This year we added a $19 border security fee on each shipment between Canada and the United States. We move more than 50,000 shipments across the border each year, so this was a big decision. In light of fuel surcharges and other fees, we worried that customers might see another $19 as a nuisance or an item to negotiate away. We got the results we'd hoped for, but it took two different strategies to get there.
If you haul internationally, you know how hard it can be to efficiently move freight across the border. To participate in FAST (Free and Secure Trade), our drivers are subject to a background check. If they pass, they get an ID card (cost: $80) and we have to provide them with extra training about FAST procedures. If they don't, that's one less driver available.
Then there are standards for yard security, from lighting to closed-circuit cameras. We had to upgrade computer systems and train staff to deal with the Pre-Arrival Processing System (PAPS), where Customs has to receive information about a shipment one hour before the load arrives at the border.
We still face delays and extra costs. On average, Canadian carriers absorb up to 90 min. per loaded trip as a result of stepped-up U.S. border security measures. All told, it costs the Canadian trucking industry an estimated $290 million a year to comply.
We thought about incorporating the fee into a rate increase, but in the end decided to keep it separate. We used the $19 surcharge as a way to talk about border-crossing procedures and policies, and what we can do to make crossborder moves more efficient.
At a time when less than 30% of shippers pay border-related surcharges, we've had almost 100% compliance — except for an LTL shipper. In that case, we settled on an annual fee because the yearly surcharge would have added up to more than $100,000.
This is trucking at its best. Sure, shippers are price shopping. But good customers aren't going to turf a reliable transportation partner over a well-justified fee, not when bankruptcies and repossessions will take tens of thousands of trucks out of the market this year.
The trouble is, not everyone is so rational. Many third parties said they wouldn't pay the fee or planned to negotiate it at the time of dispatch. Dealing with these guys demanded a more direct approach, so I wrote a strongly worded letter. The meat of it said: “If you decide to continue to do business with MSM, I want to make sure we're on the same wavelength moving forward. Since the border security fee will be added to every shipment as a separate line item, and we will not negotiate it at the time of dispatch ($400 orders will not turn into $381 orders plus the $19 surcharge), I have a suggestion for you. Don't fight it. Your ability to serve your customers is based on one thing: a healthy trucking industry. Stand up for your freight partners, support the recovery of security-related costs, and charge it to your customers. They won't resist a rational explanation of what the fee covers and why it's important. Ours didn't.”
So, did we lose a big chunk of our third-party business? Far from it. A couple of guys chirped, but they all complied once a shipment was tendered to us.
My advice? Whether it's security, fuel, hazmat, whatever, take a leadership role on surcharges. Stand up for your industry, stand up for your sales team, and help your business at the same time.
Mike McCarron is managing partner at the MSM Group of Companies, which specializes in transportation and logistics service between Canada and the United States.