.50-$3.00 * A l l f a c i l i t i e s a l l o w a t l e a s t 24 hours f r e e time b e f o r e charges are assessed. minimum ranges from $2.50 t o $3.50 per shipment. With the a d d i t i o n a l h a n d l i n g charges o f $.35 t o $.50 per hundredweight and minimums o f $2.50-$3.00, the c o s t o f u n l o a d i n g goods f o r c l e a r a n c e by Customs a t A t l a n t i c highway s u f f e r a n c e warehouses ranged upwards from $5.00 to $6.50 f o r each m a n i f e s t shipment. The comparable r a t e s f o r the f o u r western Customs r e g i o n s were the P a c i f i c r e g i o n minimum ranged from $3.75 t o $5.00; A l b e r t a minimum ranged from $2.75 t o $3.00 per shipment; Saskatchewan minimums were about $3.00 per shipment; and, the Winnipeg r e g i o n minimums were from $4.25 t o $5.75 per shipment. Above these minimums, the charges by hundredweight were $.50 i n the P a c i f i c , A l b e r t a and Saskatchewan r e g i o n s and $.60 t o $.90 per hundredweight i n the Winnipeg r e g i o n . The bulk of a l l h i g h w a y - c a r r i e d imports i n t o Canada en t e r through O n t a r i o and Quebec. I t was i n d i c a t e d t h a t these areas have the h i g h e s t c o n c e n t r a t i o n of highway s u f f e r a n c e warehouses i n Canada and one might expect t h a t , as a r e s u l t , c o m p e t i t i o n between them might be more i n t e n s e than i n the ot h e r Customs r e g i o n s . P r i c e c o m p e t i t i o n , however, does not appear to be an important f a c t o r i n d e c i d i n g on which o f the s u f f e r a n c e f a c i l i t i e s w i l l be used t o c l e a r the goods c a r r i e d by motor c a r r i e r f i r m s . S i n c e the c o s t of s u f f e r a n c e procedur i s passed on to the buyer o f the t r a n s p o r t a t i o n s e r v i c e by the motor c a r r i e r f i r m , and s i n c e a l l goods must e n t e r by way of a s u f f e r a n c e f a c i l i t y , i t i s l i k e l y more important t o have the goods c l e a r e d as c l o s e t o the c a r r i e r ' s break-bulk p o i n t as p o s s i b l e . L o c a t i o n appears t o be a more important f a c t o r 154 than p r i c e i n the c h o i c e o f a highway s u f f e r a n c e warehouse. In the Montreal/Quebec Customs r e g i o n s warehousing charges ranged from $.25 to $.40 per hundredweight w i t h minimums r a n g i n g from $3.00 to $4.00 per shipment. Handling charges were l e v i e d on top o f the warehousing charges w i t h minimums o f $3.00 t o $7.00 per shipment. In O n t a r i o the warehousing and handling r a t e s ranged from $.20 per hundredweight t o $.55 per hundredweight w i t h minimums o f $2.00 to $4.00 per shipment. The h e a v i e s t volume Customs r e g i o n i n Canada, the Toronto/Hamilton r e g i o n , had r a t e s r a n g i n g from $.25 to $.30 per hundredweight above minimums of $3.00 t o $3.50 per shipment. W i t h i n t h i s r e g i o n o n l y two s u f f e r a n c e warehouses 1—both l o c a t e d away from major p o p u l a t i o n c e n t r e s and o f f o f major t r a n s p o r t a t i o n r o u t e s — r e p o r t e d r a t e s which were o u t s i d e t h i s range. Many shipments, c a r r i e d i n both t r u c k l o a d and l e s s -t h a n - t r u c k l o a d l o t s , are not unloaded from the c a r r i e r s equipment f o r the purpose o f Customs c l e a r a n c e . These s h i p -ments which are not unloaded f a c e charges from the s u f f e r a n c e warehouse based on the weight o f the l o a d . In O n t a r i o , the warehouse f a c i l i t i e s r e p o r t i n g i n the f i v e Customs r e g i o n s showed charges o f $.50 to $.75 per t o n f o r unloaded t r u c k l o a d shipments w i t h minimums r a n g i n g from $6.00 to $15.00 per v e h i c l e . The warehouse o p e r a t o r s i n o t h e r Customs r e g i o n s i n d i c a t e d t h e i r r a t e s ranged from $.75 to $8 0 per t o n above 155 minimum charges o f $10.00 t o $15,00 per v e h i c l e . Where goods loaded on a v e h i c l e are not c l e a r e d by Customs, and must remain w i t h i n the s u f f e r a n c e complex, a charge i s l e v i e d f o r use o f the p a r k i n g a r e a i n the d e t e n t i o n compound. The compound-use t a r i f f item o r d i n a r i l y a l l o w s a t l e a s t 24 hours f r e e time b e f o r e charges b e g i n , a l t h o u g h some f a c i l i t i e s a l l o w no f r e e time and some a l l o w v i r t u a l l y l i m i t -l e s s f r e e time. The range of charges a p p l i c a b l e under t h i s item was from no charge, to $5.00 per 24 hours, up t o $12.00 per 24 hours. There appears to be no p a t t e r n as t o the l e v e l o f t hese charges among warehouse o p e r a t o r s . Most o f the l a r g e r volume f a c i l i t i e s have a charge around $10.00 per 24 hours but many s m a l l e r warehouses have s i m i l a r charges and many have a nominal charge around $3.00 per n i g h t . The v a r i -ance i s p r o b a b l y due t o the v a r y i n g c o s t s o f l a n d a t each warehouse. Where goods remain w i t h i n the p u b l i c area o f the ware-house beyond a s t a t e d f r e e time allowance a s t o r a g e charge i s a p p l i c a b l e on the shipment. As w i t h the charge f o r goods h e l d on a v e h i c l e i n the d e t e n t i o n compound, the amount o f f r e e time v a r i e s s i g n i f i c a n t l y between highway s u f f e r a n c e warehouses. Storage charges g e n e r a l l y ranged from $.25 t o $.40 per hundred-weight per day above minimum charges o f $3.00 to $5.00 per shipment per day a t warehouses a c r o s s Canada. Free time allowances ranged from 24 hours to 96 hours, a l t h o u g h the average i s 48 t o 72 hours. 156 There i s no evidence a v a i l a b l e from the warehouse o p e r a t o r s responding to the survey, or from o t h e r sources, t h a t any c o l l u s i o n e x i s t s between warehouse o p e r a t o r s i n the s e t t i n g o f r a t e s and charges a t the highway s u f f e r a n c e ware-houses. Except where one o p e r a t o r o p e r a t e s warehouses a t s e v e r a l l o c a t i o n s , t h e r e i s no apparent r e l a t i o n s h i p between the r a t e s a t any o f these f a c i l i t i e s and no p a t t e r n as t o how r a t e s are s e t by warehouse o p e r a t o r s . I t might be c o n c l u d e d from t h i s t h a t t h e r e i s no c o n s p i r a c y between warehouse oper-a t o r s a g a i n s t the motor c a r r i e r f i r m s f o r c e d t o use the f a c i l i t i e s t o c l e a r goods through Customs. Rates f o r s e r v i c e s p r o v i d e d a t the f a c i l i t i e s appear to be based more on the t r a d i t i o n a l p r i c e s e t t i n g p r i n c i p l e s which c a l l f o r revenues to cover expenses and a l l o w a margin f o r p r o f i t . The l e v e l o f the p r o f i t might c o n c e i v a b l y be h i g h e r a t the monopoly highway s u f f e r a n c e warehouses than would be the case i f some form of c o m p e t i t i o n were a v a i l a b l e between these f a c i l i t i e s , but the l e v e l o f t h i s p r o f i t i s d i f f i c u l t t o determine without complete f i n a n c i a l r e p o r t s from a l l warehouses. Question 19: F i n a n c i a l i n f o r m a t i o n . Q u e s t i o n 19 o f the survey r e q u e s t e d f i n a n c i a l i n f o r m a t i o n from the s u f f e r a n c e f a c i l i t i e s . I n f o r m a t i o n from the balance sheet and the income statement o f each f a c i l i t y was r e q u e s t e d i n o r d e r t o a n a l y s e the f i n a n c i a l s t r u c t u r e and performance of the i n d u s t r y . The response to t h i s q u e s t i o n was l e s s than 157 adequate t o make such an a n a l y s i s p o s s i b l e . The m a j o r i t y o f the respondents i n d i c a t e d t h a t the highway s u f f e r a n c e warehouse was a segment o f a l a r g e r ware-housing o p e r a t i o n and no se p a r a t e f i n a n c i a l statements were produced. Other o p e r a t o r s i n d i c a t e d t h a t f i n a n c i a l i n f o r m a t i o n about the s u f f e r a n c e o p e r a t i o n c o u l d not be made p u b l i c as a r e s u l t o f company p o l i c y . Complete f i n a n c i a l statements are a v a i l a b l e f o r o n l y t h r e e f a c i l i t i e s r e s p o n d i n g t o the q u e s t i o n n a i r e . Question 20: P l e a s e take t h i s o p p o r t u n i t y to make any comments you wish r e g a r d i n g the s u f f e r a n c e warehouse system i n Canada, and t o o u t l i n e any changes you f e e l c o u l d be made, e.g. i n s u f f e r a n c e warehouse p o l i c y o r Customs procedures, which would be b e n e f i c i a l t o s u f f e r a n c e warehouse e f f i c i e n c y . The f i n a l q u e s t i o n i n the 197 6 survey gave the warehouse o p e r a t o r s the o p p o r t u n i t y t o make any comments about the c u r r e n t s u f f e r a n c e system they wished. Seven respondents to the ques-t i o n n a i r e took time t o make comments. A common complaint amongst the warehouse o p e r a t o r s i s the amount o f paper r e q u i r e d t o c l e a r goods through Canada Customs. I t was suggested t h a t i f Revenue Canada would reduce the amount of documentation which must be c o - o r d i n a t e d b e f o r e the e n t r y can be c l e a r e d or i f i t were s i m p l i f i e d many d e l a y s c o u l d be reduced. One warehouse o p e r a t o r p l a c e d blame i n t h i s 158 r e g a r d on both Customs and the motor c a r r i e r f i r m s . While he m a i n t a i n e d t h e r e i s an excess o f documentation, when a d e l a y o c c u r s c a r r i e r s seldom check t o f i n d where the cause of the d e l a y o r i g i n a t e s . T h i s causes d i s p u t e s between the warehouse keeper and the c a r r i e r over the a p p l i c a t i o n o f stor a g e charges. Two warehouse o p e r a t o r s i n d i c a t e d t h a t improvements c o u l d be made i n the r e l a t i o n s h i p between Customs and the o t h e r government a g e n c i e s w i t h r e s p o n s i b i l i t i e s o v e r imported goods. Delays are o f t e n encountered when release a p p r o v a l s from a g e n c i e s o p e r a t i n g under the Food and Drug A c t o r the H e a l t h o f Animals A c t are not f o r t h c o m i n g . There i s an apparent l a c k o f c o - o r d i n a t i o n between these v a r i o u s a g e n c i e s a t some l o c a t i o n s . Some o p e r a t o r s i n O n t a r i o and Quebec i n d i c a t e d a concern over the i n t e n t i o n s o f Revenue Canada w i t h r e g a r d t o the con-t i n u a t i o n o f the highway s u f f e r a n c e warehouse system. These o p e r a t o r s f e a r t h a t the c e n t r a l i z a t i o n o f Customs procedures by use o f the e n t r y data p r o c e s s i n g system, Cargo E n t r y P r o c e s s i n g and E c o l l e c t i o n s System w i l l be used as an excuse t o e l i m i n a t e s m a l l e r i n l a n d s u f f e r a n c e p o i n t s . These o p e r a t i o n s , i t i s mainta i n e d , o f f e r a good s e r v i c e t o i n l a n d i m p o r t e r s and t h e i r c l o s i n g w i l l cause a det o u r o f i n d u s t r i a l growth away from areas not s e r v i c e d by a l o c a l s u f f e r a n c e warehouse. The i n t e n t i o n s o f Revenue Canada are not e n t i r e l y c l e a r s i n c e no p o l i c y statements on t h i s matter have been made. 159 FOOTNOTES - CHAPTER 4 1 Revenue Canada, Customs and E x c i s e . Memorandum D9, L i s t o f Customs O f f i c e s . August 1974. 2 I b i d . 160 CHAPTER FIVE  THE SPECIFIC COMPLAINTS The p r e v i o u s c h a p t e r s have p r e s e n t e d the i n f o r m a t i o n which i s a v a i l a b l e about the highway s u f f e r a n c e warehouse s y s -tem; i n f o r m a t i o n based on Revenue Canada r e g u l a t i o n s g o v e r n i n g these f a c i l i t i e s and on the 1976 Highway S u f f e r a n c e Warehouse Survey. P r e l i m i n a r y examination o f the t r a n s b o r d e r t r u c k i n g i n d u s t r y , undertaken as a p r e l u d e t o t h i s data c o l l e c t i o n p r o -c e s s , i n d i c a t e d t h a t , a t many s u f f e r a n c e warehouses, user c a r r i e r f i r m s had o u t s t a n d i n g c o m p l a i n t s about the way i n which the system.is s t r u c t u r e d and op e r a t e d . The bulk o f these c o m p l a i n t s had been l e v e l l e d a g a i n s t the warehouse oper-a t o r and c i t e d the i n e q u i t y o f the monopoly they enjoy. A second area i n t o which complaints f a l l concerns the c o m p l i c a t e d e n t r y procedures which Customs r e q u i r e s f o r imported goods and of the s u f f e r a n c e warehouse p o l i c y which i t a d m i n i s t e r s . T h i s c h a p t e r w i l l speak t o these s p e c i f i c c o m p l a i n t s . I t should be p o i n t e d out a t the o u t s e t o f t h i s d i s c u s s -i o n t h a t i t i s not in t e n d e d as an i n d i c t m e n t o f i n d i v i d u a l warehouse o p e r a t i o n s . While the comp l a i n t s may have been d i r -e c t e d a t p a r t i c u l a r o p e r a t i o n s , those c o n s i d e r e d here are a l s o a p p l i c a b l e t o the warehouse system i n g e n e r a l . T h i s d i s c u s s i o n w i l l c o n s i d e r s i x areas i n t o which 161 complaints have g e n e r a l l y f a l l e n i n the p a s t : 1) P o l i c y a d m i n i s t r a t i o n 2) Warehouse Ownership p o l i c y 3) Warehouse c a p a c i t y c o m p l a i n t s 4) Rates and charges 5) E f f e c t s on i n t r a - m o d a l c o m p e t i t i o n 6) E f f e c t s on i n t e r - m o d a l c o m p e t i t i o n These s p e c i f i c problems are p r e s e n t e d as a r e s u l t o f the com-p l a i n t s o f t r a n s b o r d e r motor c a r r i e r f i r m s u s i n g highway s u f f e r a n c e warehouses, a t the s u g g e s t i o n o f customs house brokerage f i r m s o p e r a t i n g from these f a c i l i t i e s and as a r e s u l t o f o b s e r v a t i o n o f the way i n which s u f f e r a n c e warehouses oper-a t e s . While they are u n l i k e l y t o r e p r e s e n t a l l the problems, ; these areas do i n c l u d e those which are o f g r e a t e s t importance to the o p e r a t i o n o f e f f i c i e n t and e q u i t a b l e c l e a r a n c e f a c i l i -t i e s f o r the highway mode. In examining these areas o f complaint i t i s w e l l t o remember t h a t Revenue Canada has desig n e d the p o l i c y and r e g -u l a t i o n s which govern the s u f f e r a n c e warehouse system w i t h i t s own i n t e r e s t i n mind. The Customs and E x c i s e Branch o f Rev-enue Canada has the r e s p o n s i b i l i t y o f e n f o r c i n g f e d e r a l p r o-v i s i o n s a f f e c t i n g the i m p o r t a t i o n o f goods i n t o Canada and i t i s t h i s r e s p o n s i b i l i t y which the p r e s e n t system i s desig n e d t o s a t i s f y . From a Customs point, o f view the system and a t t e n d a n t c l e a r a n c e procedures work w e l l . R e g u l a t i o n s r e q u i r e t h a t 162 s p e c i f i c packaging and documentation accompany the goods to Canada, t h a t the goods a r e c l e a r e d a t border c r o s s i n g s o r are r e p o r t e d and c a r r i e d under bond to an i n l a n d c l e a r a n c e warehouse where Customs o f f i c i a l s are i n attendance. In o t h e r words, Customs i s a b l e to r e t a i n c o n t r o l over imported goods u n t i l they are a p p r a i s e d and d u t y - p a i d . A t the same time, the i n l a n d warehouse