What price Security?

They’re being called everything from border-crossing surcharges to homeland security fees. One carrier uses the term “war surcharge.” No matter how you spin it, this ancillary fee has one purpose: to recoup mounting costs related to delays and investments in security related to cross-border moves.

Dave Sirgey, president of the Fort Erie, Ont.-based Freight Carriers Association–a group that monitors economic conditions in the industry and advises carriers on setting rates–says Canadian trucking companies have been digging deep into their pockets to pay for things they never would have anticipated prior to Sept. 11: securing terminals and equipment against theft; delays at congested border inspection stations; the costs to participate in pre-clearance programs established by Canada and the United States; drivers and potential new hires who fail security screenings; as well as a host of upcoming pre-arrival notification mandated by customs and immigration agencies in the United States.

Carriers of hazardous materials face added pressures. The U.S. Federal Motor Carrier Safety Administration last month proposed a new permit system for carriers that haul dangerous goods. Among the requirements: drivers would have to check in with the carrier at least once every two hours or whenever they deviate from a written route plan. If more than three hours elapse since the last communication, the carriers would be required to contact law enforcement. Penalties for violations would range from $27,500 to $100,000 US.

Even though these new costs have been slashing away at margins for two years, Sirgey says many truckers are hesitant to ask customers to fork over surcharges to cover them. “Unlike a fuel surcharge, some of these costs can’t be quantified easily,” he says. “You need as much documentation as possible to justify it.”

Clayton Gording, vice-president of operations at Reimer Express Lines in Winnipeg, says his company applies a border-crossing fee. So far, it’s been a battle to apply universally. “There are companies that are understanding and others that really resist and you have to keep absorbing these costs for the time being,” he says. The real danger, he says, is in creating a two-tier system where some customers are subsidizing the extra freight costs of others.

A general rate increase may be the fairest solution and the easiest to administer, says Enno Jakobson, director of risk management at Challenger Motor Freight in Cambridge, Ont. “Customers don’t want to hear about surcharges,” he says. “They think with all the new border initiatives, we should be crossing quicker. It’s simply not true. Instead, we’ve incurred all these costs with virtually no benefit to date.”

Eric Gignac, vice-president of operations at Quebec City-based Transport Guilbault, says his company was one of the first Quebec carriers to implement security surcharges and ran into much resistance at first. His response: Gignac told customers to pick between security surcharges or border wait-time fees, which he quantifies daily through the fleet’s GPS system.

Gignac is disappointed more of his competitors aren’t implementing surcharges by now. Many seem to have backtracked in hopes of attracting more business.
Sirgey isn’t surprised. “There’s no doubt some carriers will refuse to ask for surcharges or increases as a marketing ploy,” he says. “But these costs will only continue, and those guys will just market themselves out of business.”

Clayton Gording agrees. Sooner or later, responsibility for security, compliance, and border-related delays needs to be divvied up more equitably. “We have to find ways of passing on at least some of these costs,” he says. “It’s through no fault of the carrier these things are happening to the industry.”