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A study of highway sufferance warehouses Bayne, Kenneth Bruce

Abstract

Revenue Canada, Customs and Excise is given the responsibility for controlling the importation of foreign goods into Canada by provisions of federal legislation. The control is effected by regulations requiring that most imported goods pass through a sufferance warehouse to be presented to Customs, along with approved documentation, for appraisal and assessment of applicable duty and taxes. Sufferance warehouses have been approved for all modes carrying foreign goods into Canada with the manifest mode of transport dictating the sufferance mode. The sufferance warehouse concept originated on the docks where goods arriving by sea were discharged for entry into Canadian markets. This was the natural clearance location , being the first breakbulk point on Canadian soil the clearance function could be-undertaken with minimum disruption to the efficient flow of goods. Rail sufferance warehouses were authorized soon after rail, lines crossed the Canada-United States border. Rather that requiring appraisal and assessment of import charges at frontier border crossings Revenue Canada authorized creation of rail sufferance warehouses, at inland ports where the normal breakbulk function takes place. Similar facilities have been authorized for the air mode at airports across Canada. Until 1952, the transborder motor carrier industry was required to present shipments to Customs at frontier border points. In that year, a national rail strike put pressure on the trucking industry and on Customs, to improve the delivery system for transborder goods. Revenue Canada's response was extension of the inland sufferance warehouse concept to the highway mode.. A series of privately-owned warehouses were authorized on a monopoly basis within each Customs port area, through which all transborder motor carriers were required to clear goods for Customs purposes. The highway sufferance warehouse system has accommodated the needs of Customs, those of the motor carriers and those of consignor/consignees of transborder goods by providing breakbulk facilities for carriers, adherence to the clear ance process which Revenue Canada demands and a minimum of delay time and cost for the consignee and the Canadian taxpayer within a centralized facility. In spite of the success complaints have been heard from motor carrier firms forced to use the facilities operated by the monopoly warehouse-keeper who is often a carrier firm competing for transborder freight traffic. These complaints are of inequities in the treatment of carriers using the warehouse facilities which the unregulated monopoly power of the operator permits. Specifically, carriers complain of unequal provision of services at the warehouses, about excessive rates and charges for space and services and about the effects of these factors on intra and inter modal competition. The thesis examines the transborder motor carrier industry share of the freight market and the clearance process for imported goods. It was found that the trucking industry holds a significant and increasing share of the market-— increasing at the expense of the rail carriers. The clearance procedures were found to be complicated by excessive and confusing documentation requirements and, although some simplification has occurred, changes which would simplify this major cause of clearance delays are advisable. The available information about the highway sufferance warehouse system is presented and is supplemented by the results of the 1976 Highway Sufferance Warehouse Survey undertaken as a part of this study. The thesis examines the specific complaints about the sufferance warehouse system and suggests that they result from a lack of enforcement of the existing regulations governing warehouse operations by Revenue Canada. Both public and private interests are served when competition in the transborder freight market is encouraged and in those instances when public sector inaction discourages competition changes are necessary. The thesis considers the United States system highway clearance system and suggests that the problems in Canada are not serious enough to require adoption of new procedures but could benefit from some 'fine tuning’ measures which would place with Revenue Canada the responsibilty for regulating the monopoly sufferance warehouse system.

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