system a l l o w s Revenue Canada t o p r o v i d e f o r t h i s c o n t r o l a t no c o s t t o the department beyond the p e r s o n n e l c o s t s which would be i n c u r r e d i n any case. In f a c t , as was p o i n t e d out e a r l i e r , the a d o p t i o n o f the i n l a n d warehouse system has saved government r e s o u r c e s which would have been r e q u i r e d to p r o v i d e p u b l i c l y - o w n e d f a c i l i t i e s a t f r o n t i e r border crossings.. The system works w e l l f o r Customs purposes and i t may be d i f f i c u l t t o e f f e c t any changes which might improve the system f o r o t h e r s . The q u e s t i o n which w i l l be d e a l t w i t h i n more s p e c i f i c terms i s how the highway s u f f e r a n c e warehouse system works f o r the p r i v a t e i n t e r e s t s which must use i t — t h e t r a n s b o r d e r motor c a r r i e r i n d u s t r y . I f the system p r o v i d e s e q u i t a b l e treatment f o r a l l c a r r i e r s so t h a t the l i m i t e d c o m p e t i t i o n a l l o w e d by v a r i o u s r e g u l a t o r y a g e n c i e s i n the t r a n s b o r d e r highway f r e i g h t market i s not d i s r u p t e d then these p r i v a t e i n t e r e s t s as w e l l as the p u b l i c i n t e r e s t s are s e r v e d . Where t r a n s p o r t c o m p e t i t i o n i s encouraged, the p u b l i c b e n e f i t s from c h o i c e among s e v e r a l a l t e r n a t i v e p r i c e - s e r v i c e combinations and the r e s o u r c e s a v a i l a b l e i n the economy are a l l o c a t e d e f f i c i e n t l y . I f the c l e a r a n c e warehouse system j e o p a r d i z e s 163 t h i s p r o c e s s then the p u b l i c i n c u r s the c o s t s o f i n e f f i c i e n c y through the c o s t o f l e s s c o m p e t i t i o n , d e l a y s i n r e c e i v i n g imported goods, and h i g h e r t r a n s p o r t a t i o n charges. I f the highway s u f f e r a n c e warehouse system works f o r a l l c a r r i e r s then the c a r r i e r s and the p u b l i c b e n e f i t as w e l l as Customs. Before c o n s i d e r i n g the areas o f complaint i t i s i n t e r -e s t i n g t o note the p e r c e p t i o n s of the c o n s i g n o r s and consignees of goods which go through the i n l a n d s u f f e r a n c e warehouse s y s -tem. These p e r c e p t i o n s add p e r s p e c t i v e to the c o m p l a i n t s o f motor c a r r i e r f i r m s . In T r a n s b o r d e r T r u c k i n g : An A n a l y s i s of  User P e r c e p t i o n s , David M a i s t e r and John Munro showed t h a t i n the view o f u s e r s " . . . t h e r e a r e few overwhelming problems w i t h the t r a n s b o r d e r t r u c k i n g i n d u s t r y (at l e a s t i n comparison t o the domestic t r u c k i n g industry)."''" The u s e r s o f t r a n s b o r d e r t r u c k i n g s e r v i c e s are not o v e r l y concerned about the l e v e l of s e r v i c e they r e c e i v e and do not appear to f a v o u r major changes i n the i n s t i t u t i o n a l s t r u c t u r e o f the i n d u s t r y . The a n a l y s i s undertaken i n the study i n c l u d e d c o n s i d -e r a t i o n o f the performance o f the Customs c l e a r a n c e p r o c e s s , i n c l u d i n g the s u f f e r a n c e warehouse system. As an i n d i c a t i o n of the p e r c e p t i o n s o f c o n s i g n o r s and consignees o f goods e n t e r -i n g Canada by t r u c k , the study showed t h a t both modal and c a r r i e r c h o i c e i s i n f l u e n c e d by the ease o f Customs c l e a r a n c e o f f e r e d . While t h i s f a c t o r i s important to many con s i g n e e / c o n s i g n o r s i t i s c o n s i s t e n t l y outranked by ' t r a n s i t t i m e 1 and 'time r e l i a b i l i t y 1 . A l l t h r e e f a c t o r s are measures o f time i n v o l v e d i n t r a n s p o r t but the former has an a d d i t i o n a l com-ponent—Customs p r o c e d u r e s — w h i c h i s l e s s o f a concern than d e l i v e r y time. The growing share o f the t r a n s b o r d e r f r e i g h t market h e l d by the motor c a r r i e r i n d u s t r y when c o n s i d e r e d i n the l i g h t o f these f i n d i n g s i s founded on a f a v o u r a b l e com-b i n a t i o n o f t r a n s i t times, time r e l i a b i l i t y , ease o f Customs c l e a r a n c e and l e v e l o f r a t e s f o r many shipments t o Canada. I t appears t h a t few c o n s i g n o r s / c o n s i g n e e s are d i s s a t i s f i e d w i t h the c l e a r a n c e times a v a i l a b l e through the highway s u f f e r a n c e warehouse system. Yet the motor c a r r i e r i n d u s t r y c o n t i n u e s to complain about the c o s t o f c l e a r i n g through these f a c i l i t i e s , about the q u a l i t y o f s e r v i c e they r e c e i v e and o f the d e l a y s which o c c u r . Does the i n l a n d highway s u f f e r a n c e warehouse system p r o v i d e f o r a l l c a r r i e r s the b e n e f i t s which the concept promised C o n s i d e r the complaints o f the c a r r i e r s . 1. P o l i c y A d m i n i s t r a t i o n As much a f a c t o r i n the e f f e c t i v e n e s s o f any p o l i c y i s the way i n which a d m i n i s t r a t i o n o f t h a t p o l i c y i s under-taken by the agency r e s p o n s i b l e f o r i t . The most s e r i o u s problem which has been i d e n t i f i e d from t h i s study o f the h i g h -way s u f f e r a n c e warehouse system i s the p o l i c y a d m i n i s t r a t i o n which has been forthcoming from Revenue Canada. So important i s t h i s problem t h a t i t c o u l d be the b a s i c cause o f the ot h e r problems i d e n t i f i e d here and the primary reason why changes i n the c l e a r a n c e system are ne c e s s a r y . C o n s i d e r the r e l a t i o n s h i p between the highway s u f f e r -ance warehouse system and Revenue Canada. The warehouse was e s t a b l i s h e d as a s e r i e s o f p r i v a t e l y - o w n e d , p r o f i t - o r i e n t e d b u s i n e s s e s s e r v i n g a c a p t i v e c l i e n t e l e which pays f o r the s e r v i c e s i t c o n t r a c t s and r e c e i v e s . Revenue Canada, on the ot h e r hand, i s a government department and, as an o p e r a t i n g 'bureau 1, e x h i b i t s d e f i n i t e c h a r a c t e r i s i t i c s which are f o r e i g n t o the p r i v a t e s e c t o r , commercial o r i e n t a t i o n . These c h a r a c -t e r i s t i c s a f f e c t the motives f o r and the outcomes o f d e c i s i o n s made by the departments d e c i s i o n makers and i n f l u e n c e i t s r e l a t i o n s h i p w i t h the p r i v a t e . A complete review o f the t h e o r y o f bureaucracy i s 3 beyond the scope o f t h i s study. There a r e , however, c e r t a i n c h a r a c t e r i s t i c s which might a s s i s t i n e x p l a i n i n g how and why Revenue Canada d e c i s i o n s a f f e c t i n g the highway s u f f e r a n c e warehouse systems are made. F i r s t , by d e f i n i t i o n , the output o f a bureau cannot be d i r e c t l y o r i n d i r e c t l y e v a l u a t e d i n any market e x t e r n a l t o the o r g a n i z a t i o n . T h i s i m p l i e s t h a t ^bureau o f f i c i a l s are unable t o make r a t i o n a l 'business' d e c i s i o n s about the o p e r a t i o n o f the bureau because they have no market i n f l u e n c e s t o guide them. For the s i t u a t i o n a t hand, t h i s c o u l d be i n t e r p r e t e d t o mean t h a t d e c i s i o n s made by Revenue Canada, which a f f e c t t he m a r k e t - o r i e n t e d highway s u f f e r a n c e warehouse system are made without knowledge o r un d e r s t a n d i n g o f the nature and m o t i v a t i o n o f t h a t system. The consequences o f t h i s s i t u a t i o n w i l l be made c l e a r l a t e r . 166 Another c h a r a c t e r i s t i c p e c u l i a r t o bureaus i s the way i n which d e c i s i o n s a re made. G e n e r a l l y , bureaus and t h e i r o f f i c i a l s are c o n s e r v a t i v e by nature and become i n c r e a s i n g l y so as they age. T h i s c o n s e r v a t i s m r e s u l t s i n p e r c e p t i o n s by bureau o f f i c i a l s which tend t o p a r t i a l l y s c r e e n out data and i n f o r m a t i o n which might ,be adverse t o the bureau's i n t e r e s t s and, t o magnify those f a c t o r s f a v o u r a b l e t o i t s i n t e r e s t s . In making d e c i s i o n s a f f e c t i n g bureau o p e r a t i o n s and i n f l u e n c e , d e c i s i o n makers tend t o g i v e inadequate a t t e n t i o n t o p o s s i b l e a c t i o n s i n v o l v i n g l a r g e changes i n the s t a t u s quo. F u r t h e r -more, b u r e a u c r a t i c d e c i s i o n s a re seldom made q u i c k l y and seldom take s u f f i c i e n t account o f the f u t u r e . Given these f a c t o r s , Revenue Canada c o u l d be expected t o be slow t o a c t and c o n s e r v a t i v e i n making d e c i s i o n s which i n the end w i l l l a c k f o r e s i g h t . For the s u f f e r a n c e warehouse system t h i s i m p l i e s t h a t the g r e a t e s t concern o f Revenue Canada i s i t s c o n t r o l f u n c t i o n , which i s over-emphasized a t the expense o f i t s r e s p o n s i b i l i t y to ensure t h a t the monopoly warehouse system o p e r a t e s t o the b e s t advantage o f c a r r i e r s , b r o k e r s , c o n s i g n e e s / c o n s i g n o r s and consumers, a l l o f whom must pay the c o s t s o f o p e r a t i n g the system. I t w i l l remain a major c o n t e n t i o n throughout t h i s a n a l y s i s t h a t these f a c t o r s have a f f e c t e d the q u a l i t y o f a d m i n i s t r a t i o n which Revenue Canada has e x e r c i s e d over the highway s u f f e r a n c e warehouse system. By f a i l i n g t o r e c o g n i z e 167 the nature o f the r e l a t i o n s h i p which was e s t a b l i s h e d between the monopoly warehouse o p e r a t o r and the motor c a r r i e r f i r m s f o r c e d t o use i t s s e r v i c e s , Revenue Canada i s p a r t i a l l y r e s -p o n s i b l e f o r the problems which have developed. The s i t u a t i o n a t p r e s e n t i s i n d i c a t i v e o f t h i s g e n e r a l t r e n d . Today, as i n the p a s t , Revenue Canada q u i c k l y and c o n s i s t e n t l y e n f o r c e s the r e g u l a t i o n s which govern i t s r e l a -t i o n s h i p s w i t h the warehouse o p e r a t o r and w i t h the bonded motor c a r r i e r f i r m s o p e r a t i n g t r a n s b o r d e r r o u t e s through the s u f f e r a n c e warehouse system. As a p r a c t i c a l p a r t o f t h e i r o p e r a t i o n s , warehouse o p e r a t o r s and c a r r i e r f i r m s have an i n t e r e s t i n m a i n t a i n i n g a good r e l a t i o n s h i p w i t h Revenue Canada s i n c e compliance w i t h o p e r a t i v e r e g u l a t i o n s ensures t h a t these f i r m s w i l l c o n t i n u e t o r e c e i v e departmental sanc-t i o n s f o r t h e i r o p e r a t i o n s . While Revenue Canada cannot be accused of n e g l e c t i n g the r e l a t i o n s h i p s i n which i t i s d i r e c t l y i n v o l v e d , the same cannot be s a i d o f the Revenue Canada-forced, commercial r e l a -t i o n s h i p between the s u f f e r a n c e warehouse o p e r a t o r and the motor c a r r i e r f i r m s u s i n g h i s f a c i l i t i e s . Revenue Canada c r e a t e d the m o n o p o l i s t s u p p l i e r o f s u f f e r a n c e f a c i l i t i e s , gave him a c a p t i v e c l i e n t e l e , l a i d out r e g u l a t i o n s to govern the r e l a t i o n s h i p and has s i n c e i g n o r e d the way i n which the r e l a -t i o n s h i p has developed. When comp l a i n t s were r e c e i v e d from motor c a r r i e r f i r m s about the warehouse system, the r e g u l a t i o n s were a l t e r e d and then a g a i n went without enforcement. The 168 i m p l i c a t i o n should not be taken t h a t a l l warehouse o p e r a t o r s are g u i l t y o f t a k i n g advantage o f t h e i r monopoly p o s i t i o n •• but the p o t e n t i a l o f the warehouse o p e r a t o r t o abuse the power i s too e a s i l y a v a i l a b l e and i t i s the r e s p o n s i b i l i t y o f Rev-enue Canada t o c o n t r o l i t so t h a t the imposed system works e q u a l l y w e l l f o r a l l c a r r i e r s . In c o n s i d e r i n g the p o l i c y f a c -t o r s which f o l l o w , i t should be remembered t h a t the u l t i m a t e cause o f many complaints i s not the p o l i c y but the a d m i n i s t r a -t i o n o f t h a t p o l i c y — o r l a c k o f i t . There are a t l e a s t two p o s s i b l e s o l u t i o n s t o t h i s problem. The f i r s t would see a change o f a t t i t u d e on the p a r t o f Revenue Canada. By t a k i n g the r e s p o n s i b i l i t y i t should, Revenue Canada c o u l d c r e a t e and e n f o r c e r e g u l a t i o n s which make the warehouse o p e r a t o r - u s e r c a r r i e r r e l a t i o n s h i p more e q u i t a b l e and l e s s open t o abuse. The p r o s p e c t s o f t h i s s i t u a t i o n a r i s i n g a re l e s s than, h o p e f u l . The b u r e a u c r a t i c n a ture o f the o r g a n i z a t i o n seems t o prevent i t from b e i n g con-cerned about an y t h i n g but i t s own f u n c t i o n — t h a t o f c o n t r o l l i n g imported goods and g e n e r a t i n g t a r i f f and e x c i s e revenues f o r the Crown. An a l t e r n a t i v e course o f a c t i o n i s t o change the p o l -i c y g o v e r n i n g the highway s u f f e r a n c e warehouse system. Changes i n the o r g a n i z a t i o n o f the system c o u l d be made which would e l i m i n a t e the l a n d l o r d - t e n a n t problems, w h i l e a t the same time m a i n t a i n i n g the b a s i c concept o f c e n t r a l i z e d c l e a r a n c e o f • >• goods b e i n g imported i n t o Canada. The b a s i s o f the p o l i c y 169 change would be the removal o f the l a n d l o r d - t e n a n t r e l a t i o n -s h i p by c r e a t i n g a s t r a t a - t i t l e c o m p l e x — a common t e r m i n a l — to serve as a c l e a r a n c e , b r e a k b u l k and d i s t r i b u t i o n c e n t r e f o r a l l t r a n s b o r d e r motor c a r r i e r f i r m s . Every c a r r i e r f i r m would be f r e e t o p a r t i c i p a t e i n the ownership of t h e complex and t o operate i t s own c l e a r a n c e and breakbulk warehouse. A l l f i r m s i n v o l v e d would be r e s p o n s i b l e f o r p r o v i s i o n o f f a c i l i -t i e s and s e r v i c e s f o r Customs and f o r m a i n t a i n i n g common areas w i t h i n the complex. W i t h i n such a complex each c a r r i e r would have d i r e c t c o n t r o l over the l e v e l o f s e r v i c e i t r e q u i r e d and the c o s t s i t i n c u r s i n c a r r y i n g f o r e i g n goods i n t o Canada w h i l e a t the same time Customs c o n t r o l c o u l d be m a i n t a i n e d . In a d d i t i o n , such a complex c o u l d e l i m i n a t e the need f o r a p u b l i c area t o serve i t i n e r a n t c a r r i e r s : w i t h s e v e r a l c a r r i e r -owned c l e a r a n c e warehouses a v a i l a b l e a t the f a c i l i t y , the i t i n e r a n t c o u l d a l l o w i t s consignments to be handled by the lowest b i d d e r , such as i s the arrangement w i t h i t i n e r a n t c a r r i e r s a t i n t e r n a t i o n a l a i r p o r t s a c r o s s Canada. The b e n e f i t s o f t h i s system w i l l become more c l e a r as each o f the p r e s e n t problem areas are c o n s i d e r e d . G e n e r a l l y , however, such a system would e l i m i n a t e the problems o f monop-o l y power abuses, o f unreasonable o f q u e s t i o n a b l e l e v e l s o f r a t e s and charges and o f unbalanced i n t r a m o d a l c o m p e t i t i o n . 2 . S u f f e r a n c e Warehouse Ownership P o l i c y There are not p r o v i s i o n s i n the c u r r e n t s u f f e r a n c e 170 warehouse r e g u l a t i o n s which serve t o r e s t r i c t the ownership o f highway s u f f e r a n c e warehouses i n Canada. The e x i s t i n g f a c i l i t i e s a r e owned by a v a r i e t y o f i n t e r e s t s from t r a n s -border motor c a r r i e r f i r m s — e i t h e r d i r e c t l y o r i n d i r e c t l y through s u b s i d i a r y o r a s s o c i a t e d c o m p a n i e s — t o t h i r d p a r t y i n t e r e s t s such as Custom-House brokerage f i r m s and g e n e r a l warehousing i n t e r e s t s . Each o f these o p e r a t i o n s i s p r i v a t e l y -owned and o p e r a t e s as monopolies i n i t s r e s p e c t i v e r e g i o n o r Customs p o r t a r e a . The u n w i l l i n g n e s s o f Revenue Canada t o expand the system beyond t h i s monopoly s i t u a t i o n has made the ownership i s s u e a major one i n the co m p l a i n t s by us e r motor c a r r i e r f i r m s about the highway s u f f e r a n c e warehouse system. I t a p a r e n t l y seemed n a t u r a l t o Revenue Canada t h a t the c l e a r a n c e f a c i l i t i e s f o r the highway mode would be p r o -v i d e d by c a r r i e r s i n t h a t mode as had been the case w i t h the r a i l mode b e f o r e i t . For reason e x p l a i n e d e a r l i e r , Revenue Canada o r i g i n a l l y a c c e p t e d a p p l i c a t i o n s from t r a n s b o r d e r highway c a r r i e r s t o e s t a b l i s h these f a c i l i t i e s t o serve t h e i r own needs and those o f o t h e r c a r r i e r f i r m s . The problems t h i s s i t u a t i o n c r e a t e d l e d t o the 196 0 r e g u l a t i o n s a f f e c t i n g owner-s h i p and the r i g h t s o f ownership. F i r s t , a p p l i c a t i o n s from t r a n s b o r d e r motor c a r r i e r s f o r a p p r o v a l t o oper a t e s u f f e r a n c e warehouses were no l o n g e r t o be accepted by Revenue Canda i n an attempt t o end comp l a i n t s from user motor c a r r i e r s t h a t such ownership gave an advantage t o the owner c a r r i e r a t the expense o f c a r r i e r s f o r c e d t o use the monopoly f a c i l i t i e s . 171 Second, by r e q u i r i n g a l l warehouse owners t o l e a s e space t o u s e r c a r r i e r f i r m s f o r t h e i r e x c l u s i v e use as s u f f e r a n c e warehouses, Revenue Canada hoped t o g i v e every c a r r i e r the o p p o r t u n i t y to o p e r a t e i t s own c l e a r a n c e warehouse thus ending the c omplaints o f poor s e r v i c e and u n f a i r t r e a t -ment. Enforcement o f both o f these r e g u l a t i o n s might w e l l have accomplished the t a s k but no p r o v i s i o n f o r enforcement was made. C a r r i e r f i r m s soon found ways around the ownership r e s t r i c t i o n s , a p p l y i n g through s u b s i d i a r y o r a s s o c i a t e d com-p a n i e s whose ownership was never i n v e s t i g a t e d by Revenue Can-ada. F u r t h e r , many e x i s t i n g o p e r a t i o n s f a i l e d t o supply l e a s e space to user c a r r i e r s , e i t h e r o u t r i g h t or by s e t t i n g l e a s e r e s t r i c t i o n s and r a t e s which most c a r r i e r s were not w i l l i n g t o a c c e p t . The m a j o r i t y o f c o m p l a i n t s about s u f f e r a n c e warehouse l a n d l o r d s are aimed a t those who are a l s o t r a n s b o r d e r motor c a r r i e r f i r m s . T h i s group has the most t o g a i n by o p e r a t i n g o u t s i d e the r e g u l a t i o n s . The s e l f - i n t e r e s t o f these c a r r i e r -owners can r e s u l t i n d i s c r i m i n a t i o n a g a i n s t user c a r r i e r s i n the p r o v i s i o n o f space or s e r v i c e or i n the l e v y i n g o f r a t e s and charges which g i v e s them a c o m p e t i t i v e advantage over o t h e r o p e r a t o r s . While few i n c i d e n t s o f o u t r i g h t b i a s i s shown by these warehouse keepers, a l l concerned w i t h s u f f e r a n c e oper-a t i o n s i n d i c a t e t h a t as l a n d l o r d t h e r e are many forms o f s u b t l e b i a s which a f f e c t user c a r r i e r o p e r a t i o n s a t the highway s u f f -erance warehouse. These are i n c l u d e d i n the d i s c u s s i o n s to come on c a p a c i t y , r a t e s and c h arges and i n t r a m o d a l c o m p e t i t i o n . 172 There are warehouse keepers who have l i t t l e t o g a i n by d i s c r i m i n a t i n g a g a i n s t user c a r r i e r s . T h i r d p a r t i e s to the movement o f goods t r a n s b o r d e r , such as customs br o k e r s and g e n e r a l warehouse o p e r a t o r s , which operate highway c l e a r -ance f a c i l i t i e s as a b u s i n e s s , can reap more b e n e f i t by en-c o u r a g i n g c a r r i e r f i r m s to use the f a c i l i t i e s . With income based on a t u r n o v e r of warehouse space, d e l a y s i n the c l e a r -ance o f goods c o s t the warehouse revenue. While these f a c i l -i t i e s are not always the most e f f i c i e n t i n the system, t h e r e seems to be fewer co m p l a i n t s about them than the former type. The problems o f s u f f e r a n c e warehouse ownership are compounded by o t h e r f a c t o r s . Revenue Canada appears u n w i l l i n g to r e c o g n i z e t h a t a problem e x i s t s and to e n f o r c e the r e g u l a -t i o n s g o v e r n i n g the l a n d l o r d - t e n a n t r e l a t i o n s h i p i t has f o r c e d on t r a n s b o r d e r motor c a r r i e r s . T h i s l a c k of a c t i o n by Revenue Canada has c r e a t e d a s i t u a t i o n i n which t h e r e i s no proper forum f o r d e a l i n g c o n s i s t e n t l y w i t h the c o m p l a i n t s o f user c a r r i e r f i r m s . I t would seem a p p r o p r i a t e f o r such a forum to e x i s t i n a system i n which monopoly warehouse o p e r a t o r s d e a l w i t h a c a p t i v e c l i e n t e l e a t the i n s i s t e n c e o f the government. Ownership need not be a s i g n i f i c a n t problem f o r the s u f f e r a n c e warehouse system as l o n g as r e g u l a t i o n s a p p r o p r i a t e t o the ownership p o l i c y are i n e x i s t e n c e and a r e e n f o r c e d . There are b e n e f i t s a v a i l a b l e t o a l l p a r t i e s w i t h an i n t e r e s t i n t r a n s b o r d e r goods movement i n c e n t r a l i z e d c l e a r a n c e f a c i l i -t i e s such as those a v a i l a b l e a t highway s u f f e r a n c e warehouses. 173 I f these f a c i l i t i e s are to be privately-owned monopolies, Revenue Canada should ensure t h a t a l l c a r r i e r s are t r e a t e d e q u a l l y i n the p r o v i s i o n of space and s e r v i c e and i n the l e v y -i n g of r a t e s and charges by warehouse operators. The a u t h o r i t y to operate a sufferance warehouse was o r i g i n a l l y intended to be a p r i v i l e g e and i f t h i s i s to be abused then the p o l i c y which bestows the p r i v i l e g e should be amended and a l l c a r r i e r s should be a u t h o r i z e d to own and operate such f a c i l i t i e s . As long as a monopoly suff e r a n c e warehouse o p e r a t o r — b e i t a motor c a r r i e r f i r m or any other o p e r a t o r — h a s the o p p o r t u n i t y . to abuse t h a t power, the warehouse system w i l l not work e q u i t -ably f o r a l l transborder motor c a r r i e r s . 3. Warehouse Capacity Problems The c a p a c i t y of highway sufferance warehouses cannot be measured e x c l u s i v e l y by the number of f r e i g h t doors, the square footage of the warehouse or the amount o f equipment a v a i l a b l e to handle incoming and out-going shipments. As important a f a c t o r i n measuring c a p a c i t y i s through-put; how f a s t are shipments moved through the clearance warehouse. In a d d i t i o n , a highway su f f e r a n c e warehouse complex c o n s i s t s of two components, both of which a f f e c t i t s a b i l i t y to r e c e i v e and hold goods pending Customs cl e a r a n c e . F i r s t there i s the warehouse component i n which goods are p h y s i c a l l y h e l d while i t s , r e p r e s e n t a t i o n — C u s t o m s documents—are d e a l t with by the second component, the l o c a l Customs o f f i c e . 174 The warehouse component can be segregated i n t o two subcomponents, the p u b l i c a r e a o f the warehouse and, the l e a s e d space f a c i l i t i e s f o r motor c a r r i e r f i r m s . The p u b l i c area i s open to any and a l l motor c a r r i e r f i r m s c a r r y i n g i n bond goods i n t o the Customs p o r t and i s o p e r a t e d by the ware-house owner who p r o v i d e s the warehousing space as w e l l as the p e r s o n n e l and equipment t o handle a l l incoming goods. Leased space i s p r o v i d e d a t some s u f f e r a n c e warehouses t o motor c a r r i e r s w i s h i n g t o p r o v i d e t h e i r own c l e a r a n c e warehouse f a c i l i t i e s w i t h i n the s u f f e r a n c e warehouse complex. By em-p l o y i n g such space the motor c a r r i e r f i r m becomes r e s p o n s i b l e f o r the manner i n which goods a r e warehoused and subsequently p r e s e n t e d f o r Customs a p p r a i s a l . While the goods remain i n the warehouse, t h e i r docu-mentation i s p r e s e n t e d t o Customs f o r a p p r a i s a l . While Cus-toms does not p h y s i c a l l y handle the goods, i t does a f f e c t the c a p c i t y o f the warehouse by i n f l u e n c i n g the time from r e c e i p t o f the c l e a r a n c e documents t o r e l e a s e o f the goods. Where a p p r a i s a l times a r e l e n g t h y , , t h e capacity o f the warehouse i s d i m i n i s h e d by slow t u r n o v e r o f space. Motor c a r r i e r f i r m s complain o f a l a c k o f c a p a c i t y i n the p u b l i c area and a l a c k o f l e a s e space w i t h i n s u f f e r a n c e warehouse complexes. The l a t t e r c o mplaint i s a s e r i o u s one, because the r e g u l a t i o n s o u t l i n i n g the r e s p o n s i b i l i t i e s o f the warehouse keeper r e q u i r e space to be l e a s e d , a t a r e a s o n a b l e c o s t , t o any c a r r i e r r e q u e s t i n g i t . The f a i l u r e o f Revenue Canada t o d e a l w i t h these c o m p l a i n t s b r i n g s back the p o i n t s made i n d i s c u s s i n g the a d m i n i s t r a t i o n o f the p o l i c y and regu-l a t i o n s . In the 1976 S u f f e r a n c e Warehouse Survey r e s u l t s , i t was p o i n t e d out the l e a s e space a t s u f f e r a n c e warehouses has not become an important p a r t o f s u f f e r a n c e warehouse o p e r a t i o n s . The capacity o f the p u b l i c area i n warehouses depends on many f a c t o r s b e s i d e s the p h y s i c a l c h a r a c t e r i s t i c s o f the b u i l d i n g . As important, i s the speed w i t h which c l e a r a n c e can be e f f e c t e d and t h i s i s governed by f a c t o r s such as the e f f i -c i e n c y o f the warehouse s t a f f and equipment, the presence o f a l l customs documents upon a r r i v a l o f the goods, the e f f i c i e n c y o f the b r o k e r who handles the p r e s e n t a t i o n o f the d e c l a r a t i o n to Customs and the a b i l i t y o f the Customs o f f i c e t o handle q u i c k l y a l l e n t r i e s made t o i t . There i s no doubt t h a t d u r i n g peak times the p h y s i c a l l i m i t a t i o n s i n both t y p e s o f warehouse space are the cause o f c a p c i t y d e l a y s , but on a r e g u l a r b a s i s the f a c t o r s noted above, which are out o f the c o n t r o l o f the warehouse o p e r a t o r , are more o f t e n the l e g i t i m a t e cause o f d e l a y s a t highway s u f f e r a n c e warehouses, w h i l e ' l a c k o f capa-c i t y ' s e r v e s as the scapegoat. The q u e s t i o n o f d e l a y s caused by the i n a b i l i t y o f the l o c a l customs o f f i c e t o handle the owrkload p l a c e d upon i t deserves some e x p l a n a t i o n . U n l i k e the c a r r i e r o r Customs broker, Customs has no v e s t e d i n t e r e s t i n having goods c l e a r e d w i t h no d e l a y s . The c u r r e n t s t a f f budget f r e e z e imposed by the government o f t e n makes i t i m p o s s i b l e f o r r e g i o n a l and 176 l o c a l Customs a u t h o r i t i e s to p r o v i d e s u f f i c i e n t , competent s t a f f t o q u i c k l y p r o c e s s incoming e n t r i e s . A t the l o c a l l e v e l t h i s problem i s compounded by poor morale and low p r o d u c t i v i t y on the p a r t o f some o f f i c i a l s . Shortage o f o p e r a t i n g funds o f t e n makes i t i m p o s s i b l e t o r e p l a c e p e r s o n n e l even on a temporary b a s i s . As an example, i n Vancouver, d u r i n g March 1977 t h e r e were i n excess o f 600 e n t r i e s backlogged a t U n i t e d T e r m i n a l s L t d . , where up t o f o u r hundred e n t r i e s are r e c e i v e d d a i l y . The one day c l e a r a n c e d e l a y i n t u r n r e s u l t s i n a shortage o f o therwise p r o d u c t i v e s u f f e r a n c e warehouse space, and i n complaints from user motor c a r r i e r f i r m s t h a t the ware-house keeper i s f a i l i n g t o p r o v i d e s u f f i c i e n t warehouse capa-c i t y . The s o l u t i o n to t h i s type o f c a p a c i t y problem s h o u l d not n e c e s s a r i l y be found i n i n c r e a s e d warehouse c a p a c i t y but by improving the c a p a c i t y o f the l o c a l Customs o f f i c e t o handle the normal flow o f incoming e n t r i e s . The 1976 Highway S u f f e r a n c e Warehouse Survey i n d i c a t e d t h a t goods a r r i v i n g a t s u f f e r a n c e warehouses are c l e a r e d w i t h few r e p o r t e d d e l a y s as a r e s u l t o f l a c k o f c a p a c i t y . On a v e r -age, 80 p e r c e n t o f t r u c k l o a d shipments c l e a r e d through the s u f f e r a n c e warehouse system are r e l e a s e d from Customs bond by the c l o s e o f the f i r s t b u s i n e s s day a f t e r a r r i v a l . L e s s - t h a n -t r u c k l o a d shipments are not c l e a r e d as f a s t as t r u c k l o a d s h i p -ments because o f the a d d i t i o n a l h a n d l i n g r e q u i r e d ; the l a r g e r f a c i l i t i e s r e s p o n d i n g t o the survey i n d i c a t e t h a t up t o 75 p e r c e n t o f LTL shipments are c l e a r e d w i t h i n one b u s i n e s s day o f t h e i r a r r i v a l . Where d e l a y s o c c u r the most common reasons 177 a r e l a c k o f p r o p e r customs d o c u m e n t a t i o n , customer e r r o r s , and Customs d e l a y s . T h i s c o n c l u s i o n i s s u b s t a n t i a t e d by d i s c u s s i o n s w i t h l i c e n c e d Customs b r o k e r s o p e r a t i n g a t t h e s u f f e r a n c e warehouse complexes. T h i s group w h i c h does have a v e s t e d i n t e r e s t i n h a v i n g goods c l e a r e d q u i c k l y , i n d i c a t e s t h a t e x c e p t d u r i n g peak p e r i o d s , t h e c a p a c i t y o f t h e system c a n n o t be used as a l e g i t i m a t e r e a s o n f o r d e l a y s i n h a v i n g goods c l e a r e d f o r dom-e s t i c c o n s u m p t i o n . I n V a n couver, f o r i n s t a n c e , i t i s u n u s u a l f o r i m p o r t e d goods n o t t o be c l e a r e d w i t h i n e i g h t hours o f a r r i v a l a t t h e warehouse. I n some c a s e s , i t t a k e s t h e c a r r i e r f i r m t h a t l o n g t o u n l o a d ' t h e highway equipment and a r r a n g e f o r l o c a l d e l i v e r y . Customs b r o k e r s a r e more c r i t i c a l o f Revenue Canada t h a n o t h e r s i n t e r v i e w e d , l i k e l y because t h e y know the department's b u s i n e s s b e t t e r t h a n most o t h e r s . B r o k e r s com-p l a i n about t h e c o m p l i c a t e d d o c u m e n t a t i o n r e q u i r e m e n t s as w e l l as about th e p r e s s u r e on t h e l o c a l Customs o f f i c e s as a r e s u l t o f t h e i r i n a b i l i t y t o d e a l w i t h i n c r e a s i n g demand f o r s e r v i c e . C o n s i d e r , as w e l l , t h e c o n c l u s i o n s from t h e s t u d y o f 4 t r a n s b o r d e r t r u c k u s e r s ' p e r c e p t i o n s o f t h e i n d u s t r y . Here i t was shown t h a t c o n s i g n o r s and c o n s i g n e e s o f goods t r a n s -p o r t e d by t r u c k i n t o Canada a r e s a t i s f i e d w i t h t h e g e n e r a l a b i l i t y o f t h e highway mode t o d e l i v e r t h e i r goods i n a r e a s o n -a b l e t i m e . These f i n d i n g s f u r t h e r i m p l y t h a t s ystem c a p a c i t y as w e l l as o t h e r causes o f d e l a y a r e n o t o f major i m p o r t a n c e i n t r a n s p o r t i n g goods i n t o Canada by t r u c k . 178 In summary, system c a p a c i t y i n i t s e l f i s not a s e r i o u s problem f o r the s u f f e r a n c e warehouse i n d u s t r y i n the Customs p o r t s i n Canada. T h i s i s not t o say t h a t a t some f a c i l i t i e s a d d i t i o n a l warehouse space c o u l d not be put t o p r o d u c t i v e use, a t l e a s t d u r i n g peak-load p e r i o d s . The number o f s u f f e r a n c e warehouses f o r the highway mode has always been r e s t r i c t e d by Revenue Canada but the c a p a c i t y a t these f a c i l i t i e s has been al l o w e d to i n c r e a s e as the market demands. In a d d i t i o n , Revenue Canada has made moves t o s i m p l i f y and speed the c l e a r -ance p r o c e s s . F a s t e r c l e a r a n c e s r e s u l t s i n the p o t e n t i a l f o r g r e a t e r system c a p a c i t y but i t remains up t o warehouse keepers and c a r r i e r f i r m s to make e f f e c t i v e use o f t h i s p o t e n t i a l . E a r l i e r i t was shown t h a t the i n t r o d u c t i o n o f CEPACS procedures would p r o v i d e t h i s type o f i n c r e a s e d c a p a c i t y through f a s t e r c l e a r a n c e . 4. Rates and Charges a t Highway S u f f e r a n c e Warehouses While c o n s i d e r i n g the p o t e n t i a l channels i n which mon-opo l y power abuses c o u l d be d i r e c t e d , the l e v e l o f r a t e s and charges was i n t r o d u c e d . I t i s i n t h i s area t h a t many o f the complaints from user motor c a r r i e r f i r m s have been d i r e c t e d . O p e r a t i n g from t h e i r monopoly p o s i t i o n s , w i t h no e f f e c t i v e r e g u l a t i o n governing t h e i r a c t i o n s , warehouse o p e r a t o r s are f r e e to s e t r a t e s and charges a t t h e i r d i s c r e t i o n . Because o f a l a c k o f power t o r e g u l a t e the r a t e s t r u c t u r e s a t highway s u f f e r a n c e warehouses, Revenue Canada i s unable to d e a l w i t h the complaints o f u s e r motor c a r r i e r firms.. 179 In the chapter four analysis of rates and charges at highway sufferance warehouses was made. With the c r i t e r i a i n mind that rates be 'reasonable'—as required i n the s u f f e r -ance warehouse r e g u l a t i o n s — r a t e s and charges can be considered for space and service i n the sufferance warehouse public area and for space provided under the lease provisions of the ware-house regulations. Rates and charges for space and service i n the public area of a f a c i l i t y are not e a s i l y dealt with for the purpose here. At some f a c i l i t i e s the public area i s not an important part of the warehouse operation while at others i t i s the bulk of the operation. At the former warehouses, public area rates and charges are l e v i e d as a nuisance charge and are thus set purposely high, while at the l a t t e r f a c i l i t i e s these l e v i e s represent the bulk of warehouse revenues. The importance of these charges i n t h i s regard should have l i t t l e e f f e c t on t h e i r l e v e l s . On an i n t r a - i n d u s t r y basis the rates charges at each f a c i l i t y represent the costs faced by the warehouse operator and, since these vary across Canada, rates across the system are u n l i k e l y to be equal. In the rate analysis i t was shown that rates charged within customs regions were usually com-p e t i t i v e , although t h i s type of f a c i l i t y r a r e l y operates i n competition with other l i k e f a c i l i t i e s . Any warehouse opera-tor with rates and charges d r a s t i c a l l y o u t - o f - l i n e with others i n the general area might well be looked on with some s u s p i c i o n — 1 8 0 a s i t u a t i o n no warehouse o p e r a t o r would wish t o be i n . The q u e s t i o n o f whether the r a t e l e v e l s a c r o s s the i n d u s t r y are •padded 1 to take advantage o f the monopoly p o s i t i o n o f the un r e g u l a t e d warehouse o p e r a t o r can o n l y be answered w i t h more i n t e n s i v e study. One might s u s p e c t , however, t h a t the u n w i l l -ingness o f most warehouse o p e r a t o r s t o r e l e a s e f i n a n c i a l i n f o r m a t i o n o r t h e i r t a r i f f s — w h i c h are a v a i l a b l e by l a w — i n d i c a t e s t h a t the l e v e l o f r a t e s and charges i n e f f e c t h i d e monopoly p r o f i t s as a r e s u l t o f t h e i r monopoly p o s i t i o n . Attempts t o compare the l e v e l o f r a t e s and charges a t highway s u f f e r a n c e warehouse p u b l i c areas on an i n t e r - i n d u s t r y b a s i s are a l s o d i f f i c u l t . I t was expected t h a t the p u b l i c a r e a s e r v i c e s p r o v i d e d by c l e a r a n c e warehouse keepers are not s i m i l a r t o those p r o v i d e d by the p u b l i c warehousing i n d u s t r y o r any o t h e r type o f warehousing i n Canada. O p e r a t o r s o f gen-e r a l p u b l i c warehousing are i n t e r e s t e d i n l o n g e r term storage o f goods and l e v y charges f o r t h i s space on the b a s i s o f space u t i l i z e d over time and more a t t r a c t i v e s t o r a g e charges are a v a i l a b l e when the term i s l o n g e r . S u f f e r a n c e warehousing, on the o t h e r hand, i s s h o r t t e r m — o n e o r two d a y s — a n d the ware-house keepr l e v i e s charges on the b a s i s o f the weight o f the shipment, w i t h minimum charges i n e f f e c t . T h i s o p e r a t o r bene-f i t s when t h e r e i s a q u i c k t u r n o v e r o f goods through the f a c i l -i t y . P e n a l t i e s f o r d e l a y s i n c l e a r i n g goods are a s s e s s e d i n the form o f sto r a g e charges designed to encourage the t u r n -over n e c e s s a r y . There i s l i t t l e b a s i s f o r comparison between these types o f p u b l i c warehousing. 181 Charges f o r l e a s e d space at highway s u f f e r a n c e ware-houses are g e n e r a l l y h i g h e r than those f o r e g u i v a l e n t space o u t s i d e the warehouse complex. T h i s i s t r u e f o r both ware-house and o f f i c e space l e a s e d t o c a r r i e r s and customs b r o k e r s . The warehouse o p e r a t o r j u s t i f i e s these charges by c i t i n g c o s t f a c t o r s common o n l y i n s u f f e r a n c e warehouses; the warehouse owner must supply o f f i c e and examination space to Customs a t no charge a l o n g w i t h f u r n i t u r e , s e r v i c e s and u t i l i t i e s ; he must meet c e r t a i n minimum b u i l d i n g requirements; and, he must sup p l y s e c u r i t y f o r i n bond shipments a t the complex. In a d d i -t i o n , the t r a n s i e n t nature o f the t r a n s b o r d e r t r u c k i n g i n d u s t r y makes p r o v i s i o n o f l e a s e space warehousing more o f a r i s k than i s f a c e d by l e s s o r s o f g e n e r a l warehousing space. A l l o f these f a c t o r s tend t o i n c r e a s e the c o s t o f l e a s e d space i n the s u f f e r a n c e warehouse. Whether the i n c l u s i o n o f these components would l e a d to l e a s e r a t e s which are o f t e n double o r more those f o r s i m i l a r space o u t s i d e the s u f f e r a n c e warehouse should, however, be the s u b j e c t o f some f u r t h e r i n v e s t i g a t i o n . While i t i s r e a s o n a b l e to expect t h a t the charges f o r l e a s e space and the r e s t r i c t i v e l e a s e agreements a t the f a c i l i t i e s where they are a v a i l a b l e , do have some f a c t o r added to account f o r the monopoly p o s i t i o n o f the warehouse o p e r a t o r , the respon-s i b i l i t y t o ensure t h a t the r a t e s and l e a s e p r o v i s i o n s are not e x c e s s i v e belongs to Revenue Canada. The most s e r i o u s problem wi t h r a t e s and charges a t s u f f e r a n c e warehouses i s t h a t they can be s e t a r b i t r a r i l y by the warehouse keeper. While i t i s d i f f i c u l t t o say c o n c l u s i v e l y 182 t h a t s u f f e r a n c e warehouse r a t e s and charges are 'reasonable' or a t l e v e l s which r e p r e s e n t the t r u e c o s t s o f p r o v i d i n g the space and s e r v i c e s , some o b s e r v a t i o n s can be made. Monopoly warehouse o p e r a t o r s are not e f f e c t i v e l y c o n t r o l l e d by Revenue Canada as to t h e i r o p e r a t i o n s o r t o the l e v e l o f r a t e s and charges they employ. Furthermore, they enjoy t h e i r monopoly p o s i t i o n s and t r y hard t o m a i n t a i n them. T h i s would seem t o i n d i c a t e t h a t t h e r e are p r o f i t s b e i n g made which a r e s u f f i c i e n t to encourage t h i s p o s i t i o n . New r e g u l a t i o n s g i v i n g Revenue Canada the power t o r e g u l a t e s u f f e r a n c e warehouse r a t e s would be one way to remove the q u e s t i o n a b l e r a t e s and charges p r a c t i c e s a t some f a c i l i t i e s . I f such a step were taken, however, i t would r e q u i r e some i n -v e s t i g a t i o n o f the components which make up o p e r a t i n g c o s t s o f these f a c i l i t i e s and on-going a n a l y s i s t o ensure r a t e s and • charges remained a t a c c e p t a b l e l e v e l s . I f Revenue Canada takes an i n t e r e s t i n such a t a s k i t c o u l d serve t o end the c o m p l a i n t s o f e x c e s s i v e r a t e s and charges. A much more p r a c t i c a l way t o remove t h i s problem, how-ever, would be t o remove the source o f p o s s i b l e a b u s e — t h e monopoly warehouse owner. Where every c a r r i e r c o u l d operate i t s own warehouse w i t h i n a c e n t r a l i z e d f a c i l i t y , the c o s t o f c l e a r i n g goods would be c a l c u l a t e d by each i n d i v i d u a l c a r r i e r f i r m based on the l e v e l o f e f f i c i e n c y i t c o u l d a c h i e v e and wi t h the requirement t h a t the l a n d l o r d be p a i d f o r space and s e r v i c e e l i m i n a t e d , t r u e c o s t o f each c l e a r a n c e would be 1 8 3 i n c u r r e d by the c a r r i e r . In a d d i t i o n , the a b i l i t y o f t r a n -s i e n t c a r r i e r s t o choose the most e f f i c i e n t c a r r i e r ' s f a c i l i -t i e s through which to c l e a r goods consigned to i t p r o v i d e s an e f f i c i e n t s i t u a t i o n ' f o r e v e r y c a r r i e r and consignee. 5 . P o l i c y E f f e c t s on Intramodal C o m p e t i t i o n The problem o f i n t r a m o d a l c o m p e t i t i o n imbalance has been evide n c e d s i n c e the i n t r o d u c t i o n o f the s u f f e r a n c e ware-house concept to the highway mode. The problem e x i s t s where the owner and o p e r a t o r o f the highway s u f f e r a n c e warehouse i s a motor c a r r i e r f i r m competing on t r a n s b o r d e r r o u t e s w h i l e p r o v i d i n g s u f f e r a n c e s e r v i c e s t o o t h e r t r a n s b o r d e r motor c a r r i e r s from h i s monopoly warehouse. Where ownership i s out o f the hands o f i n t e r n a t i o n a l highway c a r r i e r s , t h e r e i s l i t t l e i n c e n t i v e f o r encouraging the d i s t o r t i o n o f the c o m p e t i t i v e atmosphere between c a r r i e r f i r m s . C o n s i d e r , f o r example, the highway s u f f e r a n c e warehouse o p e r a t e d by a Customs brokerage f i r m . In t h i s case, i t would be t o the advantage o f the owners to g i v e good s e r v i c e t o a l l user c a r r i e r f i r m s as a means o f promoting i t s b u s i n e s s . On the o t h e r hand, where competing c a r r i e r s p a r t i c i p a t e i n the ownership of these f a c i l i t i e s , the b u s i n e s s i n t e r e s t s of the warehouse might w e l l be s a c r i f i c e d by the s e l f - i n t e r e s t o f the c a r r i e r t o expand i n the f r e i g h t market at the expense o f the competing c a r r i e r s which employ the s e r v i c e s o f the highway s u f f e r a n c e warehouse. In t h i s case, a c o m p e t i t i v e advantage, a l t h o u g h i n d i r e c t , can be had by the motor c a r r i e r — w a r e h o u s e o p e r a t o r a t the expense o f 184 e f f i c i e n c y i n the market p l a c e . T h i s c o m p e t i t i v e advantage was seen by many motor c a r r i e r s a t the i n c e p t i o n o f the highway s u f f e r a n c e warehouse system. Revenue Canada, on the o t h e r hand, a p p a r e n t l y d i d not r e c o g n i z e the r a m i f i c a t i o n s o f the d e c i s i o n t o make the system one o f p r i v a t e l y owned, monopoly warehouses. From the beg i n n i n g , the s e l f - i n t e r e s t o f many c a r r i e r f i r m s o p e r a t i n g s u f f e r a n c e warehouses r e s u l t e d i n o u t r i g h t d i s c r i m i n a t i o n a g a i n s t c a r r i e r f i r m s compelled t o d e l i v e r f o r e i g n goods t o these s u f f e r a n c e f a c i l i t i e s f o r c l e a r a n c e . The 1960 r e g u l a -t i o n s r e s t r i c t i n g ownership o f f u t u r e warehouses to non-t r a n s p o r t a t i o n i n t e r e s t s and r e q u i r i n g a l l warehouse o p e r a t o r s to l e a s e space t o user c a r r i e r f i r m s was an attempt t o end the c o m p e t i t i v e advantage which the warehouse owner-motor c a r r i e r f i r m had over the c a r r i e r f i r m s u s i n g the warehouses. T h i s was the f i r s t attempt made by Revenue Canada t o c o n t r o l the r e l a t i o n s h i p between the warehouse o p e r a t o r and the user motor c a r r i e r f i r m . The e f f e c t s o f the 1960 r e g u l a t i o n s have removed many of the advantages h e l d by the warehouse operator-motor c a r r i e r f i r m . Every t r a n s b o r d e r c a r r i e r has the o p p o r t u n i t y t o e s t a b -l i s h a breakbulk p o i n t a t the s u f f e r a n c e warehouse through which he may handle, and be r e s p o n s i b l e f o r , the goods consigned to him. The problems have not been t o t a l l y removed. At many highway s u f f e r a n c e warehouses, l e a s e space i s not a v a i l a b l e and where i t i s , the l e a s e charges are o f t e n q u e s t i o n a b l y 185 high and the lease agreements r e s t r i c t i v e . The e f f e c t s of these factors on intermodal competition are not e n t i r e l y c l e a r , but the f a c t that some warehouse keepers are able to operate outside the e x i s t i n g regulations leaves i n question the equit-able p o s i t i o n of a l l c a r r i e r firms at the highway sufferance warehouse. 6. P o l i c y E f f e c t s on Intermodal Competition Chapter one dealt with intermodal competition for commodity groups between highway and r a i l c a r r i e r s i n the transborder market. An i n d i c a t i o n was given of the r e l a t i v e importance, and recent changes i n the importance, between the modes i n terms of market share i n the commodity groupings. The r e s u l t s show that the quantity of goods as measured by d o l l a r value c a r r i e d by truck has been increasing at the ex-pense of the r a i l mode. Regardless of t h i s growth i n market share by the trucking industry, one of the most common com-p l a i n t s against the highway sufferance warehouse system has been that i t prevents the motor c a r r i e r s from competing f r e e l y with the r a i l mode. In theory, t h i s s i t u a t i o n gives neither truck nor r a i l an advantage because of Customs requirements. There are two conditions which might be seen as g i v i n g r a i l an advantage over truck. The f i r s t r e s u l t s from an issue given previous consideration, that l o c a l Customs o f f i c e s at sufferance warehouses, be they r a i l , highway or a i r f a c i l i t i e s , r a r e l y operate at high l e v e l s of p r o d u c t i v i t y and d i s p a r i t y 186 between these o f f i c e s c o u l d make i t e a s i e r t o c l e a r goods a t the l o c a l r a i l s u f f e r a n c e warehouse than a t the highway f a c i l -i t y . Only c o n s i d e r a t i o n o f the s i t u a t i o n a t each Customs o f f i c e would show which had the b e t t e r r e c o r d s . The second case d e a l s d i r e c t l y w i t h s u f f e r a n c e ware-houses. ( R a i l o p e r a t o r s a re e n t i t l e d t o own t h e i r own s u f f e r -ance f a c i l i t i e s t o which a l l i n bond goods consigned t o i t w i l l be d e l i v e r e d . T r u c k i n g f i r m s must, on the o t h e r hand, d e l i v e r i n bond goods t o a highway s u f f e r a n c e warehouse i n which they l i k e l y have no ownership i n t e r e s t . At the highway f a c i l i t y the c a r r i e r may op e r a t e i t s own s u f f e r a n c e warehouse-breakbulk f a c i l i t y i n l e a s e d space or the goods must go through the p u b l i c a r e a o p e r a t e d by the warehouse keeper. There may be some advantage t o r a i l by the e x i s t e n c e o f t h i s s i t u a t i o n s i n c e , i n a l l cases, the r a i l w a y handles the shipments w h i l e o n l y i n l e a s e d space does the t r u c k i n g f i r m handle i t s own shipments. The through-put performance o f most highway s u f f e r -ance warehouse has a l r e a d y been shown t o be s a t i s f a c t o r y , a t l e a s t i n the p e r c e p t i o n s o f the us e r s o f t r u c k f r e i g h t s e r v i c e s i n t o Canada and t h e r e i s no evidence t h a t r a i l i s g i v e n s u f f i -c i e n t time advantage over t r u c k so as to make t h i s an i s s u e . There i s one group o f consignees w i t h which r a i l has some advantage over t r u c k i n the p r o v i s i o n o f t r a n s p o r t a t i o n s e r v i c e s . These are the consignees which operate C l a s s I I I ( c ) S u f f e r a n c e Warehouses. These i n c l u d e c o n s o l i d a t o r s , f r e i g h t f orwarders, p o o l c a r o p e r a t o r s and some l a r g e i m p o r t e r s . 187 Customs r e g u l a t i o n s a l l o w r a i l r o a d s alone t o c a r r y i n bond goods to these consignees f o r c l e a r a n c e w ithout p r e v i o u s de-l i v e r y t o a r a i l s u f f e r a n c e warehouse. Highway c a r r i e r s are not g r a n t e d t h i s p r i v i l e g e , b e i n g r e q u i r e d t o d e l i v e r a l l goods to the highway s u f f e r a n c e warehouse f o r c l e a r a n c e . For these consignees the r a i l c a r r i e r o f f e r s an advantageous s e r v i c e and t h e i r a l l e g i a n c e has a l l o w e d the r a i l w a y s t o ex-pand t h e i r c a r r i a g e o f these goods by r a i l c a r , by piggyback and by c o n t a i n e r . I t i s i n t h i s p a r t i c u l a r case t h a t the r a i l c a r r i e r s have a d i s t i n c t advantage over the highway c a r r i e r . I t i s a s i t u a t i o n over which the t r u c k i n g f i r m s have no c o n t r o l and they are t h e r e f o r e a t an u n f a i r disadvantage as compared t o r a i l c a r r i e r s . Only a change i n the r e g u l a t i o n s by Revenue Canada can remove the b i a s . The r e g u l a t i o n s i n t h i s r e g a r d should be expanded to i n c l u d e a l l modes, t r u c k , a i r , ocean, as w e l l as r a i l . The purpose o f t h i s c h apter was to i n v e s t i g a t e s e v e r a l s p e c i f i c a r e a s o f complaint. A f t e r c o n s i d e r a t i o n o f these complaints i t appears t h a t most are not as s e r i o u s as the motor c a r r i e r s c l a i m . What i s r e q u i r e d i s a change i n the way i n which Revenue Canada e n f o r c e s the r e g u l a t i o n s g o v e r n i n g the o p e r a t i o n o f the highway s u f f e r a n c e warehouse system and s p e c i f i c a l l y those r e g u l a t i o n s which d e a l w i t h the commercial r e l a t i o n s h i p between the monopoly warehouse o p e r a t o r and the 1 8 8 motor c a r r i e r s f o r c e d t o use the f a c i l i t i e s . R e g u l a t i o n o f the monopoly p o s i t i o n o f warehouse o p e r a t o r s s h o u l d make the system work e q u i t a b l y f o r a l l those f o r c e d t o use them. In the l o n g e r term, s a n c t i o n o f common t e r m i n a l f a c i l i t i e s as the warehouse system expands might e l i m i n a t e the problems by making each c a r r i e r r e s p o n s i b l e f o r p r o v i d i n g i t s own ware-house f a c i l i t i e s w i t h i n a c e n t r a l i z e d c l e a r a n c e f a c i l i t y . 189 FOOTNOTES: - CHAPTER V 1 D.H. M a i s t e r and J.M. Munro. Transb o r d e r T r u c k i n g : An A n a l y s i s o f User P e r c e p t i o n s . Working Paper No. 25, Centre f o r T r a n s p o r t a t i o n S t u d i e s , U n i v e r s i t y o f B.C., Vancouver, 1977. 2 I b i d . , p.11-15. 3 Anthony Downs, I n s i d e Bureaucracy• L i t t l e , Brown and Company, Boston Moss, 1967. 4 D.H. M a i s t e r and J.M. Munro. o p . c i t . 190 CHAPTER SIX SOLVING THE PROBLEMS WITH THE  HIGHWAY SUFFERANCE WAREHOUSE SYSTEM No study o f the i n l a n d highway s u f f e r a n c e warehouse system c o u l d be c o n s i d e r e d complete without some c o n s i d e r a t i o n o f p o s s i b l e a l t e r n a t i v e s . While r a d i c a l change t o the a l r e a d y e s t a b l i s h e d system might be i m p r a c t i c a l and unnecessary, con-s i d e r a t i o n o f a l t e r n a t i v e s might p r o v i d e some guidance i n f i n d i n g ways to improve the system. Chapter f i v e i d e n t i f i e d the problem areas i n which changes t o the c u r r e n t system are r e q u i r e d . In s p i t e o f these problems, however, the highway s u f f e r a n c e warehouse system has the p o t e n t i a l f o r becoming an e f f i c i e n t system f o r c l e a r i n g imported goods. Changes are needed i n p o l i c y , a d m i n i s t r a t i o n , s t r u c t u r e and o p e r a t i o n , but no change need a l t e r the b a s i c system. The f i r s t s e c t i o n o f t h i s c h apter w i l l c o n s i d e r the U n i t e d S t a t e s Customs S e r v i c e procedures h a n d l i n g goods imported i n t o the U.S. by the highway mode. There are no s u f f e r a n c e warehouses i n use i n the U n i t e d S t a t e s ; i n bond goods may be s t o r e d i n the bonded c a r r i e r o r i m p o r t e r ' s warehouse pending c l e a r a n c e o r a t a government c l e a r a n c e warehouse. T h i s system has some advantages and some d i s a d v a n t a g e s when compared t o the Canadian system, many o f which w i l l be d e a l t w i t h here. The second s e c t i o n o f the c h a p t e r w i l l d e a l w i t h s o l u t i o n s t o 191 the problems i d e n t i f i e d i n c h a p t e r f i v e . the o p t i o n s f o r change i n c l u d e a d o p t i o n o f an e n t i r e l y new system o f c l e a r i n g imported goods t o a simple ' f i n e t u n i n g ' o f the p r e s e n t i n l a n d s u f f e r a n c e warehouse system. While the o p t i o n s f o r change are l i m i t l e s s , c o n s i d e r a t i o n w i l l be g i v e n o n l y t o s e v e r a l p r a c t i c a l ones. (a) The U n i t e d S t a t e s C l e a r a n c e System The major r e s p o n s i b i l i t y o f the U n i t e d S t a t e s Customs S e r v i c e i s to a d m i n i s t e r the T a r i f f A c t o f 193 0.^ " Primary d u t i e s o f the agency i n c l u d e : (1) The assessment o f a l l d u t i e s , t a x e s and f e e s on imported merchandise; (2) The enforcement o f Customs and r e l a t e d laws; and, (3) The a d m i n i s t r a t i o n o f c e r t a i n n a v i g a t i o n laws and t r e a t i e s . These r e s p o n s i b i l i t i e s c o r r e s p o n d c l o s e l y t o those o f the Customs and E x c i s e Branch o f Revenue Canada. A l t h o u g h w i t h the same purpose, these two customs ag e n c i e s have chosen b a s i -c a l l y d i f f e r e n t methods o f a c h i e v i n g the t a s k . C o n s i d e r a t i o n w i l l be g i v e n here to the d i f f e r e n c e s between the s e methods and to the advantages o f each f o r the t r a n s b o r d e r t r u c k i n g i n d u s t r y . In accordance w i t h r e s p o n s i b i l i t i e s under the former two d u t i e s l i s t e d above, the U n i t e d S t a t e s S e r v i c e has 192 e s t a b l i s h e d a system f o r h a n d l i n g the fl o w o f goods i n t o the U n i t e d S t a t e s from f o r e i g n c o u n t r i e s . As was the case w i t h the procedures e s t a b l i s h e d i n Canada, the system i s too c o m p l i c a t e d and e x t e n s i v e t o be d e a l t w i t h i n any d e t a i l here. A t the o u t s e t i t should be noted t h a t , u n l i k e the Canadian s i t u a t i o n , t h e r e i s l i t t l e d i f f e r e n t i a t i o n by mode f o r Customs purposes i n t r a n s p o r t i n g goods i n t o the U n i t e d S t a t e s ; the Customs r u l e s e s t a b l i s h e d f o r imported goods a p p l y e q u a l l y t o goods c a r r i e d by a l l modes. F u r t h e r , goods c a r r i e d t o the U n i t e d S t a t e s by one mode may be forwarded, i n bond, by any o t h e r mode w i t h no major problems b e i n g encountered because o f customs r e g u l a t i o n s . For the i n t e r n a t i o n a l t r u c k i n g i n d u s t r y t h i s i n t e r m o d a l f l e x i b i l i t y i s not a f a c t o r s i n c e goods m a n i f e s t by roa d are u s u a l l y d e l i v e r e d t o t h e i r d e s t i n -a t i o n by road. N e v e r t h e l e s s , the i n t e r m o d a l i t y a l l o w e d by the U n i t e d S t a t e s Customs r e g u l a t i o n s a l l o w s goods t o be moved f r e e l y by the most con v e n i e n t and e f f i c i e n t mode a t a l l times. The Canadian s i t u a t i o n i s , o f co u r s e , markedly d i f f e r -ent from t h a t i n the U n i t e d S t a t e s . Canadian Customs r e g u l a -t i o n s are d i f f e r e n t f o r each mode and w i t h minor e x c e p t i o n s goods m a n i f e s t by one mode a t the time o f r e p o r t i n g must be c l e a r e d a t the s u f f e r a n c e f a c i l i t i e s e s t a b l i s h e d f o r t h a t mode. For Canadian con s i g n e e s , the need f o r i n t e r m o d a l i t y i s not as important as f o r t h e i r c o u n t e r p a r t s i n the U n i t e d S t a t e s . Major markets f o r goods imported i n t o Canada are w i t h i n s h o r t d i s t a n c e s from the i n t e r n a t i o n a l boundary and the use o f more 193 than one mode i s not u s u a l l y n e c e s s a r y . In the U n i t e d S t a t e s , however, d i s t a n c e i s a f a c t o r which i n t e r m o d a l i t y might make l e s s s i g n i f i c a n t . The b a s i s o f the U n i t e d S t a t e s system o f h a n d l i n g goods e n t e r i n g t h a t c o u n t r y i s an e x t e n s i v e customs bonding system f o r c a r r i e r firms,warehouse o p e r a t o r s and i m p o r t e r s . Customs bonds are r e q u i r e d by law to guarantee: (1) That d u t i e s and tax e s due the Government are p a i d ; (2) That everyone p a r t y t o the i m p o r t a t i o n o f goods performs p r o p e r l y i n c o n t r o l and d i s p o s i t i o n o f the merchandise; and, (3) That l i q u i d a t e d damages a s s e s s e d because o f improper performance are p a i d . To f u l f i l l t h e s e requirements bonds must be o f an a p p r o p r i a t e type and o f s u f f i c i e n t v a l u e t o cover the t r a n s a c t i o n f o r which i t i s the gua r a n t e e i n g instrument. There a r e i n excess o f 30 d i f f e r e n t types o f s p e c i a l bonds, a l l o f which f a l l i n t o f i v e g e n e r a l c l a s s e s : (1) E n t r y Bonds, d e s i g n a t e d t o ensure compliance w i t h the laws r e g a r d i n g e n t e r i n g goods f o r customs purposes. (2) C a r r i e r Bonds, t o guarantee proper performance by i n bond c a r r i e r s . (3) Inward C a r r i e r Bonds, d e s i g n e d t o ensure t h a t c a r r i e r f i r m s r e t a i n c o n t r o l o f the i n bond goods u n t i l Customs r e l e a s e a u t h o r i t y i s g i v e n . (4) Warehouse bonds, guarantee proper performance by the warehouse o p e r a t o r i n c o n t r o l l i n g and s a f e g u a r d i n g warehoused merchandise. 194 (5) Overtime Bonds, ensure payment f o r s e r v i c e s performed by Customs p e r s o n n e l o u t s i d e r e g u l a r duty hours and on h o l i d a y s . The a d m i n i s t r a t i o n o f t h i s bonding system i s not e a s i l y accomplished. Bonds are o r d i n a r i l y i s s u e d f o r a one year p e r i o d and must be kept up t o date a t a l l times. The bond-type must a l s o be a p p r o p r i a t e f o r the type o f s e c u r i t y r e q u i r e d and the v a l u e o f the bond must be o f a s u f f i c i e n t amount t o guarantee a l l o u t s t a n d i n g t r a n s a c t i o n s a t any g i v e n time. Where the type o r v a l u e o f the bond i s not a p p r o p r i a t e or s u f f i c i e n t , a new bond must be a p p l i e d f o r . The Customs S e r v i c e keeps t r a c k o f the s t a t u s o f a l l bonds by means o f the Automated Bond I n f o r m a t i o n System (ABIS) which produces r e p o r t s on a l l bonds i n e f f e c t . The c o m p l i c a t e d nature o f the bonding system r e s u l t s i n problems f o r Customs o f f i c i a l s , c a r r i e r f i r m s and i m p o r t e r s . Every flow c h a r t o f Customs e n t r y procedures shows some time which must be spent by a Customs o f f i c e r i n ch e c k i n g the a p p r o p r i a t e n e s s and s u f f i c i e n c y o f the c a r r i e r and i m p o r t e r ' s bonds. Lack o f e i t h e r o f these f e a t u r e s may r e s u l t i n d e l a y s i n moving goods o r i n p e n a l t i e s b e i n g a s s e s s e d . In a d d i t i o n , c a r r i e r f i r m s and impo r t e r s must devote time t o a d m i n i s t r a t i o n o f t h e i r bonds t o a v o i d d e l a y s and p e n a l t i e s . As compared t o the U n i t e d S t a t e s Customs S e r v i c e bond system, the Canadian bond system i s simple and r e q u i r e s l i t t l e a d m i n i s t r a t i o n by Customs and E x c i s e or by the c a r r i e r f i r m . Where U n i t e d S t a t e s customs bonds are time l i m i t e d , the Canad-i a n e q u i v a l e n t i s permanent and remains i n e f f e c t u n t i l withdrawn by the c a r r i e r f i r m o r revoked by Revenue Canada. Where the U n i t e d S t a t e s bonding system secures each shipment i n d i v i d u a l l y , based on the v a l u e o f the goods, the Canadian system c a l l s f o r bonds based on the nature and q u a n t i t y o f equipment o p e r a t e d by the c a r r i e r f i r m . Once posted, one bond covers a l l a s p e c t s o f t h a t p o r t i o n o f the i n bond movement f o r which the c a r r i e r f i r m i s r e s p o n s i b l e . A d m i n i s t r a t i o n o f the Canadian bond system i s a simple matter, s i n c e bonding r e q u i r e -ments change o n l y when the c a r r i e r f i r m ' s f l e e t o f equipment changes. I n c l u s i o n on the l i s t o f bonded c a r r i e r f i r m s i s s u e d by Revenue Canada i s the o n l y p r o o f o f adequate bonding a c a r r i e r f i r m r e q u i r e s t o c o n t i n u e i n bond goods movements. I t would be unwise f o r Revenue Canada t o c o n s i d e r a d o p t i n g a bond system such as the one i n the U n i t e d S t a t e s . I t i s c o s t l y to m a i n t a i n and y e t r e s u l t s i n no g r e a t e r a s s u r -ances o f proper a c t i o n by c a r r i e r f i r m s than does the l e s s c o m p l i c a t e d Canadian system. U n i t e d S t a t e s Customs law r e q u i r e l a r g e p e n a l t i e s f o r commission o f improper a c t s , and t h i s requirement i s e n f o r c e d , thus the need f o r l a r g e and secure bonds from c a r r i e r f i r m s , warehouse o p e r a t o r s and i m p o r t e r s . The Canadian procedures f o r c l e a r i n g goods are designed such t h a t Customs and E x c i s e c o n t r o l o f i n bond goods i s much more p h y s i c a l than the U n i t e d S t a t e s system, thus fewer commissions o f improper a c t i o n s on the p a r t o f a l l p a r t i e s are p o s s i b l e . In both c o u n t r i e s , the c o n t r o l which the Customs a u t h o r i t i e s have over motor c a r r i e r f i r m s tends to encourage these f i r m s to f o l l o w the r u l e s l a i d out f o r them. 196 Upon a r r i v a l i n the U n i t e d S t a t e s , the consigneee, o r any o t h e r p a r t y w i t h the r i g h t t o make e n t r y , f i l e s a formal e n t r y f o r the goods w i t h the d i s t r i c t o r p o r t d i r e c t o r o f Customs. T h i s e n t r y i s made u s i n g a commercial i n v o i c e f o r the goods where the v a l u e i s l e s s than $250.00 and w i t h a commercial i n v o i c e and s p e c i a l Customs i n v o i c e f o r goods v a l u e d i n excess o f t h i s amount. There are t h r e e b a s i c types o f e n t r y which can be made: (1) The consumption e n t r y (2) The warehouse e n t r y (3) The i n bond t r a n s p o r t a t i o n e n t r y The 'Consumption e n t r y ' i s p r e s e n t e d when the goods are to be r e l e a s e d immediately f o r domestic consumption. Upon p r e s e n t a t i o n o f the e n t r y , customs o f f i c i a l s w i l l d e s i g n a t e r e p r e s e n t a t i v e q u a n t i t i e s o f the shipment f o r examination under c o n d i t i o n s p r o p e r l y s a f e g u a r d i n g the goods. Examination o f shipments i s ne c e s s a r y t o determine: (1) The v a l u e o f the goods f o r customs purposes; (2) The d u t i a b l e s t a t u s o f the goods; (3) Whether s u f f i c i e n t marking o f the goods has taken p l a c e ; (4) Whether the goods have been p r o p e r l y i n v o i c e d ; (5) Whether the goods are o f a type p r o h i b i t e d e n t r y ; and (6) Whether the q u a n t i t y o f the goods have been a c c u r a t e l y r e p r e s e n t e d . 197 T h i s type o f e n t r y s e r v e s the same purpose as the consumption e n t r y i n use i n Canada. P r e s e n t a t i o n o f a con-sumption e n t r y must be accompanied by a d e p o s i t o f an amount equal t o the e s t i m a t e d duty due on the goods. T h i s d e p o s i t a c t s as an added s e c u r i t y t h a t the goods w i l l be f u l l y duty-p a i d upon l i q u i d a t i o n o f the e n t r y . Any d i s c r e p a n c y between the amount d e p o s i t e d and the f i n a l assessment o f duty must be c o r r e c t e d by the importer or by the Customs S e r v i c e upon l i q u i d a t i o n o f the e n t r y . As was shown, t h e r e i s no p a r a l l e l to t h i s p r o v i s i o n i n the Canadian c l e a r a n c e system which r e q u i r e s a guarantee o r payment o f a l l duty and t a x e s b e f o r e a p p r a i s a l o f the goods and b e f o r e r e l e a s e by Customs o f f i c i a l s . In Canada, the e n t r y charges are p a i d o r guaranteed by bond a f t e r a p p r a i s a l and b e f o r e r e l e a s e . The 'Warehouse e n t r y ' a l l o w s the consignee t o p l a c e imported goods i n a Customs bonded warehouse f o r st o r a g e f o r up to t h r e e y e a r s without payment o f duty and t a x e s . The p r o v i s i o n s governing such an e n t r y , and the subsequent s t o r a g e and h a n d l i n g o f the goods are b a s i c a l l y the same as the Canad-i a n B6 Warehouse e n t r y . . The 'Entry f o r In Bond T r a n s p o r t a t i o n 1 has no formal p a r a l l e l i n Canadian Customs procedures. T h i s e n t r y a l l o w s the consignee t o move the goods from one Customs p o r t area t o another without appraisement and payment o f duty. Goods des-t i n e d f o r an i n l a n d p o r t and a r r i v i n g a t a f r o n t i e r b o rder c r o s s i n g — B l a i n e , Washington, f o r example—may be e n t e r e d f o r 1 9 8 i n bond t r a n s p o r t a t i o n and then d e l i v e r e d to the i n l a n d p o r t f o r e n t r y f o r consumption o r bonded warehousing. Goods e n t e r -i n g the U n i t e d S t a t e s on t h i s type o f an e n t r y must be d e l i v e r e d to the c a r r i e r f i r m ' s breakbulk l o c a t i o n and s t o r e d pending examination and r e l e a s e by Customs o f f i c i a l s . The a r r i v a l of the goods must be r e p o r t e d t o the Customs S e r v i c e w i t h i n f i v e days o f e n t e r i n g the U n i t e d S t a t e s . During the p e r i o d from f i r s t r e p o r t i n g , the c a r r i e r f i r m r e t a i n s r e s p o n s i b i l i t y f o r the goods, and upon r e l e a s e by the Customs S e r v i c e , the goods are r e l e a s e d t o the custody o f the c a r r i e r f i r m . Goods a r r i v i n g a t the f r o n t i e r border c r o s s i n g en r o u t e to Canada must be r e p o r t e d to Customs and E x c i s e by means o f a c a r r i e r i s s u e d cargo m a n i f e s t . There i s no formal e n t r y r e q u i r e d f o r goods b e i n g moved i n Canada i n bonded v e h i c l e s as i s the case w i t h goods e n t e r i n g the U n i t e d S t a t e s . The main d i f f e r e n c e between procedures a t Canadian and U n i t e d S t a t e s f r o n t i e r Customs o f f i c e s i s t h a t a t the l a t t e r t h e r e i s g r e a t e r ease i n h a v i n g goods e n t e r e d f o r consumption than i s the case a t the former. Canadian a u t h o r i t i e s have chosen to d i s c o u r a g e the c l e a r a n c e o f l e s s - t h a n - t r u c k l o a d l o t s a t f r o n t i e r b o r d e r c r o s s i n g s by removing c l e a r a n c e f a c i l i t i e s . U n i t e d S t a t e s a u t h o r i t i e s , on the o t h e r hand, m a i n t a i n exam-i n i n g warehouses a t f r o n t i e r border c r o s s i n g s t o accommodate examination and appraisement f u n c t i o n s . These warehouses are o f the type which were g e n e r a l l y abandoned by Revenue Canada at the time the i n l a n d c l e a r a n c e system was i n t r o d u c e d . Where motor c a r r i e r f i r m s seek speed i n the movement and c l e a r a n c e 199 o f goods, the use o f f r o n t i e r c l e a r a n c e f a c i l i t i e s i s a v o i d e d . Goods shipped i n bond i n e i t h e r o f the two c o u n t r i e s f a c e l i t t l e advantage e i t h e r i n terms o f time taken t o c l e a r customs, or t o be r e l e a s e d f o r domestic consumption. In the U n i t e d S t a t e s i n bond shipments are d e l i v e r e d to the c a r r i e r f i r m ' s normal breakbulk l o c a t i o n , a p o i n t a l r e a d y i d e n t i f i e d as an e f f i c i e n t p o i n t i n the t r a n s p o r t a t i o n stream f o r c l e a r -ance t o take p l a c e . The goods are warehoused w h i l e the p a r t y f i l i n g the e n t r y p r e s e n t s i t t o the Customs S e r v i c e . T h i s p r o c e s s and the examination and appraisement procedures r e q u i r e s the c o n s i g n e e / b r o k e r and/or the Customs o f f i c i a l s t o have p h y s i c a l c o n t a c t w i t h the shipment which c o u l d i n v o l v e s e v e r a l t r i p s over some d i s t a n c e between the Customs S e r v i c e o f f i c e , the c a r r i e r f i r m ' s breakbulk f a c i l i t y and the c o n s i g n e e / b r o k e r s o f f i c e s . The p h y s i c a l s e p a r a t i o n o f p a r t i e s i n t e r e s t e d i n the e n t r y and the goods themselves can r e s u l t i n d e l a y s i n having the goods c l e a r e d . The Canadian system a l s o a l l o w s the c a r r i e r f i r m to d e l i v e r i n bond goods to an i n l a n d breakbulk l o c a t i o n . The i n l a n d highway s u f f e r a n c e warehouse system i s designed s p e c i -f i c a l l y f o r h a n d l i n g i n bond, highway t r a n s p o r t e d goods. The system a l l o w s the breakbulk f a c i l i t i e s w i t h i n the warehouse complex to be o p e r a t e d by the c a r r i e r so, i n e f f e c t , each f i r m may d e l i v e r goods to i t s own t e r m i n a l f a c i l i t y as the c a r r i e r s t o the U n i t e d S t a t e s may do. The e f f i c i e n c y here i s enhanced by the f a c t t h a t the b r e a k b u l k - c l e a r a n c e l o c a t i o n s 200 are c e n t r a l i z e d as s u f f e r a n c e warehouses, i n which a l l com-ponents n e c e s s a r y to e f f e c t a q u i c k b r e a k b u l k - c l e a r a n c e f u n c -t i o n are p r e s e n t . Under i n l a n d highway s u f f e r a n c e warehouse r e g u l a t i o n s goods may be p h y s i c a l l y handled by the c a r r i e r f i r m s t r a n s p o r t i n g the goods as w e l l as p h y s i c a l l y c o n t r o l l e d by Customs without l o s s o f the e f f i c i e n c y a v a i l a b l e from combining c l e a r a n c e and breakbulk l o c a t i o n s . The U n i t e d S t a t e s system o f h a n d l i n g shipments o f imported goods does not o f f e r added b e n e f i t s which are o f a s u f f i c i e n t nature to make i t s a d o p t i o n by Canadian Customs a u t h o r i t i e s worthwhile. Goods c r o s s i n g i n t o Canada are r e -p o r t e d t o Customs a t the f r o n t i e r by means o f a cargo m a n i f e s t / p r o b i l l and without the need f o r a formal e n t r y . Once r e p o r t e d goods may be c l e a r e d a t the f r o n t i e r or d e l i v e r e d to any mani-f e s t i n l a n d p o r t f o r c l e a r a n c e a t a f a c i l i t y d esigned to meet the needs o f the breakbulk and c l e a r a n c e f u n c t i o n s o f the t r a n s b o r d e r highway goods movement. L i t t l e d e l a y and i n c o n -venience t o the c a r r i e r f i r m o r the c o n s i g n e e / b r o k e r i s i n h e r -ent i n t h i s system which s a t i s f i e s both the e f f i c i e n c y and c o n t r o l c r i t e r i a i d e n t i f i e d e a r l i e r . There are some problems w i t h the highway s u f f e r a n c e warehouse system as i t o p e r a t e s today, but none so s e r i o u s t h a t changes t o - t h e system to c o r r e c t them are not p o s s i b l e w i t h i n the p r e s e n t framework. S o l u t i o n s t o these problems w i l l be c o n s i d e r e d next. (b) 'Fine-Tuning' the S u f f e r a n c e Warehouse System 201 In the l a s t c h a p t e r , i t was suggested that'some a l t e r -n a t i v e t o the highway s u f f e r a n c e warehouse system i n which a few monopoly o p e r a t o r s p r o v i d e Revenue Canada-authorized c l e a r a n c e warehouse s e r v i c e t o a c a p t i v e c l i e n t e l e o f t r a n s -b o rder motor c a r r i e r f i r m s might be found as a means o f e l i m -i n a t i n g the i n e q u i t i e s o f the p r e s e n t system. The i d e a o f a common t e r m i n a l i n which a l l i n t e r e s t e d c a r r i e r s m a i n t a i n an ownership i n t e r e s t was proposed as one such a l t e r n a t i v e . A d o p t i o n o f an a l t e r n a t i v e such as t h i s would r e q u i r e a major change o f p o l i c y by Revenue Canada as w e l l as a major change i n the s t r u c t u r e o f the c l e a r a n c e warehouse system. I t i s u n l i k e l y t h a t a change o f the l a t t e r type c o u l d o c c u r w i t h o u t d i s r u p t i o n o f the c l e a r a n c e p r o c e s s which would be u n a c c e p t a b l e to Revenue Canada. However, a change i n p o l i c y t o make the s t r u c t u r e o f s u f f e r a n c e f a c i l i t i e s more f l e x i b l e would enable f u t u r e expansions o f the system to make use o f a l t e r n a t i v e concepts such as the p r o p o s a l d i s c u s s e d b r i e f l y here. For the e x i s t i n g warehouse system some changes are r e q u i r e d as w e l l but the problems which beg f o r change are not s e r i o u s enough to t o t a l l y revamp the system. On the c o n t r a r y , t h e r e i s i n s u f f i c i e n t evidence t o support r a d i c a l change t h a t a d o p t i o n o f the U n i t e d S t a t e s Customs S e r v i c e procedures would e n t a i l , f o r example. The a b i l i t y o f t r a n s b o r d e r motor c a r r i e r s t o operate breakbulk t e r m i n a l s w i t h i n a s u f f e r a n c e warehouse complex which p r o v i d e s f o r the p h y s i c a l p r o x i m i t y o f the goods 202 be i n g imported w i t h the Customs a u t h o r i t i e s v e s t e d w i t h the r e s p o n s i b i l i t y f o r c o n t r o l l i n g i m p o r t a t i o n s , w i t h the c a r r i e r which has the r e s p o n s i b i l i t y f o r d e l i v e r i n g them t o f i n a l d e s t i n a t i o n and w i t h the Customs broker who r e p r e s e n t s the consignee makes the c l e a r a n c e p r o c e s s e a s i e r and f a s t e r than o c c u r s i n the U n i t e d S t a t e s . There i s one a s p e c t o f the U n i t e d S t a t e s Customs pro c e s s which should be c o n s i d e r e d f o r a d o p t i o n by Canadian a u t h o r i t i e s ; the s i m p l i c i t y o f the Customs documentation r e q u i r e d f o r i m p o r t a t i o n i n t o the U n i t e d S t a t e s . .In ch a p t e r f o u r i t was s t a t e d t h a t , a c c o r d i n g t o warehouse o p e r a t o r s , l a c k o f a p p r o p r i a t e and complete Customs documentation i s the most common cause o f d e l a y s f o r c l e a r i n g goods i n t o Canada. While t h i s has no d i r e c t b e a r i n g on the o p e r a t i o n o f the highway s u f f e r a n c e warehouse system, i t i s important i n the o v e r a l l c l e a r a n c e p r o c e s s . L e s s c o m p l i c a t e d requirements f o r docu-mentation might encourage c o n s i g n o r s t o be more thorough i n p r o v i d i n g c o r r e c t documents t o e f f e c t an easy c l e a r a n c e . Although l a c k o f documentation i s r a r e l y the cause o f d e l a y s f o r goods r e q u i r e d immediately, i t i s o f b e n e f i t t o everyone i f c o r r e c t Customs documentation i s a v a i l a b l e when the goods a r r i v e a t the s u f f e r a n c e warehouse. I f the s u f f e r a n c e warehouse system i s to remain as i t i s p r e s e n t l y s t r u c t u r e i t w i l l r e q u i r e some change i n o r d e r to l i v e up t o the p o t e n t i a l t h a t the o r i g i n a l concept promised. G e n e r a l l y speaking, the system works w e l l f o r Customs, f o r 203 c a r r i e r s and consignees. The changes which are recommended here may be c o n s i d e r e d measures t o ' f i n e tune' the system without changing the g e n e r a l nature o f the c l e a r a n c e p r o c e s s and warhouse system. The r e s u l t o f t h i s f i n e t u n i n g should be t o make the i n l a n d c l e a r a n c e warehouse approach more e q u i t a b l e f o r a l l motor c a r r i e r f i r m s , w h i l e r e t a i n i n g the e f f i c i e n c y and c l e a r a n c e ease which i s now i n h e r e n t i n the system. The f i r s t , and most important, change must be a change i n the a t t i t u d e w i t h which Revenue Canada d e a l s w i t h the h i g h -way s u f f e r a n c e warehouse system. Throughout t h i s study, f r e q u e n t r e f e r e n c e has been made to the a t t i t u d e which Revenue Canada has toward t h i s system and to the problems t h i s has c r e a t e d i n s u f f e r a n c e warehouses a c r o s s Canada. Without a r e v e r s a l o f t h i s a t t i t u d e , few o f the changes r e q u i r e d to improve the system can be s u c c e s s f u l l y made. There are two d i f f e r e n t r e l a t i o n s h i p s which have been i d e n t i f i e d as e x i s t i n g w i t h i n the highway s e f f e r a n c e warehouse system. F i r s t , t h e r e are the r e l a t i o n s h i p s between Revenue Canada and the warehouse o p e r a t o r s and between Revenue Canada and the motor c a r r i e r f i r m s c a r r y i n g i n bond good i n t o Canada. The s i g n i f i c a n t t h i n g about t h i s r e l a t i o n s h i p i s t h a t , i n every i n s t a n c e , r e g u l a t i o n s g o v e r n i n g them are c a r e f u l l y en-f o r c e d . Warehouse o p e r a t o r s and Customs bonded c a r r i e r f i r m s work to p r o t e c t t h i s r e l a t i o n s h i p t o a v o i d the p e n a l t i e s which r e s u l t from breaches o f r e g u l a t i o n s . 204 The second r e l a t i o n s h i p i s the commercial r e l a t i o n s h i p between the monopoly warehouse o p e r a t o r and h i s c a p t i v e c l i e n -t e l e . The terms o f t h i s r e l a t i o n s h i p e x i s t i n the form o f of r e g u l a t i o n s p u b l i s h e d by Revenue Canada. The r e a l i t y o f t h i s r e l a t i o n s h i p , however, i s t h a t i s has been n e g l e c t e d by Revenue Canada. The r e a l i t y o f t h i s r e l a t i o n s h i p , however, i s t h a t i t has been n e g l e c t e d by Revenue Canada; the r e g u l a t i o n s have never been w e l l e n f o r c e d . I t appears t h a t the 'bureau-c r a t i c ' c h a r a c t e r i s t i c s , i d e n t i f i e d i n chapter f i v e , have p r e -vented Revenue Canada from comprehending the nature o f the commercial r e l a t i o n s h i p d e s c r i b e d above. I n t e r e s t e d o n l y i n i t s own c o n t r o l f u n c t i o n , Revenue Canada has i g n o r e d the antag-o n i s t i c r e l a t i o n s h i p which has developed between some ware-house o p e r a t o r s and motor c a r r i e r f i r m s . Accompanying t h i s change i n a t t i t u d e must be a new i n t e r e s t i n p r o v i d i n g e q u i t a b l e and e f f i c i e n t c l e a r a n c e ware-housing s e r v i c e s f o r a l l t r a n s b o r d e r motor c a r r i e r f i r m s . T h i s i n t e r e s t should m a n i f e s t i t s e l f i n enforcement o f the r e g u l a t i o n s which are now i n e x i s t e n c e and i n the i n t r o d u c t i o n o f new r e g u l a t i o n s t o smooth the r e l a t i o n s h i p between the warehouse o p e r a t o r s and the c a r r i e r f i r m s u s i n g t h e i r f a c i l i t -i e s . I t i s , indeed, i n a p p r o p r i a t e f o r Revenue Canada t o f o r c e such a r e l a t i o n s h i p without e x e r c i s i n g some c o n t r o l o v e r i t . There are many avenues open t o Revenue Canada i n t h i s r e g a r d . One would be to i n c r e a s e the r o l e o f the S u f f e r a n c e Warehouse A d v i s o r y Committee e s t a b l i s h e d i n 1974 t o c o n s i d e r 205 a p p l i c a t i o n s f o r new f a c i l i t i e s . The committee's powers c o u l d be expanded to i n c l u d e : (1) C o n s i d e r a t i o n o f new a p p l i c a t i o n s based on c r i t e r i a e s t a b l i s h e d i n 1974 and i n c l u d e d i n Memorandum D20-3, Customs S u f f e r a n c e Warehouse R e g u l a t i o n s ; (2) I n v e s t i g a t i o n o f complaints from those f i r m s u s i n g s u f f e r a n c e warehouses; (3) Recommendation o f changes and/or p e n a l t i e s i n those c a s e s where breaches o f the r e g u l a -t i o n s have' o c c u r r e d . The c r e a t i o n o f such a r e g u l a t o r y body w i l l h e l p Customs d e a l more e f f e c t i v e l y w i t h the problems of the highway s u f f e r a n c e warehouse system. With the ground r u l e s l a i d out f o r everyone concerned and w i t h more c o n s i s t e n t a c t i o n on c a r r i e r c omplaints the o v e r a l l a d m i n i s t r a t i o n o f the system should improve. With the change i n a t t i t u d e toward the highway s u f f e r a n c e warehouse system and the enforcement o f c u r r e n t r e g u l a t i o n s , a l l c a r r i e r f i r m s w i l l g a i n c o n f i d e n c e i n the system but t h e r e remain s e v e r a l areas i n which changes should take p l a c e i n the oper-a t i o n of the c l e a r a n c e warehouse system. Revenue Canada should c o n s i d e r the need f o r i n c r e a s e s i n c l e a r a n c e warehouse c a p a c i t y , both a t e x i s t i n g f a c i l i t i e s and through l i c e n c i n g o f new f a c i l -i t i e s . In the p a s t , Revenue Canada has shown i n c r e a s i n g l y s t i f f e r r e s i s t a n c e to expansion o f the system beyond the 'one-p e r - p o r t area* p o l i c y adopted w i t h the e x t e n s i o n o f the system to the highway mode. The volume o f motor v e h i c l e c r o s s i n g s a t the Canada-United S t a t e s i n t e r n a t i o n a l boundary has i n c r e a s e d s i g n i f i c a n t l y s i n c e 1960 and i n d i c a t i o n s are t h a t the t r e n d w i l l 2 0 6 c o n t i n u e . The p o p u l a r i t y o f t h i s mode has c r e a t e d capacity-problems a t many s u f f e r a n c e warehouses which i n t u r n r e s u l t i n c l e a r a n c e and d e l i v e r y d e l a y s f o r t r a n s b o r d e r goods. A more l i b e r a l i n t e r p r e t a t i o n o f the c r i t e r i a f o r e s t a b l i s h i n g new s u f f e r a n c e f a c i l i t i e s — e s p e c i a l l y i n l a r g e p o r t areas where volume o f b u s i n e s s and d i s t a n c e d i c t a t e the need f o r a d d i t i o n a l a p p r a i s a l p o i n t s — w o u l d l i k e l y r e s u l t i n some new f a c i l i t i e s f o r the highway mode. Revenue Canada has argued t h a t t h e r e a re good reasons f o r keeping the s u f f e r a n c e warehouse system as a s e r i e s o f monopoly f a c i l i t i e s . A t the b e g i n n i n g , the arguments were based on the need f o r c o n t r o l o f imported goods and on the p r o h i b i t i v e c o s t t o the taxpayer o f p r o v i d i n g expanded s e r v i c e s a t b o r der c r o s s i n g s . More r e c e n t l y , arguments a g a i n s t expan-s i o n o f the system beyond the one-per-customs p o r t are based on the c o s t o f p r o v i d i n g s u f f i c i e n t , t r a i n e d s t a f f a t s e v e r a l u n d e r - u t i l i z e d f a c i l i t i e s r a t h e r than a t one c e n t r a l i z e d f a c i l i t y . A t p r e s e n t , Customs p e r s o n n e l a re q u a l i f i e d t o d e a l w i t h i m p o r t a t i o n s by one mode and t h e r e i s l i t t l e o r no f l e x -i b i l i t y i n p r o v i d i n g s t a f f f o r a l l Customs f u n c t i o n s w i t h i n the p o r t area. Delays a t the highway s u f f e r a n c e warehouse cannot be a l l e v i a t e d by Customs o f f i c e r s from o t h e r Customs o f f i c e s i n the p o r t which are u n d e r - u t i l i z e d . Revenue Canada should i n v e s t i g a t e the p o s s i b i l i t y o f s t a n d a r d i z i n g the q u a l -i f i c a t i o n s o f a l l s t a f f t o make t h e i r assignment w i t h i n the p o r t area more f l e x i b l e . By doing so the problems o f i n s u f f i -c i e n t s t a f f i n g f o r expanded c l e a r a n c e s e r v i c e s may be e l i m i n a t e d . 207 Highway s u f f e r a n c e warehouse c a p a c i t y should not be i n c r e a s e d simply to s a t i s f y c o m p l a i n t s o f c a r r i e r f i r m s u s i n g the s u f f e r a n c e f a c i l i t i e s . Each a p p l i c a t i o n f o r new ware-houses should be c o n s i d e r e d on the b a s i s o f the c r i t e r i a p r e s e n t e d i n the 1974 Customs S u f f e r a n c e Warehouse R e g u l a t i o n s and o p e r a t i n g a u t h o r i t y s h o u l d be awarded o n l y where the s e c r i t e r i a are met. While c a p a c i t y i n c r e a s e s a t s p e c i f i c l o c a -t i o n s may be necessary, c a p a c i t y problems do not appear to be wide-spread. Only a s m a l l p r o p o r t i o n o f the goods imported i n t o Canada a r e r e q u i r e d f a s t e r than they can now be d e l i v e r e d and where immediate d e l i v e r y i s r e q u i r e d procedures are a v a i l -a b l e t o e f f e c t t h a t d e l i v e r y . Customs sh o u l d a l s o c o n t i n u e t o work t o make the c l e a r a n c e procedure as simple as p o s s i b l e . E a r l i e r i t was suggested t h a t a d o p t i o n o f s i m p l e r Customs documentation might be one step i n t h a t d i r e c t i o n . T h i s should be complemented by s t r e a m l i n i n g o f the c l e a r a n c e procedure i n s i t u a t i o n s where new methods prove s u c c e s s f u l . A p r o c e d u r a l m o d i f i c a t i o n has been undergoing t e s t s i n Vancouver a t the p r e s e n t time. The w i l l i n g n e s s o f Revenue Canada o f f i c i a l s i n Vancouver t o p a r t i c i p a t e i n such an experiment, and to adopt new procedures which prove a c c e p t a b l e , should be encouraged as a means of making the c l e a r a n c e p r o c e s s more e f f i c i e n t . The problem o f monopoly ownership w i t h i n the s u f f e r -ance warehouse system i s one which needs c a r e f u l c o n s i d e r a t i o n by Revenue Canada. I t has been shown how the monopoly warehouse 208 o p e r a t o r — u s e r motor c a r r i e r f i r m r e l a t i o n s h i p has' been i g n o r e d by Revenue Canada, t o the p o i n t where some warehouse o p e r a t o r s have a l l o w e d i n e q u i t i e s i n treatment o f user c a r r i e r s a t s u f f e r a n c e warehouses. With a change i n t h i s a t t i t u d e and i n t r o d u c t i o n o f q u a l i t y a d m i n i s t r a t i o n by Revenue Canada, many o f thes e problems are l i k e l y t o d i s a p p e a r as a matter o f course. Monopoly o p e r a t o r s , however, might always be expected t o seek any a v a i l a b l e advantage i n s e r v i n g a c a p t i v e c l i e n t e l e , be i t d i r e c t l y o r i n s u b t l e ways.. I t i s the r e s p o n s i b i l i t y o f Revenue Canada t o ensure t h a t abuses o f monopoly power do not take p l a c e . Complaints from user c a r r i e r f i r m s o f u n f a i r treatment o r poor s e r v i c e a t the hands o f warehouse o p e r a t o r s must be d e a l t w i t h i n a c o n s i s t e n t manner and to the s a t i s -f a c t i o n o f a l l concerned p a r t i e s . The be s t way to d e a l w i t h monopoly power i s not always to e l i m i n a t e i t . As good a s o l u t i o n i n c o n d i t i o n s i n which monopolies are main t a i n e d i s t o n e u t r a l i z e i t through s t r i c t enforcement o f the r e g u l a t i o n s governing the m o n o p o l i s t — c a p t i v e c l i e n t e l e r e l a t i o n s h i p . Not a l l warehouse o p e r a t o r s are g u i l t y o f abusing the power they have; the most f r e q u e n t complaints are about warehouse keepers which are a l s o motor c a r r i e r f i r m s competing i n t r a n s b o r d e r f r e i g h t markets. These r e l a t i o n s h i p s are the ones which need a t t e n t i o n from Revenue Canada. One area i n which many complaints have been r e c e i v e d i n the p a s t i s r a t e s and charges f o r l e a s e d space and f o r 209 s e r v i c e s i n the p u b l i c a r e a . To these c o m p l a i n t s , Revenue Canada responds t h a t i t has no a u t h o r i t y t o s e t r a t e s a t highway s u f f e r a n c e warehouses. The power t o c o n s i d e r and approve r a t e l e v e l s a t s u f f e r a n c e warehouses sh o u l d be a v a i l -a b l e t o Customs a u t h o r i t i e s . In c h a p t e r f o u r , c o n s i d e r a t i o n was g i v e n t o the l e v e l o f r a t e s and charges i n the p u b l i c areas o f highway s u f f e r a n c e warehouses a c r o s s Canada. The i n d i c a t i o n was t h a t the r a t e l e v e l s a t those f a c i l i t i e s p r o v i d i n g t a r i f f s were g e n e r a l l y s t a b l e w i t h i n each Customs Region and d i d not appear t o be e x c e s s i v e . The p r o p o r t i o n o f the t o t a l t r a n s p o r t a t i o n b i l l t h a t s u f f e r a n c e warehouse s e r v i c e r e p r e s e n t s i s . s m a l l . Where r a t e s c o u l d be c o n s i d e r e d h i g h — m a i n l y those f o r s t o r a g e — they are h i g h f o r a purpose. S u f f e r a n c e warehouse f a c i l i t i e s are not meant as a l o c a t i o n to s t o r e goods a f t e r c l e a r a n c e has been e f f e c t e d and t o encourage an e f f i c i e n t flow through the f a c i l i t y storage r a t e s s h o u l d be c o n s i d e r e d as a p e n a l t y , j u s t as demurrage charges are i n the r a i l w a y and s h i p p i n g i n d u s t r i e s . The r a t e s and charges f o r l e a s e d space w i t h i n the warehouse complexes were found, i n a t l e a s t one case, to be a t q u e s t i o n a b l y h i g h l e v e l s . Some o p e r a t o r s are t a k i n g advan-tage o f t h e i r p o s i t i o n s by r e q u i r i n g c a r r i e r s l e a s i n g space to c o m p l e t e l y f i n a n c e warehouse space over the p e r i o d o f a s h o r t l e a s e and l e a v i n g the c a r r i e r f i r m no r e s i d u a l i n t e r e s t i n the f a c i l i t y a f t e r the l e a s e e x p i r e s . I t i s t h i s area o f 210 l e a s e space r a t e s where enforcement o f r e g u l a t i o n s must be e f f e c t e d by Revenue Canada. Warehouse o p e r a t o r s s h o u l d be r e q u i r e d t o supply space t o t r a n s b o r d e r motor c a r r i e r f i r m s and t o do so a t a charge which f a i r l y r e p r e s e n t s the f u l l c o s t s o f p r o v i d i n g t h a t space. The p r o v i s i o n o f these f a c i l i t i e s i s e s s e n t i a l f o r the f u l l e f f i c i e n c y o f the s u f f e r a n c e ware-house concept to be r e a l i z e d and f o r every c a r r i e r t o have the chance t o compete on an e q u a l b a s i s . In s h o r t , the problems o f the highway s u f f e r a n c e warehouse system i s t h a t o f u n r e g u l a t e d monopoly power e x e r c i s e d by some warehouse o p e r a t o r s . The s o l u t i o n t o the problem i s to be found i n a r e c o g n i t i o n by Revenue Canada o f t h i s f a c t and i n a p p r o p r i a t e a c t i o n s t o e l i m i n a t e the abuse. (c) Summary T h i s study has not d i s p u t e d the need f o r Customs c o n t r o l over goods b e i n g imported i n t o Canada. For v a r i o u s p u b l i c i n t e r e s t reasons o f economic and s o c i a l o r i g i n such c o n t r o l i s c o n s i d e r e d as ne c e s s a r y and d e s i r a b l e . The impo-s i t i o n o f Customs c o n t r o l i n the flow o f goods i n t o the cou n t r y does, however, have i t s c o s t s , c o s t s which are r e -f l e c t e d i n the p r i c e the consumer pays f o r the goods. While i t i s a n e c e s s a r y f u n c t i o n f o r a n a t i o n a l government, i t should be remembered t h a t the c o n t r o l f u n c t i o n adds no val u e t o the goods and r e p r e s e n t s an e x t e r n a l demand on the 211 f r e e f l o w o f goods. The c o n t r o l f u n c t i o n s h o u l d , t h e r e f o r e , be designed so as t o minimize the i n c o n v e n i e n c e and c o s t i t imposes on the t r a n s p o r t a t i o n stream. By s i m p l i f y i n g the c l e a r a n c e procedures and r e q u i r e d documentation, improve-ments which may be i n s t i t u t e d a t l i t t l e p u b l i c c o s t , Customs need not be a major o b s t a c l e i n the t r a n s b o r d e r goods h a n d l -i n g system. The * f i n e tuning' measures proposed here f o r improv-i n g the highway s u f f e r a n c e warehouse system are an attempt t o r e c o g n i z e the needs o f e f f i c i e n c y and economy i n the t r a n s -p o r t a t i o n system and the need o f Revenue Canada to e x e r c i s e i t s c o n t r o l r e s p o n s i b i l i t y . They are, however, proposed t o a i d the motor c a r r i e r i n d u s t r y and s p e c i f i c a l l y those c a r r i e r s f o r c e d t o use monopoly highway s u f f e r a n c e warehouses. The concept embodied by the warehouse system has the p o t e n t i a l to b e n e f i t the i n t e r e s t s o f a l l those i n t e r e s t e d i n the movement o f goods a c r o s s the Canada-United S t a t e s b order but i t must be made t o o p e r a t e e q u a l l y as w e l l f o r c a r r i e r s as f o r Customs. In the s h o r t term, t h i s means enforcement o f e x i s t i n g r e g u l a t i o n s g o v e r n i n g the warehouse system and the r e l a t i o n s h i p between the monopoly warehouse o p e r a t o r and the c a p t i v e c l i e n t e l e f o r c e d to use h i s f a c i l i t i e s . T h i s enforcement sho u l d ensure t h a t space and s e r v i c e s are o f f e r e d on an e q u a l b a s i s t o every c a r r i e r so t h a t none a c h i e v e s an advantage 212 because o f p r e f e r e n t i a l treatment a t the c l e a r a n c e f a c i l i t y . I t s h ould ensure t h a t no d e l a y s , beyond those n o r m a l l y r e -q u i r e d t o c l e a r goods, are encountered i n moving goods through the f a c i l i t y and on t o i t s f i n a l d e s t i n a t i o n . I t s h o u l d ensure t h a t a l l c a r r i e r s who d e s i r e i t are accommodated i n l e a s e d space w i t h i n the warehouse f a c i l i t y . And, i t sh o u l d ensure t h a t the r a t e s and charges a t s u f f e r a n c e warehouses do not leave the warehouse o p e r a t o r w i t h monopoly p r o f i t s , b e i n g those which exceed the normal c o s t s o f doing b u s i n e s s and e a r n i n g a f a i r r e t u r n . Abuse of monopoly power serve s t o d e s t r o y the c o m p e t i t i v e f o r c e s i n the t r a n s b o r d e r motor c a r r i e r i n d u s t r y when the p u b l i c i n t e r e s t i s b e s t served when compet-i t i o n i s encouraged. In the l o n g e r term, Revenue Canada should ensure t h a t the c a p a c i t y o f the warehouse system i s s u f f i c i e n t t o meet the demands o f the t r a n s b o r d e r motor c a r r i e r i n d u s t r y , b o t h g e n e r a l l y and w i t h i n s p e c i f i c Customs p o r t a r e a s . As p a r t o f t h i s response t o the demand f o r more space Revenue Canada should c o n s i d e r a l t e r n a t i v e s t o the p r e s e n t i n s t i t u t i o n a l s t r u c t u r e o f the system, such as the common t e r m i n a l p r o p o s a l i n t r o d u c e d i n chapter f i v e . I f these measures are adopted, i f o t h e r s are v i g o u r -o u s l y s o u g h t a n d i f Revenue Canada a c c e p t s i t s r e s p o n s i b i l i t y f o r e n s u r i n g t h a t the c l e a r a n c e prodess i s e f f i c i e n t and t h a t the s u f f e r a n c e warehouse system o p e r a t e s e q u a l l y w e l l f o r a l l then the l e g i t i m a t e complaints can be s i l e n c e d . BIBLIOGRAPHY 214 BIBLIOGRAPHY General Downs, Anthony. M a i s t e r , D.H. and Munro, J.M. Munro, John M. Purdy, H.L. I n s i d e Bureaucracy. L i t t l e , Brown and Company, Boston, M a s s a c h u s s e t t s . 1967. Transbo r d e r T r u c k i n g : An A n a l y s i s of  User P e r c e p t i o n s . Working Paper No. 25, Centre f o r T r a n s p o r t a t i o n S t u d i e s . U n i v e r s i t y o f B.C., Vancouver, B.C. A p r i l , 1977. Trade L i b e r a l i z a t i o n and T r a n s p o r t a t i o n  i n I n t e r n a t i o n a l Trade. P u b l i s h e d f o r the P r i v a t e P l a n n i n g A s s o c i a t i o n o f Canada. U n i v e r s i t y o f Toronto P r e s s . Toronto, Canada, 196 9. T r a n s p o r t C o m p e t i t i o n and P u b l i c P o l i c y  i n Canada. U n i v e r s i t y o f B.C. P r e s s Vancouver, B.C. 1972. Governments Canada. Revenue Canada, Customs and E x c i s e . Memorandum D3. Commercial Motor V e h i -c l e s (Customs) R e g u l a t i o n s . January, 1975. Memorandum D9. L i s t o f Customs O f f i c e s . August, 1974. Memorandum D l l . L i c e n c i n g o f Customs House Brok e r s . A p r i l , 1960. Memorandum D2 0. Customs Warehousing  R e g u l a t i o n s . J u l y , 1974. Memorandum D20-3. Customs S u f f e r a n c e  Warehouse R e g u l a t i o n s . J u l y , 1974. Memorandum D43. Information, f o r E x p o r t -e r s t o Canada. June, 1975 215 Canada. Re v i s e S t a t u t e s . Anti-Dumping A c t . R.S. 1968-69 c . 1 0 , s . l . Customs A c t . R.S. c.51, s . l . Customs T a r i f f A c t . R.S.c.60,s.l. E x c i s e Tax A c t . R.S. c.100, s . l . Canada. S t a t i s t i c s Canada. Cata l o g u e 65-002. Summary o f E x p o r t s . 1973-75. Catalogue 65-003. E x p o r t s by C o u n t r i e s . 1973-75. Catalogue 65-005. Domestic E x p o r t s t o the U n i t e d S t a t e s . 1973-75. Catalogue 65-005. Summary o f Imports. 1973-75. Catalogue 65-006 Imports by Country. 1973-75. Catalogue 65-007. Imports by Commodities. 1973-75. Catalogue 65-202 Trade o f Canada: E x p o r t s . 1973-75. Catalogue 65-203 Trade o f Canada: Imports. 1973-75. Catalogue 65-205. Review o f F o r e i g n Trade. 1973-75. Catalogue 66-206 E x p o r t s by Mode of T r a n s -p o r t . 1973-75. Catalogue 66-001 T r a f f i c Between the U n i t e d S t a t e s and Canada. 1975. Canada. T r a n s p o r t Canada. I n t e r n a t i o n a l Truck T r a f f i c Survey. Ottawa, 1974 U n i t e d S t a t e s . Laws, S t a t u t e s , e t c . I n t e r s t a t e Commerce Commission. 1930 U n i t e d S t a t e s . T r e a s u r y Department. Customer S e r v i c e . E x p o r t i n g t o the U n i t e d S t a t e s . Washington, D.C. 1973. P e r i o d i c a l s Canadian T r a n s p o r t a t i o n and D i s t r i b u t i o n Management. V o l No. 15. Southern B u s i n e s s P u b l i c a t i o n . Don M i l l s , O n t a r i o , May, 1977. 217 APPENDIX The 1976 Highway S u f f e r a n c e Warehouse Survey Q u e s t i o n n a i r e THE UNIVERSITY OF BRITISH COLUMBIA 2075 WESBROOK MALL VANCOUVER, B.C., CANADA V6T 1W5 F A C U L T Y OF C O M M ERCE A N D BUSINESS ADMINISTRATION November 5, 1976 Vance Bros. Dear Si r : I am writing to you to ask your assistance in a study of highway sufferance warehouses that I am conducting as part of my MSc. (Business Administration) studies at the University of Br i t i s h Columbia. My study w i l l analyse the effects of the sufferance warehouse system on the transborder motor carrier industry. I have designed the following questionnaire so that i t can be answered in approximately fifteen minutes. You should find that most of the information I seek is readily available to you. I would be grateful i f you would take time to complete the questionnaire and return i t to me (in the enclosed stamped envelope) as soon as possible. In the questionnaire, I have asked for certain "rates and charges" information. If i t would be more convenient for you, please feel free to answer these questions by attaching your current published rate schedule. Please be assured that a l l information received w i l l be treated with the utmost confidentiality; no data w i l l go beyond my advisor and myself. No data on individual sufferance warehouses w i l l be  released. Thank you for your cooperation. Should you have any questions, please feel free to c a l l collect to me at or to my advisor, Professor David H. iiaister, at Yours truly, Kenneth Bayne KB /Id B i d . SUFFERANCE WAREHOUSE STUDY A survey conducted i n p a r t i a l f u l f i l m e n t of the requirements f o r the degree of Master of Science (Bus. Admin.). Kenneth Bayne November 1976 U n i v e r s i t y of B r i t i s h Columbia A l l responses w i l l be treated with the utmost c o n f i d e n t i a l i t y ; no data w i l l go beyond my advisor and myself. No inform-ation on i n d i v i d u a l sufferance warehouses w i l l be released. Where precise information i s not a v a i l a b l e please make an estimate and indicate such estimates with an a s t e r i s k {*). I f you f i n d that any of the information I require i s not available to you, please complete the balance of the questionnaire and return i t . GENERAL INF0RI4ATI0N Name and address of the sufferance warehouse company. Name: Address: Name and Po s i t i o n of person answering questionnaire. Name: Pos i t i o n : Date f a c i l i t y established. Outline any expansions of the f a c i l i t y . • pate Size of Expansion Docks Sq. F t . Indicate any motor c a r r i e r firms which p a r t i c i p a t e i n the ownership of the sufferance warehouse and indicate t h e i r ownership share. Motor C a r r i e r # ownership 222 6. L i s t here a l l motor c a r r i e r s that lease space f o r t h e i r exclusive use at your sufferance warehouse. Square Feet Motor C a r r i e r Leased Docks 7. Indicate the number of motor c a r r i e r s who u t i l i z e the public warehouse area reg u l a r l y . ' .  L i s t the names of the major motor c a r r i e r s using t h i s area of the f a c i l i t y . Motor C a r r i e r Motor C a r r i e r 1. Iz ; 2. its. 3. L i s t the names of any Customs House Brokers who lease space i n your sufferance warehouse. Customs Broker Customs Broker l . . 2, 2 223 SIZE OF FACILITY PLEASE ANSWER THE FOLLOWING QUESTIONS FOR: (A) MOTOR CARRIERS THAT ARE PART OR FULL OWNERS OF THE SUFFERANCE WAREHOUSE; (B) MOTOR CARRIERS THAT LEASE SPACE FROM THE WAREHOUSE KEEPER FOR THEIR OWN USE; and, (C) THE PUBLIC SUFFERANCE WAREHOUSE. 9. What i s the square footage of the warehouse f a c i l i t y ? (A) OWNER CARRIERS SQ. FT. (B) LEASING CARRIERS SQ. FT. (C) PUBLIC AREA SQ. FT. TOTAL SQ.'FT. 10. How many docks are there i n the warehouse f a c i l i t y ? (A) OWNER CARRIERS _ SQ. FT. (B) LEASING CARRIERS __3Q. FT. (C) PUBLIC AREA SQ. FT. TOTAL _3Q. FT. 11. What i s the si z e of the warehouse s t a f f ? (A) OWNER CARRIERS '•(B) LEASING CARRIERS (C) PUBLIC AREA TOTAL 224 12. Please estimate the number of shipments cleared through your sufferance warehouse i n 1975. (A shipment i s represented by the goods l i s t e d on a v a l i d Canada Customs cargo co n t r o l document or Form ASA.) (A) OWNER CARRIERS (B) LEASING CARRIERS (C) PUBLIC AREA TOTAL 13. Please estimate the tonnage of shipments cleared through your f a c i l i t y i n 1975 and estimate the percentage of t h i s t o t a l which was LESS-THAN -TRUCKLOAD. . T m % LTL (A) OWNER CARRIERS tons fo (B) LEASING CARRIERS tons fo (C) PUBLIC AREA tons fo TOTAL tons fo THROUGHPUT PERFORMANCE 14. From t h e i r time of a r r i v a l at the public area of the sufferance warehouse, what percentage of TRUCKLOAD shipments are normally release i n less than one day fo one day to two days fo more than two days From t h e i r time of a r r i v a l at the public area of^ the sufferance warehouse, what percentage of LEob-THAN-TRUCKLOAD shipments are normally released i n ; les s than one day $ one day to two days % more than two days % Please rank the following i n order of importance i n d i c a t i n g what you believe are the major causes of delay i n c l e a r i n g goods through Customs. ( ) motor c a r r i e r delays ( 1 i n s u f f i c i e n t s t a f f ( ) Customs Broker problems ( ) Canada Customs delays ( ) customer errors ( ) other RATES AND CHARGES IF YOUR SUFFERANCE WAREHOUSE PUBLISHES A SCHEDULE OF RATES AND CHARGES, YOU MAY ANSVffiR THESE QUESTIONS BY ATTACHING THE CURRENT SCHEDULE TO YOUR COMPLETED QUESTIONNAIRE. I f your f a c i l i t y o f f e r s space to c a r r i e r s on a lease basis, what i s the charge f o r t h i s space? $_ per sq. f t . and/or $ per dock and/or $ . per ? 2 2 6 l 6 \ Please provide a schedule of rates f o r services provided i n the public area of the warehouse. Rates Miniraum Charge (1) Use of warehouse (2) Handling of shipments (3) Shipments not warehoused (4) Use of detention compound (5) Storage charges ( i n a d d i t i o n to 1.) (6) D i s t r i b u t i o n of manifests _/cwt. _/cwt« /shipment _/cwt. _/day _/cwt. /day. J manifest. Jshipment Jshipment /day /shipment FINANCIAL INFORMATION IF YOUR SUFFERANCE WAREHOUSE PUBLISHES FINANCIAL INFORMATION YOU MAY ANSWER THE FOLLOWING QUESTIONS BY ATTACHING A COPY OF YOUR LATEST FINANCIAL STATEMENT TO THE QUESTIONNAIRE. 19. (a) BALANCE SHEET Current Assets Fixed Assets land buildings equipment T o t a l Assets Current L i a b i l i t i e s $ To t a l Debt " Other L i a b i l i t i e s T o tal Equity ' To t a l L i a b i l i t i e s (b) Income Statement Revenues: Leased Space: Owner Ca r r i e r s Leasing C a r r i e r s General Warehouse Other Income Tota l Revenues $ Total Expenditures T o t a l Income before taxes Income Tax Expense Net Income continued 228 MISCELLANEOUS 20. Please take t h i s opportunity to make any comments you wish regarding the sufferance warehouse system i n Canada, and to outline any changes you f e e l could be made, eg. i n sufferance warehouse p o l i c y or Customs procedures, which would be b e n e f i c i a l to sufferance warehouse e f f i c i e n c y ( i f any). 

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